PNHP

Hawaii considering single payer

Hawaii considering single payer

State of Hawaii
House of Representatives
Twenty-Second Legislature, 2003
House Bill No. 1617

Establishes the State Health Authority to provide health care for all Hawaii citizens.

SECTION 1. (excerpt)

While Hawaii was once known for having a low uninsured population, between two and five per cent in 1994, health agencies are now concerned with the growing number of uninsured individuals. The Healthcare Association of Hawaii estimates that the current rate of uninsured individuals is ten per cent. While the Prepaid Health Care Act requires employers to provide health insurance for employees working twenty hours per week or more, there is no such requirement to provide coverage for employees working less than twenty hours per week.

The legislature believes that while the Prepaid Health Care Act served its purpose during the time it was created and many years thereafter, it is now time to consider other options. Increasing health care costs, insurance premiums, employer costs, prescription drug costs, long-term care costs, together with the growing number of uninsured individuals, and inadequate Medicaid reimbursements are creating a need for new and innovative legislation that will provide affordable health care for all of Hawaii’s citizens.

A single payer system, where one entity covers all the health care for a specific population either directly or through contracts with insurers, is a viable option for the State to provide health care coverage for all citizens at an affordable cost.

http://www.capitol.hawaii.gov/sessioncurrent/bills/hb1617_.htm

Comment: Currently, the leading proposals for universal health care coverage include some variation of an employer mandate. Hawaii has provided the testing grounds for this model of reform. The experiment failed. Health care costs have not been controlled, and, worse, 10% of the population remains uninsured.

Other nations effectively control their costs through various mechanisms of global budgeting. If we were to maintain our current, generous level of health care spending, global budgeting would still allow adequate funding of comprehensive services for everyone. And, if we were to establish a single program for everyone, the problem of the uninsured would disappear.

Hawaii has a second opportunity to get it right. Let’s hope that they do.

Dr. Frist to the Rescue

How not to fix Medicare
Marcia Angell M.D.

Sen. Bill Frist (R-Tenn., whom The New York Times has taken to calling Dr. Frist), the Senate majority leader and President Bush’s new fair-haired boy, wants to fix Medicare. This is the same Bill Frist whose father founded a for-profit hospital chain, Hospital Corporation of America (HCA). Headed by Frist’s brother, HCA merged with another hospital chain, Columbia, to form the behemoth Columbia/HCA. After riding high for a few years, Columbia/HCA (now again called HCA) came crashing down when it was charged with massively defrauding Medicare and other insurers. So far it has paid $1.7 billion in fines to settle those charges, and its legal troubles are not over.

Not surprisingly, Bush and Frist would fix Medicare by making it more like the fragmented, for-profit insurance system that people under 65 find increasingly unreliable, inadequate and arbitrary. If Democrats engage this issue properly, it should be one of the epic battles of this session of Congress.

It’s not clear that Medicare needs fundamental fixing. It succeeds very well in its main purpose, which is to provide nearly every American over the age of 65 with a uniform package of benefits. Those benefits cannot be taken away from anyone or reduced for any reason. And because it is a non-profit, single-payer system, Medicare is fairly efficient, with low overhead costs.

Still, Medicare could use some fixing at the margins. It pays doctors too much for doing high-technology tests and procedures and too little for examining and talking with patients. Its benefit package needs updating to provide long-term care and drug benefits. And its finances need overhauling. More about this shortly.

So is this the kind of fixing Sen. Frist has in mind? Not on your life. Sen. Frist and his White House friends want the very opposite. They want to introduce commercial competition, encourage Medicare recipients to join managed-care plans, cap what Medicare will pay for services and pass more of the costs on to recipients themselves. Yes, they include a prescription-drug benefit, but apparently without any regulation of the pharmaceutical industry’s prices or of the drugs covered. Most Republicans favor paying private insurers to offer limited drug coverage under Medicare. Drug companies would remain free to charge whatever they like for expensive, new brand-name drugs often no better and sometimes worse than older, generic drugs. In other words, Sen. Frist and the White House would introduce the blessings of the private health market to Medicare.

Let’s take a closer look at those blessings. The majority of people under the age of 65 are covered by employer-sponsored private insurers, mostly through investor-owned managed-care plans. Health benefits vary widely and are often grossly inadequate. The hallmark of this market is the extent to which health dollars are diverted from medical care to corporate profits and overhead. Private insurers keep an average of 14 percent of premiums for their own profits and overhead; they outsource other tasks, such as utilization review and case management, to other for-profit businesses that also divert money from actual care. Compare that with the less than 3 percent overhead costs of Medicare.

Managed-care plans maximize profits in several ways. They try to avoid marketing their products to people likely to get sick. They cut costs by stinting on medical services and making patients pay more out of pocket. They usually limit the choice of doctors or charge higher premiums for the privilege of free choice. No wonder Americans hate managed care.

In fact, surveys have shown that Medicare is far more popular with its recipients than the private health-care system is. Furthermore, despite every effort to reduce costs by limiting services, private insurance premiums are now rising at double-digit rates — much faster than the rate of inflation for Medicare. Why on earth would anyone want to visit these conditions on Medicare? One might as well wish for locusts.

Furthermore, we have had experience with pushing Medicare recipients into private managed-care plans, and it was a disaster. In the early 1990s, Congress directed Medicare to encourage seniors to enroll in managed-care plans as a means of containing costs. For each senior, Medicare paid health plans 95 percent of the average Medicare costs per beneficiary in that geographic region. If the health-plan sponsors could provide coverage for less, they could pocket what they saved. Seniors were lured by the promise of smaller co-payments and broader benefits, such as coverage for prescription drugs and eyeglasses.

But look at what happened. The plans — deliberately — attracted mainly the youngest and healthiest of seniors, people who cost far less than 95 percent of the average. According to one study, Medicare ended up paying 12 percent more for enrollees in managed-care plans than it would have paid for the same patients outside the plans. “Choice” was a bonanza for the managed-care companies, but not for consumers or taxpayers. As patients aged or became seriously ill, they often left the plans and returned to the regular Medicare system, where coverage was usually more accessible and they could choose their own doctors and see specialists if they wanted.

When Medicare officials grasped that they were losing money, not saving it, on managed care, they cut back on reimbursement levels. At that point, deprived of their excess profits, private health plans began to bail out. Many curbed the benefits of Medicare recipients or stopped accepting them altogether (a couple of million seniors were simply dumped). Why would Sen. Frist, or anyone for that matter, want to repeat that failed experiment?

The answer may lie in a conservative ideology that believes private enterprise is always better and — even in the face of abundant evidence to the contrary — more efficient in providing just about anything, including a social service such as health care. And it may also lie in Republican gratitude for the lavish financial support the party receives from the health and pharmaceutical industries. But Sen. Frist’s own background is surely an important factor. His family is in the for-profit health-care business. Although he himself is said to have put his large interest in HCA into a blind trust (with the approval of the Senate Select Committee on Ethics), it still remains true that whatever is good for HCA is good for Bill Frist. And it is undeniable that Medicare policies affect the fortunes of the company. Yet Frist has become an important voice on health policy in the Senate, and now that he is majority leader, his influence will grow. It is astonishing that this obvious conflict of interest has been so little noted.

How, then, should we shore up Medicare? its fees should be adjusted to reward high-tech medicine less and time spent with patients more. It needs a mechanism for discouraging physicians from providing unnecessary services to generate more income. Other advanced countries with single-payer systems achieve that. In Canada, for example, doctors who are found to do much more than the average number of tests in their specialty may have their practices reviewed.

In addition, the benefit package should be updated to reflect current medical realities. Medicare, remember, was crafted in the mid-1960s, when medicine was quite different. Long-term care for chronic diseases was less important then (the focus was on acute diseases), as were prescription drugs for outpatients (there were not many effective drugs and they were cheap). That is why Medicare does not cover these things. But conditions have changed. Long-term care and outpatient prescription drugs are now not only medically necessary but also very expensive. It makes no sense for Medicare to continue to exclude them. However, any prescription-drug benefit would need to be restricted to the least-expensive effective drugs and include a mechanism for bargaining with drug companies for the best prices. Otherwise it would be an unaffordable windfall for the pharmaceutical industry.

The funding of Medicare also needs some attention. Medicare is divided into two parts. Part A, which covers hospital care and skilled nursing and home health care, is funded by a 2.9 percent payroll tax. Part B, which covers doctors’ services and outpatient care, comes out of general tax revenues and monthly payments from recipients. Those payments, now $58.70 per month, have increased over the years. Seniors are also responsible for substantial co-payments for services. The result is that Medicare recipients now pay more out of pocket (in constant dollars) for their health care than they did before Medicare was instituted. That tends to undermine the whole purpose of the program, which is to shield vulnerable seniors from the burdens of illness. I would favor eliminating the monthly Part B premiums and greatly reducing co-payments, as well as shifting more of the cost to general federal revenue.

Whether these reforms would have a net effect of increasing or reducing total Medicare costs is hard to say. Reducing overtreatment by physicians would save money. On the other hand, expanding benefits, eliminating Part B premiums and reducing co-payments would increase costs to the program. Seniors themselves would certainly save money, as would Medicaid, which now pays for much of long-term care. The fact is, countries with single-payer systems get more appropriate care for less overall money. Advances in technology and the aging population may well raise total health-care costs over time. But that’s all the more reason to spend health dollars efficiently. And if we Americans want to spend a little more of our gross domestic product on health care, that’s our choice.

Sen. Frist and the White House have it exactly backward. Turning Medicare over to the private sector would duplicate all of the health market’s arbitrariness, cost shifting and inefficiency. Instead, we should be thinking about strengthening and expanding Medicare as a public program. After all, it’s the only part of our health-care system that works even reasonably well. And if irony were not dead, we would surely notice how strange it is that the future of Medicare is in the hands of someone whose family business is paying enormous fines to settle charges of defrauding that very same program.
Marcia Angell M.D.

Copyright © 2003 by The American Prospect, Inc. Preferred Citation: Marcia Angell M.D., “Dr. Frist to the Rescue,” The American Prospect vol. 14 no. 2, February 1, 2003. This article may not be resold, reprinted, or redistributed for compensation of any kind without prior written permission from the author. Direct questions about permissions to permissions@prospect.org.

www.prospect.org/print/V14/2/angell-m.html

The Economics of Health Reconsidered

The Economics of Health Reconsidered
Second Edition
By Thomas Rice
Health Administration Press, November 2002

The challenges facing health policymakers – to ensure that costs are kept manageable and quality remains acceptable in a world of limited budgets but expanding technological capabilities – are daunting. New and innovative ideas are essential. If analysts misinterpret economic theory as applied to health – by assuming that market forces are necessarily superior to alternative policies – then they will blind themselves to policy options that might actually be better at enhancing social welfare.

http://www.ache.org/pubs/rice2.cfm

Comment: “The Economics of Health Reconsidered” is an extremely important addition to the health policy literature.

For the benefit of non-economists, Professor Rice first describes the traditional economic model of market competition, demand theory, supply theory, and equity and redistribution. He then describes many of the problems with the traditional model and then some of the important implications for health policy. Finally he also discusses the role of government. With academic purity, he describes concepts such as Pareto optimality, the Edgeworth box, revealed preference, elasticity of supply, demand inducement and many other fundamentals of economics.

Why is it important that health care reform activists understand all of this? Virtually every person debating health care reform invokes economic theory, using that theory to explain why his or her model of reform is “better.” By providing us with an understanding of normative policy analysis, Dr. Rice helps us recognize that many statements are made that purport to be absolute truths based on fundamental theories in economics when, in reality, they are merely an expression of policy that the advocate believes we SHOULD adopt. Ironically, in many instances, the advocate truly believes that his or her statement cannot be challenged because it adheres rigidly to the “pure laws” of economics, when, in reality, it was merely a statement of personal opinion based often on that person’s own social goals.

In the Forward, Professor Uwe Reinhardt states, “… the book and other such critiques should be read as pleas that social goals not be posited inadvertently or surreptitiously in policy analysis, either carelessly through normative economic analysis or through deliberately mischievous use. It is difficult enough at times for economists to see through such tactics; it is well-nigh impossible for even highly educated lay persons – let alone the general public – to see through these tactics.”

Everyone who wishes to debate or advocate for health care reform should read “The Economics of Health Reconsidered.” It will help us recognize the social goals posited in the economic treatises on health care reform. We should then be able to expose those that have nefarious intents (nefarious from OUR perspective). Undoubtedly we too will continue to err in our careless digressions into normative policy analysis, but perhaps we can be forgiven because of our morally superior, egalitarian social goals (superior from OUR perspective).

Bush trades Rx benefits for tax cuts

By Thomas Oliphant, 1/28/2003

WASHINGTON:PRESIDENT BUSH took office two years ago with a preposterous message against the gauzy backdrop of a phantom budget surplus that we could have it all – lower taxes and more services and benefits.

This week the message hidden in the fog of pre-State of the Union propaganda is that we can’t and that Bush wants to attack the services and benefits that make up America’s social contract to keep the tax cuts coming.

The best and biggest example is Medicare.

Behind PR words like ”choice” and ”competition” and the alleged ”magic of the marketplace” lies an option for the country’s retired people that Bush has rejected. He hasn’t rejected it because he considers it bad policy; it was considered an obvious part of a responsible health care policy. Instead, he has rejected it because he places a higher priority on cutting the top income tax rate and eliminating the levy on stock dividends.

The rejected choice would have added a prescription drug benefit to Medicare. It would have required major changes in basic Medicare to reduce the growth in its costs – currently more than $260 billion a year. But the changes would not touch Medicare’s essential features, which nearly two generations of retired people have embraced wholeheartedly.

In studying this option, administration officials went to great lengths to estimate how many retired people would choose it. Their conclusion was that virtually everyone would. The idea would have stimulated bipartisan discussion. There would have been vigorous arguments about the scope of the drug coverage and the extent of the cost controls, but the option would have nudged toward agreement.

The rejection of this choice had nothing to do with its merits and everything to do with Bush’s domestic priorities. The cost was estimated to be nearly $470 billion over the next decade. In demanding that $100 billion come out of a Medicare initiative, the president changed the politics from center to right.

To protect his tax cuts, Bush came up with a three-pronged hybrid based on coercion and cave-ins to his party’s campaign cash cows – insurance companies and their health maintenance organizations, drug companies, and for-profit health care providers. To call these three prongs ”choices” borders on the obscene.

The first one is fee-for-service Medicare as we know it. Not even Bush would propose eliminating this choice for those in or nearing retirement. The only problem with his initiative is that for those who choose it there would be no prescription drug benefits – none. That is the classic Hobson’s Choice – in reality, no choice at all.

To get even a puny drug benefit as well as limited coverage for the catastrophic illnesses that can land a person in a nursing home, there would be two paths open to the elderly.

One is HMOs and the managed care that Americans, with good reason, love to hate. For the growing population of basically healthy Americans in retirement this can be a genuine option were it not for the fact that insurance companies have been dropping coverage under Medicare by the millions recently because they don’t like the profit margins. In many parts of the country there are simply no HMOs offering retired people coverage. Bush wants to offer them higher profits and a new, coerced market.

To fill the remaining, cavernous gaps, he is also offering a national alternative run by for-profit companies. The details are sketchy, but this ”coverage” would reimburse no catastrophic costs up to $6,000 annually. For drugs, a retired person would pay half his costs up to $3,000 and receive no reimbursement for costs between $3,000 and roughly $5,500. For the first time, there would even be a requirement for copayments for home health care – in effect a new tax on the infirm trying to stay out of the hospital.

You can also bet that the Bush proposal will include nothing resembling restraints on soaring drug prices or for-profit provider charges. Given current trends, you could almost imagine every one of Bush’s new dollars getting snapped up in higher prices and fees.

This abomination did not emerge out of administration discussions about health care policy. Instead, it emerged out of discussions about budget priorities.

Right now the government’s hemorrhaging finances are mostly the result of a slumping economy and the higher costs of war. Down the road, however, the cause of an even greater hemorrhage will be tax cuts.

Something had to give, and Bush has decided that to preserve all those tax cuts, that something should be Medicare and its 40 million elderly beneficiaries.

Thomas Oliphant’s e-mail address is oliphant@globe.com.

This story ran on page A15 of the Boston Globe on 1/28/2003. © Copyright 2003 Globe Newspaper Company.

House leaders seeking universal healthcare

Tuesday, January 28, 2003
By Robbie Dingeman Advertiser Health Writer

State House leaders yesterday proposed an overhaul of the healthcare insurance system in Hawai’i, creating a state authority that would provide universal health coverage for all residents.

Rep. Dennis Arakaki, chairman of the House Health Committee, admitted such a radical change probably would not pass this year. But he said something revolutionary needs to be done to make affordable healthcare more available and to stem rising costs.

Hawai’i has long been viewed as a model state in providing its citizens with health coverage. The Prepaid Health Care Act of 1974 requires that employers pay the bulk of health insurance premiums for full-time employees.

But the share of Hawai’i residents without health coverage increased from 7.5 percent to 11.1 percent between 1997 and 2001, according to the U.S. Census Bureau. Among those who fall through the cracks are retirees and part-time workers.

Arakaki, supported by House Speaker Calvin Say and others, wants to scrap the prepaid health insurance program and replace it with a state authority that would roll all public and private healthcare insurance coverages into a single state-run insurance fund.

As described in House Bill 1617, the authority would collect payments from all insurance mechanisms – private plans such as HMSA, Medicaid, public-worker benefit programs and the medical portions of auto and workers’ comp insurance.

“Healthcare spending is at an all-time high; double-digit increases are expected for Medicaid costs and private insurance premiums, an aging population is needing more care and prescription drugs; and the poor economy is making it difficult for any payer to cover it, whether state governments, businesses or individuals,” said Arakaki, D-30th (Moanalua, Kalihi Valley, Alewa).

Senate President Robert Bunda was less than enthusiastic about Arakaki’s proposal, although he did not know the details.

“The first thing that crosses my mind is when you have any kind of state administration, of course you’re talking about more people added to the rolls, you’re talking about a bureaucratic maze that people kind of don’t want anymore,” said Bunda, D-22nd (North Shore, Wahiawa). “There are times when you have a state administrator doing something maybe the private sector should be doing, (and) the process is somewhat slowed down.”

Reaction from industry and community representatives was cautious to skeptical.

Cliff Cisco, senior vice president for the Hawai’i Medical Service Association, the state’s biggest private health insurer, said such a big change is unlikely to win support quickly.

“This would be a significant move toward government responsibility for all healthcare,” Cisco said. “I’m not sure that this community is ready to turn everything over to the government.”

Arakaki acknowledged that the proposal is likely to face opposition from businesses and the unions, who might not like the idea of being put into one plan. But he believes businesses, who have complained about the increasing costs of health insurance premiums, might be open to the discussion as a way to slow or stop rising costs.

Greg Marchildon, executive director of AARP Hawai’i, which represents retirees, said the organization sees the need for reform, because “the system in due time is simply going to implode under its own weight.”

But Marchildon isn’t sure the timing is right for a radical overhaul, because Hawai’i has been effective at insuring most of its residents.

“We are the envy of the rest of the states,” he said.

No state has universal health coverage, although there have been ballot initiatives put before voters.

In November, Oregon voters rejected a universal healthcare system that would have been the first in the nation, in which every resident would receive medical coverage for everything from massage therapy and marriage counseling to brain surgery and long-term care. The sponsors of the initiative cited rising numbers of uninsured people and spiraling costs.

Backers of the ballot proposal said they were outspent by powerful special interests, despite strong grassroots support.

“This is going to be a very tough haul,” Marchildon said.

Across the country, universal healthcare advocates have been frustrated in bids to revive debate and congressional action in Washington after the Clinton administration’s failed attempt to retool healthcare finance in 1993-94.

Oregon’s ambitious proposal called for potentially steep increases in payroll and personal income taxes. But supporters said those costs would be offset, because residents no longer would pay premiums for private health insurance. Instead, they would rely on a single-payer system that would reimburse doctors and other providers for their medical bills, with no co-payments or deductibles.

Opponents, including business leaders, insurers and health maintenance organizations, said the plan would have cost as much as $20 billion a year, wreaked economic havoc and caused an exodus of investment and jobs from Oregon.

Rich Meiers, president and chief executive of the Healthcare Association of Hawai’i, representing hospital and other healthcare providers, said it’s clear the industry needs to “look at something new,” though he stopped short of saying a state-run system would be an improvement.

Costs are going up for consumers and hospitals, while government reimbursements have declined as the numbers of uninsured have gone up, Meiers said.

The Associated Press contributed to this report. Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 535-2429.

Article url: http://the.honoluluadvertiser.com/article/2003/Jan/28/ln/ln14a.html

Social insurance is not a new concept

American Journal of Public Health
January 2003
Medical Care for All the People
By Henry E. Sigerist

The idea of social insurance is by no means new but has a history of over sixty years. It is not a revolutionary but, on the contrary, a basically conservative issue. It does not tend to overthrow the existing economic order but provides a corrective mechanism that mitigates its hardships.

The provision of medical services to the population has two aspects, one economic and one medical. Both must be considered and studied together because they are inseparable. Indeed the best economic plan defeats its own purpose if the money is used to finance a poor type of medical service, and on the other hand the best medical plan must collapse if it is not properly financed. Illness is an unpredictable risk for the individual family, but we know fairly accurately how much illness a large group of people will have, how much medical care they will require, and how many days they will have to spend in hospitals. In other words, we cannot budget the cost of illness for the individual family but we can budget it for the nation. The principle must be to spread the risk among as many people as possible and to pool the resources of as many people as possible. In other words, we must apply the principle of insurance, with which everybody in America is familiar. . . .

The experience of the last fifteen years in the United States has, in my opinion, demonstrated that voluntary health insurance does not solve the problem of the nation. It reaches only certain groups and is always at the mercy of economic fluctuations. . . . . Hence, if we decide to finance medical services through insurance, the insurance system must be compulsory.

http://www.ajph.org/cgi/content/full/93/1/57

Comment: Henry E. Sigerist was the director of the Johns Hopkins University Institute of the History of Medicine. His comments above are excerpted from an article published in the Canadian Journal of Public Health in 1944. The Canadians understood what he had to say. Will we ever understand?

Don't abandon Medicare; fix it

The Henry J. Kaiser Family Foundation
January 2003
Paying for Choice:
The Cost Implications of Health Plan Options for People on Medicare
By Rani E. Snyder, Thomas Rice, and Michelle Kitchman

Medicare coverage alone does not provide sufficient financial protection for many program beneficiaries. Thus, the vast majority obtains supplemental coverage from four main sources: former employers, individual “Medigap” insurance policies, Medicaid, and Medicare+Choice plans.

This report examines the financial implications associated with these different choices by calculating how much people on Medicare would spend annually out-of-pocket on costs including-premiums, cost-sharing requirements, and spending for uncovered services-under different supplemental insurance arrangements.

Findings from this report show that the insurance choices that Medicare beneficiaries make have substantial and often dramatic effects on their out-of-pocket medical spending. We found that a number of factors affect how much a person on Medicare would likely spend out-of-pocket.

First, and perhaps not surprisingly, is health status.

Second, type of plan matters in determining beneficiary healthcare costs.

Third, within a particular insurance type, the specific plan chosen affects costs as well.

Fourth, there is a great deal of variation in costs for non-covered services like pharmaceuticals.

Finally, in some instances there are large differences in costs by geographic areas.

Of particular importance is that fact that these costs differences are often hidden because they are not reflected in the premiums paid, but rather through cost-sharing requirements and uncovered services. Thus, when engaging in comparison-shopping, consumers may put too much emphasis on cheaper premiums without considering the more difficult to assess cost-sharing requirements for covered services and costs for other non-covered services.

The supplemental insurance market presents opportunities for Medicare beneficiaries to insure themselves against future health care costs, but the choice is neither easy nor risk-free – particularly for those living on fixed incomes. There are no steadfast rules for beneficiaries to make the “right” choice in selecting a supplemental insurance plan.

http://www.kff.org/content/2003/6060/6060.pdf

Comment: The traditional Medicare program fails to provide sufficient financial protection. Most Medicare beneficiaries who have significant health care needs must rely on supplemental plans to reduce financial barriers to care. This report makes it clear that, in spite of efforts to regulate the supplemental market, beneficiaries are exposed to risk, especially through uncertainties in cost-sharing and in services covered. And current trends are further increasing risk through greater cost-sharing and through a reduction in benefits.

Current political efforts are aimed at preventing any improvement in the traditional Medicare program. The most visible effort is to continue to prohibit pharmaceutical coverage, but to offer this benefit only in the private health plan marketplace. Our politicians wish to use drug coverage as a lure to entice individuals to leave the traditional Medicare program.

Shoving Medicare beneficiaries into the private marketplace can only compound the problems presented in this report. Uncertainties and risk will only increase as the market experiments with variations in premiums, cost-sharing and benefits covered.

Instead of compounding the deficiencies in the Medicare program, let’s fix them. In the traditional Medicare program, let’s provide comprehensive benefits and eliminate financial barriers to care. Then we can also eliminate the supplemental market that has been increasing costs, but without a commensurate increase in financial and health security.

Don’t abandon Medicare; fix it

The Henry J. Kaiser Family Foundation
January 2003
Paying for Choice:
The Cost Implications of Health Plan Options for People on Medicare
By Rani E. Snyder, Thomas Rice, and Michelle Kitchman

Medicare coverage alone does not provide sufficient financial protection for many program beneficiaries. Thus, the vast majority obtains supplemental coverage from four main sources: former employers, individual “Medigap” insurance policies, Medicaid, and Medicare+Choice plans.

This report examines the financial implications associated with these different choices by calculating how much people on Medicare would spend annually out-of-pocket on costs including-premiums, cost-sharing requirements, and spending for uncovered services-under different supplemental insurance arrangements.

Findings from this report show that the insurance choices that Medicare beneficiaries make have substantial and often dramatic effects on their out-of-pocket medical spending. We found that a number of factors affect how much a person on Medicare would likely spend out-of-pocket.

First, and perhaps not surprisingly, is health status.

Second, type of plan matters in determining beneficiary healthcare costs.

Third, within a particular insurance type, the specific plan chosen affects costs as well.

Fourth, there is a great deal of variation in costs for non-covered services like pharmaceuticals.

Finally, in some instances there are large differences in costs by geographic areas.

Of particular importance is that fact that these costs differences are often hidden because they are not reflected in the premiums paid, but rather through cost-sharing requirements and uncovered services. Thus, when engaging in comparison-shopping, consumers may put too much emphasis on cheaper premiums without considering the more difficult to assess cost-sharing requirements for covered services and costs for other non-covered services.

The supplemental insurance market presents opportunities for Medicare beneficiaries to insure themselves against future health care costs, but the choice is neither easy nor risk-free – particularly for those living on fixed incomes. There are no steadfast rules for beneficiaries to make the “right” choice in selecting a supplemental insurance plan.

http://www.kff.org/content/2003/6060/6060.pdf

Comment: The traditional Medicare program fails to provide sufficient financial protection. Most Medicare beneficiaries who have significant health care needs must rely on supplemental plans to reduce financial barriers to care. This report makes it clear that, in spite of efforts to regulate the supplemental market, beneficiaries are exposed to risk, especially through uncertainties in cost-sharing and in services covered. And current trends are further increasing risk through greater cost-sharing and through a reduction in benefits.

Current political efforts are aimed at preventing any improvement in the traditional Medicare program. The most visible effort is to continue to prohibit pharmaceutical coverage, but to offer this benefit only in the private health plan marketplace. Our politicians wish to use drug coverage as a lure to entice individuals to leave the traditional Medicare program.

Shoving Medicare beneficiaries into the private marketplace can only compound the problems presented in this report. Uncertainties and risk will only increase as the market experiments with variations in premiums, cost-sharing and benefits covered.

Instead of compounding the deficiencies in the Medicare program, let’s fix them. In the traditional Medicare program, let’s provide comprehensive benefits and eliminate financial barriers to care. Then we can also eliminate the supplemental market that has been increasing costs, but without a commensurate increase in financial and health security.

Sen. Breaux needs to support cooperation rather than compromise

Modern Physician
Jan. 23, 2003
Breaux unveils universal coverage plan
By Elizabeth Thompson Beckley

Every American citizen would be required to purchase a basic level of health insurance in a new plan for universal coverage unveiled today by Sen. John Breaux (D-La.) at a health policy conference in Washington.

The framework of the Breaux plan would give every American the right and the accountability to purchase health insurance at an affordable group rate through policies such as union, church or employer-based plans or coverage pools created by the states. States would get some federal grants to help in organizing these pooling arrangements and the federal government itself would provide fallback plans.

Additionally, every policy would be required to offer a standard benefits package comparable to the plan offered to Congress and federal employees. The federal government would continue to provide financial help for low-income citizens to offset the burden of cost sharing. A new, refundable tax credit would be available in advance for premium subsidies for the poor.

Penalties would exist for those who do not enroll themselves or their children. Breaux cites the possible loss of the personal child tax exemption as a potential example.

He says because the proposal is coming from a “moderate to conservative” Democrat, more Republicans may be willing to take a look at his plan.

http://modernphysician.com/

Comment: Everyone agrees that universal coverage must be the goal. But how you get there and what you have after you are there are absolutely crucial. An individual mandate, with all of the administrative waste of our current system of multiple health plans, using tax credits, and penalizing those who cannot afford to participate is an approach that will significantly increase costs and fall far short of universal coverage.

Comprehensive reform should be supported on the basis of sound policy, and not merely because it is a compromise proposal of a “moderate to conservative Democrat.” Compromise, in which flawed policies are adopted because they seem to fall between the extremes supported by the factions, should be rejected, especially when it is possible to agree on sound policies. Instead of negotiating compromise, the factions should be cooperating in achieving desirable goals that all of us support.

The goals in health care reform should include universality, comprehensiveness, assured access, affordability, free choice of providers, efficient administration, and an end to excessive cost escalation. These concepts should not be opposed by moderates merely because of the perception that they originated from the left. Freedom of choice, administrative efficiency, and containing public costs are concepts that are claimed by the political right. So let’s reject the mediocrity that is inevitable with compromise and instead begin cooperating on reform that is in the best interests of all of us.

Frist has serious conflict on health care issue

January 23, 2003
Chicago Sun-Times
Op-Ed

Senate Majority Leader Bill Frist must recuse himself from health care legislation deliberations.

He comes to his new post with a record of self-interest and partiality for the corporate health care delivery system.

Frist owns $26 million of his family’s company, Hospital Corporation of American (HCA), the nation’s largest for-profit hospital chain. HCA has the questionable achievement of executing the largest white-collar crime in U.S. history, having been penalized $1.7 billion in fines, so far, for gouging Medicare, health care for our elderly.

It was only a forgiving Bush administration Justice Department that spared the perpetrators prison time. In 1995, Frist supported a Medicare bill to increase for-profit hospital reimbursements by $65 per patient, while reducing not-for-profit reimbursements by $6 per patient. More recently, he has worked to stop a strong patient’s bill of rights, and gridlocked a Medicare prescription benefit.

His reward from the health care industry: more campaign finance dollars than all but two Senate colleagues.

Dr. Frist has an ethical imperative to assure the American public that he will not, as majority leader of the Senate, frame health care legislation.

Quentin Young, M.D.,

Physicians For a National Health Program

Vladeck rejects incremenatlism

American Journal of Public Health
January 2003
Editorial

Universal Health Insurance in the United States: Reflections on the Past, the Present, and the Future

By Bruce Vladeck, PhD

… advocates of universal health insurance need to reject the proposition that their goals can be achieved through a series of incremental steps. When the concept of incrementalism first began appearing in the political science literature in the United States, the model was the Social Security Act, which began in 1935 in quite a limited form. The original law was confined to old-age benefits and Aid to Families with Dependent Children, but it didn ‘t have survivor benefits, federal disability benefits, or much in the way of benefits for spouses, and of course didn’t contain Medicare or Medicaid. In the 67 years the Social Security Act has been in existence, it has been amended 40 times, and most years the program has had some incremental improvement. Since the founding fathers of Medicare and Medicaid were primarily alumni of the Social Security system’s development, it is not surprising that they adopted a similar strategy toward health insurance.

But somehow, over time, this particularistic strategy has been transformed into a normative imperative about how to do politics in the United States. According to this view, the only possible change is incremental: expanding health insurance can only be achieved in incremental steps. But over the last 35 years, incremental expansions in public health insurance have not been sufficient to reduce the number of the uninsured. The private health insurance system has been unraveling at a pace roughly equal to that of expansions in public programs, while population growth has largely been driven by immigration-immigration to a country in which a widely disproportionate share of new Americans lack health insurance.

Meanwhile, as proponents of universal health insurance have been incrementally trudging “sideways,” advocates of nonincremental strategies in other spheres of politics and public policy have scored some notable successes, at least from their point of view. For instance, in the mid-1990s the Economic Opportunity Act was repealed, along with many other valuable remnants of the Great Society’s legislative outburst of 1965 to 1966. Major parts of the infrastructure through which civil rights were enforced in the 1970s and 1980s have been dismantled. In 1995 to 1996, Congress eliminated entitlement for cash benefits for low-income mothers and their children, along with a whole range of entitlements for legal immigrants. In addition, Congress came very close to eliminating the entitlement status of Medicaid. There have been very significant nonincremental changes in other areas of public policy as well.

Those who worked most strenuously for all those changes had no patience for incrementalism as a prescriptive theory: they always felt that it was a much better strategy to go for broke. They asked for too much, they overreached, on the theory that you are only going to get a fraction of what you ask for anyway, but if you don’t ask for enough to start with, you certainly won’t get enough.

This is an old political debate, but whatever the advocates of universal health insurance have been doing for the last 30 or 35 years, it obviously hasn’t worked very well. There is very little to lose from trying something different. One of the different things that might be tried is to determine in very broad terms what the goals and principles of universal health insurance are by deciding on a set of defining ethical and moral principles and insisting that those goals and objectives be part of every conversation until they are achieved. Perhaps the “Rekindling Reform” initiative will help shape such goals and principles for universal health insurance.

http://www.ajph.org/cgi/content/full/93/1/16

The January issue of the American Journal of Public Health is dedicated to “Rekindling Health Care Reform.”

Administrative efficiency of public programs is lost in the health plan marketplace

The Kaiser Commission on Medicaid and the Uninsured
The Medicaid Resource Book
July 2002
By Andy Schneider, et al

In total, the states spent $6.6 billion (federal and state funds combined) on (Medicaid) program administration in FY 1997, representing $163 per enrollee and 3.9% of total Medicaid spending.

… these estimates do not include the administrative costs incurred by Medicaid managed care plans. In some states, administrative outlays are folded into capitation payments to MCOs (managed care organizations). These outlays reflect the costs attributable to activities such as utilization review, quality improvement, and data collection and reporting. Although these amounts are not included in the data states report to CMS, one study has reported that HMOs participating in Medicaid had administrative cost ratios of over fourteen percent in 1998. The same study found that HMOs that did not participate in Medicaid had administrative cost ratios of just under 16 percent for that same year.

A… point is made on the managed care side of the program. The increase in state contracting with MCOs on a risk basis, it is argued, creates the need for more, not fewer, administrative resources: “the movement by Medicaid officials to contract with large managed care companies does not, as many originally thought, mean that the staffs of state governments can easily be streamlined. To the contrary, the effective management of managed care puts pressures on state agencies to hire additional personnel. Failure to do so seriously threatens the access of Medicaid enrollees to health care of adequate quality. Whether state agencies will be able to build and sustain adequate staffs to deal with managed care in an era dominated by the dogma of downsizing remains an open question.”

For both states and the federal government, Medicaid is a challenging program to administer. Medicaid bears all of the administrative responsibilities of a traditional insurer, which range from determining the scope of benefits it offers to processing claims to monitoring the quality of services it purchases. In addition, Medicaid pays for a much broader array of benefits than private insurers or Medicare and must make income and resource eligibility determinations that those payers do not. Finally, states and the federal government must carry out these responsibilities in an environment of rapid change in the health care marketplace and ever-increasing fiscal stakes.

http://www.kff.org/content/2003/2236/

Comment: Publicly administered health insurance programs have much lower administrative costs than do private health plans. But it is important to realize that much of the efficiency of public programs is lost in our fragmented, duplicative method of funding health care. By using private managed care organizations, significant percentages of public funds are being diverted to private administrative costs. But what is not commonly realized is that the public administrative costs are also increased even more because of the requirement for additional state oversight of the managed care organizations. And this doesn’t even take into account the greater administrative burden and costs placed on the providers of health care.

Reform advocates who reject the single payer model because of lack of political feasibility usually support increases in public programs to fill in the voids in coverage. They must keep in mind the fact that advocacy for this model of reform comes at the very high cost of perpetuating and expanding the egregious administrative waste of our system.

Reasonable solutions can be achieved only after the problem is precisely defined. Administrative waste is one of the greatest and most serious problems of our current system. A satisfactory solution must reduce this waste. The single payer model is clearly the most administratively efficient system of funding health care. The burden should be on advocates of other models of reform to prove the superiority of their approach. Lacking that, we should move forward and enact a single payer system now.