PNHP

Headaches For All

Headaches For All

Everybody knows it will take a lot more than diet and exercise to fix America’s health

AMERICANS are constantly told that their health care is the best in the world. In terms of research, technology and advances in surgery, the boast is undoubtedly true. In other ways, it is hard to justify. At any one time, more than 43m Americans under the age of 65 have no health insurance (the elderly are covered by Medicare, a federal insurance programme). The infant mortality rate for black Americans runs at 14 per 1,000 live births, double the rate for white Americans and over four times the rate in Japan. Indeed, in a 2000 study of the effectiveness of health-care systems around the world, the World Health Organisation ranked America only 37th (France came top).

If all that speaks ill of the nation as a whole–over half of America’s uninsured in 2002-03 were without cover for at least nine months–the situation in some states is far worse. Families USA, a health-consumer organisation, notes that in Texas–the state that George Bush likes to call home–some 43.4% of the “non-elderly” population were without health insurance for all or part of 2002 and 2003. In California the rate was 37.1%; in Florida 34.6%. The Kaiser Family Foundation (KFF) notes that infant-death rates across the South, from Arkansas to the Carolinas, are far higher than in the western states.

This is a poor reward for spending more on health than any other country. Health care accounts for almost 15% of America’s gross domestic product, compared with less than 8% for Japan and Britain. Moreover, where other countries pay for their health care mostly out of taxation (the OECD average in 2001 was 72%), over half of America’s spending is accounted for by private insurance–normally provided by an employer–and out-of-pocket payments. Indeed,America is the only industrialised democracy without publicly funded universal health cover.

To counteract the costs of medical advances and malpractice suits,insurance premiums have been rising by more than 10% a year. In 1998 the average health-care cost per employee for a private-sector company was $1 an hour; by last year, it had risen to $1.50. This has a perverse effect: employers either tend to cut or eliminate their workers’ coverage–thereby adding to the uninsured–or try not to hire new workers. With the cost of insuring a single worker now running at around $3,000 a year, the proportion of workers covered by a company health plan has fallen to 61% in 2004, according to KFF, compared with around 65% in 2001.

The Search For A Cure
Clearly, reform is needed. One reason is pressure from voters. Health care is consistently near the top of their concerns, especially if they are old; old people are both sicker, and vote more, than the average American. They note that many of their drugs are much cheaper in Canada than in the United States, and ask why the federal authorities are refusing to legalise imports from across the northern border. (In defiance of the Food and Drug Administration, Illinois has recently approved the importation of drugs from Canada; Vermont is suing the
FDA.) Seizing the moment, John Kerry says he backs such imports.

A second reason for reform is the inexorable pressure of demography. As baby-boomers retire, they will add to the burden of health care in general and Medicare in particular. Indeed, America’s total expenditure on health care is expected to rise from just under $2 trillion a year now to almost $3 trillion by the end of the decade.

So the question is not so much whether to reform, but how. The Clinton plan a decade ago for universal coverage was defeated by doctors and insurance companies, as well as by Republicans. In its place came health-maintenance organisations (HMOs), health-care-management companies that contract with doctors and hospitals to manage treatment and costs. The proportion of employees with employer-provided care enrolled in managed health-care plans rose from 27% in 1988 to 92% in 2000.

But HMOs succeeded only for a time in slowing the rise in health-care costs. Some politicians, such as the former Democratic presidential candidate, Dennis Kucinich, believe the only workable solution is to replace the private-sector insurance companies with a government-run “single-payer” system, as in Canada. This, however, would guarantee the same lobbying that defeated Mr Clinton–which is why neither Mr Kerry nor Mr Bush is talking about dramatic change.

Mr Bush’s remedy is particularly modest. He proposes extending the new Health Savings Accounts to allow individuals to deduct from their taxes the cost of premiums for major medical coverage. According to the Treasury Department, this would extend insurance to an extra 1m Americans. Similarly, there are tax credits to help workers laid off “due to international trade” to find insurance; other credits would make insurance affordable for around 4.5m workers with no employer-provided or public insurance. Meanwhile, a five-year plan is already under way to fund 1,200 new or expanded community health centres to serve an additional 6.1m people, and association Health Plans are proposed to allow small businesses to band together to provide cover to another 600,000.

The centrepiece of the president’s reform, however, is to make prescription drugs available to the 40m elderly and disabled Americans covered by Medicare. From 2006 (a discount card will in the meantime offer savings off retail prices), a Medicare recipient will pay the first $250 in a year, Medicare most of the next $2,000 and the recipient the next $2,850 (after which Medicare will again pick up the tab). The plan is both complicated and expensive: over $570 billion, according to the latest estimates, over ten years. Embarrassingly for the president, the price tab is rising not just for the government but also for Medicare recipients: their premiums are set to rise by 17% in 2005.

These are not the only problems with Mr Bush’s proposals. The tax credits, aimed at helping the poor and worth some $90.5 billion over ten years, would actually benefit the rich, who need no help, and would be little help to the low-paid, who pay little or no tax and are most at risk of losing insurance. As for Medicare reform, the congressional Budget Office reckons that, as an unintended side-effect, a third of retired people whose drugs are now covered by their former employers will lose that coverage (why should the bosses pay if the government will pick up the tab?) and be forced to accept inferior cover from Medicare. The most damning criticism of the proposals, however, is that their impact will be too limited: according to the Kaiser Family Foundation, the ranks of the uninsured will fall by just 1.8m.

THE 95% SOLUTION
By contrast, Mr Kerry aims to reduce the number of uninsured by 26.7m and so bring health insurance to 95% of America’s population. That ambition carries a hefty price-tag of $653 billion over nine years, which a President Kerry would finance mainly by repealing Mr Bush’s tax cuts for Americans earning over $200,000. In the Kerry vision, all Americans would have the right to the same health plans as their congressmen and some 9m federal employees and their dependents. Tax credits would help find cover for 55-64-year-olds, who are too old to be good insurance risks for an employer but too young to qualify for Medicare. To help poor families, Mr Kerry would make the government assume all the costs of the 20m children who now benefit from state Medicaid plans. In return, the states would have to expand insurance to those poor families who do not qualify for Medicaid.

Mr Kerry’s biggest claim is that he can cut insurance costs by up to two-thirds for small businesses: the federal government would act as a reinsurer, reimbursing employee health plans for 75% of costs above $50,000. This alone would lower employee premiums by 10%. In addition, there would be tax credits of up to 50% of the cost of covering employees, and employers would profit from buying into the federal worker-insurance programme. Meanwhile, everyone–firms, employees and states–would benefit from discounts gained by the bulk purchasing of drugs. (At the moment, the drug companies are loth to co-operate with any buyer except Medicaid, the federal/state programme for the poor.)

Add in a “quality bonus” to give hospitals a financial incentive to reduce medical errors; add, too, a “technology bonus” to favour computerisation and so cut non-medical costs (now running at $350 billion a year) from $12-25 per health-care transaction to less than a cent. The result is a health plan which the 35m-strong AARP, the formidable lobby group for the elderly–which supported Mr Bush’s Medicare scheme–finds much more convincing than the president’s.

That does not mean it is without problems. Mr Bush’s team notes that while Mr Kerry claims it will be harder to bring undeserving malpractice suits, he refuses to cap the awards–even though the Bush camp says that the “broken medical liability system” drives up costs by at least $28 billion a year for the federal government alone. (It certainly pushes up the cost of doctors’ malpractice insurance.)

The Bush team also attacks Mr Kerry for adding to the burden of regulation. Small businesses would have to offer costly benefits in order to join the federal employees’ health-benefits programme. Overall, say the Republicans, the Kerry plan simply shifts the burden to the taxpayer. But given the unpopularity of the present system, this is a burden that taxpayers sometimes seem ready to bear.

Greetings From The Disunited “United States Of Canada”

November 14, 2004
WASHINGTON — I pledge allegiance to the flag of the disunited states of America.

Now is the winter of some people’s discontent following the stormy election of President Bush. The Internet is all abuzz with residue resentment. Canada’s immigration Web site reports a sharp increase in inquiries from Americans seeking information on how they can defect to our chilly neighbor. Other Webheads are offering a “Boycott Ohio” petition.

That in particular saddens me, since I grew up in Ohio and still have friends and relatives living behind the Buckeye curtain.

But the wackiest idea I have run across so far is the option offered by Web sites that are calling for secession.

That’s right. Secession, you may recall, didn’t work out very well the last time it was tried in this country. (For the benefit of those of you who snoozed through history class, I point out that secession resulted in the Civil War.)

Nevertheless, several Web sites are offering color maps of a new North American political landscape in which the so-called “blue states” that voted for Democratic Sen. John Kerry are joined to our northerly neighbor in a new, blue country called the “United States of Canada.”

The remaining states–the “red states” that voted for Bush–are renamed “Jesusland,” which sounds like a good name for some televangelist’s Christian amusement park.

Well, count me out.

I think the best revenge for blue-state Americans is to continue to stand with our red-state brothers and sisters to hold Washington accountable, no matter which party happens to be in charge.

Besides, as much as I like to visit Canada, I don’t see much advantage to having Canada permanently visit me–except maybe national health insurance.

That’s not a small thing. As you may have heard Kerry mention repeatedly during the recent presidential campaign, an estimated 45 million Americans in this, the world’s most powerful and prosperous country, lack health insurance.

Back in the early 1990s, only about 30 million Americans lacked health insurance and President Bill Clinton and First Lady Hillary Clinton took a stab at trying to close that gap.

Their push for universal coverage was beaten back quite impressively by the health insurance industry’s “Harry and Louise” ads.

Those scary little attack ads painted horror scenarios of skyrocketing costs, shrinking coverage and Americans no longer able to choose their own doctors.

A decade later? Surprise, surprise. We have the higher costs and shrinking coverage that “Harry and Louise” warned us about, except that we also have even more uninsured patients.

Now the same insurance industry tells us scary stories about Canadians rushing to the U.S. for elective surgery and other procedures they can’t get quickly enough in Canada. You have to turn to the news to hear the other side of that story, like the Americans now turning to Canada to get their flu shots or to find cheaper prices for American-made pharmaceuticals.

And you also might hear in the news about how Americans are more dissatisfied than citizens of other major industrial nations with their basic health care even while paying more of their own money for treatment, according to a recent five-nation survey by the non-profit Commonwealth Fund.

One-third of Americans told the pollsters that the U.S. health-care system should be completely rebuilt, which was far more than residents of Australia, Canada, New Zealand, or the United Kingdom. Just 16 percent of Americans said that the U.S. health-care system needs only minor changes, the lowest number expressing approval among the countries surveyed.

Want to see President Bush’s plan for insuring the uninsured? Hold up a blank sheet of paper.

Well, OK, it’s not quite that bad, but it’s close. He has offered tax-free health savings accounts for those who can afford to put money aside for their health-care costs. The business-oriented Bush seems never to have witnessed a social problem that cannot be solved with a tax break.

But what if you’re a minimum-wage waitress with kids, and you can’t afford to put money aside for health-care costs? Well, I guess there’s always prayer.

Of course, no country’s health-care system is perfect, and America does offer the best health care that money can buy, if you can afford it. The problems come when you can’t afford it.

We’re problem solvers. That’s the American way. We can build a better system, if we want to. The first step is to demand what we have not had, a fair and balanced national health-care debate, not just dueling campaign ads.

AMA members’ opinions on reform

American Medical Association
Division of Market Research and Analysis
September 2004

2004 AMA Advocacy Agenda Setting Survey
(The survey was sent to all 202,777 members of the AMA. 8,323
responded, either by mail or online.)

Members’ Opinions of Approaches to Increase Health Insurance Coverage to the
Uninsured % Favor
(The first number is the percent of physicians in favor, and the second is the percent of medical students and resident physicians in favor. Multiple responses are possible.)

53/50 – Use of tax credits
38/49 – Expanding eligibility for public programs
41/40 – National single payer system
24/34 – Employer mandates
27/26 – Individual mandates
53/44 – Government-sponsored catastrophic coverage

Office-based physicians (56%) are more likely than administrative physicians
(49%), hospital-based physicians (45%), and physicians in medical teaching/
research (45%) to favor the use of tax credits. Psychiatrists (58%) are the
most likely and anesthesiologists (30%) are the least likely of all specialties to favor a national single payer system. Physicians in medical teaching/ research (57%), administrative physicians (52%) and hospital-based physicians (49%) are more likely than office based physicians (38%) to favor a national single payer system. Physicians 40 years of age or more (43%) are more likely than physicians less than 40 years of age (35%) to favor a national single payer system.

http://www.ama-assn.org/ama1/x-ama/upload/mm/363/agendasurvhighlights.pdf

Comment: The AMA’s conclusion: “AMA members are divided on the approaches
they favor to increase health insurance coverage to the uninsured.” That is true. But some aspects of this survey are worthy of comment.

Many physicians with progressive views have dropped out of the AMA, partly
because of a perception that it is controlled by relatively conservative physicians. There is some basis for this perception as is exemplified by the fact that 75% of AMA PAC contributions for the recent election went to Republican candidates. Also, the health reform policies supported by the AMA House of Delegates are very similar to those supported by President Bush. So the survey likely is heighted toward the conservative physicians in the United States.

It has been said that there are three primary models of universal coverage:
universal single payer, an employer mandate with a backup public program,
and an individual mandate with a backup public program. It is quite remarkable that, of these three choices, a national single payer system has the strongest support. There is even greater support for government-sponsored catastrophic coverage, which would have some features of the single payer model, albeit with a high deductible requirement.

Tax credits received high support, but they are not insurance models. They are
merely a mechanism of funding insurance.

The employer mandate and individual mandate leave in place our current private insurance programs. They have the least support in this survey. All other options involve government funding and government administration, and all of them received greater support from the physicians responding.

It may be a stretch to say that the conservative physicians of our nation prefer a government-run, taxpayer-financed health insurance program. But it’s not far from the truth.

The AMA and PNHP should sit down together and discuss health policy, devoid
of partisanship. We may not be as far apart as it would otherwise seem.

AARP continues its attack on social insurance

The New York Times
November 12, 2004
AARP Opposes Bush Plan to Replace Social Security With Private Accounts
By Robert Pear

Gearing up for battle over the future of Social Security, AARP, the influential lobby for older Americans, said Thursday that it opposed President Bush’s plan to divert some payroll taxes into private retirement accounts. But it supports new incentives for private accounts that supplement Social Security.

Working closely with Congress and the White House, AARP helped shape legislation adding drug benefits to Medicare last year. Social Security is an even bigger issue, politically and financially…

Marie F. Smith, president of the organization, said, “AARP adamantly opposes replacing any part of Social Security with individual accounts.” But Ms.Smith added that the group supported incentives for people to establish personal retirement accounts in addition to Social Security.

John C. Rother, the organization’s policy director, said, “We favor private accounts when they are in addition to Social Security, but not as a substitute.”

http://www.nytimes.com/2004/11/12/politics/12benefit.html?oref=login

Comment: The single payer model of health care reform is a program of social insurance. Social Security and Medicare are our two existing programs of social insurance. An attack on either of them is an attack on the fundamental concept of social solidarity. Do we care about each other,or are we each on our own? AARP is certainly sensitive to the hit that it took after its highly publicized efforts to assist the Bush administration and the conservatives in Congress in crafting and passing legislation that threatens the Medicare program with privatization schemes. AARP didn’t want to entangle itself in a similar controversy with Social Security.

To ward off any criticism, AARP took the precaution of announcing that they are opposed President Bush’s plan to divert some payroll taxes into private retirement accounts. But does that keep them out of the fray? In the same announcement they state that they support personal retirement accounts in addition to Social Security. That certainly sounds like a wise position. But is it?

As you are well aware, many versions of private accounts already exist.There is a very real risk that another new version that is designed and marketed specifically as an extension of Social Security would be regressively funded. The affluent, the sector with the real political voice, would then advocate for a reduction in the funding of the existing program,or, at a minimum, strongly oppose the increased funding that will be required to support a program that becomes top-heavy in the ratio of retirees to workers.

If AARP truly believed that the interests of all seniors would be served best by delegating more funds to retirement pensions, then they should be supporting the much more equitable method of increasing funding of our existing Social Security program. In sharp contrast, regressive funding of private accounts is highly inequitable.

In supporting private accounts, AARP is stepping up to the negotiating tables having already wasted a major negotiating chip. That is a very fundamental violation of the game-plan rules of negotiation strategy.

We could sound like demagogues by further suggesting that AARP may be contemplating its role in the enterprise of personal retirement accounts for tens of millions of Social Security beneficiaries. We would be consistent since we previously were demagogues when we suggested that AARP’s interests might lie with supplemental Medicare coverage. But if it takes demagoguery to expand understanding, then so be it.

If AARP is to represent the seniors of our nation, it needs to be a strident voice in support of Medicare and Social Security. Sadly, it appears that it is merely using the seniors of our nation as a front to hide their nefarious support of moneyed interests, some of whom don’t want to pay Social Security taxes and others who do want to enrich themselves through the management of private retirement accounts. The seniors deserve much better.

The AARP board needs to be replaced with individuals who will tell CEO Bill Novelli where to go. And maybe he should take with him Erik Olsen, the AARP President-elect, who is former president and CEO of Delta Dental Plan of California.

Urge NIH to provide public access to research

Action Required By November 16, 2004!

Following is a very important communication from Nobel Laureate Harold Varmus and his colleagues. The National Institutes of Health (NIH) has issued a policy recommendation that would ensure that the results of NIH-funded research would be available to all at no cost. This important policy would make sure that taxpayer-funded research would serve the public good. The comment period ends November 16. Please read the following, check the links, and then
Post Your Comments At The Link Provided.

This is a rare opportunity. Your simple act can make a difference. Do it now.

Thanks,
Don McCanne

*************

Dear Open Access Supporter,

On September 3, 2004 the NIH posted for comment an “Enhanced Public Access Policy.” This policy would require the recipients of NIH research grants to provide to the National Library of Medicine a digital copy of the final accepted manuscript (or the published version itself) of every published report resulting from NIH-funded research, so that the research results can be made freely available to scientists and the public through PubMed Central within six months of publication.

We are writing now to urge you to submit a comment in support of this proposal right away. The deadline for comments is just a few days away -November 16th.

The text of the proposal is available at:
http://grants.nih.gov/grants/guide/notice-files/NOT-OD-04-064.html
You can post comments here:
http://grants.nih.gov/grants/guide/public_access/add.htm

A powerful lobby of publishers and scientific societies is trying to block this plan. They claim that this is an unwarranted government intrusion on their business practices. In fact, the NIH policy has no authority over publishers – its rules apply only to the scientists who voluntarily accept grants from the NIH. The publishers remain free to operate their businesses as they always have and to compete in the free market to provide the best service and value to their authors and readers. But the publishers are wrong in arguing that they are entitled to monopoly control over access to the results of research that American taxpayers have paid for. On the contrary, the taxpayers who fund the research, and the scientists who carry it out, have every right to ask the grant recipients to provide open access to the published results. And they have every right to expect that the benefits of the research will be amplified by making it freely and widely available for others to use and to build on.

Let the NIH know that you support this policy proposal. Even better would be to tell the NIH that you would prefer an even stronger policy that requires full and immediate open access to all papers resulting from NIH-funded research. It is important that the NIH and other policymakers understand that this is not (as some publishers would have them believe) a radical proposal destined to destroy scientific publishing, but a thoughtful compromise that balances the desire for better access with the commercial interests of scientific publishers.

More information about the policy is available at:
http://www.nih.gov/about/publicaccess/index.htm
http://www.taxpayeraccess.org/

Notable statements of support for the plan include:
An open letter to the US Congress signed by 25 Nobel Laureates:
http://www.taxpayeraccess.org/bof.html
The Council of the National Academy of Sciences:
http://www4.nationalacademies.org/news.nsf/isbn/s09162004?OpenDocument

Please let us know if you have any questions.
Harold Varmus
Patrick Brown
Michael Eisen

Care for veterans

Lexington Herald-Leader Lexington, KY
Editorial, November 11, 2004

Care for veterans
Honor them by providing health services

When a group of Harvard Medical School researchers reported last month that almost 1.7 million military veterans have no health coverage, a spokeswoman for the Bush administration disputed the study.

She said fewer than 900,000 veterans lack health coverage or care. Either way, there’s no way to feel good about so many veterans going without health care, especially on this Veterans Day when war casualties are mounting in Iraq.

The physicians who produced the study are proponents of a single-payer national health care system and were accused by a Department of Veterans Affairs spokeswoman of using veterans to advance their agenda. Whatever their motives, they drew their findings from two government studies– the Current Population Survey and the National Health Interview Survey — that interview large random samples of the U.S. population.

For analysis purposes, they counted a veteran who had no health insurance but had been seen at a VA hospital or clinic as insured. Among the study’s
findings:
Uninsured veterans have increased by 235,259 since 2000 to 1,694,312. The typical uninsured veteran was an employed man in his late 40s with one or two family members.More than two-thirds were employed, and 7 percent worked more than one job.

Many uninsured vets had major health problems, and a disturbingly high number reported problems in obtaining health care. Two-thirds reported receiving no preventive care the previous year.

Almost all World War II and Korean War vets are old enough to have medicare coverage. But 1 in 11 of the 7.85 million Vietnam-era vets have no health coverage. Among the 8.7 million veterans who served in other eras, including the Persian Gulf War, 1 in 8 are uninsured.

3.9 million members of veterans households lack health coverage. About half of uninsured veterans have incomes that disqualify them from VA health care under means-tests issued by the Bush administration last year for veterans with no service-related injuries.

The authors say the VA lacks resources to care for an influx of 1.7 million uninsured vets. They also said that in terms of access to care, uninsured vets are indistinguishable from the 45 million Americans with no insurance. Five million Americans lost health insurance over the last four years.

Nov. 11 is the day we set aside each year to honor those who gave part of their lives to defending our nation in the armed services. A good many of them, it seems, are on their own the other 364 days.

A primer on health care

A primer on health care
In the first of a two-part series on the Japanese health insurance system, Tomoko Furukawa goes back to basics
By TOMOKO FURUKAWA
There are two main types of Japanese Health Insurance: National Health Insurance and Employees’ Health Insurance

Once you have joined the health insurance system, you will be issued with an insurance card (“hokensho”), which you must bring with you every time you pay a visit to a clinic or hospital or other medical facility. If you forget your card, you may have to pay the full amount for treatment, though this is refunded later.

National Health Insurance
All residents of Japan who are planning to stay in the country for at least one year and haven’t joined another health insurance program are entitled, and expected, to join the National Health Insurance Program.

This includes part-time workers, the self-employed, and those without full-time status at a company they work for (this often includes teachers at English schools).

Under this system, both the policy holder and dependents enjoy equal coverage.

The amount you must pay into the National Health Insurance System is based on local resident tax (which, in turn, is based on income), your assets, the number of people benefiting from coverage and, often, the number of people living in your area that have joined the system (eg. ward, city, town etc.).

At present, regardless of income and assets, the highest amount payable annually is 530,000 yen, though this can rise to 610,000 yen depending on the number of people over age 40 in your household. Payments are not automatically deducted from wages, but must be paid in installments at a post office or health insurance office.

Foreign residents are often shocked when they see a massive jump in their premium from the first year of joining the system to the next.

The reason for this jump is that, for the first year, the premium is set at a minimum of around 2,500 yen.

For the second year, however, it is calculated based on income.

Under National Health Insurance, the policy holder and his/her dependents must pay 30 percent of inpatient and outpatient fees, with 70 percent covered by insurance.

Those enrolled in all health insurance schemes can avail of some free or very low-costs general check-ups (chest X-ray, urinalysis, blood test etc.). Also available are dental checks (for cavities, gum disease etc.), TB tests and treatment if sick.

Health exams and check-ups are generally not covered by insurance. Local authorities and companies arrange yearly or twice-yearly check-ups at designated times for local residents and employees.

However, while a preventative check-up may not be covered, there’s nothing stopping the insured person from going to their doctor with a complaint (fictitious or otherwise) and having a check-up performed as part of diagnostic treatment.

The NHI reimburses amounts paid over 63,000 yen (35,400 yen for low-income families) for medical treatment in one month; amounts over 37,200 yen, starting from the fourth time, if a household receives high-cost medical care four or more times a year; amounts over 10,000 yen for treating long-term, government designated ailments such as diabetes. A list of these designated diseases and conditions is available from your local city/town office.

However, reimbursement details under national health insurance are decided by local governments, so specific details of benefits should be checked with your local insurance office.

You may also be reimbursed if you receive treatment at a facility that does not accept your insurance and consequently hits you with a hefty bill.

In order to qualify for the above, you must be able to show that you were forced, through an emergency or unavoidable situation, to go to that facility. However, applicants will not necessarily be reimbursed the full amount, but rather will receive repayment based on a government-fixed fee.

If you get prior permission from your local EHI office, you can be reimbursed for transportation costs to hospital.

The Japanese health insurance system does not cover costs incurred as a result of accident caused by a third-party, since in Japanese custom the third-party is expected to pay. However, if that person cannot pay, then the insurance system may reimburse your costs and bill the person involved themselves.

If you cause the accident you have no coverage under the health insurance system.

Employees Health Insurance

This plan is for company employees and their dependents. It covers those who work full-time or at least 3/4 of the hours that a full-time worker puts in for a company that has joined an EHI plan.

In order for your dependents (basically your extended family stretching back three generations) to benefit from your policy, they must rely on you for more than half of their livelihoods and have an annual income of less than half of yours — or up to 1,200,000 yen per annum.

Under the national pension plan, employer and employee each pay half the premium, which is based on a percentage of income.

Unlike the national health insurance system, the EHI policyholder pays 10 percent of costs, while dependents pay 20 percent of inpatient care costs, and 30 percent of outpatient costs.

For high-cost medical care, the EHI will reimburse any high-cost medical expenses or extraordinary medical expenses along the same lines as National Health Insurance.

Reimbursement usually occurs within two months of payment, though interest-free loans are available for those in need of funds to tide them over until the cash arrives.

Benefits are the same as those under NHI with the exception of coverage amount.

Getting out

It is essentially impossible to leave the Japanese health insurance system once you have joined, unless you are leaving the country, moving somewhere else, or starting a new job.

If you move jobs and go from full-time to part-time status you may decide to opt out of the health insurance system altogether and get private health insurance.

If you shift from EHI to NHI, you will be charged from the date you left the EHI.

You can receive an exemption from paying premiums if you have trouble paying due to unemployment, bankruptcy issues etc.

Health resources

There are several good resources for information on health insurance and health care in general in Japan.

One of the best is the Japan Health Handbook, published by Kodansha.

The book contains sections ranging from alternative medicine and mental health to old-age care, with lots more in between. Though Kodansha no longer prints the book, it may be still possible to find copies in English-language bookstores in major Japanese cities, and the book can certainly be found on Amazon and other online book retailers.

On the Web, many embassy homepages provide information on English-speaking hospitals and clinics around Japan. One particularly comprehensive list can be found on the homepage of the U.S. Embassy in Japan at japan.usembassy.gov/e/acs/tacs-7119.htm

Another good resource is the AMDA International Mediscal Information Center homepage ( homepage3.nifty.com/amdack)

This provides telephone services to foreign residents in eight languages, explaining the health care system in Japan to foreign residents and pointing them in the direction of medical facilities with staff who speak their language.

What’s not covered

Not covered under the two systems are normal childbirth; abortion for economic reasons; vaccinations; cosmetic surgery; orthodontics; alternative medicine. Also not covered are accidents that occur in or on the way to work.

Health resources

There are several good resources for information on health insurance and health care in general in Japan.

One of the best is the Japan Health Handbook, published by Kodansha.

The book contains sections ranging from alternative medicine and mental health to old-age care, with lots more in between. Though Kodansha no longer prints the book, it may be still possible to find copies in English-language bookstores in major Japanese cities, and the book can certainly be found on Amazon and other online book retailers.

On the Web, many embassy homepages provide information on English-speaking hospitals and clinics around Japan. One particularly comprehensive list can be found on the homepage of the U.S. Embassy in Japan at japan.usembassy.gov/e/acs/tacs-7119.htm

Another good resource is the AMDA International Mediscal Information Center homepage ( homepage3.nifty.com/amdack)

This provides telephone services to foreign residents in eight languages, explaining the health care system in Japan to foreign residents and pointing them in the direction of medical facilities with staff who speak their language.

Next week’s column will cover the above issues, aswell as those of tax deductions, coverage, high medical expenses, specialist treatment, back payments and more.

Send your questions and views, good and bad, on the Japanese health care system to community@japantimes.co.jp

The Japan Times: Nov. 9, 2004

Vets return, but not always with healthcare

Vets return, but not always with healthcare
Alexandra Marks Staff writer of The Christian Science Monitor
11/10/2004

After serving 410 days in Iraq with the 1st Armored Division, Spc.Stuart Wilf came home to Colorado on Oct. 2. He changed his clothes, borrowed his mother’s car, and went out with friends to celebrate. On the way home, he fell asleep at the wheel and had a head-on collision with a tree. He survived, but since he was newly discharged, he had no health insurance.

“That was a mind-boggling thing to find out the first day he’s out of the service,” says his mother, Becky Wilf. “His bill was $54,000 just for the hospital. That doesn’t include the surgeon.”

Specialist Wilf is just one of thousands of veterans returning home from Iraq and Afghanistan who advocates contend are falling through the cracks of a federal system unprepared to deal with so many soldiers. After spending months in a war zone, many of the 170,000 soldiers who’ve returned home are struggling with their transition to back to civilian life – from coping with a maze of red tape and contradictory messages on healthcare to finding affordable housing and jobs with adequate incomes to accessing disability payments.

One of the biggest problems, according to advocates and a report by the Government Accountability Office, is a lack of resources to deal with battle fatigue, or posttraumatic stress disorder, as it’s now called. Another is providing support for Reserve and National Guard troops, who make up 45 percent of the troops in Iraq.

“The bottom line is that the VA [Department of Veterans Affairs] wasn’t prepared for the 33,000 troops that have come back and gone to the VA needing care,” says Paul Rieckhoff of Operation Truth, a nonprofit advocacy group for veterans of Iraq and Afghanistan. “They’re definitely not ready for the flood that’s going to come back next year.”

View from the other side
The VA disputes that and says it has ordered its services so that returning veterans will receive top-priority care. Last year, it announced that it would no longer be able to provide health services to veterans who make more than $26,000 a year (on average) and have no service-connected health problems. As a result, VA spokeswoman Cynthia Church says that what were once “unbelievable wait times” have been reduced. That allows the VA to treat returning combat veterans who were wounded or have service-related problems for free for two years.

“No veteran now waits longer than 30 days for their first appointment,” she says. “In terms of access to facilities, we’ve got more than 158 hospitals and more than 800 clinics, and we contract with service providers in communities where there may be a need.”

The VA’s policy are less clear when it comes to vets like Wilf, who sustained injuries after he was discharged. He and his family spoke with four different VA representatives and were told that because his injuries were not combat related, he was ineligible for VA care.

After inquiries from reporters, the VA in Washington said that if Wilf had been enrolled in the VA system, he would have been eligible for treatment for noncombat problems because he had just returned from combat duty. But he would have to pay for a percentage of the cost if he were able, and he would not be a priority case. “Part of the problem is the way the law reads. It says it’s mandatory to provide care for a condition possibly related to service, but doesn’t really address treatment of an unrelated condition,” says Gary Baker, head of the Eligibility Center at the VA.

Wilf has since filled out the application to enroll but is still waiting for it to be processed. In the meantime, the hospital where he was treated has forgiven most of the $54,000 bill because he was technically indigent. But he still has another $24,000 in related bills to pay.

Wilf was active duty, but some returning troops in the National Guard and Reserves have also found themselves without healthcare. When they were activated, they were eligible for Tricare, the Defense Department’s health-insurance program, but they lost coverage when they returned home.

Last summer, however, Congress voted to extend Tricare coverage for 180 days after deactivation. And last month, it voted to extend the coverage again, this time allowing Guard and Reserve troops to receive a year of Tricare coverage for every 90 consecutive days they serve.

Mr. Rieckhoff of Operation Truth lauds Congress for the move, but he contends it’s still not enough. He points to his own situation. He was on active duty and served as an infantry platoon leader in central Baghdad for 11 months. But now he finds himself in a job with no insurance. He was also told that the VA would treat only service-related injuries.

“The ironic part is that I’m drilling in the National Guard. It’s not like I’m completely out of the military,” he says.

Harvard’s numbers

A study done at Harvard University has found that almost 1.7 million veterans of all wars lack health insurance, an increase of 13 percent since 2000. More than one in three vets under the age of 25, like Wilf, have no health insurance. “It’s particularly offensive to send people off to war and not take care of them when they come home,” says Dr. Steffie Woolhandler, a professor at Harvard Medical School and coauthor of the study.

The VA contends the number of veterans without healthcare coverage is far smaller. Ms. Church says 60 percent of those uninsured veterans would be eligible for care if they enrolled in the VA. The study’s authors dispute that, noting that many have incomes higher than $26,000, live in areas where there are no VA services, or were unable to receive care due to long waiting lists. Church charges that the study’s authors are using the issue of uninsured vets to further a political agenda of creating a national health-insurance system. Veteran activists discount that. “This is not a political issue; it’s a soldier issue,” says Steve Robinson of the National Gulf War Resource Center.

A Gulf War veteran, he retired from active duty in October 2001, applied for benefits in 2002, and has yet to be enrolled in the VA healthcare system. “What happens in Washington is that these important things get turned into political footballs to get kicked around,” he says. “Then the issue doesn’t get the attention it deserves.”
(c) Copyright 2004 The Christian Science Monitor.  All rights reserved.

Consumer-Directed Managed Care

Health Affairs
November/December 2004
Consumer-Directed Health Plans And The RAND Health Insurance Experiment
By Joseph P. Newhouse

What Was The RAND Experiment?

The RAND HIE (RAND Health Insurance Experiment) randomized families to health insurance plans that varied their cost sharing from none (“free care”) to a catastrophic plan that approximated a large family deductible with a stop-loss limit of $1,000 (in late-1970s dollars), which was scaled down for the low-income population. If one uses the rate of increase in per capita medical spending to convert late-1970s dollars into 2004 dollars, a $1,000 deductible then would be more than a $6,000 deductible is today.

The HIE participants in the large-deductible (95 percent coinsurance) plan used
25-30 percent fewer services than those in the free-care plan; on average,
they had just under two fewer face-to-face physician visits per person per
year and were 23 percent less likely to be hospitalized in a year. Substantial reductions in use were found among all income groups. But the heat in the hoary debate over the appropriate role for patient cost sharing was not the magnitude of any savings, but whether any reduction in use induced by increased cost sharing was among “necessary” or “unnecessary” services and therefore whether it adversely affected health. Those on the political left generally espoused the view that the services were necessary; those on the right, that they were unnecessary.

On this score, the results of the HIE had something for both sides. For most
people enrolled in the RAND experiment, who were typical of Americans covered by employment-based insurance, the variation in use across the plans appeared to have minimal to no effects on health status. By contrast, for those who were both poor and sick-people who might be found among those covered by Medicaid or lacking insurance-the reduction in use was harmful, on average. In particular, hypertension was less well controlled among that group, sufficiently so that the annual likelihood of death in that group rose approximately 10 percent. This adverse effect occurred in spite of the reduced cost sharing for low-income families, a feature generally not found in today’s plans.

http://content.healthaffairs.org/cgi/content/abstract/23/6/107

Comment: The RAND Experiment is of great importance because it is cited as
the rationale for creating consumer (patient) sensitivity to health care costs. This principle is the primary mechanism of controlling health care costs in the consumer-directed model of health care reform. We now have the advantage of having witnessed the debate, tempered by time, of the real impact of the RAND conclusions. Professor Newhouse provides us with an allegedly objective assessment of the RAND experiment from this historical perspective.

And what were the results? Most people, who are healthy and employed, remain
healthy even with cost sharing. But for those who are poor and sick, the reduction in use was harmful to their health, even resulting in death.

Although cost sharing does not have much of a negative impact on healthy people, it really does not decrease total health care spending much since most people are healthy and have much less need to access the health care delivery system. Keep in mind that 80% of individuals use only 20% of all health care services, and the reduction in utilization caused by cost sharing is a relatively small percentage of that 20% of total costs.

But what about the poor and sick? Cost sharing does reduce spending, but that reduction is in essential health care services. Significantly impaired health outcomes are absolutely inevitable.

Presenting the results of the RAND Experiment as an objective debate between
two sides that have an equal claim to the debate turf provides objectivity that is about as cold and calculated as the surveyor of battle scenes who report collateral damage in terms of statistical body counts. To suggest that the cost sharing debate has something for both sides ignores the fundamental issue that there is only one side to providing affordable health care access to those with significant medical needs.

Unfortunately, Professor Newhouse doesn’t stop there. Although he acknowledges the “counterrevolution against managed care,” he states:”How will the increased initial cost sharing mesh with managed care? I see them as complementary. One result of the RAND HIE was that the variation in cost sharing affected the likelihood of seeing a physician or other health professional about a medical problem, but it had only a small effect on the costliness of an episode once care was sought. By contrast, the tools of managed care aim primarily at the costliness of an episode.”

And…

“… higher initial cost sharing may make the instruments of traditional managed care more effective.”

Thus we enter the age of the grand experiment with Consumer-Directed Managed
Care. The body of health policy literature has already written the outcome:
suffering and death for those with greater health care needs.

Wouldn’t it be better to spend more of our $1.8 trillion on those who need health care?

Fail Globally, Act Locally

Fail Globally, Act Locally:Hotel Workers, Family Medicine, and the Future of Health Care
Kevin Grumbach, MD
November 11, 2004

Earlier this year, the San Francisco Chronicle quoted me as saying that my motto was, “Fail globally, act locally.” This was in the context of discussing my frustrating legacy as a physician advocate for universal health care, affirmative action, and primary health care. I thought about this motto this week as I pondered a dilemma that brought global issues in health policy home to a personal and local level.

Months ago, I accepted an invitation to be a keynote speaker at a national conference of family doctors and educators in family medicine scheduled for this weekend in San Francisco at the Hyatt Regency Hotel. I was honored to be invited to address the conference. Then, on September 29, 1400 hotel workers at four of the City’s major hotels went on strike—largely over a dispute about proposed increases in employee contributions for health benefits. Two days later, the hotel consortium The San Francisco Multi-Employers Group responded by locking out 2600 union workers at 10 additional San Francisco hotels, including the Hyatt Regency.

As the date of the conference approached, I experienced a sinking feeling. I watched the hotels dig in their heels and continue the lock out despite Mayor Newsom’s call for a cooling off period. I saw TV clips of the housekeepers and banquet waiters and prep cooks out on the picket lines, about to lose their health insurance. I thought about hundreds of conference registrants arriving in San Francisco, expecting to hear me deliver my plenary address on the theme of “Humanizing Care.” I wondered what I should do. Cross the picket line and swallow hard when giving my talk on making health care more humane? Cancel my talk on short notice and leave the conference organizers and my colleagues in the lurch?

I have much sympathy for the hotel workers. It’s not that my family traces its roots back to Mother Jones and had me singing Solidarity Forever in grade school (both my parents are physicians). And as a head of a medical school department, I am a “manager” and sometimes find myself contending with union grievances that seem more senseless than substantive. But the issues at stake in the hotel workers labor dispute are deeply meaningful—both to the workers involved and to the future of our nation’s health care system. At the core of the dispute is whether hotel workers in lower income jobs will be able to earn a living wage and afford health insurance. According to a September 2004 study by the UC Berkeley Labor Center, a full-time hotel room cleaner in San Francisco earns $2,611 per month. The “self-sufficiency” income required to pay for basic necessities for a single parent with a preschool age child living in San Francisco is $4,003. Currently, unionized hotel workers in San Francisco contribute $10 per month towards the purchase of family health insurance coverage. The new contract proposal by the Multi-Employers Group would require employees to contribute $32.53 monthly next year, rising to $273.42 in the contract’s fifth year.

The number of Americans with employment-based private health insurance has plummeted in recent years as employers drop coverage altogether or compel workers to assume a larger share of the cost of premiums—with the result that low wage employees are increasingly unable to afford to participate in their company’s health benefit plan. Between 2001 and 2003, 5 million fewer Americans were covered by employment based health plans, contributing to the surge in the number of the nation’s uninsured that has now reached 45 million. In my own practice as a family physician at the Family Health Center at San Francisco General Hospital, I care for many uninsured and marginally insured San Franciscans. I see first hand the hotel housekeeper with arthritis in her knees from a lifetime of making 40 beds a day, the banquet server with chronic dermatitis of his hands from carrying stacks of hot plates. The hotel concierges may be doing all right and not showing up at San Francisco General. But there are a lot of service workers behind the scenes in our city who are barely making ends meet, experiencing deteriorating health, and struggling to afford health care.

I also feel badly for the organizers of the conference. Conference planning requires booking venues years in advance and getting locked into hotel contracts that leave the organizers financially liable in the event of cancellations. The organizers of the family medicine conference have suffered a string of bad luck lately. The organization’s major annual conference in the spring of 2003 was scheduled to be held in Toronto, Canada. The only problem was that the SARS outbreak hit Toronto a few weeks before the conference date. The conference was cancelled days before the opening session. Who on the conference planning staff could have anticipated that the Hyatt would take the lead in an offensive lock out of its workers in the very city planned for the November 2004 conference? Conference registrants purchase their plane tickets in advance and carefully arrange their work and family lives to be in San Francisco for a 3 day meeting. How should they respond when they find out that hotel workers are picketing their conference hotel?

Conference organizers and participants are in a no-win situation when hotels use these types of tactics. For the courageous organization willing to take on a hotel and demand a rebate of all payments on the grounds that the hotel violated the terms of its conference contract by locking out workers, good luck! You will be spending a lot of time in court battling a multinational corporation in the “hospitality” industry represented by a top-dollar legal firm.

The people I don’t have any sympathy for are the hotel owners. As Mayor Newsom has pointed out, hotels like the Hyatt are no longer local businesses in touch with the local environment. These hotels are operated by huge conglomerates headquartered in distant cities, and have posted handsome profits in recent years. In their view, holding the line on employee pay and benefits is essential for sustaining this financial performance. I believe that this is a narrow view, breeding both resentful employees and disgruntled customers.

I decided not to attend the conference to deliver my keynote address. I had hoped to find some middle ground that would have permitted the conference organizers to use the meeting as an opportunity to educate attendees about the issues at stake in the labor dispute, allowing me to cross the picket line in good conscience and talk about the general topic of humanizing care while also addressing the immediate matter of the human rights of the hotel workers. But conference organizers get skittish about politics intruding on conference plenaries and being perceived as taking sides against the hotel. (The organization has another conference already booked for the Hyatt Regency in 2006.) I was gratified by the support I received from many colleagues about my decision, several of whom have decided to join the picket line at the Hyatt, reaffirming my faith that many health professionals desperately desire a more just system of health care in our nation.

I wish the hotel workers luck in their negotiations with the hotel industry, especially when it comes to preserving affordable health benefits. However, it is difficult to be optimistic about the future of health benefits for our nation’s workers. The US is facing the “perfect storm” of escalating health care costs and decreasing insurance coverage. I am skeptical that workers on the lower end of the wage scale will be able to avert continued deterioration of benefits under our current market-driven health care system. Maybe we should all start picketing together for the national health insurance system that is so long overdue in the United States.

The Corporate Transformation of Health Care

The Corporate Transformation of Health Care
Can the Public Interest Still Be Served?
By John P. Geyman, M.D.

From the Preface:
The economic boom of the 1990s, though it served many health care corporations and their investors well, has not been kind to U.S. health care. With more than 43 million uninsured Americans, and tens of millions underinsured, the health care system is collapsing around us. Inflation of health care costs continues unabated, rendering health care increasingly unaffordable to a large and growing part of the population, currently estimated at about 50%. Yet we are being told by corporate interests and many politicians in both parties that incremental reforms of our market-based system will be effective if we just give them more time.

This book provides an up-to-date analysis of the failing medical marketplace and suggests an approach to urgently needed structural reform.

Springer Publishing Company:
http://www.springerpub.com/books/public_health/pub_2466_6.html

Comment: John Geyman’s book provided my “escape literature” this weekend during my air travel between California and the national PNHP conference in
Washington, DC. How could a book that so aptly describes our very expensive but highly wasteful system that fails to provide quality outcomes ever be considered escape literature? Simply because it provides hope. There will be affordable, high quality, comprehensive health care for everyone once we adopt single payer reform. Books such as this make it clear that a universal social insurance program is an absolute inevitability.

Companies Sue Union Retirees To Cut Promised Health Benefits

Firms Claim Right to Change Coverage, Attempt to Pick Sympathetic Jurisdictions
The Process Server Pays a Call
By Ellen E. Schultz

Staff Reporter of THE WALL STREET JOURNAL
November 10, 2004; Page A1

When a deputy sheriff came to his door with a court summons, George Kneifel, a retiree in Union Mills, Ind., was mystified. His former employer was suing him. The employer, beverage-can maker Rexam Inc., had agreed in labor contracts to provide retirees with health-care coverage. But now the company was asking a federal judge to rule that it could reduce or eliminate the benefit.

Many companies have already cut back company-paid health-care coverage for retirees from their salaried staffs. But until recently, employers generally were barred from touching unionized retirees’ benefits because they are spelled out in labor contracts. Now, some are taking aggressive steps to pare those benefits as well, including going to court.

In the past two years, employers have sued union retirees across the country. In the suits, they ask judges to rule that no matter what labor contracts say, they have a right to change the benefits. Some companies also argue that contract references to “lifetime” coverage don’t mean the lifetime of the retirees, but the life of the labor contract. Since the contracts expired many years ago, the promises, they say, have expired too.

The companies taking such steps remain a minority. Most big employers continue to provide the retiree health coverage spelled out in labor contracts. But the number of employers using the courts to attempt to reduce benefits for union retirees is rising, and some have been successful. “There’s absolutely no doubt that there’s been an increasing number of cases over the past three years,” says Richard Brean, associate general counsel of the United Steelworkers of America.
They have little to lose by trying. Typically, as such legal cases drag on, the employers save money as some of the retirees, who have to pay growing portions of their health-care costs, forgo costly care, drop out of the plans or die. If companies lose in court, the worst that happens is they have to resume paying benefits. They don’t face punitive damages or penalties. And they may not have to resume benefits for those retirees who dropped out of the health plans. What’s more, their earnings get a pop. That’s because at the same time as they sue, employers typically announce reductions in the retirees’ benefits. Doing so entitles them to lessen the liabilities carried on their books. Lower liabilities translate to higher earnings.

The retirees, by contrast, often find themselves in a bind — unsure of their recourse and facing, as they age, the court system’s typical long waits for legal resolution. The U.S. Labor Department is of little help. Retired workers “aren’t our constituents anymore,” says a spokeswoman for the department.

Unions often do go to bat for retirees. The United Auto Workers and the Steelworkers have been the most active in filing suits to protect retirees whose benefits a company has unilaterally changed. But unions aren’t allowed to strike or file unfair-labor-practice complaints on behalf of retirees.

Employers that want to cut union retirees’ health coverage or make retirees pay a larger portion could just impose changes and wait to be sued. But by suing first, they stand a chance of choosing the jurisdiction. This is important, because federal circuits’ appellate courts tend to take differing positions in these disputes. Indeed, the unsettled nature of the law on these issues — with employers’ arguments sometimes succeeding and sometimes not — may be a factor prompting some companies to have a go at gaining the legal right to change benefits.

One afternoon last December, Basil Chapman was sitting on his porch in Barboursville, W.Va., with his dog, Bo, when a union representative phoned the retiree to say an executive of his former employer wanted to speak to him. Mr. Chapman called the executive, at ACF Industries Inc., a railroad-car maker where Mr. Chapman worked for 38 years. He was told ACF was going to change health coverage, making retirees pay for a portion that previously was free.
“We have a contract. You can’t do that,” Mr. Chapman said, according to court papers later filed by ACF. “We will file in federal court against you b—–ds.” Asked about this, Mr. Chapman, who is 60, says he didn’t swear on the phone.

The next Monday, ACF, which financier Carl Icahn controls through an investment vehicle, sued Mr. Chapman in federal district court in St. Louis. The company asked the court to rule that it had the right to change or terminate health coverage for 678 retirees and their dependents. ACF said it was suing to protect itself, noting that “defendant Chapman has already informed ACF that he plans to file a lawsuit concerning the amendments of the plan.”

“I can’t understand why they’re picking on me,” Mr. Chapman says. “I’m just a retired guy who was sitting on my porch.”

CO-PAY BLUES
This week, the Online Journal looks at the financial burdens facing health-care consumers who have insurance and offers advice on handling medical expenses.
Do you have questions or ideas about selecting health-care coverage and managing your family’s costs? We invite you to participate in a discussion2 with health-insurance and benefits experts.

Monday: The lines between HMOs and PPOs are blurring. Here’s how to choose3 the right plan option for you.

Tuesday: Dr. Benjamin Brewer, in his Doctor’s Office column, talks about how insurance coverage affects the patients4 that doctors agree to service.

Thursday: Fiscally Fit columnist Terri Cullen focuses on the quandary patients face when health-care providers charge more than what insurers will pay.

Employers that sue retirees name one person or a handful. They may choose people at random, retirees who have complained, or people who were active in the union that negotiated the contract at issue. Mr. Chapman, who repaired equipment and stenciled names on railroad cars at ACF, also headed a Steelworkers bargaining committee. The named defendants represent the “class” of retirees.

Key Contract Element
Mr. Chapman says health coverage for retirees was a key element of labor contracts he helped negotiate in 1995. Up to then, although the company paid 100% of hospitalization and surgical coverage, retirees paid for major medical. But their premiums for that coverage had risen so high that many had dropped it.
To make health coverage affordable for future retirees, the union accepted lower starting pay for new workers in exchange for lower-cost major medical coverage for retirees. According to the contract, any employee retiring during the term of the agreement “will contribute a flat $100 per month for life towards the cost of such coverage. The Company will pay any additional required costs.”

The company doesn’t dispute that the contract says that, but it says that “$100 per month for life” referred only to the major medical coverage, not explicitly to the hospital/surgical portion.

In addition, it believes the agreements to provide health coverage to retirees expired with the contracts, said Marc Weitzen, general counsel for ACF at Icahn & Co. in New York, in an interview.

The retirees, represented by the union, countersued to dismiss the complaint. They contended ACF had gone through “the charade of telephoning retiree Mr. Chapman about the cuts, just so it could provoke a predictable negative reaction and then use the reaction to immediately sue.”

The retirees said ACF had sued in St. Louis, which is part of the 8th federal circuit, because it “apparently believes that the 8th Circuit is more favorable to employers in retiree medical benefits cases, and apparently feels that its chances are improved if it makes the retirees litigate hundreds of miles from their homes.”

CREATIVE STRATEGIES

Companies that cut retiree health benefits promised in writing may use one or more arguments or tactics:
” Escape Clause: Insert sentence in benefit plan saying company “reserves the right” to change benefits.
 
” ‘Life’ Line: Argue that “lifetime coverage” refers to life of the contract, not lives of retirees.
 
” Fine Print: Say that retirees signing health-plan enrollment forms waived prior agreements.
 
” Trip to Court: Sue retirees, ask court to declare company has right to cut benefits.
 
Source: WSJ research

Most of ACF’s retirees live in West Virginia, in the 4th Circuit, where a court favored union retirees in an earlier decision. The retirees asked the judge to dismiss the case or transfer it to the southern district of West Virginia.

Mr. Weitzen at Icahn & Co. said ACF sued in Missouri because it administers the benefits plans from there. He added, “As with many other U.S. businesses, ACF believes it has the right to pass along certain of its health-insurance costs to retirees.”

It is legal and common for litigants to try to pick a favorable jurisdiction. If two parties sue each other, the courts generally hear the case that’s filed first. But a court can dismiss or transfer a case if it believes a company is “forum shopping” or suing retirees as a pre-emptive strike to deprive them of their rights, as “natural plaintiffs,” to sue in the court they would choose.

That happened in this case. In August, the court in St. Louis — saying it appeared ACF’s move “resulted in a proverbial race to the courthouse in order to deprive defendants of their choice of forum” — moved the suit to federal court in Huntington, W.Va. The case is ongoing.

But a different court came to the opposite conclusion regarding Rexam, illustrating why employers make these legal thrusts at retirees.

In early 2002, Rexam raised retirees’ share of the cost of prescription drugs. “For people getting a pension of $300 to $400 a month, it ate their whole pension,” says Mr. Kneifel, the retiree in Union Mills, Ind., who is 65.

For more than a year, retirees complained to the company that it had no right to change negotiated agreements, which stated that “Company-paid major medical coverage will be provided for all retirees,” and specified what the retirees’ costs would be.

‘Reserves the Right’
Rexam responded that a booklet describing the coverage contained a clause that said the company “reserves the right to amend, modify or discontinue the plan in the future in conformity with applicable legislation.”

The retirees said the clause meant that if government legislation or regulations changed, then the plan might have to be modified accordingly. It didn’t give the company a right to unilaterally change the agreement, retirees said, pointing to another clause specifically stating that the right to modify the benefits “was subject to any applicable collective bargaining agreement.”

In May 2003, Rexam sued the retirees, asking a federal court to declare that it had the right to change their benefits.

It filed in Minneapolis. The appearance of a deputy sheriff bearing a summons to court 475 miles away was a shock to Mr. Kneifel. “I’m glad I was home when they came, because my wife had a stroke about six years ago,” he says. “Suing retirees is a cowardly way to go about the whole thing.”

The retirees, represented by the Steelworkers, countersued in Toledo, Ohio, asking that the case be dismissed or transferred there. They said Minnesota was home to only 100 of the 3,600 retirees and that Rexam had made a pre-emptive legal strike to choose the jurisdiction. The business, which was called American National Can Co. before its 2000 purchase by Rexam Inc., is based in Chicago and has offices in Charlotte, N.C. It is a subsidiary of Britain’s Rexam PLC. The judge in Minneapolis rejected the retirees’ arguments. Because they had not been planning to sue Rexam, they couldn’t claim Rexam was suing in a pre-emptive strike, said Judge Ann Montgomery. She let the case stay in Minneapolis because Rexam employs 115 people in St. Paul and has retirees in Minnesota.

Judge Montgomery also said she was allowing the suit to move forward “in the interests of justice.” She cited a liability for the benefits on Rexam’s balance sheet and said the company was harmed “because it cannot lower the liability unless it reduces the retirees’ benefits.” The case is pending.

A Rexam spokesman said with health-care costs rising, the company “must do what we can to address these costs” to remain competitive, but will continue to provide retirees with fair coverage.

Gradual Erosion

The erosion of legal protection for retiree health benefits has been gradual. When medical costs began to rise steeply in the 1980s, employers first started to cut benefits for salaried retirees. If sued, employers pointed to clauses they had added to the health plans’ technical documents. The clauses said the employer reserved the right to change the benefits.

Retirees complained that the clauses were buried in long technical documents they often didn’t know existed. (Companies must provide employees a summary of these documents when they first become health-plan participants; the summaries may or may not include the clauses at issue.) The retirees also pointed to employer literature referring to lifetime coverage. Nonetheless, courts began accepting company arguments.

A key case involved cuts by General Motors Corp. in coverage it had offered to 50,000 salaried employees over the years to induce them to retire early. A 6th Circuit appellate court ruled in 1998 that what mattered weren’t brochures that advised prospective retirees that health coverage would be provided “at GM’s expense for your lifetime,” but a clause in which GM reserved the right to alter benefits. Although dissenting judges assailed this reasoning, and the federal circuits remain divided about it, salaried retirees have steadily lost in benefits cases ever since.

Union retirees were more secure because their benefits were part of negotiated contracts. But after the GM ruling, more employers began to argue that that decision’s logic applied to union retirees, as well, and some courts agreed.

Meanwhile, over the years some employers also have argued that promises of lifetime coverage expired when the contracts expired, or were canceled out by clauses noting how long the contracts would run. Initially, courts rejected those arguments, saying general “duration clauses” in contracts refer simply to the period of the contract, and pertain to salary and benefits for active employees, not to benefits for retirees.

But some courts in the past decade have accepted these employer arguments. The federal circuits are split. Retirees who go to court on their own to contest cuts in their benefits face a hard road. Employers generally use a combination of arguments when they unilaterally change union retirees’ health coverage and file suit against the retirees.

Serving Papers
Asarco Inc. told retirees in mid-2003 that it was raising their health-care premiums. As it did so, the copper company sent summonses to some retirees in Arizona, where many live, telling them they were defendants in a suit it was filing in Phoenix.

The suit pointed to a clause in health-plan documents saying, “The Company reserves the right to amend or terminate the Plans at any time for any reason….even after you retire.”

In addition, Asarco pointed to general “duration clauses” in the contracts, which said the agreements expired when the labor contracts did. The agreements that expired, the company said, included the one to provide retirees with health coverage until they qualify for Medicare.

Retired Asarco miner Chuck Yarter learned he was being sued when he got a call from a process server trying to find his remote home in the Sonora Desert near Marana, Ariz. Mr. Yarter, 61, says he told the man how to find his modest 625-square-foot house, which sits at the end of a dirt road, with a distant view of the open-pit Silver Bell copper mine where Mr. Yarter was a mechanic on heavy equipment.

He smiles recalling the visit: His black dog, Lady, wouldn’t let the visitor out of his car. The process server handed the papers through the car window before trundling away through the saguaro and mesquite. “I’ve never been served papers in my life,” Mr. Yarter says.

In its July 8, 2003, letter to him and other retirees, Asarco, a unit of Grupo Mexico SA, said: “As you know, the past several years have been very difficult for the copper industry. The continuing low copper prices and escalating medical costs force us to make these changes.”

Mr. Yarter, who monitors copper prices on the Internet, says Asarco is just making excuses. Copper prices have nearly doubled since the July 2003 letter, to about $1.36 a pound from 76 cents.

Asarco, in a statement, said it acted in response to “the constantly escalating” cost of providing medical and drug coverage, saying it must control costs because it can’t control what it gets for its copper. It said it continues to make coverage available “at a reasonable cost,” declining further comment because the case is in litigation.

Three unions filed a counterclaim on retirees’ behalf against Asarco: the Steelworkers, the International Brotherhood of Electrical Workers and the International Chemical Workers. The retirees’ suit says that the duration clauses weren’t meant to limit the retirement benefits of people who had already retired, “as such retirement benefits were meant to last during retirement independent of the expiration of agreements applicable to active employees.”

It added that the “alleged ‘severe financial distress’ has not prevented the Company from paying its top management quite handsomely.” And it said that ” ‘unforeseen circumstances’ do not justify a breach of contractual obligations … to persons living on fixed income who can ill-afford to pay the costs the company has shifted upon them.”

Since Asarco imposed the changes, Mr. Yarter’s share of premiums, deductibles and co-payments has grown to consume half of his $1,005 monthly pension. He says he is staying in the plan anyway, because his wife, Frances, has diabetes.
But Larry Bracamonte, 64, with a pension of $448 a month, is among Asarco retirees who have dropped the plan as a result of the increase. He works at a furniture store, and twice a month, he drives a van full of Arizona retirees five hours to Algodones, Mexico, to buy prescription drugs more cheaply than in the U.S. He says a neighbor can’t afford even the lower-cost Mexican drugs on her Asarco widow’s pension of $54 a month, so she gets drugs from a state program for low-income people.

Mr. Yarter says he’s in better shape than many Asarco retirees. “I did all the retirement planning you’re supposed to do,” he says. “I decided I could afford to retire.” After retiring, he studied computer programming and obtained an associate’s degree in systems administration.

Now he’s looking for work, so far without success. “If the company kept its promise, I’d be all right,” he says. “Nobody ever thought the company would try to renege on a contract like that.”

Write to Ellen E. Schultz at ellen.schultz@wsj.com5
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