PNHP

Sen. Grassley knows a good story when he sees it

Sen. Grassley knows a good story when he sees it

By Gilbert Cranberg
Nieman Watchdog
Commentary
November 10, 2008

AARP, which purports to be the seniors’ friend, has a lot of explaining to do to Iowa’s Senator Charles Grassley, ranking Republican on the Senate Finance Committee. In a scorching letter to AARP, Grassley implies that the organization is more interested in profiting from seniors than in serving them.

In saying AARP “purports” to be seniors’ sidekicks, I have in mind the way it exploits the belief of its members, many of them elderly, that it gives reliable, disinterested advice when it puts its name to insurance products and promotes them. Actually, it profits from what it peddles. How much does it make from the tie-ins? In a piece I wrote for this site in November 2007, I described how I questioned AARP about its financial interest in a Medicare Advantage plan it touted in behalf of United Health Care, the large and prosperous private health-care insurer. The response from an AARP spokesman: as a “private business contract” it won’t be disclosed.

AARP could stonewall me without consequence, but now it has to contend with Grassley, whose letter to AARP has “United States Senate” in big, bold letters atop the stationery. Grassley wants AARP to divulge “a detailed description of any sales commissions, inducements, incentives or other compensation offered to agents for the sale of each of the AARP insurance products.” Further, he wants to know how AARP, as an organization, “benefits financially from the sale of these policies and, if so, please provide the annual gross and net revenues to AARP from the point in time when the policies were first marketed up to the present.” Grassley set a Nov. 24 deadline for answers.

The financial data could shed important light on what really interests Grassley: why AARP sells to its members insurance policies that prove to be essentially worthless when coverage is needed.

In a press release accompanying the letter to AARP, Grassley lit into the organization:

“The pitch for these products should be straight-up and informative, instead of designed to leave the impression of being comprehensive when the product is, in fact, very limited and leaves consumers seriously in debt if they need intensive medical care. Individuals shopping in the health insurance marketplace shouldn’t be taken advantage of. A big-time advocate for health security should not target under- and un-insured Americans with misleading marketing.”

Grassley based his attack, in part, on what he learned from staffers posing as consumers shopping for coverage who were told by AARP marketers that a product, a “supplemental indemnity plan,” with flimsy coverage was “good health insurance.” The coverage was so poor that a Texas woman, Lisa Kelly, who bought it, was told by a major hospital treating her for leukemia, that it was unacceptable; the hospital even balked at changing a chemotherapy IV until her husband could show proof of payment.

AARP can take a hint; a few days after Grassley sent his letter, the organization said it would suspend marketing the inadequate supplemental benefit plan that so irked the senator.

Grassley learned about Kelly and her experience with AARP’s recommended policy from a story in the Wall Street Journal. The press as a whole, however, has been derelict in shining light on the organization’s practices and ties to the commercial insurance business. An exception has been the Des Moines Register, which ran two strong editorials Dec. 9 and 10 connending Grassley and criticizing AARP.

Senator Grassley shouldn’t have to do the press’s work for it. AARP has some 40 million members. It is a powerhouse. The press should have been all over this issue long ago. The least it can do now is pay close attention to the answers Grassley gets from AARP and from the 24 state insurance commissioners he also queried in states where the flawed AARP-backed policy is sold.

[Editor’s note: A related issue–the privatization and weakening of Medicare through Medicare Advantage plans–also cries out for press attention. See pieces on this site by Judith Stein, executive director of the Center for Medicare Advocacy.]

Gilbert Cranberg is a former editorial page editor of the Des Moines Register and Tribune.

'Medicare Advantage' a misnomer

Taxpayers foot bill for private insurance to inadequately cover seniors' health care

Jonathan D. Walker
The Journal Gazette
November 10, 2008

America has a split personality when it comes to health care. There is recognition that the government has to provide care for the people, but there is a conflicting sense that private industry has to be involved because it can somehow be more efficient. Medicare Advantage is the upshot of this thinking — but the result has been a lot of taxpayer dollars wasted on windfall payouts to private insurance companies.

With Medicare Advantage, the government is basically paying private insurance companies more money to do what Medicare could be doing more cheaply and more efficiently in the first place — if we as citizens asked it to. A lot of this extra money is not used to help the people Medicare is supposed to be helping.

Instead, the money is wasted on administrating, marketing and generating profits for insurance companies. In other words, the government is using our tax dollars to pay for the “privilege” of bringing in all the hassles of private health insurance into Medicare.

The confusing array of plans can cause less sophisticated shoppers to get stuck with very bad plans that increase their co-pays and force them to change doctors and hospitals. Careful consumers can get what seems to be a good plan because the insurance companies can use some of the money they get from the government to offer extra benefits and services.

But even smart shoppers can get into trouble. If they get sick, they will suddenly get hit with the large deductibles that go along with these plans — often thousands of dollars. To avoid these costs, patients switch back to standard Medicare once they become ill.

This scenario turns out to be a great advantage for the private insurance companies that run the Medicare Advantage plans. They use our tax dollars to get paid to do what the government could do for less, and they make even more money by covering only the healthiest seniors.

It gets even more frustrating because the healthy seniors who are getting a great deal at taxpayer expense are understandably reluctant to modify the system (as long as they stay healthy). Whenever Congress threatens to cut back on Medicare Advantage, the insurance companies can call on these seniors to contact their representatives and halt any changes.

Multiple sources have shown that the Medicare Advantage program is a waste of money, including the Medicare Payment Advisory Commission (Congress’ advisory body on Medicare payments) and the Congressional Budget Office. According to the Government Accountability Office, Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. They estimate it will cost an extra $54 billion by 2112 — about what it would cost to provide all children in America with health insurance.

And it is not just a problem of wasted taxpayer dollars. The profit motive has resulted in terrible abuses, especially with patients who have limited abilities to understand the complexity of these plans. In a hearing in 2007, Sen. Herb Kohl, D-Wis., said, “Our investigation has revealed a disturbingly consistent picture, one which only seems to be growing. Countless seniors purchasing Medicare Advantage plans have been preyed upon and unwittingly taken advantage of by insurance agents. Seniors have been removed from traditional Medicare without their knowledge, signed onto plans they can’t afford, misled regarding coverage and told their doctors accept these plans when in reality they don’t. This is simply unacceptable.”

America’s health care system is in enough trouble without wasting resources on inefficient programs that don’t give us our money’s worth — simply because powerful lobbyists get these programs enacted and then keep the programs from being cut. When organizations like the Congressional Budget Office, the Government Accountability Office and the Medicare Payment Advisory Commission tell us that there is no advantage to Medicare Advantage, we should listen.

Jonathan D. Walker , M.D., is a member of Hoosiers for a Commonsense Health Plan. He wrote this for The Journal Gazette.

Learn all you can about health care alternatives

By DAVID ROSS STEVENS
Louisville Courier-Journal
November 17, 2008

By now it is almost a cliche to say that America’s health care system is broken. In response, many politicians who are calling for “reform” and “universal health coverage” are not, in fact, clarifying the situation because they include in their new plans the very elements that have busted the system. So the political battle in the first days of 2009 will be over “token reform” or a bold, truly universal type of health insurance.

The challenge is for citizens to get involved. the public must do its part by educating itself about the various alternatives, and letting their representatives in Washington know what they conclude.

How broken is our current system?

Some 47 million Americans are uninsured; another 50 million are underinsured (not fully covered).

About 8.7 million children are uninsured.

Most bankruptcies have a health reason as a major cause, and 68 percent of those people who have gone belly up do have health insurance policies.

The World Health Organization ranks the level of U.S. health care at 37th in the world.

Private health insurance companies, which have doubled the premiums since 2000, have a bureaucratic overhead of 28-31 percent while Medicare operates at 3 percent efficiency. Therein lies a large part of the problem. These companies have an incentive to reduce benefits to patients.

The most persistent solution on the grassroots level is a single-payer system, the single payer being the federal government. This program involves a Medicare-type approach for everyone, but it would be expanded to include dental care, vision care and preventive programs. Overall, it would cost about the same — maybe a little more, maybe a little less — as the present 15 percent of the Gross National Product (GNP). All other industrialized nations with full coverage for all citizens average about half the costs in total medical care.

A single-payer system is best outlined in congressional bill HR676, which would set up the National Health Insurance (NHI) program. What it is not is “socialized medicine.” England and Spain have socialized medicine, wherein the doctors and hospitals are all employees of the federal government. Under HR676 the present system would stay; doctors would remain private vendors and would submit their bills to one payer, the U.S. government, not to the 1,500 private health insurance companies. Patients would still choose their doctors. (More about HR676 later)

Is a single-payer system just the blue-sky proposal of some Washington, D.C., think tank? Not by a long shot. It is the work product of Rep. John Conyers and has 90 other congressmen as co-sponsors. This is about one in five House members. Also endorsing HR676 are the U.S. Conference of Mayors (a nonpartisan group of 1,100 members), Physicians for National Health Care Program (more than 10,000 doctors), League of Independent Voters, the United Church of Christ and the United Methodist Board of Church and Society, 32 city councils (including Louisville, Indianapolis, Baltimore, Detroit and Boston), 14 national and international labor organizations, the American Medical Students’ Association, the National Family Farm Coalition and more.

There was a time when the doctors would (and did) kill any national health care plan in the womb. Today a solid 59 percent of U.S. physicians now support national health insurance. Particularly strong on the issue are psychiatrists (83 percent), pediatric sub-specialists (71 percent), emergency medicine physicians (69 percent), general internists (64 percent) and family physicians (60 percent). Doctors and hospitals have to employ huge staffs just to process insurance claims from a multiplicity of insurance firms. About 20 percent of private doctors’ income goes to pay for this staff.

Businesses are now leaning toward a national program. The Business Coalition for Single Payer Healthcare in New York (www.BusinessCoalition.net) poses this scenario: “If you own a small business with a $100,000-per-month payroll, your health care costs can be reduced from typically $15,000 per month to just $3,300 — from 15 percent to 3.3 percent of wages, a savings of $140,400 per year.”

General Motors, which says health care adds at least $1,500 to each car, is paying people to leave their jobs so they can hire replacements at 50 cents on the dollar with reduced health benefits. This may help the bottom line and the company can compete better, but it is a sad commentary on the state of American health care, especially for the newest of workers.

Neither of the two major presidential candidates favored a single-payer program. Democrat Barack Obama comes up with a halfway reform that includes the insurance companies in the mix. His plan would offer help to nearly half of the uninsured people and would cover all children. Republican John McCain’s plan was only a small reform that features a tax credit plan of $5,000 for a family. This wouldn’t come close to paying a normal $12,000 premium for family health care. And the McCain plan, from some analysts’ viewpoint, would offer help to only about 4 to 5 million uninsured people.

Neither Republican nor Democrat solutions take advantage of the tremendous savings realized from eliminating the waste in the private health insurance industry. This waste alone, by the estimates of several studies, would pay for health coverage for all of the uninsured. More than several states have tried systems of mandating and subsidizing policies from insurance companies. Minnesota, Tennessee, Vermont, Washington and Massachusetts have learned the hard way in failing to fix the system by including the health insurance industry.

Where else would the money come from to support a national program? HR676 calls for a modest payroll tax on all employers and employees of 3.3 percent each, in addition to a 1.45 percent tax that they are already paying for a total of 4.75 percent each. Also there would be a 5 percent health tax on the top 5 percent of income earners and a 10 percent tax on the richest 1 percent . A small tax on stock and bond transfers is also envisioned along with the closing of corporate tax loopholes and repealing the Bush tax cut for the highest 1 percent of income earners.

When you subtract the cost of insurance premiums, the deductibles and the co-pays, most businesses and most people would pay less for national health care than they do today. Even if the cost did go up some, the coverage would be much broader and medical needs would be met much more easily.

What we are learning is that the United States is all alone among its peers in the whole world. This is the only country that treats health care as a commodity distributed according to ability to pay, rather than as a social service distributed according to medical need.

The challenge is to get fully informed citizens involved in changing things for the better.

Mr. Stevens is a member of the Southern Indiana branch of Hoosiers for a Commonsense Health Plan (so.in.hchp@gmail.com, whose Kentucky counterpart can be reached at www.kyhealthcare.org)

Health plan more of same

By Bob Balhiser
Independent Record, Helena, Montana
11/17/2008

The Baucus health care reform plan looks like the hodge-podge system we now have, just more of it! To top it all off, he “didn’t have a price tag for the plan.” Amazing!

Here is a worthwhile test that any new health care reform plan should have to pass in order to be considered: Make quality health care available to all U.S. citizens while reducing overall health care outlays as a percentage of GDP.

We spend more in this country on health care than any other industrialized country, and have worse outcomes. We can do better, and we should not accept any new plan that does not dramatically streamline and improve the system.

The uninsured often donate organs, but rarely receive them

FOR IMMEDIATE RELEASE
Nov. 17, 2008

Contacts:
Andrew A. Herring
David U. Himmelstein, M.D.
Steffie Woolhandler, M.D.
Mark Almberg, (312) 782-6006, mark@pnhp.org

People who lack health insurance are about 20 times more likely to donate their liver or a kidney for a lifesaving transplant than to receive one, a new study shows. The study is the first to assess the health insurance of organ donors nationally.

A team of Harvard University researchers, writing in the current issue of International Journal of Health Services, reports that a representative sampling of U.S. patients in 2003 shows that at least 16.9 percent of organ donors had no health insurance at the time of their hospitalization. In contrast, only 0.8 percent of the transplant recipients were similarly uninsured; in other words, almost all recipients had some kind of health coverage at the time of their procedure.

Among the transplant recipients, equal proportions (44.2 percent) were covered by private insurance and by Medicare, a public program that serves seniors and some of the disabled (including virtually all patients needing kidney transplants). Medicaid, a government program for the poor, covered another 9 percent. About 2 percent were covered under other programs.

Among organ donors, however, insurance coverage was much less extensive. Private insurance was the most common source of payment for their medical bills (44.8 percent), followed by Medicare (14.6 percent) and Medicaid (2.6 percent). One-fifth of organ donors’ insurance status was listed as “other,” a designation that may have indicated that their bills were paid by organ procurement organizations. Some of these may have been uninsured for other medical care. Yet even assuming that all of these had coverage, the authors found that 16.9 percent of the organ donors were uninsured. By comparison, only 4.6 percent of other inpatients were uninsured.

The authors analyzed data from the 2003 National Inpatient Sample, a representative sample of hospital stays compiled by the Agency for Healthcare Research and Quality (AHRQ) under the U.S. Department of Health and Human Services. Using AHRQ guidelines, the research team extrapolated their results from the coded hospital records of 1,447 solid organ donors (including donors of kidneys, pancreases, livers, hearts, lungs and corneas) and 4,962 recipients.

The finding that most transplant recipients were insured at the time of their transplant had previously been known. However, “our finding that uninsured patients frequently serve as organ donors is both new and poignant,” the authors write. “The U.S. health care system denies adequate care to many of the uninsured during life. Yet, in death, the uninsured often give strangers the ultimate gift.”

Strikingly, lack of insurance was a stronger predictor of organ donation than was any hospital characteristic or demographic factor other than age (older people’s organs are more often diseased and unsuitable for transplantation).

The authors emphasize that the asymmetry of who donates organs and who receives them does not reflect “the values or intentions” of the medical transplant community, whose members avow a “commitment to equal access for all patients.”

They also point out that, because organ transplantation uses a “scarce resource that can only come from fellow human beings,” special protocols, including guidelines adopted by Congress, have been developed to improve equity in the transplantation of organs.

The lead author of the study, Dr. Andrew Herring, commented: “If you lack the financial resources to afford a transplant either through insurance or otherwise, few centers will consider you as a candidate. The 1984 National Organ Transplant Act stipulates that transplants should be equally available to all Americans, regardless of their ability to pay. Unfortunately, the health care system is presently not funded adequately to make this a reality.” Herring is currently an emergency medicine resident at Highland Hospital in Oakland, California. He performed the study while he was a medical student at Harvard.

Dr. Steffie Woolhandler, a co-author and associate professor of medicine at Harvard, said, “The fact that many organ donors were uninsured dramatically highlights the lack of fairness in the U.S. health care system as a whole. The only way to surmount this problem is to adopt a single-payer national health insurance program, which would guarantee comprehensive and affordable care to everyone without exception.”

The lack of health coverage is responsible for at least 18,000 deaths annually, according to the Institute of Medicine. In August, the Census Bureau reported that 45.6 million Americans lacked health insurance in 2007.

“Insurance status of U.S. organ donors and transplant recipients: The uninsured give, but rarely receive,” Andrew A. Herring, M.D.; Steffie Woolhandler, M.D.; and David U. Himmelstein, M.D. International Journal of Health Services (New York), Vol. 38, No. 4.

A copy of the study is available at https://pnhp.org/organ_donors

Physicians for a National Health Program, a membership organization of over 15,000 physicians, supports a single-payer national health insurance program. To contact a physician-spokesperson in your state, call (312) 782-6006 or visit www.pnhp.org/stateactions.

Aetna creates “Medical Home.” Really?

Aetna and Partners in Care Test New Approach to Health Care Services

Aetna
News Release
November 13, 2008

New Model Creates a “Medical Home” for Patients that is Based on a Strong Primary Care Relationship and Close Coordination with Other Care Providers

Aetna (NYSE: AET) and Partners In Care, Corp. (PIC) today announced a pilot program to test an innovative new health care model that will make the health care system an easier place for patients. Called a “Patient-Centered Medical Home” the model emphasizes the role of the primary care physician (PCP) in managing and coordinating patient care across a range of care providers, including specialists and hospitals.

The Patient-Centered Medical Home concept of care has been under development since the mid-90s and is based on a patient having an ongoing relationship with a personal physician trained to provide first contact and continuous, comprehensive care. This personal physician leads a team of care providers at the practice level who collectively take responsibility for the ongoing care of patients, looking beyond the walls of their own office, and communicating with the patient’s other providers to assure the treatment plans are followed. The concept is designed to nurture and strengthen the relationship between the patient and physician.

“PIC sees its role as a physician organization as finding ways to support the practicing physicians in their effort to improve the overall quality of care provided to their patients, and by rewarding physicians for achieving national certification standards. This joint effort will have a significant impact,” said Kevin O’Brien, President & CEO, Partners In Care.

http://www.aetna.com/news/newsReleases/2008/1113_PICCorp.html

And…

Partners in Care, Corp.

Constituted as a for-profit, closely held, New Jersey corporation, the equity is held by seventy individual shareholders belonging to the United Medical Group (UMG).

Using the techniques developed under full-risk contract management, PIC has bundled patient health advocacy, managed care administration, and medical informatics into a series of customizable product and service lines. Our customer base includes individual physician practices, large physician organizations, mid-sized employers, health plans, and benefit consultants / brokers.

http://www.piccorp.com/aboutus.htm

Comment:

By Don McCanne, MD

Our very expensive but highly dysfunctional system of financing health care has resulted in serious deficiencies and neglect of the infrastructure of our health care delivery system. Foremost amongst these problems is the rapid deterioration of the primary care infrastructure.

It is not as if we have remained unaware of this very serious deficiency. In fact, the American Academy of Family Physicians, the American College of Physicians, the American Academy of Pediatrics, and the American Osteopathic Association have supported the medical home concept as a model for reinforcing primary care. The label is not important. What is important is the concept that everyone should have available a primary care entry point that improves access to coordinated, comprehensive health care services. This is not about gatekeepers. It’s about everyone receiving the health care that they need.

Our dysfunctional, fragmented, multi-payer and no payer system of financing health care has been incapable of realigning incentives and appropriately allocating resources to build and maintain the primary care structure that we need. We spend more money and we get less.

Don’t worry. Aetna, in partnership with Partners in Care, has usurped the “medical home” label to… provide us with a comprehensive primary care system? Well… No. On top of our flawed systems of financing and delivering care, they are adding “customizable product and service lines.” With our system already weighted down with an excess of egregiously wasteful administrative services, they are using the medical home label to sell us even more egregiously wasteful administrative services!

‘Medicare Advantage’ a misnomer

Taxpayers foot bill for private insurance to inadequately cover seniors’ health care

Jonathan D. Walker
The Journal Gazette
November 10, 2008

America has a split personality when it comes to health care. There is recognition that the government has to provide care for the people, but there is a conflicting sense that private industry has to be involved because it can somehow be more efficient. Medicare Advantage is the upshot of this thinking — but the result has been a lot of taxpayer dollars wasted on windfall payouts to private insurance companies.

With Medicare Advantage, the government is basically paying private insurance companies more money to do what Medicare could be doing more cheaply and more efficiently in the first place — if we as citizens asked it to. A lot of this extra money is not used to help the people Medicare is supposed to be helping.

Instead, the money is wasted on administrating, marketing and generating profits for insurance companies. In other words, the government is using our tax dollars to pay for the “privilege” of bringing in all the hassles of private health insurance into Medicare.

The confusing array of plans can cause less sophisticated shoppers to get stuck with very bad plans that increase their co-pays and force them to change doctors and hospitals. Careful consumers can get what seems to be a good plan because the insurance companies can use some of the money they get from the government to offer extra benefits and services.

But even smart shoppers can get into trouble. If they get sick, they will suddenly get hit with the large deductibles that go along with these plans — often thousands of dollars. To avoid these costs, patients switch back to standard Medicare once they become ill.

This scenario turns out to be a great advantage for the private insurance companies that run the Medicare Advantage plans. They use our tax dollars to get paid to do what the government could do for less, and they make even more money by covering only the healthiest seniors.

It gets even more frustrating because the healthy seniors who are getting a great deal at taxpayer expense are understandably reluctant to modify the system (as long as they stay healthy). Whenever Congress threatens to cut back on Medicare Advantage, the insurance companies can call on these seniors to contact their representatives and halt any changes.

Multiple sources have shown that the Medicare Advantage program is a waste of money, including the Medicare Payment Advisory Commission (Congress’ advisory body on Medicare payments) and the Congressional Budget Office. According to the Government Accountability Office, Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. They estimate it will cost an extra $54 billion by 2112 — about what it would cost to provide all children in America with health insurance.

And it is not just a problem of wasted taxpayer dollars. The profit motive has resulted in terrible abuses, especially with patients who have limited abilities to understand the complexity of these plans. In a hearing in 2007, Sen. Herb Kohl, D-Wis., said, “Our investigation has revealed a disturbingly consistent picture, one which only seems to be growing. Countless seniors purchasing Medicare Advantage plans have been preyed upon and unwittingly taken advantage of by insurance agents. Seniors have been removed from traditional Medicare without their knowledge, signed onto plans they can’t afford, misled regarding coverage and told their doctors accept these plans when in reality they don’t. This is simply unacceptable.”

America’s health care system is in enough trouble without wasting resources on inefficient programs that don’t give us our money’s worth — simply because powerful lobbyists get these programs enacted and then keep the programs from being cut. When organizations like the Congressional Budget Office, the Government Accountability Office and the Medicare Payment Advisory Commission tell us that there is no advantage to Medicare Advantage, we should listen.

Jonathan D. Walker , M.D., is a member of Hoosiers for a Commonsense Health Plan. He wrote this for The Journal Gazette.

Uwe Reinhardt on why health care costs so much

Why Does U.S. Health Care Cost So Much? (Part I)

By Uwe E. Reinhardt
The New York Times
November 14, 2008
The graph (available at the link below) tells a compact story of United States health spending relative to that of other nations.
Shown on the horizontal axis is the gross domestic product per capita in 2006. The vertical axis represents 2006 health spending per capita. The data points in the graph represent two dozen developed countries that are members of the Organization for Economic Cooperation and Development (O.E.C.D.).
The data are expressed in Purchasing Parity Dollars (PPP$). This metric is designed to adjust for cross-national differences in the purchasing power of national currencies relative to the real goods and services. One can think of PPP$s as dollars that buy roughly the same basket of real goods and services in different countries.
You’ll notice that there is enormous variation in health spending per capita in different countries within the O.E.C.D. But the graph also indicates that there exists a very strong relationship between the G.D.P. per capita of these countries (roughly a measure of ability to pay) and per-capita health spending.
Just knowing the G.D.P. per capita of nations helps us explain about 86 percent of the variation in how much different countries pay for health care for the average person. Canada, for example, on average spent only PPP$3,678 on health care per person in 2006, which is about 55 percent of the amount the United States paid per person. But Canada’s G.D.P. per capita in 2006 was also smaller than the comparable United States figure, although not that much smaller (it was 84 percent of the American level).
The line helps us estimate that roughly $1,141 of the $3,036 difference between Canadian and American health spending per capita — or 38 percent — can be explained by the underlying difference in G.D.P. per capita alone.
An additional insight from the graph, however, is that even after adjustment for differences in G.D.P. per capita, the United States in 2006 spent $1,895 more on health care than would have been predicted after such an adjustment. If G.D.P. per capita were the only factor driving the difference between United States health spending and that of other nations, the United States would be expected to have spent an average of only $4,819 per capita on health care rather than the $6,714 it actually spent.
Health-services researchers call the difference between these numbers, here $1,895, “excess spending.” That term, however, is not meant to convey “excessive spending,” but merely a difference driven by factors other than G.D.P. per capita. Prominent among these other factors are:
1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services;
2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems;
3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries;
4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative.
There are three other explanations that are widely — but erroneously — thought among non-experts to be cost drivers in the American health spending. To wit:
1. that the aging of our population drives health spending
2. that we get better quality from our health system than do other nations, and
3. that we get better health outcomes from our system
I will comment in more detail on factors that do and do not drive health spending in subsequent posts.
http://economix.blogs.nytimes.com/2008/11/14/why-does-us-health-care-cost-so-much-part-i/

Whoa. This one’s pretty heavy, but you really don’t have to understand Purchasing Parity Dollars and the other economic lingo to be able to understand the take-home message.
There is an important reason to present the economic data, and that is that we need to approach health care reform using highly credible factual data. Many individuals have an opinion as to why heath care costs in the United States are so high, but those views are often based on nothing more than hearsay, and often are incorrect. Reform must be based on solid facts.
So what is Prof. Reindardt’s take-home message? Although somewhat repetitive, it is worth emphasizing these points again.
What does NOT increase costs:
1. Living longer does NOT contribute significantly to health care costs. Most health care spending occurs near the end of life, and we are allocated only one death apiece. That spent on chronic diseases during the additional years of life expectancy is negligible when compared to end-of-life spending.
2. Higher quality of health care in the United States is NOT a cause of increased health care costs for the simple reason that the quality of our health care is quite mediocre, on average, when compared with other nations.
3. Better health outcomes are NOT a reason for higher health care costs simply because our outcomes are not better by most measures, and on several measures we are worse.
What DOES increase costs:
1. Nations with a high GDP have more money to spend on health care, and they spend it. (The graph in the original article demonstrates this point well. It also demonstrates that the United States is the single outlier of the two dozen nations, with much higher per capita spending than would be projected by our very high GDP.)
2. The United States pays higher prices for health care services and products than do other nations for the same services and products. This was demonstrated in the Health Affairs article, “It’s the Prices, Stupid.” Our dysfunctional system of financing health care has not been capable of optimizing prices (think of pharmaceuticals). We could do much better using negotiated pricing through a single financing system.
3. Our fragmented, multi-payer system has resulted in profound administrative waste, adding significantly to our high health care costs. Proposals to limit administrative costs of private insurers to 15 percent of their revenues will have very little impact since many are already at that level, and this limit will not provide any relief for the administrative burden that our multi-payer system has placed on the health care delivery system. Administrative savings would be possible only by adopting a simpler health insurance system.
4. Our costs are higher because of our greater use of expensive, high-tech services and equipment that all too often provides no benefit and may even be detrimental. We need to identify those services not providing value so that we can redirect our resources elsewhere (a complex but doable task).
5. Our American tort system has provoked the use of flat-of-the-curve defensive medicine that wastes resources, thereby increasing costs. How we should reform the tort system remains controversial, but it must be addressed.
6. The contraction of our primary care infrastructure has contributed indirectly to our high health care costs. Primary care environments provide quality care at a lower cost. Shifting health care access to specialized environments increases costs through some of the mechanisms listed above. Overuse of emergency departments is a problem because of the strain on the capacities of the system, but it is not much of a contributor to increased costs since the marginal costs of the additional load are quite small.
Everyone agrees that health care reform must address the high costs of health care. Most current proposals merely expand the way we are already paying for care without changes that will have any major impact on these cost drivers.
Instead of expanding our current dysfunctional financing system and then attempting to transform it into a social insurance model, it would be so much easier and much less expensive to simply replace it with a single payer national health program.

Uwe Reinhardt on why health care costs so much

Why Does U.S. Health Care Cost So Much? (Part I)

By Uwe E. Reinhardt
The New York Times
November 14, 2008

The graph (available at the link below) tells a compact story of United States health spending relative to that of other nations.

Shown on the horizontal axis is the gross domestic product per capita in 2006. The vertical axis represents 2006 health spending per capita. The data points in the graph represent two dozen developed countries that are members of the Organization for Economic Cooperation and Development (O.E.C.D.).

The data are expressed in Purchasing Parity Dollars (PPP$). This metric is designed to adjust for cross-national differences in the purchasing power of national currencies relative to the real goods and services. One can think of PPP$s as dollars that buy roughly the same basket of real goods and services in different countries.

You’ll notice that there is enormous variation in health spending per capita in different countries within the O.E.C.D. But the graph also indicates that there exists a very strong relationship between the G.D.P. per capita of these countries (roughly a measure of ability to pay) and per-capita health spending.

Just knowing the G.D.P. per capita of nations helps us explain about 86 percent of the variation in how much different countries pay for health care for the average person. Canada, for example, on average spent only PPP$3,678 on health care per person in 2006, which is about 55 percent of the amount the United States paid per person. But Canada’s G.D.P. per capita in 2006 was also smaller than the comparable United States figure, although not that much smaller (it was 84 percent of the American level).

The line helps us estimate that roughly $1,141 of the $3,036 difference between Canadian and American health spending per capita — or 38 percent — can be explained by the underlying difference in G.D.P. per capita alone.

An additional insight from the graph, however, is that even after adjustment for differences in G.D.P. per capita, the United States in 2006 spent $1,895 more on health care than would have been predicted after such an adjustment. If G.D.P. per capita were the only factor driving the difference between United States health spending and that of other nations, the United States would be expected to have spent an average of only $4,819 per capita on health care rather than the $6,714 it actually spent.

Health-services researchers call the difference between these numbers, here $1,895, “excess spending.” That term, however, is not meant to convey “excessive spending,” but merely a difference driven by factors other than G.D.P. per capita. Prominent among these other factors are:

1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services;

2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems;

3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries;

4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative.

There are three other explanations that are widely — but erroneously — thought among non-experts to be cost drivers in the American health spending. To wit:

1. that the aging of our population drives health spending

2. that we get better quality from our health system than do other nations, and

3. that we get better health outcomes from our system

I will comment in more detail on factors that do and do not drive health spending in subsequent posts.

http://economix.blogs.nytimes.com/2008/11/14/why-does-us-health-care-cost-so-much-part-i/

Comment:

By Don McCanne, MD

Whoa. This one’s pretty heavy, but you really don’t have to understand Purchasing Parity Dollars and the other economic lingo to be able to understand the take-home message.

There is an important reason to present the economic data, and that is that we need to approach health care reform using highly credible factual data. Many individuals have an opinion as to why heath care costs in the United States are so high, but those views are often based on nothing more than hearsay, and often are incorrect. Reform must be based on solid facts.

So what is Prof. Reindardt’s take-home message? Although somewhat repetitive, it is worth emphasizing these points again.

What does NOT increase costs:

1. Living longer does NOT contribute significantly to health care costs. Most health care spending occurs near the end of life, and we are allocated only one death apiece. That spent on chronic diseases during the additional years of life expectancy is negligible when compared to end-of-life spending.

2. Higher quality of health care in the United States is NOT a cause of increased health care costs for the simple reason that the quality of our health care is quite mediocre, on average, when compared with other nations.

3. Better health outcomes are NOT a reason for higher health care costs simply because our outcomes are not better by most measures, and on several measures we are worse.

What DOES increase costs:

1. Nations with a high GDP have more money to spend on health care, and they spend it. (The graph in the original article demonstrates this point well. It also demonstrates that the United States is the single outlier of the two dozen nations, with much higher per capita spending than would be projected by our very high GDP.)

2. The United States pays higher prices for health care services and products than do other nations for the same services and products. This was demonstrated in the Health Affairs article, “It’s the Prices, Stupid.” Our dysfunctional system of financing health care has not been capable of optimizing prices (think of pharmaceuticals). We could do much better using negotiated pricing through a single financing system.

3. Our fragmented, multi-payer system has resulted in profound administrative waste, adding significantly to our high health care costs. Proposals to limit administrative costs of private insurers to 15 percent of their revenues will have very little impact since many are already at that level, and this limit will not provide any relief for the administrative burden that our multi-payer system has placed on the health care delivery system. Administrative savings would be possible only by adopting a simpler health insurance system.

4. Our costs are higher because of our greater use of expensive, high-tech services and equipment that all too often provides no benefit and may even be detrimental. We need to identify those services not providing value so that we can redirect our resources elsewhere (a complex but doable task).

5. Our American tort system has provoked the use of flat-of-the-curve defensive medicine that wastes resources, thereby increasing costs. How we should reform the tort system remains controversial, but it must be addressed.

6. The contraction of our primary care infrastructure has contributed indirectly to our high health care costs. Primary care environments provide quality care at a lower cost. Shifting health care access to specialized environments increases costs through some of the mechanisms listed above. Overuse of emergency departments is a problem because of the strain on the capacities of the system, but it is not much of a contributor to increased costs since the marginal costs of the additional load are quite small.

Everyone agrees that health care reform must address the high costs of health care. Most current proposals merely expand the way we are already paying for care without changes that will have any major impact on these cost drivers.

Instead of expanding our current dysfunctional financing system and then attempting to transform it into a social insurance model, it would be so much easier and much less expensive to simply replace it with a single payer national health program.

Lessons from the U.K.

Lessons from the U.K.

By Martin Roland, D.M.
The New England Journal of Medicine
November 13, 2008
The United Kingdom takes the importance of primary care for granted. The U.K. government is effectively the country’s single payer, and successive administrations have been convinced by mounting evidence that primary care promotes high-quality, cost-effective, and equitable health care. If anything, the U.K. government has become more convinced over the past 15 years that strong primary care needs to be at the heart of the country’s health care system — quite the reverse of the situation in the United States. U.K. primary care physicians now have average earnings of $220,000 (in U.S. dollars), which is more than many specialists earn.
Having a single-payer system helps a great deal in terms of organizing quality-improvement activities.
U.K. primary care physicians increasingly work in multidisciplinary teams, with nurses taking on an increasing proportion of the work. Nurses see patients with minor illnesses and assume responsibility for the routine management of chronic diseases.
Having a single-payer system also means that U.K. primary care physicians hold each patient’s lifelong record, which includes a letter regarding every visit to a specialist. Virtually all primary care physicians use electronic medical records, and laboratories now generally download lab results directly into family practitioners’ computer systems. Again, the government took advantage of having a single-payer system to define common standards to which all suppliers of electronic medical records must adhere.
It is hard to discuss U.K. medical care without mentioning universal coverage. Although it may not be politically achievable in the United States, universal access to care is probably the key factor behind findings that U.K. citizens have better health outcomes than their U.S. counterparts despite having health care costs that are a fraction of those in the United States.
http://content.nejm.org/cgi/content/full/359/20/2087-b

What can we learn from the U.K.? Through a single payer system the U.K. has been able to build a strong primary care infrastructure with teams organized to provide high-quality coordinated care for everyone. They have done this at a fraction of the costs of U.S. health care, while compensating their primary care physicians very generously.
And how is the U.S. going to use this information? We are going to reject it because it is not a uniquely American solution. Instead, we are about to expand our dysfunctional, fragmented, wasteful, costly system of financing health care, simply because it is uniquely American!?
The U.K. system, like that of many other nations, uses their power as a monopsony to purchase much greater value in health care. The United States now wants to use our tax dollars as credits to help us purchase individual plans that do not cooperate but compete. That competition not only results in tremendous administrative waste, it also destroys any prospect of creating an effective monopsony.
So we are going to tax ourselves to provide even more funds to our unique, corporate-model private insurers to allow them to burn up more resources while establishing a barrier to much needed delivery system reform (a barrier because the financing is fragmented).
We do have a very weak monopsony in the form of Medicare. Can’t we learn lessons from Medicare, and then project the improvements that we could make if it were converted into a strong monopsony? Maybe as a single payer that wouldn’t be uniquely American, but couldn’t we pretend it is until we achieve the structural reform that we desperately need?

Lessons from the U.K.

Lessons from the U.K.

By Martin Roland, D.M.
The New England Journal of Medicine
November 13, 2008

The United Kingdom takes the importance of primary care for granted. The U.K. government is effectively the country’s single payer, and successive administrations have been convinced by mounting evidence that primary care promotes high-quality, cost-effective, and equitable health care. If anything, the U.K. government has become more convinced over the past 15 years that strong primary care needs to be at the heart of the country’s health care system — quite the reverse of the situation in the United States. U.K. primary care physicians now have average earnings of $220,000 (in U.S. dollars), which is more than many specialists earn.

Having a single-payer system helps a great deal in terms of organizing quality-improvement activities.

U.K. primary care physicians increasingly work in multidisciplinary teams, with nurses taking on an increasing proportion of the work. Nurses see patients with minor illnesses and assume responsibility for the routine management of chronic diseases.

Having a single-payer system also means that U.K. primary care physicians hold each patient’s lifelong record, which includes a letter regarding every visit to a specialist. Virtually all primary care physicians use electronic medical records, and laboratories now generally download lab results directly into family practitioners’ computer systems. Again, the government took advantage of having a single-payer system to define common standards to which all suppliers of electronic medical records must adhere.

It is hard to discuss U.K. medical care without mentioning universal coverage. Although it may not be politically achievable in the United States, universal access to care is probably the key factor behind findings that U.K. citizens have better health outcomes than their U.S. counterparts despite having health care costs that are a fraction of those in the United States.

http://content.nejm.org/cgi/content/full/359/20/2087-b

Comment:

By Don McCanne, MD

What can we learn from the U.K.? Through a single payer system the U.K. has been able to build a strong primary care infrastructure with teams organized to provide high-quality coordinated care for everyone. They have done this at a fraction of the costs of U.S. health care, while compensating their primary care physicians very generously.

And how is the U.S. going to use this information? We are going to reject it because it is not a uniquely American solution. Instead, we are about to expand our dysfunctional, fragmented, wasteful, costly system of financing health care, simply because it is uniquely American!?

The U.K. system, like that of many other nations, uses their power as a monopsony to purchase much greater value in health care. The United States now wants to use our tax dollars as credits to help us purchase individual plans that do not cooperate but compete. That competition not only results in tremendous administrative waste, it also destroys any prospect of creating an effective monopsony.

So we are going to tax ourselves to provide even more funds to our unique, corporate-model private insurers to allow them to burn up more resources while establishing a barrier to much needed delivery system reform (a barrier because the financing is fragmented).

We do have a very weak monopsony in the form of Medicare. Can’t we learn lessons from Medicare, and then project the improvements that we could make if it were converted into a strong monopsony? Maybe as a single payer that wouldn’t be uniquely American, but couldn’t we pretend it is until we achieve the structural reform that we desperately need?

Reform proposal of Sen. Baucus

Senator Takes Initiative on Health Care

By Robert Pear
The New york Times
November 11, 2008
Without waiting for President-elect Barack Obama, Senator Max Baucus, the chairman of the Finance Committee, will unveil a detailed blueprint on Wednesday to guarantee health insurance for all Americans by facilitating sales of private insurance, expanding Medicaid and Medicare, and requiring most employers to provide or pay for health benefits.
… would eventually require everyone to have health insurance coverage, with federal subsidies for those who could not otherwise afford it.
… broadly compatible with Mr. Obama’s campaign promises. But Mr. Baucus’s 35,000-word plan would go further than Mr. Obama’s in one respect, eventually requiring all people — not just children — to have coverage.
… create a nationwide marketplace, a “health insurance exchange,” where people could compare and buy insurance policies. The options would include private insurance policies and a new public plan similar to Medicare.
Insurers could no longer deny coverage to people who had been sick. Congress would also limit insurers’ ability to charge higher premiums because of a person’s age or prior illness.
People would have a duty to obtain coverage when affordable options were available to all through employers or through the insurance exchange. This obligation “would be enforced, possibly through the tax system,” the plan says.
People age 55 to 64 should be able to buy Medicare coverage if they do not have access to a public insurance program or a group health plan.
Medicaid would be available to everyone below the poverty level…
The State Children’s Health Insurance Program would be expanded to cover all uninsured youngsters in families with incomes at or below 250 percent of the poverty level …
He would offer tax credits to small businesses to help them defray the costs of providing health benefits to employees.
To make insurance more affordable for those who buy coverage on their own, Mr. Baucus would offer tax credits to individuals and families with incomes at or below four times the poverty level…
http://www.nytimes.com/2008/11/12/washington/12health.html

And…

Call to Action, Health Reform 2009

Senator Max Baucus, Chairman, Senate Finance Committee
November 12, 2008
Individual Responsibility
Once affordable, high-quality, and meaningful health insurance options are available to all Americans, it will be each individual’s responsibility to have coverage. This step is necessary to make the entire health care system function properly.
Premium Subsidies
In order to make health coverage affordable for all Americans, refundable tax credits would be available to individuals and families with incomes at or below four times the Federal poverty level. These tax subsidies would be available to individuals and families who purchased coverage through the Health Insurance Exchange. The Independent Health Coverage Council would define what an “affordable” premium is, taking into account the reasonable percent of income to be spent on health care coverage. The premium subsidy would make up the difference between the amount suggested by the Council and the premium amount charged by the plan. The amount of the subsidy could be based on a benchmark that would be equal to a locally adjusted, average premium in the Exchange. This construct would encourage individuals to be prudent purchasers of health care policies.
Conclusion
Each of the key challenges facing our health care system — lack of access to care, the cost of care, and the need for better-quality care — must be addressed in concert. Covering millions of uninsured through a broken health system will be fiscally unsustainable. Attempting to address the inefficiencies plaguing our system and the perverse incentives in the delivery system without covering the uninsured will fail to alleviate the burden of uncompensated care and cost shifting. The time for incremental improvements has passed; health care reform must be comprehensive in scope.
This Call to Action provides a starting point for the upcoming health care reform debate. It is a vision and not a legislative proposal. It is comprehensive but not an exhaustive exploration of every health care issue that can or should be considered.
The next crucial step is a constructive dialog on policy priorities among policymakers, stakeholders, health policy thought leaders and the public. Consensus will be difficult to achieve, but common ground from which to build can and must be found.
Call to Action, Health Reform 2009 (98 pages):
http://finance.senate.gov/healthreform2009/finalwhitepaper.pdf

And…

2009 Health Reform Plan

Sen. Max Baucus
C-SPAN
November 12, 2008
News Conference
Sen. Baucus: “Some people suggest the United States should have a single payer system. I disagree. I don’t think a single payer system makes sense in this country.”
http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=282373-1

As the powerful chairman of the Senate Finance Committee, and as a person passionately dedicated to comprehensive health care reform, we need to listen to what Sen. Max Baucus has to say. “Call to Action, Health Reform 2009” is his white paper describing serious problems with our health care system, and includes a collection of legislative proposals to address those problems. It is an important report because it does represent what seems to be the prevailing views in Washington, D.C. on the direction for reform.
There are many valuable recommendations in this report. Some of them should be enacted soon as possible as urgent measures to hold us over while we are pressing forward with comprehensive reform. Others can be enacted independently of the comprehensive legislative package. But some represent flawed policy concepts and should never be enacted.
Only one of the major flaws will be touched on here: the mandate for individuals to purchase their own health plans should they not be covered under their employers’ plans.
Under this proposal, a family of four will have to fully fund their own coverage if their income is over $84,800 (four times the poverty level). According to the 2008 Milliman Medical Index, a family of four is already paying an average of $15,600 for health care. That means that this family would be paying over 18 percent of their income for health care. Since this is average, many families would be paying a much higher percentage.
Many in the policy community believe that health care expenditures over 10 percent of income expose individuals or families to the potential of financial hardship. To keep expenditures at 10 percent, a family of four with average medical expenses would require an income over $156,000. Those with above average expenses would require even greater incomes.
Financing health care with private health plans no longer makes sense. We need a single universal risk pool that is funded equitably using progressive tax policies. Sen. Baucus says that he doesn’t think that a single payer system makes sense in this country, but it’s the only system that does.