PNHP

Would Clinton sign a single-payer bill?

Would Clinton sign a single-payer bill?

Posted by Marcella Bombardieri
Political Reporter
Boston Globe.com
February 6, 2008

NEW YORK — On a day that’s all about the horserace, we bring you an interesting tidbit about policy, specifically, health care, which has been one of the biggest issues in the Democratic race.

Both Democrats offer relatively moderate health care proposals that would give Americans choices about where to get their insurance. Hillary Clinton learned the hard way in the early 1990s that many Americans are squeamish about the idea of giving up choice to the government.

A “single-payer” plan, basically where the government runs health insurance, is usually considered politically untenable. In fact, at the South Carolina debate a couple weeks ago, Clinton charged Barack Obama with being inconsistent on, among other things, health care – by having flipflopped on single-payer. Obama denied having supported it, but in a 2003 speech, he said, “I happen to be a proponent of a single-payer health care program.”

But perhaps, in a different world, would Clinton agree?

In New Haven on Monday, a fourth-year Yale medical student named Liza Goldman approached us excitedly to report on a conversation she had with the New York Senator on the rope line.

According to Goldman, she told Clinton, “I’m sure you know that single-payer would save billions of dollars and thousands of lives.”

Clinton, Goldman says, responded in agreement but said, “It’s not politically feasible.”

So Goldman offered her a hypothetical: “Would you sign it if it came across your desk?”

“She said yes, and shook my hand,” Goldman said.

A Clinton spokesman did not get back to us about whether Clinton remembers the conversation the same way.

Note from PNHP – Liza Goldman is the daughter of Dr. Sarah Huertas-Goldman, chair of PNHP’s Puerto Rico chapter.

Market-Based Failure — A Second Opinion on U.S. Health Care Costs

By Robert Kuttner
The New England Journal of Medicine
Volume 358:549-551 / February 7, 2008 / Number 6
Perspective

U.S. health care expenditures rose 6.7% in 2006, the government recently reported. According to the Centers for Medicare and Medicaid Services, total health care expenditures exceeded $2.1 trillion, or more than $7,000 for every American man, woman, and child.1 Medicare costs jumped a record 18.7%, driven by the new privatized drug benefit. Total health care spending, now amounting to 16% of the gross domestic product, is projected to reach 20% in just 7 years.

Relentless medical inflation has been attributed to many factors — the aging population, the proliferation of new technologies, poor diet and lack of exercise, the tendency of supply (physicians, hospitals, tests, pharmaceuticals, medical devices, and novel treatments) to generate its own demand, excessive litigation and defensive medicine, and tax-favored insurance coverage.

Here is a second opinion. Changing demographics and medical technology pose a cost challenge for every nation’s system, but ours is the outlier. The extreme failure of the United States to contain medical costs results primarily from our unique, pervasive commercialization. The dominance of for-profit insurance and pharmaceutical companies, a new wave of investor-owned specialty hospitals, and profit-maximizing behavior even by nonprofit players raise costs and distort resource allocation. Profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and less appreciated syndrome is the set of perverse incentives produced by commercial dominance of the system.

Markets are said to optimize efficiencies. But despite widespread belief that competition is the key to cost containment, medicine — with its third-party payers and its partly social mission — does not lend itself to market discipline. Why not?

The private insurance system’s main techniques for holding down costs are practicing risk selection, limiting the services covered, constraining payments to providers, and shifting costs to patients. But given the system’s fragmentation and perverse incentives, much cost-effective care is squeezed out, resources are increasingly allocated in response to profit opportunities rather than medical need, many attainable efficiencies are not achieved, unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system. The result is a blend of overtreatment and undertreatment — and escalating costs. Researchers calculate that between one fifth and one third of medical outlays do nothing to improve health.

Great health improvements can be achieved through basic public health measures and a population-based approach to wellness and medical care. But entrepreneurs do not prosper by providing these services, and those who need them most are the least likely to have insurance. Innumerable studies have shown that consistent application of standard protocols for conditions such as diabetes, asthma, and elevated cholesterol levels, use of clinically proven screenings such as annual mammograms, provision of childhood immunizations, and changes to diet and exercise can improve health and prevent larger outlays later on. Comprehensive, government-organized, universal health insurance systems are far better equipped to realize these efficiencies because everyone is covered and there are no incentives to pursue the most profitable treatments rather than those dictated by medical need. Although the populations of most countries that belong to the Organization for Economic Cooperation and Development are older than the U.S. population, these countries have been far more successful at containing costs without compromising care (see graph).


Health Care Expenditures in Selected Countries.
The growth rate of medical expenditures has been slowest in
nations with universal health insurance systems. Data are from
the Organization for Economic Cooperation and Development.
GDP denotes gross domestic product.

Many U.S. insurers do reward physicians for following standard clinical practices, but these incentives do not aggregate to an efficient national system of care. After more than three decades of managed care — and the same three decades of studies by Wennberg and colleagues identifying wide variations in practice patterns — consistent practices are still far from the norm.2 Commercial incentives are not fixing what’s broken.

Instead, cost-containment efforts have fallen heavily on primary care physicians, who have seen caseloads increase and net earnings stagnate or decline. A popular strategy among cost-containment consultants relies on the psychology of income targeting. The idea is that physicians have a mental picture of expected earnings — an income target. If the insurance plan squeezes their income by reducing payments per visit, doctors compensate by increasing their caseload and spending less time with each patient.

This false economy is a telling example of the myopia of commercialized managed care. It may save the plan money in the short run, but as any practicing physician can testify, the strategy has multiple self-defeating effects. A doctor’s most precious commodity is time — adequate time to review a chart, take a history, truly listen to a patient. You can’t do all that in 10 minutes. Harried primary care doctors are more likely to miss cues, make mistakes, and — ironically enough — order more tests to compensate for lack of hands-on assessment. They are also more likely to make more referrals to specialists for procedures they could perform more cost-effectively themselves, given adequate time and compensation. And the gap between generalist and specialist pay is widening.3

A second cost-containment tactic is to hike deductibles and copayments, whose frank purpose is to dissuade people from going to the doctor. But sometimes seeing the doctor is medically indicated, and waiting until conditions are dire costs the system far more money than it saves. Moreover, at some point during each year, more than 80 million Americans go without coverage, which makes them even less likely to seek preventive care.4

The system also has inflationary effects on hospitals’ revenue-maximization strategies. Large hospitals, which still have substantial bargaining power with insurers, necessarily cross-subsidize services. The emergency department may lose money, but cardiology makes a bundle. So hospitals fiercely defend their profit centers, investing heavily in facilities for lucrative procedures that will attract physicians and patients. For the system as a whole, it would be far more cost-effective to shift resources from subspecialists to primary care. But in an uncoordinated, commercialized system, specialists might take their business elsewhere, so they have the leverage to maintain their incomes and privileges — and thereby distort cost-effective resource allocation.

Defenders of commercialized health care contend that economic incentives work. And indeed they do — but often in perverse ways. The privately regulated medical market is signaling pressured physicians to behave more like entrepreneurs, inspiring some to defect to “boutique medicine,” in which well-to-do patients pay a premium, physicians maintain good incomes, and both get leisurely consultation time. It’s a convenient solution, but only for the very affluent and their doctors, and it increases overall medical outlays.

Other doctors opt out by becoming proprietors of specialty hospitals, usually day surgeries. In principle, it is cost-effective to shift many procedures to outpatient settings that are less expensive but still offer high-quality care. In a government-organized universal system, the cost savings can be usefully redirected elsewhere. But in our system, the savings go into the surgeons’ pockets, and their day hospitals often have a parasitic relationship with community hospitals, which retain the hardest cases and give up the remunerative procedures needed to subsidize those which lose money.

A comprehensive national system is far better positioned to match resources with needs — and not through the so-called rationing of care. (It is the U.S. system that has the most de facto rationing — high rates of uninsurance, exclusions for preexisting conditions, excessive deductibles and copayments, and shorter hospital stays and physician visits.) A universal system suffers far less of the feast-or-famine misallocation of resources driven by profit maximization. It also saves huge sums that our system wastes on administration, billing, marketing, profit, executive compensation, and risk selection. When the British National Health Service faced a shortage of primary care doctors, it adjusted pay schedules and added incentives for high-quality care, and the shortage diminished. Our commercialized system seems incapable of producing that result.

Despite our crisis of escalating costs, dwindling insurance coverage, and deteriorating conditions of medical practice, true national health insurance that would not rely on private insurers remains at the fringes of the national debate. This reality reflects the immense power of the insurance and pharmaceutical industries, the political fragmentation and ambivalence of the medical profession, the intimidation of politicians, and the erroneous media images of dissatisfied patients in universal systems.5

Sometimes, we Americans do the right thing only after having exhausted all other alternatives. It remains to be seen how much exhaustion the health care system will suffer before we turn to national health insurance.

No potential conflict of interest relevant to this article was reported.

Source Information

Mr. Kuttner is co-editor of the American Prospect and a senior fellow at Demos, a New York-based public policy research and advocacy organization.

References

1. Catlin A, Cowan C, Hartman M, Heffler S. National health spending in 2006: a year of change for prescription drugs. Health Aff (Millwood) 2008;27:14-29. [Free Full Text]

2. Wennberg JE, Gittlesohn A. Small area variations in health care delivery. Science 1973;182:1102-1108. [Free Full Text]

3. 2007 Medical Group Compensation and Financial Survey. Alexandria, VA: American Medical Group Association, 2007.

4. Going without health insurance: nearly one in three non-elderly Americans. Princeton, NJ: Robert Wood Johnson Foundation, March 2003.

5. Schoen C, Osborn R, Doty MM, Bishop M, Peugh J, Murukutla N. Toward higher-performance health systems: adults’ health care experiences in seven countries, 2007. Health Aff (Millwood) 2007;26:w717-w734. [Free Full Text]

More Fiscal Trouble Lies Ahead

by David Himmelstein, MD
WBUR.org
Thursday, February 7th, 2008

Last week the news leaked out from the Patrick administration that public spending for the health reform plan in the coming fiscal year will be about $400 million over the original projections. This follows a $146 million cost overrun in the current year.

Why are such miscalculations the norm? Are the costs of health reform unknowable? Or did politicians (and the media) listen only to the “experts” who told them what they wanted to hear?

As I wrote here several months ago, the Census Bureau has been saying for years that there were far more uninsured in Massachusetts than state leaders cared to admit. But politicians and the economists who advised them stuck to their guns. It turns out the Census Bureau was right. The result is that many more people are eligible for the subsidized coverage than the legislature or governor planned for. And, by the way, the demand for free care from safety-net hospitals and clinics is not dropping as fast as projected, again a result of undercounting the uninsured and ignoring the large number of immigrants who are mostly ineligible for insurance under the reform.

Of course, the economic advisors also underestimated the impact of rising medical costs, taken in by claims that that the “Quality and Cost Control Council” would rein in costs, and that the computerized health records and improved prevention touted in the bill would save money. I laughed those off last May in this space.

(By the way, the same health economist who advised the legislature as it was drawing up the original budget, recently told a real whopper in the letters section of the Boston Globe — claiming that a single payer reform “would cost many multiples of the current Massachusetts reform effort.” He chose to ignore the reams of evidence that single payer would save vast sums on bureaucracy and profits. Indeed, the CBO, the GAO, and even the Lewin Group, a consulting firm which is owned by a health insurer, have all projected that single payer would cover everyone without any increase in total costs).

Unfortunately, any reasonable forecast sees more fiscal trouble ahead for Massachusetts’ health reform. The $400 million overrun estimated for the coming year doesn’t account for the recession that looks to be headed our way. If we’re lucky, it’ll be no worse than the fairly mild downturn in 2001-2003. Back then, the number of working age people who didn’t have jobs climbed by 167,000, and the number of uninsured rose by 168,000 — presumably including many of those who lost jobs, as well as some of their dependents. So a modest downturn is likely to swell the ranks of the low-income uninsured by about 165,000 — adding perhaps $400 to $600 million to the bill for public subsidies.

So as we plan for the next year or two, let’s factor in the real costs that lie ahead, not the fantasy projections politicians would like to believe. If those realistic cost estimates look unsustainable, then lets get ready to talk about a reform that we can afford — like a single payer program.

David Himmelstein is an associate professor of medicine at Harvard Medical School and Co-founder of Physicians for a National Health Program

International Health Systems for Single Payer Advocates

Health care systems in the Organization for Economic Cooperation and Development (OECD) countries primarily reflect three types of programs:

1. In a single-payer national health insurance system, as demonstrated by Canada, Denmark, Norway, Australia, Taiwan and Sweden (1), health insurance is publicly administered and most physicians are in private practice. U.S. Medicare would be a single payer insurance system if it applied to everyone in the U.S.

2. Great Britain and Spain are among the OECD countries with national health services, in which salaried physicians predominate and hospitals are publicly owned and operated. The Veteran’s Administration would be a U.S. single payer national health service system if it applied to everyone in the U.S.

3. Highly regulated, universal, multi-payer health insurance systems are illustrated by countries like Germany and France, which have universal health insurance via non-profit “sickness funds” or “social insurance funds”. They also have a market for supplementary private insurance, or “gap” coverage, but this accounts for less than 5 percent of health expenditures in most nations.

Sickness or social insurance funds do not operate like insurance companies in the U.S.; they don’t market, cherry pick, set premiums or rates paid to providers, determine benefits, earn profits or have investors, etc. In most countries, sickness funds pay physicians and hospitals uniform rates that are negotiated annually (also known as an “all-payer” system). Princeton economist Uwe Reinhardt calls Switzerland’s “sickness funds” quasi-governmental agencies(2). In France, the overwhelming majority of the population is in a single non-profit fund, so many observers consider the French system “single payer.”

There is no model similar to sickness funds operating in the U.S. (3), although they are often confused with the Federal Employee Health Benefit Program (FEHBP), which is simply a group of for-profit private insurance plans with varying benefits, rules, regulations, providers, etc. The 1993 Clinton health plan was an attempt to regulate private insurance companies in the U.S. to behave more like sickness funds, but the insurance industry defeated it.

Notes:

(1) The three basic models are general outlines, and there are many examples of “mixed models” (e.g. although Sweden has national health insurance, the hospitals are owned by county government, a feature more common to countries with a national health service).

(2) Many countries are tinkering with how sickness funds operate (e.g. Germany). The most extreme change is in the Netherlands, which since 2006 has allowed the non-profit regional sickness funds to become for-profit insurance companies, and new insurance companies to form, in the hope that “competition” would control costs. After just one year of experience, the country has experienced 1) a wave of anti-competitive mergers of the insurers 2) emergence of health plans that “cherry pick” the young and healthy and 3) loss of universal coverage and the emergence of 250,000 residents who are uninsured and 4) another 250,000 residents who are behind on their insurance payments. All of the positive data from the Netherlands (on costs, infant mortality, quality, etc) is based on the system pre-2006 (personal communication, Hans Maarse).

(3) In the film “Sick around the World” five nation’s health systems are shown. The U.K. is an example of a single payer national health service. Taiwan is an example of a single payer national health insurance. Germany, Japan, and Switzerland use multiple”sickness funds” that are non-profit and pay uniform rates to providers (“all-payer”)

The OECD regularly publishes a CD-ROM with 10+ years of comparative data for those interested in pursuing further research. It is available on the OECD website at www.oecd.org.

Comparative studies of several nations’ systems by Gerard Anderson at John Hopkins are on the Commonwealth www.commonwealthfund.org

by Ida Hellander, MD
Physicians for a National Health Program

Is "keeping the insurance you have" your choice?

Retirement reversal

Retired public employees may face higher health care costs, fewer benefits under proposal by cash-strapped Sonoma County

By Bleys W. Rose
The Press Democrat
February 5, 2008

After four decades of promising Sonoma County public employees generous health benefits upon retirement, the county now is warning thousands of current employees and retirees they face precedent-setting reductions.

A proposal by county administrators that would effectively force many retirees to pay more for their health plans will be presented today to county supervisors.

In addition, the administration proposes to dramatically alter health benefits for new hires by, in the future, not funding anything upon retirement.

The decision could have implications for government employees across the county, from cities to school districts, as they confront mounting health insurance bills for retirees.

The shift in thinking about the way governments view obligations to pay future retirement benefits comes about because the private, independent Governmental Accounting Standards Board in July 2004 ruled public agencies from states to city governments to school districts needed to assess the value of their promises and explain how they plan to pay for them.

Details on how much more retirees will pay still must be negotiated with unions as contracts come up for renewal. The most notable is the Service Employees International Union, which represents 3,000 county workers and whose contract expires in June.

“We really don’t know if this proposal sets the pattern for what we can expect to see at the bargaining table, but our feeling is that they will want to stuff it down our throats,” said Tom Drumm, SEIU’s work site organizer for county employees.

http://www1.pressdemocrat.com/article/20080205/NEWS/802050310/0/NEWS01

And…

Public Employee Post-Employment Benefits Commission (California)

Funding Pensions and Retiree Health Care for Public Employees

On December 28, 2006, Governor Arnold Schwarzenegger established the Public Employee Post-Employment Benefits Commission to propose ways for addressing unfunded post-employment benefits. The first of the Commission’s three assigned missions is to: “Identify the full amount of post-employment health care and dental benefits for which California governments are liable and which remain unfunded.” (Health and dental benefits are “other post-employment benefits” or OPEB.)

Key findings:

* California’s public employers reported a combined unfunded OPEB liability of at least $118 billion as their most recent actuarial valuations.

* Pay-as-you-go continues to be the funding strategy used by those agencies that offer OPEB benefits.

* The total amount that public employers are currently paying or setting aside for future payments is at most $3.5 billion on an annual basis.

Recommendation 19:

Public employers should provide timely notification to both active and retired employees when proposing a change in retiree health care benefits. This notification should be provided in a time frame that reasonably allows affected employees and retirees to understand the impact of the benefit change, to review other options available to them, and to comment to the employer on the proposed changes.

Recommendation 32:

Health plan sponsors should identify individuals who are Medicare-eligible and inform them of the need to enroll in Medicare in a timely manner. Employers should provide those individuals with information on penalties which result from delayed enrollment in Medicare.

Full report (332 pages):
http://www.pebc.ca.gov/images/files/final/080107_PEBCReport2007.pdf

Comment:

By Don McCanne, MD

Quick! How many of you, under age 85, have the same health insurance plan that you had twenty years ago? None?

OK. Then how many of you changed plans simply because the private insurance market offered new plans with improved benefits and lower premiums? None?

Why did you change? Did your employer change the health benefit program offered to employees? Did your employer increase your share of the premium to a level that you could no longer afford it? Did your employer terminate the program? Did you change jobs and lose the coverage you had? Did you lose coverage because you reached an age that bumped you off of your parents’ plan? Did you become self-employed but found that you could not afford the premium for individual coverage? Or was coverage denied because of a pre-existing disorder? If you did have coverage in the individual market, did the insurer increase premiums to a level that you could no longer afford? Or did the insurer simply withdraw that product from the market? When you did change coverage for reasons not really under your control, did the new plan have better benefits with lower costs than your prior plan?

What is the obvious conclusion? Health insurance coverage on a continual basis is practically non-exisent in the private insurance market. In almost all of the instances listed, the insured individual was not granted the option of “keeping the insurance you have.”

Everyone knows that the most stable coverage that exists is that offered to government employees. The life-time health benefit package offered is one of the most important reasons that individuals seek employment in the government sector. But that is beginning to change.

The experience in Sonoma County is presented above as only a single example of the challenges faced by government entities in financing health benefits for their employees. You have no doubt read many other reports of other reductions in government employer-sponsored benefits.

As we discuss options for comprehensive health financing reform, retired government employees are amongst the most vocal in wanting the option of keeping the coverage they have. Those who are smug about their coverage should read the report of the Public Employee Post-Employment Benefits Commission. It is quite sobering.

And what about employees in the private sector? The auto industry has long been noted for having the most comprehensive benefit packages available. How have they responded? They converted their programs into VEBAs (Voluntary Employees’ Beneficiary Association) and turned the control over to the union. The problem is that these VEBAs are underfunded upfront. What will happen to retiree benefits once it is obvious that the funds will soon be depleted? And keep in mind that the auto industry has had the best that the private sector has to offer. Do you believe that the retired auto workers will want to “keep the insurance you have” when there are no funds to back it up?

Today’s message is not simply about underfunding of promised health benefits. It is about where we are headed in our efforts to reform health care financing.

Most polls on health care reform continue to ask many of the same questions as they have over the past couple of decades, but there is one new question. The pollsters are now asking if you support reform that would allow you “to keep the insurance you have.” For healthier individuals who believe that they have good insurance, this concept polls very well. In fact, the other questions in the polls are now tailored to reinforce this simple concept.

Large political coalitions are forming to spread this gospel. They are rejecting those who call for a national health program, stating that the policy debate is over, and now it is all about unity (behind this concept).

This movement has really gained traction. It is likely that the next president of the United States will enter office having campaigned on the promise of allowing you to keep the insurance you have.

The horrendous tactical error is that they are walking away from the policy dialogue when that is precisely what we now need to have. When our very best health programs, those provided by the government and the auto industry, are being threatened, we know that the lesser plans that most of us have will be shredded in an attempt to control insurance costs, by further reducing benefits and increasing cost sharing. And externalities, such as those listed above, will make it highly unlikely that we would even have the choice of keeping the same insurance we have.

“Oh wait,” they say, “you can buy the government Medicare-like plan that is more comprehensive and less expensive than private coverage.”

BS. Adverse selection would cause premiums in the government program to skyrocket (death spiral), and nobody could afford it.

We do need a national health program that provides lifetime comprehensive benefits for everyone, while being funded equitably. But that has been removed from the agenda of the keep-the-insurance-you-have coalitions, and that is precisely why their claim that we now have unity is a blatant fraud. That is why those of us who really do care about effective reform insist that we move forward with an honest dialogue on policy.

Yes. The progressives have once again called back up to duty our infamous circular firing squad. Blam! Blam!

Is “keeping the insurance you have” your choice?

Retirement reversal

Retired public employees may face higher health care costs, fewer benefits under proposal by cash-strapped Sonoma County

By Bleys W. Rose
The Press Democrat
February 5, 2008

After four decades of promising Sonoma County public employees generous health benefits upon retirement, the county now is warning thousands of current employees and retirees they face precedent-setting reductions.

A proposal by county administrators that would effectively force many retirees to pay more for their health plans will be presented today to county supervisors.

In addition, the administration proposes to dramatically alter health benefits for new hires by, in the future, not funding anything upon retirement.

The decision could have implications for government employees across the county, from cities to school districts, as they confront mounting health insurance bills for retirees.

The shift in thinking about the way governments view obligations to pay future retirement benefits comes about because the private, independent Governmental Accounting Standards Board in July 2004 ruled public agencies from states to city governments to school districts needed to assess the value of their promises and explain how they plan to pay for them.

Details on how much more retirees will pay still must be negotiated with unions as contracts come up for renewal. The most notable is the Service Employees International Union, which represents 3,000 county workers and whose contract expires in June.

“We really don’t know if this proposal sets the pattern for what we can expect to see at the bargaining table, but our feeling is that they will want to stuff it down our throats,” said Tom Drumm, SEIU’s work site organizer for county employees.

http://www1.pressdemocrat.com/article/20080205/NEWS/802050310/0/NEWS01

And…

Public Employee Post-Employment Benefits Commission (California)

Funding Pensions and Retiree Health Care for Public Employees

On December 28, 2006, Governor Arnold Schwarzenegger established the Public Employee Post-Employment Benefits Commission to propose ways for addressing unfunded post-employment benefits. The first of the Commission’s three assigned missions is to: “Identify the full amount of post-employment health care and dental benefits for which California governments are liable and which remain unfunded.” (Health and dental benefits are “other post-employment benefits” or OPEB.)

Key findings:

* California’s public employers reported a combined unfunded OPEB liability of at least $118 billion as their most recent actuarial valuations.

* Pay-as-you-go continues to be the funding strategy used by those agencies that offer OPEB benefits.

* The total amount that public employers are currently paying or setting aside for future payments is at most $3.5 billion on an annual basis.

Recommendation 19:

Public employers should provide timely notification to both active and retired employees when proposing a change in retiree health care benefits. This notification should be provided in a time frame that reasonably allows affected employees and retirees to understand the impact of the benefit change, to review other options available to them, and to comment to the employer on the proposed changes.

Recommendation 32:

Health plan sponsors should identify individuals who are Medicare-eligible and inform them of the need to enroll in Medicare in a timely manner. Employers should provide those individuals with information on penalties which result from delayed enrollment in Medicare.

Full report (332 pages):
http://www.pebc.ca.gov/images/files/final/080107_PEBCReport2007.pdf

Comment:

By Don McCanne, MD

Quick! How many of you, under age 85, have the same health insurance plan that you had twenty years ago? None?

OK. Then how many of you changed plans simply because the private insurance market offered new plans with improved benefits and lower premiums? None?

Why did you change? Did your employer change the health benefit program offered to employees? Did your employer increase your share of the premium to a level that you could no longer afford it? Did your employer terminate the program? Did you change jobs and lose the coverage you had? Did you lose coverage because you reached an age that bumped you off of your parents’ plan? Did you become self-employed but found that you could not afford the premium for individual coverage? Or was coverage denied because of a pre-existing disorder? If you did have coverage in the individual market, did the insurer increase premiums to a level that you could no longer afford? Or did the insurer simply withdraw that product from the market? When you did change coverage for reasons not really under your control, did the new plan have better benefits with lower costs than your prior plan?

What is the obvious conclusion? Health insurance coverage on a continual basis is practically non-exisent in the private insurance market. In almost all of the instances listed, the insured individual was not granted the option of “keeping the insurance you have.”

Everyone knows that the most stable coverage that exists is that offered to government employees. The life-time health benefit package offered is one of the most important reasons that individuals seek employment in the government sector. But that is beginning to change.

The experience in Sonoma County is presented above as only a single example of the challenges faced by government entities in financing health benefits for their employees. You have no doubt read many other reports of other reductions in government employer-sponsored benefits.

As we discuss options for comprehensive health financing reform, retired government employees are amongst the most vocal in wanting the option of keeping the coverage they have. Those who are smug about their coverage should read the report of the Public Employee Post-Employment Benefits Commission. It is quite sobering.

And what about employees in the private sector? The auto industry has long been noted for having the most comprehensive benefit packages available. How have they responded? They converted their programs into VEBAs (Voluntary Employees’ Beneficiary Association) and turned the control over to the union. The problem is that these VEBAs are underfunded upfront. What will happen to retiree benefits once it is obvious that the funds will soon be depleted? And keep in mind that the auto industry has had the best that the private sector has to offer. Do you believe that the retired auto workers will want to “keep the insurance you have” when there are no funds to back it up?

Today’s message is not simply about underfunding of promised health benefits. It is about where we are headed in our efforts to reform health care financing.

Most polls on health care reform continue to ask many of the same questions as they have over the past couple of decades, but there is one new question. The pollsters are now asking if you support reform that would allow you “to keep the insurance you have.” For healthier individuals who believe that they have good insurance, this concept polls very well. In fact, the other questions in the polls are now tailored to reinforce this simple concept.

Large political coalitions are forming to spread this gospel. They are rejecting those who call for a national health program, stating that the policy debate is over, and now it is all about unity (behind this concept).

This movement has really gained traction. It is likely that the next president of the United States will enter office having campaigned on the promise of allowing you to keep the insurance you have.

The horrendous tactical error is that they are walking away from the policy dialogue when that is precisely what we now need to have. When our very best health programs, those provided by the government and the auto industry, are being threatened, we know that the lesser plans that most of us have will be shredded in an attempt to control insurance costs, by further reducing benefits and increasing cost sharing. And externalities, such as those listed above, will make it highly unlikely that we would even have the choice of keeping the same insurance we have.

“Oh wait,” they say, “you can buy the government Medicare-like plan that is more comprehensive and less expensive than private coverage.”

BS. Adverse selection would cause premiums in the government program to skyrocket (death spiral), and nobody could afford it.

We do need a national health program that provides lifetime comprehensive benefits for everyone, while being funded equitably. But that has been removed from the agenda of the keep-the-insurance-you-have coalitions, and that is precisely why their claim that we now have unity is a blatant fraud. That is why those of us who really do care about effective reform insist that we move forward with an honest dialogue on policy.

Yes. The progressives have once again called back up to duty our infamous circular firing squad. Blam! Blam!

More administrative fraud

Health Care Financing Fraud Trial Nears

By Andrew Welsh-Huggins
Associated Press
January 31, 2008

Six years after the collapse of the country’s biggest health care finance company (National Century Financial Enterprises), a trial is nearing for five executives accused of a $1.9 billion fraud that helped bring the company down.

The case involves one of the largest alleged white-collar crimes after Enron or WorldCom, yet it is largely unknown to the public.

National Century had been the nation’s largest source of financing to health care providers. Doctors, hospitals and other providers received money from the company rather than waiting for insurance payments, usually getting 80 or 90 cents on the dollar. National Century was then to collect and keep the full amount of the payments owed by insurance companies.

The government alleges National Century executives routinely overpaid some health care providers, many of them entities the executives had a financial interest in.

National Century raised the money to fund its business by selling bonds to investors, who received interest payments followed by a lump-sum payment.

Federal prosecutors say the officials conspired to defraud investors by diverting money from investors’ funds for improper uses, fabricating data in investor reports, and moving money back and forth between accounts to conceal investor fund shortfalls.

http://ap.google.com/article/ALeqM5gkdc2GUMaHK0IngdvbVHeZuQs0fgD8UGFDRG1

Comment:

By Don McCanne, MD

Accepting accounts receivable as security for short term loans is a process know as factoring. Based on this report, it appears that National Century was yet another administrative intermediary that used a variation of factoring to divert 10 to 20 percent of health care dollars to its own interests. As if we didn’t have enough administrative excesses in our system already, this is an atrocious waste of resources.

Why does this industry even exist? Well, it does meet a need. If payment for health care services already delivered is delayed, funds required to pay overhead expenses are tied up in the accounts receivable. Factoring increases cash flow, allowing the bills to be paid, though at a very high cost.

If we had a single national health program with one set of rules, billing for services would be much more efficient and timely, and there would be no need to depend on factoring to increase cash flow.

So what is different about our current system that would create delays in cash flow? A major contributor to the problem is our multi-payer system, which creates administrative barriers to payment though the complexities of coverage and payment rules by the different insurers. Errors are inevitable, which result in payment delays or denials.

There is also a nefarious element in the delays. Private insurers can and do use relatively minor technicalities to delay payments often for months, especially for larger claims. Why would they do this? It is because it allows them to work the float. This past year, 43 percent of private insurers’ profits were from investment income from their reserves. That is a motivation unique to private insurers that would not exist in a public financing program.

Of course, National Century was involved not only in the “legitimate” business of factoring, but it also engaged in fraudulent acts involving investors, crossing the line into criminal activity.

But aren’t factoring, programed delays in claims payment, and selling innovative bond products all pretty much from the same mindset? How much longer are we going to leave the market element in charge?

GHI/HIP change could hurt health care

By RICHARD PROPP
Albany Times Union
Tuesday, January 29, 2008

The huge combined health insurance company GHI/HIP wants to convert from nonprofit to for-profit status. Shocked? I doubt it. Empire Blue Cross-Blue Shield set the example in 2002.

So, if this new conversion application is approved, will Capital District Physicians Health Plan and MVP Health Care follow suit? As Oscar Wilde once said, “I can resist everything except temptation.”

The Capital District Alliance for Universal Healthcare believes that health care is a necessity and a social good, and that everyone should have access to high-quality, appropriate and necessary health care. The GHI/HIP “for profit” quest does not appear to further that goal.

The GHI/HIP conversion issue emphasizes many of the ongoing concerns as to whether insurance companies should continue to play such a critical role in determining who gets health care, and how and when.

When a health insurance company seeks for-profit status, it appears it has made a decision to fundamentally change how it operates to acquire a large infusion of cash. This fundamental change will logically result in a shift from a consumer-satisfaction priority to a shareholder-satisfaction focus.

Shareholders need to be kept happy, and the way to keep them happy is to make the company very profitable. How can that possibly benefit the consumers, or would-be consumers, of health insurance products? It certainly won’t bring down the cost of health insurance coverage.

There is no assurance, likewise, that the large infusion of cash generated by a conversion to for-profit status will be used to benefit those who have, or would like to be covered by, a health insurance policy. The history of Empire BCBS is relevant. Its assets were used to increase its CEO’s total compensation of $2.1 million in 2002, the year it got approval to convert to for-profit, to $15.5 million in 2006.

GHI/HIP’s request was first disclosed publicly Dec. 13 and requires careful scrutiny. Why is the Insurance Department review timeline so short? Hearings are scheduled today in New York City and Thursday in Albany. There is no justifiable reason to act in haste on this important issue. The Empire BCBS approval process took five years.

The following questions should be asked at the hearings so that an informed and thoughtful decision can be made:

* What are the consequences of the company going from an ethic of subscriber value to one of shareholder value?

* Will the need to assure adequate profits mean premiums will increase and that more care will be denied or delayed?

* 2.7 million people lack health insurance in New York. What effect will conversion have on that number?

* How much of the new revenues generated by going for-profit will finance GHI/HIP lobbyists, and will they work for consumers or shareholders?

* In four other states, Kansas, Maryland, Washington and North Carolina, requests for for-profit status were declined after serious scrutiny by insurance regulators, including the hiring of independent outside experts who studied the impact on the insurance market and access to health care, marketplace competition and industry concentration. Are there no other management alternatives to for-profit? Are relevant studies being carried out by this administration?

* GHI/HIP has $900 million in reserves and just bought Connecticare for $350 million. Why does GHI/HIP need for-profit status to secure its future?

Dr. Arnold Relman, a physician, teacher and thoughtful national medical leader, has written that the key to saving America’s health care lies in having a nonprofit health care system that includes everyone. It seems to us that approving GHI/HIP’s conversion is inconsistent with that idea, will only benefit the shareholders and executives, and will result in worse health care in New York state.

Richard Propp, M.D., is chair of the Capital District Alliance For Universal Healthcare Inc.

ABX1 1 favored insurers over health for all Californians

Leland Y. Yee
San Francisco Chronicle
Tuesday, February 5, 2008

I joined California nurses, school employees, senior groups and a number of labor unions last week in opposing the governor’s flawed health-care bill, Assembly Bill X1 1. While the bill was touted as a fix to our broken health-care system, after extensive study by the Senate Health Committee and the nonpartisan Legislative Analyst’s Office, it is now clear that this proposal was bad for consumers and unfairly favored insurance companies.

This bill was not a step in the right direction, but a huge jump backward for working families who lack health care. As a co-author of the true universal health care bill, Senate Bill 840, I opposed AB X1 1 because it would have required consumers to buy their policies regardless of the cost. Under AB X1 1, all Californians would have been required to buy insurance with no caps on premiums, no regulation of the costs of insurance or medical expenses, no maximum deductibles, and no clearly defined minimum coverage.

In addition, the bill would have provided incentives for employers who now provide benefits to cancel coverage in order to pay cheaper premiums or shift more costs to workers.

Much of the funding was also tied to an increase in the tobacco tax, which I support. However, due to the success of our anti-smoking programs, the funding would be undermined and the revenue stream would continue to decline while the cost of insurance would undoubtedly rise, with shortfalls falling on the backs of working families. The bill also naively counted on increased funding from the federal government – at a time when the Bush administration is cutting children’s health-care coverage. California sends significantly more revenue to Washington than we get back in federal funding and services.

The most objectionable part of this proposal was that if an individual did not purchase insurance within 62 days of the enactment of this flawed legislation, then the Franchise Tax Board would have been authorized to collect premiums by garnishment of wages or mortgage liens on the property of working Californians.

This is simply unethical and an unacceptable way to treat California workers. That is why the California Nurses Association, California School Employees Association, Congress of California Seniors, California Alliance for Retired Americans, Gray Panthers, Senior Action Network, United Food and Commercial Workers, Communication Workers of America, League of Women Voters, and the Teamsters, among many stakeholders, opposed the bill.

Last week, the nonpartisan legislative analyst also concluded that the program presents billions of dollars in risk to California taxpayers while the state is struggling to close a $14.9 billion budget deficit.

An analysis by Professor Jonathan Gruber of the Massachusetts Institute of Technology and the National Bureau of Economic Research shows that due to the struggling economy, the governor’s health-care plan could result in an even more significant hit to the state budget and increase the number of uninsured.

According to the Gruber study, “[F]or every 100 people losing their jobs, the number of people uninsured grows by 85.” Under AB X1 1, this scenario would force even more Californians to spend thousands of dollars a year for insurance they cannot afford.

Such an experiment is under way in the Commonwealth of Massachusetts with troubling results. Already the Commonwealth’s budget is being strained by the unanticipated costs of the mandated insurance program. Over the next few years, Massachusetts lawmakers will be forced to divert hundreds of millions of dollars out of the general fund to subsidize a program that was supposed to pay for itself, taking scarce funds away from other critical programs. While this is happening, Massachusetts residents who have not or cannot comply with the mandate to buy costly insurance on the open market are being forced to pay hefty fines, further compromising their ability to meet the requirements of the law.

Under AB X1 1, the consumer would have been forced to foot the bill so insurance companies could profit. Instead of pushing such a fatally flawed legislation, we should all be fighting to change our failing health-care system without penalizing those who can least afford it. This issue is too important for us to get it wrong.

Leland Y. Yee is the assistant president pro tem of the state Senate. Sen. Yee represents the Eighth Senate District, which includes San Francisco and San Mateo counties.

This article appeared on page B – 7 of the San Francisco Chronicle

Krugman on Gruber on individual mandates

Clinton, Obama, Insurance

By Paul Krugman
The New York Times
February 4, 2008

I’ve tried to explain in previous columns, there really is a big difference between the candidates’ approaches. And new research, just released, confirms what I’ve been saying: the difference between the plans could well be the difference between achieving universal health coverage — a key progressive goal — and falling far short.

So the Obama plan would leave more people uninsured than the Clinton plan. How big is the difference?

To answer this question you need to make a detailed analysis of health care decisions. That’s what Jonathan Gruber of M.I.T., one of America’s leading health care economists, does in a new paper.

Mr. Gruber finds that a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured — essentially everyone — at a taxpayer cost of $124 billion. Over all, the Obama-type plan would cost $4,400 per newly insured person, the Clinton-type plan only $2,700.

http://www.nytimes.com/2008/02/04/opinion/04krugman.html?hp

And…

Covering the Uninsured in the U.S.

By Jonathan Gruber
National Bureau of Economic Research
January 2008

One of the major social policy issues facing the U.S. in the first decade of the 21st century is the large number of Americans lacking health insurance. This article surveys the major economic issues around covering the uninsured. I review the facts on insurance coverage and the nature of the uninsured; focus on explanations for why the U.S. has such a large, and growing, uninsured population; and discuss why we should care if individuals are uninsured. I then focus on policy options to address the problem of the uninsured, beginning with a discussion of the key issues and available evidence, and then turning to estimates from a micro-simulation model of the impact of alternative interventions to increase insurance coverage.

http://www.nber.org/papers/w13758

Comment:

By Don McCanne, MD

This 74 page technical paper discusses economic issues and modeling of reform measures that would increase coverage for the uninsured. It is important to understand Professor Gruber’s framing and modeling since he is an advisor for various reform efforts such as those in Massachusetts and California, and he is also providing support for the proposals of leading Democratic candidates for president.

Although this paper presents modeling of “the impact of alternative interventions to increase insurance coverage,” he begins with assumptions that significantly limit the variety of options studied. He limits his options based on “two political constraints.”

“First, it is difficult to envision a solution to the problem of the uninsured which does not involve in some way the private insurance industry… The health insurance industry in the United States has revenues of over $500 billion per year, making it a very concentrated interest that would have to be defeated to move to nationally provided health insurance.”

“The second constraint is the fiscal situation of the U.S. government. Except for a brief window at the end of the 20th century, the U.S. government budget has been in significant deficit for thirty years, and this deficit shows no sign of abating… Given these pressures, major new expenditures to cover the uninsured are likely to engender a major political battle.”

Before he has even begun his analysis, he eliminates a single payer national health program because we must involve the private insurance industry, in spite of his acknowledgment of the high administrative costs.

Also, his modeling does not look at the impact on our total health care costs, but rather he models the impact on taxpayer costs. In so doing, he has placed a very high priority on keeping the costs of the expansions of health care coverage out of our government budgets, demonstrating that the biggest “bang for the buck” is attained by those alternatives that result in the lowest taxpayer cost per each additional individual obtaining coverage, ignoring the fact that the difference must be paid by individuals and/or employers.

He discusses two “modest reforms:” public insurance expansion, and non-group tax credits, which are quite inadequate compared to the need.

Then, for “more fundamental reform,” he states that issues to be addressed include pooling, affordability, and mandates. He considers three options, “given the constraint that private insurance provision must be a centerpiece of any reform plan.”

His first option is to ensure universal access of individuals to an affordable insurance product. He describes state-specific pools that are community rated with guaranteed issue. Voluntary participation would be encouraged by sliding scale subsidies based on income. By his modeling, this would cover about one-half of the uninsured, at a high taxpayer cost of $4500 per individual (Obama plan – per Krugman).

His second option is to add an individual mandate to this universal access approach. He makes the assumption, without supporting evidence (theorizing that strong penalties would be effective), that “95% of those who would not voluntarily choose to insure are forced to insure through the mandate.” By his modeling, this would cover about 97% of the uninsured at a lower taxpayer cost of $2732 per newly insured (Clinton plan – per Krugman).

His third option is to remove the tax subsidy (regressive) for employer-sponsored insurance and use those funds for the pools in the individual mandate approach. The tax subsidy is so great ($200 billion) that this would result in a negative cost per dollar of insurance provided (individual mandate cost of $120 billion). But once again, this is a reduction in government spending (a government subsidy not granted) with a redistributive shift between employers and individuals of varying incomes.

Professor Gruber concludes, “To fundamentally control health care costs we need to actually be willing to deny care that does little for health – but which consumers now want. This would be accomplished either through government technology policy, medical standards, or global provider budgets… The fundamental insight of this round of reform is therefore to not hold the attainable goal (universal coverage) hostage to the (currently) unattainable goal, fundamental health care cost control.”

But isn’t that the problem? Health care costs are now so high that private insurers can no longer provide us with reasonably comprehensive plans at premiums that are affordable for middle-income individuals.

His first option of pooling (community rating and guaranteed issue) cannot make the plans affordable. His second option of an individual mandate can’t work simply because the plans are not affordable, especially when he has made keeping government budgets in check a major priority. His third option corrects a tax policy injustice, but, in itself, is hardly a reason to perpetuate the inefficiencies and injustices of the private health plans.

Jonathan Gruber and Paul Krugman deserve their reputations as being amongst the most respected economists in the nation. But their fixation on individual mandates provides about the same level of insight as to what we need in the way of health financing reform as does the insight provided by the proctologist who tries to tell us our general state of health from his perspective.

Oregon's health care lottery

Health plan takes new applicants

By Thelma Guerrero-Huston
StatesmanJournal.com
January 29, 2008

More than 600,000 adult Oregonians lack medical care coverage, according to Oregon Department of Human Services.

Last week, the agency announced it would offer new enrollment opportunities for uninsured individuals… by allowing them to put their names on a reservation list for possible health coverage in the Oregon Health Plan’s Standard benefit plan.

In March, a computer will begin to draw names randomly from the reservation list. People whose names are drawn will be mailed an application to apply for the OHP Standard plan.

Applications will continue to be mailed out each month until 10,000 to 12,000 new individuals are enrolled.

This is the first time since 2004 that the Standard plan — established in 1994 — is open to new enrollments.

Currently, there are 19,000 people on the OHP Standard plan, which provides low-cost health care coverage to Oregon residents who are age 19 or older, have a low income, and do not qualify for traditional Medicaid coverage.

“People without health insurance coverage are sicker and die sooner than those who are able to access health care every day,” said Dr. Bruce Goldberg, DHS director. “This is really a tragedy. It’s a stain on our community in general.”

http://www.statesmanjournal.com/apps/pbcs.dll/article?AID=2008801290334

Comment:

By Don McCanne, MD

Oregon has long been admired for its innovative efforts to expand coverage in an environment of limited state resources. It has even seriously considered single payer reform.

But a lottery to provide coverage for 10,000 to 12,000 of Oregon’s 600,000 uninsured adults? Come on!

Oregon’s health care lottery

Health plan takes new applicants

By Thelma Guerrero-Huston
StatesmanJournal.com
January 29, 2008

More than 600,000 adult Oregonians lack medical care coverage, according to Oregon Department of Human Services.

Last week, the agency announced it would offer new enrollment opportunities for uninsured individuals… by allowing them to put their names on a reservation list for possible health coverage in the Oregon Health Plan’s Standard benefit plan.

In March, a computer will begin to draw names randomly from the reservation list. People whose names are drawn will be mailed an application to apply for the OHP Standard plan.

Applications will continue to be mailed out each month until 10,000 to 12,000 new individuals are enrolled.

This is the first time since 2004 that the Standard plan — established in 1994 — is open to new enrollments.

Currently, there are 19,000 people on the OHP Standard plan, which provides low-cost health care coverage to Oregon residents who are age 19 or older, have a low income, and do not qualify for traditional Medicaid coverage.

“People without health insurance coverage are sicker and die sooner than those who are able to access health care every day,” said Dr. Bruce Goldberg, DHS director. “This is really a tragedy. It’s a stain on our community in general.”

http://www.statesmanjournal.com/apps/pbcs.dll/article?AID=2008801290334

Comment:

By Don McCanne, MD

Oregon has long been admired for its innovative efforts to expand coverage in an environment of limited state resources. It has even seriously considered single payer reform.

But a lottery to provide coverage for 10,000 to 12,000 of Oregon’s 600,000 uninsured adults? Come on!