PNHP

Concepts from yesterday’s message

Concepts from yesterday’s message

The claim is often made by HSA supporters that the premiums of the HDHPs are much lower because of the high deductible. But, in fact, they are usually much lower only because the plans are priced in the individual market which excludes from coverage individuals with preexisting disorders. When the plans include guaranteed issue (everyone is allowed in the plan) and community rating (the premiums reflect the average costs of all individuals in the plan) then the premiums reported above are typical ($11,772 per year for a family in California).

Either we support the insurance principle of spreading risk by including everyone, or we don’t. But let’s end the lie that we can lower premiums for everyone by a modest increase in the deductible, when in reality we are lowering premiums by leaving out those who have the greatest need to be included.

Alan Sager, Ph.D., Professor of Health Services, Boston University School of Public Health, responds:

Agreed!

But one thing: insurance is about sharing risks among similar people. That’s experience rating and why actuaries exist. Leaky boats pay higher premiums. That’s the essence of insurance.

It’s also why insurance does not work in health care. We use the word, but we mean social insurance, community rating. Community rating is not real insurance. To claim otherwise, I think, inadvertently plays into the hands of the privatizers because the game is then played on their (insurance) court.

I think it’s helpful to be clear on this because it shows that only government action can win durably affordable coverage for all. That’s because community rating never survives in any market.

Alan Sager, Ph.D.
Professor of Health Services
Director, M.P.H. Program in Health Services
Director, Health Reform Program
Boston University School of Public Health
www.healthreformprogram.org

Comment: Professor Sager is absolutely right. Many current proposals for reform of the insurance market are specifically directed against community rating. To keep premiums low and therefore competitive, private insurers and the policymakers who support them will inevitably tailor insurance pools to exclude high cost beneficiaries with greater health care needs.

We do need to conduct the debate in our court of social insurance (government) with everyone included, and not in the court of the private insurers (market) who would leave out those who have the greatest needs.

Don McCanne

National Health Insurance scheme gets green light

Daily Express
(Independent National Newspaper of East Malaysia)
December 16, 2004
National Health Insurance scheme gets green light

After two years of study, the Government has agreed to implement the proposed National Health Insurance Scheme (NHIS) soon to reduce the healthcare burden on the Government and help ease the long waiting time in public healthcare facilities.

Health Minister Datuk Dr Chua Soi Lek said it would be based on a community-rated model.

“This means it would be based on cost and risk-sharing across the population, with the rich subsidising the poor, the young for the elderly, the healthy for the sick and the employed for the unemployed,” he said.

“The mechanism will be affordable, viable and sustainable, provide Universal and comprehensive coverage and achieve greater equity and accessibility to quality health are for all Malaysians,” he added.

Chua said the present system would be retained and be improved with greater integration between the public and private sectors while the mechanism would help to ensure better access to healthcare, either in the public or private sector.

“To govern and run the national health financing mechanism, there is also a need to set up a National Health Financing Authority under the Ministry of Health and to be wholly owned by the Government,” he said.

The National Health Financing Authority would function as a single payer for the healthcare of all citizens and eligible non-citizens.

http://www.dailyexpress.com.my/news.cfm?NewsID=31399

Comment: So they’re proposing “a single payer for the healthcare of all citizens” through a National Health Financing Authority to be wholly owned by the government. Sounds like a good idea. Do you think that might work here?

National Institute for Clinical Excellence

The Commonwealth Fund
Newsletter
December 2004
Issue of the Month: The British National Institute for Clinical Excellence
By Vida Foubister

The mission of U.K.’s five-year-old National Institute for Clinical Excellence is to create, disseminate, and foster implementation of standards of health care. There is no such model for national standards in the U.S. What can we learn from NICE?

Last February, the National Institute for Clinical Excellence (NICE)-a relatively new part of the British National Health Service (NHS) created to improve the quality of health care-released a clinical guideline on in vitro fertilization (IVF).

Surprisingly, there was little reaction among those affected even though the clinical guideline, like much of the guidance issued by NICE in the past five years, limited the care available through the NHS based on clinical as well as cost effectiveness. Specifically, the infertility guideline recommends that the NHS provide no more than three cycles of IVF to women between ages 23 and 39 as the clinical evidence shows a low success rate beyond those parameters.

Why was there no professional or public outcry? “We go through a very iterative process where we involve the main stakeholders,” explains Sir Michael D. Rawlins, M.D., a professor of clinical pharmacology at the University of Newcastle upon Tyne who has served as chairman of NICE since its inception.

NICE issues three types of guidance: technology appraisals of new and existing medicines, medical devices, diagnostic techniques, surgical procedures, and health promotion activities; clinical guidelines for the appropriate treatment and care of people with specific diseases and conditions; and recommendations on the safety and efficacy of interventional procedures, that is, predominantly new diagnosis or treatment processes that involve gaining access to the inside of a patient’s body, with or without cutting, and the use of electromagnetic energy or ultrasound.

Although the primary goal is to improve the standard of care received by NHS patients, cost effectiveness is a factor in the technology appraisals and clinical guidelines. Cost is not considered in the interventional procedure reviews.

Since January 2002, the NHS has been legally obliged to provide funding and resources for medicines and treatments NICE recommends as a part of the technology appraisals program. This means that, in some cases, the cost of medicines and devices NICE chooses not to approve are shifted to patients.

In addition, clinicians are wary of using interventional procedures that NICE deems unsafe.

Across the pond in the United States, there is no similarly focused federal agency and NICE’s approach appears to have attracted considerable interest-as indicated by the 10,000 daily hits on its Web site from U.S. visitors.

“We have something that looks somewhat analogous in many of the domains
in which NICE is working,” says Joseph Newhouse, Ph.D., professor of health care policy at Harvard Medical School… It’s just not “pulled together in one agency with a crisp mandate.”

(In the public and private sectors) there are a number of technology assessment groups that analyze drugs, devices, and procedures… There is another major difference between these groups and NICE-none of them explicitly considers cost effectiveness. “Right now, we’re not facing it. We’re making coverage decisions based on safety and efficacy; the costs are not supposed to enter into the decision,” says Victor R. Fuchs, Ph.D., Henry J. Kaiser, Jr., Professor Emeritus at Stanford University.

“You don’t hear a huge hue and cry in Britain through the media or the legal system [about] the fact that they’re doing this,” Fuchs continues. “England, apparently, is much more willing to come to terms with the fact that every health care system has to make some kind of rationed decisions.”

In the final analysis, it appears that both the United States and the United Kingdom are moving toward evidence-based medicine. The British model doesn’t have the duplication of effort seen in the United States and, as a result, is likely to be less costly. However, with the rapid evolution of medical technology, one concern with this approach, Neumann says (Peter Neumann, Sc.D., an associate professor at the Harvard School of Public Health), is “What if the government gets it wrong?”

http://www.cmwf.org/publications/publications_show.htm?doc_id=252181#issue

Comment: The health care system in the United States is unique in its continued acceleration in health care costs, primary related to ever greater utilization of high tech and specialized services, but without a demand from us for a commensurate increase in health care value.

In fact, the studies of John Wennberg and his colleagues have confirmed that regions with greater capacity and utilization of high tech, specialized services have not demonstrated significant improvement in health care outcomes. In fact, in some studies, greater spending has been correlated with lower quality care. And Barbara Starfield and colleagues have demonstrated that placing a greater priority on primary care services ensures higher quality at a lower cost.

Unfortunately, the issue is frequently framed as a need to ration services because of the limitations of our finite resources. The implication is that we should deny individuals of some highly beneficial services because we can’t afford to pay for all of them.

Rather than frame the debate as an issue over rationing, it would be much more instructive to frame the debate as to whether we should continue to allow unlimited funding of the large amount of care that is not beneficial and maybe even detrimental. Although the precise amount of funds that could be recovered has not been quantified, it is clearly in the hundreds of billions of dollars. If we were to decide that we would pay only for beneficial services, we could provide comprehensive care for everyone and actually reduce health care spending.

But I remain very dubious that fragmented, private and public sector efforts could accomplish this. There are too many vested interests that would continue to support the profound waste on which they thrive.

It’s time to get over the fear of the government bogeyman, and establish a single, public National Institute for Clinical Excellence. After all, Uncle Sam is our very own bogeyman, and we do have some control over him!

The many faces of outsourcing

The Bush administrations unwillingness to deal with health care costs menaces Wisconsin jobs and workers pocketbooks.
The many faces of outsourcing
By Roger Bybee

As the Grim Reaper of outsourcing-related job loss now shadows gleaming office parks in Waukesha and the Fox Valley and sooty factory neighborhoods in Kenosha and Manitowoc we realize that the crisis is not solely the result of Corporate Americas endless search for lower wages. The greed-fueled health care cost crisis is another contributing factor to outsourcing.

Not only are industrial jobs shipped off to Mexico and China, now even highly-paid professional jobs are being “outsourced” to India and other misery-wage nations. A new study by researchers from Cornell and the University of Massachusetts estimates the loss of 406,000 U.S. jobs to these nations in 2004.

Part of our government’s response must be to remove all tax incentives to corporations that reward shifting jobs overseas and stashing profits (recently estimated at 31 percent of total U.S. corporate profits) in “tax havens” like Bermuda. We must insist that huge, highly profitable corporations reciprocate the loyalty shown them by the workers and taxpayers who subsidize their prosperity.

At the same time, we must also recognize that holding down healthcare costs is one of the most central ways to stop outsourcing and restore our economic strength. Even our most responsible and conscientious employers face ever-intensifying pressures because of spiraling health care costs. Just since 2000, U.S. healthcare premiums have soared by a staggering 59 percent. That means Wisconsin employers, especially small firms, face huge difficulties because of unaffordable health premiums. How much of the rising costs can they pass on to good employees in terms of deductibles and co-pays and still retain them? In Wisconsin, workers’ share of premiums has climbed by 49 percent since 2000, while workers’ wages have crept up by only 12.2 percent.

Even big corporations like the U.S. auto firms now find themselves pushed to the wall by health costs. It now costs $900 to $1,300 more to produce an auto in the U.S. than Canada. The differential is a stunning $4 an hour more per worker in the U.S.

Why are U.S. health costs so much higher than elsewhere? It is mostly because of America’s massive and parasitic insurance-HMO bureaucracy. “As much as half the health-care dollar never reaches doctors and hospitals–who themselves face high overhead costs in dealing with multiple insurers,” estimates Dr. Marcia Angell, former editor-in-chief of the New England Journal of Medicine.

Despite per-person health care spending that is nearly double any other nations, America’s overall quality on a variety of key health indicators is only 15th best in the world, as ranked by the World Health Organization. But instead of addressing the twin emergencies of our health care crisis and the torrent of jobs leaving America, some politicians are shamelessly sounding false alarms. To take the heat off of big campaign donors, President Bush and others have tried to blame medical-malpractice claims and “frivolous” lawsuits for the outflow of jobs and soaring health premiums. Tort “reform” is the answer, he informs us.

But by tort reform the president means effectively closing the courtroom doors to ordinary citizens who have suffered harm at the hands of medical providers or big corporations. In reality, this alleged legal “crisis” is fabricated: The rate of tort filings has actually been falling since 1975. Moreover, the Consumer Federation of America reports that malpractice costs are at their lowest point in history, just 55 cents of every $100 spent on health care.

Clearly, the election-year rhetoric of Bush and others offers only preposterous explanations and non-solutions for our job losses and soaring health costs. Depriving us of our constitutional right to our court system will neither halt the outflow of good jobs or curb skyrocketing health costs. Instead of Bush’s clumsy attempt at misdirecting public concern, we need to deal squarely with the core of the problem: the unchecked power of the for-profit bureaucracies of the insurers, HMOs, and drug companies. These bureaucracies consume vast resources through wasteful duplication, huge CEO pay, enormous overhead, and ruthless pricing practices. This is where serious cost cutting must begin.

Roger Bybee is a Milwaukee-based writer and consultant.

Paying for health care that could be free

The Philadelphia Inquirer
Dec. 10, 2004
Paying for health care that could be free
By Marian Uhlman

About 3,100 children from low-income families in Southeastern Pennsylvania who are entitled to free government health insurance aren’t getting it.

Instead, these children are enrolled in an Independence Blue Cross plan that has fewer benefits and costs their families $45 a month.

“This has come as a shock,” said Alisa Simon, health director for Philadelphia Citizens for Children and Youth. “This is taking income from a family who really needs it for other things – for rent, for food – and it’s buying them a product that is nowhere as good.”

Independence Blue Cross has offered both the government Children’s Health
Insurance Program and its own private Special Care plan to low-income people
since the early 1990s.

Health advocates said they became aware of the situation this fall while examining how Independence Blue Cross markets products to low-income
people, including the ones available to children.

Independence Blue Cross “did a very inadequate job of informing people of choices and providing accurate information,” said Jonathan Stein, general counsel for Community Legal Services Inc.

People would not deliberately choose “a costly, less satisfactory insurance product over a free and much more comprehensive package,” he said.

CHIP covers mental health services, prescription drugs, hearing aids, eyeglasses, and routine dental care. Independence Blue Cross’ Special Care does not.

CHIP also covers unlimited office visits. And there are no out-of-pocket costs. Blue Cross’ Special Care has a cap of four doctor office visits a year and a $10 copay per visit.

http://www.philly.com/mld/inquirer/news/local/10381195.htm

Comment: Many agree that we need national policies that would ensure coverage for the uninsured, but they are concerned about allowing the government to administer the program. They suggest that we should continue
to use private health plans to administer insurance programs.

Independence Blue Cross has provided us with yet one more example proving
that this industry lacks the ethics and integrity to properly manage health
care funding.

A publicly owned and publicly managed system would certainly require continual oversight. But at least the taxpayers, as owners, would have some semblance of control.

Eliminating disparities more effective than expanding technology

American Journal of Public Health
December 2004
The Health Impact of Resolving Racial Disparities: An Analysis of US Mortality Data
By Steven H. Woolf, MD, MPH, Robert E. Johnson, PhD, George E. Fryer, Jr, PhD, MSW, George Rust, MD, MPH and David Satcher, MD, PhD

Abstract

The US health system spends far more on the “technology” of care (e.g., drugs, devices) than on achieving equity in its delivery. For 1991 to 2000, we contrasted the number of lives saved by medical advances with the number of deaths attributable to excess mortality among African Americans.

Medical advances averted 176,633 deaths, but equalizing the mortality rates of Whites and African Americans would have averted 886,202 deaths. Achieving equity may do more for health than perfecting the technology of care.

From the Discussion

Improvements in the technology of care did save lives during 1991 to 2000, but the deaths averted were considerably fewer than the potential lives saved by reducing the mortality rate of African Americans to the rate of Whites. Five deaths could have been averted for every life saved by medical advances.

This contention assumes that racial disparities could be abolished, a formidable premise. Elsewhere, we discuss the immense societal challenges such an effort must overcome. Here, our intent was to offer policymakers a sense of perspective about how the potential gains from overcoming these challenges would compare with continued investment in the technology of care.

… our fundamental finding: resolving the causes of higher mortality rates among African Americans can save more lives than perfecting the technology of care. Policymakers could act on this information without waiting for more precise projections. The prudence of investing billions in the development of new drugs and technologies while investing only a fraction of that amount in the correction of disparities deserves reconsideration. It is an imbalance that may claim more lives than it saves.

http://www.ajph.org/cgi/content/abstract/94/12/2078

Comment: As they have with other similar reports, the opponents of reform will undoubtedly dismiss this study by attributing the differences to the blame-the-victim flaws in personal choice that are cultural rather than due to a failed health care system.

Although the causes may be complex, the disparities are very real. Close to a million African Americans died prematurely in the 1990s because of racial disparities. We already know that lack of health insurance results in a greater risk of premature death, and that larger percentages of African Americans are without insurance.

Although there is much to be done, an important first step would be to provide comprehensive health care coverage for everyone. That way, affordability of health care would be eliminated as one of the more important racial disparities that negatively impact health.

A few numbers:

3000 died prematurely due to a terrorist attack on 9/11.
1300 U.S. soldiers died prematurely due to combat in Iraq.
18,000 young adults die prematurely each year due to lack of insurance.
100,000 Iraqi citizens died prematurely due to (fill in your own explanation).
886,000 African Americans died prematurely in the 1990s due to national policies that tolerate inequitable disparities.

(What is very telling is the next step that those of us who really do care will take. We’ll delete this message and return to our daily routines.)

Mayhem in the Medical Marketplace

Mayhem in the Medical Marketplace
by David U. Himmelstein and Steffie Woolhandler
Monthly Review, 12/20/04

Even in the United States, some aspects of life are too precious, intimate or corruptible to entrust to the market. We prohibit selling kidneys and buying wives, judges, and children.

How far should such prohibitions extend? In recent years entrepreneurs and their friends in government have privatized many publicly-funded services previously provided by government or nonprofit agencies including interrogating Iraqi prisoners. Even in liberal Cambridge, our school superintendent proposes enlisting a for-profit firm to set up a new public high school.

Health care epitomizes this trend. Tax dollars account for 60 percent of U.S. health spending (counting as government spending not just Medicare, Medicaid, and Veterans Administration hospitals, but also the costs of health benefits for public workers and the tax subsidies for private coverage). (Indeed, on a per capita basis, public funding for health care in the United States exceeds total health spending in nations with national health insurance.) Yet investor-owned firms have come to dominate kidney dialysis, nursing homes, psychiatric hospitals, rehabilitation facilities, and HMOs. They have made significant inroads among acute care hospitals (they own about 13 percent of such facilities), as well as outpatient surgical centers, home care agencies, and even hospices.

Market theorists argue that the profit motive optimizes care and minimizes costs. But a growing body of evidence indicates that this dogma has no clothes.

The latest studies published in the Canadian Medical Association Journal and the Journal of the American Medical Association come from a highly respected group of Canadian researchers. They painstakingly culled every study ever published that compares the costs and outcomes of care at for-profit and nonprofit hospitals and dialysis clinics. To avoid bias in selecting studies, a librarian blacked out all indication of whether the study showed an advantage for nonprofit or for-profit. The researchers then used sophisticated statistical methods to combine all of the data (which all came from studies of U.S. facilities).

Their meticulous analyses demonstrate markedly higher costs and death rates in investor-owned hospitals than in nonprofit ones, and poor outcomes in investor-owned kidney dialysis clinics. The excess cost of for-profit care is substantial 19 percent implying that the $37.348 billion Americans paid for care at investor- owned acute care hospitals in 2001 would have cost only $31.385 billion at nonprofits; the waste amounted to $5.963 billion.

The waste in lives is more shocking; 2047 unnecessary deaths annually caused by for-profit ownership of hospitals, and 2500 killed each year by for-profit ownership of kidney dialysis centers.

It is easy to see why the profit motive might lead to skimpier care and lower quality. But why does investor ownership increase costs?

Investor-owned hospitals are profit maximizers, not cost minimizers. Strategies that bolster profitability often worsen efficiency and drive up costs. Columbia/HCA the largest hospital firm used several tricks to inflate its Medicare billings: exaggerating the severity of diagnoses; falsifying expense ledgers that form the basis of Medicare payment; and bouncing patients from its acute care hospitals to its convalescent hospitals and home care agencies, allowing it to bill multiple times for a single episode of illness. After paying fines and settlements totaling $1.7 billion, the firm continued merrily and profitably on its way. Tenet, the second largest hospital firm paid nearly $700 million to settle charges that it gave kickbacks for referrals and inappropriately detained psychiatric patients in order to fill beds during the 1980s, when the firm was known as NME. Tenet is back in the news for another round of alleged misdeeds, including performing hundreds of unnecessary, but lucrative cardiac procedures.

For-profit executives reap princely rewards, draining money from care. When Columbia/HCAs CEO resigned in the face of fraud investigations he left with a $10 million severance package and $324 million in company stock. Tenets CEO exercised stock options worth $111 million shortly before being forced out in 2003. The head of HealthSouth (the dominant provider of rehabilitation care) made $112 million in 2002, the year before his indictment for fraud.

Enormous CEO incomes explain part, but not all of the high administrative costs at investor-owned health care firms. Investor-owned hospitals spend much less on nursing care than nonprofit hospitals, but their administrative costs are six percentage points higher—reflecting their more meticulous attention to financial details.

High administrative costs and lower quality have also characterized for-profit HMOs. Now the dominant private insurers in the United States, such HMOs take 19 percent for overhead, versus 13 percent in nonprofit plans, 3 percent in the U.S. Medicare program, and 1 percent in the Canadian national health insurance program. Not surprisingly, contracting with private HMOs has inflated Medicare costs. According to the Congressional Budget Office, Medicare HMOs have selectively recruited healthy seniors who, had they stayed in traditional Medicare, would have cost Medicare little about $2 billion less annually than Medicare paid the HMOs in premiums. Private plans that were unable to recruit the healthy dropped out of their Medicare contracts, disrupting care for millions of seniors. The Republicans response was to sweeten the pot for HMOs by including $46 billion to raise HMO payments as part of the recently-enacted Medicare prescription drug bill.

Why do for-profit firms that offer inferior products at inflated prices survive in the market? Several prerequisites for the competitive free market described in textbooks are absent in health care.

First, it is absurd to think that vulnerable users of public services such as frail elders and the seriously ill who consume most care can act as informed consumers. They are usually unable to. They cannot comparison-shop, reduce demand when suppliers raise prices, or accurately appraise quality. Even lucid, educated patients may have difficulty gauging whether a hospitals luxurious appurtenances bespeak good care.

Second, the products of complex services like health care are notoriously difficult to evaluate, even for sophisticated buyers. Doctors and hospitals create the data used to monitor them; when used as the basis for financial reward such data has the accuracy of a tax return. By labeling minor chest discomfort angina rather than chest pain a U.S. hospital can raise its Medicare payment rate by 9.2 percent and factitiously improve its angina outcomes. Exploiting such loopholes has proven more profitable than improving efficiency or quality.

Even for honest firms, careful selection of lucrative patients and services is the key to success, while meeting community needs often threatens profitability. For example, for-profit specialty hospitals offering only cardiac or orthopedic care (money makers under current payment schemes) have blossomed across the United States. Most of these new hospitals duplicate services available at nearby nonprofit general hospitals, but the newcomers avoid money losing programs such as geriatric care and emergency departments (a common entry point for uninsured patients). The profits accrue to the investors, the losses to the nonprofit hospitals, and the total costs to society rise through the unnecessary duplication of expensive facilities.

Finally, a real market would require multiple independent buyers and sellers, with free entry into the marketplace. Yet, many hospitals exercise virtual monopolies. A towns only hospital cannot compete with itself, but can use its market power to inflate its earnings. Not surprisingly, for-profit hospital firms in the United States have concentrated their purchases in areas where they can gain a large share of the local market. Moreover, many health care providers and suppliers enjoy state-conferred monopolies in the form of licensure laws for physicians and hospitals, and patent protection for drugs (the pharmaceutical industry provides a virtual encyclopedia of market failure in U.S. health care, but well leave that for another day). Moreover, its an odd market that relies largely on public funds.

Privatization results in a large net loss to society in terms of higher costs and lower quality, but some stand to gain. Privatization creates vast profit opportunities for powerful firms and investors. The Frist family, whose scion Bill leads Republicans in the U.S. Senate, amassed its vast fortune from Columbia/HCAs hospitals. Ross Perot made his money selling computing services to Medicare. And each bump in Medicare payments to HMOs has driven HMO stock prices skyward.

Privatization also redistributes income among health workers. Pay scales are relatively flat in government and nonprofit health institutions; pay differences between the CEO and a housekeeper are perhaps 20:1. In U.S. corporations, a ratio of 180:1 is average. In effect, privatization takes money from the pockets of low wage, mostly female and often minority health workers and gives it to investors and highly paid managers.

Behind false claims of efficiency lies a much uglier truth. Investor-owned health care embodies a new value system that eradicates any vestige of the community roots and samaritan traditions of hospitals, makes doctors and nurses into instruments of investors, and views patients as commodities.

The inroads of the market have stimulated a new surge of support for national health insurance (NHI). Recently, 13,000 doctors have signed an NHI proposal (which appeared in the Journal of the American Medical Association) that would ban for-profit insurers and hospitals, echoing the sentiment of the 62 percent of Americans who favor NHI (according to an October, 2003 Washington Post/ABC News poll).

But market fundamentalists continue to peddle privatization as a panacea for health care and Americas other problems. They assure us that Aetna and Columbia/HCA will solve our health care woes, just as Edison will save our failing public schools, Enron will cut electricity rates in California, and Halliburton and Blackwater will rescue us in Iraq.

Cheapest Health Insurance Found Out West

SmartMoney.com
December 7, 2004
Cheapest Health Insurance Found Out West
By Stacey L. Bradford

On Tuesday, eHealthInsurance.com, an online insurance broker, released its first national survey ranking the most affordable cities for health insurance. The results were striking.

According to eHealthInsurance, families in Kansas City can purchase comprehensive coverage for just $171.86 per month… Despite a general high cost of living, eight California cities ranked among the top 10 most affordable places for health insurance.

The most expensive health care is found on the East Coast. According to the survey, a family shopping for health insurance in Boston would pay $767.30 a month in premiums; in New York City, $712.77 a month.

Premiums are much higher in places like Massachusetts and New York since insurers must comply with a number of state mandates that raise the overall cost of providing health care. These mandates include what the industry calls “guaranteed issue” (a health plan can’t reject an applicant based on health status) and community rating (a health plan can’t arbitrarily raise an individual’s rates).

In conducting this survey, eHealthInsurance considered only those plans that offer comprehensive benefits, including annual preventative exams, lab and x-ray services, emergency-room treatments and hospitalization. Each plan also includes an annual deductible of no more than $2,000 in addition to a 20% coinsurance. The maximum out-of-pocket costs ranged between $4,000 and $10,000 per year.

http://www.smartmoney.com/bn/index.cfm?story=20041207014549

Comment: Although this would appear to be merely an interesting article on geographical variations in premium pricing, it is actually a loud alarm, warning of the catastrophe ahead once the health policies of the Bush administration are enacted.

A major component of Bush’s proposal for an ownership society is to place control of health care costs in the hands of the owners of the funds, who are the patient-consumers. Individually owned health savings accounts (HSAs) are a major part of that strategy. But it is recognized that such accounts would not cover major, catastrophic health care costs. The need for high deductible health insurance (HDHI) to cover catastrophic expenses is obvious.

A strategy of the ownership society is to establish policies that would encourage individual purchase of HDHI. The tax deductibility of employer-sponsored plans would be terminated, and premiums for individual HDHI would become deductible on individual tax returns. Thus policies would encourage a system in which routine expenses are paid out of individual accounts and catastrophic expenses are covered by the individual’s own HDHI.

Numerous previous messages have explained why HSAs are totally unsatisfactory for ensuring affordable access to care for individuals with significant health care needs, whether acute or chronic. But what about these HDHI plans that would cover 100% of the catastrophic costs after the deductible is met?

Supporters of HDHI claim that catastrophic coverage is very inexpensive, and they frequently cite the eHealthInsurance.com website as proof. After all, a family of four in Kansas City can purchase a comprehensive plan for only $171.86 per month. This sounds like a very good deal. What is being left unsaid?

One issue is that the depiction of these plans as covering 100% of the expenses after the deductible is dishonest. These plans are managed care PPO plans with restricted provider lists, significantly limiting choice in providers. Both the deductible and the maximum out-of-pocket expenses are misleading because many health care expenses are excluded as qualifying expenses. Individuals who obtain care outside of the restrictive provider lists are heavily penalized financially, and most of the penalties do not apply to the deductible nor to the out-of-pocket maximum. Further, 20% coinsurance is not the same as a co-payment. 20% of tens of thousands of dollars in charges is quite different from a $25 co-payment. For individuals with high health care costs, these HDHI plans leave individuals with much greater financial exposure that the deceptive depictions would suggest.

Another crucial issue is the shift from employer-sponsored plans to individual coverage. In many states, underwriting provisions allow the insurers to exclude from their plans individuals who have significant health care needs. By selling their plans exclusively to healthy individuals, premiums can be kept quite low because of low rates of utilization. Some states even allow insurers to raise premiums selectively for those individuals who do develop problems and increase their utilization.

To avoid this problem of denying coverage for those with needs, some states have improved equity by establishing guaranteed issue and community rating. Guaranteed issue assures that everyone would be covered regardless of
preexisting disorders, and community rating prevents insurers from charging different premiums based on varying health care needs. But once you establish equity, premium levels then reflect the true costs of pooling risk, as the rates in Boston and New York demonstrate. Cheap insurance that truly pools risk does not exist.

If HDHI is to become the national standard, as the Bush team would have it, then it must be recognized that those with significant needs must be included. 90% of the population uses only 28% of health care. We could cover them with very low premiums if we isolated them in a separate risk pool. But once you add the other 10% that utilizes 72% of health care, the premium per beneficiary skyrockets. Placing the 10% with needs in a separate insurance risk pool would require a premium of about $44,000 per beneficiary. But think of the pride that these individuals would have in owning their own high deductible PPO policy.

HDHI that covers those who don’t need it, and leaves out those who do, is not insurance. It’s fraud. It shouldn’t be our national policy.

Means-Testing In Medicare

Health Affairs
December 8, 2004
Means-Testing In Medicare
By Mark V. Pauly

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 introduces means-testing of premiums and benefits in two ways. It will means-test the Part B premium, setting higher premiums for better-off seniors. More importantly, it will offer much more generous drug benefits, at low or zero premiums, to lower-income beneficiaries. This paper argues that additional means-testing could improve Medicare’s financial picture. It proposes a strategy in which future Medicare beneficiaries with higher incomes will pay for cost-increasing but quality-improving new technology, possibly with prefunding that begins before retirement.

Medicare as we know it today cannot be sustained…

The upper middle class, to some extent, live off their wealth after they retire, instead of cutting consumption close to the poverty level. The primary type of wealth for retirees is housing wealth; more than half of elderly households have housing wealth in excess of $100,000; they own their own homes, often with a paid-up mortgage. In contrast, nonhousing financial wealth is low among the elderly and is highly correlated with income, with only about 10 percent having nonhousing wealth in six figures. The primary consumption-increasing aspect of the situation for many seniors is being able to live nearly tax-free in a mortgage-free house, so housing costs are low. It is this extra consumption “cushion” that could help pay for access to new technology.

…these actions may require that the majority of the population that is not poor accept the responsibility of explicitly paying for its access to new technology, through partial income conditioning. Far from being a threat to Medicare as we know it, means-testing may be one of the few ways to preserve the program’s generous funding and access, without across-the-board “brute rationing,” that we all want to be able to anticipate in retirement.

http://content.healthaffairs.org/cgi/content/full/hlthaff.w4.546/DC1

And…

Health Affairs
December 8, 2004
Perspective: Medicare Means-Testing: A Skeptical View
By Marilyn Moon

In response to claims that Medicare is unsustainable over time, Mark Pauly has suggested a means-testing approach as a solution to its financing problems. To obtain enough resources in this way, however, it is necessary to ask middle-class beneficiaries to pay much more for their health care, by subjecting them to vouchers. The spending limits Pauly suggests are arbitrary and would likely place an untenable burden on beneficiaries with modest incomes. A better approach to financing would be to examine the ability of both taxpayers and beneficiaries to pay in the future-likely resulting in a different outcome.

Pauly’s premise depends on three sets of assumptions: (1) that it is feasible to limit insurance to cover only existing technology, (2) that there are enough wealthy older Americans to make this means-testing exercise worthwhile, and (3) that society is unwilling to help pay for an aging population. As argued above, the first two assumptions are highly questionable, since Pauly would have to ask modest-income seniors to pay very high costs over time based on an arbitrary formula whose meaning would be hard to fathom by those affected. But even more important, one can only hope that willingness to pay is based on something beyond the assertion of no more taxes.

http://content.healthaffairs.org/cgi/content/full/hlthaff.w4.558/DC1

Comment: Medicare covers an average of only one-half of the health care expenses for the typical Medicare beneficiary. The out-of-pocket financial burden is already great for those with significant health care needs.
And
most of them have non-housing “wealth” of under $100,000, which is expected to last for the remainder of their lives.

Mark Pauly’s numbers on income levels that would be appropriate for means testing are confusing, but he suggests that he would include about 40 to 60 percent of retirees, which would include those over 300% of the poverty level ($28,000 for an individual or $37,000 for a couple). With his background in economics, you would think that Pauly might squirm a little bit if he faced the prospect of having to help fund his own high tech medical care with less than $100,000 in the bank and a pension of $28,000.

Mark Pauly is already famous for advocating for greater patient cost sharing in order to avoid the “moral hazard” of accessing more health care services merely because they are covered by insurance. Unfortunately, cost sharing is a blunt instrument that reduces access to beneficial services by making them unaffordable for many. Means testing of Medicare beneficiaries prior to funding access to high tech medical services would seem to have the same blunt impact that would make technologically advanced care unaffordable for many.

Allowing Mark Pauly to play a role in health care reform seems to me to be a much greater moral hazard than providing adequate insurance coverage for those with genuine health care needs.

————————————————————————————-
Message: 2
Date: Thu, 9 Dec 2004 08:14:56 -0800
From: “Don McCanne”
Subject: qotd: Pauly and Moon and the truth behind means-tested

kaisernetwork.org
HealthCast
12/8/2004
Means-Testing in Medicare
An interview of Mark Pauly and Marilyn Moon by Larry Levitt, editor-in-chief, kaisernetwork.org

Mark Pauly, Ph.D., professor, health care systems, Wharton School, University of Pennsylvania:

“The real problem with Medicare is not so much the future spending growth, but the fact that it is financed through the tax system.”

Marilyn Moon, Ph.D., vice president and director of the health program, American Institutes for Research:

“I think … that when we have to make tough choices, we should look at whether people should pay more. But I don’t think that the price of holding taxes exactly where they are should be borne solely by people who are really firmly middle and lower middle class seniors.”

“I think to call thirty-thousand-dollar-a-year households as being well off and able to bear a substantially higher burden that over time will lend them to be spending half or more of their income on health care is not the right approach. I think that this is another example of where people in their enthusiasm to avoid higher taxes can go overboard in the other direction.”

For the audio of this interview:
http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1326

Comment: Yesterday’s message commented on the carefully written Health Affairs articles by these two authors. But it is interesting to see how a live interview can get down to the real issues that are otherwise buried in the rhetoric of erudite articles.

The Disparate Consensus on Health Care for All

By Steve Lohr
Published: December 6, 2004
The New York Times

N Washington, the phrase “universal coverage” is rarely mentioned as the way to provide health insurance for the 45 million uninsured Americans. It evokes memories of the Clinton administration’s sobering failure to forge a national health care plan. Yet among health care experts there is a surprising consensus that the United States must inevitably adopt some kind of universal coverage.

“Politically, it’s like the electrified third rail on the subway – no one wants to touch it,” said Margaret O’Kane, president of the National Committee on Quality Assurance, an independent group that seeks to improve the quality of health care.

But health care experts contend that the issue must be addressed. Their policy proposals vary widely, and the proponents of universal coverage are as different as Dr. William W. McGuire, chief executive of one of the nation’s largest health insurers, and Dr. David Himmelstein of the Harvard Medical School, who recommends eliminating big insurers like Dr. McGuire’s company, the UnitedHealth Group.

Whatever their differences, they do agree that moving toward universal coverage would surely save lives and maybe dollars as well. A report this year by the Institute of Medicine of the National Academy of Sciences found that the uninsured are sick more often than the insured and likely to die younger, resulting in an estimated 18,000 additional deaths a year.

The uninsured receive medical care, but often when it is most expensive – acute care at hospitals after emergencies instead of regular checkups and other preventive care. And the uninsured pay only 35 percent of their own medical bills, according to the Institute of Medicine report. Most of the rest is paid by taxpayers through subsidies to hospitals and clinics.

Any plan for universal coverage must answer at least three basic questions: Will the move to national coverage follow an incremental, step-by-step path or require drastic change? What role will the government play? What should be covered under a universal system?

Dr. Himmelstein, an associate professor at the Harvard Medical School, advocates a fairly sweeping overhaul of health care in America by moving to a single-payer system run by the government. The nation, he said, can no longer afford the costs of bureaucracy in the American system.

Dr. Himmelstein was a co-author of a study last year, published in The New England Journal of Medicine, that found that administrative costs represented 31 percent of total health care spending in the United States, about double the proportion in Canada, which has a single-payer system.

The culprits, in Dr. Himmelstein’s view, are all the middlemen – chiefly insurers – tussling with doctors, hospitals and nursing homes over bills and reimbursements. “Health care has become a spectator sport with this huge, costly bureaucracy watching over us,” he said.

About one million of the workers in the system, Dr. Himmelstein said, are doing unneeded administrative work that could be eliminated. The savings from moving to a single-payer system, he estimated, would be roughly $375 billion a year. “That allows you to cover everyone,” he said.

The single payer, Dr. Himmelstein suggested, would be a pumped-up Medicare with greater buying power to bargain hard with suppliers like pharmaceutical makers, to control drug costs.

Not surprisingly, Dr. McGuire of UnitedHealth opposes the single-payer formula. “The key issue is not who is paying, but what you are paying for,” he said. “I think we should have mandatory insurance. It should be based on the concept of an essential benefit. Guided by medical science, we should decide what is essential and provide it.”

The essential package, Dr. McGuire said, should cover hospital care. It should also promote healthy lifestyles and cover preventive care so that people with high blood pressure or high cholesterol, for example, would be less likely to develop heart disease, which is not only debilitating for the patient but also costly to treat.

Preventive care need not be expensive, Dr. McGuire said. For example, there are low-cost generic drugs that are equally effective in most cases – statins for lowering cholesterol and beta blockers for high blood pressure – that cost pennies per pill instead of the dollars charged for brand-name drugs still covered by patents.

If a person is employed, his or her employer would have to pay for the essential benefit, according to Dr. Maguire. Self-employed people, or others who are financially able, would pay for their own insurance, and for everyone else, the obligation would fall to the federal government or the states.

Business Roundtable CEOs cite health care costs

Business Roundtable
Press Release
December 1, 2004
Business Roundtable Releases December CEO Economic Outlook Survey

Business Roundtable is an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees in the United States and $4 trillion in annual revenues.

In the annual question about challenges to growth, CEOs cited health care costs as the greatest cost pressure to Corporate America…

“In 2005, Business Roundtable CEOs will work to alleviate the costs that keep our economy from reaching its potential and hurt the competitiveness of U.S. businesses,” said (Hank McKinnell, chairman of Business Roundtable and chairman and CEO of Pfizer Inc.). “In addition to a focus on deficit reduction and entitlement reform, a top priority will be seizing opportunities to improve the health care marketplace and mitigate soaring costs.”

http://www.businessroundtable.org/newsroom/Document.aspx?qs=5866BF807822B0F1AD7468422FB51711FCF50C8

Comment: Considering the source of this press release, questions inevitably arise:

Since the health care industry is a major sector of our economy, isn’t growth in the health care business sector a positive development for the economy?

If other sectors of the business community object to the costs of their employee health benefit programs, shouldn’t consideration be given to ending the link between employment and health care coverage?

If the nation decided that a more equitable system of funding health care should be established, what responsibility would business have to contribute to such an equitable system? (This question is crucial since business interests might be more supportive of an equitable, publicly funded, universal system if they were divorced from any obligation to fund it directly.)

And, finally, is Pfizer chairman and CEO Hank McKinnell, whose company has been a major contributor to excessive health care pricing, really the personality to lead the Business Roundtable in “seizing opportunities to improve the health care marketplace”?

The Nation Now Wants to Hear From Woolhandler and Himmelstein

Mixed solutions to problem of uninsured
American Medical Association
House of Delegates
Interim Meeting Highlights
Monday, December 6, 2004

About 300 delegates heard details on one of the AMA’s seven agenda items during Sunday’s Forum for Medical Affairs. One of five presenters, John Goodman of the National Center for Policy Analysis outlined HSA advantages, including: restoration of the patient-physician relationship; portability; and patient and physician incentives.

According to Physicians for a National Health Program spokesperson Steffie Woolhandler, MD, the use of tax credits to cover the uninsured, as proposed by the AMA, is “a bad idea. It’s been tried before and it’s failed.” While she doesn’t support the Canadian national system per se, she believes the U.S. system should become “Canada deluxe.”

After congratulating Dr. Woolhandler on her life’s work in researching the uninsured (which brought the crowd to its feet), and noting the obvious differences between hers and the AMA’s proposals, AMA President John C. Nelson, MD, MPH, emphasized the extreme importance of working together to create a comprehensive solution.

http://www.ama-assn.org/ama/pub/category/14367.html

And…

The Disparate Consensus on Health Care for All
By Steve Lohr
The New York Times – December 6, 2004

In Washington, the phrase “universal coverage” is rarely mentioned as the way to provide health insurance for the 45 million uninsured Americans. It evokes memories of the Clinton administration’s sobering failure to forge a national health care plan. Yet among health care experts there is a surprising consensus that the United States must inevitably adopt some kind of universal coverage.

…health care experts contend that the issue must be addressed. Their policy proposals vary widely, and the proponents of universal coverage are as different as Dr. William W. McGuire, chief executive of one of the nation’s largest health insurers, and Dr. David Himmelstein of the Harvard Medical School, who recommends eliminating big insurers like Dr. McGuire’s company, the UnitedHealth Group.

Whatever their differences, they do agree that moving toward universal coverage would surely save lives and maybe dollars as well. Any plan for universal coverage must answer at least three basic questions: Will the move to national coverage follow an incremental, step-by-step path or require drastic change? What role will the government play? What should be covered under a universal system?

Dr. Himmelstein, an associate professor at the Harvard Medical School, advocates a fairly sweeping overhaul of health care in America by moving to a single-payer system run by the government. The nation, he said, can no longer afford the costs of bureaucracy in the American system.

Dr. Himmelstein was a co-author of a study last year, published in The New England Journal of Medicine, that found that administrative costs represented 31 percent of total health care spending in the United States, about double the proportion in Canada, which has a single-payer system.

The culprits, in Dr. Himmelstein’s view, are all the middlemen – chiefly insurers – tussling with doctors, hospitals and nursing homes over bills and reimbursements. “Health care has become a spectator sport with this huge, costly bureaucracy watching over us,” he said.

About one million of the workers in the system, Dr. Himmelstein said, are doing unneeded administrative work that could be eliminated. The savings from moving to a single-payer system, he estimated, would be roughly $375 billion a year. “That allows you to cover everyone,” he said.

The single payer, Dr. Himmelstein suggested, would be a pumped-up Medicare with greater buying power to bargain hard with suppliers like pharmaceutical makers, to control drug costs.

Not surprisingly, Dr. McGuire of UnitedHealth opposes the single-payer formula. “The key issue is not who is paying, but what you are paying for,” he said. “I think we should have mandatory insurance. It should be based on the concept of an essential benefit. Guided by medical science, we should decide what is essential and provide it.”

If a person is employed, his or her employer would have to pay for the essential benefit, according to Dr. Maguire. Self-employed people, or others who are financially able, would pay for their own insurance, and for everyone else, the obligation would fall to the federal government or the states.

The thorny issue in an essential benefit program is what is covered and what is not. Shoulder surgery to ease the pain when swinging a golf club or impotence pills should not be considered essential, said Dr. Reed Tuckson, a senior vice president for medical care advancement at UnitedHealth.

It will take political will and some hard choices about what path to take, but the United States certainly has the means to provide health insurance to everyone, health experts say. Neelam Sekhri, a health policy and finance expert at the World Health Organization, illustrates it this way: American government spending on Medicare and Medicaid alone, which covers about 40 percent of the population, if spread across the nation’s entire population, would equal on a per capita basis total spending by most European countries.

From a strictly financial standpoint, Ms. Sekhri said, “Given the amount of money that the United States spends on health, there is no reason why it should not be able to provide a very good system of universal health coverage.”

http://www.nytimes.com/2004/12/06/business/businessspecial2/06universal.html?oref=login

Comment: Harvard professors Steffie Woolhandler and David Himmelstein were co-chairs of the writing committee that produced the 1989 New England Journal of Medicine article, “A National Health Program for the United States: A Physicians’ Proposal.” They were cofounders of Physicians for a National Health Program (PNHP). Since then they have continued in a leadership role in producing innumerable other reports, research data, articles, restatements of the physicians’ proposal, in addition to their other advocacy activities in support of single payer, national health insurance.

It has sometimes been a thankless task. With the defeat of the unfortunate Clinton attempt at reform, policymakers decided that reform could never be comprehensive but must be in incremental steps. Advocates of universal reform were essentially barred from participation in the forums on reform. Even the progressives, who were previously in support of a universal health program, became fragmented over factional disputes. To the public at large, the movement for a national health program appeared to have wilted and died.

But David and Steffie were not deterred. They led the writing team that produced the 2003 JAMA article, “Proposal of the Physicians’ Working Group for Single-Payer National health Insurance.” They provided irrefutable evidence of the profound administrative waste of our fragmented system of funding health care (2003 NEJM, “Cost of Health Care Administration in the United States and Canada”).

Their colleagues at PNHP became passionate advocates of the single payer model because we recognized the vast superiority over the current system and over other mediocre proposals for reform. We pounded on doors and inserted our foot when opened. We insisted on being part of the debate, even if our presence was not particularly welcome.

Current attempts at reform have failed miserably. Costs continue to escalate, greater numbers are without insurance, and we have a major epidemic of under-insurance with the resultant explosion of financial hardship due to non-covered medical expenses.

The failure of our current system is no longer in dispute. We now hear throughout the nation the resounding chorus calling out for a national solution. Since David and Steffie and the rest of us persevered, we were there when others decided that we need to broaden our perspective on reform. David and Steffie, with the help of colleagues, have shown that we can provide affordable, comprehensive health care coverage for everyone. The policy science is not in dispute. Others are now saying that maybe it is time to take a serious look at the single payer, Medicare for All, national health insurance model.

Today, the American Medical Association and The New York Times affirmed the credibility of David and Steffie and of the single payer model of reform. Although the process has only begun, single payer will now have its rightful place in the national dialogue on reform. In fact, the greater burden in the debate may well shift to the defenders of the status quo since the superiority of the single payer model will speak for itself.

Steffie and David can be very, very proud, as we are of them. I mean… like… Steffie brought members of the AMA House of Delegates to their feet!