PNHP

The inefficiency of tax credits for private insurance

The inefficiency of tax credits for private insurance

Health Care for All, Just a (Big) Step Away
By Eduardo Porter
The New York Times
December 18, 2005

Next year, the federal government expects to provide about $130 billion for Americans to buy health insurance (through the tax break for employer-sponsored coverage).

Although subsidizing health insurance may seem a worthy effort, a positive contribution to the goal of universal coverage, it is among the most inefficient spending in the nation’s fiscal arsenal.

… if the objective is to expand health care coverage, a bolder option is available: focusing the bulk of the money on the bottom end of the income distribution.

Added to what is already spent on Medicaid, this financing would be roughly enough to make health insurance free for people earning up to three times the poverty level, and perhaps somewhat more, said Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology who has studied the efficiency of alternative methods for financing health insurance.

To make insurance universal, two other things would be needed, Mr. Gruber said. As soon as the tax break was eliminated, company-provided health insurance would be likely to disappear, too. So some mechanism would be needed to pool groups of people and to avoid leaving higher-risk people to face enormous insurance costs. Such a mechanism would probably make health insurance affordable for all. And to make it universal, a mandate would be needed to make people buy it.

http://www.nytimes.com/2005/12/18/business/yourmoney/18view.html?pagewanted=all

And…

Tax Policy for Health Insurance
By Jonathan Gruber
National Bureau of Economic Research
December 2004

Despite a $140 billion existing tax break for employer-provided health insurance, tax policy remains the tool of choice for many policy-makers in addressing the problem of the uninsured. In this paper, I use a microsimulation model to estimate the impact of various tax interventions to cover the uninsured, relative to an expansion of public insurance designed to accomplish the same goals. I contrast the efficiency of these policies along several dimensions, most notably the dollars of public spending per dollar of insurance value provided. I find that every tax policy is much less efficient than public insurance expansions: while public insurance costs the government only between $1.17 and $1.33 per dollar of insurance value provided, tax policies cost the government between $2.36 and $12.98 per dollar of insurance value provided. I also find that targeting is crucial for efficient tax policy; policies tightly targeted to the lowest income earners have a much higher efficiency than those available higher in the income distribution.

http://www.nber.org/papers/w10977

Comment: Professor Gruber has demonstrated that a tax-payer funded government insurance program would be a far more efficient use of public dollars than tax-payer funded tax credits for the purchase of either employer-sponsored or individual private insurance plans. Even targeted tax credits for private insurance are much less efficient than tax-funded public programs.

Those who insist that we should use policies supporting private insurance to expand coverage do recognize the inequities of their proposals. Realizing that low-income individuals cannot afford reasonable coverage, they have recommended tax credits that are specifically targeted to this sector. Without considering all of the other inefficiencies and inequities of private insurance, Dr. Gruber’s work should lead to the conclusion that private insurance approaches should be abandoned as being a terrible waste of public dollars.

It is true that a publicly-funded, universal insurance program would increase public spending, but the important difference is that it would provide greater insurance value by eliminating many of the inefficiencies and inequities of our fragmented public/private system, thereby improving overall efficiency.

Not only those on the right want to see an efficient system, and not only those on the left want to see an equitable system. It seems that equity and efficiency should provide us with a common ground for crafting reform.

Universal medicare: TV is listening; what about Washington?

A reader writes, “What are your thoughts about the statement by Matt Santos, the Democratic presidential nominee on TV’s ‘The West Wing,’ that extending Medicare to all Americans would be an inexpensive and effective way of providing national health insurance?”

My first thought is what Matt Santos might have been reading lately.

It’s possible he was reading one of my old columns, for example, http://www.lansingcitypulse.com/030212/health2/index.html. There I mentioned that both the UAW and General Motors had concluded that national health insurance was the best way to get the auto industry to stop hemorrhaging red ink (and that was well before recent bankruptcies and plant closings).

Or else Santos might have been perusing the recent columns by Paul Krugman of The New York Times, who, I admit, gets a bit more exposure. Krugman has been teaching his readers a crash course in Health Economics 101 and basically saying that no matter how you add up the numbers, some sort of single-payer national insurance makes the most sense.

Finally, ol’ Matt may have been paying attention to the literature put out by the Physicians for a National Health Program. For some years they have been talking about “universal Medicare,” and it’s from them that I picked up the phrase to use in my 2003 column. The thinking is that we need some sort of single-payer national health insurance. But if we call it “Canadian style single-payer,” it’s a non-starter right away in the U.S. political landscape. Medicare, as we have seen in the last couple of years, is extremely popular; even the most-far-right conservatives are afraid to mess with it too much. And it just so happens that Medicare is the closest thing we have in the United States to a single payer system, even though it serves only a part of the population. So maybe “universal Medicare” is the way to get the average Joe on the street to think about it.

What about Santos’ claims that this will save money? Lots of people have done that math too, and it keeps coming out favorably. We continue to believe the myth that the government is inherently inefficient and the private sector is a model of efficiency. The administration of the Medicare program costs about 3 percent of total revenues. The average U.S. private health insurer spends between 15percent and 25 percent of revenues on administrative overhead and bureaucracy. It’s been frequently estimated that switching to a single-payer system would immediately save the U.S. some $150 to 200 billion annually, which is enough to provide good health care for all of those now uninsured.

By contrast, no one advocating a “free market” solution to the U.S. health care implosion has been able to come up with a plan that will both provide universal access and also control costs.

The proof seems to lie in the international experience. The most developed nations of the world all manage to provide high quality care for all their citizens while spending around 8-9 percent of their GDP to do it. All have some sort of nationally-run or at least nationally-coordinated plan, though some, like Germany, are not true single-payer.

The United States is the sole outlier. We leave about 46 million uninsured, or up to 80 million if you count those who lack insurance for at least part of a two-year period. We spend 15 percent of GDP on this boondoggle. And for all that, we get a health care system that on recent international charts ranks around 30th in the world, somewhere around Slovenia’s.

Experts in health policy have been saying this for years. Now the TV politicians appear to be saying it. When are the real politicians going to speak up?

(Howard Brody is a family practice physician and professor of medical ethics at MSU.)

Aetna's Rowe on high-deductible coverage

Consumer-Directed Health Insurance: The Next Generation
An interview: John Rowe, a physician, is chairman and chief executive officer of Aetna, one of the nation’s largest insurance companies. James Robinson is the Kaiser Permanente Distinguished Professor of Health Economics at the University of California, Berkeley, School of Public Health.
Health Affairs
December 13, 2005

The Limits Of High Deductibles

Robinson: One of the criticisms of high-deductible products is that they are financially more onerous to high users of care than they are to the healthy. Healthy people don’t need much medical care, and so they won’t use much, whereas sick people do need medical care, and they spend more. High-deductible products reduce the subsidy from the healthy to the sick that operates through low-deductible health insurance.

Rowe: At this point, you know, we’re talking about two percent or so of the insurance pool being enrolled in these products, and so we haven’t reached the tipping point.

Robinson: How far, as you and your colleagues think about this, will the deductibles increase?

Rowe: Employers are still raising them. We haven’t hit the limit of cost sharing… Some people consider increases in the deductible to be a bad sign and believe there will be significant pushback from employees and that it won’t go much higher. But my sense is that for many employers, raising the deductible is the alternative to not offering insurance at all. And so I would not be surprised to see much higher deductibles in the small-business and middle markets. I don’t think you’ll see that in the larger corporate accounts, however.

We’re talking as if the products are uniform in the marketplace in high-deductible health plans, but they are not. In the market you see two very different types. You see plans such as the Aetna plan where the deductibles are moderate and where preventive services and medications and other things are out of the deductible and reimbursed on a first-dollar basis. But then you can also find, on the Internet, products with a $10,000 deductible-very-high-deductible health plans with nothing out of the deductible [in terms of preventive services and drugs]. Those are not the kinds of products we at Aetna think are in people’s best interest. Those are not the products that we sell.

Robinson: That’s an interesting distinction.

Rowe: They are giving high-deductible health plans a bad name.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.583v1

Comment: Checking the Aetna website for California, plans available include, amongst others, California PPO 5000, California High-Deductible PPO2 (HSA Compatible), and California PPO Value 5000. If you remain within the Aetna network of providers, these plans have a deductible of $5,000 for individuals and $10,000 for families. For care obtained out-of-network, the deductibles are $10,000 for individuals and $20,000 for families (plus fees beyond Aetna’s allowable schedule). The only listed services for which the deductible is waived are an annual routine OB/GYN exam (but no maternity visits), and up to $200 for an annual physical with a $25 or $50 copay (though in some plans the pharmacy deductible may be lower).

These may not be the kinds of products that, in Dr. Rowe’s words, “we at Aetna think are in people’s best interest,” but they do sell them.

By pretending that Aetna is not part of the problem, I would say that Dr. Rowe is himself giving “health plans a bad name,” and quite deservedly so. Even the best of the private insurers are catering preferentially to insurance purchasers rather than patients, by marketing products that abandon their primary role of providing financial security for those with health-care needs.

Clearly it is time to dismiss the private insurers as the stewards of our health care dollars. By establishing our own, single-payer, national health insurance program, we would establish policies that would ensure that health-care dollars be spent on… health care!

Aetna’s Rowe on high-deductible coverage

Consumer-Directed Health Insurance: The Next Generation
An interview: John Rowe, a physician, is chairman and chief executive officer of Aetna, one of the nation’s largest insurance companies. James Robinson is the Kaiser Permanente Distinguished Professor of Health Economics at the University of California, Berkeley, School of Public Health.
Health Affairs
December 13, 2005

The Limits Of High Deductibles

Robinson: One of the criticisms of high-deductible products is that they are financially more onerous to high users of care than they are to the healthy. Healthy people don’t need much medical care, and so they won’t use much, whereas sick people do need medical care, and they spend more. High-deductible products reduce the subsidy from the healthy to the sick that operates through low-deductible health insurance.

Rowe: At this point, you know, we’re talking about two percent or so of the insurance pool being enrolled in these products, and so we haven’t reached the tipping point.

Robinson: How far, as you and your colleagues think about this, will the deductibles increase?

Rowe: Employers are still raising them. We haven’t hit the limit of cost sharing… Some people consider increases in the deductible to be a bad sign and believe there will be significant pushback from employees and that it won’t go much higher. But my sense is that for many employers, raising the deductible is the alternative to not offering insurance at all. And so I would not be surprised to see much higher deductibles in the small-business and middle markets. I don’t think you’ll see that in the larger corporate accounts, however.

We’re talking as if the products are uniform in the marketplace in high-deductible health plans, but they are not. In the market you see two very different types. You see plans such as the Aetna plan where the deductibles are moderate and where preventive services and medications and other things are out of the deductible and reimbursed on a first-dollar basis. But then you can also find, on the Internet, products with a $10,000 deductible-very-high-deductible health plans with nothing out of the deductible [in terms of preventive services and drugs]. Those are not the kinds of products we at Aetna think are in people’s best interest. Those are not the products that we sell.

Robinson: That’s an interesting distinction.

Rowe: They are giving high-deductible health plans a bad name.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.583v1

Comment: Checking the Aetna website for California, plans available include, amongst others, California PPO 5000, California High-Deductible PPO2 (HSA Compatible), and California PPO Value 5000. If you remain within the Aetna network of providers, these plans have a deductible of $5,000 for individuals and $10,000 for families. For care obtained out-of-network, the deductibles are $10,000 for individuals and $20,000 for families (plus fees beyond Aetna’s allowable schedule). The only listed services for which the deductible is waived are an annual routine OB/GYN exam (but no maternity visits), and up to $200 for an annual physical with a $25 or $50 copay (though in some plans the pharmacy deductible may be lower).

These may not be the kinds of products that, in Dr. Rowe’s words, “we at Aetna think are in people’s best interest,” but they do sell them.

By pretending that Aetna is not part of the problem, I would say that Dr. Rowe is himself giving “health plans a bad name,” and quite deservedly so. Even the best of the private insurers are catering preferentially to insurance purchasers rather than patients, by marketing products that abandon their primary role of providing financial security for those with health-care needs.

Clearly it is time to dismiss the private insurers as the stewards of our health care dollars. By establishing our own, single-payer, national health insurance program, we would establish policies that would ensure that health-care dollars be spent on… health care!

The fallacy of hospital price shopping

Price Check: The Mystery of Hospital Pricing
California HealthCare Foundation
December 2005

In 2004, the California Legislature passed… AB 1626, requiring hospitals to provide information to patients on fees for 25 common services and to post notices informing patients that information was available to them.

That same year, the California Hospital Association developed and encouraged member hospitals to adopt voluntary guidelines… that hospitals should have clearly stated written payment and financial assistance policies, that hospitals should post notices about these policies, and that hospitals should train staff on communicating these policies.

In an effort to evaluate hospital-pricing practices, the California HealthCare Foundation sent a group of would-be patients to 64 hospitals throughout California. These “mystery shoppers” posed as low-income, uninsured patients who needed to find a hospital for an upcoming test or procedure.

Key Findings

* Better systems are needed

* Getting a price can be a frustrating process

* Type of procedure partially determines whether hospitals provide a price

* Hospitals must expand training to ensure employees understand how to deliver pricing and payment information

* Hospital pricing information is inconsistent, making it difficult to shop for the best value

* Financial assistance can be a “Catch-22”

* Written notices communicating financial assistance are often inadequate or inaccessible

Although some of the shoppers had positive experiences, overall the project revealed a wide communications gap between hospitals and their patients – a gap that has poor implications for patients who must pay all or part of their medical bills.

http://www.chcf.org/documents/hospitals/
PriceCheckMysteryHospitalPricing.pdf

Comments: Access to health-care price information theoretically would be important not only for the uninsured (over 6 million in California alone), but also for the insured if price sensitivity of consumer-driven health plans (CDHP) were to have any significant impact on reducing health care spending. This study demonstrates that voluntary efforts and even legislation have not been very effective in informing price-sensitive health-care shoppers of their options.

This report recommends that improvements be made in providing information on pricing, but this conclusion should be challenged on the basis that the framing of the problem was inappropriate.

Sending a patient out on his/her own, with very limited financial resources, to find best prices when options may be limited or nil, is not an effective policy for cost containment. If a patient needs a C-T scan or cardiac catheterization, that patient is really limited to the facilities that his/her physician utilizes if care is to be properly coordinated.

We should be directing our efforts to providing maximum value for beneficial health-care services. A much more effective solution would be to enlist the power of a monopsonistic, single-payer purchaser that would negotiate for all patients not only the best prices, but also the best services and products.

It’s time to give up on bending or breaking the health-care system merely to make it pliable to free-market competition. What is this really all about?
The whims of free-market theorists, or the health of the people?

New Study Shows U.S. Hospital Charges Continue to Rise, Even After Changes in Medicare Payment Policy

California Nurses Association

– EMBARGOED FOR RELEASE –
December 13, 2005

Contact: Charles Idelson, 510-273-2246, 415-559-8991 (pg/cell), or the IHSP at 510-267-0634.

New research on pricing practices of over 4,200 hospitals across the U.S. documents that huge markups in charges to patients are continuing, even after federal changes in Medicare reimbursement policies that were supposed to help contain skyrocketing costs.

The research is contained in the third annual report on charges by the Institute for Health and Socio-Economic Policy (IHSP), the research arm of the California Nurses Association. For the third consecutive year, the report documents a strong correlation between huge hospital markups on their sticker prices over their costs, high profits and the growth of large corporate hospital chains.

What may be most striking in the new report is that charges continue to be scandalously high even after Medicare changed its reimbursement policy following the huge public outcry over outlier payments, made for especially complicated medical procedures.

But, the new report shows, the nation’s 100 most expensive hospitals set their gross charges at an average of 680% (up from 673% in 2002-2003) of their costs– meaning the average top 100 hospitals would bill $680 for a patient’s case where the actual costs were $100, or a 680% charge to cost ratio. The national average for all 4,184 hospitals surveyed was 244% of costs, an increase from 232% the prior year.

Notably, 77% of the hospitals — and 95 of those in the 100 most expensive — had at least one fiscal quarter included in their cost reports after the Medicare changes were announced.

Medicare, noted IHSP director Don DeMoro, adjusted the financial threshold at which outlier payments would kick in, with a resulting decline in reimbursements of $1.8 billion for those hospitals included in this year’s report. “Yet it’s abundantly clear that hospitals, in the aggregate, responded by raising their charges at an increasing social cost. The impact of the Medicare ruling overall appears to be minimal.”

“The result,” said CNA President Deborah Burger, RN, “is that more people than ever are priced out of access to care. High hospital charges are a direct contributor to skyrocketing increases in healthcare costs that result in more people losing healthcare coverage, more employers eliminating benefits or raising co-pays or deductibles, and the ongoing implosion of our health care system.”

Burger noted that since the Medicare ruling went into effect, hospitals have recorded all time record profits, an aggregate $22.6 billion in 2003 and $26.3 billion in 2004, and the number of uninsured has climbed to 46 million. “The system is working for well-heeled execs of the healthcare industry, but not for the rest of us.”

Included in the report is a listing of the nation’s 100 most expensive and 100 least expensive hospitals, the top 10 most expensive hospitals by state, and the 40 hospitals that charge the most for operating room services, prescription drugs, and medical supplies. The research is based on federal cost reports with aggregated data for over 30.5 million patient discharges in fiscal years 2003-2004 filed for all patient services and other financial categories for 4,222 U.S. hospitals.

Among the key findings:

* Higher charges correlate to higher profits.
* Higher charges are also associated with hospital chains, and large hospitals. 89 of the top 100 hospitals were system affiliated, compared to only 30 of the 100 least expensive.
* For-profit hospitals had the highest average charges, 366% of cost, government hospitals the lowest, 181%.
* Hospital markups are much higher for drugs, medical supplies, and operating rooms, which are now primary profit center for hospitals. For drugs, medical supplies, and operating rooms, the top 40 hospitals had respective average charges of 2,319%, 5,090%, and 1,073% of costs.
* High hospital charges are, in part, a result of the hospitals battle with other segments of the healthcare industry, especially pharmaceuticals and HMOs.
* New Jersey, Florida, California, and Pennsylvania are the most expensive places to get sick. New Jersey hospitals charges were an average 415% of costs.

The report contradicts two notable paradigms:

a- Public oversight, or regulation, reputedly reduces profit and harms the public interest. But, the most regulated state, Maryland, for the second year in a row, had the lowest average hospital charges while the number of Maryland hospitals making profits is right at the national average.

b- Mergers supposedly produce greater efficiency for consumers and thus lower costs. However, the efficiencies gained seem to produce higher charges and profits and more marketing, not lower costs.

Hospital industry officials have contended that the charges don’t matter, but:

a- Charges, or the list price, are the starting point for negotiations with HMOs and other insurers, the higher the charge, the higher the eventual payment.

b- Medicare’s “flat” reimbursement rates vary by individual hospital and are influenced by a number of variables, including a federally computed relative weighting system for each DRG. The DRG weights are heavily impacted by the list prices for products or services. Rather than saying Medicare rates are “flat” or “fixed” it would be more accurate to say the rates “float” year by year relative to variables in the reimbursement system, of which gross charges are a main factor.

c- Self-payers, the uninsured, are forced to pay the full list price.

“This report,” said Burger, “reinforces that no amount of market tinkering can resolve the healthcare crisis. All sectors drive up costs, reducing access to care and undermining quality. Only fundamental change, a universal system based on a single standard of care for all, will end this vicious spiral and produce a humane system that works for Americans.”

The political vulnerability of Medicaid

State Plans Medi-Cal Rate Pinch
By Evan Halper
Los Angeles Times
December 13, 2005

Gov. Arnold Schwarzenegger is planning to cut the rates the state pays doctors to treat the poor, a move medical groups warn would result in more Californians losing access to healthcare.

The administration announced in a bulletin mailed to Medi-Cal providers Monday that it planned to temporarily cut reimbursement rates by 5% through 2006. The news comes at a time when the rates already are so low that many doctors refuse to participate in the program.

“We are paying doctors at the lowest rate of any state,” said Dr. Jack Lewin, chief executive of the California Medical Assn. “Half the doctors in this state have dropped out of the program. The rest are staying involved almost as a goodwill service for their communities. This sends the message from the state that these patients are not that important.”

“We recognize that this rate reduction is a hardship to healthcare providers,” said Ken August, a spokesman for the California Department of Health Services. “But California continues to face a deficit.”

Now California is in much better financial shape. Although the state technically continues to run a deficit – it is on track to spend more money next year than it will bring in – an unexpected surplus in receipts in recent months has left state coffers flush with enough cash to balance it out.

http://www.latimes.com/features/health/medicine/la-me-medical13dec13,1,4645251.story?coll=la-health-medicine

And…

House and Senate Still Far Apart on Medicaid Changes
By Robert Pear
New York Times
December 12, 2005

Members of Congress will soon plunge into battle over the future of Medicaid as House and Senate negotiators try to resolve huge differences in legislation that would allow states to cut benefits and increase charges for millions of low-income people, including many children.

In a detailed analysis of the House bill, the Congressional Budget Office predicted that 70,000 to 110,000 people would lose Medicaid coverage for failure to pay premiums.

Democrats, who are generally opposed to the House and Senate budget bills, are excluded from the current negotiations.

http://www.nytimes.com/2005/12/12/politics/12medicaid.html?pagewanted=all

Comment: As a program that funds health care for low-income individuals, Medicaid is a welfare program. The political support for providing aid to people in need has significantly waned. The shift toward the emphasis on individual responsibility began before President Bush took office, as it was President Clinton who set out to “end welfare as we know it.” The issues are much more political than they are partisan.

Low-income individuals lack a forceful political voice. A tax-funded health insurance program designed specifically for them will always be vulnerable to the budget-cutting process. Since adjustments never match the rate of inflation, underfunding is compounded over time.

With increasing financial losses for those caring for Medicaid patients, the number of willing providers declines. Concentrating money-losing patients amongst fewer providers is creating a variation of the death spiral since the increases in losses are not sustainable. As providers withdraw, impairment of access and outcomes is inevitable.

The federal government and the states are not going to search for new revenue sources to pump up the Medicaid budget. Instead, the search is on for benefit reductions that address budget issues rather than health-care needs. The problems of Medicaid will only grow worse. We don’t need more partisanship, but we do need constructive politics to make it happen.

Rather than a welfare program, low-income individuals should be placed in an equitable, universal system of social insurance. Just as our current social insurance program – Medicare – has strong political support, so would a universal, single-payer Medicare for All.

The HDHP and CDHP experiment has already failed

Early Experience With High-Deductible and Consumer-Driven Health Plans:
Findings From the EBRI/ Commonwealth Fund Consumerism in Health Care Survey
By Paul Fronstin, EBRI, and Sara R. Collins, The Commonwealth Fund
Employee Benefit Research Institute
December 2005

This report presents findings from the first EBRI/Commonwealth Fund Consumerism in Health Care Survey. The online survey of privately insured adults ages 21-64 was conducted to provide national data regarding the growth of high-deductible health plans with and without savings accounts and their impact on the behavior and attitudes of health care consumers. The sample was randomly drawn from Harris Poll Online, Harris Interactive’s online sample of Internet users who have agreed to participate in research surveys. The final sample of adults participating in the survey is skewed toward higher-income, more highly educated individuals and also under represents minorities.

Despite its limitations, this is the first national survey of individuals with high-deductible health plans who also have savings accounts (HSAs or HRAs), or so-called consumer-driven health plans (CDHPs), and people with high-deductible health plans who are eligible to contribute to a health savings account but who currently do not have an account (HDHP).

Health Care Spending

When combined with premiums, outlays on health care as a share of income rose substantially among those with HDHPs and CDHPs, particularly among those with low incomes or health problems. More than two-fifths (42 percent) of people with HDHPs and 31 percent of those in CDHPs spent 5 percent or more of their income on out-of-pocket costs and premiums, compared with 12 percent of people in comprehensive plans. Nearly everyone (92 percent) with HDHPs with incomes under $50,000 spent 5 percent or more of their income on out-of-pocket costs and premiums, and one-third spent 10 percent or more. This compares with 34 percent of people in that income group in comprehensive plans who spent 5 percent or more of their income and 10 percent who spent 10 percent or more. People with health problems in HDHPs were also vulnerable to spending large shares of their income on out-of-pocket costs and premiums: more than half (53 percent) of those in HDHPs with health problems spent 5 percent or more and 18 percent spent 10 percent or more.

Cost-Related Access Problems

While people reported using health services at similar rates across health plans, adults with CDHPs and HDHPs were significantly more likely to report that they had avoided, skipped, or delayed health care because of costs than were those with comprehensive insurance, with problems particularly pronounced among those with health problems or incomes under $50,000. The survey asked whether in the last year respondents had delayed or avoided getting health care services when they were sick because of costs. About one-third of people in CDHPs (35 percent) and HDHPs (31 percent) reported delaying or avoiding care, twice the rate of those in comprehensive health plans (17 percent). Having a health problem made it more likely that people avoided or delayed care. Among people who reported being in fair or poor health or having at least one chronic health condition, those in CDHPs or HDHPs reported delaying or avoiding care at higher rates than those in comprehensive plans: 40 percent of those in CDHPs and 31 percent of people in HDHPs, compared with 21 percent in comprehensive plans.

Attitudes and Satisfaction

Overall, individuals with comprehensive health insurance were more satisfied with their health plan than individuals with CDHPs and HDHPs. Specifically, 63 percent of individuals with comprehensive health insurance were extremely or very satisfied with their health plan, compared with 42 percent among CDHP enrollees and 33 percent of individuals with HDHPs.

Availability and Use of Cost and Quality Information

The survey asked respondents whether their health plans provided any information regarding the cost and quality of providers. Just 1 in 7 people (12-16 percent) in all plan types said that their plans provided either type of information on doctors and hospitals.

More than 70 percent of people enrolled in CDHPs and 60 percent of those in HDHPs strongly or somewhat agreed that the terms of their health plans made them consider costs when deciding to see a doctor when sick or fill a prescription; less than 40 percent of those in comprehensive plans felt this way.

Conclusion

At its most fundamental level, consumerism in health care is an attempt to wrest control of the galloping increase in health care costs experienced by employers over the first half of this decade by addressing the incentives surrounding the demand for health care. This survey finds that consumer plans do, in fact, significantly raise consumer sensitivity to costs and reduce use.

But the survey also demonstrates that at least one factor crucial to the success of consumer-driven health plans-realistic, useful, accessible health-cost information-does not yet exist on a widespread basis. Further, the survey also demonstrates that cost-related reductions in demand are highest among individuals with the most to lose-those who are sick and those who have low incomes. To the extent that the health care cost problem is a problem owned by all of us, early evidence from the consumerism movement suggests that solving it through blunt, demand-side instruments like high deductibles gives disproportionate responsibility for the problem to the most vulnerable among us.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_12-2005.pdf

Comment: Although the negative impact of CDHPs and HDHPs were fully predicted and then confirmed by this survey, one finding is shocking in the intensity of the negative impact: “Nearly everyone (92 percent) with HDHPs with incomes under $50,000 spent 5 percent or more of their income on out-of-pocket costs and premiums, and one-third spent 10 percent or more.” The introduction of financial disincentives to care resulted in widespread financial hardship.

A fundamental principle of health care research is that when preliminary results demonstrate significant harm that cannot be offset by any potential benefit, it is an ethical imperative that the study be terminated immediately. The experiment with CDHP and HDHP has already crossed that threshold. Further experimentation can only define more precisely the enormity of financial hardships created. Health policy researchers have the same ethical obligation as biomedical researchers; they should call for an immediate end to this disastrous experiment.

What feature of this model is causing the harm? The HSA plays an insignificant role in that it is merely a restricted savings account. The patient must still meet the out-of-pocket expenses whether they come from other income or savings or from this account distinguished primarily by an inequitable, regressive tax benefit.

The real harm is caused by the high-deductible requirement of both the CDHPs and the HDHPs. Extensive data already exist that confirm the harm done by high deductibles in impairing access and health outcomes and in creating a financial burden for those in need. This study indicates that the financial hardship appears to be far more extensive than previously thought.

What can we do? Existing HSAs can be converted into IRAs, and future HSAs should be prohibited as bad tax policy, bad pension policy and bad health policy. HDHPs should be prohibited. Financial hardship created by the need to access the health-care system can be eliminated by covering all beneficial services through a single risk pool. Since insurers will never attempt to corner the market on those who need care, this can be accomplished only by public policies requiring a universal pool. It’s time for single payer.

Des Moines Register editorial – A system that works for America

A system that works for America
By Register Editorial Board
The Des Moines Register
December 7, 2005

The U.S. health-care system doesn’t work for ordinary people. It doesn’t work for Bill Cotton of Des Moines, who is spending his life savings for his wife’s nursing-home care. Or Hollee Crees of West Des Moines, who has had to fight the state of Iowa to keep her son on Medicaid. Or John Greener of Washington, Iowa, who can’t retire from teaching because his health care would be unaffordable.

And they’re insured. Then there are the 45 million Americans without health insurance.

The Register’s editorial board has pushed repeatedly for a tax-financed system of health care that provides basic care for all Americans. We have suggested using Medicare as a financing model that could be gradually expanded to cover everyone. Why Medicare? It’s a proven model that provides uniform coverage with low administrative costs – around 3 percent, compared with an average of 15 percent in the private sector. Medicare is familiar, which makes it politically palatable.

Medicare was created 40 years ago because seniors needed help with health care. Now everyone needs it. It makes sense to build on the idea of pooling people together, lowering costs through economies of scale and greater negotiating leverage, and offering uniform benefits people can understand.

We realize our suggestion is hardly simple. Medicare would need to be reformed before it could be expanded – and not in the way Congress “reformed” it in 2003. It should provide a uniform drug benefit that allows the government to negotiate the cost of drugs. It should offer a more comprehensive package of benefits, which would eliminate the need to purchase supplemental insurance. It should do a better job of coordinating patients’ care.

But wouldn’t a system like that break the budget? No. A taxpayer-financed system, covering all Americans, could save 1.1 trillion health-care dollars over 10 years, concluded a recent study by the nonprofit, nonpartisan National Coalition on Health Care, the nation’s largest alliance working to improve health care.

The coalition offered four scenarios for reforming health care in this country. All are comprehensive reform plans, not tinkering around the edges. All would provide everyone with health insurance, increase efficiency and improve quality of care. All four would save money. The one that would save the most money: a universal, publicly financed program.

Kenneth Thorpe, a former government economist, estimated the cost and savings using Congressional Budget Office methodology. He assumed employers would pay 75 percent of the tax for covering employees and workers would pay the remaining 25 percent through payroll taxes. The benefits wouldn’t be bare bones either. They would be similar to what federal employees enjoy. The system would provide drug coverage and wouldn’t require purchasing supplemental insurance.

The coalition isn’t a bunch of left-wing nuts. It’s co-chaired by former Iowa Gov. Robert Ray, a Republican. Members include Principal Financial Group, AARP and Blue Shield of California.

None of the coalition’s coverage and cost scenarios exactly matches the expansion of Medicare that the Register advocates. But they clearly indicate that Medicare expansion would be feasible and save money.

The alternative to comprehensive reform is to keep putting Band-Aids on a system that doesn’t work even for the insured. Quality and availability of care varies for those covered by Medicare versus Medicaid versus benefits through public jobs versus thousands of different plans through private employers versus insurance bought in the open market. And millions are uninsured. The fractured system’s very structure – or lack of it – makes it wasteful.

Instead, the United States could use the money it’s already spending on health care to cover all Americans.

One system. Everyone pays for it. Everyone is insured by it. It would be more efficient and more humane.

It would work for ordinary people. It would work for America.

The obstacle: Special interests

So what stands between America and a tax-financed system of health care?

Powerful special interests that funnel cash to politicians for their political campaigns and lobby heavily to protect their bottom lines.

Reforming the current system theoretically could eliminate the health-insurance industry, although parts of that business would likely remain. Consumers in many countries with national health-care systems buy insurance policies to cover care beyond what the government provides. The pharmaceutical industry would see smaller profits if a government system negotiated down the cost of drugs for everyone.

Two other key players, physicians and businesses, have historically opposed a taxpayer-financed system. Their main national associations continue to do so. As members’ costs and frustration mount, however, views are starting to change.

Business associations have long advocated market-based solutions rather than a government system. Yet, in part because of existing government involvement, the free market hasn’t worked in health care. Businesses large and small see that each year when they receive their annual health-insurance rate increases.

The American Medical Association, too, has fought the idea of a national system, but some physician groups are coming around. Many doctors are growing tired of the paperwork burden of dealing with thousands of different private insurance plans in addition to government programs. And physicians embrace a credo of providing health care to everyone.

The business and medical lobbies wield considerable clout in the halls of Congress. If some of that clout shifted toward pushing reform, rather than resisting it, Congress would be forced to respond.

http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20051207/OPINION03/512070328/1035/OPINION

Blue Bank and Blue VISA to administer HSAs

Blue Cross starting bank for health-related matters
By Sarah Skidmore
The San Diego Union-Tribune
December 6, 2005

The Blue Cross and Blue Shield Association announced yesterday that it will start its own bank (Blue Healthcare Bank) to provide members a place to handle their health-insurance related banking.

This is the second recent financial offering by the Blue Cross and Blue Shield Association. Last month, the association announced an agreement to work with Visa on a branded debit card to pay for health services.

The bank will provide financial services for members enrolled in plans that require dedicated accounts for their health care spending, such as health savings accounts, flexible spending plans or other health reimbursement arrangements.

Such plans are part of a small but growing trend in insurance toward “consumer-directed health plans,” which essentially put more of the decision-making and financial responsibility on the consumer.

Health plan members would use the bank to save and withdraw money for health expenses, even using check or debit cards to do so. The bank will offer some credit lines to members to pay for health care expenses and various investment opportunities.

“It’s a strategic investment for the blues,” said Maureen Sullivan, senior vice president of strategic services for the Chicago-based association. “For these (new health) services to succeed long term, we need to provide comprehensive services.”

http://www.signonsandiego.com/news/business/20051206-9999-1b6bank.html

BlueCross BlueShield Association
Press Releases

12/05/2005
Blue Cross And Blue Shield Companies To Develop Bank

11/21/2005
Blues And Visa Enter Into Co-Branded Debit Card Deal

http://onlinepressroom.net/bcbsa/

Comment: Supporters of health savings accounts (HSA) with high-deductible health plans (HDHP) tout the simplicity of paying cash for up-front medical expenses followed by 100% coverage after the HDHP deductible is met. They gloss over the fact that complex, detailed accounting is required to define when the deductible has been met. Factors to be considered include whether services and products qualify, whether they are provided in or out of network, and what amounts are disallowed because they exceeded the contracted rates. Additional accounting may be required to determine tax liability and potential penalties for disallowed distributions.

As the largest marketers of HDHPs, Blue Cross and Blue Shield insurers (BC/BS) faced the possibility of losing control of the administrative task of providing this complex accounting. The alternative would have been to require their beneficiaries to provide reams of documentation at the time that the deductible was believed, by the patient, to have been met. The receipts, cancelled checks, charge card records and whatever else would not have provided enough information for the insurers to qualify the expenses as meeting the deductible. In most instances, many charges would be disqualified and the deductible would not have been met, but the insurer would have expended considerable administrative effort with the end result that no HDHP benefits would be paid out.

In order to maintain control of the administration of the up-front expenses, BC/BS really didn’t have much choice other than to establish Blue Healthcare Bank to segregate the accounts, and the Blue-branded VISA debit card to document access to the accounts. An additional reason for the bank is that BC/BS had to enter the lending business in the form of credit lines attached to the debit cards. For the debit card to function smoothly at the time of service, credit lines have to be in place to cover expenses after the HSAs are depleted, but before the deductible is met. It is not clear whether they also intend to extend credit for the inevitable disallowed charges that occur after the “100% coverage” is in place.

HSAs do not provide administrative simplification. Not only do the HDHPs require the same administrative effort to account for HSA spending, they are now adding the administrative costs of banking and debit cards. It makes you wonder what the driving force is behind the passion of the HSA/HDHP advocates. It certainly isn’t logic.

Our health care serves up profits

By Andre Picard
The Globe and Mail (Canada)
Thursday, December 1, 2005

Starbucks spends more on health insurance for its American employees than it does for coffee beans — $200-million (U.S.) annually. General Motors spends more on health benefits than it does on steel — the equivalent of more than $1,500 per U.S. vehicle it builds.

Wal-Mart’s annual bill for health benefits is $1.5-billion yet, by some accounts, fewer than half of the company’s 1.3 million U.S. employees are actually insured.

Aside from being fodder for cocktail party conversations, why do these little bits of trivia matter? Because they serve as a graphic reminder that one of the biggest beneficiaries of Canada’s medicare system is big business, and the millions of workers it employs.

When we talk about the right to buy private insurance — a hot topic since the Supreme Court’s Chaoulli decision — one aspect is often overlooked: Who will pay for it? In countries with private health insurance for basic medical care, premiums are invariably paid — in whole or in large part — by employers; they become a key element of contract negotiations. (In Canada, health insurance is available but it covers services not covered by medicare such as prescription drugs, dental care, vision care, etc. The Chaoulli decision extends the right to other basic services if they are not provided by the state in a timely manner.)

The U.S. has an employer-based health-insurance program — 90 per cent of people with health insurance get it through employers. But there are 45 million who are uninsured, and many more who depend on Medicare (for the elderly) and Medicaid (for the poor).

The employer-based health-insurance system is one of the major concerns of U.S. business because it is a drain on profits. Thankfully, the system is collapsing under the weight of its irrationality.

Bob Moffit of the ultraconservative Heritage Foundation said it best: “Why is America the only industrialized country that ties health insurance to employment? It’s nuts.”

“Imagine if auto insurance worked the same way. So if you lost your job, you could no longer drive. That would be absurd.”

Yet, the absurd reality is that, in the U.S., many employees dare not change jobs for fear of losing their health benefits.

According to a recent survey by the Kaiser Foundation, the average health premium in the U.S. is now $10,880 a year — more than the gross earnings of minimum-wage workers. On average, employees with benefits pay $3,718 of that total, with employers picking up the balance.

Even loyal employees are taking it on the neck. Last month, the United Auto Workers approved a contract that will allow GM to cut $15-billion from its retiree health-care liability. Practically speaking, that means retirees will now have to pay additional insurance premiums of up to $750 a year.

Wal-Mart, for its part, is talking about screening policies to avoid hiring employees with health problems and looking for ways to shuffle workers and their families to government-run social services programs like Medicaid.

Wal-Mart is an easy target but it is simply doing what the market demands — maximizing profits. Employer-based health coverage creates an inherent conflict of interest: Companies will always protect profits over the health of workers and retirees.

Still, there are companies — Starbucks, Costco, Verizon, Honeywell — that continue to offer health coverage to all employees. They argue that the only way to get good people is to pay living wages and provide decent benefits. Companies without good benefits have extremely high turnover and, not surprisingly, unhealthy workers.

Howard Schultz, the chairman of Starbucks, has been the most outspoken business leader about the moral responsibility of corporations to provide health benefits. But he has also expressed exasperation: “What’s perverse is that companies like ours who are doing the right thing are actually paying more,” he said on CNBC.

Mr. Schultz noted that those with health insurance are paying more to offset the costs of the 45 million uninsured who depend on government programs and charity. He said public, state-run health programs would be more efficient, cost-effective and just.

In Canada, individuals and corporations pay higher taxes than in the U.S. But when medicare benefits are factored in, the differences are negligible.

A universal program like medicare not only introduces an element of social justice, it also levels the playing field — it does not allow corporations to satisfy the profit demands of Bay Street (and Wall Street) at the expense of their employees’ security and health.

As the U.S. moves inexorably from private sector coverage to public sector coverage, Canadians should take a moment to appreciate their much-maligned system. And business leaders, in particular, should have the courage and the honesty to stand up and declare how good they have it.

Canada’s medicare system is far from perfect, but it has done wonders for the bottom line of corporate Canada.

apicard@globeandmail.ca

Metropolitan Detroit AFL-CIO Central Labor Council Endorses Conyers Single Payer Health Care, HR 676

Detroit, MI–The motor city became the first big urban labor council to endorse HR 676, Single Payer Health Care, a bill introduced by Congressman John Conyers.

Acting at its regular November meeting, the Council, which represents 36 local unions, resolved to “…work with other unions and community groups to build support and action for single payer universal health care and HR 676.” The resolution, which passed unanimously, was introduced by Michele Artt, a delegate from the Detroit Federation of Teachers.

The Detroit AFL-CIO joins a growing list of Central labor bodies that have endorsed HR 676. The Conyers bill now has 57 co-sponsors.

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For a complete list of union endorsers of HR 676 contact:
Kay Tillow
c/o Nurses Professional Organization (NPO)
1169 Eastern Parkway #2218
Louisville, KY 40217
(502) 636 1551or (502) 459 3393
email: Nursenpo@aol.com