Budget deal will do real damage to health care

The choice is clear: Increase taxes or let the impact fall on children and the elderly

Editorial
The Sacramento Bee
July 1, 2008

Faced with a $17 billion deficit, the governor and state lawmakers are considering cuts that would likely drop tens of thousands of children from the Medi-Cal program, the state’s version of Medicaid.

They also are considering restricting adult eligibility requirements for Medi-Cal, hurting families trying to transition from welfare to work.

Elderly patients would also take a hit. As part of a 10 percent cut scheduled to take effect today, the state plans to reduce payments received by pharmacists who serve Medi-Cal patients. Pharmacists say it would force them to lose money on commonly prescribed drugs.

California’s budget crisis is real. It will demand deep cuts, and the state’s health care programs will have to shoulder a share of the sacrifice. But the level of cuts aimed at Medi-Cal, and the nature of those cuts, would have broad and dangerous impacts. Legislators, particularly Republicans who have taken a vow not to raise taxes under any circumstance, need to consider the consequences.

A better option would be a modest, broadly distributed levy – yes, a tax – to prop up this state’s health care program for the poor. Consider it a down payment on a once-and-future goal: a more universal system of health coverage.

http://www.sacbee.com/110/story/1051327.html

Comment:

By Don McCanne, MD

As a welfare program representing patients lacking an adequate political voice, Medicaid has been chronically underfunded. The problem is especially severe in California (where it is called Medi-Cal) with one of the lowest Medicaid reimbursement rates in the nation, and a very large population of low-income individuals who might otherwise qualify for the program. We have more uninsured individuals in California than the entire population of Massachusetts.

Further cuts in Medi-Cal funding will reduce access to providers who cannot continue to accept ever greater losses in caring for patients under this program. Changes in funding and administration of the program will eventually remove close to half a million children from this program (Health Access analysis).

There is no other immediate alternative except to increase revenues – taxes – to pay for this program. Yet the Republicans in the state legislature have vowed not to raise taxes under any circumstance, and they have the power to block the two-thirds vote required for a tax increase.

Compare this with the politics of Medicare. Congress will soon return and restore the 10 percent cut in Medicare payments to physicians that went into effect today. The public has made it quite clear that they will not tolerate political shenanigans directed against our Medicare program.

If the Medi-Cal patients were part of a Medicare program that included everyone, they would be insulated from these budget cuts since the rest of us would demand full funding of the program. One of the great advantages of a single payer national health program is that it would eliminate the welfare-stigmatized Medicaid program. All children would be covered… and so would the rest of us.

AMA meeting: AMA clarifies plan on tax credits for insurance

By Doug Trapp
American Medical News
July 7, 2008

Existing AMA policy, first approved a decade ago, calls for ending employees’ federal income tax exemption for work-based coverage. That should happen, however, only after establishing a system of tax credits to help people buy health insurance. Related AMA policy also calls for… an individual insurance mandate for those earning more than 500% of the federal poverty level, and subsidies for medically high-risk people.

AMA policy adopted at the (House of Delegates) meeting further specifies that once tax credits are in place, employee exemptions for health insurance spending should end only for federal income taxes — not for state or federal payroll taxes, which include Medicare, Social Security and unemployment taxes. (T)he exemption for payroll taxes… would disproportionately affect lower-income people and raise employers’ payroll taxes, and would not provide additional revenue for health insurance tax credits.

Richard Warner, MD, a Kansas psychiatrist, offered an amendment to maintain tax-free HSA contributions after insurance tax credits are in place, but the house did not adopt it.

Delegates also clarified AMA policy on the tax deductibility of health insurance spending. Previous policy had called for deductibility of out-of-pocket medical expenses and insurance premiums, but the house rescinded it in favor of the tax credit plan. AMA policy still envisions people with lower incomes having more generous tax credits and easier access to them than wealthier people.

David McKalip, MD, a neurosurgeon in St. Petersburg, Fla., offered an amendment to give Americans at all income levels tax credits for purchasing health insurance. He said the AMA policy represents a massive transfer of wealth that would discourage wealthier Americans from having health insurance by ending their tax incentives for buying it. His proposal was rejected.

http://www.ama-assn.org/amednews/2008/07/07/prsk0707.htm

From a policy perspective, this is really great news. The AMA already is on record for supporting progressive financing of our health care system through the use of refundable, advanceable, inversely-income-indexed tax credits to purchase private health plans. The current additional actions of the AMA House of Delegates even more explicitly support the concept of progressive financing of health care, based on ability to pay.
Health savings accounts (HSAs) are a regressive method of financing health care because they provide a greater tax deduction to higher income individuals. The AMA proposal would end this unfair policy by no longer allowing the deduction of HSA contributions from taxable income. An attempt to endorse the continuation of tax-free HSA contributions was rejected.
AMA policies would tend to shift coverage from employer-sponsored plans to the individual market. To encourage this shift, some policymakers recommend eliminating the deductibility of employer-sponsored coverage, and making premiums and out-of-pocket expenses deductible for the individual. The AMA recognizes that this would perpetuate unfair regressive tax policies. Instead, the AMA recommends not allowing the deductibility of medical expenses or premiums, but instead providing tax credits that are inversely proportional to each individual’s income. There could not be a more explicit support of shifting from regressive to progressive tax policies to fund health care.
The AMA also supports a mandate to purchase insurance for individuals with incomes over 500 percent of the federal poverty level. This is another policy that explicitly acknowledges that the wealthy have a responsibility to contribute to the pooling of funds for health care for everyone.
The AMA also supports tax subsidies for high-risk people, yet another acknowledgment that financing of major health care costs must be through progressive tax policies.
Perhaps the most exciting news of all is the action taken on an amendment offered in protest to the “massive transfer of wealth” that would take place by ending the regressive tax incentives to purchase private insurance. (Technically, the AMA proposal would end the “massive transfer of wealth to the wealthy” through health plan deductibility, and replace it with a transfer to lower-income individuals who need help paying for health care.) The AMA rejected this amendment, seeing through the mean-spirited “massive transfer of wealth” rhetoric. AMA members are first and foremost physicians who really do care about their patients.
In relying on private health plans to provide coverage, the AMA still has a major hurdle before reaching a model that actually would work. They do support greater regulation of the insurance plans, but through a robust market of private plan choices. Regulations are required to make the plans do their job of providing us with affordable access to health care, whereas markets function to provide us with price-competitive insurance products that keep prices down by preventing us from having affordable access to health care that we need. We can avoid that perpetual push-pull by replacing the private plans with a single risk pool, funded through progressive tax policies, and administered by our own public agency.
The AMA is getting closer. If they would just knock down this private-plan hurdle, the AMA could lead the way.

Medicare Advantage Organizations: Actual Expenses and Profits Compared to Projections for 2005

GAO
June 24, 2008
On average, MA organizations’ self-reported actual medical expenditures as a percentage of revenue were lower in 2005 than they had projected. MA organizations, on average, reported spending 85.7 percent of total revenue on medical expenses in 2005, but had projected medical expenditures of 90.2 percent of total revenue. Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations’ self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected.
http://www.gao.gov/new.items/d08827r.pdf

And…

Medicare Cloture Narrowly Fails

By Drew Armstrong
CQ Politics
June 26, 2008
It now looks certain that doctors will take a deep cut to their Medicare payment rates next week, after the Senate failed to move forward on a take-it-or-leave-it Medicare bill offered up by Democrats.
The White House reiterated its veto threat against the bill on Thursday, likely making moot the narrow victory that seemed possible for Democrats. The administration opposes a provision that would partially offset the cost of the bill by cutting some bonus payments to private Medicare Advantage plans in areas with teaching hospitals. It also disagreed with a provision to limit a subset of the plans known as “private fee for service,” saying the bill would “reduce access, benefits, and choices for many of the approximately 2.25 million beneficiaries who have chosen to enroll in” those plans.
The Medicare Advantage plans are paid at a higher rate than traditional Medicare, and Democrats have long argued that the private plans’ rates should be cut.
The Bush administration and many Republicans argue that the plans inject private competition into the market and will eventually lower costs.
The House passed the measure two days ago, 355-59, in a vote comfortably more than the two-thirds majority that would be needed to override a presidential veto.
http://www.cqpolitics.com/wmspage.cfm?docID=news-000002907388&parm1=1&cpage=1

The political defeat of the measure to prevent Medicare pay cuts for physicians was not partisan. Enough Republicans joined Democrats in the House to form a veto-proof majority in support of the legislation. Though many Republicans also joined the Democrats in the Senate, they came up one vote short on cloture. Sens. Obama and Clinton interrupted campaign activities to vote, but Sen. McCain was a no-show.
This was a victory for conservative/libertarian ideologues who wish to destroy the traditional Medicare program and replace it with private health plans. Their first step was to use taxpayer funds to overpay private Medicare Advantage plans so that patients would be attracted by the greater benefits that could be offered (benefits that in all fairness should be offered as well to those remaining in the traditional program). The next step is to reduce compensation in the traditional Medicare program so that physicians will bail out. Fee reductions of about 40 percent are scheduled over the next couple of years, which should accelerate the physician exodus. That would convert Medicare into an underfunded Medicaid-type welfare program, with patients fleeing to the private options.
The eventual surprise that Medicare Advantage beneficiaries are not anticipating is that it will be converted into a defined contribution program with the costs of health care inflation being shifted to the patients’ portion of the Medicare Advantage premium and to other out-of-pocket cost sharing.
Fortunately, many Republicans do support the social solidarity represented by Medicare. They are offended by the efforts to waste taxpayer funds on the excesses of private insurers in a nefarious plot to destroy the best health care financing program we have (though it needs further improvement). Joining with the Democrats, these Republicans will surely do the right thing when they return from their recess. Sen. McCain will also have another opportunity to dispel the claim that he offers us only four more years of Bush policies.

GAO
June 24, 2008

On average, MA organizations’ self-reported actual medical expenditures as a percentage of revenue were lower in 2005 than they had projected. MA organizations, on average, reported spending 85.7 percent of total revenue on medical expenses in 2005, but had projected medical expenditures of 90.2 percent of total revenue. Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations’ self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected.

http://www.gao.gov/new.items/d08827r.pdf

And…

Medicare Cloture Narrowly Fails

By Drew Armstrong
CQ Politics
June 26, 2008

It now looks certain that doctors will take a deep cut to their Medicare payment rates next week, after the Senate failed to move forward on a take-it-or-leave-it Medicare bill offered up by Democrats.

The White House reiterated its veto threat against the bill on Thursday, likely making moot the narrow victory that seemed possible for Democrats. The administration opposes a provision that would partially offset the cost of the bill by cutting some bonus payments to private Medicare Advantage plans in areas with teaching hospitals. It also disagreed with a provision to limit a subset of the plans known as “private fee for service,” saying the bill would “reduce access, benefits, and choices for many of the approximately 2.25 million beneficiaries who have chosen to enroll in” those plans.

The Medicare Advantage plans are paid at a higher rate than traditional Medicare, and Democrats have long argued that the private plans’ rates should be cut.

The Bush administration and many Republicans argue that the plans inject private competition into the market and will eventually lower costs.

The House passed the measure two days ago, 355-59, in a vote comfortably more than the two-thirds majority that would be needed to override a presidential veto.

http://www.cqpolitics.com/wmspage.cfm?docID=news-000002907388&parm1=1&cpage=1

Comment:

By Don McCanne, MD

The political defeat of the measure to prevent Medicare pay cuts for physicians was not partisan. Enough Republicans joined Democrats in the House to form a veto-proof majority in support of the legislation. Though many Republicans also joined the Democrats in the Senate, they came up one vote short on cloture. Sens. Obama and Clinton interrupted campaign activities to vote, but Sen. McCain was a no-show.

This was a victory for conservative/libertarian ideologues who wish to destroy the traditional Medicare program and replace it with private health plans. Their first step was to use taxpayer funds to overpay private Medicare Advantage plans so that patients would be attracted by the greater benefits that could be offered (benefits that in all fairness should be offered as well to those remaining in the traditional program). The next step is to reduce compensation in the traditional Medicare program so that physicians will bail out. Fee reductions of about 40 percent are scheduled over the next couple of years, which should accelerate the physician exodus. That would convert Medicare into an underfunded Medicaid-type welfare program, with patients fleeing to the private options.

The eventual surprise that Medicare Advantage beneficiaries are not anticipating is that it will be converted into a defined contribution program with the costs of health care inflation being shifted to the patients’ portion of the Medicare Advantage premium and to other out-of-pocket cost sharing.

Fortunately, many Republicans do support the social solidarity represented by Medicare. They are offended by the efforts to waste taxpayer funds on the excesses of private insurers in a nefarious plot to destroy the best health care financing program we have (though it needs further improvement). Joining with the Democrats, these Republicans will surely do the right thing when they return from their recess. Sen. McCain will also have another opportunity to dispel the claim that he offers us only four more years of Bush policies.

By Peter J. Cunningham and Laurie E. Felland
Center for Studying Health System Change (HSC)
June 2008

The number and proportion of Americans reporting going without or delaying needed medical care increased sharply between 2003 and 2007, according to findings from the Center for Studying Health System Change’s (HSC) nationally representative 2007 Health Tracking Household Survey. One in five Americans — 59 million people — reported not getting or delaying needed medical care in 2007, up from one in seven — 36 million people — in 2003.

While access deteriorated for both insured and uninsured people, insured people experienced a larger relative increase in access problems compared with uninsured people. Moreover, access declined more for people in fair or poor health than for healthier people. In addition, unmet medical needs increased for low-income children, reversing earlier trends and widening the access gap with higher-income children. People reporting access problems increasingly cited cost as an obstacle to needed care, along with rising rates of health plan and health system barriers.

While cost continued to be the overwhelming concern among uninsured people (more than 90% of uninsured people reported cost as a barrier across all three surveys), the increase in cost barriers occurred mostly among insured people. Higher patient cost sharing — people facing higher deductibles and other increased out-of-pocket expenses for medical services — likely is driving growing cost concerns among insured people.

The health plan-related barriers that people increasingly cited were that their health plan would not pay for treatment (9.2 percentage point increase), followed by the doctor or hospital would not accept their insurance (4.5 percentage point increase). The return of health plan prior-authorization requirements for certain services may be a contributing factor. Also, rising insurance deductibles or coinsurance that cause people to be responsible for much or all of a medical bill may contribute to some people reporting that their health plan would not pay for the treatment. The increase in people reporting that their doctor would not accept their insurance may mean more doctors are opting out of private insurance networks or not accepting new Medicare or Medicaid patients.

http://www.hschange.org/CONTENT/993/

And…

Increasing Number of U.S. Residents Delay, Forgo Needed Health Care Because of Cost Concerns, According to (HSC) Report

Kaiser Daily Health Policy Report
June 26, 2008

Karen Ignagni, CEO of America’s Health Insurance Plans, said that lawmakers must address a number of issues — such as differences in quality of care across the nation and the high costs of surgeries, medical imaging services and specialty medications — to make medical care more affordable (Rubenstein, Wall Street Journal, 6/26).

http://www.kaisernetwork.org/Daily_reports/rep_hpolicy.cfm#52980

Comment:

By Don McCanne, MD

Access to health care in the United States is bad and getting worse. Particularly shocking are some of the factors that are associated with impaired access: increasing rates of uninsurance, deterioration in the financial protection afforded those who are insured, rising rates of health plan barriers, children being in families with low incomes (reversing prior gains), excessive increases in health care costs, and, most shocking of all, actually having a need for health care, insured or not.

Other contributors to impaired access include the growing shortage of primary care professionals, evolving entrepreneurial trends with a decline in the provision of charity services, and the increasing constraints in the capacities of community health centers and other safety-net institutions.

The fastest growing cause of impaired access is the increase in health plan-related barriers. So what is the response of the insurance industry? “Lawmakers must address” the issues. If the insurance industry is making things worse, and they want to turn the problems over to lawmakers, then we should accept their suggestion. Why continue to pay them hundreds of billions of dollars when their insurance product innovations are no longer ensuring affordable access for those of us with significant health care needs?

In an HSC press release, Gail Shearer, director of health policy analysis at Consumers Union, stated, “This study is yet another wake-up call to policymakers that our health care system is failing to meet the needs of even insured consumers in America. Health care reform is not just about decreasing the numbers of uninsured people. It is about transforming the system into one that consistently provides appropriate quality care without unfair financial burdens.”

Single payer, anyone?

Kaiser Family Foundation
June 2008

As a result of recent changes in the economy, have you and your family experienced any of the following problems, or not? Was this a serious problem, or not?

Percent of the public saying each was a “serious problem:”
43% – Problems paying for gas
27% – Problems getting a good-paying job or raise in pay
25% – Problems paying for health care and health insurance
19% – Problems paying for food
16% – Problems with credit card debt or other personal debt
15% – Losing money in the stock market
14% – Problems paying your rent or mortgage

Which ONE of the following health care issues would you most like to hear the presidential candidates talk about?

51% – Making health care and health insurance more affordable
22% – Expanding health insurance coverage for the uninsured
10% – Improving the quality of care and reducing medical errors
7% – Reducing the total amount the country spends on health care
4% – Reducing spending on government programs like Medicare/Medicaid

Do you think that the cost of health care is something the president and Congress can do a lot about, do a little about, or is that mostly beyond their control?

62% – A lot
21% – A little
13% – Beyond their control
3% – Don’t know

The presidential candidates have proposed different approaches to improving the health care system in the U.S. Which of the following comes closest to your view?

56% – The main goal of these efforts should be to make sure that EVERYONE is covered by health insurance
41% – The main goal of these efforts should be to make health insurance more available and affordable in the private marketplace, even if everyone doesn’t get covered

When thinking about health insurance coverage in this country, which of the following comes closer to your view?

59% – We need to get everyone into the same insurance pool so we can spread the costs of sick and healthy people over the whole population
32% – Healthier people should not be asked to pay more to subsidize sicker people by being in the same insurance pool with them
10% – Don’t know/Refused

http://www.kff.org/kaiserpolls/h08_posr062508pkg.cfm

Comment:

By Don McCanne, MD

Paying for health care and health insurance is already a serious problem for one-fourth of us. That is greater than the percent of individuals having serious problems paying for food and housing and paying off credit cards and other personal debt.

The strongest support is for making health care and health insurance affordable. The public also supports covering everyone with insurance, although that support is much weaker amongst Republicans (11%).

A strong majority believes that the president and Congress can do a lot about the cost of health care, suggesting that there is strong support for a major government role in health care reform.

The most reassuring finding in this poll is that almost twice as many people believe that “we need to get everyone into the same insurance pool so we can spread the costs of sick and healthy people over the whole population” as do those who believe that the healthy “should not be asked to pay more to subsidize sicker people by being in the same insurance pool with them.”

And look at the breakdown of the support for a single risk pool covering everyone: 74% of Democrats, 57% of Independents, and 39% of Republicans. Imagine a coalition of the Democrats, a strong majority of Independents, and two-fifths of the Republicans. That should be more than enough to refute the notion that a single payer national health program is not politically feasible. The public already supports the policy; we just need to get them to understand the “single payer” label, or come up with a new one.