PNHP

UnitedHealth sets standards for market success

UnitedHealth sets standards for market success

Health insurance giant buys Sierra

By Ian Mylchreest
Las Vegas Business Press
March 19, 2007

Local health insurance giant Sierra Health Services agreed last week to be bought by Minnesota-based UnitedHealth Group. The deal is an all-cash transaction that will pay Sierra shareholders $43.50 per share. That values the local insurer at $2.6 billion.

The David and Goliath relationship in this deal is evidenced by UnitedHealth’s financing. It said that the transaction would be financed “with cash on hand, cash flows from operations and normal capital market activities.”

UnitedHealth spokesman Tyler Mason said the deal would not involve significant job losses in Las Vegas because the company would maintain its local operations. “We need people on the ground to grow the business and that is what we intend to do,” he said.

UnitedHealth faced turmoil in 2006 when its then-CEO William McGuire became the poster boy for backdating stock options, after a front page story in the Wall Street Journal revealed the practice. The board eventually forced McGuire out but his $1.6 billion in stock options were left untouched.

http://www.lvbusinesspress.com/articles/2007/03/19/news/iq_13194749.txt

And…

AMA asks Justice Department to block takeover of Sierra Health Services

AMA
March 19, 2007

The American Medical Association (AMA) today asked the Department of Justice to block the proposed acquisition of Sierra Health Services by UnitedHealth Group, and outlined its strong opposition to the merger in a letter to U.S. Attorney General Alberto Gonzales. The AMA has deep reservations about United’s goal of dominating the Nevada health insurance market, and in particular the Las Vegas market, by purchasing the state’s largest insurer.

If the proposed merger is allowed, the AMA estimates that United would control 78 percent of the HMO market in Nevada, and 95 percent of the HMO market in the Las Vegas-Paradise metropolitan area.

The proposed acquisition of Sierra highlights the alarming trend of consolidation within the health insurance industry. Between 1995 and 2005, there were more than 400 mergers involving health insurers and managed care organizations. The AMA has long cautioned that this trend is responsible for a growing market imbalance where patients and physicians are left vulnerable to the demands of a few giant health insurers.

http://www.ama-assn.org/ama/pub/category/17426.html

And…

UnitedHealthcare under fire over pay

By Chris Rauber
San Francisco Business Times
March 16, 2007

Doctors locally and statewide are engaged in a new round of warfare with UnitedHealthcare, and the California Medical Association has asked state regulators to step in.

The CMA, which represents 35,000 doctors statewide, wants the state Department of Managed Health Care and the Department of Insurance to see if reports of widespread delays, underpayments and other errors on doctors’ contracts by the giant Minnesota-based health plan are the result, as the doctors’ group says it suspects, “of a significant lack of administrative capacity.”

This is year two of tumultuous disputes between UnitedHealthcare, which acquired Cypress-based PacifiCare in late 2005, and many of the region’s doctors and medical practices. Last October, for example, United boasted that it had added 41 hospitals and nearly 11,000 physicians to its California provider network in the first half of 2006, including premier groups like San Francisco-based Brown & Toland Medical Group. But Sun Microsystems dropped the health plan, replacing it with Blue Cross of California, reportedly in part due to the continuing dispute with doctors. Benefits consultants said other major companies could take similar steps if the situation dragged on into this year.

http://www.bizjournals.com/sanfrancisco/stories/2007/03/19/story1.html?b=11742768001432550

Comment:

By Don McCanne, MD

And our national policies are designed to keep big government out of our health care and allow market forces to play out? If you step back and look at how Medicare functions and then look at how UnitedHealth and the other private insurers function, how could anyone seriously contend, when it comes to health insurance, that big market forces provide greater value than big government?

Particularly ironic is that fact that this large player in an industry noted for its highly wasteful, profound administrative excesses is being accused of having a “significant lack of administrative capacity.” It has so many administrators that it has to hire more administrators to find the administrators within its administrative pools to administer the administrative functions of their company whose primary product is administrative services.

But this does show what markets do well. Their administrative services have been so profitable that they can buy for $2.6 billion, in an all cash deal, one of the small players, while retaining its large administrative staff so that they can keep “people on the ground to grow the business.”

Is that what this is all about? Allowing administrators to intrude into our health care system to create market successes by diverting health care resources to their own industry? Shouldn’t it be about improving resource allocation for the benefit of patients? Private insurers excel at the former, whereas public insurance excels at the latter.

If we adopted a universal national health insurance program it would be very damaging to the private health insurance market. Is that a price that we are prepared to pay?

The single-payer solution

Commentary

By Linda Hunt Beckman
Philadelphia Inquirer
Tue, Mar. 20, 2007

Linda Hunt Beckman is a professor of English at Arcadia University and a coordinator for Neighborhood Networks

It is no secret that health care in this country needs a fix. About 47 million people don’t have any health insurance, including more than a third of families with incomes of $40,900 or more.

And for those who can get a policy through their jobs, premiums are sky-high, with cutbacks in benefits. Many jobs don’t provide health insurance anymore, and the cost of private insurance is prohibitive. Americans pay more for health care than people in any other country, and there is a reason: Administrative expenses, created largely by the many layers of the health-insurance system, and insurance-company profits take one out of every five health-care dollars.

Many Pennsylvanians welcomed Gov. Rendell’s announcement in February that he had a health-care plan. What many did not know is that there is another plan our state legislature could pass and that it offers a cheaper, better fix. Senate Bill 300, the Family and Business Health Care Security Act, would provide single-payer universal health care to all Pennsylvanians (there will be a counterpart House bill). The national bill, H.R. 676, providing single-payer coverage for all Americans, has been in Congress for several years; it may be easier to pass the state bill first.

Single-payer health care in Pennsylvania would be much like Medicare for all (but better, because it would cover all costs; offer medications at a fair price; provide dental, optical, and mental-health care, and allow a relatively straightforward and just settlement – within the system – for malpractice). Just as senior citizens get almost all of their health care through a publicly funded, privately delivered system, the Family and Business Act would mean you could go to a doctor or hospital of your own choosing, and these physicians and facilities would not be working for the state or run by it (it would no more fit the negative notion Americans have of “socialized medicine” than does Medicare). The term single payer means that the money for the health-care system would come out of a single tax-supported fund, just as the money for Medicare does. And if we compare Medicare with the administrative expenses created by health-insurance industry, the overhead on our Medicare system is less than 4 percent.

Why don’t we know about the option these bills provide? Health care is excellent in countries – including Canada, France, Australia, Denmark and most other developed nations – with single-payer plans. These programs are accessible to everyone, regardless of income; simpler to understand; less troubled by bureaucratic complications and expenses, and, most important, offer affordable care of high quality. We in the United States are unfamiliar with the single-payer option because tremendous amounts of money are spent by the medical-insurance and pharmaceutical industries to keep us in the dark. They would lose big bucks if we chose to go this route.

That health care elsewhere is less expensive is easily established: The United States spent an average of $6,102 a person on it in 2004, according to the Organization for Economic Cooperation and Development, while Canada spent $3,165 a person, France $3,159, Australia $3,120 and Britain just $2,508. Medications offered by those systems are affordable because those governments, unlike ours in running Plan D for those on Medicare, can negotiate with pharmaceutical companies for lower prices.

We could be as healthy and spend as little. S.B. 300 calls for funding by a 3 percent income tax on all citizens and a 10 percent tax on employers. These taxes, unfortunately, cannot be progressive because the Pennsylvania Constitution mandates a flat tax. Still, 3 percent of income is far less than most of us pay now for health insurance (with more spent out of pocket), and the legislation would offer the same services to people who have no income.

The governor’s plan would not cover even nearly everybody, would not pay for medications, would not be as comprehensive in kinds of care provided, and would cost the state far more. Rendell’s plan, like other supposedly universal health-care plans now in operation in Massachusetts and Maine and proposed in California, would be far more expensive because health-insurance companies, which require costly layers of administration and demand large profits, are the middlemen.

The corporate opposition to single payer exaggerates flaws that some systems have, or had, ignoring the fact that our health care is rationed by income. If you are poor, you may well get inferior health care all of your life. We could learn from problems elsewhere and thus develop the best truly universal health-care system of all.

Linda Hunt Beckman (beckman5@verizon.net) is a professor of English at Arcadia University and a coordinator for Neighborhood Networks.

The health care crisis

By Alex Gerber
Washington Times
Commentary
March 18, 2007

Modern medicine has probably done more to mitigate the misery and suffering that plague mankind than all the political ideologies, economic theories and religious persuasions combined.

The triumphs of modern medicine, however, are marred by the failure of health-care socioeconomics to keep pace with the brilliant advances of medical science and technology. The soaring costs of health care and the millions of medically uninsured Americans are stark testimonies of this truism.

Health-care costs are rising the fastest in history. Since 2000, private, employer-based insurance premiums have risen 4 times faster than wages. Total health-care spending has reached $1.9 trillion annually, 16 percent of the national gross domestic product (GDP), almost twice the ratio of the other industrialized nations and projected to climb to $4 trillion, 20 percent of the GDP, by 2015.

We can no longer ignore the dire consequences of the increasing health-care costs. Federal Reserve Board Chairman Ben Bernanke has warned us a fiscal crisis looms due to these unsustainable costs and “the U.S. economy could be seriously weakened, with future generations bearing the costs.” This admonition was first raised by George Washington’s 1796 Farewell Address when he impugned “ungenerously throwing upon posterity the burden which we ourselves ought to bear.”

Also hovering like dark clouds over our health-care system are 47 million medically uninsured Americans — having risen 5 million since President Bush assumed office. That the uninsured have poorer medical outcomes has been well documented. Indeed, there are wards in our nation’s capital where health statistics are akin to those of Third World countries. The National Institute of Medicine has reported that 18,000 Americans die yearly for lack of health insurance, and our economy loses $60 billion to $ 130 billion per year due to poor health and early death.

The problem of runaway health costs and huge numbers of medically uninsured is related to the unanticipated nature of accidents and disease. The answer to preventing a medical calamity from becoming a financial catastrophe is budgeting in advance through insurance as we do for a possible house fire or auto accident.

But there are modifying factors with health insurance, revolving around society’s decision that health care, unlike owning a home or an auto, is a fundamental right. Thus, health problems beyond an individual’s control — diabetes, congenital birth defects, being hit by a drunk driver — should be insured by the community’s pooling of resources (not unlike the collective responsibility civilized societies assume for allaying the costs of natural disasters like hurricanes or floods). Since Otto von Bismarck introduced this concept in Germany more than a century ago, all modern industrial nations, except the world’s richest, have come to this conclusion.

The reason for this American anachronism is buried in history. During World War II, the War Labor Board froze wages and workers were in short supply. To lure them, employers picked up the tab for complete health insurance. National health-care costs in those days totaled only $40 billion yearly — less than 5 percent of the Federal GDP. Due to the influence of its well-paid lobbyists in Washington, the private insurance industry has maintained its dominance of health insurance to this day.

Many health-care insurers are more interested in the bottom line than in the public’s health. The obvious way to increase profits is to decrease benefits by excluding poor health risks from insurance programs. This adverse selection of “cherry picking” plus the 10 percent to 30 percent overhead of marketing, advertising, stockholder dividends and huge executive salaries — none of which cures a single patient — is largely responsible for health-care costs that have “broken” our health-care system.

The answer to our outmoded, multipayer, profit-oriented health-care industry is its replacement by a nonprofit, single-payer government agency. In short, universal health insurance (UHI) through Medicare for our entire population. President Clinton attempted to reform our health-care system along these lines but could not compete with the insurance industry’s $19 million, Harry and Louise TV blitz that conned the public and Congress into believing UHI was “socialized medicine,”

In fact, our country already has UHI — workman’s compensation, which is the law in all 50 states. Society mandates health insurance for breadwinners who are injured on the job but not if they suffer the same injury while driving home from work. Why should a 5 o’clock whistle determine whether medical expenses are covered?.

In this regard, UHI will not be as costly as popularly assumed — perhaps one-tenth the eventual $2 trillion cost of the Iraq war. The uninsured are not all dying on the streets. The majority are obviously receiving care, admittedly delayed, somewhere — emergency rooms, public hospitals or uncompensated care at private hospitals and clinics — with a “cost shift” to the insured. We thus already largely pay for the care of the uninsured.

The model for a UHI program could well be the Canadian UHI health care system, with modifications, which boasts a quality of care equal to ours at far lower cost. Indeed more personnel are needed to administer Blue Cross in Massachusetts than to administer the entire health care system in Canada.

It was not always so. In 1971, the ratio of total health care costs to GDP was 7.1 percent in Canada and 7.6 percent in the United States. With the adoption of its single-payer health care system 25 years ago, Canada’s ratio rose to 9.6 percent in 2006 while ours has almost doubled to 16 percent.

Briefly, Canada’s health-care system provides one standard of care for the entire population, rich and poor alike, under a tax-funded plan. There are no additional expenses (deductibles or co-payments) at the time of treatment.

The superiority of Canada’s health-care system was perhaps best expressed by a recent Harris Interactive poll among the leading industrial societies that evaluated patient satisfaction with their health-care system. Canada ranked first and the United States last. An ABC News poll found that, by a 2-to-1 margin, Americans prefer a switch to Canada’s health-care system.

We should heed the voice of the people.

Alex Gerber, M.D.,a clinical professor of surgery, emeritus, at the University of Southern California, is a former health-care consultant to the White House and the U.S. Department of Health and Human Services.

Massachusetts' "humane exemption" from universal coverage

Promises, promises in healthcare reform

The Boston Globe
March 17, 2007

People of all stripes are closely following the state health reform plan as it is rolled out. Many are beginning to feel that in fact it will be rolling over quite a few in need of affordable quality healthcare (“State OK’s 7 low-cost health plans for uninsured,” Business, March 9).

The utter irony of the quote from Jon Kingsdale, a former Tufts HMO executive and the executive director of the Commonwealth Connector board, is as tragic as it is absurd: “We want to get everybody in the Commonwealth using health insurance, but we also want to be humane and recognize the exceptions.”

This statement amounts to applauding the law’s “individual mandate exemption” that will allow moderate-income state residents who lack health insurance to request a “humane” exception in order to not face tax penalties while receiving state permission to remain uninsured.

ANN ELDRIDGE MALONE
Jamaica Plain
The writer, a registered nurse, is executive director of the Alliance to Defend Health Care.

JAMES ROOSEVELT, chairman of the private insurers’ trade organization, dismisses worries about the affordability of the state’s mandated health plans (“Misinformation and fear muddy healthcare debate,” Letters, March 13). He trumpets the fact that plans without deductibles will be available. What he doesn’t say is that these plans will have huge copayments. In the “basic” no-deductible plan, patients will have to pay 35 percent of the total cost of hospital care, X-rays, lab tests, and outpatient surgery. Even a simple appendectomy would cost thousands out-of-pocket. Few of the uninsured could afford this, especially after forking over premiums of between $3,028 (for a 26-year-old) to $6,056 (for a 56-year-old).

The Connector (the agency running the new health reform) and the insurance companies boast about the low-cost, quality coverage they’re forcing the uninsured to buy. But they admit, in insurance speak, that the new plans have 60 percent of the actuarial value” of a comprehensive plan. Stripped of jargon, this means the uninsured will get 60 percent of the coverage people like Mr. Roosevelt have for their families. And he could afford high copayments and big deductibles. Our patients can’t.

Drs. STEFFIE WOOLHANDLER and DAVID U. HIMMELSTEIN
Cambridge

http://www.boston.com/news/globe/editorial_opinion/letters/articles/2007/03/17/promises_promises_in_healthcare_reform/

Comment:

By Don McCanne, MD

Does universal mean everyone? Or does it mean everyone, except for those who cannot afford health care access because we insist on a convoluted model of reform that is designed to preserve the interests of those very entities most responsible for the intolerable injustices of our high-cost health care system merely because the politics of protecting those interests are more easily negotiated than the politics of obtaining affordable health care for everyone?

Doesn’t the simplicity contrasted with the complexity of those two questions tell you something?

Accepting new patients based on payment source

CDC
MMWR
March 16, 2007

QuickStats: Percentage of Office-Based Primary-Care Physicians Who Did Not Accept New Patients, by Expected Payment Source — National Ambulatory Medical Care Survey, United States, 2003–2004

Although 94.2% of primary-care physicians reported in 2003–2004 that they were accepting new patients, acceptance varied by the patient’s expected payment source.

Percent who did not accept new patients, by expected payment source:

43.0% – Charity or no charge
42.3% – Workers’ compensation
31.6% – Capitated private insurance
29.3% – Medicaid
20.3% – Medicare
11.4% – Noncapitated private insurance
7.0% – Self-pay

http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5610a8.htm?s_cid=mm5610a8_e

Full CDC report, “Characteristics of Office-Based Physicians and Their Practices: United States, 2003-04:”
http://www.cdc.gov/nchs/data/series/sr_13/sr13_164.pdf

Comment:

By Don McCanne, MD

Most office-based primary-care physicians are accepting new patients, but they understandably are concerned about the prospect of receiving adequate payment for their services.

How many of these physicians do you believe enjoy making practice policy decisions based on various potential payment sources? Doesn’t it seem logical that physicians would prefer to make decisions based strictly on the patients’ health care needs, without having to consider how the care is to be funded?

Under a single-payer national health insurance program, a question about accepting new patients based on expected payment source would never have to be asked.

More importantly, how often have you seen surveys in which patients report that they are unable to find a physician who is taking new patients? Well, most of them are, but often only after the patients pass the screening questions for health care payment. At a time when access to primary care has become a major problem, shouldn’t we take the first step of removing this major barrier to care?

We also need to improve incentives for students to select careers in primary care. It would be far simpler to realign incentives through the supply side mechanisms of the single payer model. In fact, demand side approaches impair access by inserting financial barriers to care when our goal should be to improve access. Single payer would remove those barriers.

Time for a change?

Health care system due for an overhaul, many say

By Sandy Miller
Times-News writer
Sunday, March 11, 2007

Some would say the United States has the best health care system in the world.

But the numbers speak otherwise.

There are more than 46 million uninsured people in the United States and 218,000 of them live in Idaho. Millions more are underinsured. And despite the fact that the U.S. spends twice as much on health care than other industrialized nations – $7,129 per capita, according to the World Health Organization – it doesn’t seem to be getting much bang for its buck. Among other things, the U.S. is 27th on the list for life expectancy and a depressing 75th on the list for the number of children under age 2 immunized against measles.

People are calling out for change, and many of them are saying it’s time for a single-payer – or universal – health care system. And the voices being heard aren’t the voices of radical socialists, but the voices of mainstream, often conservative doctors, hospital administrators and other health care officials – people working within the system itself. Business owners are speaking out, too, by shifting more of the costs to employees and in some cases, dropping their employer-sponsored insurance policies altogether. Workers – the patients – are also saying enough is enough.

“When you can’t even afford your medical bills, something needs to be done,” said Roxy Carr of Twin Falls, who filed medical bankruptcy a few years ago when she found herself $45,000 in debt due to complications from diabetes.

The business of health care

Dr. Rod Kack, a local ear, nose and throat doctor, says the problems all started about three decades ago when medicine ceased being an art and became a business. The Centers for Medicare and Medicaid and other insurance companies replaced doctors as the decision makers.

“The third-party payers became the drivers in medicine,” Kack said.

And their motivations has little do with improving health care.

“Health insurance doesn’t have anything to do with health,” Kack said. “It has to do with business.”

Retired surgeon Dr. Harry Brumbach remembers back when doctors made the decisions. He remembers how back in the 1960s, two of his patients – a husband and wife died of cancer, leaving behind a teenage daughter. One day, the daughter’s high school principal called Brumbach and said if the girl had to pay off her parents’ medical debts, she wouldn’t be able to afford to go to college. Brumbach forgave the debt right then and there.

“I was in the golden era when we could make our own decisions – when we could treat people and forgive a bill without punity. Now, you’re punished by the feds.”

Kack said there’s a “health care pie” and everyone is competing for a piece of that pie.

“We have competition for resources,” Kack said. “There’s competition for dollars available. Thirty years ago, the bulk of the charges were for the doctor and what he did. Now, it’s direct hospital services.”

Another problem, Kack said, is overuse of expensive technology. Although he agrees state-of-the-art technology has its place, and can do some wonderful things, he believes it’s utilized too often.

“Money has been diverted into technology,” Kack said. “Medicine has changed from a profession that used to be hands-on. Now, it’s hands-off and technology driven.”

A single-payer system

Kack believes there needs to be a big change in health care, but he stops short of advocating a single-payer national health insurance system in which a single public or quasi-public agency organizes health financing, while delivery of care remains largely private.

“A single-payer system would be a nightmare because of the expectation of services,” Kack said. “They’re going to expect more than they get.”

But many others think a single-payer system is just the fix for America’s broken health care system. At the very least, a universal care system would provide basic health care to all. And that, said one hospital official, is not only the financially-responsible thing to do, but the moral thing to do.

“I think the basic health care system should be available to everyone,” said John Kee, chief executive officer at St. Luke’s Magic Valley Regional Medical Center. “What we are doing now isn’t right.”

Kee agrees that universal health care systems, such as the one in Canada, aren’t perfect.

“If you talked to Canadians, they’d say they have a great basic health care system, but you have to wait.”

Still, Kee said a single-payer system is the answer. And he’s not the only one.

Physicians jump on board

“Five years ago, if you mentioned national health care to a roomful of doctors, they would have booed,” said Bobbie Dennett, a disability hearing officer for the Idaho Department of Health and Welfare and the co-chair of the Outreach Committee of Idaho Health Care For All.

They’re not booing so much anymore. In fact, a number of physicians across the U.S. have banded together and formed Physicians for a National Health Program. According to the organization’s Web site, the reason the U.S. spends more and gets less on health care than other industrialized nations is because the U.S. has a “patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: Overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay.” In turn, doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. PNHP estimates that all this administration consumes a third of Americans’ health dollars.

PNHP believes single-payer financing is a way to recapture the wasted money. The potential savings on paperwork – more that $350 billion per year – alone is enough to provide comprehensive coverage to everyone without paying any more than we already do.

Massachusetts’ “humane exemption” from universal coverage

Promises, promises in healthcare reform

The Boston Globe
March 17, 2007

People of all stripes are closely following the state health reform plan as it is rolled out. Many are beginning to feel that in fact it will be rolling over quite a few in need of affordable quality healthcare (“State OK’s 7 low-cost health plans for uninsured,” Business, March 9).

The utter irony of the quote from Jon Kingsdale, a former Tufts HMO executive and the executive director of the Commonwealth Connector board, is as tragic as it is absurd: “We want to get everybody in the Commonwealth using health insurance, but we also want to be humane and recognize the exceptions.”

This statement amounts to applauding the law’s “individual mandate exemption” that will allow moderate-income state residents who lack health insurance to request a “humane” exception in order to not face tax penalties while receiving state permission to remain uninsured.

ANN ELDRIDGE MALONE
Jamaica Plain
The writer, a registered nurse, is executive director of the Alliance to Defend Health Care.

JAMES ROOSEVELT, chairman of the private insurers’ trade organization, dismisses worries about the affordability of the state’s mandated health plans (“Misinformation and fear muddy healthcare debate,” Letters, March 13). He trumpets the fact that plans without deductibles will be available. What he doesn’t say is that these plans will have huge copayments. In the “basic” no-deductible plan, patients will have to pay 35 percent of the total cost of hospital care, X-rays, lab tests, and outpatient surgery. Even a simple appendectomy would cost thousands out-of-pocket. Few of the uninsured could afford this, especially after forking over premiums of between $3,028 (for a 26-year-old) to $6,056 (for a 56-year-old).

The Connector (the agency running the new health reform) and the insurance companies boast about the low-cost, quality coverage they’re forcing the uninsured to buy. But they admit, in insurance speak, that the new plans have 60 percent of the actuarial value” of a comprehensive plan. Stripped of jargon, this means the uninsured will get 60 percent of the coverage people like Mr. Roosevelt have for their families. And he could afford high copayments and big deductibles. Our patients can’t.

Drs. STEFFIE WOOLHANDLER and DAVID U. HIMMELSTEIN
Cambridge

http://www.boston.com/news/globe/editorial_opinion/letters/articles/2007/03/17/promises_promises_in_healthcare_reform/

Comment:

By Don McCanne, MD

Does universal mean everyone? Or does it mean everyone, except for those who cannot afford health care access because we insist on a convoluted model of reform that is designed to preserve the interests of those very entities most responsible for the intolerable injustices of our high-cost health care system merely because the politics of protecting those interests are more easily negotiated than the politics of obtaining affordable health care for everyone?

Doesn’t the simplicity contrasted with the complexity of those two questions tell you something?

Critical condition: Single-payer plan gains steam as cure for health care system

By Julie Creek
The Journal Gazette
Sun, Mar. 18, 2007

Fears about cost, quality and lack of access have pushed health care reform to center stage in American domestic politics. In the 13 years since the Clinton health care plan went down in flames, the problems that plan was designed to address have become more severe, and reform promises to be a major issue in next year’s presidential race.

Among solutions under discussion is the “single-payer” system, which proponents argue is the best way to provide health insurance and control costs. Here are some questions and answers about it:

1. Why are we hearing more about a single-payer health care system?

It seems almost a misnomer to refer to the existing hodge-podge of private and public health care financing as a system. And it’s becoming increasingly difficult to find anybody familiar with health care who doesn’t believe the “system” is either in crisis already or headed for collapse.

Consider:

* About $2 trillion is spent each year on health care in the United States — 15.2 percent of the country’s gross domestic product in 2003 — twice as much as any other country — and that amount is expected to rise rapidly.

* Roughly 30 percent of what we spend goes to administrative costs alone.

* Even with all the money spent, as a group, Americans aren’t particularly healthy, ranking in the middle among industrialized countries on a list of overall health indicators — including life expectancy and infant mortality.

* Nearly 47 million people — about 15 percent of the population — have no health insurance at all, including about 800,000 Hoosiers. And that number is increasing as American companies, struggling to compete in the global economy, jettison employee health insurance. People with chronic medical conditions who aren’t covered by group insurance often can’t buy health insurance at any price.

* Workers who still have private health insurance have watched their insurance premiums rise 87 percent since 2000.

* Many hospitals — especially not-for-profit hospitals — are struggling to care for uninsured patients who cannot pay for the expensive care they receive in emergency rooms.

The economic and social crisis spawned by the many uninsured prompted several states, led by Massachusetts, to come up with their own plans to provide basic health insurance to all citizens. The Indiana General Assembly is mulling over a plan that would hike the cigarette tax and plow the increased revenue into health insurance coverage for a portion of the state’s uninsured working poor population.

A New York Times/CBS News poll released in early March found that a majority of Americans believe the federal government should guarantee health insurance to every American and say they’re willing to pay more taxes to do so.

2. What — exactly — is a single-payer system? What would it look like?

Single-payer national health insurance is a system in which doctors and hospitals work for themselves but a single public or public-private agency handles the financing. Under the single-payer plan proposed by Physicians for a National Health Program, all Americans would be covered for medically necessary services for life, and patients would have a choice of doctors and hospitals.

Patients would go to their doctor or hospital for treatment. Doctors would bill the national agency and receive payment on a fee-for-service basis. Hospitals would receive lump sums to pay operating expenses. Health facilities — including nursing homes — would be managed by regional planning boards.

Proponents of a single-payer system argue that much of the cost of providing universal coverage could be paid by eliminating the role of private insurance companies and putting wasted administrative dollars back into caring for patients. A health care tax would replace private insurance premiums and out-of-pocket expenses currently paid by individuals and businesses. Costs would be controlled by negotiated fees, global budgeting and bulk purchasing.

The Medicare program for senior citizens — created by Congress in the mid-1960s — is a single-payer system. A federal agency pays all the bills. Doctors and hospitals negotiate fees with the agency, and Medicare spends only about 3 percent of its funds for administrative expenses.

Some proponents of a single-payer system advocate expanding the Medicare program to cover all Americans. Physicians for a National Health Program supports a bill introduced a couple of years ago in Congress by Rep. Dennis Kucinich that would do so.

3. What are the advantages and disadvantages of a single-payer system?

Probably the most obvious advantage is that it would cover everyone from cradle to grave, eliminating the inequities and economic distortion created by the nearly 47 million Americans who have no health insurance at all.

A single-payer system would also streamline an administrative system that sucks up 30 percent of every dollar spent on health care. Many doctors say the bureaucratic tangle has begun to feed on itself, forcing them to hire more workers to handle insurance claims and billing, increasing office overhead expenses.

A single-payer system would eliminate profit-driven insurance companies from the health care system. Because they answer to stockholders, private insurance companies are under enormous pressure to control costs. As the cost of care increases, companies respond by limiting the care they cover and lowering payments to health care providers. On the other hand, taxpayers, especially corporate ones, are likely to exert the same kinds of pressure on the government to hold down costs.

On the disadvantage side, a single-payer system would be a wrenching change and create a huge, faceless bureaucracy. That prospect scares many physicians, even those who dread haggling with insurance companies over treatment for their patients. They also fear the power that would be conferred upon a single payer.

“Who would you rather fight with, the federal government or Anthem?” asked Dr. Mike Schatzlein, an executive with the Lutheran Health Network. “I would probably take my chances with Anthem.”

Health care observers also fear that removing the profit motive from the health care system altogether would stifle investment and innovation in finding new treatments and drugs. If the federal government became the only payer, limiting potential profit, companies would be less likely to invest the huge sums necessary up front to develop new drugs and treatments.

4. Who supports it?

A few health care consumer groups, including Hoosiers for a Commonsense Health Plan, support a single-payer system as the most equitable way to distribute finite health care resources.

As a group, physicians are split.

Physicians for a National Health Program claims 12,000 physician members across the country, but others favor less dramatic reforms.

“Most physicians believe we need universal access,” said Dr. Vidya Kora, president of the Indiana State Medical Association. “But that doesn’t necessarily translate into believing in a single-payer system.”

“Most people believe the solution won’t come from the feds,” he added. “That’s why states are experimenting.”

Many physicians hope states will lead the way to more coherent regional systems — which might include single-payer elements — that will cover everybody.

“I would hope to see individual states or coalitions of states work together to build a state system,” said Dr. Tom Hayhurst, a retired physician and outgoing Fort Wayne City Council member. “Of course they would have to figure out how to pay for it.”

5. Who opposes it?

Insurance companies oppose a single-payer system because it would kick them out of the health care system, which has been a major profit center for them.

Many business groups also oppose a single-payer system because it would place controls on for-profit health care providers.

“A single-payer system would disrupt the marketplace and impede consumer choice,” said Katie Mahoney, director of health care policy for the U.S. Chamber of Commerce.

The U.S. Chamber is backing an incremental plan that would extend the federal Children’s Health Insurance Program to cover all uninsured children, allow states to offer Medicaid coverage to adults based solely on need and create a tax credit to help individuals and families afford private health insurance.

Even as they’re being squeezed by increasing number of uninsured patients and lower reimbursements for treating Medicare and Medicaid patients, hospital officials are generally suspicious of dealing with a bureaucracy that has no competition.

While they agree that everyone should have health insurance, the American public is split — largely along party lines — on whether a national health insurance program is the answer.

6. What has been the experience of other countries that have national health care systems?

The U.S. is one of just a few industrialized countries that don’t have government-sponsored national health-insurance programs, but plans vary widely from country to country. Some countries — including Spain and Great Britain — have “socialized” programs in which doctors and other providers are government employees and receive government salaries.

National health care programs in Canada and Germany use a system in which doctors are self-employed but bill a national health care agency on a fee-for-service basis.

Canada’s program is mentioned most often as a potential model for an American single-payer system, although Canadians often complain that they must wait long periods for non-emergency procedures.

7. Would health care be rationed under a national single-payer system?

Of course. But, remember, it is already rationed in the existing system based on the ability to pay. Generally speaking, those who can afford it get care; those who can’t afford it don’t, unless they’re lucky enough to find a provider who can give them free care or go to a hospital emergency room that is required to provide emergency care. When there is disagreement in cases of privately insured Americans, insurance companies frequently decide what care patients will receive by refusing to pay for procedures or treatments they deem unnecessary.

Single-payer advocates believe that taking insurance companies out of the equation will free up most of the 30 percent of health care dollars spent on administrative costs to provide more care.

Some single-payer advocates support allowing patients to buy supplementary insurance that would cover elective or cosmetic treatments that likely wouldn’t be covered under a national plan. But Dr. Rob Stone, of Hoosiers for a Commonsense Health Plan, believes that supplementary plans would result in some patients being “more equal” than others.

8. Would I be able to choose my doctor?

More than likely. The plan proposed by Physicians for a National Health Program wouldn’t affect the relationship between doctors and their patients. The change would come in the way doctors are paid for their work. Ultimately, it would depend on what kind of plan Congress adopted, but given that Americans feel so strongly about their freedom of choice, it’s hard to imagine Congress creating a single-payer system that didn’t allow patients to choose their doctors.

By the Numbers

The cost of health care:

Amount spent on health care per person in 2003:

Canada — $2,998

Germany — $2,983

Great Britain — $2,317

United States — $5,711

Projected growth of National Health Expenditure in US:

2007: $2.3 trillion

2008: $2.5 trillion

2009: $2.7 trillion

2010: $2.9 trillion

Julie Creek is an editorial writer for The Journal Gazette. She joined the newspaper in 1990 and was an education reporter and assistant metro editor. You can reach her at 260-461-8609 or by email at jcreek@jg.net

Watson Wyatt on employer costs and CDHPs

12th Annual National Business Group on Health / Watson Wyatt Survey Report 2007

Watson Wyatt Worldwide
March 15, 2007

Annual cost increases for all employers remained at 8 percent for the second year in a row (about twice the rate of inflation) and are expected to stay at this level through 2008.

CDHPs (consumer-directed health plans) continue to gain popularity. Thirty-eight percent of employers now offer such a plan, and 25 percent offer a health savings account (HSA). Yet, the median employee enrollment rate in CDHPs remains a relatively low 8 percent. While CDHPs can help control cost increases when combined with other tactics, the use of CDHPs alone does not correlate with a lower cost trend.

http://www.watsonwyatt.com/research/resrender.asp?id=2007-US-0031&page=1

And…

Employers up use of high-deductible health plans

By Kim Dixon
Reuters
March 15, 2007

Nine percent of U.S. employers in a poll by a health consulting firm (Watson Wyatt Worldwide) said they plan to offer only one health insurance option next year — a high-deductible policy that may encourage workers to skimp on care.

This type of plan charges higher monthly deductibles, typically about $1,000 for individuals, in exchange for cheaper monthly premiums and preventive services. The aim is to stem a rise in overall medical costs, which are climbing at twice the rate of general inflation.

“There is a concern about whether we are working our way toward a system where high deductibles are the norm and consumers don’t have a choice,” Gail Shearer, a health policy analyst at the advocacy group Consumers Union, said.

“If you are a person of low or moderate income, if the deductible is very high, there will be financial barriers to care.”

Late last year, another survey (Employee Benefits Research Institute and Commonwealth Fund) found that the plans encourage workers to scrimp on care and that people who were in the plans were more likely to cut back on basic care such as prescriptions or doctor visits.

http://today.reuters.com/news/articleinvesting.aspx?type=companyNews&storyid=26135+16-Mar-2007+RTRS

Comment:

By Don McCanne, MD

This report from the industry confirms that more employers are offering high-deductible health plans (HDHPs), and in some instances as the only option for the employee. Many employers are not including the other component of consumer-directed health plans (CDHPs) – health savings accounts (HSAs).

Other studies have confirmed that high-deductible plans create financial barriers to care which cause patients to reduce their use of basic, beneficial health care services and medications. Thus HDHPs have been a major contributor to the growing epidemic of underinsurance.

Perhaps the most important finding of this new study is that CDHPs alone do not correlate with a lower cost trend.

Decreased utilization of services without a decline in cost trends would seem to be an enigma, but it really isn’t. High-deductible plans have very little impact on our total health care spending because most high-cost care is given after the deductible has been met and is no longer a disincentive to care. On the other hand, high-deductible plans potentially do decrease office visits and prescription drug use for the majority of us who have not met our deductibles. Thus a great opportunity for preventive and early intervention health care is passed by for many, even though the cost of that care is so small that it does not shown up in cost trends in this study.

Since the underinsurance of CDHPs/HDHPs has failed to reduce health care cost trends that are twice the rate of inflation, then why are we expanding these programs that violate the fundamental rule of first do no harm?

When to Violate the Top Two Commandments of Antigovernment Crusaders

By ROBERT H. FRANK
New York Times
March 15, 2007
Economic Scene

When asked to identify the two most important items from their list of 10 public policy commandments, most antigovernment crusaders pick (1) public spending shall be kept to an absolute minimum and (2) the state shall not transfer income from rich to poor.

No government heeds these admonitions in any literal sense. Yet they have had a profound impact on public policy decisions, especially in the United States. Often, however, their impact has been the opposite of what antigovernment crusaders intended.

The problem is that many compellingly advantageous public policies cannot be enacted without violating the two commandments. Every significant policy change benefits some people and harms others. If the gains to winners substantially outweigh the costs to losers, solutions can always be found that allow everyone to come out ahead. But those solutions often involve higher taxes and income transfers to the poor.

Regulations that limit auto emissions are a case in point. Because these regulations increase car prices, legislators in most jurisdictions exempt older vehicles to avoid imposing unacceptable costs on the mostly low-income motorists who drive them. Yet the cost to society of this exemption far outweighs its benefit for the poor.

For example, although fewer than 10 percent of the vehicles in Los Angeles are more than 15 years old, these cars account for more than half the smog. Exempting the old cars thus necessitates much stricter regulations for new ones. But the cheapest ways of reducing emissions from new cars have long since been adopted. According to a RAND Corporation study, meeting air quality targets by further tightening new-car standards is several times as costly as meeting those targets by eliminating the exemption for older vehicles.

By raising taxes on high-income motorists, the government could finance vouchers that would enable low-income motorists to scrap their older vehicles in favor of cleaner used cars of more recent vintage. The required taxes would be much smaller than the resulting savings from not having to adopt such costly standards for new vehicles. Both rich and poor motorists would win.

The problem is that taking these steps would violate the two commandments. Antigovernment crusaders have prevailed for now. The ostensible champions of economic efficiency, they have kept government budgets smaller and blocked some transfers to low-income families. In the process, however, they have made everyone poorer.

Some believe that minimal government is synonymous with economic efficiency. But it is not. As the emissions example illustrates, economic efficiency sometimes requires that government play a larger role.

This example is part of a much broader pattern. In health care, for example, the private insurance system employed in the United States delivers worse outcomes at substantially higher cost than the single-payer system employed in virtually every other industrial country. But switching to the single-payer system would require higher taxes and increased benefits for low-income citizens, steps that would violate the two commandments. So for now, we remain saddled with a system that everyone agrees is dysfunctional.

In the realm of antipoverty policy, most economists agree that raising the earned-income tax credit would be the most efficient way of increasing the living standard of the working poor. Under this program, general tax revenues support income subsidies to those whose earnings fall below a given threshold. Its compelling advantage is that unlike a higher minimum wage, it does not discourage hiring. But raising taxes to increase the earned-income tax credit would violate the two commandments.

Because the most efficient antipoverty policy is deemed politically unfeasible, many economists support current legislative proposals to raise the minimum wage for the first time in a decade. If this legislation passes, antigovernment crusaders will be able to claim, truthfully, to have prevented an increase in the federal budget. But they will have won a hollow victory. For unlike an increase in the earned-income tax credit, an increase in the minimum wage not only limits job creation for the least- skilled workers, it also raises the prices of goods they produce. Over all, it would have been cheaper to raise the earned-income tax credit.

Antigovernment crusaders have also prevented the adoption of energy policies that would produce better outcomes for all. For example, economists of all political stripes have argued that a stiff tax on gasoline would relieve traffic congestion, reduce greenhouse gases, accelerate the development of energy-saving technologies and reduce dependence on foreign oil. But it would also impose significant economic hardship on low-income families, making it necessary to increase transfer payments to those families. Both the tax on gasoline and the transfers to low-income families would be clear violations of the two commandments. And so gasoline taxes continue to be far lower in the United States than in other industrial countries.

That democratic forces limit the economic hardship that government can impose on low-income families is a good thing. But sometimes imposing hardships on those families would create far larger gains for society as a whole. In such cases, we can always devise solutions that make everyone better off. But it is impossible to put these solutions into practice without violating the two commandments.

Is it better to solve a problem by spending two extra dollars in the private sector than by spending one additional dollar in the public sector? The two commandments insist, preposterously, that it is.

Economic efficiency is a worthy goal because when the economic pie grows larger, everyone can have a larger slice than before. Antigovernment crusaders deserve credit for emphasizing the importance of this goal. But as events of recent years have repeatedly demonstrated, they are often the biggest obstacles to its achievement.

Robert H. Frank, an economist at the Johnson School of Management at Cornell University, is the author of “The Economic Naturalist,” which will be published this spring. Contact: www.robert-h-frank.com.

Universal health care provides everyone access

By DOMENICK BUSCEMI
The Morning Call
March 15, 2007

”Rationing in the U.S. system is based on income: If you can afford care, you get it; if you can’t afford it you don’t.”

Local op-ed columnist John Brinson wrote last month about Gov. Ed Rendell’s ”Prescription for Pennsylvania” proposals and health care in general. I see things much differently.

He asserted that this country has the best health-care system in the world. But a 2000 study by the World Health Organization based on various indicators (including disability-adjusted life expectancy, child survival to 5 years of age, social disparities in care, experiences with health-care system and out-of-pocket health care expenditures) found the average ranking of the United States to be 15th out of 25 countries. In another study of 11 Western countries, the U.S. was ranked last with respect to its primary care base and its per capita health care expenditures (the highest).

He said that problems in health care today are due to government interference in the marketplace. I think the truth is quite the opposite. A single-payer system would dramatically reduce administrative costs. Under our current market-driven system, administrative costs, including all paperwork and billing, are about 24 percent of our health-care budget. Our Medicare system overhead, on the other hand, is less than 4 percent. More than half of our health dollars are already tax-supported (Medicare, Medicaid, government employees, military, tax breaks to providers, etc.), and any new taxes needed would be offset by decreased insurance premiums and out-of-pocket costs.

Brinson also said government mandates and price controls result in long waits and lower quality. Statistics prove him wrong. The reason we hear more about these stories in the other countries is because their health care systems are publicly accountable, while ours is not. So, problems are aired in public. In the United States, no one is ultimately accountable for how health care works. Rationing in the U.S. system is based on income: If you can afford care, you get it; if you can’t afford it you don’t. This is the reason many Americans die needlessly every year. No other industrialized nation rations health care to the degree that the United States does. Yet, a number of studies, notably by the General Accounting Office in 1991 and by the Congressional Budget Office in 1993, show that there is more than enough money in our health-care system to serve everyone, if it were spent wisely. One example is administrative costs, which are far higher in the United States than other countries.

His statistics on the uninsured don’t give the reasons why people eligible for Medicaid haven’t signed up. (Perhaps the regulations are too confusing.) He also doesn’t take into account that the cost of COBRA insurance ($800 to $1,200 a month) is prohibitive for many unemployed people. He mentions people who have no insurance for two years or less because they can’t afford it, or worse, are uninsurable, but he brushes over this injustice as if it were insignificant. I say these are reasons why we need universal coverage.

His solution is to give employees tax deductible money to buy insurance. Isn’t this, in effect, government-sponsored health care? Can you imagine the pressure and misinformation to which the average person would be subjected by competing health insurance agents? It also adds to the cost of overhead to pay for the brokers and insurance agents who sell the coverage. He doesn’t elaborate on the amount or kinds of insurance that would be purchased by a $200-a-month policy. His suggestion about people turning to charitable hospitals for care has little respect for a person’s dignity. Furthermore, his claim that it’s efficient to pass the cost of care for the uninsured on to people with insurance is absurd. This care is frequently provided by expensive emergency rooms, when a preventative care visit to a doctor’s office would be more efficient.

The obvious solution to the problem is to stop making a profit from the sickness and misery of human beings. Facts point to a single-payer, universal health care system where everyone pays his or her fair share and everyone receives equal access.

Domenick Buscemi of Lower Mount Bethel Township is the organizer for the Lehigh Valley Healthcare Reform Meetup Group (http://healthcare.meetup.com/26/ ) and is the former president of Teamster Local 773 in Allentown. His e-mail address is buscemi@ptd.net.

Schwarzenegger's Health Plan Unaffordable for California, Nurses Charge

Healthcare Costs Could Hit $12,320--or 25% of Income--on Premiums and Deductible Before Insurers Pay for Any Care

Total Out-of-Pocket Costs Could Exceed 36% of Household Income

California Nurses Association
Press Release
March 15, 2007

Gov. Arnold Schwarzenegger’s health plan could cost the typical California household from 25% to 36 percent of their family income, according to data released today by the California Nurses Association.

Schwarzenegger’s health proposal, based on a new Massachusetts law, would require all California residents to purchase health insurance. But with no controls on rising premiums — which have risen 87 percent this decade — most Californians are likely to opt for bare bones plans that carry a heavy price tag and limited benefits.

Under the Governor’s minimum plan, the typical California resident would likely be expected to pay $12,320 per year in medical expenses and premiums—before any medical care is paid for by their insurance company.

Schwarzenegger has proposed that the minimum, cheapest plans include a $5,000 deductible prior to an insurance payment. The deductible is on top of the insurance company’s premium charges, which are likely to cost up to $7,320 per household, the amount established in eastern Massachusetts for those required to buy health insurance.

For the typical California household, that means being forced to spend 25 percent of their income on medical costs—before any care is paid for by the insurance they are forced to buy (based on the median household income of $48,440 as of 2003 U.S. Census Bureau data).

The real costs could be far more. Schwarzenegger’s proposal further says that out-of-pocket costs could rise to $10,000 per household if more extensive care is needed — which would drive out of pocket costs up to 35 percent of the median family income. (Any hospital stay would expose a family to the $10,000 cost quickly; the average hospital charge per discharge in California is nearly $33,000.)

And since the Governor’s projected costs are for the least expensive coverage, it is likely that most families would have to spend extra for dental, vision, mental health, long-term care, and other care.

“Many families may end up having to make the terrible choice of assuming more medical debt which can lead to financial ruin, or foregoing needed care,” said CNA President Deborah Burger, RN. “Schwarzenegger’s healthcare plan could lead to financial ruin and bankruptcy, instead of nursing them back to health.”

Health care experts say health costs constitute a “financial burden” if they exceed 10 percent of a family’s post-tax income. In testimony to the House Ways and Means Committee in January, Diane Rowland, vice president of the Kaiser Family Foundation, noted that one in six adults who are privately insured “report having substantial problems paying their medical bills” and that two-thirds of the privately insured who have medical debt have family incomes of up to $75,000.

Additionally, a recent study by the American Academy of Pediatrics found that high-cost, high-deductible insurance plans are a hazard to patient health, because they provide parents and other patients with an incentive to skip or delay preventive care, immunizations, compliance with recommended treatment, and other needed care.

SB 840 Would Provide Affordable Care to Californians:

CNA has long advocated for a universal, single-payer healthcare plan as the only affordable and fair way to ensure that every patient receives a single standard of high-quality care. Governor Schwarzenegger vetoed just such a plan, Sen. Sheila Kuehl’s SB 840, last year.

Upon reintroducing her bill this year, Senator Kuehl remarked, “SB 840 works by pooling our health care resources so everyone — state and federal government, income earners and employers – contributes something and we all get coverage. This allows us to consolidate the administrative functions of thousands of different insurance companies and plans into one comprehensive insurance plan, saving businesses and consumers, as well as the state, billions of dollars in the first year alone.”

CNA is the principal sponsor of SB 840 and is engaging in an active campaign to ensure its passage, including direct mail to households, a radio ad, and a new web site, www.SinglePayer.com.

Representing 75,000 RNs from California to Maine, the California Nurses Association/National Nurses Organizing Committee is the fastest-growing association of direct-care RNs in the nation. Learn more at www.CalNurses.org