PNHP

It's the high deductible, not the HSA cash account

It's the high deductible, not the HSA cash account

Pearlstein Live
washingtonpost.com
February 8, 2006

Steven Pearlstein writes about business and the economy for The Washington Post. This is from a transcript of his online discussion.

Washington, D.C.: I’m hoping you can clarify a key point during your discussion. Nearly every newspaper article I’ve seen recently reports that there are now 3 million HSAs (this is based on a recent survey of health plans conducted by AHIP and has been cited by the White House). This is misleading. AHIP’s study found that 3 million lives were covered by a high-deductible health plan (HDHP) that is COMPATIBLE with an HSA. HSAs must be opened by a bank or other qualified trustee. Based on some early data we’re compiling, it looks like about 1 million HSAs (the actual accounts) have been established as of Jan. 1.

Steve Davis
Managing Editor
Inside Consumer-Directed Care

Steven Pearlstein: Thanks for that clarification.

http://www.washingtonpost.com/wp-dyn/content/discussion/2006/02/07/DI2006020700721.html

Inside Consumer-Directed Care is an industry publication:
http://www.aishealth.com/Products/NewsICD.html

Comment: By Don McCanne, M.D.

CDHC advocates (consumer-directed health care) are using AHIP’s report (America’s Health Insurance Plans) on three million HSA-compatible (health savings account) HDHPs (high-deductible health plans) to “prove”
that they’re not only for the young and wealthy. Their claim is that many older individuals with more modest incomes are turning to HSAs.

Higher-income individuals welcome the tax advantages and the opportunity to expand their pensions through the HSAs. Lower-income individuals are more desperate and are seeking health care coverage with lower premiums.
Higher-income individuals also welcome the HDHPs as smarter insurance when paying up-front costs is no problem, but lower-income individuals lack the discretionary income to fund the HSAs.

We do not yet have the data defining the income levels of the one-third opening HSAs and of the two-thirds selecting only the HDHPs but not the HSAs. But if the studies show any other trend than the blatantly obvious, the news headlines should reflect the view of a nation gone mad.

I checked eHealthInsurance for HSA-compatible plans in my zip code, and the lowest deductible I found for a family of four was $3500 individual/$7000 family, and the lowest premium was $2448. Median household income in 2004 was $44,389. Calculate the cost of housing, food, clothing, transportation, and other essentials, and then add the cost of HDHP premiums and the deductibles required before health care coverage begins, and then see how much you have left to deposit in a health savings account (even if you gave up computers, television cable, cell phones, etc.). It is no wonder that the nation’s savings rate is now a negative.

The CDHP advocates claim that these policies are great for older, lower-income individuals. To be fair, they are not quite countering our argument that they’re for the healthy and wealthy. They avoid using the spin that they also work for the sick and poor, substituting, instead, older and with lower incomes. But ignoring the needs of the sick is the fatal flaw in their proposal.

There is an important consequence of the HDHPs, intended or unintended. Only individuals with health care needs will be contributing to the health-cost-related expansion of the negative national savings rate. The majority of us who remain healthy will not have to share in this particular burden, at least not until the cost-shifting exceeds our discretionary income.

Okay. So young or old, sick or healthy, high-deductible health plans work for you as long as you qualify on the basis of wealth.

Using technology better

Is Technological Change In Medicine Always Worth It? The Case Of Acute Myocardial Infarction
By Jonathan S. Skinner, Douglas O. Staiger, Elliott S. Fisher
Health Affairs
February 7, 2006

Abstract:

We examine Medicare costs and survival gains for acute myocardial infarction (AMI) during 1986-2002. As David Cutler and Mark McClellan did in earlier work, we find that overall gains in post-AMI survival more than justified the increases in costs during this period. Since 1996, however, survival gains have stagnated, while spending has continued to increase. We also consider changes in spending and outcomes at the regional level. Regions experiencing the largest spending gains were not those realizing the greatest improvements in survival. Factors yielding the greatest benefits to health were not the factors that drove up costs, and vice versa.

From the Discussion:

Dramatic progress has been made in the treatment of heart attacks among the elderly during the past two decades. Between 1986 and 2002 the average one-year survival rate following AMI increased by nearly 10 per 100 elderly AMI patients at an estimated cost of less than $25,000 per life year saved. But underlying these numbers is tremendous heterogeneity across time and space: There was little improvement in survival after 1996, despite continued growth in costs, and there was much variation in survival gains across regions and over time, with regional gains that were (if anything) negatively related to costs. These facts and others like them have generated a debate over the value of additional medical care spending. On the one hand, aggregate trends in patient outcomes suggest that the technological innovations were “worth it.” In contrast, the apparent lack of any strong association between costs and patient outcomes or quality of care across regions suggests that aggressive cost-control policies might benefit society by eliminating unnecessary medical care for patients in high-cost regions.

A key assumption is that uneven diffusion of cost-effective innovations is a key factor driving differences in patient costs and outcomes. Support for this view comes from Paul Heidenreich and McClellan, who concluded that the vast majority of the increase in thirty-day survival following AMI between 1975 and 1995 was the consequence of low-cost treatments such as aspirin, beta-blockers, angiotensin-converting enzyme (ACE) inhibitors, and thrombolytics. Furthermore, both observational and clinical trial evidence suggests that use of these noninvasive treatments reduces the incremental benefit of more-expensive treatments such as invasive surgery.

It is important to note that our new view does not apply solely to “low-tech” effective treatments such as aspirin and beta-blockers, but rather it applies equally to any highly effective treatment, whether high-tech or low-tech.

The benefits of health care technology are often substantial. However, as health care costs continue to rise, squeezing consumers, producers, and the federal budget alike, principles of accountability-that each incremental dollar should provide something of real value to patients-become increasingly important. That some regions could implement technological innovations at remarkably low cost is a reminder that waste and inefficiency are not inevitable by-products of technological growth. Thus, efforts to develop measures of quality and efficiency that can encourage hospitals or provider groups to adopt low-cost, highly effective care, while discouraging incremental spending with no apparent benefits, might allow us to keep the golden goose of technological progress alive and well nourished.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.
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And…

To Use Technology Better
By Alan M. Garber

… their findings suggest that we should reexamine our approach to biomedical innovation. In nearly every disease area, we could use better treatments and better diagnostic approaches. For some diseases, like most cancers, dramatic improvements in outcomes are unlikely to occur without major investments in the development of new drugs, devices, and biotechnology products. As much as we would like new tools, though, Skinner and colleagues show that we haven’t mastered the tools that we already possess. The gains from more effective, efficient approaches to heart attack care, without using any medications or procedures that are not already available, would be enormous.

We have much to learn about promoting better medical care, and we should not underestimate the difficulty of the task. But in comparison to the money spent to develop new technologies, we spend a paltry sum on finding ways to improve the use of technologies we already have. According to a widely cited estimate, the average cost of developing a new drug-an average drug, not a breakthrough-was $802 million in 2000, or about $900 million in 2005 dollars. The entire 2005 budget for the only federal agency responsible for research on more effective care delivery, the Agency for Healthcare Research and Quality (AHRQ), was less than $320 million.

Encouraging both innovation and access to new technologies is the central challenge facing the U.S. health care system. If the cost of medical innovations is too high, only the well-insured-such as today’s Medicare beneficiaries-will have access to them. But as health spending rises, fewer and fewer people will have insurance, and swelling out-of-pocket payments will place some new treatments out of the reach of even the insured. A shrinking number of patients will then benefit from advances in care. New technologies can improve health, but unless we learn to use them better, we cannot expect to harness their value.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.
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Comment: By Don McCanne, M.D.

Should we continue with our current fragmented system of funding care that results in ever more costly expansion of both mediocre and valuable high-tech services? Or should we change to a single, integrated system of funding care that would make better use of what we have, while rewarding new technology that truly improves health care value?

With dedicated public stewards, a single payer system would be much more effective in achieving the latter goal.

Where does all the money go?

By Dr. Susanne King
Berkshire Eagle
Tuesday, February 7, 2006

The United States spent $1.9 trillion on health care in 2004, 16 percent of the nation’s economy. Yet 46 million Americans remain uninsured, a 6 million increase since President Bush took office. In his State of the Union address last week, the president failed to mention these statistics, nor did he offer any effective solutions to the health care crisis.

His suggestion for wider use of electronic records could help provide more efficient care, but provides no help toward addressing the glaring inequities and financial costs of our health care system. The health savings accounts he proposes, which would make patients “take ownership” of their health care, are unaffordable for the vast majority of people who don’t have extra money for a savings account, or for the enormous deductible they would have to pay before using the account. Health savings accounts please Wall Street banks, as the New York Times noted last week; that should make us all suspicious.

*

When I was in medical school, I spent a few of my clinical clerkships in the Veterans’ Administration (VA) hospital allied with my medical school. The difference between the VA hospital and the private hospitals where I also trained was remarkable. In the VA hospital, laboratory and radiology services were so slow and inept that medical students would wheel patients to the X-ray department and perform blood counts in the laboratory. The elevators never worked. Nor did many of the ancillary staff. I directed my first “code blue” (a cardiac arrest) as a junior medical student on a young veteran with pneumonia. I ran the code until the resident physician arrived from the far reaches of
the hospital.

But all that has changed. Last week I spoke with my nephew, a junior medical student who has just finished a rotation at a VA hospital. He spoke of the high quality of care he observed there, as well as the efficiency of the system. Recent studies have shown that both the quality of care and patient satisfaction are higher in the VA system than in the private sector.

And the VA system has improved health care to veterans, even as it is spending less per patient. Between 1999 and 2003, the number of patients enrolled in the VA system increased by 70 percent, yet funding only increased by 41 percent. Amazingly, the VA system has been able to provide better care, for satisfied patients, with less money. Why hasn’t President Bush looked at a government program that works, to offer a solution to the health care crisis?

My nephew, a future doctor of America, said that the VA system has made him a believer in a national health care system, a “single-payer” insurance system. “Single-payer” means that there would be one administrator of health care funds, the government, which would collect and disperse the $1.9 trillion that are now administered by a huge patchwork of private insurance companies. That is a major reason why health care in the U.S. is so expensive, yet provides too little care to too few people. Too much of the $1.9 trillion goes toward the profiteering of drug and insurance companies. There is no private insurance in the VA system; and an additional source of savings is that drug companies have to negotiate prices with the VA, with resultant discounts for VA drugs, making their prices more commensurate with drug prices in other countries.

While many Americans cannot afford insurance coverage or medications, drug companies made more profits in 2002 than the other 490 companies in the Fortune 500 combined. The new Medicare drug bill, however, does not allow Medicare to negotiate with drug companies; it is yet another gift to the pharmaceutical industry from the Bush administration. While he is handing huge profits to the drug companies, as well as the insurance companies who are anticipating their windfall profits from Medicare, he plans to reduce payments to hospitals, the actual providers of care.

A new study from the University of California supports a 2003 study by Harvard researchers, Drs. David Himmelstein and Steffie Woolhandler, on the administrative costs that beleaguer our current health care system. Using conservative estimates, they found that only 66 percent of the health care dollar actually goes toward medical care. The rest goes toward billing (every doctor’s nightmare), marketing, insurance company profits, and administration. The Harvard study showed that a single-payer national health insurance, which would eliminate the insurance companies and streamline the healthcare system, would save almost $300 billion, enough to provide comprehensive health care for everyone.

Our veterans have the reformed health care system they deserve, one that provides comprehensive, high quality, efficient health care for their entire lives, including nursing home care. And we all deserve this kind of care.

Unlike the VA, which is restricted to specific public hospitals with salaried doctors, a single-payer national health care system would include private hospitals and doctors’ offices. But like the VA, everyone would be covered for all their health care needs, and, like the VA, this health care system would decrease administrative costs and prescription drug costs.

*

And here at home in Massachusetts, where we spend more per person on health care than anywhere in the world, the state Legislature’s health care conference committee still hasn’t been able to negotiate legislation to expand access to affordable health insurance. Ironically, financing is the sticking point, as the legislators look for more money to finance a plan that includes the insurance companies, with their administrative waste, profits and complexity.

It would be so simple if our Legislature would just consider single-payer legislation for our state, the Massachusetts Health Care Trust (Senate Bill 755). No extra funds would be needed; the studies have been done which show a single-payer system is feasible with the money we currently spend on health care. We need to elect the legislators who will make affordable health care reform happen.

Reinhardt on HSAs and having "skin in the game"

Economist bashes Bush HSA proposal
United Press International
February 6, 2006

President Bush’s health savings account (HSA) plan will mean income-based healthcare rationing, an economist said Tuesday.

“Should healthcare be cheaper for high-income people?” asked Princeton economics professor Uwe Reinhart at the National Health Policy Conference in Washington. “Is this a faithful reflection of America’s social ethic?”

Assuming a premium rise of 8 to 10 percent over the next 10 years, the cost of keeping an average family healthy–including insurance premiums, deductibles and co-payments–will be $21,000 per year, far more than low-income families can afford, he said.

And giving a tax break for HSAs will help the wealthy, who pay a relatively high tax rate, but do little to alleviate the problem of soaring healthcare costs for the poor, who will likely be forced to forego medical treatment.

Saving the maximum allowed by HSAs, which could be increased to as much as $10,000 per year, is “easy when you make $200,000, harder if you make $30,000,” he said.

It is also not clear if patients will be willing and able to gather information and make informed decisions about treatments, as they would be called on to do in a transition to a system of individually-based health savings accounts and high-deductible insurance, Reinhart added.

Finally, if paying for medical expenses out of pocket is really about consumers taking charge, he asked, why do corporate executives always negotiate for excellent insurance as part of their compensation packages?

“I propose that coronary bypasses for corporate executives cost $1 million,” he said, “so they can have skin in the game and be empowered.”

http://www.upi.com/

Comment: By Don McCanne, M.D.

You hear it everywhere. Health care consumers need to have “skin in the game.” HSA advocates from the very highest levels, even The White House, are calling for empowering patients by requiring them to have more “skin in the game.” Every time I hear that, I cringe.

The greatest crisis in health care today is affordability, for the uninsured and many of the insured as well. A significant number of the 20 percent or so of people who have significant health care needs have already depleted their reserves. To suggest that they need “skin in the game” conjures up thoughts in me of, “Oh my God, they’re going to skin them alive before they get more health care.” I don’t actually envision much blood and gore, but I do see hapless people stretched to their limits, having to make choices about which of life’s basics should be forgone.

I am grateful to Professor Reinhardt for giving me a new mental image that appears in response to having “skin in the game.” My image actually goes further than the million dollar coronary bypasses for the corporate executives. I see a new health-care funding system tailored to the policies supported by the leaders of the consumer-directed health care movement. To be sure that everyone with health care needs would have “skin in the game,” we’ll make fees flexible and set them at a level that would deplete a person’s assets, leaving them with just enough so they have to make decisions about such basics as food and housing.

What a relief. A vision of Uwe Reinhardt is so much more pleasant than a vision of Hannibal Lecter!

Internal and external validity and the RAND HIE

By Don McCanne, M.D.

In a KPBS debate between James Knight and Don McCanne on consumer-directed health care and health savings accounts, Dr. Knight stated, “… the Rand Health Insurance Experiment… shows that people who pay for their own health care services themselves… will spend about 45 percent less on health care with no significant change in their health care status…”

Actually, the study showed that people who paid 95 percent of their health care costs out-of-pocket had annual expenditures that were 28 percent lower than those who paid nothing for health care. But the much more important point to be challenged is the implication that reduced utilization due to out-of-pocket spending never impacts health status.

Dr. Knight’s statement requires a response which the structured radio format did not permit. Below, internal and external validity are defined, followed by my response to Dr. Knight.

The KPBS debate:
http://www.publicbroadcasting.net/kpbs/news.newsmain?action=article&ARTICLE_ID=873506

The Economics of Health Reconsidered, Second Edition
By Thomas Rice, Ph.D.
Health Administration Press

Two major classifications designate the validity of research studies: internal validity and external validity. Internal validity refers to how well study results accurately represent what actually occurred in the specific setting being examined. External validity refers to how well the results from a particular study can be generalized to other settings and/or populations.

It is generally agreed among the health services research community that the RAND Health Insurance Experiment was very strong in terms of its internal validity. External validity is more of a concern, however.

http://www.ache.org/pubs/rice2.cfm

Email message from Don McCanne (not always known for his diplomacy):

Dr. Knight,

It was a pleasure to debate you on KPBS on the issues of CDHC and HSAs.
We’ll certainly never agree on health care reform, but we really should agree on the objective data in the health policy literature. Bending or breaking the data does not advance the dialogue on reform.

As with other CDHC supporters, you cited the RAND HIE as demonstrating that the decreased utilization due to patient cost sharing did not change health care status. But you are likely aware that economists rightfully have questioned the external validity of this study. Innumerable other studies have demonstrated a significant impairment in access and outcomes resulting from cost sharing. Even a closer look at the RAND HIE data confirmed that cost sharing did have a negative impact on sub-sectors such as hypertensives. The internal validity of the RAND HIE study would apply only to very healthy populations followed for a short enough period of time such that chronic disease would continue to have a very low prevalence in that population.

Applying the RAND HIE results to a cross section of our entire population with its high prevalence of chronic disease is not appropriate, and if done so deliberately to deceive, then is even dishonest.

Though you won’t enjoy it, you should read my Quote of the Day from yesterday that discusses the new RAND study which demonstrates that elimination of cost sharing reduces health care spending.

Based on what I said above, you should immediately challenge my statement. It has very high internal validity for the population using cholesterol-lowering drugs, but its external validity is very limited. Instead of stating, “reduces,” it should have stated, “can reduce.”

If you wish to read more, my message on the new RAND study is at the following link:
https://pnhp.org/news/2006/february/rand_eliminating_cop.php

We’ll certainly continue the debate over single payer, CDHC, and the various incremental approaches. At PNHP we pride ourselves on the fact that our single payer advocacy is based on an honest, comprehensive assessment of the health policy literature. If CDHC is to have any credibility, you’ll have to show us solid data demonstrating that your model will not have the negative impact that has been predicted and is already being confirmed. Your task will not be easy because you are beginning with highly flawed policy theory.

Peace,
Don

Don McCanne, M.D.
Senior Health Policy Fellow
Physicians for a National Health Program www.pnhp.org

RAND – Eliminating copays can reduce health care spending

Varying Pharmacy Benefits With Clinical Status: The Case of Cholesterol-lowering Therapy
By Dana P. Goldman, PhD; Geoffrey F. Joyce, PhD; and Pinar Karaca-Mandic, PhD (From the RAND Corporation, Santa Monica, Calif.)
The American Journal of Managed Care
January 2006

Methods: Using claims data from 88 health plans, we studied 62 274 patients aged 20 years and older who initiated CL (cholesterol-lowering) therapy between 1997 and 2001. We examined the association between copayments and compliance in the year after initiation of therapy, and the association between compliance and subsequent hospital and emergency department (ED) use for up to 4 years after initiation.

Benefit Scenarios: We used estimates from both the compliance and service-use models to estimate the impact of 2 alternative BBC (benefit-based-copayment) designs relative to a base case of a $10 copayment for all patients (the modal copayment). We derived the predictions by first estimating compliance using our copayment and compliance model, and then predicting hospitalizations and ED visits with the compliance and service-use models. The first scenario was chosen to keep total pharmacy payments unchanged. Patients at high and medium risk had no copayments while copayments for low-risk individuals were increased from $10 to $22. In the second scenario, medium-and high-risk patients received the medication for free, while low-risk patients still paid $10. The estimates were computed assuming 6.3 million privately insured or Medicare-insured adults on CL therapy in the United States, as calculated using the 1999-2000 National Health and Nutrition Examination Survey.

Results: Table 3 (available at link below, though this text explains the findings in the table) shows the effects on the sample of 6.3 million CL users of 2 designs for BBCs. The base case is a $10 copayment for all patients. Under scenario 1, high- and medium-risk patients faced no copayment and low-risk patients had copayments of $22. Compared with the base case, full compliance increased 9 percentage points among the high-risk group (62% to 71%) and 10 percentage points among the medium-risk group (59% to 69%), and decreased from 52% to 44% among the low-risk group. There was no change in aggregate health plan payments for drugs because reduced use by the low-risk group was offset by increased use by the high-risk group. The high-and medium-risk groups had no out-of-pocket payments, but out-of-pocket payments by the low-risk group increased $280 million (from $272 million to $552 million). This scenario averted 79 837 hospitalizations overall, even after accounting for an additional 10 406 hospitalizations among the low-risk group. Similarly, ED use was reduced in aggregate by 31 411.

Scenario 2 eliminated copayments for high- and medium-risk patients with no change in copayments for low-risk patients. This benefit increased prescription drug spending by health plans ($486 million) and lowered spending by patients ($311 million). Scenario 2 resulted in 90 243 fewer hospitalizations and 36 493 fewer ED admissions compared with the base case.

Our scenarios with BBCs (Table 3) reduced the number of hospitalizations by approximately 80 000 to 90 000 annually and the number of ED visits by 30 000 to 35 000, resulting in net aggregate savings of more than $1 billion.

Conclusion: The challenge for the healthcare system is to make patients more sensitive to the cost of treatment without encouraging them to forego cost-effective care. Health plans increasingly recognize the need to differentiate coverage based on demonstrated value. For example, some health plans have eliminated copayments for some generic drugs, while others now assign drugs to tiers based on their cost effectiveness. The problem with these approaches is that clinical efficacy of any drug varies across patients.

We showed that strategically reducing copayments for patients who are most at risk can improve overall compliance and reduce use of other expensive services. In an era of consumer-directed healthcare and improved information technology, tailoring copayments to a patient’s expected therapeutic benefit can increase the clinical and economic efficacy of prescription medications.

http://www.ajmc.com/Article.cfm?Menu=1&ID=3072

Comment: By Don McCanne, M.D.

The RAND Health Insurance Experiment (RAND HIE), completed over twenty years ago, demonstrated that patient cost sharing (coinsurance) reduces the utilization of health services and thereby reduces total health care spending. It is the study most commonly cited by supporters of consumer-directed health care (CDHC), because it makes their case that health care spending will decline if patients are required to use some of their own funds whenever health care services are accessed.

Further analysis of the RAND data confirmed that patient cost sharing does decrease use of beneficial services. In conceding this point, the CDHC advocates have called for greater transparency so that patients can select beneficial services that provide value and reject services that are of little or no benefit. Although this trend may lead to posting of price lists and primitive measures of quality, the complexities of medical decisions over which are truly beneficial services are difficult enough for the physician and will never be within the purview of the patient. Deductibles, copayments, and coinsurance will always result in decreased use of beneficial services.

This new RAND study is interesting because it almost seems to be a flip of the prior RAND conclusions. In this study, eliminating copayments reduced total health care spending. However, this principle would apply only in instances wherein the intervention encouraged (e.g., cholesterol-lowering therapy) is less expensive than the consequences of not intervening (e.g., hospitalizations and ED visits).

The concept of adjusting cost sharing based on potential health care cost reductions does have some serious flaws. Just reading this study demonstrates that the administrative complexities are great even with the simple intervention of cholesterol-lowering drugs. It is unlikely that the data required for more complex clinical situations would be readily forthcoming, not to mention the complexity of pre-assigning patients in variable cost-sharing categories. This bird likely will never fly.

Another serious concern is that this study, by design, looked at the financial impact of benefit-based-copayments while seemingly dismissing, as a trade-off, the negative clinical impact that a drug-spending-neutral shift in copayments would produce. That is, in eliminating copayments for high- and medium-risk groups, the copayments for the low-risk group were increased from $10 to $22 in order to keep the total spending for this drug benefit budget-neutral. That $12 increase in copayments saves the health plan $280 million, but for this low-risk group, it results in 10,406 additional hospitalizations and 5,082 additional ED visits. That doesn’t even include additional morbidity and mortality.

As to the focus of the study, the authors state, “…more importantly, these benefits can be achieved without increasing a health plan’s pharmacy costs.”

They didn’t even look at a scenario that would have eliminated copayments for the low risk group. That would have increased plan costs even more, but how many hospitalizations would it have prevented?

The most fundamental flaw of consumer-directed health care is that it depends on demand-side spending control that reduces utilization of truly beneficial services. A single-payer national health insurance program would depend on more carefully targeted and patient-friendly supply-side mechanisms of containing health care costs.

For their next study, instead of defining demand-side mechanisms that would reduce health plan spending at a cost of reduced patient access, RAND should study supply-side mechanisms that would improve resource allocation for all of us, perhaps starting with the reduction of detrimental high-tech excesses that impair both quality and outcomes. Reducing costs while improving outcomes would certainly provide us with greater health care value.

Health Care for All/New Jersey responds to Kristof op-ed

New York Times
February 5, 2006

To the Editor:

Nicholas D. Kristof suggests that we mandate health-promoting measures like taxing junk foods. He says he’s personally “convinced that we need universal health care based on a single payer system,” but “that is not politically feasible now.”

“Not politically feasible” is code for “the politicians have been bought and paid for by the special interests.”

Aren’t our pols on the take also from purveyors of corn syrup, French fries and other noxious nostrums?

What makes Mr. Kristof think that lobbyists for agribusiness and Big Tobacco will smile on his ideas for a “systematic assault on the causes of American ill health”?

How many employers must go under; how many Americans must declare health-related bankruptcy; and how expensive must the profiteers make American health care before a rational, national health system becomes “politically feasible”?

In several states and cities that have reduced the amount of private money in politics with “clean election” laws, universal health care has suddenly become more “politically feasible.” The rash of political scandals makes this an idea whose time has come.

John Glasel
Hoboken, N.J., Jan. 31, 2006
The writer is secretary of Health Care for All/New Jersey.

FEHBP's initial experience with HDHPs & HSAs

Federal Employees Health Benefits Program First-Year Experience with High-Deductible Health Plans and Health Savings Accounts
GAO
January 2006

Like many large employers, the FEHBP has expanded enrollee health plan choices by offering HDHPs combined with HSAs.

Forty-three percent of actively employed HDHP enrollees earned federal salaries of $75,000 or more compared to 14 percent of the other new plan enrollees and 23 percent of all FEHBP plan enrollees.

http://www.gao.gov/new.items/d06271.pdf

Comment: By Don McCanne, M.D.

Proponents of HDHPs (high deductible health plans) and HSAs (health savings accounts) have contended that these products are not only for the healthy and wealthy, but work well for everyone. As proof, they cite statistics showing that many enrollees were previously uninsured. They fail to mention that these plans with very high deductibles were the only ones with premiums that the uninsured could afford. Many enrollees have not been able to put any funds in their HSAs, and there is a much lower level of satisfaction with this coverage. Although the previously uninsured recognize that this coverage is better than nothing at all, they do understand their financial vulnerability if they were to develop significant health care needs.

Federal employees have a large number of health care coverage options available through FEHBP (Federal Employees Health Benefits Program). It is instructive to see who chooses HDHPs with HSAs when a range of options is available. This study by the GAO (Government Accountability Office) confirms that higher income individuals are much more likely to select these plans.

That should come as no surprise since these plans, by design, are particularly well suited for higher income individuals to benefit from the tax and pension benefits of these plans.

The policy lesson: It is not who is buying these plans, but rather it is who is benefiting from theses plans that is important. High income individuals who can easily afford the out-of-pocket costs benefit from the regressive tax policies that these plans represent. Modest and low income individuals are on the losing end of these regressive policies, and they lose even more when they can’t afford the out-of-pocket expenses to which the HDHPs leave them exposed.

So why don’t we simply let the wealthy have these plans, and the rest of us can look for other solutions? Lower income individuals will never be able to fund their share of health care. That means that funding of a health care system that covers everyone must be progressive. Perpetuating a regressive system exclusively for the benefit of the wealthy only magnifies the affordability issues for the rest of us.

KPBS debate on HSAs

These Days:
What is consumer-directed health care?
Tom Fudge
KPBS
Feb. 1, 2006

In his State of the Union address, President Bush pushed for the expansion of tax-free health savings accounts. Host Tom Fudge talks with two doctors on opposing sides of the issue to debate the pros and cons of consumer-directed health care.

Guests:

Dr. James Knight. A local urologist and CEO of Consumer Directed Health Care Incorporated.

Dr. Don McCanne. Senior health policy fellow of Physicians for a National Health Program.

For the KPBS archived audio of this 14 minute debate on HSAs:
http://www.publicbroadcasting.net/kpbs/news.newsmain?action=article&ARTICLE_ID=873506

Comment: Activists in the health care reform movement may want to save this link since it can be used to educate the public on health savings accounts (HSAs). The debate centers around what HSAs pretend to be and what they really are.

State of the Union on health care

State of the Union Address
President George W. Bush
The White House
January 31, 2006

Keeping America competitive requires affordable health care. (Applause.) Our government has a responsibility to provide health care for the poor and the elderly, and we are meeting that responsibility. (Applause.) For all Americans — for all Americans, we must confront the rising cost of care, strengthen the doctor-patient relationship, and help people afford the insurance coverage they need. (Applause.)

We will make wider use of electronic records and other health information technology, to help control costs and reduce dangerous medical errors. We will strengthen health savings accounts — making sure individuals and small business employees can buy insurance with the same advantages that people working for big businesses now get. (Applause.) We will do more to make this coverage portable, so workers can switch jobs without having to worry about losing their health insurance. (Applause.) And because lawsuits are driving many good doctors out of practice — leaving women in nearly 1,500 American counties without a single OB/GYN — I ask the Congress to pass medical liability reform this year. (Applause.)

http://www.whitehouse.gov/stateoftheunion/2006/

Comment: By Don McCanne, M.D.

Unfortunately, President Bush once again has failed to address one of the more pressing issues in health care today. How can we continue to pay for the 80% of health care costs consumed by the 20% of individuals with greater health care needs?

Everyone understands that pooling risk is the answer; the large number of healthy individuals pay into the insurance pool so that those with needs can afford health care. The simplest, most equitable and most efficient method of doing this would be to establish a national health insurance program.

It is understandable that the President, as a conservative, is opposed to national health insurance since he believes that funding sources should be private rather than through the tax system. So it seems that the President would support private solutions to pooling risk, but does he?

Health savings accounts break up portions of the pools into individual accounts. High deductible plans remove large amounts of up-front costs from the pools. Association health plans strip out state mandated benefits thereby pulling more funds out of the risk pools. Cost sharing reduces demands on pools by making health care access unaffordable for many.

While ignoring the dramatic increases in actual health care costs, attention has been directed toward making health insurance premiums more affordable. Premiums are lower when the pool has to pay out less. The pool pays out less when the responsibilities are shifted from the pools to the individual participants. The healthy pay less, and the sick pay more. It’s as simple as that.

President Bush’s policies are not designed to encourage risk pooling in the private sector. Just the opposite. His policies are designed to break up risk pools and shift the responsibility to individuals, even if that makes care unaffordable. His policies insulate the healthy from the costs of the sick.

Though the President’s ideology prevents him from supporting national health insurance, why is he supporting policies that inhibit us from joining together, in the private sector, to share health care risks in common pools, so that everyone would always have affordable access to health care?

Private solutions don’t work anyway. The private insurers are doing everything in their power to avoid the market segment that requires more health care. Government programs such as Medicare and Medicaid cover the elderly and poor in that high-cost sector. It’s time for us to enact a single government program that would cover the entire high-cost sector, and the rest of us as well.

PNHP Decries "State of the Union" Health Care Proposals

National Doctors’ Group Decries “State of the Union” Health Care Proposals

Bush Reforms Would Worsen Care, Bankrupt Sick Families

President Bush’s proposals for health reform would simultaneously: (1) worsen access to care for people who are already covered; (2) offer billions for new tax subsidies that will not expand coverage; (3) drive up bureaucratic costs and do nothing to control overall health spending; and (4) offer tax breaks targeted to the wealthiest Americans.

CONSUMER-DIRECTED HEALTH CARE

* “Consumer Directed Health Care” (CDHC) is simply another term for skimpy insurance. These plans shift costs from employers to workers by forcing them to pay huge deductibles — from $2000 to $20,000 — before insurance kicks in.

* Many plans exclude important services (e.g. maternity care) altogether, so spending for these doesn’t even count towards the deductible.

* High deductibles discourage needed as well as unneeded care, and particularly discourage preventive care. For instance, diabetic patients forego routine eye and foot care, and end up with amputations and blindness. Similarly, patients with high blood pressure skimp on treatment and end up with strokes and heart attacks.

* These plans effectively penalize the sick for being sick, and will drive an increasing number of middle class families into bankruptcy. While healthy people may pay a little less, the sick will pay far more. Of course, virtually everyone gets sick and has high health costs at some point in their life — costs that will drain whatever money middle class people will be able to put into an HSA.

TAX CREDITS FOR THE UNINSURED

* The tax credits the President would offer are so meager that they would not even cover the skimpiest of plans that are actually available. The average cost of family coverage is now about $10,000, while the President suggests offering the poor only a $3000 tax subsidy. Past experience with a similar subsidy program (under The Trade Adjustment Assistance Act) showed that only a tiny fraction of low income families were able to get coverage, even with a substantially more generous subsidy than Bush now proposes.

ADDED WASTE AND BUREAUCRACY

* CDHC plans will not control costs. More than 30 percent of health spending is already consumed by administrative waste. HSAs and high deductible plans save nothing on existing insurance bureaucracy because patients and insurers must still keep track of each health expenditure to know when the deductible is reached.

* CDHC will add a new layer of bureaucratic costs to the system. A consultant has estimated that additional account management fees, transaction fees etc. required because of HSAs will cost $1 billion annually by 2011 (Modern Healthcare January 16, 2006:16). Moreover, doctors and hospitals will have to spend even more than at present on their billing, since collecting cash from individual patients (many of whom will not be able to pay) is costlier than computerized billing of insurance plans. One consultant has estimates these increased collection costs at 0.5% of total practice revenues, which would amount to billions of dollars annually.

* Savings Account Plans encourage predatory lending to sick families. Already, insurance firms are chartering their own banks and investment firms are gearing up to manage HSA assets — for a fee. Moreover, insurers are planning to issue HSA debit and credit cards (with high interest rates).

* Nor will the incentives in CDHC contain overall health spending. First, about 70% of health costs are incurred by a relatively few very sick people who will quickly exceed their deductible limits and have no incentives to “comparison shop” or otherwise save on care. Second, by discouraging routine preventive care in the short term CDHC threatens to actually increase costs in the long run. Finally, research in other nations demonstrates that an increase in deductibles does not decrease system-wide costs. Doctors generally tell their sick patients how soon they need to return for a visit, how frequently lab tests should be monitored etc. In Saskatchewan, Quebec and Switzerland, co-payments merely shifted care from the poor toward the wealthy as doctors apparently kept themselves fully booked, and yielded no overall savings.

HEALTH CARE TAX CREDIT FOR THE WEALTHY

* The vast majority of CDHC tax breaks are sure to accrue to those who need them the least. The tax advantages of HSAs are far more valuable to people in high tax brackets than to the poor or middle class. In fact, early data shows that only one half of people choosing HSA plans have deposited any money in the account — presumably because they couldn’t afford to. Rich people choose these plans because they offer a big tax break, and poor people choose them because the premiums are lower — they look like a good deal until you get sick.

By contrast, single-payer national health insurance could provide high-quality, comprehensive coverage to every American by recovering more than $300 billion annually squandered on needless administration with a single, simplified payment system.

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Physicians for a National Health Program is an organization of 14,000 physicians advocating for non-profit national health insurance. PNHP has chapters and spokespersons across the country. For contacts, call (312) 782-6006

Steffie Woolhandler, M.D. is an Associate Professor of Medicine at Harvard Medical School. She is the author of “Costs of Health Care Administration in the United States and Canada,” New England Journal of Medicine, August 21, 2003.

FOR MORE INFORMATION: “Impacts of Health Reform,” By Ken Thorpe, Ph.D., National Coalition on Health Care (available at: http://www.nchc.org/materials/studies/Thorpe%20booklet.pdf).

COMMENTS ON STATE OF THE UNION HEALTH PROPOSALS FROM PNHP MEMBER PROF. JAMES G KAHN

First Appeared Monday, 30 January ’06, UCSF Today

President’s State of the Union Likely to Address Health Care

James G. Kahn, MD, MPH, a professor at UCSF’s Institute for Health Policy Studies and in the Department of Epidemiology and Biostatistics, will be among those tuning in to hear the President’s State of the Union address on January 31.

Kahn, who researches health care costs and policies, recently published a study in Health Affairs that found that billing and insurance paperwork consume at least one out of every five dollars of private insurance health spending in California.

Kahn answered some questions regarding the President’s policies and what he expects to hear in the address on Tuesday night. The President will deliver his fifth State of the Union address before a joint session of Congress at 6 p.m.

Q: Do you expect any positive news regarding health care spending in the President’s address? A: Unfortunately, I expect more bad news than good. We’ve had a law in the US for a few years for people to set up Health Savings Accounts (HAS). Originally, if an individual did not use all of the money that he or she put aside, it would be contributed to a shared insurance pool for those who needed it. The rules were changed in the bill that implemented the Medicare drug benefit. Now, any remaining money goes into an Individual Retirement Account, rather than remaining in the pool. I expect that the President is going to recommend that the amount of money people can put into Health Savings Accounts be increased.

Q: You consider this a negative? A: For most people, yes. It’s great for the individual healthy person who does not use the money set aside, but it means there is less money for people who get sick; therefore the integrity of the shared insurance pool is compromised. It gives healthy, wealthy people a tax break and added retirement income. However, by shifting money away from health care, it compromises the ability to maintain in the insurance pool for people who are sick and have no reason or ability to get an HSA plan. With higher limits on these accounts, it is an exacerbation of what is already a bad policy.

Q: What about the expected proposal for tax breaks for medical spending? A: We have the same problem here. Who benefits most from tax deductions? – wealthier people. It’s once again helping individuals that least need the help. At least as important, when economists have looked at tax incentives for health insurance, they conclude that it is one of the least effective ways to use federal money: the fewest people insured per federal dollar spent. It costs the government lots of money and reduces pressure on employers to pay for health insurance for employees. So, overall you are shifting expenses from employers to the federal government, which is ironic in an era when the government says it wants to stay out of people’s business.

Q: What would you like to see the President propose? A: Within the current system, there are a few things that could happen. It would be great to propose that employers be mandated to offer reasonable health insurance – insurance that is comprehensive and affordable for employees. Another valuable proposal would be to increase public health insurance. The Children’s Health Insurance Program was very successful in getting children health coverage, stemming growth in the numbers of uninsured children, but unfortunately, this program has been cut back.

Further, Medicaid (Medi-Cal) reimbursements are being cut, and the federal government is giving the states more leeway to make it harder to use Medicaid. This administration is also pushing the privatization of programs, which will cost more in administrative costs and profits for insurers. The new Medicare drug program is a great example of that. It must be administered – by law – through pharmacy benefit plans. In addition, this scattered approach has resulted in a lot of confusion, with many seniors unable to get their medications.

What I’d really like to see is Presidential support for national health insurance – public funding of privately delivered care. There is ample evidence from here and Canada that this would increase system efficiency enough to allow comprehensive coverage for everyone, both healthy and sick. However, the current administration is philosophically committed to a total private sector solution – for health insurers as well as providers. Then again, remember that it was Nixon who went to China.

Kahn will offer his comments and reaction after the State of the Union address for UCSF Today.

Plan OK for rich, healthy

By David Lazarus
San Francisco Chronicle
Wednesday, February 1, 2006

When he leaves office in a couple of years, President Bush will continue to be covered by the Federal Employees Health Benefit plan, for which taxpayers pay up to 75 percent of costs.

He’ll also receive a pension of more than $180,000 a year and will be eligible for treatment at any military hospital.

No one at the White House could tell me precisely what Bush’s out-of-pocket medical obligations will be. But it’s a fairly safe bet that his visits to the doctor won’t put much of a dent in his annual stipend.

That’s worth considering in light of the president’s advocacy of so-called health savings accounts, which he said in Tuesday night’s State of the Union speech should play a greater role in covering the medical costs of ordinary Americans.

“Keeping America competitive requires affordable health care,” Bush declared.

However, is that what health savings accounts will do?

I’ve spoken to a number of experts, and the consensus is that health savings accounts can be a nifty financial tool as long as you’re rich or don’t get sick.

For working-class people who develop serious or chronic health problems, the accounts can be economically devastating — and could perhaps worsen the nation’s already dysfunctional health care system.

And here’s the real kicker: Experts say an ever-increasing number of employers will be shifting workers to health savings accounts in coming years as a way to keep spiraling insurance costs in check.

If this isn’t something you’re dealing with at the moment, just wait. It very likely will be soon.

“Employers are desperate to do something about health care costs, and most will move in this direction,” said Paul Fronstin, a health economist at the nonpartisan Employee Benefit Research Institute.

“But are workers sophisticated enough to deal with their own health care?” he asked. “That’s a real issue.”

Health savings accounts were authorized by the same 2003 law that created the Medicare prescription drug benefit (and look how well that’s turned out).

Funds placed in such accounts are tax deductible and, as long as they’re used for medical expenses, remain tax-free. Balances can be rolled over from one year to the next.

Health savings accounts are intended to be coupled with high-deductible insurance plans. Deductibles must be at least $1,000 for individuals and $2,000 for families.

An account holder is thus responsible for up to the first $2,000 of medical costs in a single year. After that, his or her insurance kicks in.

The idea here is that consumers of health care will make more prudent and responsible decisions because their own money is on the line. This, in turn, will help keep down medical costs.

The reality, experts say, is that health savings accounts benefit the wealthy far more than lower-income people (the higher your tax bracket, after all, the more valuable a tax shelter becomes).

Similarly, the financial benefit of a health savings account lies in making the maximum contribution each year and allowing that money to compound, so that a sizable nest egg takes shape to cover medical expenses.

This is relatively easy for richer Americans, who may be seeking additional savings vehicles after maxing out their annual 401(k) contributions.

For everyone else, it’s a real question whether they’ll have any money left over each year for health savings.

On Monday, the Commerce Department reported that the savings rate fell to minus 0.5 percent last year, meaning that average Americans not only spent all their after-tax cash but also dipped into previous savings or borrowed more money.

This is the first time this has happened on an annual basis since the Great Depression.

“One of the biggest problems with health savings accounts is that people with low or moderate incomes won’t be able to make a lot of contributions,” said Edwin Park, senior health policy analyst at the Center on Budget and Policy Priorities.

“That’s a real concern,” he said. “A lot of people won’t be able to make all their payments before reaching the deductible.”

Another concern is that as more employers push workers into health savings accounts — with or without matching funds — an increasing number of people may be left to their own devices in the largely unregulated individual insurance market.

“If you’re young and healthy, you might be able to get a pretty good policy,” Park observed. “If you’re not young and healthy, you’re going to have some pretty serious problems getting affordable coverage.”

John Holahan, director of health policy research at the nonpartisan Urban Institute, said the challenge in reforming the United States’ health care system is that there’s no one-size-fits-all policy out there.

“Most people don’t spend a lot on health care,” he said. “A minority of people spends an awful lot.”

The catch is that the millions of people comprising that minority will become increasingly more expensive to insure as healthier Americans pursue separate policies, thus spreading an insurer’s risk less broadly among the population.

“Health savings accounts may be good for people with no health problems,” Holahan said. “They’re not much good for society unless we address some of the issues surrounding people with health problems.”

In other words, health savings accounts are a stopgap at best. They may relieve financial pressure on major employers, and they may even teach people to be better health care consumers.

But they’ll do little if anything to improve overall coverage (let alone to insure the 46 million Americans now lacking health insurance).

“This isn’t a silver bullet,” said Fronstin at the Employee Benefit Research Institute. “This will help some people but not all people. It’s not a solution for all our health care problems.”

Bush won’t face these problems when he becomes a full-time ex-president — he’s got a retirement package awaiting him that the rest of us can only dream of.

This makes it easy for Bush to champion the idea of an “ownership society.” He has his.

You’re on your own.

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