Passing the Buck
By Paul Krugman
The New York Times
April 22, 2005

Isn’t competition supposed to make the private sector more efficient than the public sector? Well, as the World Health Organization put it in a discussion of Western Europe, private insurers generally don’t compete by delivering care at lower cost. Instead, they “compete on the basis of risk selection” – that is, by turning away people who are likely to have high medical bills and by refusing or delaying any payment they can.

Yet the cost of providing medical care to those denied private insurance doesn’t go away. If individuals are poor, or if medical expenses impoverish them, they are covered by Medicaid. Otherwise, they pay out of pocket or rely on the charity of public hospitals.

So we’ve created a vast and hugely expensive insurance bureaucracy that accomplishes nothing. The resources spent by private insurers don’t reduce overall costs; they simply shift those costs to other people and institutions. It’s perverse but true that this system, which insures only 85 percent of the population, costs much more than we would pay for a system that covered everyone.

Think about how crazy all of this is. At a rough guess, between two million and three million Americans are employed by insurers and health care providers not to deliver health care, but to pass the buck for that care to someone else. And the result of all their exertions is to make the nation poorer and sicker.

Why do we put up with such an expensive, counterproductive health care system? Vested interests play an important role. But we also suffer from ideological blinders: decades of indoctrination in the virtues of market competition and the evils of big government have left many Americans unable to comprehend the idea that sometimes competition is the problem, not the solution.

http://www.nytimes.com/2005/04/22/opinion/22krugman.html?hp

Comment: The debate today rages on as to whether we want to build on the current system, or replace it with a single, universal system. But why would we continue to support an industry that is consuming ever more of our health care dollars when its primary function is to devise methods of shifting the funding of health care from the insurance risk pool to patients and taxpayers? We are paying for a complex and expensive administrative system designed specifically to defeat the function that is the reason for its existence: pooling risk.

To quote further from Krugman’s article: “According to the (World Health Organization), the higher costs of private insurers are ‘mainly due to the extensive bureaucracy required to assess risk, rate premiums, design benefit packages and review, pay or refuse claims.’ Public insurance plans have far less bureaucracy because they don’t try to screen out high-risk clients or charge them higher fees.”

Why then are we even considering the option of expanding our current system? It’s broken beyond repair. Installing a new universal system would be cheaper and more effective. And we would all be healthier, both physically and financially.

Medicare’s dilemma grows: How far to go in coverage
By Julie Appleby
USA Today
4/21/2005

…an ongoing dilemma for Medicare: whether to pay for a treatment when data on its effectiveness are uncertain or show it to be of limited value. The program… will increasingly face such debates as medical technology advances, baby boomers retire and Medicare confronts vast deficits.

“The question is, are we willing to pay for treatments that have a small chance at success?” says Peter Neumann, associate professor of health policy at the Harvard School of Public Health. “It’s true that we are a wealthy country, but whether we admit it or not, there are limits.”

Should Medicare cover every new $20,000-a month cancer drug? If a treatment is found for Alzheimer’s disease, will it go only to those diagnosed with the disease, or will patients who have normal age-associated memory lapses also be covered? Can the U.S. afford to put a pacemaker or other cardiac device into every patient with heart problems?

Medicare and other insurers are aiming to develop a better understanding of treatment outcomes by studying the results. Medicare, for example, has recently approved some new technologies but will track the patients – either by requiring them to be in clinical trials or by using a databank where medical information can be compiled – to see how well they do.

But cost isn’t the only factor in Medicare’s growing push to gather more data on effectiveness. The head of Medicare, Mark McClellan, says better evidence can help Medicare avoid treatments that don’t work or are dangerous.

“Why shouldn’t a patient who is very desperate say, ‘I’m willing to take a risk of dying from this technology, because I have little to lose’?” asks Princeton economist Uwe Reinhardt. While Medicare and other insurers should not pay for every treatment, regardless of its value, he says that some provision should be made to allow for innovation and experimentation.

http://www.usatoday.com/money/industries/health/2005-04-20-medicare-cover_x.htm

Comment: A common criticism of the Medicare program is that there are excessive delays in approving coverage of new technological advances. But we should keep in mind that new technology has contributed significantly to the continuing escalation of health care costs. So it seems that the Centers for Medicare and Medicaid Services is acting responsibly in requiring adequate evidence that new technology is providing reasonable value for the taxpayer.

It is entirely appropriate to limit coverage of unproven new technology to an experimental protocol until there are adequate data to warrant coverage for everyone.

As patients, each of us may want unlimited access to new, unproven, high tech care, but, as taxpayers, we should be assured that our health care spending on others is responsible.

Socialized Medicine? From Republicans?
By Matt Miller
Fortune
May 2, 2005

What do General Motors’ woes, the Medicare prescription-drug law, the state and local health-care time bomb…, and Congress’s recent refusal to trim soaring state Medicaid subsidies have in common? They’re all stones on the path toward the nationalization of health-care spending-an idea that’s so easy to slam politically yet so sensible for business that only Republicans can sell it! Before everyone screams, please note that I said health-care spending, not delivery. There’s a difference.

…there’s a potential common agenda lurking beneath today’s health-cost angst. Think of it as a two-step: First, we’d move a chunk of private-sector health costs to government, something business and labor could embrace as a competitiveness booster. Then we’d find ways to guarantee coverage for all while reengineering health-care delivery to lower costs in the long term (without the price controls that stall innovation abroad). Easier said than done, you may say. But seen in this context, the prescription-drug bill last year was the first step in the Republican-led socialization of health spending. Companies have been clobbered funding retiree health plans. The GOP felt their pain, and presto, $750 billion over ten years moved from private to public budgets.

The bigger hurdle may be stereotypes. Business’s sensible drive to get Uncle Sam to take on more of the health burden will run into the nihilistic (but potent) “big government” rhetoric of the GOP-plus the party’s delusion that we can keep federal taxes at 17% to 18% of GDP as the boomers retire. If Republican pols want to help Republican CEOs solve their biggest problems, this caricature of a political philosophy will have to give way to something more grown-up. Just as the Nixon-to-China theory of history says it will ultimately take a Democratic President to fix Social Security, it may take a Republican President to bless the socialization of health spending we need.

http://www.fortune.com/fortune/print/0,15935,1050964,00.html

Comment: It has been said many times. The liberals will educate the nation on the advantages of a universal, publicly funded health insurance program, but it will be the conservatives who enact it. The pro-business argument for it is just too persuasive.

American Medical News
April 25, 2005
Uninsured a problem hard to grasp, solve
By Joel B. Finkelstein

…disagreement over exactly how many uninsured Americans there are continues to muddy the national debate about how to fix the problem, experts said.

The Census Bureau’s Current Population Survey offers the most-often-cited number of 45 million Americans without health insurance for all of 2003. But a survey by the Dept. of Health and Human Services found that only 28.8 million lacked health insurance that year. The surveys differ in size and methods.

In a separate analysis of the Census Bureau data, HHS suggested there may be as few as 9 million uninsured Americans.

Researchers arrived at that number after deducting individuals who should be in Medicaid, illegal immigrants, young adults with little or no health care costs, and people who could afford health insurance but chose not to buy it.

http://www.ama-assn.org/amednews/2005/04/25/gvsc0425.htm

Comment: The Department of Health and Human Services makes a very important point. Policy decisions should never be made based on raw data alone. An intelligent “administrative analysis” of the data can provide us with a much more rational basis for establishing policy. Thanks to HHS’s expertise, it looks as if we may be faced with establishing policies for only 9 million uninsured rather than the 45 million estimate of the Census Bureau.

Giving this more thought, we’ve been pretty stupid in our approach to health care coverage. Instead of being concerned about the 45 million without insurance, we should have been directing our attention to the real numbers: the 251 million who do have insurance, which is 85% of our population.

About 237 million people (80% of our population) use about $380 billion in health care (20% of our national health care spending). That means that the average health care costs per individual for this 80% of our population is about $1600. Yet the Kaiser Family Foundation survey reported that we spend $3700 per individual in health insurance premiums.

If we had used our data more effectively, we would have reframed the debate quite differently. We should have been asking why anyone in their right mind would pay $3700 to cover $1600 in health care benefits! Quite obviously we should have been establishing policies that would make certain that none of these 237 million have health insurance, since it is clear that the real problem is that we have excessive numbers of individuals covered!

But when we discuss our new brilliant analysis of the raw data, we do have to be careful not to mention the other 20% of our population whose health care costs average $26,000 per person. After all, why should we ever establish policies that benefit the minority at the expense of the majority?

HHS is right. The 9 million without insurance is only 3% of our population. That’s such a small number that we can ignore it. Thank goodness we have an administration which selects brilliant bureaucrats who can provide such clarity in our approach to health policy issues.

And the dead that will result from these policies? Everyone understands that collateral damage is just a fact of life.

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

(Please share this message with others. After all, it’s time that we get our national priorities right!)

AcademyHealth
March 2005
Managed Care Mandates Fall Short of Curbing California Medicaid Costs
By Bonnie J. Austin, J.D.

Over the past several years, growth in Medicaid spending has far outpaced the growth in state tax revenues and now accounts for nearly 22 percent of total state government spending. Rapid health care cost increases during the 1990s led many state governments to shift Medicaid recipients into managed care plans in an effort to control costs. The conventional wisdom at the time suggested that states would save money as a result. Like many other states, California sought relief through managed care; it passed legislation to foster enrollment and county by county, Medicaid recipients moved from a fee-for-service (FFS) system to managed care plans.

To shed light on the effects of transitioning beneficiaries from FFS Medicaid to Medicaid managed care, Mark Duggan, Ph.D., and colleagues from the University of Maryland and the National Bureau of Economic Research examined how mandatory enrollment in managed care has affected both spending and health outcomes for California Medicaid recipients. They found that despite a dramatic increase in Medicaid managed care enrollment-from less than 12 percent in 1993 to 51 percent in 1999-there was neither a significant reduction in spending nor improved health outcomes.

“Our findings suggest that managed care contracting reduced the efficiency of the Medicaid program in California,” says Duggan. “In fact, Medicaid spending appeared to increase by almost 20 percent following the shift to managed care and persisted long after the mandates first took effect” (suggesting that they are not simply driven by startup costs of a new plan).

The researchers also found that the switch from FFS to managed care did not lead to significant improvements in health outcomes.

Although the burden of administrative costs on the health care system is enormous, Duggan did not have data on these costs. Nevertheless, anecdotal evidence suggests that the shift from FFS to Medicaid managed care contracts resulted in increased administrative costs for the state. Therefore, the increase in Medicaid spending resulting from the shift to Medicaid managed care in this project may be understated.

Clearly, California’s goal of reducing Medicaid expenditures by shifting beneficiaries from FFS to managed care plans was not successful. While these results may not apply across the board, policymakers should consider the possibility that managed care may not be the mechanism through which to curb budget shortfalls.

http://www.hcfo.net/pdf/findings0305.pdf

Comment: Many explanations can be given as to why private takeover of publicly administered health care financing programs have failed to deliver on the promise of higher quality at lower cost. One more quote from this brief provides further insight: “…commercial plans will contract with Medicaid only if they believe that they can earn a profit…”

It may seem obvious that the lesson learned from this (and innumerable other studies) is that we should reject the private plans and work on adopting more efficient, publicly administered health care coverage for all of us. But our resistance to public solutions has caused policymakers to turn elsewhere. They have decided that we should control the costs of coverage simply by reducing what is covered. This works very well for those of us who are and will remain healthy, and it relieves us of the burden of being our brother’s keeper. Why should we assume any greater responsibility?

(That last rhetorical question was prompted, in part, by this quote from an e-mail that I received from a very dedicated physician: “Policy science is behind a lot of stuff that isn’t and won’t happen.”)

🙁

Statistics Canada
Median waiting times for non-emergency surgeries, household population aged
15 and over, Canada and provinces, 2003

Median waiting time (weeks): 4.3

http://www.statcan.ca/english/freepub/82-401-XIE/2002000/tables/html/at007_en.htm

About Statistics Canada:
http://www.statcan.ca/english/about/abtstc.htm

Comment: Calls for national health insurance in the United States are
frequently countered with the claim that such a transformation would result in excessive delays in care, “like they have in Canada.”

First of all, implied in that comment is the principle that queues should be reduced by removing some individuals from the waiting list. We currently do this up front by the simple measure of making care unaffordable for the uninsured and under-insured. Most policymakers across the political spectrum
believe that this is not ethically acceptable.

But what is the reality in Canada? Emergency surgeries are not a problem; they are provided for immediately. On the other hand, the median time for non-emergency surgery is four weeks, which is an interval that is comparable to that in the United States. The major difference is that queues in the United States are accessible only for those with the ability to pay, whereas, in Canada, no person is excluded based on inability to pay.

It is true that selected elective surgeries may be delayed longer than four weeks (offset by an equal number that have their surgeries in less than four weeks). But it is important to realize that these numbers were for 2003. Since then, Prime Minister Paul Martin made improving access to health care his number one priority in his election campaign. He is already delivering on his promise by providing federal funds to improve capacity in areas where deficiencies exist.

Our current level of health care spending, $1.9 trillion, is more than enough to ensure adequate capacity in our entire system. The opponents of national health insurance simply are not telling the truth when they claim that including everyone will automatically result in excessive delays in care. I won’t call them liars, even if that’s what they really are.

The Henry J. Kaiser Family Foundation
April 2005
Low-Income Subsidies for the Medicare Prescription Drug Benefit:
The Impact of the Asset Test
By Thomas Rice, Ph.D. and Katherine A. Desmond, M.S.

Conclusions

This study estimates that in 2006, when the new Medicare prescription drug benefit goes into effect, 2.37 million low-income Medicare beneficiaries will not qualify for subsidized coverage because they fail the asset test. As a result, these individuals will face the same “doughnut hole” cost-sharing requirements as wealthier beneficiaries. This means that in addition to paying full monthly premiums, they will be responsible for substantial out-of- pocket costs – e.g., $3,600 of the first $5,100 of annual prescription drug spending on covered drugs in 2006.

The study further examines the types of beneficiaries who will be excluded by the asset test, as well as the types of assets responsible. Perhaps the most noteworthy finding is that the asset test will fall most heavily on those who are widowed. Whereas only 29 percent of Medicare beneficiaries are widowed, nearly half – 46% – of those failing the asset test are widowed and nearly all of these (43% of the 46%) are women. Widows tend to be older, live alone, and have more chronic illnesses necessitating prescription drug purchases, but have less family support as well. Put another way, the life event (death of a husband)leads to reduced income and thus more of a need for subsidies, but as written, the legislation effectively excludes many widows from these subsidies.

It is hardly surprising that most individuals who do not meet the asset test have relatively modest assets, which tend to be bank accounts rather than stocks, mutual funds, and bonds. They have little in the way of private retirement accounts such as IRAs and 401(k)s, real estate beyond their own home, and almost no equity in businesses. This would be expected among a population of low-income individuals.

The study’s findings raise serious questions about the equity of the asset test. During their working years, Americans are encouraged to save for retirement and the possibility that they will face sizable long-term care expenses. Those to whom this message is most salient will have little or no income beyond what they receive from Social Security. By accumulating modest amounts of assets, either through bank accounts or retirement-savings vehicles, these same people have guaranteed that they will not qualify for the low-income Medicare drug subsidies – but the vast majority use prescription drugs every day. Using more common parlance, they find themselves in a “Catch-22.” If they do save, they are disqualified from the subsidies. If they do not save, they will receive the subsidies but will have almost nothing to fall back upon besides their Social Security checks. And this burden tends to fall on the most vulnerable of seniors: older, low-income widows living alone.

This dynamic appears to be inequitable, given the groups of seniors who are most affected, and unfair because it penalizes both savings and widowhood. Modifying or eliminating the asset test would help protect those disadvantaged by low incomes who would be excluded from subsidized prescription drug benefits due to the asset test.

http://www.kff.org/medicare/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=52270

Comment: Is the asset test a good idea? After all, why should taxpayers purchase prescriptions for individuals who have some money set aside in a bank account? And why shouldn’t we make seniors sensitive to the costs of prescription drugs so that they’ll fill only the prescriptions that they really need?

It should be presumed that all prescriptions are selected in consultation with the patient’s health care professional based on an anticipated maintenance or improvement in physical health that exceeds any potential risk of the medication. Thus there should be no prescription that shouldn’t be filled because it’s not really needed. Prescription medication should be rejected only on the basis of lack of benefit, but not on the basis of lack of affordability.

And why shouldn’t we require a spending down of assets before providing protection against prescription drug costs? Requiring a person to deplete their limited assets before they can have affordable access to prescription drugs is simply an inhumane policy.

Means testing of income and assets theoretically is a method of improving equity in access to health care for those with very low incomes and very limited assets. The problem is that those of relatively modest means who fall above the thresholds will be victims of this inequitable method of establishing health benefits. As you adjust the thresholds upwards, eventually benefits become available to individuals who really don’t need financial assistance from taxpayers, creating yet another inequity.

We should begin with the presumption that everyone should be able to receive prescription drugs, and, indeed, any health care that they need. Rather than attempting to create financial equity at the time of accessing the health care system, it is far easier to create equity at the time of funding the system. That is one of the great advantages of social insurance. Everyone receives the health care that they need, while the entire system is funded equitably.

Unfortunately, our national policymakers have a different set of priorities. They wish to reduce the tax burden on those who have no financial barriers to care by reducing health care utilization of the great majority of citizens of modest means. Is that really what America is about?

The Orange County Register
April 10, 2005
Private plans haven’t delivered the cure
By Don R. McCanne, M.D.

Bruce Bodaken, CEO of Blue Shield of California, warns that, unless we reduce health-care costs and provide coverage for the uninsured, we will likely turn to a government-run single-payer system [“‘Vicious cycle’ of care,” Business, March 30].

That raises two questions. Why hasn’t Bodaken’s own industry been able to solve the problems during the past half-century that it has had control of health care spending? And what is there about a single-payer system that would cause policy-makers to turn to that option?

Private health plans should be providing us with higher quality at lower cost. But by most measures, we are receiving relatively mediocre care that is rife with error and wasteful excesses, while many are not receiving even the most basic essential services. And over 90 percent of Americans agree that health care costs are out of control. Since private plans are failing us on cost and quality issues, are there any other reasons to keep them in charge?

Do private plans avoid the inherent waste of government bureaucracies?Unfortunately, private plans actually consume a far greater percentage of health care dollars in administrative costs than do public programs such as Medicare. And worse, our fragmented system of funding care places a tremendous,wasteful administrative burden on the providers of health care.

Bodaken exemplifies this inefficiency in admitting that he can’t figure out the benefits of his own personal health plan provided by his own company. Do private plans provide us with choice? The American Medical Association just released a report confirming, by Justice Department standards, that 93 percent of HMO/PPO markets are “highly concentrated.” So much for true market choice of health plans. Besides, the choice we really want is choice of our own physicians and hospitals. Most private plans limit our choice and assess severe financial penalties for failing to use their preselected choices.

If we leave the plans in place, what options do we have? Everyone agrees that the status quo will never do since costs are skyrocketing, access is diminishing and quality is not improving.

Should we relax regulatory oversight, allowing the markets to work more effectively? We know that the plans invariably attempt to sell to the healthy and avoid the sick. That might be appropriate for the marketplace, but it shifts the burden of risk from the plans to the taxpayers.

Should we instead increase regulatory oversight? Requiring that plans jointly guarantee affordable coverage for everyone would create a de facto single-payer system since the plans then would provide primarily only the administrative services that we actually do need for health care financing.

The $1.9 trillion that our nation is already spending on health care is more than enough to pay for comprehensive health care services for everyone. But there is an urgent need for us to demand much more accountability for our health care spending. Just don’t expect it to come from the health plans.

http://www.ocregister.com/ocr/2005/04/10/sections/commentary/READER%20REBUTTALS/article_474432.php