PNHP

A Proposal for Financing National Health Insurance

A Proposal for Financing National Health Insurance

In this 1999 article, physician economist Dr. Edith Rasell outlines a possible system for financing national health insurance. Savings on administration (currently 31 percent of health spending) would be combined with current sources of public funding (Medicare, Medicaid, SCHIP, etc). A modest 2 percent personal income tax would replace insurance premiums and out-of-pocket costs currently paid by individuals (the average individual health insurance premium alone is today more than $3,500), and a 7 percent payroll tax would replace employer contributions and relieve them of the costly burden of administering their own health benefits (industrialized sectors currently pay as much as 14 percent of payroll for health care).

Although Dr. Rasell’s is the most often cited financing structure, any number of different arrangements could possibly be used. Since the financing of public programs is more a matter of tax policy than health policy, PNHP does not endorse any single financing proposal.

Read “An Equitable Way to Pay for Universal Coverage” (pdf)

For-Profit Hospitals Cost More and Have Higher Death Rates

In this pair of studies from the Canadian Medical Association Journal, a distinguished team of researchers led by Dr. P.J. Devereaux at McMaster University (Ontario) performed large scale meta-analyses on the existing research concerning mortality rates and payments for care at private for-profit vs. nonprofit hospitals. Since private for-profit hospitals are virtually nonexistent in Canada, the research examined U.S. for-profit hospitals. Taken together, the studies reviewed 23 academic papers (15 on mortality rates, 8 on payments) examining more than 26,000 hospitals.

After all the research was reviewed, the evidence against for-profit hospitals was conclusive: for-profits had 19 percent higher costs and 2 percent higher death rates. The authors attribute these defects directly to the for-profit nature of the hospitals: The necessity to generate revenues to satisfy investors, the significantly higher administrative costs and the large executive bonuses, they say, “result in limitations of care that adversely affect patient outcomes.”

Read “Payments at For-Profit and Non-Profit Hospitals” (pdf)

Read “Mortality Rates of For-Profit and Non-Profit Hospitals” (pdf)

For-Profit Hospitals Cost More and Have Higher Administration Expenses

In this 1997 NEJM study, Drs. Steffie Woolhandler and David Himmelstein examine costs of care and administration at for-profit, nonprofit and public hospitals in the U.S. They found that administration consumes 34.0 percent of total costs at for-profit hospitals, 24.5 percent at nonprofit hospitals, and 22.9 percent at public hospitals. Compared with public hospitals, nonprofit hospitals were 23 percent costlier and for-profits were 34 percent costlier. Among acute care hospitals, for-profits had higher adjusted costs per discharge ($8,115) than did nonprofit ($7,490) or public ($6,507) hospitals. Much of this difference was due to higher administrative costs.

Read “Costs of Care and Administration At For-Profit and Other Hospitals in the U.S.” (pdf)

For-Profit HMOs Provide Worse Quality Care

In this 1999 JAMA study, Drs. David Himmelstein, Steffie Woolhandler, Ida Hellander and Sidney Wolfe examined the performance of for-profit HMOs vs. nonprofit HMOs on 14 quality-of-care indicators. Compared to the nonprofits, for-profit HMOs performed worse on all 14 care indicators. After controlling for HMO model type, geographic region and method of data collection, the researchers found investor-ownership to be consistently associated with lower quality care.

Read “Quality of Care at Investor-Owned vs. Not-for-Profit HMOs” (pdf)

For-Profit Medicare Plans Cost 11 Percent More Than Traditional Medicare

Medicare advantage (formerly Medicare + Choice) plans are private for-profit plans that administer Medicare benefits. Given a big boost by the 2003 Medicare drug bill, supporters argued that competition and businesslike efficiency of these plans would drive down costs. In fact, the reverse is true. Private plans enrolled only cheap, healthy seniors and dumped the rest on the traditional program. The result has been large overpayments by Medicare to the private plans. This latest report from MedPac finds private plans are paid an average of 111 percent of what it would have cost to treat their beneficiaries in traditional Medicare.

Click here to read more (pdf)

Individual Mandates (The Massachusetts Plan)

In April 2006, Massachusetts passed an “individual mandate” bill, legislation which requires all residents to buy a private health insurance plan or face a tax penalty. Some subsidies are provided for low-income residents, and a new state agency was created to assist residents in finding a plan. Two months later the American Medical Association endorsed the mandate concept and a number of state legislatures introduced copycat bills.

But as Drs. David Himmelstein and Steffie Woolhandler point out in this editorial response, individual mandates offer a false promise of universal coverage. Mandate proponents promise comprehensive coverage at a low cost, but the exorbitant price of private coverage (averaging $3,500 for an individual and $10,000 for a family) means that many families will have to decide between financial hardship and low-premium plans that offer no coverage worthy of the name.

Moreover, individual mandates do nothing to control the rising cost of care, continuing to funnel health dollars though wasteful private insurers and hospitals. Instead, they mandate that cost of covering the uninsured should be incurred by the uninsured themselves.

Click here to read their response

Connecticut's study of three models of reform

Health Care in Connecticut:
Sounding the Alarm
(A Policy Brief released June 22, 2006)

Economic and Social Research Institute (ERSI) (Jonathan Gruber, a health economist at the Massachusetts Institute of Technology developed the cost and coverage estimates used in the full report and this brief. The Urban Institute contributed to macroeconomic analysis to the report.)

This brief outlines three health care policies for Connecticut to consider as alternatives over its current helter-skelter system of health care and coverage. The implementation of each strategy would result in a range of benefits over the existing system. However, only one of the three strategies fully meets the criteria of universal health care established by the Institute of Medicine (IOM).

Policy I

One Health Plan Serving All State Residents

With all state residents under 65 in a single health plan sponsored by the state government, Connecticut would achieve 100 percent coverage while reducing total health care costs. By directly purchasing services from health care providers, the plan would provide benefits like those offered by typical private employers today. A standard benefits package would be available to all and would include the services covered by a typical benefits plan offered by the Connecticut employer now.

A new state commission would administer the plan either directly or through a private insurer. The commission would control costs by defining covered benefits and out-of-pocket sharing rules, setting a statewide budget for health spending, negotiating reimbursement levels with providers and setting standards for quality of care. Individuals and employers could purchase additional health care services or coverage.

…while all residents would be insured, total health care spending on the nonelderly would fall by 5 percent. Average health costs per insured would decline by 16 percent, from $4,121 to $3,447, in part because of reduced administrative costs incurred by insurers, health care providers and employers.

Total employer payments for health insurance would fall by $590 million or
11 percent.

Because of lower health insurance and health care costs, this approach would give Connecticut households $1 billion in new, net annual income available for purposes other than health care and health insurance.

This policy alternative could fully meet the criteria articulated by the Institute of Medicine:

  • Universal coverage can be achieved – 100 percent of residents would be covered.
  • Health care coverage would be more continuous, with all nonelderly residents enrolled in the state plan.
  • Coverage would be affordable to state residents.
  • The health insurance strategy would be affordable and sustainable for society, although some firms not offering coverage today would experience new costs.
  • The one state plan would have the capacity to implement measures that dramatically improve quality and efficiency, and eliminate disparities in access to and the quality of care among ethnic and racial minorities.

(Endnote 6: Estimates are limited to the nonelderly. However, the reduction in health care prices… would probably affect costs for the elderly as well. If either such “ripple effects” or a federal waiver allowed Medicare beneficiaries to benefit fully from the cost savings achieved by the one state plan alternative, the average Medicare beneficiary could realize annual savings of up to $410 in out-of- pocket costs.)

Policy II

A State Pool with Competing Private Plans for Residents Lacking Employer-Sponsored Coverage

This second policy alternative would satisfy some, but not all, of the Institute of Medicine’s principles.

Policy III

Expanding the Health Coverage Safety Net for Low- and Moderate- Income Adults and Insuring All Children

While this approach would cover a significant number of the uninsured at modest cost, it would not satisfy the criteria of the Institute of Medicine.

http://www.universalhealthct.org/pdf/policybrief_web.pdf

Comment:

By Don McCanne, M.D.

Who’s surprised? We now have yet one more highly credible study from other independent sources demonstrating that single payer is the only model of the three which meets the reform criteria of the Institute of Medicine, while also being the most effective in reducing health care spending. An FEHBP-type program for the uninsured, or expanding the safety net for lower-income individuals and all children, both are more expensive and fall short of reform goals.

Although PNHP would tweak the single payer model studied, our changes would not alter the fundamental findings of this report. Single payer would provide continuous, comprehensive, high quality care for everyone, reduce disparities in access and quality, while being the most effective model in finally making health care affordable.

We really don’t need more studies. The policy science could not be more solid. What we need now is politics.

Bring on National Health Insurance

By Vincent P. Maconi
Delaware On-line, The News Journal, 6/25/06

Editorial for Single-Payer

When Gov. Minner nominated me to be Delaware’s secretary of Health and Social Services in January 2001, a few eyebrows were raised. I’m not a physician, nor had I spent any of my government career in health care. But if coming into the job without a lifetime of experience required me to climb a steep learning curve, it also allowed me to enter the field without preconceived notions.

It quickly became clear to me that this nation needs universal health care. America’s health care system, despite the efforts of millions of dedicated health care professionals, is broken. Frankly, nothing but national health insurance makes sense.

I might seem an odd official to be championing national health insurance, given that many of the times my name has appeared in this newspaper over the past few years, it has been to defend efforts to control costs of the state’s largest health care program, Medicaid. In fact, attempting to get my arms around state spending has given me an excellent vantage point from which to see the system’s problems — and the only logical solution.

Phil Soule, Delaware’s long-serving Medicaid director who recently retired, once told me that in years past, Medicaid was all about making people healthier. Now it’s all about who is paying the bills. He’s absolutely right, and sadly that focus extends to just about everyone else in the health care arena.

Everybody — doctors, hospitals, insurance companies, government officials, and patients themselves — spends too much time administering or coping with the system and figuring out who will pay for a service — and not enough time figuring how to deliver service better or to more people. No one spends enough time figuring out how to make people healthier.

Having spent my life in politics and government, I’m a realist. I know that the current president and leadership in Congress have no interest in a universal health care system. Those who don’t oppose it on philosophical grounds would likely argue that the country can’t afford it.

I could make the argument that the world’s wealthiest country should guarantee health care to all of its citizens. That’s the kind of society that I want to live in. But for those who aren’t moved by that aspiration, there’s every likelihood that a national health care system would not only pay for itself through a healthier populace, it would also cost less in dollars than what the nation pays for health care now.

Our money’s worth

The literature of health care is replete with studies comparing this country’s health care with other developed nations, all of which have national health care systems. Virtually every one shows the same thing: The United States spends more money per capita than any other country, yet is less healthy.

We’re paying the highest prices, but getting the lowest quality.

Look at a health spending analysis by the Organization for Economic Cooperation and Development, comprised of 30 of the world’s leading industrialized nations. Examining the 2002 data, the OECD reported that the United States per capita health care spending of $5,267 was not only 53 percent higher than that of the second-highest country, Switzerland, it was almost two and a half times the average per capita health care expenditure of all the other developed nations.

To put it another way, the United States is spending nearly 15 percent of its gross domestic product (the combined value of all goods and services produced by a nation) on health care. Only Switzerland and Germany also spend as much as 10 percent.

The United States pays much higher prices than other countries for hospital stays, drugs and physician services.

Administratively, we’re awash in red tape. Health administrative costs in America are triple what they are in Canada, which has universal health care.

What results are we getting for paying that huge bill? The system hasn’t produced health coverage for all. Even in Delaware, which has one of the lowest rates of people without health insurance in the country — thanks largely to the huge investments Gov. Minner and the General Assembly have made in the state’s major health care programs, Medicaid and the Children’s Health Insurance Program — 10 percent of our residents lack any form of coverage.

Nationwide, that figure is more than 15 percent. Many of the uninsured are the working poor, who earn too much to receive government aid, but not enough to afford insurance.

Let’s also examine two universally recognized measures of national health: life expectancy and infant mortality. A quick surf on the Internet reveals that, among those 30 OECD countries, the U.S. life expectancy of 76 years exceeds that of only seven: Mexico, South Korea, Turkey, and the former communist nations of Slovakia, Poland, Hungary and the Czech Republic.

People everywhere from Iceland to Australia live longer than we do in America.

Last November, ABC News reported that the United States ranks 28th in the world in infant mortality — not just far behind Sweden, France, Japan and Germany but behind Cuba too. The United States is on a par with Croatia and Lithuania.

If the lack of support for health care reform by the president and Congress isn’t puzzling, the lack of business support is. You can’t pick up a newspaper without reading about another company cutting back on health coverage for employees or pensioners.

Certainly, the business community has historically preferred less government. But given that private businesses are having the same difficulties paying for health care as the public sector, I predict that over time, more business executives will come to see that health care is better left to government.

In today’s global economy, American companies are at a competitive disadvantage when up against businesses in other nations whose out-of-pocket health costs are zero. It’s a mystery why General Motors and other automobile companies, with their well-publicized dilemmas regarding health care overhead, are not leading the call for national health care. Small businesses too are experiencing increased difficulty in locating affordable health insurance.

With all due respect to those passionate advocates for a single-payer system in Delaware, I doubt this state could do it alone. Were Delaware the only state to adopt universal health care, individuals from surrounding states (if not the entire country) would flock here, especially the sick and uninsured. Delaware would go broke quickly.

Universal health care likely wouldn’t work in Delaware alone unless it figures out a way to prevent individuals from moving to this state to take advantage of the health care system — something I’m sure the Supreme Court of the United States would find problematic.

Whether the president, Congress and business are uninterested or opposed to a nationwide health care system, the country nevertheless is going to get there sooner or later. The only question is whether it gets there accidentally or on purpose.

Right now it’s getting there accidentally. As fewer private businesses offer health insurance to employees, the percentage of the population that receives health care from government programs continues to rise. The New York Times recently projected that by 2014, more than half of Americans will receive their health care from the government. So let’s get there on purpose.

Taiwan did exactly that 11 years ago, switching from a system similar to that of the United States to universal health care. Within six years, its uninsured population declined from over 40 percent to less than 3 percent, without an increase in costs.

As Winston Churchill once said, “Count on Americans to do the right thing, after they’ve tried everything else.” It’s time to end the irrationality of this health care system and move to national health insurance.

Vincent P. Meconi is secretary of the Delaware Department of Health and Social Services.

Smooth Sailing in Medicare Drug Benefit May Not Last, Wall Street Seers Say

Commonwealth Health Policy Report

June 22, 2006 — An annual event that typically gives Washingtonians blinkered by spin and ideology a bracing dose of business perspective on health care lived up to its reputation Wednesday.

Among the blunt assessments offered by Wall Street analysts at the event: the commercial insurance industry has given up trying to control health costs; much of the enrollment growth in the private plan side of Medicare is in plans that do little if anything to actually try to manage care; Medicare drug plans are going to set premiums for 2007 with basically no clue about whether they are running profits or losses in 2006; and starting in 2008, those plans are likely to cover a much more limited range of drugs.

Much of the focus of this year’s “Wall Street Comes to Washington Conference” was on the first year of the Medicare drug benefit, a reflection perhaps of the much greater impact that private sector behavior has on Medicare since the passage of the Medicare overhaul law (PL 108-173) in 2003.

Wall Street types noted the drug benefit has commanded center stage in the health care investment community, even though it has about as much impact on the overall earnings of the companies that offer those benefits as the price of paper clips, said Douglas Simpson, an analyst at Merrill Lynch.

But Wall Street’s growing focus on Washington seems less surprising due to the larger trend suggested by the Medicare drug benefit—the growing use by Republicans of private or public–private approaches to health care ills that policy makers more traditionally have targeted with government solutions.

Insurance industry analyst Robert Laszewski noted there are now three “important experiments” testing those approaches—the Medicare drug benefit, health savings accounts, and the new Massachusetts law requiring individuals without insurance to buy private coverage, in some cases with the help of government subsidies.

The result of those experiments tilting toward the private sector may be known within a few years, when the health care cost crisis may be reaching the boiling point nationally, Laszewski suggested, hinting at the possibility of dramatic government intervention in health care if those experiments don’t work out well.

‘Training Wheels’ on Rx Benefit

Laszewski said Medicare drug plans won’t have enough data on claims this year to make their premium bids for next year anything other than guesswork. He said one plan told him that premium bids for 2007 would be nothing more than “a crapshoot.”

But Christine Arnold, a managed care analyst with Morgan Stanley, noted that the drug benefit comes with “training wheels” for drug plans. She was referring to reinsurance provisions and “risk corridors” that cushion plans against losses, particularly in 2007.

But those wheels start to come off in 2008, with plans absorbing a larger share of any losses they occur that year, Arnold said. The result is that plans will have more restrictive formularies that year to rein in costs, she predicted. Plans also may be in a much tighter cost control mode because they tried to get a larger market share at the start of the benefit by charging low premiums, analysts suggested.

Because enrollment surpassed their projections, the analysts suggested that “adverse selection” would not be a big problem in the first year of the benefit. Adverse selection is when so many people with high health costs sign up for coverage that it forces the plan to charge sharply higher premiums the following year. This causes enrollees with relatively low costs to seek a better deal and creates a continuing spiral of rising premiums that makes the plan unaffordable.

Analysts suggested that enough healthy people are enrolling to keep that from happening, but they expressed some caution. “I think it’s way too early to know anything,” said Laszewski, referring to a lack of data on claim costs.

“It doesn’t look like adverse selection was an issue per se,” said Matthew Borsch, an insurance analyst with Goldman Sachs. But Borsch said he’ll be interested to see how high premiums are next year in drug plans with more comprehensive coverage that are more attractive to seniors who expect to fully utilize the drug benefit as compared with low premium plans offered by Humana that were expected to attract relatively healthy seniors.

‘Policy Mess’ in ’08?

Laszewski suggested that the drug benefit’s future may not be serene. “What happens when the federal government makes up for all the underpricing” by drug plans in early premium-setting? he asked.

If risk corridors entail much added federal spending to bail out plans with losses, and if plans also have to boost premiums 25 to 30 percent [in 2008] “to make up for all of this, you’ve got a policy mess on your hands,” he said. “I think there’s a real issue in terms of long-term policy sustainability of the program.”

Arnold agreed with Laszewski that managed care plans in Medicare, called Medicare Advantage plans, will have to trim benefits because strong reimbursement by the federal government since passage of the Medicare overhaul law won’t continue.

Medicare Advantage enrollment is up by about a million since then, but Laszewski expressed surprise that growth hasn’t been greater because of the extra benefits and lower-cost sharing offered by those plans. The plans are a “fantastic deal” for seniors but “the leap was just too much” out of traditional Medicare for many seniors, he said.

Much of the enrollment growth in Medicare Advantage has been in “private fee-for-service” plans, which allow enrollees to see the providers of their choice without financial penalty while also getting good coverage of costs not covered by traditional Medicare, analysts said. But there is little management of care in the plans. It’s unclear how sustainable the plans will be, said Borsch, apparently referring to their cost to taxpayers.

‘Boring’ Consolidation

Simpson said consolidation in the insurance industry has been “huge” and will continue over the next several years. Other analysts agreed, saying the trend is troubling. “I don’t like it—I just get bored,” Arnold said, complaining that she has just five big companies to follow and they have stopped innovating.

“When has anything interesting ever come out of a huge company trying to integrate 30 others,” she said.

Insurers are so big that they cope with Wall Street pressure for near-term earnings growth not through innovations in cost control but by acquiring other companies, Laszewski said. “It’s never been so boring—or profitable. The industry has given up on managing care and controlling costs,” he said. “We have a lot of people making themselves really rich and selling their industry down the river,” he said of insurance company executives. “I think my industry is on a long walk off a short pier.”

Private innovation using credit cards

This may pinch a bit – Credit cards for health care can cost big bucks
By Jennifer Heldt Powell
BostonHerald.com
June 19, 2006

The cards and credit programs have been around for many years but they’re becoming more prevalent as credit card companies look to create new products. New consumer-driven health plans could also drive up demand. Under those plans, patients face higher co-pays and deductibles. They may look to put those payments on credit cards.

Overall, consumer advocates say they’re concerned about the use of credit cards to pay for health care costs, especially among those with lower incomes.

But those who offer the cards say they allow consumers to get treatments they might otherwise have to delay.

Some plans, like Capital One’s, work like a car loan with a fixed interest rate and a fixed monthly payment for a certain amount of time.

Others are credit cards with no interest for a number of months. If the card is not paid off by the end of the promotional period, interest rates of 22 percent or more will be charged retroactively to the beginning of the loan.

http://business.bostonherald.com/businessNews/view.bg?articleid=144360

Comment:

By Don McCanne, M.D.

How often have we heard that national health insurance should be rejected because it would suppress innovations that could only take place in the private sector? Well, they’re right.

Only in the private sector would insurers offer innovative products that are designed to shift risk from the insurer to the individual insured (by reducing benefits and increasing cost sharing). Only in the private sector would insurers establish health savings accounts and high-deductible health plans (with their lucrative fees and decreased risk for insurers). Only in the private sector would insurers expand their market to include credit cards and debit cards (with an additional twenty-two percent added to the patients’ out-of-pocket costs). Only in the private sector would insurers push for a mandate to require individuals to purchase their own affordable plans (affordable only because they shift unaffordable costs from the insurers to the patients). Only in the private sector would insurers push for regulatory relief allowing them to offer more profitable, lower-premium plans (threatening to eliminate financial security for patients). Only in the private sector would insurers support policies allowing them to cherry-pick the healthy (while shifting high-cost patients to public programs, proposed government reinsurance schemes, and to involuntary private charity when all else fails).

Wouldn’t it be terrible if we had to give up all of this innovation merely because we decided to establish a national health insurance program?

Twenty-two percent is hard to beat. Why look for health care value when private innovation can generate profits like that?

Pact signed to develop health insurance program for British Virgin Islands

By ANGELA BURNS-PIPER
Virgin Islands Daily News
June 9, 2006

Tortola – Within one year, the government of the British Virgin Islands should receive a design for a national health insurance program to provide adequate health-care coverage for every man, woman and child in the territory.

Chief Minister Orlando Smith signed a contract Thursday with the University of the West Indies’ Health Economics Unit for the design and implementation of a national health insurance program for the BVI.

“While there are many intricate details to be worked out, the fundamental vision behind national health insurance is simple: We want a system of health-care coverage that will enable every man, woman and child of the BVI to get the health care that they need,” Smith said.

As in many other countries, the government of the BVI provides health care for certain categories of people, such as children younger than 15 years old and the elderly. Everyone else usually has to pay for their health care, although it is heavily subsidized.

“Though some people have health insurance, too many people do not and therefore cannot get access to the health care that they need, especially when they have to travel overseas to be referred,” Smith said. “So these are some of the things that had to be taken into consideration.”

Smith said that for the program to succeed, it will take the input and participation of the entire community, and he challenged every citizen and resident of the BVI to get involved.

“Over the coming year, there will be many opportunities for you to make your voices heard and to contribute to the formulations of a health-care system that works best for you,” he said. “Take up this challenge, speak your mind, ask hard questions, seek out information.”

The Social Security Board will be working closely with the UWI team during the coming months and will be responsible for administering this program after it is implemented.

Director Antoinette Skelton, who chaired Thursday’s signing ceremony, said the board is committed to making the program a success. “The Social Security Board is committed to this project because we see the access to adequate health care as the extension of the social protection presently offered by our organization,” she said.

“The failure to provide adequate social health protection leads to great inequality and poverty, since health expenditure puts pressure on family income and has an enormous effect on the most vulnerable,” she said.

She said it is a well-known fact that the high cost of treatment of illnesses such as HIV-AIDS, cancer, and heart disease is one of the main factors in generating poverty because it forces families who are not protected by health insurance to go to extreme lengths – sacrificing their savings or avoiding spending on basic necessities – to meet the high cost.

Professor Karl Theodore of UWI, who signed the contract with the chief minister, said it is important for the BVI and the university. “For in coming here to cooperate with the establishment of the national health insurance program, UWI is demonstrating its commitment to improving the quality of life of the people of the region,” he said.

Theodore said the program basically is about social insurance, in which there is prepayment and when an event occurs, contributors can access health services without having to put money in. He said it is different from private insurance, in which there is a pooling of risk and payment is based on individual risk.

“With social insurance, payment is based on risk assigned to the community as a whole,” Theodore said said. “The objective is to really maximize the access to health care of all the citizens and residents of the country.”

He said that when the system becomes functional, each person will be issued a card, which will be a guarantee to good service and an instrument to keep track of what is happening with the system in terms of quality and cost of service.

The professor said the program will take about three years to put in place.

The contract, worth $585,100, calls for UWI to perform a number of tasks, including developing the legislative framework, registering the population, developing information systems and generating actuarial projects.

– Contact Angela Burns-Piper at 284-494-1291 or send e-mail to angelaburnspiper@yahoo.com.