PNHP

The Obama administration's confidence game on administrative savings

The Obama administration's confidence game on administrative savings

Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System

HealthReform.gov, U.S. Department of Health & Human Services
February 18, 2010

Recently, Anthem Blue Cross of California, an insurance company owned by the for-profit company WellPoint, Incorporated, announced that its individual market premiums would rise by as much as 39 percent in the coming months. This shocking increase isn’t unique. Across the country, families have seen their premiums skyrocket in recent years, and experts predict these increases will continue.

A Broken Health Insurance System Works for Insurance Companies – Not Families

The “value gap” in the health insurance market is evident not just in overall premium hikes, but also in the use of those premium dollars. Over the past decade, the amount private insurance companies spent on administrative costs grew faster than the amount spent on prescription drugs, a trend that is projected to continue through the next decade. Three of the top five insurers cut the proportion of premiums they spent on customers’ medical care last year, committing more to salaries, administrative expenses, and profits.

Lower Premiums.

The Congressional Budget Office estimates that reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent. (25)

(25) Congressional Budget Office. Letter to Senator Bayh. November 30, 2009.

http://www.healthreform.gov/reports/insuranceprospers/index.html

And…

Letter to Senator Bayh

Congressional Budget Office
November 30, 2009.
(Reference 25, above)

Nongroup Policies

CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law.

• Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained.

• Average premiums would be 7 percent to 10 percent lower because of a net reduction in costs that insurers incurred to deliver the same amount of insurance coverage to the same group of enrollees. Most of that net reduction would stem from the changes in the rules governing the nongroup market.

• Average premiums would be 7 percent to 10 percent lower because of a shift in the types of people obtaining coverage. Most of that change would stem from an influx of enrollees with below-average spending for health care, who would purchase coverage because of the new subsidies to be provided and the individual mandate to be imposed.

New Market Rules Would Reduce Administrative Costs

Compared with plans that would be available in the nongroup market under current law, nongroup policies under the proposal would have lower administrative costs, largely because of the new market rules:

• The influx of new enrollees in response to the individual mandate and new subsidies—combined with the creation of new insurance exchanges—would create larger purchasing pools that would achieve some economies of scale.

• Administrative costs would be reduced by provisions that require some standardization of benefits—for example, by limiting variation in the types of policies that could be offered and prohibiting “riders” to insurance policies (which are amendments to a policy’s terms, such as coverage exclusions for preexisting conditions); insurers incur administrative costs to implement those exclusions.

• Administrative costs would be reduced slightly by the general prohibition on medical underwriting, which is the practice of varying premiums or coverage terms to reflect the applicant’s health status; nongroup insurers incur some administrative costs to implement underwriting.

• Partly offsetting those reductions in administrative costs would be a surcharge that exchange plans would have to pay under the proposal to cover the operating costs of the exchanges.

http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

Comment: 

By Don McCanne, MD

Although the Obama administration continues to advocate for reform based on private health plans, they have seized on the current outrage over skyrocketing insurance premium increases to to demonstrate why reform is essential. Although they are attacking the private insurance industry, they continue to push for a reform model that provides this market with tens of millions of new customers.

Do the proposed reforms of the insurance market really provide us with the assurance that everyone will have access to affordable health care? We already know that they could not achieve the goal of covering everyone, and will leave about 25 million with no coverage (RAND 2/10). Also there is doubt that other measures in the legislation will have much impact in containing costs. But what about the egregious administrative waste in our dysfunctional financing system?

In their report released yesterday, the administration claims that “reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent.” They cite the CBO letter to Sen. Bayh as their source for this statement.

And what does the CBO say? First, the premiums will actually be 10 to 13 percent higher because of the offsetting requirement for increased benefits in these plans that would increase premiums by 27 to 30 percent. For those who say that the improved benefits are worth this increase, keep in mind that the benefits move from the current actuarial value of 60 percent to an actuarial value of 70 percent. That is still significantly below the 80 percent actuarial value of current employer-sponsored plans. These individual plans will continue to leave many people who need health care exposed to unaffordable out-of-pocket expenses.

What does CBO say about the 14 to 20 percent administrative savings claimed by the Obama administration? Half of it (7 to 10 percent) isn’t even administrative savings but merely represents a dilution of the risk pool with healthy individuals mandated to purchase private health plans.

The other half of the premium savings, also 7 to 10 percent, stems from a slight reduction of administrative costs since the plans would be sold through an insurance exchange eliminating some of the costs such as underwriting and brokers’ fees. When you look at the CBO explanation of where the administrative savings would occur, it is clear that there is not much there, and some of it would be offset by the additional administrative costs of the new exchanges.

Although the Obama administration is using this to claim administrative savings, the total reduction in our national health expenditures (NHE) would be so infinitesimal that it wouldn’t even warrant a footnote in the annual NHE report.

The profound administrative waste in our system is not limited to the outrageous excesses of the private insurers but it permeates the entire system, including the very high costs of the burden that private insurers place on physicians, hospitals and other sectors of the health care delivery system.

Although the amount of the recoverable waste is disputed, everyone agrees that it is profound. Very solid data demonstrates that somewhere around $4 trillion could be recovered over the next decade merely by changing to a single payer national health program – an improv
ed Medicare that covered everyone. Those who argue that it is only half that need to explain why we should therefore refuse the $2 trillion in savings ($ 2,000,000,000,000).

Most of us have tired of conspiracy theories. But think about this. The Obama plan (to be formally released Feb. 22) is a gift of our tax funds to the private insurance industry. Recent events have suggested that the plan may not survive the legislative process. Polls and focus groups show that the public is outraged by insurance company abuses. The insurers have chosen the most inopportune time in the reform process to cram outrageous premiums into the faces of their customers. Or is it inopportune? Look at the platform that it has given President Obama and the cover that it provides for members of Congress. It is giving them an avenue that will allow them to push through this program that the insurance industry understands that it must have for its own survival.

The Obama plan will leave tens of millions uninsured. It will not adequately control health care spending. It will perpetuate the profound administrative waste in our system. Above all, it will revitalize the private insurance industry for decades to come. If we’re not going to react, then we’re simply going to have to learn to live with it.

The Obama administration’s confidence game on administrative savings

Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System

HealthReform.gov, U.S. Department of Health & Human Services
February 18, 2010

Recently, Anthem Blue Cross of California, an insurance company owned by the for-profit company WellPoint, Incorporated, announced that its individual market premiums would rise by as much as 39 percent in the coming months. This shocking increase isn’t unique. Across the country, families have seen their premiums skyrocket in recent years, and experts predict these increases will continue.

A Broken Health Insurance System Works for Insurance Companies – Not Families

The “value gap” in the health insurance market is evident not just in overall premium hikes, but also in the use of those premium dollars. Over the past decade, the amount private insurance companies spent on administrative costs grew faster than the amount spent on prescription drugs, a trend that is projected to continue through the next decade. Three of the top five insurers cut the proportion of premiums they spent on customers’ medical care last year, committing more to salaries, administrative expenses, and profits.

Lower Premiums.

The Congressional Budget Office estimates that reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent. (25)

(25) Congressional Budget Office. Letter to Senator Bayh. November 30, 2009.

http://www.healthreform.gov/reports/insuranceprospers/index.html

And…

Letter to Senator Bayh

Congressional Budget Office
November 30, 2009.
(Reference 25, above)

Nongroup Policies

CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law.

• Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained.

• Average premiums would be 7 percent to 10 percent lower because of a net reduction in costs that insurers incurred to deliver the same amount of insurance coverage to the same group of enrollees. Most of that net reduction would stem from the changes in the rules governing the nongroup market.

• Average premiums would be 7 percent to 10 percent lower because of a shift in the types of people obtaining coverage. Most of that change would stem from an influx of enrollees with below-average spending for health care, who would purchase coverage because of the new subsidies to be provided and the individual mandate to be imposed.

New Market Rules Would Reduce Administrative Costs

Compared with plans that would be available in the nongroup market under current law, nongroup policies under the proposal would have lower administrative costs, largely because of the new market rules:

• The influx of new enrollees in response to the individual mandate and new subsidies—combined with the creation of new insurance exchanges—would create larger purchasing pools that would achieve some economies of scale.

• Administrative costs would be reduced by provisions that require some standardization of benefits—for example, by limiting variation in the types of policies that could be offered and prohibiting “riders” to insurance policies (which are amendments to a policy’s terms, such as coverage exclusions for preexisting conditions); insurers incur administrative costs to implement those exclusions.

• Administrative costs would be reduced slightly by the general prohibition on medical underwriting, which is the practice of varying premiums or coverage terms to reflect the applicant’s health status; nongroup insurers incur some administrative costs to implement underwriting.

• Partly offsetting those reductions in administrative costs would be a surcharge that exchange plans would have to pay under the proposal to cover the operating costs of the exchanges.

http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

Comment: 

By Don McCanne, MD

Although the Obama administration continues to advocate for reform based on private health plans, they have seized on the current outrage over skyrocketing insurance premium increases to to demonstrate why reform is essential. Although they are attacking the private insurance industry, they continue to push for a reform model that provides this market with tens of millions of new customers.

Do the proposed reforms of the insurance market really provide us with the assurance that everyone will have access to affordable health care? We already know that they could not achieve the goal of covering everyone, and will leave about 25 million with no coverage (RAND 2/10). Also there is doubt that other measures in the legislation will have much impact in containing costs. But what about the egregious administrative waste in our dysfunctional financing system?

In their report released yesterday, the administration claims that “reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent.” They cite the CBO letter to Sen. Bayh as their source for this statement.

And what does the CBO say? First, the premiums will actually be 10 to 13 percent higher because of the offsetting requirement for increased benefits in these plans that would increase premiums by 27 to 30 percent. For those who say that the improved benefits are worth this increase, keep in mind that the benefits move from the current actuarial value of 60 percent to an actuarial value of 70 percent. That is still significantly below the 80 percent actuarial value of current employer-sponsored plans. These individual plans will continue to leave many people who need health care exposed to unaffordable out-of-pocket expenses.

What does CBO say about the 14 to 20 percent administrative savings claimed by the Obama administration? Half of it (7 to 10 percent) isn’t even administrative savings but merely represents a dilution of the risk pool with healthy individuals mandated to purchase private health plans.

The other half of the premium savings, also 7 to 10 percent, stems from a slight reduction of administrative costs since the plans would be sold through an insurance exchange eliminating some of the costs such as underwriting and brokers’ fees. When you look at the CBO explanation of where the administrative savings would occur, it is clear that there is not much there, and some of it would be offset by the additional administrative costs of the new exchanges.

Although the Obama administration is using this to claim administrative savings, the total reduction in our national health expenditures (NHE) would be so infinitesimal that it wouldn’t even warrant a footnote in the annual NHE report.

The profound administrative waste in our system is not limited to the outrageous excesses of the private insurers but it permeates the entire system, including the very high costs of the burden that private insurers place on physicians, hospitals and other sectors of the health care delivery system.

Although the amount of the recoverable waste is disputed, everyone agrees that it is profound. Very solid data demonstrates that somewhere around $4 trillion could be recovered over the next decade merely by changing to a single payer national health program – an improved Medicare that covered everyone. Those who argue that it is only half that need to explain why we should therefore refuse the $2 trillion in savings ($ 2,000,000,000,000).

Most of us have tired of conspiracy theories. But think about this. The Obama plan (to be formally released Feb. 22) is a gift of our tax funds to the private insurance industry. Recent events have suggested that the plan may not survive the legislative process. Polls and focus groups show that the public is outraged by insurance company abuses. The insurers have chosen the most inopportune time in the reform process to cram outrageous premiums into the faces of their customers. Or is it inopportune? Look at the platform that it has given President Obama and the cover that it provides for members of Congress. It is giving them an avenue that will allow them to push through this program that the insurance industry understands that it must have for its own survival.

The Obama plan will leave tens of millions uninsured. It will not adequately control health care spending. It will perpetuate the profound administrative waste in our system. Above all, it will revitalize the private insurance industry for decades to come. If we’re not going to react, then we’re simply going to have to learn to live with it.

Single payer health care rally for Obama visit: The concept is better for everyone except those getting rich off current, broken system, organizer says

By Michael Roberts
Denver Westword 
Denver News Blog, Thu., Feb. 18 2010

President Barack Obama’s visit to Denver today is prompting [several events].

Health Care For All Colorado (HCFAC) is behind a “Medicare For All” march co-starring Dr. Margaret Flowers, a Maryland pediatrician who was briefly arrested outside a Baltimore hotel where Obama was speaking while advocating for the issue.

Flowers’s point, according to Jim Worthy, a HCFAC board member and co-organizer of today’s march, is a simple one: “President Obama, in his address to the Republican caucus, recently suggested that if anyone had a better idea for health care reform, they should come to him and let him know. And Medicare For All is a better plan.”

How do we know? Experience, Worthy argues.

“Single payer is a better solution because it’s been tried,” he says. “It’s in effect in a number of other developed countries around the world, and it achieves lower costs and better outcomes than any other alternatives out there. And this is not policy-wonk speak. There’s real-world, on-the-ground evidence that it delivers real health care to people at lower cost.”

Moreover, he continues, expanding the current Medicare plan to cover the U.S. public as a whole makes practical sense on a number of levels. “It’s a proven system,” he stresses. “I understand that there are funding issues and a lot of mechanical issues in terms of making it work better. But if you ask physicians, they’re perfectly content with the claims, processing and effectiveness of Medicare. Their prime issue is reimbursement rates. And if it works for our nation’s seniors, it’s a perfectly workable model for the rest of the American citizenry.”

If all that’s true, why isn’t single payer being seriously considered in Congress or the White House?

“I remember that during the campaign, back in July of 2008 in Albuquerque, President Obama said that if he was starting from a blank page, single payer would be the way to go,” Worthy says. “But he felt it would be too disruptive.”

Worthy’s take? “What it disrupts are the people who make money off the current situation. It’s plainly that simple. People are protecting their profits, and they’re doing so at the expense of citizens’ health.”

Given the opposition by the powers-that-be to single payer, then, Worthy believes moving the proposal forward “will require true democracy as represented by actions of individual citizens in this country to make an ethical or moral choice for the kind of democracy they want to live in.”

Those who feel likewise are encouraged to gather at 1:30 p.m. today at a location that practically screams “health care” — the parking lot of Argonaut Liquors, 760 East Colfax, across the street from the Fillmore Auditorium, where the Obama event will take place. There, Flowers and others will address what Worthy calls “the fundamental question developed countries have asked and answered is: ‘Is access to health care a human right or not?’

“In other developed countries other than the U.S., they’ve said, ‘Yes, it is a human right,'” he goes on. “Our representatives haven’t quite figured out that the American people have come to the same conclusion, so we need to remind them of that. And that’s part of what today’s rally is all about.”

http://blogs.westword.com/latestword/2010/02/single_payer_health_care_rally.php

The Obama administration's confidence game on administrative savings

Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System

HealthReform.gov, U.S. Department of Health & Human Services
February 18, 2010
Recently, Anthem Blue Cross of California, an insurance company owned by the for-profit company WellPoint, Incorporated, announced that its individual market premiums would rise by as much as 39 percent in the coming months. This shocking increase isn’t unique. Across the country, families have seen their premiums skyrocket in recent years, and experts predict these increases will continue.
A Broken Health Insurance System Works for Insurance Companies – Not Families
The “value gap” in the health insurance market is evident not just in overall premium hikes, but also in the use of those premium dollars. Over the past decade, the amount private insurance companies spent on administrative costs grew faster than the amount spent on prescription drugs, a trend that is projected to continue through the next decade. Three of the top five insurers cut the proportion of premiums they spent on customers’ medical care last year, committing more to salaries, administrative expenses, and profits.
Lower Premiums.
The Congressional Budget Office estimates that reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent. (25)
(25) Congressional Budget Office. Letter to Senator Bayh. November 30, 2009.
http://www.healthreform.gov/reports/insuranceprospers/index.html

And…

Letter to Senator Bayh

Congressional Budget Office
November 30, 2009.
(Reference 25, above)
Nongroup Policies
CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law.
• Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained.
• Average premiums would be 7 percent to 10 percent lower because of a net reduction in costs that insurers incurred to deliver the same amount of insurance coverage to the same group of enrollees. Most of that net reduction would stem from the changes in the rules governing the nongroup market.
• Average premiums would be 7 percent to 10 percent lower because of a shift in the types of people obtaining coverage. Most of that change would stem from an influx of enrollees with below-average spending for health care, who would purchase coverage because of the new subsidies to be provided and the individual mandate to be imposed.
New Market Rules Would Reduce Administrative Costs
Compared with plans that would be available in the nongroup market under current law, nongroup policies under the proposal would have lower administrative costs, largely because of the new market rules:
• The influx of new enrollees in response to the individual mandate and new subsidies—combined with the creation of new insurance exchanges—would create larger purchasing pools that would achieve some economies of scale.
• Administrative costs would be reduced by provisions that require some standardization of benefits—for example, by limiting variation in the types of policies that could be offered and prohibiting “riders” to insurance policies (which are amendments to a policy’s terms, such as coverage exclusions for preexisting conditions); insurers incur administrative costs to implement those exclusions.
• Administrative costs would be reduced slightly by the general prohibition on medical underwriting, which is the practice of varying premiums or coverage terms to reflect the applicant’s health status; nongroup insurers incur some administrative costs to implement underwriting.
• Partly offsetting those reductions in administrative costs would be a surcharge that exchange plans would have to pay under the proposal to cover the operating costs of the exchanges.
http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

Although the Obama administration continues to advocate for reform based on private health plans, they have seized on the current outrage over skyrocketing insurance premium increases to to demonstrate why reform is essential. Although they are attacking the private insurance industry, they continue to push for a reform model that provides this market with tens of millions of new customers.
Do the proposed reforms of the insurance market really provide us with the assurance that everyone will have access to affordable health care? We already know that they could not achieve the goal of covering everyone, and will leave about 25 million with no coverage (RAND 2/10). Also there is doubt that other measures in the legislation will have much impact in containing costs. But what about the egregious administrative waste in our dysfunctional financing system?
In their report released yesterday, the administration claims that “reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent.” They cite the CBO letter to Sen. Bayh as their source for this statement.
And what does the CBO say? First, the premiums will actually be 10 to 13 percent higher because of the offsetting requirement for increased benefits in these plans that would increase premiums by 27 to 30 percent. For those who say that the improved benefits are worth this increase, keep in mind that the benefits move from the current actuarial value of 60 percent to an actuarial value of 70 percent. That is still significantly below the 80 percent actuarial value of current employer-sponsored plans. These individual plans will continue to leave many people who need health care exposed to unaffordable out-of-pocket expenses.
What does CBO say about the 14 to 20 percent administrative savings claimed by the Obama administration? Half of it (7 to 10 percent) isn’t even administrative savings but merely represents a dilution of the risk pool with healthy individuals mandated to purchase private health plans.
The other half of the premium savings, also 7 to 10 percent, stems from a slight reduction of administrative costs since the plans would be sold through an insurance exchange eliminating some of the costs such as underwriting and brokers’ fees. When you look at the CBO explanation of where the administrative savings would occur, it is clear that there is not much there, and some of it would be offset by the additional administrative costs of the new exchanges.
Although the Obama administration is using this to claim administrative savings, the total reduction in our national health expenditures (NHE) would be so infinitesimal that it wouldn’t even warrant a footnote in the annual NHE report.
The profound administrative waste in our system is not limited to the outrageous excesses of the private insurers but it permeates the entire system, including the very high costs of the burden that private insurers place on physicians, hospitals and other sectors of the health care delivery system.
Although the amount of the recoverable waste is disputed, everyone agrees that it is profound. Very solid data demonstrates that somewhere around $4 trillion could be recovered over the next decade merely by changing to a single payer national health program – an improved Medicare that covered everyone. Those who argue that it is only half that need to explain why we should therefore refuse the $2 trillion in savings ($ 2,000,000,000,000).
Most of us have tired of conspiracy theories. But think about this. The Obama plan (to be formally released Feb. 22) is a gift of our tax funds to the private insurance industry. Recent events have suggested that the plan may not survive the legislative process. Polls and focus groups show that the public is outraged by insurance company abuses. The insurers have chosen the most inopportune time in the reform process to cram outrageous premiums into the faces of their customers. Or is it inopportune? Look at the platform that it has given President Obama and the cover that it provides for members of Congress. It is giving them an avenue that will allow them to push through this program that the insurance industry understands that it must have for its own survival.
The Obama plan will leave tens of millions uninsured. It will not adequately control health care spending. It will perpetuate the profound administrative waste in our system. Above all, it will revitalize the private insurance industry for decades to come. If we’re not going to react, then we’re simply going to have to learn to live with it.

The Obama administration’s confidence game on administrative savings

Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System

HealthReform.gov, U.S. Department of Health & Human Services
February 18, 2010

Recently, Anthem Blue Cross of California, an insurance company owned by the for-profit company WellPoint, Incorporated, announced that its individual market premiums would rise by as much as 39 percent in the coming months. This shocking increase isn’t unique. Across the country, families have seen their premiums skyrocket in recent years, and experts predict these increases will continue.

A Broken Health Insurance System Works for Insurance Companies – Not Families

The “value gap” in the health insurance market is evident not just in overall premium hikes, but also in the use of those premium dollars. Over the past decade, the amount private insurance companies spent on administrative costs grew faster than the amount spent on prescription drugs, a trend that is projected to continue through the next decade. Three of the top five insurers cut the proportion of premiums they spent on customers’ medical care last year, committing more to salaries, administrative expenses, and profits.

Lower Premiums.

The Congressional Budget Office estimates that reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent. (25)

(25) Congressional Budget Office. Letter to Senator Bayh. November 30, 2009.

http://www.healthreform.gov/reports/insuranceprospers/index.html

And…

Letter to Senator Bayh

Congressional Budget Office
November 30, 2009.
(Reference 25, above)

Nongroup Policies

CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law.

• Average premiums would be 27 percent to 30 percent higher because a greater amount of coverage would be obtained.

• Average premiums would be 7 percent to 10 percent lower because of a net reduction in costs that insurers incurred to deliver the same amount of insurance coverage to the same group of enrollees. Most of that net reduction would stem from the changes in the rules governing the nongroup market.

• Average premiums would be 7 percent to 10 percent lower because of a shift in the types of people obtaining coverage. Most of that change would stem from an influx of enrollees with below-average spending for health care, who would purchase coverage because of the new subsidies to be provided and the individual mandate to be imposed.

New Market Rules Would Reduce Administrative Costs

Compared with plans that would be available in the nongroup market under current law, nongroup policies under the proposal would have lower administrative costs, largely because of the new market rules:

• The influx of new enrollees in response to the individual mandate and new subsidies—combined with the creation of new insurance exchanges—would create larger purchasing pools that would achieve some economies of scale.

• Administrative costs would be reduced by provisions that require some standardization of benefits—for example, by limiting variation in the types of policies that could be offered and prohibiting “riders” to insurance policies (which are amendments to a policy’s terms, such as coverage exclusions for preexisting conditions); insurers incur administrative costs to implement those exclusions.

• Administrative costs would be reduced slightly by the general prohibition on medical underwriting, which is the practice of varying premiums or coverage terms to reflect the applicant’s health status; nongroup insurers incur some administrative costs to implement underwriting.

• Partly offsetting those reductions in administrative costs would be a surcharge that exchange plans would have to pay under the proposal to cover the operating costs of the exchanges.

http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

Although the Obama administration continues to advocate for reform based on private health plans, they have seized on the current outrage over skyrocketing insurance premium increases to to demonstrate why reform is essential. Although they are attacking the private insurance industry, they continue to push for a reform model that provides this market with tens of millions of new customers.

Do the proposed reforms of the insurance market really provide us with the assurance that everyone will have access to affordable health care? We already know that they could not achieve the goal of covering everyone, and will leave about 25 million with no coverage (RAND 2/10). Also there is doubt that other measures in the legislation will have much impact in containing costs. But what about the egregious administrative waste in our dysfunctional financing system?

In their report released yesterday, the administration claims that “reform will streamline administrative costs of insurance companies and bring more people into the insurance market, lowering premiums of a comparable plan in the individual market by 14 to 20 percent.” They cite the CBO letter to Sen. Bayh as their source for this statement.

And what does the CBO say? First, the premiums will actually be 10 to 13 percent higher because of the offsetting requirement for increased benefits in these plans that would increase premiums by 27 to 30 percent. For those who say that the improved benefits are worth this increase, keep in mind that the benefits move from the current actuarial value of 60 percent to an actuarial value of 70 percent. That is still significantly below the 80 percent actuarial value of current employer-sponsored plans. These individual plans will continue to leave many people who need health care exposed to unaffordable out-of-pocket expenses.

What does CBO say about the 14 to 20 percent administrative savings claimed by the Obama administration? Half of it (7 to 10 percent) isn’t even administrative savings but merely represents a dilution of the risk pool with healthy individuals mandated to purchase private health plans.

The other half of the premium savings, also 7 to 10 percent, stems from a slight reduction of administrative costs since the plans would be sold through an insurance exchange eliminating some of the costs such as underwriting and brokers’ fees. When you look at the CBO explanation of where the administrative savings would occur, it is clear that there is not much there, and some of it would be offset by the additional administrative costs of the new exchanges.

Although the Obama administration is using this to claim administrative savings, the total reduction in our national health expenditures (NHE) would be so infinitesimal that it wouldn’t even warrant a footnote in the annual NHE report.

The profound administrative waste in our system is not limited to the outrageous excesses of the private insurers but it permeates the entire system, including the very high costs of the burden that private insurers place on physicians, hospitals and other sectors of the health care delivery system.

Although the amount of the recoverable waste is disputed, everyone agrees that it is profound. Very solid data demonstrates that somewhere around $4 trillion could be recovered over the next decade merely by changing to a single payer national health program – an improved Medicare that covered everyone. Those who argue that it is only half that need to explain why we should therefore refuse the $2 trillion in savings ($ 2,000,000,000,000).

Most of us have tired of conspiracy theories. But think about this. The Obama plan (to be formally released Feb. 22) is a gift of our tax funds to the private insurance industry. Recent events have suggested that the plan may not survive the legislative process. Polls and focus groups show that the public is outraged by insurance company abuses. The insurers have chosen the most inopportune time in the reform process to cram outrageous premiums into the faces of their customers. Or is it inopportune? Look at the platform that it has given President Obama and the cover that it provides for members of Congress. It is giving them an avenue that will allow them to push through this program that the insurance industry understands that it must have for its own survival.

The Obama plan will leave tens of millions uninsured. It will not adequately control health care spending. It will perpetuate the profound administrative waste in our system. Above all, it will revitalize the private insurance industry for decades to come. If we’re not going to react, then we’re simply going to have to learn to live with it.

L.A. County slashes doctors' reimbursement rate

L.A. County slashes doctors' reimbursement rate

By Molly Hennessy-Fiske and Ron-Gong Lin II
Los Angeles Times
February 17, 2010

Emergency room doctors and on-call specialists treating poor, uninsured patients at private hospitals in Los Angeles County saw their reimbursement rate slashed by county supervisors Tuesday.

The rate cut could lead private hospitals to close emergency rooms and send more patients to crowded county hospitals, officials said.

L.A. County reimburses doctors 27% of estimated fees for patients’ first three days of care at private hospitals under the Physician Services for Indigents Program. Supervisors voted unanimously Tuesday to reduce the rate to 18% as of July 1.

The county had expected to pay doctors with $9 million from the state’s Emergency Medical Services Appropriation. But state lawmakers eliminated the fund, and as the number of uninsured grows, private doctors are expected to file more claims than ever with the county this year, Meyer said.

More than half of Los Angeles County’s 72 hospitals are operating at a deficit and two are in bankruptcy, Lott said (Jim Lott, executive vice president of the Hospital Assn. of Southern California). Countywide, 11 hospitals have closed since 2002, all of which had emergency rooms, he said.

http://articles.latimes.com/2010/feb/17/local/la-me-supes-uninsured17-2010feb17

Comment:

By Don McCanne, MD

“The County” – a hospital to which emergency patients with no money and no insurance are shipped. Most of us remember when The County was always the provider of last resort.

No longer. Any hospital with an emergency room, for humane reasons, must now provide emergency services to any person who presents with a bona fide emergency, regardless of the ability to pay. Unfortunately, the change in attitude of some occurred only after it became a criminal offense to fail to recognize that “ship ’em to The County” fell short of a humane response. The fact that this legislation was needed should not reflect on the great many dedicated professionals who have always been ready to help, without any regard to the financial status of the patient.

But what about paying for this care? Should the private hospitals and physicians write this off as charity? When operating at a deficit with bankruptcy around the corner, that won’t work. Should the county, as the health care provider of last resort, pay for at least the costs of the care? State and local governments are struggling with deficits in their budgets. The 18 percent payment by Los Angeles County’s Physician Services for Indigents Program obviously won’t cover costs. And the state certainly is not helping by eliminating their Emergency Medical Services Appropriation.

There is a way we could do this. We could establish a single payer national health program – an improved and expanded Medicare that includes everyone. Under such a system, even those physicians who have had difficulty understanding a humane health care system would change their response. When that emergency call comes in that always means another paying patient, it will become natural for those physicians to say, “Ship ’em here!”

L.A. County slashes doctors’ reimbursement rate

L.A. County slashes doctors’ reimbursement rate

By Molly Hennessy-Fiske and Ron-Gong Lin II
Los Angeles Times
February 17, 2010

Emergency room doctors and on-call specialists treating poor, uninsured patients at private hospitals in Los Angeles County saw their reimbursement rate slashed by county supervisors Tuesday.

The rate cut could lead private hospitals to close emergency rooms and send more patients to crowded county hospitals, officials said.

L.A. County reimburses doctors 27% of estimated fees for patients’ first three days of care at private hospitals under the Physician Services for Indigents Program. Supervisors voted unanimously Tuesday to reduce the rate to 18% as of July 1.

The county had expected to pay doctors with $9 million from the state’s Emergency Medical Services Appropriation. But state lawmakers eliminated the fund, and as the number of uninsured grows, private doctors are expected to file more claims than ever with the county this year, Meyer said.

More than half of Los Angeles County’s 72 hospitals are operating at a deficit and two are in bankruptcy, Lott said (Jim Lott, executive vice president of the Hospital Assn. of Southern California). Countywide, 11 hospitals have closed since 2002, all of which had emergency rooms, he said.

http://articles.latimes.com/2010/feb/17/local/la-me-supes-uninsured17-2010feb17

Comment:

By Don McCanne, MD

“The County” – a hospital to which emergency patients with no money and no insurance are shipped. Most of us remember when The County was always the provider of last resort.

No longer. Any hospital with an emergency room, for humane reasons, must now provide emergency services to any person who presents with a bona fide emergency, regardless of the ability to pay. Unfortunately, the change in attitude of some occurred only after it became a criminal offense to fail to recognize that “ship ’em to The County” fell short of a humane response. The fact that this legislation was needed should not reflect on the great many dedicated professionals who have always been ready to help, without any regard to the financial status of the patient.

But what about paying for this care? Should the private hospitals and physicians write this off as charity? When operating at a deficit with bankruptcy around the corner, that won’t work. Should the county, as the health care provider of last resort, pay for at least the costs of the care? State and local governments are struggling with deficits in their budgets. The 18 percent payment by Los Angeles County’s Physician Services for Indigents Program obviously won’t cover costs. And the state certainly is not helping by eliminating their Emergency Medical Services Appropriation.

There is a way we could do this. We could establish a single payer national health program – an improved and expanded Medicare that includes everyone. Under such a system, even those physicians who have had difficulty understanding a humane health care system would change their response. When that emergency call comes in that always means another paying patient, it will become natural for those physicians to say, “Ship ’em here!”

PNHP requests invitation to Feb. 25 White House health summit

The following letter was sent to the White House on Feb. 9, two days after President Obama announced his plans to convene a bipartisan summit on health reform on Feb. 25 in Washington.

February 9, 2010

President Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC  20500

Dear Mr. President,

Physicians for a National Health Program, an organization of 17,000 doctors who support single-payer national health insurance, respectfully requests that you invite one or more of our representatives to participate in your White House health care session on Feb. 25.

We note that in your call for the meeting you urged Republicans, Democrats and health policy experts to gather, go over all the options and “walk through them in a methodical way so that the American people can see and compare what makes the most sense.”

We would like to offer several of our members as health policy experts for this important task.

As you may know, two key research studies that helped drive the health reform process forward this past year – one in the American Journal of Public Health that found 45,000 deaths annually are linked to lack of health insurance, another in the American Journal of Medicine that found 62 percent of personal bankruptcies are linked to medical bills and illness – were the work product of Harvard Medical School research teams guided by PNHP co-founders Drs. David Himmelstein and Steffie Woolhandler.

Drs. Himmelstein and Woolhandler, who are also primary-care physicians in Cambridge, Mass., have had several other groundbreaking studies published in our nation’s leading medical journals, including one in the New England Journal of Medicine that shows administrative costs consume 31 percent of U.S. health spending, most of it unnecessary. They have also frequently testified before Congress on their research. We urge that you invite them to participate in the Feb. 25 meeting.

The presence of Dr. Margaret Flowers, our congressional fellow, would also enhance the meeting. Dr. Flowers, a Maryland pediatrician, has met with numerous members of Congress and testified before two congressional committees last year about the urgent need for single-payer health reform.

Finally, we ask that you invite our president, Dr. Oliver Fein, to participate. Dr. Fein, an internist and professor of clinical medicine and clinical public health in New York City, attended the March 5 White House Summit on health care. He is a past vice president of the American Public Health Association.

Detailed biographies and contact information for each of these doctors are available upon request. Please feel free to call me (312-782-6006) or e-mail me (ida@pnhp.org) should you need any additional information.

Sincerely,

Ida Hellander Signature
Ida Hellander, M.D.
Executive Director

Medicare-or-All supporters in Denver to rally outside Obama events Thursday

MEDIA ADVISORY

FOR IMMEDIATE RELEASE
Feb. 18, 2010

Contacts:
Elinor Christiansen, M.D., Health Care for All Colorado
Margaret Flowers, M.D., Physicians for a National Health Program
Mark Almberg, PNHP, (312) 782-6006, mark@pnhp.org

What

Physicians, nurses and other health reform advocates will rally outside two fund-raising events for Sen. Michael Bennet in Denver today where President Obama is speaking to call upon the president to support a single-payer Medicare-for-All program.

Rising to Obama’s recent challenge to critics to come up with better and more fiscally responsible ideas for health care reform, physicians and others will offer their alternative of improving and extending the popular Medicare program to cover the entire population, a solution they say has solid majority support.

Among them will be Dr. Margaret Flowers, a Maryland pediatrician and congressional fellow for Physicians for a National Health Program, an organization of 17,000 physicians who support a single-payer system, who has been trying to deliver an open letter to the president calling on him to meet with her and other Medicare-for-All advocates to discuss the single-payer alternative since his State of the Union address on Jan. 27.

Rally participants will demand that the single-payer model be put back on the table in the health care debate, given that model’s proven effectiveness in providing universal, comprehensive care; its ability to contain costs; and the fact that the annual savings in administrative costs — $400 billion — would mean that it would require no increase in overall U.S. health spending.

Where and When

The Fillmore Auditorium, 1510 Clarkson St., Denver, at 1:45 p.m., Thursday, Feb. 18

The Sheraton Denver Downtown Hotel, 1550 Court Place, Denver, at 4:45 p.m., Thursday, Feb. 18

Photo and video opportunities: Physicians wearing their white coats and RNs in their scrubs, along with other health reform advocates, will carry signs calling for Medicare for All outside both events.

Who

Margaret Flowers, M.D., congressional fellow for Physicians for a National Health Program
Leaders of Health Care for All Colorado and other health reform groups

For more details on the Denver itinerary, visit:
http://www.healthcareforallcolorado.org/

***********

Physicians for a National Health Program (www.pnhp.org), a membership organization of over 17,000 physicians, supports a single-payer national health insurance program. PNHP is headquartered in Chicago and has chapters across the United States.

L.A. County slashes doctors' reimbursement rate

L.A. County slashes doctors’ reimbursement rate

By Molly Hennessy-Fiske and Ron-Gong Lin II
Los Angeles Times
February 17, 2010
Emergency room doctors and on-call specialists treating poor, uninsured patients at private hospitals in Los Angeles County saw their reimbursement rate slashed by county supervisors Tuesday.
The rate cut could lead private hospitals to close emergency rooms and send more patients to crowded county hospitals, officials said.
L.A. County reimburses doctors 27% of estimated fees for patients’ first three days of care at private hospitals under the Physician Services for Indigents Program. Supervisors voted unanimously Tuesday to reduce the rate to 18% as of July 1.
The county had expected to pay doctors with $9 million from the state’s Emergency Medical Services Appropriation. But state lawmakers eliminated the fund, and as the number of uninsured grows, private doctors are expected to file more claims than ever with the county this year, Meyer said.
More than half of Los Angeles County’s 72 hospitals are operating at a deficit and two are in bankruptcy, Lott said (Jim Lott, executive vice president of the Hospital Assn. of Southern California). Countywide, 11 hospitals have closed since 2002, all of which had emergency rooms, he said.
http://articles.latimes.com/2010/feb/17/local/la-me-supes-uninsured17-2010feb17

“The County” – a hospital to which emergency patients with no money and no insurance are shipped. Most of us remember when The County was always the provider of last resort.
No longer. Any hospital with an emergency room, for humane reasons, must now provide emergency services to any person who presents with a bona fide emergency, regardless of the ability to pay. Unfortunately, the change in attitude of some occurred only after it became a criminal offense to fail to recognize that “ship ’em to The County” fell short of a humane response. The fact that this legislation was needed should not reflect on the great many dedicated professionals who have always been ready to help, without any regard to the financial status of the patient.
But what about paying for this care? Should the private hospitals and physicians write this off as charity? When operating at a deficit with bankruptcy around the corner, that won’t work. Should the county, as the health care provider of last resort, pay for at least the costs of the care? State and local governments are struggling with deficits in their budgets. The 18 percent payment by Los Angeles County’s Physician Services for Indigents Program obviously won’t cover costs. And the state certainly is not helping by eliminating their Emergency Medical Services Appropriation.
There is a way we could do this. We could establish a single payer national health program – an improved and expanded Medicare that includes everyone. Under such a system, even those physicians who have had difficulty understanding a humane health care system would change their response. When that emergency call comes in that always means another paying patient, it will become natural for those physicians to say, “Ship ’em here!”

L.A. County slashes doctors’ reimbursement rate

L.A. County slashes doctors’ reimbursement rate

By Molly Hennessy-Fiske and Ron-Gong Lin II
Los Angeles Times
February 17, 2010

Emergency room doctors and on-call specialists treating poor, uninsured patients at private hospitals in Los Angeles County saw their reimbursement rate slashed by county supervisors Tuesday.

The rate cut could lead private hospitals to close emergency rooms and send more patients to crowded county hospitals, officials said.

L.A. County reimburses doctors 27% of estimated fees for patients’ first three days of care at private hospitals under the Physician Services for Indigents Program. Supervisors voted unanimously Tuesday to reduce the rate to 18% as of July 1.

The county had expected to pay doctors with $9 million from the state’s Emergency Medical Services Appropriation. But state lawmakers eliminated the fund, and as the number of uninsured grows, private doctors are expected to file more claims than ever with the county this year, Meyer said.

More than half of Los Angeles County’s 72 hospitals are operating at a deficit and two are in bankruptcy, Lott said (Jim Lott, executive vice president of the Hospital Assn. of Southern California). Countywide, 11 hospitals have closed since 2002, all of which had emergency rooms, he said.

http://articles.latimes.com/2010/feb/17/local/la-me-supes-uninsured17-2010feb17

“The County” – a hospital to which emergency patients with no money and no insurance are shipped. Most of us remember when The County was always the provider of last resort.

No longer. Any hospital with an emergency room, for humane reasons, must now provide emergency services to any person who presents with a bona fide emergency, regardless of the ability to pay. Unfortunately, the change in attitude of some occurred only after it became a criminal offense to fail to recognize that “ship ’em to The County” fell short of a humane response. The fact that this legislation was needed should not reflect on the great many dedicated professionals who have always been ready to help, without any regard to the financial status of the patient.

But what about paying for this care? Should the private hospitals and physicians write this off as charity? When operating at a deficit with bankruptcy around the corner, that won’t work. Should the county, as the health care provider of last resort, pay for at least the costs of the care? State and local governments are struggling with deficits in their budgets. The 18 percent payment by Los Angeles County’s Physician Services for Indigents Program obviously won’t cover costs. And the state certainly is not helping by eliminating their Emergency Medical Services Appropriation.

There is a way we could do this. We could establish a single payer national health program – an improved and expanded Medicare that includes everyone. Under such a system, even those physicians who have had difficulty understanding a humane health care system would change their response. When that emergency call comes in that always means another paying patient, it will become natural for those physicians to say, “Ship ’em here!”

“Medicare for All: Still the One”

Remarks by Kip Sullivan
Conference call hosted by Healthcare-NOW! 
February 16, 2010

INTRODUCTION

It’s easy enough to explain why the “public option” was defeated. It’s a lot harder to explain why it rose to prominence in the first place. Even in the watered down form in which it was adopted by Democrats, the PO was probably no more politically feasible than single-payer was, but it was a lot harder to explain. And the watered down form wouldn’t work, and it probably wouldn’t even have survived.

The PO was so tiny when Democrats introduced it in June 2009 that it is fair to say it was moribund upon arrival if not dead on arrival. It was placed on life support when Sen. Reid struck it from the Senate bill in November, and it was finally put out of its misery by the election of Scott Brown in MA in January of this year.

The PO wasn’t politically feasible in 2009 for the obvious reason that it was opposed by the same people who would have opposed a single-payer system. Perhaps as importantly, the PO wasn’t politically feasible because the people who promoted it weren’t serious enough about it to make it a condition of their support for the Democrats’ bill.

So it’s pretty easy to explain why the PO fell. What’s not so easy to explain is why a lot of smart people thought the PO was such a good idea to begin with and why, if they thought it was such a good idea, they didn’t make it their bottom line. When the campaign for the PO began in 2005, it wasn’t at all clear that the leaders of the campaign intended to throw the PO overboard if that’s what it took to get Congress to pass an insurance industry bailout (by which I mean the individual mandate and the subsidies to make the mandate affordable). But by June 2009, it was clear the leaders of the PO campaign had NO intention of making a big, powerful PO a condition that Democrats had to meet. And by Xmas Eve 2009, it was clear the PO campaign had no intention of even making a TINY, ineffective PO a precondition for its support.

It appears, in short, that the leaders of the PO campaign saw an insurance industry bailout as more important than the PO. Many leaders of the PO campaign may even have seen the PO as merely a fig leaf to induce progressives (both inside and outside of Congress) to think it was ok to support a bailout.

The modern version of the PO was brought to us by Jacob Hacker. And it was promoted by Health Care for America Now and the Herndon Alliance. The Herndon Alliance has received much less publicity than HCAN, but it played a seminal role in the development of the PO campaign. So, to understand why the proponents of the PO supported it, but not enough to make it a non-negotiable demand, it helps to review the thinking of Hacker and of the founders of HCAN and the Herndon Alliance.

I doubt I’ll have enough time to describe both Hacker’s thinking and that of the Herndon Alliance and HCAN leaders. I think what I’ll do is describe Hacker’s original version of the PO, his rationale for it, what happened to the PO after it arrived in Congress in 2009, and how Hacker accommodated himself to the degradation of the PO. And then, if I have any time left over, I’ll talk briefly about the Herndon Alliance and HCAN. If I don’t have time to talk about HCAN and the Herndon Alliance, that’s ok. Their thinking pretty much mirrored Hacker’s. Like Hacker, they saw single-payer as politically infeasible; they started out supporting a big PO as a more politically feasible substitute for single-payer; and they didn’t object when congressional Democrats unveiled a microscopic form of the PO in June.

THE ORIGINAL HACKER PROPOSAL

Hacker first proposed what he called Medicare-Plus in a paper he wrote in 2001. He published another version of his idea in 2007. In that second paper, he called his idea Health Care for America. The label “public option” didn’t appear till early 2009.

Hacker’s idea, basically, was to have the federal government create a health insurance company that would sell health insurance to the nonelderly. Hacker assumed this company would enjoy all the efficiencies of Medicare and would therefore be able to undersell the insurance industry. Hacker never used the word “company” or “business” to describe the federal program he had in mind. Instead, he repeatedly described his proposed public entity as a program that would be “like Medicare.” Hacker’s refusal to use appropriate terminology contributed greatly to the confusion that became rampant among PO advocates by 2009.

There is, of course, a huge difference between what Hacker was proposing and Medicare. Medicare is a single-payer program – it’s the only insurer of basic medical services for Americans over 65 and the disabled. Because it is a single-payer insuring such a large population, and moreover a population with above-average medical needs, Medicare enjoys advantages that the insurance industry will never enjoy, including huge size, low overhead, and an ability to induce docs and hospitals to accept below-industry reimbursement rates.

The public company Hacker was proposing would have to compete with 1,500 other insurance companies within the multiple-payer jungle. The public company he was proposing would NOT be a single-payer – it would be just one insurance company among hundreds. It’s therefore far more accurate to refer to what Hacker was proposing as a company, a corporation, or a business that would be set up by the government. It was ALWAYs misleading for Hacker to refer to his proposed entity as a government program like Medicare, and it was EXTREMELY misleading for him and his acolytes to continue doing so after the Democrats adopted a microscopic version of the PO.

However, the early version of the PO that Hacker proposed DID have the potential to become a Medicare-for-all program for nonelderly Americans. In his 2001 and 2007 papers, Hacker said he wanted to give his public insurance company several very important advantages that would have allowed the company to start out with enormous size and to grow even larger early in its life. Hacker proposed five advantages or criteria for his original PO:

(1) It had to be prepopulated (he would have shifted Medicaid and SCHIP enrollees and all or some of the uninsured into the PO);
(2) Subsidies would go only to the PO;
(3) It would be open to all non-elderly Americans;
(4) It would have the authority to use Medicare rates (this was not as important as the first three criteria); and
(5) The insurance industry had to offer the same coverage.

According to an analysis of Hacker’s 2007 paper by the Lewin Group, Hacker’s original PO would have enjoyed premiums 23% below those of the insurance industry and would have enrolled 129 million people, or about half the non-elderly population. According to the Lewin Group, Hacker’s original version of the public company would grow rapidly, from insuring half the non-elderly in 2008 to two-thirds of the non-elderly within a decade. Conversely, the insurance industry’s share of the non-elderly market would shrink from half to 35% within ten years.

In my view, the Lewin Group grossly underestimated how much damage Hacker’s original version of the PO would do to the insurance industry. I think a public insurer with half the non-elderly population and premiums at 23 percent below the industry’s would have quickly destroyed the insurance industry. Twenty-three percent is an enormous differential. To put 23 percent in perspective, consider that HMOs in the 1980s had premiums only 5-10% lower than the traditional non-managed-care insurance companies they eventually displaced. Even though most Americans didn’t want to be in HMOs, employers all over the country pushed their employees into HMOs in order to take advantage of that 5-10 percent pre
mium differential. And that was two decades ago when premiums took less of a bite out of everyone’s pocket. Can you imagine how fast employers would dump their existing insurance company today for a 23 percent cut in their premium, especially if the PO were as kind and gentle as PO advocates say it would be?

It’s hard to believe that someone as informed about health policy as Hacker didn’t know his original PO had the potential to become a single-payer for the non-elderly. Let me read to you a portion of a transcript of a phone conference call sponsored by EPI on January 11, 2007 in which two participants, Ezra Klein (a blogger for the Washington Post) and Bob Kuttner (co-editor of the American Prospect), asked Hacker why he thought his proposal would succeed any better than Clinton’s 1993 Health Security Act. Klein says, “What you’ve proposed here is much more fundamentally dangerous to the actors who killed it [ie, the Clinton bill] the last time around.” Kuttner, who must have seen an early draft of the Lewin report, says, “[Y]ou’re setting in train a gradual process whereby the whole system gradually shifts from 50/50 [meaning, 50 percent are in the public program and 50 percent are insured by the insurance industry] to 60/40 to 70/30. So after a couple of generations, almost everybody is in the quasi-Medicare program. Is that the intent?”

Hacker denied that was his intent. He agreed that the PO would start out at 50 percent, but then it would basically just get stuck there despite its enormous cost advantages over the private insurance industry. Here’s what Hacker said: “[Lewin] did not forecast a huge shift over just a 10-year period. I think it was a shift of two percentage points over that period. So, at that rate, we’d have everyone within Medicare in about 250 years.”

But Hacker was wrong. As I’ve already told you, when the Lewin Group released its analysis of Hacker’s proposed program a year after this conversation took place, they projected a 34% increase in the PO’s enrollment over a decade, not 2%. And as I said, I think Lewin was being way too conservative.

Hacker’s answer to Klein and Kuttner illustrates the strange state of denial Hacker and other PO advocates induced in themselves as they tried to sell the PO as a politically feasible alternative to single-payer even though it would, in its original form, do a lot of damage to the insurance industry and would probably have led to a single-payer for the non-elderly.

But Hacker’s confusion (and the confusion of other PO leaders) over whether the PO would be more feasible than a single-payer was MINOR compared to the confusion that set in when congressional Democrats adopted a microscopic version of Hacker’s original PO. When the Democrats released their draft legislation in June 2009, it was clear they had stripped out four of the five criteria for the public company that Hacker had specified in his original papers.

The only criterion the Democrats kept was the one requiring insurance companies to offer the same coverage as the PO. The other four criteria –
• the one calling for prepopulation of the PO,
• the one requiring that only the PO get subsidies,
• the one requiring that the PO be available to all non-elderly Americans, and
• the one authorizing Medicare’s reimbursement rates

– all four of those criteria were gone. Now it was crystal clear to anyone who understood what Hacker had originally proposed that the PO the Democrats had adopted was so small it wouldn’t affect the insurance industry. The Congressional Budget Office said the Senate version of the PO would insure no one; it said the House version would insure 10 million, and then later scaled that back to 6 million.
Now that the PO had been shriveled down from 129 million people to zero to 6 million, PO advocates faced not only the same old political feasibility problem (the insurance industry and the Republicans continued to scream about the tiny PO as if it were a big PO or a single-payer), but they also faced a huge logistical problem. A PO that represented no one on the day it opened for business wouldn’t be able to crack most insurance markets in the US, and might not even be able to survive.

This is where Hacker’s habit of always comparing the PO to Medicare became extremely misleading. When Medicare commenced operations on July 1, 1966, it represented nearly all seniors. With the exception of a few hospitals in the south that temporarily resisted integrating their facilities, all clinics and hospitals in America immediately began accepting Medicare enrollees even though there was no law requiring them to do so. The reason all clinics and hospitals did that is that Medicare represented an enormous constituency on day one and providers didn’t want to walk away from so many patients and so much money.

The tiny PO the Democrats incorporated into their bills was no Medicare. It would represent no one on the day it opened for business. It would have to do what NO insurance company has done in the last three or four decades, which is to create a new, successful insurance company in every state in the US. In fact, I’m pretty sure no insurance company has expanded into even ONE new market in the last three decades by building a new insurance company from scratch. For the last three decades, insurance companies that wanted to expand their empires have done so by BUYING their way into new markets. That is, they bought an existing insurance company.

But Hacker and other PO advocates blithely ignored this issue. They ignored it because they continued to talk about the Democrats’ PO as if it were the same huge PO Hacker had originally proposed. I might add that the CBO totally ignored this issue as well. The CBO never examined the issue of whether the PO would be able to crack even one US market, much less all of them. I think the CBO was being extremely generous to the House version of the PO when they said it would insure 6 million people.

Nevertheless, as inexplicably rosy as it was, the CBO’s reports on the PO sealed its fate. The poor PO was already hated by the right wing and the insurance industry. It was being promoted by people who cared more about an insurance industry bailout than the PO. And now the CBO was revealing the truth about the Democrats’ version of the PO – that it was laughably small and for that reason was going to save little or no money.

When Democrats throughout Congress, especially those in swing districts, asked themselves why they should vote for something as controversial as a PO when the darn thing wouldn’t save any money, PO advocates had no answers.

To sum up: The PO rose to prominence because powerful Democratic constituency groups thought single-payer was not feasible but the PO was. They were wrong. The PO failed politically, and it failed as a policy idea. Politically, it turned out to be no more feasible than single-payer. As a policy, it was a disaster. The tiny PO adopted by Democrats would have accomplished nothing other than to embarrass all of us who believe government must play a prominent role in insuring the uninsured