PNHP

John Sweeney on covering everybody

John Sweeney on covering everybody

John J. Sweeney, President of the AFL-CIO
National Press Club
January 18, 2006

… if I were President of the United States, I’d use this State of the Union speech to… challenge Congress to quit stalling and pass universal health coverage this year …

(Later in the speech…)

We need a simple national health care plan that covers everybody…

http://www.aflcio.org/mediacenter/prsptm/sp01182006.cfm

Comment: Everyone across the political spectrum supports “universal health coverage,” even though for some that means only providing everyone with the option of being able to purchase a low-cost, stripped-down plan of “basic” benefits, while excluding those who fail underwriting requirements. Individuals claiming to support universal coverage can be ignored unless they present specifics on a plan for comprehensive coverage that would automatically include absolutely everyone. The problem is that most people who speak about universal coverage really mean covering the most people we can with our fragmented system of public and private programs, recognizing that “we’ll never be able cover absolutely everyone,” often said with a wink and a nod.

What about “a simple national health care plan that covers everybody”? If this is a truly sincere statement, it says much more.

“Everybody” is much more specific than that abused term: “universal.” Presumably “everybody” really does mean everybody.

“National” means federal, as opposed to state and local programs that tend to be patchwork attempts to cover more (or sometimes less) under a shredded system. A national program presumably would be a standardized, equitable program that would cover everyone in the nation.

“Simple” is a term that you don’t hear from most individuals speaking about universal coverage. That is likely because their proposals are complex modifications of our fragmented system, such as the touted consumer-directed health plans that actually reduce coverage. On the other hand, “simple” is a term used by advocates of reform who would replace our complex, highly inefficient and wasteful system of administering health care funds with a simple, publicly-administered single payer system. Could that be what John Sweeney meant?

There is no doubt that John Sweeney’s words were chosen very carefully for this important speech before the National Press Club. As to the meaning behind his words, we anxiously await signals to see if AFL-CIO’s actions will quickly evolve beyond their current efforts to merely target a few large employers.

PNHP Board Member on How to Fix the Medicare Drug Benefit

New York Times of Sunday, January 15.

To the Editor:

“States Intervene After Drug Plan Hits Early Snags” (front page, Jan. 8) reports that Medicare recipients are being denied promised prescription help. I would add that this has already increased hospitalizations.

I was outraged last week when one of my patients required hospital admission after stopping her medications because she couldn’t afford the new $45.57 co-payment demanded by her assigned private pharmaceutical benefit management company. Medicaid had previously covered her prescriptions.

The administration has designed a drug benefit to protect the pharmaceutical industry and discredit Medicare, our one single-payer health insurance program. Today’s mess could have been avoided if Congress had included the pharmacy benefit in Medicare and allowed Medicare to negotiate prices.

Congress should make changes in the drug benefit, instead of letting it serve as an opening wedge to privatizing and thus undermining original Medicare. Then it should extend Medicare coverage to everyone.

Oliver Fein, M.D.
New York, Jan. 9, 2006

The writer is chairman of the Metro New York chapter of Physicians for a National Health Program.

Citizens' Health Care Working Group

Citizens’ Health Care Working Group
“Health Care that Works for All Americans”

Note: This message is a call for action on your part. If you are already well informed on the Citizens’ Health Care Working Group, then skip to the three asterisks in the latter half of this message to take action. It is important that as many citizen voices as possible be heard during this process.

Background:

Senators Ron Wyden (D-Ore.) and Orrin Hatch (R-Utah) authored the “Health Care that Works for All Americans Act,” legislation designed to launch a national dialogue on health policy and bring quality care within the reach of every American. “Through open, public community meetings, the bill seeks to make citizen input the cornerstone of the reform process, giving citizens an opportunity to make hard decisions and voice their priorities for how to reshape the health care system. It would also guarantee a vote by Congress on the recommendations that result from the discussions.”

The bill was enacted as an amendment to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Sec. 1014 of the MMA describes “Health Care that Works for All Americans: Citizens’ Health Care Working Group,” and is available at the following link:
http://www.citizenshealthcare.gov/about/law.php

The process described in Sec. 1014 has begun. The Citizens’ Health Care Working Group has been established, and the initial steps have been completed. An informative website is accessible online:
http://www.citizenshealthcare.gov/

Hearings have been held to gather information to prepare “The Health Report to the American People.” That report has been completed (though subject to
revision) and can be downloaded at the following link:
http://www.citizenshealthcare.gov/healthreport/hrtap_full.php

Beginning in mid-January, “community meetings” will be held throughout the nation to receive citizen input on reforming our health care system. The Working Group is also accepting other input, including public responses to a web-based questionnaire. Further information on what you can do to participate follows the three asterisks below.

After the community meetings are completed, the Working Group shall prepare and make available to the public through the Internet and other appropriate public channels, an interim set of recommendations on health care coverage and ways to improve and strengthen the health care system based on the information and preferences expressed at the community meetings. There shall be a 90-day public comment period on such recommendations.

After the expiration of the public comment period, the Working Group shall submit to Congress and the President a final set of recommendations.

Not later than 45 days after receiving the final recommendations of the Working Group, the President shall submit a report to Congress which shall contain– (1) additional views and comments on such recommendations; and (2) recommendations for such legislation and administrative actions as the President considers appropriate.

Not later than 45 days after receiving the report submitted by the President, each committee of jurisdiction of Congress, the Committee on Finance of the Senate, the Committee on Health, Education, Labor, and Pensions of the Senate, the Committee on Ways and Means of the House of Representatives, the Committee on Energy and Commerce of the House of Representatives, Committee on Education and the Workforce of the House of Representatives, shall hold at least one hearing on such report and on the final recommendations of the Working Group.

***

What you can do to contribute to the national dialogue on reform:

(1) Provide your answer to each of the following four questions (framed by the Working Group):

What concerns you most about health care in America today?

Our current way of paying for health care includes payments by individuals, employers, and government. Are there any changes you think should be made to this system?

What trade-offs do you think the American public is willing to make in either benefits or financing to ensure access to affordable, high quality health care?

What is your single most important recommendation to make to improve health care for all Americans?

Submit your answers online at the following link:
http://www.citizenshealthcare.gov/speak_out/public_comment.php?pguid=e73766d8-f911-4ad1-af6c-45b2b461cf8f

(2) Attend a community meeting. For an overview, with links to meeting dates and locations, registration materials, etc.:
http://www.citizenshealthcare.gov/community/overview.php

(3) Tell your friends and members of organizations to which you belong to add their input to this process. For those without computers, please assist them in this process. Public libraries can provide computer access.

(4) For those willing to expand their efforts to advance this important national dialogue, further suggestions are listed at this link:
http://www.citizenshealthcare.gov/community/invitation.pdf

N.B.: The President, in his report to Congress, will make the final recommendations for any legislation and administrative actions. If we disagree with his recommendations, we will have no right to complain unless we have provided our input. If we do participate, then we have the right to expect from the President recommendations for “Health Care that Works for All Americans.”

No kidding – wealth improves access to specialized services

Inequalities in access to medical care by income in developed countries
By Eddy van Doorslaer, Cristina Masseria, Xander Koolman for the OECD Health Equity Research Group
CMAJ
January 17, 2006

The member states of the Organization for Economic Cooperation and Development (OECD) represent the wealthiest and healthiest countries in the world. Most of them achieved nearly universal coverage of their populations for a fairly comprehensive package of medical services decades ago. Their governments are committed not only to pursuing the efficient delivery of high-quality medical care but also to ensuring equitable access to that care. In most OECD countries, access to good-quality physician services is ensured at relatively low and sometimes zero financial cost at the point of delivery. This is mainly the result of a variety of public insurance arrangements aimed at ensuring equitable access. The increasing tension between affordability and equity has spurred a number of countries to reconsider their public-private mix and to study reforms that may enhance efficiency while maintaining equity.

Like the World Health Organization, the OECD is committed to a watchful monitoring and comparison of the performance of its members’ health care systems, and equity in access is regarded as a key objective. In 2002, the OECD Health Project commissioned a cross-country comparative study to assess how the very diverse health care delivery systems of its members fare in terms of equitable access. This article summarizes some of the main results of this study.

Results: We found inequity in physician utilization favouring patients who are better off in about half of the OECD countries studied. The degree of pro-rich inequity in doctor use is highest in the United States and Mexico, followed by Finland, Portugal and Sweden. In most countries, we found no evidence of inequity in the distribution of general practitioner visits across income groups, and where it does occur, it often indicates a pro-poor distribution. However, in all countries for which data are available, after controlling for need differences, people with higher incomes are significantly more likely to see a specialist than people with lower incomes and, in most countries, also more frequently. Pro-rich inequity is especially large in Portugal, Finland and Ireland.

Interpretation: Although in most OECD countries general practitioner care is distributed fairly equally and is often even pro-poor, the very pro-rich distribution of specialist care tends to make total doctor utilization somewhat pro-rich. This phenomenon appears to be universal, but it is reinforced when private insurance or private care options are offered.

http://www.cmaj.ca/cgi/content/full/174/2/177

And…

Commentary (on the article above)
By Jeremiah Hurley and Michel Grignon

The international comparison carries some potentially important lessons for health care policy debates in Canada. The most important is perhaps the link between equity of utilization and a country’s system of financing. It should not be surprising that the 2 countries in the study that lack universal health care insurance coverage (Mexico and the United States) have both some of the lowest overall visit rates and the greatest income-related inequity of utilization. More subtle appears to be the effect of parallel private insurance (private insurance that covers publicly insured services) among those countries with universal public insurance coverage. Such private insurance is disproportionately purchased by the wealthy and is particularly targeted at specialist services. Countries in which parallel insurance plays an important role in financing (e.g., Ireland, Spain and Portugal) achieve equitable utilization of general practitioner services across income groups – indeed, there is a tendency toward a pro-poor bias – but utilization for specialist services displays some of the highest degrees of inequity. The results of this study do not allow any definitive conclusions in this regard, but they caution against any illusion that parallel private insurance will increase access for anyone except the higher-income people who purchase it.

http://www.cmaj.ca/cgi/content/full/174/2/187

Comment: This OECD study has some very good news, some bad news, and some terrible news.

The very good news is that nations with universal systems (all industrialized nations except the United States) have relatively equitable access to primary care services – the foundation of a well-functioning health care system.

The bad news is that access to specialized services is not equitable in most countries, but it is certainly no surprise that wealth opens doors to specialized services. This differential is exaggerated in nations with parallel private insurance systems. This is not to begrudge the wealthy their improved access to specialized services (which are not always beneficial), but rather it is to express alarm over the fact that the remaining population has even greater impairment in access to specialized services merely because of stratification of the masses into the universal public insurance program, while granting the wealthy the option of using the red-velvet-roped First Class entrance to health care.

The terrible news is that the United States, lacking universal health insurance, has amongst the lowest overall visit rates and the greatest income-related inequity of utilization. There is not much consolation in the fact that Mexico shares that honor. Mexico, a relatively poor country, spends 6 percent of its GDP on health care whereas the United States, a very wealthy nation, spends 16 percent. Where is that greater quality at lower cost that the market enthusiasts keep talking about?

A brief OECD statement on the health system of Mexico:
http://www.oecd.org/dataoecd/35/19/34685343.doc

Kitzhaber's proposal doesn't go far enough

Friday, January 13, 2006
The Oregonian

Former Gov. John Kitzhaber has offered a proposal to extensively reform America’s health-care system. The plan would have the state collect Medicaid money (it does this already), Medicare money (federal insurance through Social Security) and tax savings that employers get when they pay for health insurance for their employees. He would do this by having the federal government “waive” existing restrictions on states (this could apply only to Medicaid; Medicare benefits belong to workers). The resulting pool of money ($6 billion) would support preventive care and care for “other common but often costly ailments.”

Presumably, existing services would remain (although this was not specified).

The flaws in this proposal are huge. Federal limitations in many instances serve valuable purposes. Medicare and Medicaid have very different purposes (insurance vs. welfare), structures (federal payment vs. federal/state payment) and beneficiaries (retired workers vs. the poor). Constitutionally, the federal government could not assign retirees’ Medicare benefits (earned through decades of work) to a state, nor could they constitutionally deny federal tax deductions to the employers in one state (Oregon) while extending them to the other 49 (or consider the deterrence of out-of-state or interstate employers).

Most importantly, the proposal does not increase the funding for services or expand covered people or services at a time when 43 million Americans lack health insurance.

The analogy Kitzhaber draws is to his Oregon Health Plan efforts, which were admirable and innovative. But this is different. OHP was limited to Medicaid, a federal/state program, specifically contemplating waivers. And even then, we have watched the failure of the Oregon Health Plan during the past five years. There are no state dollars in Medicare or federal taxes. The Kitzhaber proposal would require national legislation; there is no chance for a single state to lead in this way. And, as national legislation, it is far too little to address major needs.

But the critics, too, have it wrong. The proposal would not create a “single-payer” program. But it should. Our health-care failure is not that we have covered too many health services, but too few. The flaw is not that we pay too much — $1.3 trillion — but that we get too little for what we pay.

And Kitzhaber himself has it wrong in saying that health care is not as important as education or the economy. It is central to both.

In the end, Kitzhaber’s proposal is not, contrary to many commentators, nearly bold enough. We need adequate funding; national planning for health facilities and services (we had this for a decade in the 1970s and ’80s); effective cost control (especially through bulk buying of drugs, as the Veterans Administration does); a broad definition of health to address smoking, obesity and alcoholism and to offer preventive health care; and a single-payer system retaining employers and insurers as delivery mechanisms, along with state agencies to reach the uninsured and the unemployed.

Paradoxically, we are getting there a bit at a time, and have been since 1970. Contrary to Kitzhaber’s proposal, incremental steps work. In the past 35 years, we have added health care for the poor, the aged, children, veterans and workers. We have improved hospitals, doctors, insurance and drugs. We now need to pull them together, fund them adequately and make them work. If we fail, the fault will be ours.

Arthur B. LaFrance is a law professor at Lewis & Clark Law School who teaches Bioethics, Health-Care Delivery and Health, Poverty and the Law.

Bush's Turn to Health Care

Is the President Ready to Expand the Public Role?
By Sebastian Mallaby
Washington Post
Monday, January 16, 2006; A17

This time last year, President Bush was preaching Social Security reform; that got nowhere. This time six months ago, his team was thinking tax reform; it soon got cold feet. Now the new theme is health reform. “This is a big priority for the president,” Al Hubbard, the White House national economic adviser, told me Friday. “The system has got to be reformed.”

He’s right, of course. The U.S. economy as a whole is extraordinarily efficient: Since 1995 productivity has grown twice as fast as in the 1980s and 50 percent faster than in euro land. But U.S. health care is the opposite. It’s notoriously inequitable, it generates tens of thousands of fatal errors annually, and it’s unbelievably wasteful. It achieves shorter life expectancy than the British, French, German, Canadian or Japanese systems, but it eats up 16 percent of the resources in the economy, compared with between 8 and 11 percent in those other countries. The difference — 6 percent or so of economic output — suggests that the waste in the American system comes to $700 billion a year.

Back before Bush was elected, Hubbard convened a private-sector group to wrestle with this challenge. He recruited three academics — R. Glenn Hubbard of Columbia University and John F. Cogan and Daniel P. Kessler of the Hoover Institution — who continue to influence Hubbard as he ponders what Bush should say about health care in the forthcoming State of the Union address. Conveniently, the trio’s thoughts are not a secret. Their five fixes for health care have just been published as a short book.

Some look at the U.S. health mess and see a failure of the market, but the authors insist that government clumsiness prevents the market from working. Modest tort reform would free doctors from practicing expensive defensive medicine. Tougher antitrust policies would prevent price-raising alliances among hospitals. Pruning mandates on health insurers — which often reflect lobbying by doctors’ groups — might free insurers to cover only the most cost-effective procedures.

So far, so plausible: Nonpartisan health experts agree that these ideas push in the right direction. But they don’t push to the goal line, nor anywhere near it. By the authors’ own estimates, the proposals eliminate only a fraction of the waste in the American system.

Enter the authors’ really big idea — the one on which the White House is likely to build a story about its grand health-reform vision. To make the health market work, the trick is to create and then empower consumers. You create them by making individuals pay more out of pocket. And you empower them by forcing hospitals and doctors to publish information on quality and price.

The idea appeals to Al Hubbard, a bluff, no-nonsense business type with a genial, uncomplicated style. Hubbard invited me to imagine a world in which companies paid for their staffs’ groceries: Employees would load up with more food than they needed; supermarkets would seize the chance to mark up groceries; pretty soon, they wouldn’t even bother posting their prices. So it is today with medicine. You don’t know the cost of your hospital visit until a few days later, when the bill arrives.

There’s a weakness in this thinking. The country has moved far enough already toward out-of-pocket payments, which promise hardship for low-income people without much reduction in waste. Health is simply too complex for people to make smart, waste-reducing decisions; when you go to the hospital with screaming stomach pains, you have no idea how many tests you need — and you’re not in a fit state to embark on comparative shopping. A celebrated study by the Rand Corp. showed that out-of-pocket payments deter needed health consumption as much as wasteful consumption, confirming the point that ordinary people aren’t going to become savvy health shoppers.

But the White House is right to press hospitals and doctors for better information on price and quality. Limited state-level experiments suggest that public ratings shame the poorest performers into rethinking their procedures; doctors want to help their patients, and if they are confronted with evidence that they are failing to do so they are willing to shake themselves up. A few health plans have begun paying bonuses to hospitals and doctors that score well on quality and price measures. A recent study led by Harvard’s Meredith B. Rosenthal found that these incentives work.

So the White House is half right. If it sticks to the good bits of its program, it could help bring down health care inflation — which in turn would create more space for wage gains and would also stem the growth in the ranks of the uninsured. But this still raises a nagging question.

Beyond the imperative of restraining prices, the biggest challenges in health care are to get insurance to everyone and to create incentives for preventive treatment — even though prevention may pay off 30 years later, by which time the patient will have gone through multiple switches in health plans. The most plausible subsidizer of universal insurance is government, and the only entity with a stake in lifelong wellness is the government. Is the administration ready to see that?

mallabys@washpost.com

Business Group and PNHP both have the right prescription

The Wrong Prescription
Letter to the Editor
The Washington Post
January 16, 2006

I hope that The Post’s Jan. 10 editorial “Certificate of Need? Yes!” helps stop the plan to build another hospital in a city that does not need more hospital beds.

Almost all of the serious health care problems in the Washington area require more effective disease prevention and primary health care; better access to doctors and nurses for routine and early-stage problems; better nutritional counseling; access to affordable healthy food; and an array of health services that are either unavailable or available only on a fragmented and dysfunctional basis to low-income families.

Employers and employees pay on average more than $12,000 a year for family health coverage in the District. Unnecessary, costly additions to an expensive health care system will drive up costs more. Some employers will drop coverage as a result or move jobs out of the high-cost city. Either way, the poor and others with low incomes will suffer most.

The District has too much high-tech health care and too little good primary care. The worst step that the city could take is to waste $400 million on an unneeded hospital, which undoubtedly will cost even more than that before it is done.

Helen Darling
President
National Business Group on Health

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/15/AR2006011500691.html

Comment: Health care reform is often presented as a divisive issue. In articles on the topic, the single payer model of Physicians for a National Health Program (PNHP) is often presented as a government solution which has been contrasted with private sector solutions such as those supported by the National Business Group on Health. But are private business interests and public insurance interests really incompatible when it comes to health care reform?

Without commenting on the advisability of a new district hospital for Washington (which should be based on an assessment of need), this letter by Helen Darling could have been written by a member of PNHP. Look at the points on which we agree:

* Capital improvements, such as new hospitals and bed capacity, such be based on regional planning responding to identified needs.

* Excessive, ineffective high-tech health care should not be funded.

* Our deteriorating primary care infrastructure should be dramatically reinforced, which can be done by improving resource allocation.

* Prevention should be a primary goal using public health measures such as disease prevention, better nutrition with access to affordable healthier food, earlier access to the health care delivery system, and removal of impairments in access to other health services – impairments that are partially due to the fragmentation of our public and private systems of funding care.

* Current trends are resulting in a further decline in employer-sponsored coverage and “the poor and others with low incomes will suffer most.”

What is divisive about this? We agree on these points. Now is the time for all individuals and organizations to come together on reform. This does not mean that we have to enter a process of compromise in which each side gives up maybe half of the fundamental issues they support.

The National Business Group on Health can continue to advocate for higher quality services, for error reduction, for reduction of wasteful high-tech excesses, for provider assessments designed to improve system performance and for other measures that achieve the market goals of higher quality at lower costs. PNHP can continue to advocate for universal coverage, for administrative efficiency in funding care, for improved allocation of health care resources, for an equitable system of funding the universal risk pool in which each individual or entity contributes a fair share, and for budgeting mechanisms that slow the rate of growth in health care spending. These and other important goals can be achieved without having to compromise, but rather by cooperating. Together we can achieve an equitable, affordable, high quality, comprehensive health care system that would meet the needs of every individual while fulfilling the commitment of business and government for better health care for all.

Although the following quote is on war and killing, the affirmation should help us reflect on why we should not let up in our fight for health care justice:

“Now let me say that the next thing we must be concerned about if we are to have peace on earth and good will toward men is the nonviolent affirmation of the sacredness of all human life.”

Rev. Dr. Martin Luther King, Jr.

Do we need private solutions to control queues?

Public Solutions to Health Care Wait Lists
By Michael M. Rachlis
Canadian Centre for Policy Alternatives
December 2005

Executive Summary

Waits for care are the biggest political issue facing Canadian health care. Both citizens and providers are concerned that too many waits are too long and put some patients at risk.

Canadians would do well to consider public sector solutions to the wait-times problem. The good news is that many such public solutions are at hand. Here are two of the most innovative ones:

* The health care system should establish more specialized short-stay surgical clinics within the public sector. These clinics provide the efficiencies that private clinics have capitalized on, without siphoning public dollars to shareholders.

* Lessons learned from queue-management theory should be adopted. Examples from both the public and private sectors – such as line-ups at banks and airports – show us how better coordination and flow of queues can dramatically reduce wait times.

Canadians tend to assume that, if there is a wait for health care, there isn’t enough of it. For example, many breast patients have to wait for a mammogram, then wait for an ultrasound, and then wait again for a biopsy. The Sault Ste. Marie breast health centre reduced the wait-time from mammogram to breast-cancer diagnosis by 75% by consolidating the previously separate investigations. If a woman has a positive mammogram, she often has the ultrasound, and sometimes the biopsy as well, on the same day.

The Rexdale Community Health Centre serves 6,000 patients in a disadvantaged community in northwest Toronto. In 2003, patients faced a four-to six-week wait for appointments. The centre temporarily increased resources to clear its backlog, and now provides same-day service.

This same plan can be followed for surgical wait lists. First, map the process. At each step, assess whether capacity is sufficient to meet demand. If it is, temporarily increase resources to clear the backlog and go to just-in-time servicing. If capacity is insufficient for demand, then re-design services. If there is still unmet demand, then a bottleneck has been identified. It requires more resources.

These public solutions – specialty clinics in the public sector and application of queueing theory to surgical wait lists – are but two of many alternatives to private finance and for-profit delivery. Others include increasing surgical capacity in public hospitals and putting greater emphasis on prevention. There is no shortage of such solutions if the political will is present.

Let’s not add private problems to our health care system. We already have the public solutions at hand. Let’s put them into practice.

http://www.policyalternatives.ca/documents/
National_Office_Pubs/2005/Health_Care_Waitlists.pdf

And…

Explaining Waiting-Time Variations for Elective Surgery Across OECD Countries
By Luigi Siciliani and Jeremy Hurst
OECD Economic Studies No. 38, 2004/1

This study has added to the limited evidence on variations in waiting times across OECD countries for publicly-funded elective surgical procedures and on their possible determinants.

We have compared key statistics for the group of countries where waiting times are a major health policy concern (Australia, Canada, Denmark, Finland, Ireland, Italy, Netherlands, New Zealand, Norway, Spain, Sweden, and United Kingdom), with another group where waiting times are not a concern (Austria, Belgium, France, Germany, Japan, Luxembourg, Switzerland, and the United States). It is found that countries which do not report waiting times, on average spend more in health care, have higher capacity (measured in terms of acute care beds and doctors), and implement more frequently forms of activity-based funding for hospitals and fee-for-service systems for doctors (as opposed to salary). On the demand side, the two groups of countries do not differ markedly in need, as measured through the proportion of elderly in the total population or mortality rates, and in the degree of cost sharing (co-payments for surgery).

http://www.oecd.org/dataoecd/15/52/35028282.pdf

Comment: This and previous OECD papers have demonstrated that maintaining adequate capacity in the health care delivery system is important in avoiding excessive wait times or queues. Monitoring and adjusting capacity as appropriate prevents unnecessary queues.

The report by Michael Rachlis is important because he demonstrates that queue management need not be expensive. Sometimes modest resources must be added to expand capacity, but the amounts are negligible when considered as a percentage of the entire health care budget. His most important point is that the application of queue-management theory can correct the problems with virtually no increase in spending. A private system of funding care is not a prerequisite. The only requirement is a responsible steward with political will.

If the United States decided to include everyone in its health care system, we would have to ensure adequate capacity and apply queue-management theory. Fortunately, affordability would not be an issue since the $2 trillion that we will be spending this year is more than enough to meet those costs.

Our other option is to continue with our current, very effective method of controlling queues. We can continue to make access to health care unaffordable for a major sector of our society so those individuals don’t clog up the queue. That’s easy, and it works!

CAHI's claim of Medicare's hidden administrative costs

Medicare’s Hidden Administrative Costs: A Comparison of Medicare and the Private Sector
By Merrill Matthews, Ph.D.
The Council for Affordable Health Insurance
January 10, 2006

Executive Summary

One of the most common, and least challenged, assertions in the debate over U.S. health care policy is that Medicare administrative costs are about 2 percent of claims costs, while private insurance companies’ administrative costs are in the 20 to 25 percent range.

It is very difficult to do a real apples-to-apples comparison of Medicare’s true costs with those of the insurance industry. The primary problem is that private sector insurers must track and divulge their administrative costs, while most of Medicare’s administrative costs are hidden or completely ignored by the complex and bureaucratic reporting and tracking systems used by the government.

This study, based in part on a technical paper by Mark Litow of Milliman, Inc., finds that Medicare’s actual administrative costs are 5.2 percent, when the hidden costs are included.

In addition, the technical paper shows that average private sector administrative costs, about 8.9 percent – and 16.7 percent when commission, premium tax, and profit are included – are significantly lower than the numbers frequently cited. But even though the private sector’s administrative costs are higher than Medicare’s, that isn’t “wasted money” that could go to insuring the uninsured. In fact, consumers receive significant value for those additional dollars.

We also raise an important, although heretofore unrecognized, issue that gives Medicare an inherent advantage on administrative costs. Because of the higher cost per beneficiary, Medicare administrative costs appear lower than they really are. If the numbers were adequately “handicapped” for comparison with the private sector, they would be in the 6 to 8 percent range.

Finally, like the private sector, Medicare also has to obtain funds to pay claims. But the cost of raising that money, or borrowing it if the government doesn’t collect it from taxpayers, is excluded from Medicare administrative cost calculations. While we don’t in this paper draw any conclusions about what we shall call the “cost of capital” and its impact on Medicare’s administrative costs, we do want to highlight that those costs exist and that taxpayers, both today and in the future, must bear those costs.

http://www.cahi.org/cahi_contents/resources/pdf/
CAHI_Medicare_Admin_Final_Publication.pdf

Comment: The Council for Affordable Health Insurance (CAHI) is an association of insurance carriers advocating for market-oriented solutions to the problems of our health care system. Their bias for affordable private health insurance is at odds with our bias for affordable publicly-funded health care for everyone. They have now released a report “exposing” Medicare’s hidden administrative costs.

It is important to be aware of this report and the paper of Mark Litow of Milliman, Inc. on which this report is based. Opponents of single payer reform will use the concepts presented to dismiss the charge that private insurers are responsible for much more administrative waste than is our Medicare program.

When we are challenged, our best quick response would be to use their own numbers. After they have adjusted the numbers by applying their biased assumptions, the percent of private sector administrative costs is still over three times the administrative costs of Medicare (16.7 percent and 5.2 percent, respectively). The actuality of the administrative excesses is not in dispute – only the degree of the egregiousness of the excesses.

The opponents will also point out that the percent of administrative costs for Medicare beneficiaries is lower because the per person health care costs are higher than in the relatively healthy private insurance sector. But shouldn’t the administrative spending be directed primarily toward claims processing, especially since Medicare enrollment is a low-cost, once-in-a-lifetime event? Why should a greater percentage of health care dollars be used to administer private insurance programs with a much lower rate of claims processing? The administrative costs of claims processing is related much more to the volume of claims and much less to the number of beneficiaries. Thus their “handicapped” numbers are specious.

In another section of their report they claim that administrative costs “add value.” Most of us have difficulty recognizing the value of marketing costs, medical underwriting, brokers’ fees, excessive executive compensation packages, insurer profits, and other such administrative excesses. This claim alone, that these excesses add value, should destroy the credibility of this report.

The most important component of administrative waste was totally left out of this report – the administrative burden placed on the providers of health care. The recent Health Affairs report by J. Kahn and his colleagues demonstrated that just the billing and insurance related costs of private insurance consume about 21 percent of premium dollars, in a large part due to the administrative burden of physicians and hospitals. A single, administratively-streamlined system of claims management would dramatically reduce the waste of our current fragmented system.

And what is their conclusion?

“However, the issue is not and should not be which segment, private sector insurers or government-run plans, has the lowest administrative costs. The issue should be which does the best job of providing quality health insurance coverage for the best price. When one looks at all of the money pouring into Medicare, even with the price controls imposed by the government, the answer has to be the private sector.”

And we’re leaving these guys in charge? It almost makes you want to cry.

Health spending up, but who pays?

National Health Spending In 2004: Recent Slowdown Led By Prescription Drug Spending
By Cynthia Smith, Cathy Cowan, Stephen Heffler, Aaron Catlin the National Health Accounts Team (Office of the Actuary, Centers for Medicare and Medicaid Services)
Health Affairs
January/February 2006

U.S. health care spending rose 7.9 percent to $1.9 trillion in 2004, or $6,280 per person. Health spending accounted for 16 percent of gross domestic product (GDP).

Medicare spending rose 8.9 percent to $309 billion in 2004.

Total Medicaid spending (federal plus state and local) reached $290.9 billion in 2004.

Private health insurance premiums amounted to $658.5 billion in 2004, compared with $563.5 billion in benefits paid.

The employee share of employer-sponsored and individually purchased coverage rose to $206.4 billion in 2004, while out-of-pocket spending for copayments and deductibles and for noncovered goods and services reached $235.7 billion. When payroll taxes and premiums associated with government-subsidized care such as Medicare and Medicaid are added in, aggregate household spending totaled $557.2 billion-more than one-third of PHC (personal health care) spending in 2004. Aggregate private business spending was $448.3 billion.

The trajectory of health care spending continues to be driven by new medical treatments, rising prices, and growing utilization. Medical progress has improved health care for many families, but rising costs are also a growing burden for households, businesses, and governments. Medical spending continues to rise faster than wages and faster than economic growth, and workers are paying much more in health care premiums than just a few years ago. As costs rise, the efficiency of health care spending is increasingly scrutinized, which has led to greater interest in paying for improved quality or outcomes, disease management, and consumer-directed health care. Although much of health spending may be highly valued, continued spending growth will require difficult trade-offs for businesses, households, and governments as other spending also rises. These trade-offs are more stringent for those with fewer resources.

http://content.healthaffairs.org/cgi/content/abstract/25/1/186

Comment: Although presented as a “slowdown” in spending, the 7.9 percent increase is significantly greater than the increase in cost of living, and now constitutes 16 percent of the GDP.

In looking at the source of funds, it is important to recognize a principle accepted by virtually all economists. The employer component of the Medicare payroll tax is part of the total employee compensation package; employees fund that tax through a non-itemized reduction in take-home pay. Thus the $67.4 billion Medicare tax listed as a private business source of funds should really be listed as part of the aggregate household spending. (Actually, the entire employee benefit package is a business expense, but this principle acknowledges the fact that the source of payroll taxes for social insurance programs – Medicare and Social Security – is the employee-beneficiary of the program.)

Adjusting for the employer component of Medicare payroll taxes, private business is a source of $380.9 billion of the funds for health services and supplies, and the aggregate household spending is $624.6 billion. Although employer-sponsored coverage remains a very important source of health care funding, the out-of-pocket spending by households represents a significantly greater burden imposed by health cost escalation. In addition, taxpayers fund the public portion of health spending which is $682.7 billion.

So what are we doing about the increasing burden of rising health care costs? We are shifting more of the costs to the households. Although we all feel the pain, those with health care needs who can’t afford care will feel it the most.

The tragedy is that we know how to fix our system. But… we’re not doing it. What a shame.

Medicare Reality Check

Christian Science Monitor
January 6, 2006

(CBS) It was a very tough week for low income seniors who were supposed to be covered by the new Medicare drug benefit.

“It’s not covered!”

Time after time seniors were told they indeed have insurance under the system, just not for the specific drugs they use, CBS News correspondent Wyatt Andrews reports.

“And this particular plan does not cover this drug,” pharmacist Michael Kim said.

“But I am disabled,” said Joyce Thomas.

Thomas has her new Medicare drug card. But payment was still refused.

Did they automatically enroll Thomas in the plan?

“Yes they did, yes they did,” Thomas said.

And does your new plan cover her drug?

“No it don’t,” she said.

This also happened to Doris Strong. And to Robert Elum.

“This plan doesn’t cover my prescription,” Elum said.

When we visited Grubbs pharmacy, two blocks from the U.S. Capitol, not one senior citizen we tracked had a prescription filled smoothly. The problem is that many low-income seniors who used to be on Medicaid got randomly switched to the new Medicare system — a system of private insurance companies that may or may not cover their drugs.

Pharmacist Michael Kim also blames was insurance company meltdowns that brought denial after denial.

“There are several companies that we tried calling and the message on their machine just says: we’re so overloaded, please call back at another time,” Kim said.

So if you’re a senior citizen having trouble with your prescriptions, the best thing you can do right now is come to the pharmacy prepared.

Here’s what to do. If you have your new Medicare card, be sure to bring it. If not, bring the letter that confirmed your coverage. If, like Joyce, your drugs aren’t covered, call 1-800-MEDICARE and ask the counselor to switch you to a better plan.

Medicare officials tell CBS News these are all first-week shakedown problems that should be solved soon.

States Intervene After [Medicare] Drug Plan Hits Snags

By Robert Pear
New York Times
January 8, 2006

WASHINGTON, Jan. 7 – Low-income Medicare beneficiaries around the country were often overcharged, and some were turned away from pharmacies without getting their medications, in the first week of Medicare’s new drug benefit. The problems have prompted emergency action by some states to protect their citizens.

Although there are no hard numbers, concerns expressed by state officials and complaints from pharmacists suggest a widespread pattern of problems.

At least four states – Maine, New Hampshire, North Dakota and Vermont – acted this week to make sure poor people received the drugs they were promised but could not obtain through the federal Medicare program.

Gov. Jim Douglas of Vermont, a Republican, said the state would pay drug claims for low-income people until the federal government fixed problems in the new program, known as Part D of Medicare. Michael K. Smith, the state’s secretary of human services, said, “The federal system simply is not working.”

On Thursday, the Vermont Legislature passed a bill declaring, “There is a public health emergency due to the federal implementation of Medicare Part D, which has resulted in serious operational problems, causing Vermonters to be turned away at the pharmacy without the drugs they need.”

Many factors contributed to the initial chaos. Some people who enrolled in Medicare drug plans did not have any proof of coverage. Pharmacists could not get the information needed to verify eligibility for drug benefits and low-income subsidies. Insurance companies and their pharmacy benefit managers were swamped with calls, so pharmacists often had to wait an hour or more on telephone help lines.

Federal officials promised improvements, but state officials were growing impatient.

In Maine, Gov. John Baldacci, a Democrat, agreed to pay drug claims to provide medications for those in need. Since Tuesday, the state has incurred $2 million of expenses for Medicare beneficiaries.

On Friday, Gov. John Hoeven of North Dakota, a Republican, said he had to act because “some low-income elderly and disabled individuals can’t get their prescriptions filled through their Medicare drug plans.”

In New Hampshire, Gov. John Lynch, a Democrat, signed an executive order authorizing the state to pay drug claims that he said should have been covered by Medicare. Republican leaders of the state legislature called a special session to provide the money. The start of the Medicare drug program “has been a nightmare for many of our citizens,” Governor Lynch said.

“Many are being charged unaffordable co-payments for prescription drugs – co-pays much higher than they are supposed to be. Too many of them are leaving pharmacies without their prescriptions.”

Thomas T. Noland Jr., a spokesman for Humana Inc., a major national insurer, said that some problems were “to be expected in a new program with lots of new enrollment taking effect all at once.”

Cynthia G. Tudor, a senior Medicare official, told insurers on Wednesday that they must “immediately make improvements” to “ensure that all beneficiaries get their prescriptions filled at the point of sale.”

In a memorandum to insurers, Ms. Tudor said she had received “numerous reports” that they were “inappropriately denying some scripts,” or claims. In many cases, she said, insurers are not providing the data that pharmacies need to file claims and get paid.

Dr. Mark B. McClellan, administrator of the federal Centers for Medicare and Medicaid Services, said on Saturday that he was working closely with states to address their concerns and to help individual patients. “We are filling close to a million prescriptions a day, including hundreds of thousands for low-income beneficiaries,” Dr. McClellan said. “Many, many people are getting the prescriptions they need.”

But in an interview on Friday, Stan Rosenstein, the Medicaid director in California, said: “We are hearing more and more complaints. A significant number of people are not getting their prescriptions. That has us very troubled.”

Drug benefits are delivered by private insurers under contract to Medicare. The federal government is supposed to compute the subsidy available to each low-income beneficiary. But Michael Polzin, a spokesman for Walgreens drug stores, said that, in many cases, that information had not been shared with insurers or pharmacists.

Under Medicare rules, each drug plan is supposed to have a transition policy, providing a temporary supply – typically 30 days – of any prescription that a person was previously taking. But customer service representatives at Medicare’s toll-free telephone number said they knew nothing of this requirement, and beneficiaries said it had been virtually impossible to take advantage of it.

Nationwide, 6.2 million low-income people receive both Medicare and Medicaid. About 1.1 million of them live in California. They tend to have many chronic illnesses and high drug costs. Cheryl Meronk, manager of the health insurance counseling program in Orange County, Calif., said she was referring people to hospital emergency rooms because they had been unable to get urgently needed medications through Medicare.

Under the standard Medicare drug benefit, which took effect on Jan. 1, the patient pays a $250 deductible and 25 percent of the next $2,000 in annual drug costs.

Over the last year, Medicare officials repeatedly assured poor people that they would receive extra help, so they would not have to pay any deductible and their co-payments would not exceed $5 a prescription.

But Carol A. Herrmann-Steckel, commissioner of the Alabama Medicaid Agency, said that Medicare beneficiaries with very low incomes had often been required to pay the full $250 deductible and co-payments far exceeding $5. “One beneficiary borrowed the money,” she said. “Another charged the $250 on a credit card because she was in such dire need of the medicine.”

Beverly R. Churchwell, an aide to the Alabama commissioner, said: “Some Medicare beneficiaries have not been able to get their medications. They are being turned away at the pharmacy.”

John J. Morris, 42, of Ware, Mass., who has diabetes and multiple sclerosis, signed up for a Medicare drug plan on Nov. 16. The insurer told him his co-payments would not exceed $5, he said, but at the pharmacy this week, he was told he had to pay $23 for each of three drugs.

“I could not afford it,” Mr. Morris said, “so I was not able to get my insulin or my M.S. drug.”

In Oregon, Sandy K. Hata, a field manager for the State Department of Human Services, said: “We’ve had calls from people in tears who could not get their medications. These people were being asked to pay a $250 deductible and hundreds of dollars in co-payments.”

Jane-ellen A. Weidanz, the Medicare project manager at the Oregon Department of Human Services, said, the $250 deductible “is hitting people very hard,” adding: “People are very angry and very upset. They are yelling at us. They feel that we lied to them. They feel Medicare lied to them. They feel they cannot trust anything we say about this program.”

Texas reported a similar problem. Low-income beneficiaries are “being charged incorrect (high) co-payments,” the state’s Health and Human Services Commission said in an e-mail message to the Dallas office of the federal Medicare agency.

In Oklahoma, low-income Medicare beneficiaries were often charged the $250 deductible. “They are being treated as if they were in a higher income bracket,” said Mike Fogarty, chief executive of the Oklahoma Health Care Authority. “It’s a common problem.”

Steven E. Hahn, a spokesman for AARP, which offers a drug plan insured by UnitedHealth Group, said he knew that some low-income people had had difficulty getting medications. “We are taking this very seriously,” he said. “This is a global problem, a systemwide problem, for all plan sponsors.”

Elizabeth L. Stone, 86, who lives alone in an apartment in Manchester, N.H., is enrolled in both Medicare and Medicaid, has arthritis and a thyroid ailment and is in a wheelchair. She tried to use the new Medicare benefit to fill a prescription this week, but failed.

“I did not get any medication,” Ms. Stone said. “People at the pharmacy would not give it to me because they do not know how they will be reimbursed.”

Another low-income beneficiary, Terence J. Stevens, 65, of Lakeland, Fla., said he signed up for the drug plan on Nov. 15, the first day on which enrollment was allowed. His plan tried to charge him a $47 co-payment for a drug to treat irregular heartbeats and high blood pressure. Mr. Stevens said he was unable to pay and did not get the drug.

In Alabama, William M. Beasley, a pharmacist and a Democratic member of the State House of Representatives, said, “I have had more difficulty trying to process claims for Medicare recipients than I’ve had with any other insurer in 43 years as a pharmacist.”