PNHP

Americans lack understanding of their private health plans

Americans lack understanding of their private health plans

New Survey Shows Americans Lack Understanding of Their Health Coverage and Basic Health Insurance Terminology

eHealthInsurance
January 3, 2008

According to a survey commissioned by eHealth, Inc., the parent company of eHealthInsurance, most consumers lack a basic understanding of even the most common health insurance terms as well as the particulars of their own health insurance coverage.

Less than a quarter of respondents (23 percent) reported that they were very sure of what the terminology used in their health insurance policy actually means.

Even basic terms proved difficult, with few respondents reporting an understanding of acronyms such as HMO (36 percent), PPO (20 percent) or HSA (11 percent).

Even though PPOs are the most common type of health insurance offered by U.S. employers, only a fifth (20 percent) know what PPO stands for.

“It’s clear Americans lack a basic understanding of health insurance terms, which may prevent them from selecting the health plan best suited to their individual needs,” said Sam Gibbs, senior vice president of eHealth, Inc.

http://phx.corporate-ir.net/phoenix.zhtml?c=201232&p=irol-newsArticle&ID=1090963&highlight=

Comment:

By Don McCanne, MD

Although this survey was designed to be used in the promotion of eHealthInsurance, an online health insurance broker, it does provide information that is useful to health care reform advocates.

The opponents of a national health insurance program insist that the preferred solution is to make patients better health care shoppers by having them spend their own funds on health care, through the use of high-deductible health plans and health savings accounts.

Most concede that this trend has not had much of an impact yet on controlling health care spending, with some blaming information asymmetry. The purchaser of health care has only very limited access to useful pricing and quality information about the providers. So it is contended that more transparency is required.

Yet the private insurance industry claims that they have been successful in providing individuals with choice of a variety of health plans so that they don’t need to pay for any more coverage than they will actually use (as if anyone could possibly predict that). eHealthInsurrance is frequently cited as a resource that has made greater transparency in health plan purchasing a reality.

So how much does the health insurance shopper know? More importantly, how much does the health insurance purchaser know about the plan that they have in hand that actually specifies their coverage? Not much.

Even though PPOs are the most common type of employer-sponsored insurance, four-fifths don’t even know what PPO stands for. How many of those realize that PPOs take away choice of providers, and assess severe financial penalties for using providers outside of the plan?

Most individuals would prefer a health program with comprehensive benefits, free choice of providers, and the elimination of financial barriers to care (features of a single payer national health program). You won’t find such a plan at eHealthInsurance.

Instead of looking for transparency in the private health insurance marketplace, we should look for more transparency in the political process. Or do insurance and pharmaceutical industry funds create only an illusion of conflict of interest?

Understanding insurer profits

Health Insurers Battle Rising Costs

By TheStreet.com Ratings Staff
TheStreet.com
January 16, 2008

Health insurers continued to boost profits in the second quarter, even as they struggled to raise premiums in line with health care costs. TheStreet.com Ratings’ review of the financial performance of the 648 health insurers it tracks found that total net income rose by 27.5% during the first six months of 2007 to $8.8 billion, up from $6.9 billion the prior year.

Investment gains helped bridge the gap. They comprised 43.4% of industry profits, up from 35.7% the prior year, growing 55% to $3.8 billion through June 30, 2007 — up from $2.5 billion a year earlier. By comparison, profits from insurer’s core underwriting business increased just 9.1% to $5.8 billion through June 30, 2007, up from $5.3 billion the prior year.

(The study is based on the latest available statutory filings with the National Association of Insurance Commisssioners.)

Donna O’Rourke, senior financial analyst with TheStreet.com Ratings, explains.

Q. Are rising health care costs the biggest risk for insurers?

A. On the one hand, insurers are dealing with rising health costs, and on the other hand — as a result of competitive pressures and unwillingness by consumers to absorb more premium rate increases — the ability to raise additional revenue to cover those costs.

But the industry also does business in an uncertain political environment. Revamping the financing of health care is a hot topic among the presidential hopefuls and many state governors.

The industry has also recently placed a lot of its efforts on the unstable Medicare line of business that is often the target of cost-cutting and heavy oversight by the federal government.

Q. But if profits are rising, should investors — and consumers — be worried?

A. The industry has been going strong for several years, really since 2003, when we came out of the last recession.

This continued profitability and strong market capitalization is reflected in the latest rating review; we upgraded 27 insurers and only downgraded four. This follows first-quarter ratings upgrades of 21 insurers and nine downgrades.

But health care costs continue to rise at a faster pace than revenue, because insurers struggle with raising premiums, and this is starting to affect their bottom line.

Q. Should we be concerned about a rise in investment gains? Are insurers making riskier investments?

A. Not necessarily. Normally, the industry makes some of its money by investing its liquid assets gained through prior years gains in various investments while making most of its profits from the actual business of health insurance.

An increase in investment income is not in itself a bad thing. But in an environment where margins on the core business are starting to narrow, it could become a concern in the future. What we see happening is an uptick in the percentage of profits coming from investments.

Health insurers, which are highly regulated, typically don’t own high-risk investments. If they continue to hold low-risk investments, the income generated from them may not be sufficient to offset a decline in their business.

If insurers choose to raise the risk profile of their portfolios, they will need to make sure they have sufficient capital in place to pay out claims if their bets move in the wrong direction.

Q. Where are the largest areas of growth for health insurers?

A. The Medicare line of business, both the Medicare Advantage business and Medicare Part D, has had the biggest impact in terms of growth on the industry. Margins are very high and have been compensating for the highly competitive employer health insurance market. While this is still very small, we are also seeing growth in the individual private insurance market, and insurers continue to expand their offerings to self-funded employers.

Q. This competition should be good news for consumers, though, right?

A. That’s right. Competition in these lines of business means more choice for consumers and downward pressure on premiums.

http://www.thestreet.com/s/health-insurers-battle-rising-costs/newsanalysis/ratings/10398943.html?

Comment:

By Don McCanne, MD

A few observations:

* The $12 billion or so in annual profits from the insurers’ core underwriting business is a comparatively small proportion of our $2260 billion national health expenditures. If we eliminated these profits, we would not see much change in the overall health care budget. That said, $12 billion would buy a lot of health care and certainly should not be ignored. And it is a $12 billion expenditure that is an inappropriate use of funds designated for health care spending.

* The $8 billion or so of annual investment income is often excluded from discussions of improving financing efficiency. But should it be? That income is derived from the investment of our premium dollars that the insurers are holding in trust for our future health care. Since those are our funds, shouldn’t the investment income accrue to us? If we established our own public health insurance program, the investment return on the reserve funds would be used to reduce the taxes that finance the program.

* Although the diversion of health care profits to the private insurers makes us angry, we have to keep in mind what the greater problem is. The private insurers are a major component of our highly flawed, fragmented, multi-payer system of financing health care. Between the administrative excesses of the insurers and the administrative burden placed on the providers of health care, we waste about $350 billion that could be recovered by changing to an administratively efficient single payer system. We do want to recover that $12 billion from the core underwriting business, but it is far more important to recover the $350 billion through structural reform of our system of health care financing.

* The greatest growth for the private insurers has occurred with Medicare Advantage and Medicare Part D. Margins have been very high in these programs – much higher than in the employer health insurance market. But these are our own public programs. We have handed them over to the private insurers along with a massive excess infusion of our own taxpayer funds. This constitutes a flagrant betrayal of trust by our legislators (which is a definition of treason). Every legislator that participated in this massive fraud should be voted out of office in the next election.

* The insurance industry remains concerned about doing business in an uncertain political environment, including concerns about the unstable Medicare line of business. No problem. By establishing our own national health insurance program, we can provide the insurers with the certainty of knowing that they will no longer have to manage our universal risk pool.

Rex Nutting on health care reform

Candidates not leading on economic issues

Commentary: Michigan tailor-made for bold plans on health care, energy

By Rex Nutting
MarketWatch
January 15, 2008

The best presidents know when to lead and when to follow.

The current crop of candidates isn’t doing either when it comes to the biggest issues facing the economy: health care and energy.

The campaign stop in Michigan this week was tailor-made for one candidate to break away from the pack by showing a willingness to follow the public’s lead on health care while providing some real leadership on energy. But it didn’t happen.

Michigan’s economy has been devastated by the transformation of motor vehicle manufacturing.

What’s happened to Michigan? The same thing that’s hurting companies and consumers all over America: Exploding costs for health care and energy. Fixing those problems would go a long way toward fixing Michigan, and the rest of the U.S. economy as well.

Health care

Because the United States is the only advanced country that doesn’t have a national health care system, the Big Three companies (and every other company that wants to attract good workers) must bear the cost of health insurance. The Big Three also cover the costs for most retirees.

The answer is simple: Get out of the way and follow the people, who overwhelmingly support universal health coverage. Enrolling every American in a health insurance system run like Medicare would extend care to millions of uninsured Americans, cut costs by eliminating unnecessary paperwork, and would probably improve the quality of care.

None of the major candidates has endorsed such a simple solution, preferring elaborate Rube Goldberg plans that might bring a few more people under insurance coverage, but would not fundamentally change what most Americans believe is a deeply flawed health-care system.

Michigan could have used some bold ideas, instead of the safe but bland porridge it got.

http://www.marketwatch.com/news/story/candidates-missing-key-opportunity-lead/story.aspx?guid=%7B2E644345-1DCD-4F9E-BA1B-3A398736A30B%7D

Comment:

By Don McCanne, MD

Supporters of national health insurance certainly can identify with these comments. But why are they worth sending out as a Quote of the Day? It’s the source of the comments. Rex Nutting is Washington bureau chief of MarketWatch, a subsidiary of Dow Jones and Company.

Commonwealth Fund on candidates' reform proposals

Envisioning the Future: The 2008 Presidential Candidates' Health Reform Proposals

By Sara R. Collins, Ph.D., and Jennifer L. Kriss
The Commonwealth Fund
January 15, 2008

This report analyzes the health care proposals of eight Democratic and Republican 2008 presidential candidates–Hillary Clinton, John Edwards, Rudolph Giuliani, Mike Huckabee, Dennis Kucinich, John McCain, Barack Obama, and Mitt Romney. Their approaches to health insurance reform fall into three categories: 1) proposals that emphasize tax incentives for obtaining insurance through the individual market (Giuliani, Huckabee, McCain, Romney); 2) proposals that build on existing private and public group insurance with shared responsibility for financing coverage (Clinton, Edwards, Obama); and 3) proposals that aim to cover everyone through publicly sponsored insurance systems like Medicare (Kucinich). The report examines differences among the proposals, and evaluates them against key principles like affordability, provision of essential services, financial protection, streamlined administration, and fair financing.

Which Proposals Hold the Greatest Promise?

To evaluate these new policies, The Commonwealth Fund Commission on a High Performance Health System identified several key principles to moving the health system toward high performance. They include:

* Provision of equitable and comprehensive insurance for all

* Provision of benefits that cover essential services with appropriate financial protection

* Premiums, deductibles, and out-of-pocket costs are affordable relative to family income

* Health risks should be broadly pooled

* The proposals should be simple to administer with coverage that is automatic and continuous

* Dislocation should be kept to a minimum–people could stay in the coverage they have if desired

* Financing would need to be adequate, fair, shared across stakeholders.

Measured against these principles, the mixed private-public group insurance with a shared responsibility for financing proposed by the leading Democratic candidates and the public insurance reform proposals put forward by Kucinich have the greatest potential to move the health care system toward high performance. Both approaches have the potential to provide everyone with comprehensive and affordable health insurance, achieve greater equity in access to care, realize efficiencies and cost savings in the provision of coverage and delivery of care, and redirect incentives to improve quality. However, from a pragmatic perspective, the mixed public-private approach, which allows the more than 160 million people who now have employer-based health coverage to retain it — and does not require them to enroll in a new program as in the public insurance models — would cause far less dislocation.

The Republican candidates’ proposals for reform that rely on tax incentives and voluntary purchase of coverage in an unregulated individual insurance market are, on their own, unlikely to achieve universal coverage. Buying coverage in the individual market will continue to be challenging if tax incentives are not coupled with an individual mandate, minimum benefit standards, regulations against risk selection, and premium and out-of-pocket spending limits as a share of income. Providing incentives for coverage in the individual market without an individual mandate or regulations against risk selection would not pool risks. Insurers would still write individual policies rather than policies for a broad group of people. Moreover, because of the substantially higher administrative costs in the individual market, covering more people this way will only increase U.S. annual spending on insurance administration.

Executive Summary:
http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=647708

Full report (58 pages):
http://www.commonwealthfund.org/usr_doc/Collins_envisioningfuture2008candplans_1092.pdf?section=4039

Comment:

By Don McCanne, MD

The policy principles listed above are key to moving us toward a high-performance health system – except one. Avoiding “dislocation” by allowing an individual to elect to continue with a private plan that limits choice of providers, limits benefits, and requires greater cost sharing does not move us closer to a high-performance system but is included for pure political reasons to appease those individuals who remain uncomfortable with the concept of a public insurance program that they don’t fully understand. All of the other principles listed should be an integral part of comprehensive reform.

Of the three basic models for reform, the Republican proposals that would use tax incentives for purchasing private, individual health plans can be dismissed as being non-responsive to the key principles listed.

In contrast, the concluding comments of this report seem to equate the private-public group insurance model of the three leading Democratic candidates with the public insurance model of Dennis Kucinich in their potential to move the health care system toward high performance. They conclude that pragmatism favors the private-public model since it would result in less “dislocation.” But you need to read the full report to see if they have made a case for equivalence of the private-public and the public models of reform.

The quotations in the following comments are from the Commonwealth Fund report.

“Both Republican and Democratic candidates, with the exception of Kucinich, envision a health insurance system that continues to be structured around private insurance markets with a supporting role played by public insurance programs.”

“With respect to affordability, all the leading Democrats (Clinton, Edwards, and Obama) have said that enrollees would pay a set percentage of their income on premiums, but have not specified the percentage or what would happen if affordable plans are not available. They have also focused exclusively on premiums when determining affordability, despite the fact that out-of-pocket costs can and do comprise a substantial share of family incomes, particularly in low- and moderate-income households.”

“The complexity and fragmentation of the current health insurance system often makes obtaining and retaining insurance difficult. Kucinich’s National Health Insurance program would provide the most seamless enrollment of the current proposals. The Democratic candidates that have proposed mixed privateĆ¢ā‚¬ā€œpublic approaches would fill the gap in the current system with new group insurance ‘connectors.’ However, these proposals would not make enrollment easier or more seamless and would retain the complexity in the system.”

“Achieving universal coverage or expanded health insurance coverage will require a significant financial investment by federal and state governments, employers, households, and other stakeholders. Such a shared responsibility among stakeholders should be fair, based on ability to pay. None of the Republican candidates has identified a source of financing. The leading Democratic candidates would either roll back the tax cuts of the past few years or allow them to expire for households with incomes above $200,000 (Edwards) and $250,000 (Clinton and Obama). They have also identified other more minor sources of financing, as well as savings achieved through improved efficiency. The lack of details in their proposals on many key features — the size of the premium subsidies for low- and moderate-income families, the employer contribution, the increase in Medicaid and SCHIP income eligibility standards — means it is unclear whether the amount of identified financing will be sufficient.”

So how do the public-private and public models actually score on the principles for high performance?

* Provision of equitable and comprehensive insurance for all

The public model would be equitable by design, whereas the private-public model would use administratively complex mechanisms to attempt to achieve partial equity in the multi-payer system. The public model would provide comprehensive benefits, whereas the private-public model would likely establish a benchmark of basic coverage. The public model would automatically include everyone, whereas the private-public model would continue to leave out individuals who cannot pay the entry fees into a system that attempts to balance premiums, public subsidies, out-of-pocket expenses, and income qualifications.

* Provision of benefits that cover essential services with appropriate financial protection

The public model would include all essential services while eliminating financial barriers to care, whereas the private-public model would vary benefits and cost sharing in an attempt to keep premiums affordable (just as FEHBP does now).

* Premiums, deductibles, and out-of-pocket costs are affordable relative to family income

The public model shifts financing to the tax system which eliminates problems of affordability for the family, whereas the private-public model cannot ensure affordability for the family since the thresholds for premiums and out-of-pocket costs overlap, on a sliding scale, with family income, which also frequently is not stable.

* Health risks should be broadly pooled

The public model establishes a single, universal risk pool that includes everyone, whereas the private-public model continues to fragment risk pools while introducing cumbersome administrative mechanisms to attempt to reduce the perversities of adverse selection.

* The proposals should be simple to administer with coverage that is automatic and continuous

The public model is noted for its administrative simplicity, and it is automatic and continuous for life, whereas the private-public model perpetuates the administrative complexities of the multi-payer system, preventing enrollment from being automatic (a problem for a system that promises choice of plans from multiple potential sources), and resulting in inevitable interruptions in coverage.

* Financing would need to be adequate, fair, shared across stakeholders

The public model would financed through the tax system, ensuring adequate funding and fairness of contributions by all residents based on ability to pay, whereas the private-public model would be financed through an administratively complex system not unlike our current multi-payer system which would likely result in continued underfunding of safety-net programs for lower-income individuals, not to mention other deficiencies.

* Dislocation should be kept to a minimum — people could stay in the coverage they have if desired

So minimizing “dislocation” from existing private insurance coverage is the one principle wherein the private-public model is alleged to offer higher performance than the public model. But when you look at all of the other principles listed, The Commonwealth Fund got it wrong in their conclusion. Expanding multi-payer coverage through the private-public model of reform sacrifices the beneficial health policies of all of the other principles listed, in exchange for a political principle that provides no health system benefit.

But then maybe dislocation is a concept that we could still make use of. We should maximize the dislocation of the politicians who are standing between us and genuine reform.

Schwarzenegger-Nunez Health Proposal for California Flawed

WHY YOU SHOULD VOTE NO ON ABX1 1

AB 1X 1 is a $14 billion health care expansion that is flawed and ill timed.

* The state faces a $14 billion dollar budget deficit and ABX1 1 has an estimated price tag of an additional $14 billion dollars. It would be imprudent for the state to implement this plan prior to addressing the budget crisis.

* AB X1 1 will expand health care to some, just as many children are being denied health care due to reductions in federal and state programs.

* A better approach is to address children’s health care and the budgetary shortfall at this time and craft a workable comprehensive health care proposal at a later time.

The bill forces individuals to purchase health care without stating the benefit level or the cost of the benefits.

* AB X1 1 contains an individual mandate with subsidies available to a very limited group of individuals. Employees who are offered health care, no matter how minimal or unaffordable, are denied all subsidies and access to the pool.

* There are no caps on what the insurance products can cost and there is no specificity about the quality of the products or the minimum benefit level required. Passage of this bill will force consumers to buy insurance they may not be able to afford. Accordingly, working families could be forced to buy worthless yet still unaffordable insurance.

The individual mandate is not accompanied with adequate affordability protections.

* Individuals with family income over 400% of the Federal Poverty Level (that’s about $80,000 for a family of four), have no cap on premiums or out of pocket expenditures. Individuals with family income between 250% and 400% of the FPL (about $50,000 to $80,000 for a family of four) are eligible for a tax credit to off-set premium expenditures above 5.5% of family income. This off-set does not provide any assistance for deductibles, co-pays, pharmaceuticals and other out of pocket expenses. Three quarters of bankruptcy is due to these health costs, not premiums. People don’t fail to buy health insurance because they want to play Russian Roulette, but rather because they can not afford to do so.

* Instituting an individual mandate in this economic climate without adequate affordability protections will only add to financial devastation for many working families. Projections are for a minimum policy costing $200/month with $2500 deductible per person. Under this plan individuals can be out of pocket almost $5000 every year before receiving any insured health care. As a result, they will delay necessary preventive to delay care.

We don’t know what the real price tag will be for individuals.

* We don’t know what products will be on the market and what they will cost, because there is no cap on costs and because costs continue to rise exponentially. We are forcing individuals in California to purchase products which may be financially unfeasible and may provide benefits that are inadequate.

Most individuals don’t have the ability to opt-out if obligation is un-affordable.

* Only individuals under 250% of FPL have the ability to opt-out. Everyone else is obligated under the mandate. While the bill does authorize establishment of an additional “hardship” exemption, eligibility and procedural steps for qualifying under the exemption is as of yet undetermined.

An employer can fulfill his obligation under the bill and still fail to provide assistance to the majority of employees.

* Because an employer’s obligation is in the aggregate there is no obligation on the employer to contribute towards each individual employee. Employers may fulfill their obligations under this bill by paying for their managers or high wage employees while providing no healthcare coverage for their lower wage workers. These employees can receive little or no employer assistance, but are still obligated under the mandate even though they are the least able to afford it!

This bill codifies the practice of high profit employers funneling their low wage earners into public assistance.

* If the employer does not “offer”, the individual can go into the pool. Accordingly, a large employer can meet its obligation by putting money towards the health care premiums of high wage employees and not put any money towards the health care premiums of low wage employees. Those employees can then go into the pool (with NO MONEY going into the pool from that employer) and get health care. If the individual meets specified economic criteria that individual may be able to get federal or state assistance in purchasing health care, otherwise that individual is completely on his own.

The employer fee can’t be increased without a 2/3 vote or ballot initiative, yet an individual’s obligation can be increased without limit with only 60 days notice.

* Every future increase in health care premiums will be borne by individuals.

There are penalties for individuals who fail to comply with the individual mandate but there are no penalties for employers who skirt their obligations.

* Individuals who fail to purchase insurance will be turned over to the Franchise Tax Board. Currently, the FTB has the authority to put liens on people’s homes or garnish wages when monies are owed the state.

* There are no such penalty provisions included in the measure for employers who fail to comply with their obligations or for employers who willfully misclassify individuals as independent contractors rather than employees so as to avoid their obligations.

Definition of “Offer” leaves many without any assistance.

* An employer has “offered” health care even if he’s only put one dollar towards an employee’s health care. This “health care” could be a gym club membership or a health savings account. Where an employer has made an “offer” an employee is ineligible for pool admittance. Accordingly, under the provisions of the bill a worker could be obligated to pay the entire cost of premium/deductible/co-pay’s etc… on the open market.

There are no real cost containment provisions.

* The only significant cost containment provision requires insurers to expend no more than 15% of premiums on administrative costs. Nothing prevents insurers from increasing costs in any amount they desire to insure profits.

* There are no other reasonable cost containment provisions such as limitations on annual increases. This means we will continue to face large premium increases.

There are significant process issues and funding questions with ABX1 1 that should not exist in a bill of this magnitude.

* There has been little public vetting of the actual bill, amendments and ballot initiative language. It is unclear why there is a rush on this bill given the ballot initiative in on the November ballot. The proponents are reasonably concerned about their financial investment in that process; but is that a good enough reason not to thoroughly vet the bill?

* There are many significant unanswered questions, such as severability between the bill and the ballot initiative; on and off triggers and their impact and practicality for a program of this magnitude and effects on the general fund, and whether the “pool” has a predictable chance to be adequately funded.

* This plan will reduce County Health Systems to the point that existing trauma and burn centers could be eliminated with no guarantees that the private sector will supply these services to communities as these are not mandated hospital services under current law nor under the bill.

For all the above reasons CNA, CSEA, The Teamsters, Machinists, United Food and Commercial Workers (UFCW), and the Engineer’s and Scientists of California urge a “NO” vote when this bill comes before you in committee.

Sincerely,

Donna Gerber, Director
California Nurses Association

Dave Low, Assistant Director of Government Relations
California School Employees Association

Barry Broad, Partner
Broad & Gusman, LLP

cc: Senate Pro Tem Don Perata
Speaker Fabian Nunez

Harvard Study Finds Dangerous Increase in Emergency Department Waits Nationwide

Even the Severely Ill are Waiting Longer

Embargoed Until:
January 15, 2008
12:01 AM EST

Contacts:
Andrew P. Wilper, MD, 312-782-6006
Steffie Woolhandler, MD, MPH, 312-782-6006
David Himmelstein, MD, 312-782-6006

Waits To See An Emergency Department Physician: U.S. Trends And Predictors, 1997–2004

Waits for emergency care are getting longer each year, according to a study published online today by the journal Health Affairs. The study, which analyzed the time between a patient’s arrival in the emergency department (ED) and when they were first seen by a doctor, found that the increasing delays affected everyone, including those with and without health insurance, and people from all racial and ethnic groups.

Severely ill patients suffered the largest increases in ED waits. Between 1997 and 2004, waits increased 36% for all patients (from 22 minutes to 30 minutes, on average). However for those, whom a triage nurse classified as needing immediate attention, waits increased by 40% (from 10 to 14 minutes). Waits increased the most for emergency patients suffering heart attacks, who waited only 8 minutes in 1997, but 20 minutes in 2004, a 150% increase. A quarter of heart attack victims in 2004 waited 50 minutes or more before seeing a doctor. The authors state that the lengthening delay for care of heart attacks is dangerous, because chances of surviving a heart attack are known to worsen when treatment is delayed.

The research, carried out at the Cambridge Health Alliance/Harvard Medical School, is the first detailed analysis of national trends in ED waits. Using data from the National Center for Health Statistics (NCHS), the authors analyzed over ninety thousand ED visits nationwide between 1997 and 2004.

While all demographic groups experienced lengthening ED waits, waits were slightly longer for blacks (13.0% longer than non-Hispanic whites) and Hispanics (14.5% longer). Women also had longer waits (5.6% longer than men), while rural hospitals’ patients had the shortest waits.

The number of ED visits increased from 93.3 million in 1997 to 110.2 million in 2004. Meanwhile, the American Hospital Association reports that the number of hospitals operating 24-hour EDs decreased by 12% between 1994 and 2004. ED crowding in the remaining EDs causes one ambulance to be diverted away from a U.S. ED every minute according to the National Center for Health Statistics.

Dr. Andrew Wilper, lead author of the study, said “EDs close because, in our current payment system, emergency patients are money-losers for hospitals. Planned admissions of elective patients who need procedures are usually more lucrative for two reasons. First, elective patients can be scheduled more conveniently and efficiently, and second, they can be pre-screened for health insurance. Our study suggests that these perverse incentives are causing dangerous delays in potentially life-saving emergency care, even for those with insurance.”

“One contributor to ED crowding,” said Dr. David Himmelstein, Associate Professor of Medicine and senior author of the study, “is American’s poor access to primary and preventive care which could address medical issues before they become emergencies.”

Robert A. Lowe, MD, Associate Professor of Emergency Medicine at Oregon Health and Science University remarked, “This study shows how ED overcrowding affects all of us. If a loved one has a heart attack, it doesn’t matter whether he is well insured. He still has a 1-in-4 chance of waiting over 50 minutes, because of ED overcrowding, and this wait will only increase.”

Dr. Steffie Woolhandler, Associate Professor of Medicine at Harvard and study coauthor said, “Some policy makers, including President Bush, claim that everyone in America has access to health care through the ED. Our findings counter this notion. We have insurance company CEO’s making tens of millions of dollars per year, 47 million uninsured Americans, and worsening access to emergency care for everyone. Something is wrong here.”

Dr. Wilper was supported by a National Service Research Award.

Co-authors Drs. David Himmelstein and Steffie Woolhandler are also co-founders of Physicians for a National Health Program, www.pnhp.org.

For embargoed copies of the paper, contact Dave Howell at dave@pnhp.org, 312-782-6006

Commonwealth Fund on candidates’ reform proposals

Envisioning the Future: The 2008 Presidential Candidates’ Health Reform Proposals

By Sara R. Collins, Ph.D., and Jennifer L. Kriss
The Commonwealth Fund
January 15, 2008

This report analyzes the health care proposals of eight Democratic and Republican 2008 presidential candidates–Hillary Clinton, John Edwards, Rudolph Giuliani, Mike Huckabee, Dennis Kucinich, John McCain, Barack Obama, and Mitt Romney. Their approaches to health insurance reform fall into three categories: 1) proposals that emphasize tax incentives for obtaining insurance through the individual market (Giuliani, Huckabee, McCain, Romney); 2) proposals that build on existing private and public group insurance with shared responsibility for financing coverage (Clinton, Edwards, Obama); and 3) proposals that aim to cover everyone through publicly sponsored insurance systems like Medicare (Kucinich). The report examines differences among the proposals, and evaluates them against key principles like affordability, provision of essential services, financial protection, streamlined administration, and fair financing.

Which Proposals Hold the Greatest Promise?

To evaluate these new policies, The Commonwealth Fund Commission on a High Performance Health System identified several key principles to moving the health system toward high performance. They include:

* Provision of equitable and comprehensive insurance for all

* Provision of benefits that cover essential services with appropriate financial protection

* Premiums, deductibles, and out-of-pocket costs are affordable relative to family income

* Health risks should be broadly pooled

* The proposals should be simple to administer with coverage that is automatic and continuous

* Dislocation should be kept to a minimum–people could stay in the coverage they have if desired

* Financing would need to be adequate, fair, shared across stakeholders.

Measured against these principles, the mixed private-public group insurance with a shared responsibility for financing proposed by the leading Democratic candidates and the public insurance reform proposals put forward by Kucinich have the greatest potential to move the health care system toward high performance. Both approaches have the potential to provide everyone with comprehensive and affordable health insurance, achieve greater equity in access to care, realize efficiencies and cost savings in the provision of coverage and delivery of care, and redirect incentives to improve quality. However, from a pragmatic perspective, the mixed public-private approach, which allows the more than 160 million people who now have employer-based health coverage to retain it — and does not require them to enroll in a new program as in the public insurance models — would cause far less dislocation.

The Republican candidates’ proposals for reform that rely on tax incentives and voluntary purchase of coverage in an unregulated individual insurance market are, on their own, unlikely to achieve universal coverage. Buying coverage in the individual market will continue to be challenging if tax incentives are not coupled with an individual mandate, minimum benefit standards, regulations against risk selection, and premium and out-of-pocket spending limits as a share of income. Providing incentives for coverage in the individual market without an individual mandate or regulations against risk selection would not pool risks. Insurers would still write individual policies rather than policies for a broad group of people. Moreover, because of the substantially higher administrative costs in the individual market, covering more people this way will only increase U.S. annual spending on insurance administration.

Executive Summary:
http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=647708

Full report (58 pages):
http://www.commonwealthfund.org/usr_doc/Collins_envisioningfuture2008candplans_1092.pdf?section=4039

Comment:

By Don McCanne, MD

The policy principles listed above are key to moving us toward a high-performance health system – except one. Avoiding “dislocation” by allowing an individual to elect to continue with a private plan that limits choice of providers, limits benefits, and requires greater cost sharing does not move us closer to a high-performance system but is included for pure political reasons to appease those individuals who remain uncomfortable with the concept of a public insurance program that they don’t fully understand. All of the other principles listed should be an integral part of comprehensive reform.

Of the three basic models for reform, the Republican proposals that would use tax incentives for purchasing private, individual health plans can be dismissed as being non-responsive to the key principles listed.

In contrast, the concluding comments of this report seem to equate the private-public group insurance model of the three leading Democratic candidates with the public insurance model of Dennis Kucinich in their potential to move the health care system toward high performance. They conclude that pragmatism favors the private-public model since it would result in less “dislocation.” But you need to read the full report to see if they have made a case for equivalence of the private-public and the public models of reform.

The quotations in the following comments are from the Commonwealth Fund report.

“Both Republican and Democratic candidates, with the exception of Kucinich, envision a health insurance system that continues to be structured around private insurance markets with a supporting role played by public insurance programs.”

“With respect to affordability, all the leading Democrats (Clinton, Edwards, and Obama) have said that enrollees would pay a set percentage of their income on premiums, but have not specified the percentage or what would happen if affordable plans are not available. They have also focused exclusively on premiums when determining affordability, despite the fact that out-of-pocket costs can and do comprise a substantial share of family incomes, particularly in low- and moderate-income households.”

“The complexity and fragmentation of the current health insurance system often makes obtaining and retaining insurance difficult. Kucinich’s National Health Insurance program would provide the most seamless enrollment of the current proposals. The Democratic candidates that have proposed mixed privateĆ¢ā‚¬ā€œpublic approaches would fill the gap in the current system with new group insurance ‘connectors.’ However, these proposals would not make enrollment easier or more seamless and would retain the complexity in the system.”

“Achieving universal coverage or expanded health insurance coverage will require a significant financial investment by federal and state governments, employers, households, and other stakeholders. Such a shared responsibility among stakeholders should be fair, based on ability to pay. None of the Republican candidates has identified a source of financing. The leading Democratic candidates would either roll back the tax cuts of the past few years or allow them to expire for households with incomes above $200,000 (Edwards) and $250,000 (Clinton and Obama). They have also identified other more minor sources of financing, as well as savings achieved through improved efficiency. The lack of details in their proposals on many key features — the size of the premium subsidies for low- and moderate-income families, the employer contribution, the increase in Medicaid and SCHIP income eligibility standards — means it is unclear whether the amount of identified financing will be sufficient.”

So how do the public-private and public models actually score on the principles for high performance?

* Provision of equitable and comprehensive insurance for all

The public model would be equitable by design, whereas the private-public model would use administratively complex mechanisms to attempt to achieve partial equity in the multi-payer system. The public model would provide comprehensive benefits, whereas the private-public model would likely establish a benchmark of basic coverage. The public model would automatically include everyone, whereas the private-public model would continue to leave out individuals who cannot pay the entry fees into a system that attempts to balance premiums, public subsidies, out-of-pocket expenses, and income qualifications.

* Provision of benefits that cover essential services with appropriate financial protection

The public model would include all essential services while eliminating financial barriers to care, whereas the private-public model would vary benefits and cost sharing in an attempt to keep premiums affordable (just as FEHBP does now).

* Premiums, deductibles, and out-of-pocket costs are affordable relative to family income

The public model shifts financing to the tax system which eliminates problems of affordability for the family, whereas the private-public model cannot ensure affordability for the family since the thresholds for premiums and out-of-pocket costs overlap, on a sliding scale, with family income, which also frequently is not stable.

* Health risks should be broadly pooled

The public model establishes a single, universal risk pool that includes everyone, whereas the private-public model continues to fragment risk pools while introducing cumbersome administrative mechanisms to attempt to reduce the perversities of adverse selection.

* The proposals should be simple to administer with coverage that is automatic and continuous

The public model is noted for its administrative simplicity, and it is automatic and continuous for life, whereas the private-public model perpetuates the administrative complexities of the multi-payer system, preventing enrollment from being automatic (a problem for a system that promises choice of plans from multiple potential sources), and resulting in inevitable interruptions in coverage.

* Financing would need to be adequate, fair, shared across stakeholders

The public model would financed through the tax system, ensuring adequate funding and fairness of contributions by all residents based on ability to pay, whereas the private-public model would be financed through an administratively complex system not unlike our current multi-payer system which would likely result in continued underfunding of safety-net programs for lower-income individuals, not to mention other deficiencies.

* Dislocation should be kept to a minimum — people could stay in the coverage they have if desired

So minimizing “dislocation” from existing private insurance coverage is the one principle wherein the private-public model is alleged to offer higher performance than the public model. But when you look at all of the other principles listed, The Commonwealth Fund got it wrong in their conclusion. Expanding multi-payer coverage through the private-public model of reform sacrifices the beneficial health policies of all of the other principles listed, in exchange for a political principle that provides no health system benefit.

But then maybe dislocation is a concept that we could still make use of. We should maximize the dislocation of the politicians who are standing between us and genuine reform.

Employers spend more to insure fewer

How employers save on health care: auditing workers

By Katherine Reynolds Lewis
Houston Chronicle
January 12, 2008

Meet the insurance audit. Increasing numbers of employers are requesting personal documents to ensure that all the dependents in their health care plans are entitled to coverage.

With insurance costs rising faster than inflation for a decade, they want to verify that you’re actually married to the person receiving spousal benefits, or that your 19-year-old son really is enrolled as a full-time student. If you can’t produce proof, the dependent loses coverage.

“There has been a significant growth of interest in conducting these types of reviews,” said Daniel Priga, a Pittsburgh-based principal for the Mercer workplace consulting firm, where the workload conducting audits has doubled in each of the past two years. “This is a hot one.”

“The high turnover industries are the most likely to do them: service, retail, banking,” adds Susan Johnson, a senior consultant with Watson Wyatt Worldwide in Chicago. “Everybody’s at least talking about them. It’s grown exponentially in the last 18 months.”

An employer’s savings quickly dwarfs the expense of conducting an audit, as each dependent costs an average $3,000 a year to cover, said Michael Watson, a senior vice president for Budco.

http://www.chron.com/disp/story.mpl/headline/biz/5448912.html

Comment:

By Don McCanne, MD

Under our current system of financing health care, it certainly seems only fair that an employer who is generous enough to offer dependent coverage (even if nudged by union negotiators) should not be expected to cover additional relatives or friends of employees if those individuals are not eligible dependents.

But step back and look at the problem phrase in that sentence: “Under our current system of financing health care…”

Under our current system, which is already weighted down with administrative excesses, yet more wasteful administrative services are being provided in order to achieve the exact opposite of one of the most important goals of health care reform. These administrative services are being provided for the purpose of reducing the numbers of individuals with health care coverage. We really do need to change to a health care financing system in which absolutely everyone automatically receives comprehensive, affordable coverage for life.

As the consultant from Mercer said, “This is a hot one.” Yes… for the administrators. But not for those who lose their coverage.

A health care system for all, that works for all

Portsmouth Herald
January 12, 2008

To the Editor:

A lot of words have been spoken about health care during this campaign, but I doubt anyone could describe what any particular plan would do for their family. Confusion reigns. The Republicans want to maintain the current system with a myriad of tax credits and deductions and subsidies. Democrats want “universal” health care, which provides you with insurance but no guarantee of access or affordability. Both maintain the private insurance industry, providing them a lot more customers but without any more regulation.

A simpler approach is evident in the bill which passed in the California Senate (but vetoed by Arnold). This called for a 7 percent payroll tax on every business and a 3 percent income tax — really a premium substitute assessment, since this would be your only health care expense. This approach would cover everyone with no co-pays, deductibles and especially no pre-existing conditions. You would never see a bill from your doctor or hospital.
Evidence-based medicine is how a doctor is supposed to practice today, and it makes a lot of sense to look at these guidelines followed by physicians around the country.

No one likes the current system with 47 million uninsured, an equal number under-insured, 50 percent of bankruptcies related to medical debt and heartbreaking story after story in the newspapers about local citizen’s problems with the health care system. So how about evidence-based governance? All you have to do is look at the systems in Canada, Britain, France and other nations to see that it is possible to devise a health care program that covers everyone the same way, without any middlemen, and where there is never any worry about being able to afford a doctor’s visit or an operation. You don’t need “choice” because these plans are similar for each citizen.

Want to know more? Visit the Physicians for a National Health Program Web site at pnhp.org, watch the 20-minute “One Care” video at onecarenow.org, and treat yourself to a home showing of “Sicko.” Then you will know that health care doesn’t have to be the complicated mess it is now.

Thomas Clairmont, M.D.
Pamela Clairmont, R.N.
Portsmouth

Countering arguments by pharmaceutical industry

San Diego Union-Tribune
Letters to the editor
January 12, 2008

As the old saying goes, a lie told often enough becomes the truth. In this case, that it cost $1 billion to develop new drugs (Letters, Jan. 7). Over the past 20 to 30 years, the pharmaceutical industry has averaged net profits three times that of other Fortune 500 companies. It spends more on marketing and lobbying than on research, often including marketing research in its calculations.

It develops far more me-too drugs than breakthrough drugs. The majority of breakthrough drugs and almost all the basic research are developed at government labs and/or universities funded by government grants.

The true cost of developing drugs is closer to $120 million to $140 million, about one-eighth of what the industry claims. There are a number of excellent books on this subject available at the San Diego Public Library, including John Abramson’s “Overdo$ed America: The Broken Promise of American Medicine” (2004) and “The $800 Million Pill: The Truth Behind the Cost of New Drugs” (2004).

JOEL A. HARRISON
San Diego

ABX1 1: Universal health insurance without health care

by Claudia Chaufan
Indybay.org/news
Saturday, Jan 12th, 2008

The “Health Care Security and Cost Reduction Act”, also known as ABX1 1, and described by New York Times reporter Kevin Sack as a “bipartisan blueprint” conceived by Republican governor Arnold Schwarzenegger and Democratic Assembly speaker Fabian Nunez to bring “near-universal coverage to the country’s most populous state”, will neither provide health care security nor reduce costs of medical care. This article explains why.

Virtually everybody agrees that the American health care system is broken: costs are rising well in excess of the rate of inflation [1], insured and uninsured alike are often an illness away from bankruptcy [2], and too many go without medical care altogether – and roughly 18,000 die each year for this reason [3]. With over 20% of its population uninsured and growing, California exemplifies well the sorrowful state of health care in the country [4]. As a result, it has become fashionable, for politicians and corporate executives alike, including CEOs of health insurance companies, to call for universal coverage. As Jonathan Cohn noted recently in the New York Times Magazine, universal coverage is today the “one thing Big Business and the Left have in common” [5]. And Cohn must be right, because, at least in California, traditionally opposed interest groups are about to tie the knot in Assembly Bill X1 1 (ABX1 1), the “Health Care Security and Cost Reduction Act”. According to New York Times reporter Kevin Sack, this act is a “bipartisan blueprint” drawn up by Republican governor Arnold Schwarzenegger and Democratic Assembly speaker Fabian Nunez to bring “near-universal coverage to the country’s most populous state” [6]. So, should we not be raising our glasses in celebration? Not really.

However wonderful it would be for this well-meaning legislation to provide health security and reduce costs, there is little if any reason to believe it will do either.

For one, it cannot keep at least half of its promise, controlling costs of medical care, because not only does it not remove the private insurers that created the current nightmare, it actually gives them a central role in the new system and no incentive to control such costs — let us remember that the extraordinary administrative costs to private insurers, up to 34 cents out of each health care dollar [7], are for them no great burden, because they are easily offset, as they finance systems which allow insurers to never pay more in medical care than they collect in premiums. This is precisely the reason of the long-lasting love affair between private insurers and complex combinations of co-pays, cost-sharing, deductibles, exclusion clauses, and eligibility criteria, whose goal is not to control the cost of medical care in order to provide more and better of it to more people, but to control the costs of running insurers’ profit-maximizing business, while leaving enough spare change to shower high-level executives with generous salaries and compensation packages.

What is worse, ABX1 1 creates new eligibility categories — the poor, the not-so-poor, the non-poor, and several levels within each category — and imposes “fines” for misbehavior (e.g. failing to purchase health insurance) that will have to be enforced, all of which will increase administrative costs — and waste. And in its attempt to regulate industry, whether or not it succeeds, the legislation creates yet another layer of expensive bureaucracy that will divest resources from actual medical care.

Last, ABX1 1 will not control costs because it prevents Californians from using a major cost-containment mechanism: the purchasing power of large pools, which allows single payer systems like Canadian Medicare, the Veteran’s Administration, or even American Medicare (when it is not forced to outsource benefits to the private sector) to negotiate for best prices of medical goods and services through combinations of global budgets, fee schedules or drug formularies. This failure to control costs will prevent ABX1 1 from meeting the other half of its promise: providing health care security to Californians. It cannot provide “health care security” because it does not guarantee a comprehensive package of medical services at prices that are affordable for prospective patients. And in truth, it provides nothing: it merely mandates individuals to buy a policy in the market, whether or not the policies they can afford truly meet their medical needs. And we should note that the promised subsidies to individuals in certain income brackets, likely to increase as more people become impoverished by raising medical costs they cannot afford, thus becoming “eligible” for subsidies, are not gratis: they are borne collectively by all taxpayers.

If we are to go by the experience of other states, the prospects of ABX1 1, at least for those who would like to have the health care security and cost control of medical care that the legislation promises, are grim: a similar, individual mandate in Massachusetts is already running $147 million over the $472 million budgeted for fiscal year 2007, collections of fines from employers who fail to provide coverage are 80% below the original projections, and barely 7% of the uninsured who are not poor enough to receive subsidies have enrolled in any plan at all. Yet we should refrain from throwing the first stone to those who fail to comply with the law: the cheapest plan that meets the mandate’s requirement for a couple in their fifties costs $8,200 per year, with $2,000 deductible per person, so “choosing” to not enroll in any plan, even at risk of being fined, is not unreasonable [8]. Nor is it unreasonable to request, as many have done, a “compassionate exemption”, which by April of 2006 was already being granted to approximately 20% of those who failed to comply with the mandate (about 60,000 individuals) [9].

All of the above gives us reason to believe that an individual mandate such as the one proposed by ABX1 1 will no more protect individuals from financial ruin due to medical expenses than bare bones drivers’ insurance protects anybody from the the costs of a car accident. We do not count on those policies to get our cars back in shape, but we need them to comply with the law and protect ourselves against the claims of others. So for now, no reason to raise our glasses. And yet, some Californians are surely celebrating: among them are high level executives and shareholders in the private health insurance sector, which, if ABX1 1 becomes law, will count on a captive pool of clients for years to come. Indeed, Blue Shield California and colleagues must be following closely the smashing success of the Massachusetts plan. They must be particularly excited about the surplus of $1 million a day that Blue Cross Massachusetts is collecting. Or about the $16.4 million retirement bonus recently awarded its chairman, even as he continues to draw a $3 million dollar salary [8].

Which is why we do not need to think too hard to understand why this marriage of Republicans and Democrats must already be celebrated in so many places. We can only speculate, however, why health care reporters insist on calling ABX1 1 and similarly ill-conceived legislation “near-universal” or “universal” health coverage. Or why they are dismissing single payer, the only viable option for controlling costs and securing health care [10], as having “limited political support” [11], as editors in the New York Times recently did, despite evidence to the contrary among the public [12] and even among physicians [13]. Or why the same editors refer to single payer as “no panacea” as “indicated” by the “problems” of Medicare, clearly confusing the symptom — Medicare’s financial struggles — with the disease — the irrationalities forced upon Medicare by business-friendly legislation, which include, yet are not limited to, the generous subsidies Medicare has to pay to private insurers to “encourage” them to “compete”, at the same time that this legislation forbids Medicare itself to bargain for best prices of drugs for seniors [14].

But maybe we are missing something?

Claudia Chaufan received her medical degree from the University in Buenos Aires and her PhD from the University of California at Santa Cruz, where she currently teaches sociology of health and medicine and health policy. She is the Vice President of California Physicians Alliance, the Californa Chapter of Physicians for a National Health Program, and an active member of the national group.

References
1. Anderson, G.F., et al., It’s The Price, Stupid: Why The United States Is So Different From Other Countries. Health Affairs, 2003. 22(3): p. 89-105.
2. Woolhandler, S. and D.U. Himmelstein, Paying for health insurance-and not getting it. Health Affairs, 2002. 21(4): p. 88-98.
3. Institute of Medicine, Hidden Costs, Value Lost: Uninsurance in America. 2003, National Academies Press: Washington D.C.
4. California Health Care Foundation, Snapshot: California’s Uninsured. 2004, California Health Care Foundation: Oakland. p. 1-18.
5. Cohn, J., What’s the One Thing Big Business and the Left Have in Common?, in The New York Times Magazine. 2007.
6. Sack, K., States’ Widening of Health Care Hits Roadblocks, in The New York Times. 2007: New York. p. 1, 16.
7. Kahn, J.G., et al., The Cost Of Health Insurance Administration In California: Estimates For Insurers, Physicians, And Hospitals. Health Affairs, 2005. 24(6): p. 1629-1639.
8. Woolhandler, S. and D.U. Himmelstein, An Open Letter to the Nation from Massachusetts Physicians: Early Outcomes from Massachussetts’ Health Care Plan. 2008, https://pnhp.org.
9. Center for Studying Health Systems’ Change, Massachusetts Health Reform: Employers, Lower-Wage Workers, and Universal Coverage (Issues Brief). 2007, Center for Studying Health Systems’ Change: Washington D.C. p. Report No113 p. 1-6.
10. Sheils, J.F. and R.A. Haught, The Health Care for All Californians Act: A Cost and Economic Impacts Analysis: Executive Summary. 2005, The Lewin Group. p. 1-10.
11. Editorial, The High Cost of Health Care, in The New York Times. 2007: New York. p. 9.
12. Kuhnhenn, J. and T. Tompson, Pocketbook worries outweigh voters’ concerns over war in Iraq, in http://news.yahoo.com/page/election-2008-political-pulse-voter-worries. 2007, Associated Press.
13. Trapp, D., Internist society sees single-payer as option. 2007 December 24/31, Amednews.com.
14. Baker, D., Waste in the Medicare Drug Benefit: Why the Doughnut Hole is Unnecessary. 2006, Center for Economic and Policy Research: Washington, DC. p. 1-10.

Doctors Give Massachusetts Health Reform a Failing Grade – Poor Early Outcomes Raise Red Flags, Only Private Insurers Profit

For Immediate Release

Contacts:
Dr. Rachel Nardin, 617.667.4382
Dr. David Himmelstein, 617.665.1032
Todd Main, 312.782.6006

Over 250 Massachusetts doctors have signed an open letter to the country warning that the health reform model enacted by Massachusetts is failing and that a single payer program is the only alternative.

“It is urgent that the rest of the country know that Massachusetts is a living laboratory for the health care reforms being pushed in California and by the Obama/Clinton/Edwards campaigns. Right now the Gov. Romney/Massachusetts’ plan gets a failing grade on the ground,” said Dr.Rachel Nardin, Assistant Professor of neurology at Harvard Medical School.

An Open Letter to the Nation from Massachusetts Physicians:
Early Outcomes from Massachusetts’ Health Care Reform

We write to alert colleagues and the nation to the disturbing early outcomes of Massachusetts’ widely-heralded approach to health care reform. Although we wish that the current reform could secure health insurance for all, its failings reinforce our conviction that only a single payer program can assure patients the care they need.

In 2006, our state enacted a law designed to extend health coverage to virtually all state residents. Political leaders in other states as well as several Democratic presidential candidates have embraced this model.

Massachusetts’ law mandates that uninsured individuals must purchase private insurance or pay a fine. The law established a new state agency to ensure that affordable plans were available; offered low income residents subsidies to help them buy coverage; and expanded Medicaid coverage for the very poor. (Immigrants are mostly excluded from these subsidized programs.) Moneys that previously funded free care for the uninsured were shifted to the new insurance program, along with revenues from new fines on employers who fail to offer health benefits to their workers. In addition, the federal government provided extra funds for the program’s first two years.

Starting January 1, 2008 Massachusetts residents face fines if they cannot offer proof of insurance. Yet as of December 1, 2007 only 37% of the 657,000 uninsured had gained coverage under the new program. These individuals often feel well served by the reform in that they now have health insurance. However, 79% of these newly insured individuals are very poor people enrolled in Medicaid or similar free plans. Virtually all of them were previously eligible for completely free care funded by the state, but face co-payments under the new plan. In effect, public funds for care of the poor that previously flowed directly to hospitals and clinics now flow through insurers with their higher administrative costs.

Among the near poor uninsured (who are eligible for partial premium subsidies) only 16% had enrolled in the new coverage. And barely 7% of the uninsured individuals with incomes too high to qualify for subsidies had enrolled according to the official state figures. Few can afford premiums for even the skimpiest coverage; the lowest cost plan offered for a couple in their fifties costs $8,200 annually, and carries a $2,000 per person deductible.

Moreover, the state’s cost for subsidies is running $147 million over the $472 million budgeted for fiscal year 2007. Meanwhile, collections from fines on employers who fail to provide coverage are 80% below the original projections. The funding gap will widen in future years as health care costs escalate and insurers raise premiums. Already, state officials speak of making up the shortfall by forcing patients to pay sharply higher co-pays and deductibles, and by slashing funds promised to safety net hospitals.

While patients, the state and safety net providers struggle, private insurers have prospered under the new law, and the costs of bureaucracy have risen. Blue Cross, the state’s largest insurer, is reaping a surplus of more than $1 million each day, and awarded its chairman a $16.4 million retirement bonus even as he continues to draw a $3 million salary. All of the major insurers in our state continue to charge overhead costs five times higher than Medicare and eleven-fold higher than Canada’s single payer system. Moreover, the new state agency that brokers private coverage adds its own surcharge of 4.5% to each policy it sells.

A single payer program could save Massachusetts more than $9 billion annually on health care bureaucracy, making universal coverage affordable. But because the 2006 law deepened our dependence on private insurance, it can only add coverage by adding costs. Though politically feasible, this approach is already proving fiscally unsustainable. The next economic downturn will push up the number of uninsured just as the tax revenues needed to fund subsidies fall.

The lesson from Massachusetts is that we still need real health care reform: single payer, non-profit national health insurance.