CalPERS gives OK to HMO increase
By Victoria Colliver
San Francisco Chronicle
June 16, 2005

It’s a sign of the times when the state pension fund approves HMO rate increases roughly three times the rate of inflation and that’s considered a victory.

As expected, the California Public Employees’ Retirement System on Wednesday approved 2006 HMO rate increases averaging 8.7 percent (and 9.5% increase for PPOs, Los Angeles Times).

The single-digit increase for 2006 was the lowest rate increase since 1999, except for 2002, when there were major increases in co-payments and other out-of-pocket costs.

CalPERS is the nation’s third-largest purchaser of health care and is considered a leading indicator of future coverage trends.

Larry Levitt, a vice president with the Kaiser Family Foundation, said smaller employers are likely to be hit significantly harder than giant CalPERS.

“If I were a small employer with little bargaining leverage, I think I would have hoped CalPERS premiums would have come down even more,” he said. “It’s always good to be moving in the right direction, but I don’t think anyone believes an 8.7 percent increase is good news or even sustainable.”

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/06/16/BUGMDD97Q01.DTL

Comment: Think of it. The third largest purchaser of health care has increased patient cost sharing in order to slow the rate of premium increases, and this slowing still results in premium increases that are three times the rate of inflation!

All nations with universal insurance programs have been more successful in moderating cost increases than has the United States.

The tradeoff is not necessarily the formation of excessive queues since many nations have prevented such queues by attending to capacity needs.

The other common counter-argument advanced is that slowing costs would stifle technological innovation. Yet Great Britain, spending half as much of its GDP on health care, shared in the Nobel prizes for both CT imaging and MRI imaging. Their level of health care spending did not stop innovation.

Besides, what technological or pharmaceutical firm would walk away from trying to get their share of the $1.9 trillion that we are already spending on health care?

Much of the increase in spending is feeding administrative waste and non-beneficial technological excesses. Private plans already have proven their inability to control these excesses, and actually contribute to them.

By establishing our own monopsonistic, universal insurance program, we would be in a position to reduce this waste while being certain that new spending is providing us with value. If new advances are worth it, we can pay for them.

PNHP Statement on the Canadian Supreme Court Decision on Private Insurance

On June 9, 2005, the Supreme Court of Canada ruled that the Quebec government cannot ban private insurance that duplicates the coverage under Canada’s national health insurance system (known as Medicare) when clearly excessive waiting lists delay timely access to care and may impair health.

In both the United States and Canada, opponents of universal public programs of health insurance have used this decision to argue that private insurance provides a superior alternative to public insurance. Such arguments are fallacious and entirely unwarranted.

Long queues (waiting lists for health care services) result from inadequate capacity of the health care delivery system, not from the method of paying for care. Canada suffers from an inadequate supply of MRI machines and a shortage of specialists and technicians in some fields. These shortages have resulted in queues for a few high technology interventions. The appropriate remedy is to increase capital investment in the capacity of the system, both in physical plants and equipment, and in human resources.

In the effort to reduce queues to reasonable levels, it is crucial to avoid creating excess capacity in the system. Excess capacity results in over-utilization, which dramatically increases costs without a commensurate improvement in outcomes. Excessive interventions are sometimes even detrimental to health. Because of the dynamic nature of health care, not all capacity problems can be anticipated, and some queues are inevitable. An effective health care system monitors utilization and reacts with appropriate adjustments in capacity.

This has nothing whatsoever to do with whether insurance payments are made by a public or by a private insurance system. It defies logic to suggest that private insurance will correct the capacity deficiencies that result in queues. When a public health care delivery system has deficient capacity, the role of private insurance, as defined by this decision, is to authorize a larger payment for the services than the public insurance provides. This merely jumps those with private coverage to the front of the queue. Since the private coverage will not change the capacity of the delivery system, it will result in further delays for everyone else in the queue. Private insurance effectively offers providers a bribe if they are willing to place wealthy people at the front of the line.

The United States has served as a laboratory for private insurance. We spend far more than nations with public insurance. We have allowed the private insurance industry to profit by providing coverage primarily to the healthy.

We continue to tolerate tens of millions with no coverage, and tens of millions more have such inadequate coverage that a serious illness would lead to bankruptcy. Tens of thousands of Americans are suffering because of the lack of access to affordable coverage. At least 18,000 American adults die each year because of our failure to adopt rational policies for health care coverage.

The Canadian Supreme Court decision on queues and private insurance ignores a vast body of research data and demonstrates a total disconnect in logic.

The justices’ decision threatens to undermine the very foundations of Canada’s health care system, and would place Canadians at grave risk of unnecessary suffering and death. What Canada’s health care system needs is more money, not more private insurance and the rising inequities that would surely follow.

Physicians for a National Health Program www.pnhp.org

PNHP Statement on the Canadian Supreme Court Decision on Private Insurance

On June 9, 2005, the Supreme Court of Canada ruled that the Quebec government cannot ban private insurance that duplicates the coverage under Canada’s national health insurance system (known as Medicare) when clearly excessive waiting lists delay timely access to care and may impair health.

In both the United States and Canada, opponents of universal public programs of health insurance have used this decision to argue that private insurance provides a superior alternative to public insurance. Such arguments are fallacious and entirely unwarranted.

Long queues (waiting lists for health care services) result from inadequate capacity of the health care delivery system, not from the method of paying for care. Canada suffers from an inadequate supply of MRI machines and a shortage of specialists and technicians in some fields. These shortages have resulted in queues for a few high technology interventions. The appropriate remedy is to increase capital investment in the capacity of the system, both in physical plants and equipment, and in human resources.

In the effort to reduce queues to reasonable levels, it is crucial to avoid creating excess capacity in the system. Excess capacity results in over-utilization, which dramatically increases costs without a commensurate improvement in outcomes. Excessive interventions are sometimes even detrimental to health. Because of the dynamic nature of health care, not all capacity problems can be anticipated, and some queues are inevitable. An effective health care system monitors utilization and reacts with appropriate adjustments in capacity.

This has nothing whatsoever to do with whether insurance payments are made by a public or by a private insurance system. It defies logic to suggest that private insurance will correct the capacity deficiencies that result in queues. When a public health care delivery system has deficient capacity, the role of private insurance, as defined by this decision, is to authorize a larger payment for the services than the public insurance provides. This merely jumps those with private coverage to the front of the queue. Since the private coverage will not change the capacity of the delivery system, it will result in further delays for everyone else in the queue. Private insurance effectively offers providers a bribe if they are willing to place wealthy people at the front of the line.

The United States has served as a laboratory for private insurance. We spend far more than nations with public insurance. We have allowed the private insurance industry to profit by providing coverage primarily to the healthy.

We continue to tolerate tens of millions with no coverage, and tens of millions more have such inadequate coverage that a serious illness would lead to bankruptcy. Tens of thousands of Americans are suffering because of the lack of access to affordable coverage. At least 18,000 American adults die each year because of our failure to adopt rational policies for health care coverage.

The Canadian Supreme Court decision on queues and private insurance ignores a vast body of research data and demonstrates a total disconnect in logic.

The justices’ decision threatens to undermine the very foundations of Canada’s health care system, and would place Canadians at grave risk of unnecessary suffering and death. What Canada’s health care system needs is more money, not more private insurance and the rising inequities that would surely follow.

Physicians for a National Health Program www.pnhp.org

Insured But Not Protected: How Many Adults Are Underinsured?
The experiences of adults with inadequate coverage mirror those of their uninsured peers, especially among the chronically ill.
By Cathy Schoen, Michelle M. Doty, Sara R. Collins, Alyssa L. Holmgren(Commonwealth Fund)
Health Affairs
June 14, 2005

Abstract: Health insurance is in the midst of a design shift toward greater financial risk for patients. Where medical cost exposure is high relative to income, the shift will increase the numbers of underinsured people. This study estimates that nearly sixteen million people ages 19-64 were underinsured in 2003. Underinsured adults were more likely to forgo needed care than those with more adequate coverage and had rates of financial stress similar to those of the uninsured. Including adults uninsured during the year, 35 percent (sixty-one million) were under- or uninsured. These findings highlight the need for policy attention to insurance design that considers the adequacy of coverage.

From the article:

Defining “underinsured.”

…we classified them as underinsured if they were insured all year but reported at least one of three indicators: (1) Medical expenses amounted to 10 percent of income or more; (2) among low-income adults (below 200 percent of the federal poverty level), medical expenses amounted to at least 5 percent of income; and (3) health plan deductibles equaled or exceeded 5 percent of income.

Two of three indicators (with deductibles as the exception) relied on current-year out-of-pocket costs and medical bills. As a result, unlike methods that simulate expenses based on analysis of insurance plans, age, and health, this “snapshot” approach will miss healthier adults with inadequate coverage who had little need for medical care during the year. The methodology thus likely underestimates the number of underinsured people.

Shifting trends.

The findings are likely to be symptoms of more to come. Given the public policy push and market trends toward higher deductibles, it will be important to track coverage adequacy and related care patterns over time.
The United States may well be on a path to where it becomes harder to distinguish the insured from the uninsured if insurance no longer provides either access or financial protection.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.289

Comment: The definition of underinsured used in this study was stringent enough to select out nearly 16 million individuals whose coverage left them almost as exposed to impaired access and medical debt as are the uninsured. One obvious conclusion is that health policy improvements must apply not only to the 45 million uninsured but also to these 16 million underinsured, or a total of 35% of the U.S. population.

Besides the uninsured and underinsured, there is another important category that we’ll call, for want of a better term, the “subinsured.” This is a very large group of individuals of moderate means who are healthy and have relatively infrequent needs to access the health care system. But the very reason that we have insurance is that anyone is vulnerable and could develop major health care problems.

And what could constitute subinsurance? Suppose an individual with an income of $52,000 had a significant medical event or developed a chronic problem and had to pay $5,000 in out-of-pocket medical expenses. That is under 10% of income, and therefore the individual is not underinsured by the criteria of this study. But most of us would believe that our coverage is not adequate under similar circumstances. Such a dent in our budgets would create difficulties in paying our bills, not to mention wiping out considerations such as voluntary contributions to our pension plans or replacement of that old clunker that you’re afraid to take out on the highway.

Insurance should prevent impairment to health care access, and it should prevent financial stress. Therefore we need policies that protect not only the uninsured and underinsured, but also the subinsured. Combined, that’s the majority of us. But at the cost of health care today, how could we fund the insurance pool without including the more affluent individuals who can easily accept the burden of contributing more to cover those who cannot fund their own share? We need the affluent as well.

We desperately need policies that would equitably fund an insurance pool that ensures affordable access for everyone, covering all important beneficial services. Is there really any other option than national health insurance?

One Nation, Uninsured
By Paul Krugman
The New York Times
June 13, 2005

Harry Truman tried to create a national health insurance system. Public opinion was initially on his side: Jill Quadagno’s book “One Nation, Uninsured” tells us that in 1945, 75 percent of Americans favored national health insurance. If Truman had succeeded, universal coverage for everyone, not just the elderly, would today be an accepted part of the social contract.

But Truman failed. Special interests, especially the American Medical Association and Southern politicians who feared that national insurance would lead to racially integrated hospitals, triumphed.

Sixty years later, the patchwork system that evolved in the absence of national health insurance is unraveling. The cost of health care is exploding, the number of uninsured is growing, and corporations that still provide employee coverage are groaning under the strain.

So the time will soon be ripe for another try at universal coverage. Public opinion is already favorable: a 2003 Pew poll found that 72 percent of Americans favored government-guaranteed health insurance for all.

But special interests will, once again, stand in the way. And the big debate among would-be reformers is how to deal with those interests, especially the insurance companies. These companies played a secondary role in Truman’s failure but have since become a seemingly invincible lobby.

Let’s ignore those who believe that private medical accounts – basically tax shelters for the healthy and wealthy – can solve our health care problems through the magic of the marketplace. The intellectually serious debate is between those who believe that the government should simply provide basic health insurance for everyone and those proposing a more complex, indirect approach that preserves a central role for private health insurance companies.

A system in which the government provides universal health insurance is often referred to as “single payer,” but I like Ted Kennedy’s slogan “Medicare for all.” It reminds voters that America already has a highly successful, popular single-payer program, albeit only for the elderly. It shows that we’re talking about government insurance, not government-provided health care. And it makes it clear that like Medicare (but unlike Canada’s system), a U.S. national health insurance system would allow individuals with the means and inclination to buy their own medical care.

The great advantage of universal, government-provided health insurance is lower costs. Canada’s government-run insurance system has much less bureaucracy and much lower administrative costs than our largely private system. Medicare has much lower administrative costs than private insurance. The reason is that single-payer systems don’t devote large resources to screening out high-risk clients or charging them higher fees. The savings from a single-payer system would probably exceed $200 billion a year, far more than the cost of covering all of those now uninsured.

Nonetheless, most reform proposals out there – even proposals from liberal groups like the Century Foundation and the Center for American Progress – reject a simple single-payer approach. Instead, they call for some combination of mandates and subsidies to help everyone buy insurance from private insurers.

Some people, not all of them right-wingers, fear that a single-payer system would hurt innovation. But the main reason these proposals give private insurers a big role is the belief that the insurers must be appeased.

That belief is rooted in recent history. Bill Clinton’s health care plan failed in large part because of a dishonest but devastating lobbying and advertising campaign financed by the health insurance industry – remember Harry and Louise? And the lesson many people took from that defeat is that any future health care proposal must buy off the insurance lobby.

But I think that’s the wrong lesson. The Clinton plan actually preserved a big role for private insurers; the industry attacked it all the same. And the plan’s complexity, which was largely a result of attempts to placate interest groups, made it hard to sell to the public. So I would argue that good economics is also good politics: reformers will do best with a straightforward single-payer plan, which offers maximum savings and, unlike the Clinton plan, can easily be explained.

We need to do this one right. If reform fails again, we’ll be on the way to a radically unequal society, in which all but the most affluent Americans face the constant risk of financial ruin and even premature death because they can’t pay their medical bills.

http://www.nytimes.com/2005/06/13/opinion/13krugman.html?hp

Comment: Rather than distributing a couple of excerpts from Paul Krugman’s article, I’ve sent it out in its entirety, for a very important reason.

The debate on comprehensive health care reform is somewhat muddled, and that is because there are two debates taking place: one on consumer-directed health care, and the other on universal coverage.

The noisy but counter-productive debate is on consumer-directed health care. The proposals, such as high-deductible health plans, individual health savings accounts, and Spartan plans stripped of benefits, all move away from the concept of health insurance in that they shift the financial responsibility from a common pool in which we all share risk, transferring much of that risk to each individual. Although we hear much about these concepts, this debate is really very unimportant because it can never lead to a rational system of ensuring access to affordable care. In fact, the opposite would occur.

The opponents of egalitarianism and solidarity may have a few victories, such as the insertion of the HSA legislation into the Medicare bill, but it will soon become evident that we will not be able to tolerate the financial vulnerability of precisely those individuals most in need of health care. Even most of the libertarian health policy analysts concede that reform must pool risk in some manner (even if a conglomeration of various tightly and loosely structured pools), and that the government will have to be involved at least to the extent of ensuring coverage for those who cannot possibly fund their own share of their risk pool(s).

It is ironic that the lunatic element of the consumer-directed movement is proposing not only privatization of health care coverage, but they are already engaged in a process that weakens the protection afforded by private health plans. The majority of average-income Americans are already financially vulnerable in the face of significant medical needs because of the deteriorating coverage marketed by the private insurance industry.

Some speak kindly of the advocates of consumer-directed health care, suggesting that they are well motivated even if ill-advised, but I disagree. “Let them eat cake” policies can be conjured up only by the most uncaring, cruel, heartless advocates of class stratification with the few “haves” insulating themselves from any societal responsibility to ensure that the basic needs of the masses of “have nots” are met. (In this paragraph, I find my own rhetoric to be highly offensive, but not nearly as offensive as the attitude of those who don’t give a rat’s a** about their fellow man/woman.)

There is really only one genuine debate on reform. Do we continue to waste resources and perpetuate profound inequities in our health care system by building on our highly flawed, fragmented model of private health plans and public programs, or do we adopt an efficient, equitable, affordable system of funding coverage for everyone? Paul Krugman has provided a concise answer in his article.

You should delete my emotional and ill-advised tirade and then reproduce Krugman’s article and distribute it as widely as possible. It’s time for us to get real about health care reform.

And be sure that the debate is properly framed. In Paul Krugman’s words:

“Let’s ignore those who believe that private medical accounts – basically tax shelters for the healthy and wealthy – can solve our health care problems through the magic of the marketplace. The intellectually serious debate is between those who believe that the government should simply provide basic health insurance for everyone and those proposing a more complex, indirect approach that preserves a central role for private health insurance companies.”

Beth Capell, Ph.D. on the RAND conclusions on CDHPs:

Don:

There is a rather substantial literature (about 12 inches deep on my desk) demonstrating that people with high out of pocket costs fail to seek necessary and appropriate care.

To quote Health Access California:

Deductibles of $1000, $1500 or even $5000 per person exist. Out of pocket costs may be capped at several thousand dollars-or not at all. Numerous studies have shown that high deductible policies deter necessary care and put at risk the credit and solvency of average families. People with high deductible plans were:

· Twice as likely to skip medications,

· Twice as likely to fail to fill prescriptions,

· Twice as likely to avoid visiting a doctor for a problem, and

· Twice as likely to fail to get physician-prescribed care.

A deductible of only $1,000 caused a third of patients to spend more than 10% of income on out of pocket costs. Not surprisingly, patients with higher deductibles had more financial problems. Medical costs are involved in over half of bankruptcies–and most of those with medical bankruptcies were initially insured.

Beth Capell, Ph.D., for Health Access California

Comment: Dr. Capell is certainly correct. The RAND report is actually incorrect when it states that there is “mixed evidence on whether the financial incentives in the new plan designs will decrease use of necessary and desirable services.” The evidence is very clear. Financial disincentives do decrease access to beneficial health care products and services.

“Consumer-Driven” Health Plans: Implications for Health Care Quality and Cost
By RAND
California HealthCare Foundation
June 2005

Confronted with double-digit increases in health insurance costs and consumer dissatisfaction with managed care, employers are looking for new ways to contain health care costs. The solutions that are emerging increase consumers’ financial responsibility and involvement in their own health care choices.

One new approach – “consumer-directed health plans” or CDHPs – involves increased incentives to make consumers financially responsible when they choose costly health care options.

This report is an overview of the current state of knowledge on the effectiveness of these approaches and tools. Each of three sections addresses one of the three benefit-design approaches – high deductibles, personal spending accounts, and tiered-benefit designs. (Another section) examines point-of-use decision-support tools.

… this literature review produced the following conclusions with regard to consumer health care use decisions and health outcomes:

* High-deductible plans can be expected to reduce health care spending, but it is unclear that they will lower the rate in growth of costs over time.

* Early evidence suggests that the availability of personal health spending accounts does not eliminate the incentive effects of higher cost sharing; but how consumers will respond as account balances accrue is unknown.

* The role of cost sharing on health outcomes is uncertain. The HIE (RAND Health Insurance Experiment) suggests that modest cost sharing does not have deleterious effects for most people, but other research indicates there is some level of cost sharing that may lead to adverse outcomes, especially for the poor.

* Little is known about how tiered-network plans will affect consumer choice of provider, although some studies suggest that price is not a large factor in provider choice.

* There is mixed evidence on whether the financial incentives in the new plan designs will decrease use of necessary and desirable services as well as unnecessary care.

* It is not known whether decision-support tools can and do promote more appropriate health care use decisions or help consumers purchase value.

http://www.chcf.org/documents/insurance/
ConsumerDirHealthPlansQualityCost.pdf

Comment: Thus the beginning of another prolonged and profoundly expensive national experiment on controlling health care costs…

At the outset, there is little evidence that CDHPs will have more than a very modest impact on global health care spending since most spending is concentrated amongst the few with the greatest needs. The great majority, who are healthy, are responsible for only a small portion of overall health care spending. On the other hand, considerable early evidence does indicate that CDHPs will have a negative impact on health care access and outcomes for individuals with modest incomes and with significant health problems; the important unknown is just how much suffering and death that will result from these policies.

The RAND HIE has been used as a basis for increasing patient cost sharing because it demonstrated that deductibles and co-payments do decrease health care utilization. Studies of large, healthy populations have shown that the decline in utilization has had a negligible impact on global health outcomes. But the subsets of individuals with significant problems clearly fare worse with cost sharing. Costs can be contained without using the blunt instrument of CDHPs that harms those with the greatest needs.

The importance of this RAND report is that it demonstrates there is not enough evidence to move forward with an approach to cost containment that will cause harm, especially when it will delay, most likely by a decade, the beginning of a process to ensure that everyone would have affordable access to beneficial health care services. We do know that CDHPs will never accomplish that.

Why proceed with such a wasteful experiment, especially when we know it will result in more suffering and death? Isn’t that what we’re supposed to be preventing?