PNHP

Private insurers deny individual coverage based on occupation

Private insurers deny individual coverage based on occupation

Health insurers deny policies in some jobs

Common medications also can be deemed too risky in California.

By Lisa Girion
Los Angeles Times
January 8, 2007

Health insurers in California refuse to sell individual coverage to people simply because of their occupations or use of certain medicines, according to documents obtained by The Times.

Entire categories of workers — including roofers, pro athletes, dockworkers, migrant workers and firefighters — are turned down for insurance even if they are in good health and can afford coverage, according to the confidential underwriting guidelines of four health plans.

Although Blue Cross of California, the state’s top seller of individual policies, does not exclude applicants based on occupation, three others do: Blue Shield of California, PacifiCare Health Systems Inc. and Health Net Inc. Actuarially speaking, they say, certain workers pose too big a risk.

All four health plans look at prescription drug use to decide to whom they will sell individual policies. Dozens of widely prescribed medications — including Allegra, Celebrex and Prevacid — may lead to rejection, according to the underwriting guidelines that the health plans provide to insurance brokers but not to the public.

In fact, eight of the 20 top-selling prescription drugs in the U.S., including No. 1 Lipitor, a cholesterol fighter that racked up $12.9 billion in global sales in 2005, make the lists of two health plans.

“This is something that has been actuarially determined to keep insurance affordable for a very, very broad range of people,” said David Olson, a spokesman for Woodland Hills-based Health Net.

“This isn’t cherry picking; this is ignoring whole orchards of people,” said Jamie Court, president of the Foundation for Consumer and Taxpayer Rights.

Studies show “guaranteed issue can price people out of the market, and, as public policy, it achieves the opposite goal of getting more people insured,” said Shannon Troughton, a spokeswoman for WellPoint Inc., the Indianapolis-based parent company of Blue Cross of California.

“The current system is broken and getting worse,” (Senate President Pro Tem Don) Perata said. “Instead of competing on the basis of cost and quality, we’re seeing health insurers denying coverage to the people who need it the most. This is scandalous.”

The problem with adding even one high-risk member to an insurance plan is that the costs go up for everybody, said Tyler Mason, a spokesman for PacifiCare, a division of Minneapolis-based UnitedHealth Group Inc. “It’s the whole risk-pool thing, and one affecting the hundreds.”

“This is one of the features of our polyglot system of health insurance,” Health Net’s Olson said. Health plans “have different approaches. Our view would be that’s a good thing.”

http://www.latimes.com/business/la-fi-reject8jan08,0,6430685,full.story?coll=la-home-headlines

Comment:

By Don McCanne, MD

Our polyglot system (sic) of health insurance is a good thing? Cream-skimming, cherry-picking policies are great for the insurers since it allows them to maintain their market presence through their ability to offer competitive premiums.

But protecting the markets for private plans is terrible when it is done so by destroying the risk pooling function of insurance. Policies that create intolerable financial burdens for those with health care needs are the opposite of what we should be striving for.

We desperately need an equitably-funded universal risk pool. The private insurers will fight it every inch of the way. Is our ethical obligation to insurers or to patients? Isn’t it time to shove the private insurers out of the way so that we can establish our own public program that actually protects the financial resources of patients?

Health Care for All: Big Business to the Rescue?

As unlikely as it seems, big business may be the force that brings about universal health insurance.

By Daniel Gross
AARP Bulletin
January 2007

“It’s an outrage that any American’s life expectancy should be shortened simply because the company they worked for went bankrupt and abrogated health care coverage. And now we have a company like Ford virtually being bankrupted by the problem of rising health care costs, and yet you’ve got tens of millions of people with no health insurance.”

These words of frustration weren’t uttered by a union leader standing on a picket line. Instead, they came from billionaire Wilbur L. Ross Jr., number 322 on the Forbes 400, the former chairman of the International Steel Group and a major investor in U.S. textile, coal and auto parts companies. Ross made much of his fortune in recent years by restructuring bankrupt industrial companies, many of which were swamped by the escalating costs of insuring their aging work forces. He sees a need for some kind of government involvement in health care, and he’s not alone.

As unlikely as it seems, big business could emerge as the force that finally brings about universal health insurance. In the first week after the November elections, the CEOs of General Motors, Ford and Chrysler met with President Bush to discuss issues they faced, including health care costs. That same week, America’s Health Insurance Plans, a trade group of large insurers, released a 10-year, $300 billion proposal to provide health insurance for all children and 95 percent of adults–through a combination of tax breaks for individual taxpayers and the expansion of government programs such as Medicaid.

“I think we’re getting to a tipping point where this country is going to be willing to move on health care,” said Wal-Mart CEO Lee Scott in an appearance on the Charlie Rose show last year. “Business and labor are going to have to participate and probably play even more of a leadership role than government … and then bring the political side along with them.”

To Ross, the solution to America’s health care crisis is relatively simple. “We need some form of universal coverage that would be funded centrally by the government, but delivered privately through existing mechanisms like HMOs,” he said. The program, he suggested, could be funded by a tax on imports.

The discussion is clearly being prompted by bottom line issues: Soaring health care costs are a major problem for business. Companies in the United States compete against rivals in developed countries (Japan, Germany and France) where the government funds health care, and against developing countries (China, India) where neither business nor society at large is responsible for health insurance. Either way, American companies that provide health insurance are at a competitive disadvantage.

In 2005 money-losing General Motors spent $5.3 billion to cover the health costs of 1.1 million employees, retirees and dependents. Ross noted that, on a per-car basis, General Motors spends more money on health insurance than on steel. But Old Economy behemoths like GM aren’t the only ones suffering. “Since the beginning of this decade, health insurance premiums for average employers have increased 87 percent, compared with overall inflation of 18 percent,” said Joel Miller, vice president of operations at the Washington-based National Coalition on Health Care (NCHC), a nonprofit alliance of business, unions and consumer groups. These higher costs cut into operating margins and reduce the capacity of businesses to grow.

Thus far, the response from business has been to pass costs on to employees and reduce coverage. According to U.S. Census statistics for 2005, nearly 47 million Americans lacked health insurance, up from 40 million in 2000. And only 60 percent of Americans had job-based coverage, down from 63.6 percent in 2000–this after five straight years of robust economic growth.

Business leaders have traditionally been reluctant to call for a national effort to confront the issue. “We have people who map the genome or conquer the Internet who seem rather timid about speaking out on what’s good for the country,” said Andy Stern, president of the 1.8 million-member Service Employees International Union.

That reluctance began to change in 2004, when the NCHC–which includes large employers like Exelon, General Electric, Duke Energy and American Water–issued a report calling for comprehensive universal health coverage. The report laid out a range of options, such as expanding government programs like Medicare or letting people or businesses buy into the federal worker health plan. But while the organization’s corporate members endorsed the plan, its prominent CEO members haven’t publicly called for universal health care.

Experts like Drew Altman, president and CEO of the Henry J. Kaiser Family Foundation, say that personal ideology and lack of knowledge tend to block discussion on the subject. Case in point: Business leaders savaged the Clinton administration’s fruitless effort to create universal coverage in 1993. “Another factor,” said Altman, “is that these business leaders spend a small amount of time on the complex issue of health care. And many don’t really understand it.”

In addition, because most CEOs are focusing on creating returns for shareholders–and not on producing benefits for society at large–they tend to approach the question of rising health care costs as a business problem, not a social or political one. Some companies experiment with chronic disease management, ban smoking, invest in wellness programs, and depend on technology to manage costs. Others implement so-called “consumer-driven” reforms, like high-deductible policies or health savings accounts, which place responsibility for spending decisions in the hands of individuals, not insurers. The theory: Turning patients into consumers will help contain costs.

But now there are signs–including the NCHC report–that business is coming out of its shell and taking a receptive look at universal health care. Among the most vocal is Howard Schultz, chairman of Starbucks, which in May 2004 sponsored the Robert Wood Johnson Foundation’s “Cover the Uninsured Week.” “We can’t be the kind of society we aspire to be when we have 50 million people uninsured,” Schultz told Fortune recently. “It’s a blemish on what it means to be an American.”

Daniel Gross writes the Moneybox column for Slate and is a regular contributor to The New York Times.

Gov. Schwarzenegger must tackle the private insurers

Make health insurers play fair

Any plan to reform healthcare must tackle the biggest obstacle to insuring everyone — private insurers.

By Jamie Court and Judy Dugan
Los Angeles Times
January 5, 2007

When Gov. Arnold Schwarzenegger, on crutches, unveils his expected grand redesign of the state’s health insurance system Monday, he must tackle the biggest obstacle to insuring the uninsured: insurance companies.

For health coverage truly to be affordable and accessible, the governor and Legislature must force insurers to accept the following rules of fairness:

* A “take-all-comers” rule. Insurers today can deny a health policy to individual buyers in California for almost any reason. In Massachusetts, which recently required all citizens to carry health insurance, insurers have to take all patients, regardless of preexisting conditions. California insurers should be required to do the same.

* Charges set by community, not condition. California health insurers want to insure the healthy, not the sick, so they charge individuals who even might become sick astronomical premiums. Those who do become ill can see their premiums skyrocket or their policies canceled. It’s the opposite of Massachusetts and other states where health insurers must base premiums on broad characteristics such as age and regional healthcare costs Ć¢ā‚¬ā€ not on a buyer’s specific medical condition. The purpose of insurance, after all, is to spread the risk.

* Regulation of health premiums like auto premiums. California auto insurers must show that their profits are reasonable and ask permission of state regulators before raising premiums. The system has saved motorists tens of billions of dollars on their auto insurance since it was adopted in 1988. It’s the least the state should demand of health insurers, who now face little to no scrutiny of their profits or bloated administrative costs. As a result, health insurers that sell to individuals spend as little as 50 cents of every premium dollar on actual medical care.

* A ban on health insurance policies that set no limits on what patients can pay. A policy that pays only $300 a day for a hospital stay that costs as much as $10,000 a day may cost a lot less than comprehensive policies, but it is hardly worth the paper it is printed on. Fringe insurers have been held accountable in California courts for such “junk insurance,” but traditional insurers are moving toward similar “mini-policies.” All policies should have an out-of-
pocket maximum. If you’re left with half a million dollars in medical bills, as one California patient was recently after her husband’s death from cancer, then you’re not really covered.

* A “California Health Plan” offering universal access to public officials’ health coverage. The state employees’ retirement and benefits fund, CalPERS, has used its size and clout to cut drug costs and provide care without paying for insurers’ profit and overhead. Hundreds of thousands of state employees, including legislators and gubernatorial aides, have access to this directly state-funded system. If all Californians had access to this well-run, low-overhead plan, private insurers would be forced to drop prices and reduce overhead and profits if they wanted to compete.

http://www.latimes.com/news/printedition/opinion/la-oe-court5jan05,1,4392420.story?coll=la-news-comment

Comment:

By Don McCanne, MD

How many times have you heard from supporters of universal health care that every American should have the same coverage as members of Congress? They have the best insurance available today: Federal Employees’ Health Benefit Program (FEHBP).

California has used these same concepts to create a high-quality, comprehensive program for its public employees: CalPERS. California, led by the efforts of Gov. Schwarzenegger, is now tackling the difficult problem of covering the 6 million uninsured. Jamie Court and Judy Dugan of the Foundation for Taxpayer and Consumer Rights make the case that all Californians should be granted access to the well-run, low-overhead CalPERS program. How well would that work?

My daughter, a civil and environmental engineer, receives CalPERS coverage through her employer. Of the three types of plans offered (HMO, PPO, and EPO) she elected a PPO. Her plan has a $500 deductible, and provides 100% coverage after she has met stop-loss expenses of $3000. At her income level, a maximum out-of-pocket expense of $3000 would not be an unbearable burden (though it likely would be for low- to moderate-income individuals).

Using CalPERS coverage, she recently had an outpatient orthopedic procedure. Her orthopedist is in the insurer’s network, and prior authorization was obtained. Shortly after, she received the explanation of benefits from the CalPERS insurer. The total charges were $26,000 and the charges that were her responsibility were $16,000.

How could the best insurance available that covers all expenses after $3000 assess the patient a $13,000 penalty? I’ll leave it to you to guess how that might have happened, but I’ll describe it in the most positive word that I can come up with as a “technicality.” The important issue is not that there was a technicality, but that we continue to support a system that is rife with unnecessary and unfair technicalities.

The $13,000 penalty is currently being negotiated, but not with the CalPERS PPO. The technicality totally protects the insurer. My daughter’s only recourse is to negotiate with her health care providers a reduction in disallowed charges. The CalPERS insurer, the best there is, stands firm in its position that either the patient or the providers must bear the losses resulting from a technicality specifically designed to protect the insurer.

The role of private insurers is not amoral; it is immoral! They should be ejected from the health care equation. Those complacent with their CalPERS and FEHBP coverage need to take a closer look.

Jamie Court is a hero of mine. He has continued to stand up to the nefarious private insurance industry. I do respectfully differ with him in his conclusion in today’s article. We shouldn’t make CalPERS available to all Californians. We need to throw them out, and then cover all Californians, and the entire nation, with a comprehensive, single payer, public insurance program.

Technicalities are a strategic tool of private market plans, but not of public insurance. We should disqualify the private insurers on this technicality alone.

Private health insurance is a drag on the economy

Insurance is enough to make you sick

Private health insurance is a drag on the economy the government must fix.

By Patt Morrison
Los Angeles Times
January 4, 2007

It’s a good thing I have health insurance, because I thought my ticker was going to give out when I read this: Health insurance companies will not sell policies, at any price, to hale and healthy people who have, or had, some pretty trifling ailments. Hemorrhoids. Varicose veins.

A woman who’d gone to a psychologist after breaking up with her honey was denied. So was a guy with jock itch, and a 40-year-old man with asthma.

Lisa Girion’s front-page Times article the last day of 2006 leaped off the page and grabbed me by the throat, which is pretty much what health insurers are doing to millions of Americans — strangling them. If they don’t work for a company with health benefits and they want individual health policies, they pay huge premiums for skimpy benefits, if they can get a policy at all. For health insurers, it’s a seller’s market, and they ain’t selling.

Business, which has a firm grip on the legislative joystick, hits the panic button at talk of single-payer healthcare or universal healthcare, and it hauls out its own boogeyman phrases, such as “job-killer” and “drag on the economy.”

I’ll tell you what’s a drag on the economy. Healthcare insurance that’s impossibly expensive, or impossible to get. If the United States wants a vital economy of personal enterprise and risk-taking, then it needs to guarantee health coverage, period. Americans are willing to take chances in business and careers, but not with their families’ health, or their own.

Dan Luke is an Oregon insurance broker. He told me that he runs into this “all the time — people staying in jobs they don’t like. People have dreams about going into business for themselves that they can’t fulfill because they don’t want to lose medical coverage, and they can’t pay a lot of money for [individual policies] even if they are healthy.”

I gave him a professional for instance: Say there’s a man who wants to switch careers, start something on his own. He’s 59, married, four kids, comes to you for health insurance. He smokes cigars. (“Mmmmm,” I heard Luke say.) And he had heart-valve surgery almost 10 years ago.

Luke stopped me right there. The man would never get coverage. I didn’t even get to ask Luke about the risk factors of riding motorcycles and skiing.

My “for instance” is Arnold Schwarzenegger. If the governor weren’t a rich man, if he were just a guy with a bold idea who wanted to give it a shot, as Schwarzenegger did when he abandoned acting for governing, he couldn’t get health insurance. He’d be stuck in his old job instead of bringing something new to the economy and to his life.

A 2004 health industry survey Girion cited said 12% of applicants for individual policies were turned down. Luke believes it’s closer to 40%. “I can’t think of any other business,” he said, “where people have money in their hand to buy a product, and you can’t sell it to them.”

Schwarzenegger — on crutches because of his broken leg — gives his State of the State speech Tuesday. In October, at a meeting at The Times, I asked him what he’d do in a new term, and what he said then is what, it turns out, he’ll be promoting next week: “Find a way of providing healthcare for the people of California.” Now, with screws and cables holding his leg together, he can contemplate the pickle he’d be in if he were just Arnie S., a desk jockey dreaming of making something more of himself — and uninsurable at any price.

http://www.latimes.com/news/printedition/opinion/la-oe-morrison4jan04,1,2915046.column?coll=la-news-comment

And…

Kaiser to push for standards on health plans

The move comes amid a growing controversy over the insurance industry’s cancellation of individual policies for medical coverage.

By Lisa Girion
Los Angeles Times
January 3, 2007

Kaiser Foundation Health Plan Inc. said Tuesday that it was working with state regulators to develop standards to protect its members from unfair cancellations of health insurance, a move that the state’s largest HMO hopes could lead to industrywide reforms.

Kaiser’s move comes as it was being fined $100,000 by state regulators for dropping a policyholder it accused of concealing his epilepsy when he applied for coverage, even though the condition had never been diagnosed by a physician.

Also, the policyholder was unaware of his seizures because they were accompanied by amnesia.

Oakland-based Kaiser said its proposed standards would include the requirement that it consult with policyholders before deciding whether to rescind their coverage. Such a consultation would help the HMO determine whether policyholders intentionally submitted inaccurate information about their health conditions in order to obtain coverage.

Other health plans, including Blue Cross of California and its rival Blue Shield, are fighting regulators and former policyholders for the right to rescind coverage when medical information relevant to the policy-granting decision is left out of an application — even if the omission is an honest mistake or the result of a foggy memory or poorly worded question.

Amy Dobberteen, enforcement chief for the Department of Managed Health Care, said Kaiser’s plan to talk to policyholders first was a shift in the right direction.

“Other plans have pointed out to us endlessly that that’s not required by law,” Dobberteen said. “For goodness sake, if you are consumer-friendly, why wouldn’t you contact the consumer? Ć¢ā‚¬Ā¦ A health plan does have the moral responsibility to pursue [this information] when they are about to wipe out from under them their entire health security blanket.”

Cindy Ehnes, director of the managed care agency, has called a Jan. 29 hearing in Los Angeles to gather suggestions for regulations she is developing that would clarify the law and enhance consumer protections against unfair cancellations.

http://www.latimes.com/business/la-fi-kaiser3jan03,1,417514,full.story?coll=la-headlines-business

Comment:

By Don McCanne, MD

The first step in problem solving is to define the problem.

Let’s see. Hundreds of thousands or even millions of people nationally are denied health insurance coverage because of their prior medical histories, even for trivial disorders. That seems like a problem.

So what solution is California considering? They are attempting to establish specific guidelines for the insurers in order to protect them from penalties when they rescind coverage for individuals who successfully negotiated their underwriting process, but then obtained care for injuries or illnesses often unrelated to any preexisting problem.

What?! We do have real problems in health care. Let’s address those!

Protecting and nurturing the private insurers should be the very last priority of our public stewards, especially since the private insurers have continued to refuse to protect and nurture those with health care needs.

The private insurers are the greatest problem in health care financing today. Let’s throw them out and establish our own public single payer system. That would benefit the health of all of us. Oh, and our economy too!

U.S. has highest spending rate increase

Health Care Spending in the United States and OECD Countries

Kaiser Family Foundation
January 2007

After a brief respite in the mid-1990s, significant annual increases in health care spending over the past few years have refocused U.S. policymakers on the impacts that rising health care costs have on businesses and individuals and on federal and state budgets. Compared to other developed nations, the U.S. spends more on health care per capita and devotes a greater share of its GDP to health. Since 1980, the U.S. also has had among the highest average annual growth rates in per capita spending on health care. Despite this relatively high level of spending, the U.S. does not appear to provide substantially greater health resources to its citizens, or achieve substantially better health benchmarks, compared to other developed countries. This growing gap between health spending in the U.S. and that of other developed countries may encourage policymakers to look more closely at what people in the U.S. are getting for their far higher and faster growing spending on health care.

http://www.kff.org/insurance/snapshot/chcm010307oth.cfm

Comment:

By Don McCanne, MD

For policy analysts, the most important exhibit in this report demonstrates that the United States has not only had the highest percentage of GDP devoted to health care, but we also continue to have the highest percentage point increase in total health expenditures as a share of GDP. Although there has been some slowing of the rate of increase since 1990, ours is still the highest. The highest percentage point increase in the highest spending system has brought us neither better health benchmarks, nor, astonishingly, greater health resources for our citizens.

Our fragmented system of private plans and public programs is not working. It needs to be changed. So what are the current proposals? More of the same… but worse! Instead of fixing our system, our policymakers are supporting laws requiring individuals and/or businesses to pay the outrageous tab through mandates to purchase ever-less-effective private insurance plans.

Talk about irresponsible! Now that insurance rates and health care are truly unaffordable for average-income Americans, they are no longer simply telling us to live with it, they are ordering us to foot the bill that we can no longer pay (as long as we depend on the private insurance industry to finance health care for the majority of us).

Every policymaker knows that we can slow the rate of increase while dramatically improving the allocation of our current health care resources simply by jettisoning our highly dysfunctional system of health care financing and adopting a single-payer national health insurance program.

It’s the private plans, stupid!

Health Care Problem? Check the American Psyche

By ANNA BERNASEK
New York Times | Economic View
December 31, 2006

WHAT is the most pressing problem facing the economy? A good case can be made for the developing health care crisis. Soaring costs, growing ranks of uninsured and a steady erosion of corporate health benefits add up to a giant drag on the nation’s future prosperity.

While the outlook seems scary, it doesn’t have to be. There is a solution, proven effective for hundreds of millions of people: single-payer health insurance.

Yes, single-payer — that much-maligned idea that calls for everyone to pay into one insurer, typically the government or a public agency. The insurer then pays doctors, pharmacists and hospitals at preset rates. Patients who want unapproved procedures and doctors not willing to accept the standard payment remain free to deal with one another directly, outside the system.

Such a system makes it much easier to deal with the growing costs of medical care, like administrative expenses and prescription drugs. It could also reduce the mountains of paperwork plaguing the current system and provide insurance coverage for the 46 million Americans now doing without it.

What’s more, as demonstrated in France, Britain, Canada, Australia and other countries with functioning single-payer systems, significant savings can come without hurting the overall health of the population.

There’s only one catch. Most Americans just don’t believe it can be done. The health care crisis may turn out to be more of a problem of ideology than economics.

The economic case for a single-payer system is surprisingly strong. Start with what we already know. Countries with single-payer systems have long records of spending less on health care than the United States does. 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.

At the same time, life expectancy in the United States, a broad measure of health, was slightly lower than it was in those other countries in 2004, the latest year for which complete figures are available. And the United States had a higher rate of infant mortality.

To be sure, a single-payer system has plenty of critics. Unattractive features of some such systems, including waiting lists for particular types of care, are often highlighted by skeptics. But supporters note that the overall health of people fares well in those countries.

“The story never changes,” said Gerard F. Anderson, a professor at the Johns Hopkins Bloomberg School of Public Health. “The United States is twice as expensive with about the same outcome.

“As a consumer, I don’t mind paying more if I’m getting more, but that’s just not the case in the U.S.,” said Professor Anderson, who publishes an annual review comparing the American health care system with those of its peers.

What may be less well known is the level of administrative waste in the United States health care system, versus that of well-designed systems elsewhere. Although Americans tend to equate efficiency with private enterprise, that’s not the case with the current system.

The American system, based on multiple insurers, builds in more unnecessary costs. Duplicate processing of claims, large numbers of insurance products, complicated bill-paying systems and high marketing costs add up to huge administrative expenses.

Then there’s an enormous amount of paperwork required of American doctors and hospitals that simply doesn’t exist in countries like Canada or Britain.

“There’s little disagreement among economists today that a single-payer system would lead to lower administrative costs,” said Len Nichols, a health economist with the New America Foundation, a policy research organization in Washington. But he said that estimates varied widely over how big the savings could be.

One of the first major studies to quantify administrative costs in the United States was published in August 2003 in The New England Journal of Medicine by three Harvard researchers, Steffie Woolhandler, Terry Campbell and David U. Himmelstein. It concluded that such costs accounted for 31 percent of all health care expenditures in the United States.

More recently, in 2005, a study by the Lewin Group, a health care consulting firm commissioned to examine a proposal to provide universal health coverage in California, estimated that administrative costs consumed 20 percent of total health care expenditures nationwide.

Then there’s the test of time. Health care costs tend to rise over time as new technology and procedures are introduced. Yet here, too, government-funded systems appear to help contain long-term costs.

Consider Canada’s system. Professor Anderson points out that in the 1960s, Canada and the United States spent roughly the same per person on health care. Some three decades later, though, Canada spent half as much as America. How did Canada manage this? By controlling the use of medical equipment and hospital resources, which statistics show has helped Canadians keep a lid on costs without measurably compromising the overall health of the population.

Economic studies also show that a government-funded system could reduce costs while providing coverage for everyone. The Lewin report on the proposal to provide universal health coverage in California calculated that if such a system had been operating in 2006, it would have saved $8 billion, or around 4.3 percent of total health spending in the state. From 2006 to 2015, it estimated, savings would total $343 billion. Currently, California spends about $180 billion a year on health care.

Despite everything that is known about the economic benefits of a single-payer system, there’s one big stumbling block: many Americans don’t believe in it. They have heard horror stories from abroad, often spread by partisan advocates, focusing on worst-case examples. Such tales play upon the aversion of many Americans to government involvement in the economy.

Victor R. Fuchs, an economics professor at Stanford and a specialist in health care economics, explained it this way: “The Canadian system is a nonstarter for the U.S. even though it’s a good system for Canadians. You’re dealing with two very different countries. We were founded on life, liberty and the pursuit of happiness. They were founded on peace, order and good government. It’s a difference of values.”

Others in the field echo his skepticism. But that raises questions about how well Americans understand the system they have, and what the alternatives are.

JUDGING from other countries, many features that Americans really like — being able to choose their own doctor, for example — would remain available in a well-designed single-payer system. And a single-payer system need not mean government-provided care: it often means government-provided insurance that encourages competition among providers.

Much of the resistance to a single-payer system appears to stem from a lack of confidence in the nation’s ability to make positive change. With all of its prowess in research and technology, can’t the United States match the efficiency of other developed nations, or do even better?

Changing the minds of so many millions of people isn’t done overnight. But sooner or later, persuading people to do something that’s in their own economic interest ought to succeed.

Copyright 2006 The New York Times Company

Insurers say they have to be picky

Healthy? Insurers don’t buy it

Minor ailments can thwart applicants for individual policies.

By Lisa Girion
Los Angeles Times
December 31, 2006

Insurers have wide latitude to choose among applicants for individual coverage and set premiums based on medical conditions. Insurers say medical underwriting, as the selection process is known, is key to keeping premiums under control.

“Our goal is to extend affordable coverage to as many people as we can,” said Cheryl Randolph, a spokeswoman for PacifiCare Health Systems Inc., a subsidiary of Minneapolis-based UnitedHealth Group Inc. “But because of the medical underwriting, we do not accept everybody.”

Consumer advocates see the practice as cherry-picking — a legal form of discrimination that is no longer tolerated in schools, public accommodations or workplaces — and a way to guarantee profits.

“The idea is to avoid all risk,” said Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego.

A consumer survey this year found that 1 in 5 people who applied for individual coverage was turned away or charged a higher premium because of preexisting conditions. Experts say it is hard to know how many of California’s more than 6 million uninsured residents are uninsurable because many people with medical problems don’t even bother applying in the belief that they would be rejected.

Insurers say they are picky because they have to be.

Kaiser Permanente’s “fairly generous” benefits require that the health maintenance organization be restrictive to remain solvent, spokesman Jim Anderson said. “We have to be very careful to not enroll a bunch of people who are going to spend all the money on their care.”

A last resort for people turned away by the private market is the state’s high-risk pool, in which the state assumes the financial risk but pays private insurers to administer coverage. Enrollees spend as much as one-third of their income on monthly premiums that cost as much as $796. Yet annual benefits are capped at $75,000.

Still, demand perennially outstrips the high-risk pool’s capacity, which has been reduced over the years as medical costs have risen and funding has remained largely limited to state tobacco tax revenue and enrollee premiums. Of 32 states with medical high-risk insurance pools, California’s is one of the largest, covering 7,800 people.

http://www.latimes.com/business/la-fi-reject31dec31,0,3951790,full.story?coll=la-home-headlines

Comment:

By Don McCanne, MD

In the debates on health care reform, those supporting private insurance solutions are frequently confronted with the problem of those denied coverage due to medical underwriting. Their glib answer usually cites the various state high-risk insurance pools that, though not perfect, take care of that problem. Most audiences accept that response and move on. But should we?

Look at California’s high-risk pool – one of the largest in the nation. For close to $800 per month, the individual’s coverage ends after $75,000 in expenses. In this day when some consumer-directed advocates are recommending deductibles of $25,000 or $50,000, you can see that $75,000 isn’t much coverage. And talk about waiting lists – only 7800 of California’s 6,000,000 plus uninsured have been able to obtain this coverage, a mere 0.0013 percent of the state’s uninsured!

Do not let anyone ever again claim that state high-risk pools are taking care of this problem.

What is the answer? Some states have required that all applicants be accepted (guaranteed issue) and that rates be established based on the risks of the population covered (community rating). But this drives up insurance premiums, causing more to drop their coverage thereby increasing the numbers of uninsured.

Another current recommendation is to establish government reinsurance. After covering (or dodging) the first $50,000 or so of medical expenses, the private insurers would be relieved of further responsibility for pooling risk. But this is where the heavy spending is. Why bother leaving the egregiously wasteful private plans in charge if we shift the insurance function over to the taxpayers?

We’re back to the fundamental problem that has created all of the turmoil. Health care has become too expensive for average income individuals to fund their proportionate share. We are already spending an average of $7100 per person – over $28,000 for a family of four (when median family income is about $44,000 per year). It is an absolutely inescapable fact that, if we expect everyone to have reasonable coverage, we will have to establish a more effective pooling mechanism that not only transfers funds from the healthy to the sick, but also transfers funds from the wealthy to those not so wealthy who need health care.

The private insurance industry will never provide the framework that will accomplish this. They have made their position clear. “We do not accept everybody,” and “We have to be very careful to not enroll a bunch of people who are going to spend all the money on their care.”

A single, publicly funded, universal risk pool is precisely the structure we need. Yet we continue to support policies that protect and enhance the private insurance industry at the cost of affordable access to health care for those with needs. Doesn’t “do not accept” and “careful not to enroll” give us the moral authority to throw these buttinskies out?

Great White North

By Mark Gottlieb, Manufacturing.net
Manufacturing.Net – January 2, 2007

When you hear or read the term “North American Free Trade Agreement,” which country comes immediately to mind?

If you’re like most people, you will think first of Mexico.

But there is, of course, another big player on the continent, one whose significance as a manufacturing locale is profound and has been growing steadily for even longer than NAFTA has been around.

What was that name again?

Oh, right — Canada.

Seldom has so large a land mass been so often overlooked — not to mention dismissed, disparaged and denigrated. In the global ranking of national geographic areas, Canada is second in size only to Russia, dwarfing the continental U.S., China, India, Brazil and Australia. But because Canada’s population is so small — little more than 32 million people, or about the same as the combined populations of Shanghai and New York City — she is to many a blank spot on the map and a cipher to even her closest neighbor.

The popular image of Canada is usually limited to moose, Mounties and the infamous poutine, a dish of white cheese curds over lard-fried spuds, the whole being drenched in dark brown gravy. (Poutine is an acquired taste everywhere on earth except Quebec, where it is considered part of the provincial birthright.)

But according to the World Bank, Canada was the world’s ninth-largest economy in 2005. While Canadian Gross Domestic Product ranked far behind that of the U.S., Japan, Germany, China, the United Kingdom and France, it was closing fast on those of Italy and Spain, both of which are far more populous. And it was already well ahead of Mexico’s, as well as those of India, Brazil, Korea, Russia and Australia.

Turkey? Indonesia? Sweden? Argentina? Malaysia? Not even close.

Preliminary figures for 2006 show Canada moving up a notch to eighth place globally in GDP. And while Canada is also the world’s eighth-largest producer of petroleum and natural gas — with reserves in oil shale and oil sands so great as to be almost incalculable — it may surprise you to learn that roughly half of all Canadian exports are manufactured goods. Everything from Bauer hockey skates to Bombardier aircraft and Research in Motion BlackBerry handheld communication devices comes to us from the Great White North.

Automobiles constitute by far the country’s largest manufacturing export. Canada is the world’s third-largest exporter of automotive products, shipping more than $100 billion in vehicles and parts every year. Today, the country is home to manufacturing and assembly facilities of General Motors, DaimlerChrysler, Ford, Toyota, Honda and Suzuki.

Indeed, a milestone was passed in 2004, when for the first time the largest car-producing region in the world was not the state of Michigan. The new Motown could be found across the Ambassador Bridge from Detroit, in the Canadian province of Ontario.

It would seem, then, that Canada is fighting far above its weight class. So how to explain the remarkable performance of the Quiet Giant?

In the automotive sector at least, four reasons stand out.

First: productivity. When measured in terms of hours per vehicle assembled, Canadian car and light-truck plants beat U.S. facilities by more than 7 percent.

Second: quality. Canadian plants are routinely rated at the top in terms of quality production. In fact, GM’s facility in Oshawa, Ontario, has three times been ranked by J.D. Power and Associates’ annual initial-quality studies as the best in the entire western hemisphere. And in 2003, a Canadian Toyota plant became the first venue outside Japan to be allowed to produce the luxury Lexus vehicle.

Third: smarts. Carmakers in Canada have access to a highly educated workforce and a robust system of knowledge transfer with Canadian universities.

Fourth: publicly funded national health insurance. In the U.S. — where employer-supplied health insurance is the norm — General Motors incurs nearly $6 billion annually in medical and health-care costs for its employees and retirees, adding some $1,500 to the price of every vehicle it produces. Not so in Canada, where the national health insurance system is paid for through universal taxation and covers everyone. As a result, the average real cost of health care to employers in Canada works out to about one-eighth that incurred in the United States.

Give it a moment’s thought and you may begin to see a pattern there. Could it be that Canada’s first three advantages might all be related in some way to the fourth? Could it be that a healthy workforce — employees whose medical needs, both curative and preventive, are attended to with a minimum of fuss, stress and paperwork — is a more productive, more conscientious and more intelligent workforce? And could it be that such a workforce does a better job than its counterparts in countries like, say, the United States?

If there are lessons to be learned from Canada’s success as a manufacturing nation, the most important of them may well derive not from the factory floor but from the doctor’s waiting room. And that is something to consider seriously the next time the subject of universal health insurance comes up for debate in that other country in North America — the one found on Canada’s southern border.

Lessons for 2007

Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself…. Economic freedom is also an indispensable means toward the achievement of political freedom.
Milton Friedman
Capitalism and Freedom (1962)

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
John Maynard Keynes
The General Theory of Employment, Interest and Money (1936)

The test of our progress is not whether we add more to the abundance of those who have so much; it is whether we provide enough for those who have too little.
Franklin Delano Roosevelt
Second Inaugural Address (1937)

Perhaps it is this specter that most haunts working men and women: the planned obsolescence of people that is of a piece with the planned obsolescence of they things they make. Or sell.
Studs (Louis) Terkel
Working (1972)

Comment:

By Don McCanne, MD

Wise lessons for 2007… and beyond.

The Washington Post on the feasibility of single payer

Single-Payer Is Feasible

Letter to the Editor
The Washington Post
December 28, 2006

The Dec. 13 editorial “Inequality and Health Care” was right on the mark in its diagnosis of America’s health-care problem.

Your continued dismissal of a single-payer solution as “politically infeasible” is less persuasive. Media misrepresentation may give the impression of infeasibility. Yet Medicare is a single-payer system, and it’s enormously popular and economical.

A Dec. 1 Washington in Brief item reported that a study has found that “private health-care plans for the elderly cost the U.S. government $5.2 billion more last year than traditional Medicare coverage.”

Besides, Medicare covers the expensive populations — the elderly and disabled — leaving the young and healthy to the insurance companies, which still decline to make coverage affordable to middle-income families.

It would seem, therefore, that Medicare for All would be a more economical way to provide affordable health care to everyone than would subsidizing private insurance coverage.

Mary Von Euler
Bethesda

http://www.washingtonpost.com/wp-dyn/content/article/2006/12/27/AR2006122701496.html

The Dec. 13 Washington Post editorial, “Inequality and Health Care:”
http://www.washingtonpost.com/wp-dyn/content/article/2006/12/12/AR2006121201436.html

Comment:

By Don McCanne, MD

The significance of the publication of this letter and the editorial on which it is based cannot be understated. Although very subtle, the national dialogue on reform has changed.

In their editorial, The Washington Post stated, “switching to an entirely tax-financed system (euphemistically known as ‘single-payer’) may be politically infeasible at this point.” Please note that “…may be politically infeasible…” is a far different position from “…is not politically feasible…” It is a clear acknowledgment that the lack of political feasibility is no longer an absolute given.

The fact that they published a letter in response that expands on this point is further confirmation that The Washington Post believes that single payer has a legitimate position in our national dialogue on reform.

That’s a giant step forward. An honest debate of all policy options should be the primary determinant of political feasibility.

Private insurance risk pooling in Ireland and U.S.

Bupa health pulls out of Ireland

Health insurer Bupa has said it will close operations in Ireland to avoid making payments to a main rival.
BBC News
December 14, 2006

The Irish High Court ordered Bupa to make “risk equalisation” payments to state health insurer VHI, which has older policyholders.

The payments are meant to limit VHI’s costs and cut premiums, thus supporting the government policy of charging clients the same for health insurance.

Under the process of risk equalisation, insurers with a higher number of elderly customers – which tend to make more claims – are compensated by insurers with younger clients.

“Irish consumers are the real losers as the market will be restored to a virtual monopoly,” said Martin O’Rourke, managing director of Bupa’s Irish operations.

http://news.bbc.co.uk/1/hi/business/6180279.stm

Comment:

By Don McCanne, MD

What is the primary function of health insurance? Pooling risk. All participants make an equitable contribution into the pool of funds that pay for health care for everyone. Disease and injury can never be equitably distributed, but the financial consequences can be.

Our policymakers continue to reject the most effective model of pooling risk – single payer – with the convenient but dubious claim that it is not politically feasible. The policy recommendations currently in vogue – employer mandate, individual mandate, high-deductible plans, association health plans, etc. – all use private insurers. The policymakers give the private plans credibility by citing their use in many other nations with universal systems of health care.

It is very important to understand how these more egalitarian systems pool risk. One of the most difficult tasks is to be certain that no insurer risks insolvency due to adverse selection – having to pay out more in benefits because of a less healthy, higher cost clientele. Likewise, it is important that other insurers do not unfairly benefit from favorable selection – increasing profit by successful selective marketing to a lower cost, healthier segment of the population. Adverse selection and favorable selection defeat the crucial function of equitably pooling risk.

So how do they do it? These egalitarian systems use sickness funds or transfer funds to adjust for the inevitable selection problems, whether inadvertent or deliberate. They either draw from a common pool, or they transfer funds between their respective pools based on the actual claims experiences. Thus when we talk about private insurance in other nations, we have to acknowledge that their version has almost no resemblance to our concept of private plans in the marketplace.

Our private insurance companies are absolutely dependent on favorable selection to produce the returns that we have come to expect of them (admired by Wall Street and reviled by reform activists). The insurers have skimmed off the nation’s employees and their healthy families, plus the healthy sector of the individual insurance market. By leaving out the less healthy, higher cost sectors of our society, they have totally defeated the purpose of pooling risk.

Suppose we did mandate universal coverage, using the private insurers. Obviously, the insurers’ risks would dramatically increase once they included high cost patients, and that risk would not be evenly distributed between insurers. Suppose claims experience resulted in record profits for Wellpoint, and Cigna was insolvent at the end of the year. The egalitarian systems would require Wellpoint to transfer funds to Cigna.

Could you imagine, with our market mentality, expecting Wellpoint to transfer perhaps tens of billions of dollars to competitors? Or could you imagine a private Medicare Advantage plan transferring funds to the traditional Medicare program only because the private plan performed well through its favorable selection marketing? The private Medicare + Choice plans once walked away for much less.

And that is what just happened in Ireland. Bupa practiced favorable selection by insuring the young and healthy, and the Irish High Court required that they transfer “risk equalisation” payments to the state health insurer. Bupa walked away.

This demonstrates why our policymakers are wrong when they insist that we must use the private insurance industry to expand coverage to everyone. We must begin with the principle that funds must be pooled, and the pool needs to be funded equitably. Private insurers cover two-thirds of us but only pay one-third of our total health care costs. With an effective, egalitarian method of pooling, they would have to pay two-thirds of the costs (adjusted for the expansion to universal coverage). That would double the premiums that we are paying. Yet employers and individuals are already bailing out because they can’t afford our current premiums.

If we are serious about providing everyone with insurance that really works and is affordable, we are going to have to abandon the idea of separate private insurer risk pools. By design, a single payer system would establish a single risk pool covering everyone, and it would be funded in the only equitable manner that’s reasonable – through progressive tax policies that shift funds from the healthy to the sick and from the wealthy to those not so wealthy who need health care.

An egalitarian America? Did I just hear, “Bah, Humbug!”