PNHP

Cost of health initiative up $400m

Cost of health initiative up $400m

Number expected to seek coverage exceeds earlier estimate

By Alice Dembner
The Boston Globe
January 24, 2008

Spending on the state’s landmark health insurance initiative would rise by more than $400 million next year, representing one of the largest increases in the $28.2 billion state budget the governor proposed yesterday.

The biggest driver of the cost increase is projected growth in the number of people signing up for state-subsidized insurance, which now far exceeds earlier estimates.

State and federal taxpayers are expected to bear nearly all of the additional cost.

Although the price tag for the initiative is ballooning, the governor yesterday reaffirmed the state’s commitment to ensuring that nearly every resident is covered.

“We have fully-funded healthcare reform,” Governor Deval Patrick said at a news conference. Patrick listed the initiative among several programs started by previous administrations that he supports.

But the long-term cost of the insurance initiative continues to concern pol icy makers and analysts, who are worried that it may become unaffordable.

“These increases are more than anticipated, so we absolutely have to find ways to hold down the rate of growth in future years,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded budget watchdog that has supported the initiative.

This year the state is expected to exceed the initial budget for the health insurance initiative by about $245 million, and next year’s budget would boost spending by another $400 million.

The budget now goes to the Legislature, which last year accepted the governor’s recommendations on funding the health insurance initiative. A final budget is expected to be approved by the end of June.

The state’s top budget official, Leslie Kirwan, said yesterday that projecting costs for the health insurance initiative is difficult because the state is in “uncharted territory.”

“We’re ultimately working with a lot of uncertainty about the number of uninsured that remain out there in the population,” said Kirwan, secretary of administration and finance and chairwoman of the state panel overseeing the health insurance initiative. “Every significant decision we’ve made in healthcare reform” that draws on enrollment projections is based on “our best educated guess.”

The administration is currently working to develop a better way to count the uninsured.

When the law mandating that nearly all Massachusetts residents have health insurance was signed into law by then-governor Mitt Romney in April 2006, the state estimated that about 400,000 residents were uninsured.

Census estimates of the uninsured were far higher – about 650,000 – and many independent observers suggest that the truth lies somewhere in between.

Officials had projected that about 140,000 would enroll in the new state-financed insurance plan, called Commonwealth Care, which provides full or partial subsidies.

But by the end of last month, 169,000 people had signed up for Commonwealth Care, and the state is now estimating enrollment will reach 225,000 by June 2009, the close of the next fiscal year.

More than 70,000 have obtained Medicaid coverage since the law passed expanding eligibility, and the cost for covering those additional people, plus rate increases for hospitals, doctors, and others, is projected to grow significantly above this year’s spending.

Those who don’t qualify for subsidies or Medicaid are expected to buy private insurance or remain uninsured. Illegal immigrants are not subject to the insurance mandate or eligible for state insurance, but they can qualify for free care.

When the initiative was approved, the state expected that over time there would be a significant drop in spending on healthcare for the uninsured. The initial funding plan counted on shifting a significant portion of those “free-care” costs to pay for insurance subsidies.

But that shift is not going to happen to any large extent in 2009, according to the proposed budget.

To fund the overall increases, the state is counting on getting about half from the federal government. But officials have just begun negotiations on how much Massachusetts will actually receive.

Patrick said he is optimistic about federal support, but acknowledged that “nothing is certain.”

Separately, the state is counting on $5 million in revenue from businesses that don’t provide insurance for their employees, down from the $24 million included in this year’s budget that has not materialized.

Alice Dembner can be reached at Dembner@globe.com.

Initiating a market for organs

Economists' study says paying for organs would cut wait lists

Kidney and liver sales would add 10% to 15% to the cost of transplants, a study says. Others say organ markets would exploit poor donors.

By Kevin B. O’Reilly
American Medical News
January 28, 2008

Nearly 100,000 Americans are waiting for an organ transplant. Every day, the wait for 17 of those people ends in death.

It is a wait that could be drastically shortened or even eliminated if a market for live and cadaveric organs were allowed to operate, according to a paper co-authored by Nobel Prize-winning economist Gary S. Becker, PhD, and published last year in the Journal of Economic Perspectives.

Dr. Becker and co-author Julio Jorge Elias, PhD, estimate that a $15,000 payment for kidneys would increase the number of transplants by 44%, to about 20,000 a year. It would take nearly $40,000 in cash to donors to net a two-thirds jump in the number of liver transplants, to more than 8,600 a year.

In the case of kidney transplants, the donor payment would add just 9.5% to the cost of a transplant, while liver transplants would cost 11.2% more.

The authors based their estimates on how much it would take to convince a person earning the median American salary of $35,000 to become a donor, considering the actuarial value of a statistical life, the small risk of death in surgery, the quality-of-life impact and the value of the time spent in recovery.

Benjamin Hippen, MD, is a nephrologist specializing in renal transplantation at the Carolinas Medical Center in Charlotte, N.C. He supports paying organ donors — or “vendors,” as he calls them.

http://www.ama-assn.org/amednews/2008/01/28/prsb0128.htm

Comment:

By Don McCanne, MD

Vendors? Of their own organs?

Those who support treating health care as a commodity surely didn’t imply that we should go to this extreme. Or did they?

Emergency Room Delays

Note: The following New York Times editorial on emergency room delays (January 19, 2008) is based on research by PNHP member Dr. Andy Wilper, PNHP co-founders Drs. Steffie Woolhandler and David Himmelstein, and other Harvard researchers.

Editorial
New York Times
January 19, 2008

The nation’s failure to provide health insurance for all Americans seems to be harming even many of those who do have good health coverage. That is one very plausible interpretation of a disturbing increase in waiting times at emergency rooms that are often clogged with uninsured patients seeking routine charity care.

An analysis by researchers at the Cambridge Health Alliance and Harvard Medical School, found that the median waiting time to see a physician in hospital emergency departments jumped from 22 minutes in 1997 to 30 minutes in 2004.

For the sickest heart attack patients, according to results published in the journal Health Affairs, wait times more than doubled. In 1997, half of them got to see a doctor within eight minutes; in 2004 it took 20 minutes. For a quarter of the heart attack patients, the wait reached 50 minutes or more — a particularly disturbing lag when every minute of delay increases the likelihood of death.

The researchers attribute the longer waits primarily to an increase in the number of emergency room visits coupled with the closure of many emergency rooms. Both factors are driven by the lack of universal health coverage. Uninsured patients — and those who have no primary care doctor — flock to emergency rooms for routine coverage, clogging the system. Meanwhile, hospitals lose so much money dispensing charity care through emergency rooms that many collapse into bankruptcy or give up emergency care.

Emergency rooms are further overburdened, caring for seriously ill patients who can spend hours or even days there waiting to be admitted to inpatient or intensive care units. That is because many hospitals are either short on beds or have decided to allocate many beds to patients who pay top dollar for elective care.

The Institute of Medicine, a unit of the National Academy of Sciences, warned two years ago that the nation’s emergency rooms were at a breaking point. It called for better systems to route patients to the least crowded emergency rooms and an infusion of money to bolster emergency care. The Cambridge Health Alliance doctors call for expanding insurance coverage and primary care for the poor to provide alternatives to overcrowded emergency rooms for those seeking routine care. That is the best way to ensure that all the people who truly need emergency care get it when they need it.

National Medicare is the answer, not the bogeyman

Letter to the Editor
Palm Beach Post
Wednesday, January 23, 2008

The writer of “Candidates give too few details on universal care” (Dec. 19 letter) marshals forceful arguments based on false assumptions.

1) “A national plan would undoubtedly require restrictions on doctors’ incomes … ” The universal health-care plan drawn up in HR 676 would have the contrary effect. The U.S. National Health Insurance Act, if enacted, would eliminate the excessive drainage of money that has nothing to do with providing care. The huge sums now going to the sales forces, advertising budgets, lobbying campaigns, shareholder dividends, and huge executive salaries and bonuses would be saved. These expenditures are the root cause of the present attempt to reduce the fees Medicare pays doctors. Their elimination would halt the process. The writer’s use of the word undoubtedly magnifies the assumption’s baselessness.

2) “In a national plan, millions of Americans would not be able to obtain the same level of medical care they now enjoy … ” I can’t calibrate the level of care the 47 million uninsured Americans now enjoy. I do know, from my experiences on the lecture platform, that the over-65 generation feels blessed with the level it enjoys. When the question is put, the response is a practically unanimous, enthusiastic “God bless Medicare!” The goal of the plan is to make everyone lucky enough to be included in that same plan.

3) “It is bad enough that Congress refuses to deal with the Medicare … crisis, but to ask them to legislate a national health insurance plan as a replacement … is hard to imagine … ” I agree. It is hard to imagine, since the proposal isn’t to replace it but to make it Medicare for everyone. He is wrong about the “huge tax increase that would be required.” According to the Congressional Budget Office, eliminating all of the excessive administrative spending in our current system would save up to $400 billion. The prospect of a huge tax increase scares people, but the reality is that there is no need for it.

Let’s stop muddying the waters and trying to scare people with nonexistent goblins. The urgent need is the adoption of the same type of responsible program the rest of the developed nations have. We can’t afford to allow our elected officials to propose feeble patchwork instead of the expansion of Medicare. Let’s demand a show of leadership that will get us a system already in operation that we know works well and that can easily become the entire, one-tier national system.

H. DAVID PRENSKY
Palm Beach

Prior authorization without payment authorization

CMA Asks DOI to Pull the Plug on United Healthcare's New Notification Protocol

California Medical Association
January 18, 2008

CMA has asked the Department of Insurance to require that United Healthcare rescind its new Advance Notification Protocol. This onerous protocol requires physicians to notify United before admitting patients to the hospital and mandates that if physicians don’t comply, they won’t be paid.

United is calling this “notification” rather than “preauthorization,” but is requiring physicians to provide the exact same information that other insurers require for preauthorization, without a guarantee of payment. In our request to the DOI, CMA set forth several problems with the protocol, including United’s failure to notify physicians in a timely manner of a material change to their contracts, as required by law. CMA believes the protocol is an attempt by the insurer to improperly insert itself into decisions regarding patient treatment.

CMA also believes that it unreasonable to expect a busy physician practice to allocate the time and resources necessary to comply with United’s protocol without a guarantee of payment. In order to be compliant with the protocol and to be eligible for payment, physicians may be forced to divert resources from patient care to administrative tasks.

This protocol is one of a series of policies recently announced by United that CMA believes are unfairly onerous, punitive to physicians, and detrimental to patient care, and that we are seeking to have overturned.

http://www.calphys.org/html/cc597.asp

Supporting documents:
http://www.calphys.org/assets/applets/poizner_letter_012108.pdf

Comment:

By Don McCanne, MD

UnitedHealthcare’s “Advance Notification” protocol is very similar to established preauthorization protocols in that the insurer can deny payment if the process is not followed prior to the provision of health care services. The physician must submit the same information, in advance, that is required for preauthorization. The important difference is that fulfilling this identical notification requirement no longer ensures that the physician will be paid.

This appears to be yet another wasteful administrative burden placed on the physician that serves no purpose other than using a technicality to relieve UnitedHealthcare from the responsibility of paying for legitimate services.

Actually, it is much more than that. It is a return to the intrusive managed care policies of the 1990s that were so offensive to patients and physicians alike. Following is an excerpt from a document from UnitedHealthcare on “Advance Notification” (accessible at the “Supporting documents” link, above):

12. Why does UnitedHealthcare require notification for certain services and inpatient admissions?

Notification facilitates the ability for UnitedHealthcare to provide supportive clinical support and education, such as:

* Perform pre-op education for the patient and ensure adherence to nationally recognized guidelines in order to maximize quality and cost-efficiency

* Facilitate post-op discharge planning to optimize clinical outcomes, e.g. facilitated treatment plans post-hip and knee replacement surgery or spine surgery in order to reduce unnecessary variation in health care delivery

* Refer patients to Centers of Excellence (e.g., congenital heart disease)

* Refer patients to appropriate in-network physicians, other health care professionals or facilities

* Refer patients to our case management and disease management programs

Notification also enables UnitedHealthcare to assist with non-clinical support and education, such as:

* Educate network physicians, other health care professionals or facilities regarding enrollee benefits (e.g., some services are not covered under certain benefit plans)

* Educate network physicians, other health care professionals or facilities regarding the impact of directing enrollees to out-of-network providers (including explanation of increased patient out of pocket costs for out-of-network services) and assisting with identification of available alternative network physician, other healthcare professional or facilities

* Maximize enrollee benefits (out-of-network services may be paid at in-network benefit levels under certain special circumstances)

Don't believe claims of America's health-care superiority

By Craig Axford
The Salt Lake Tribune
01/17/2008

What constitutes a great health-care system?

Watching the Republican candidates during their final debate in New Hampshire I was hardly surprised by their statements regarding America’s health-care system. To a man, they all insisted we had “the best health-care system in the world”.

This has become predictable rhetoric, particularly from the right. To the extent flaws within our health-care system are acknowledged, the focus is on cost, frequently with particular emphasis on the cost to business as opposed to the very real and painful, sometimes even fatal implications for average Americans.

To be sure, the cost of health care in America does set us apart from the rest of the world. What puzzles me is how one can argue that a health-care system is best that covers least while also costing most?

France, Germany, the United Kingdom and Canada all spent 10.5 percent or less of their gross domestic product on health care in 2004. All provided universal coverage for their citizens. The United States spent 15.4 percent of its GDP on health care that year, while roughly 15 percent of our population went uncovered.

Sen. John McCain spoke for a more “outcome”-focused system. Most, if not all, of the industrialized world has lower infant mortality rates and longer life expectancies. When it comes to health-care outcomes, a longer life should be an “outcome” of paramount importance. Any system that falls short in that regard can hardly be argued to be the “best.”

According to a study released since the New Hampshire debates the United States ranks 19th in treating preventable illnesses. Health Affairs reported on Jan. 8 that the United States ranks behind Australia, Greece, Ireland and Portugal, among others. This, as health-care spending in America broke $2 trillion for the first time in 2006.

America will never solve its health-care problem so long as we insist on arguing our crisis is inferior to the crisis everywhere else and therefore our system is superior to everyone else’s. One is not being unpatriotic when pointing out other nations have managed to do some things better.

A case in point is our neighbor to the north. When wanting to diminish the threat a health-care reform proposal poses to the insurance or pharmaceutical lobbies, one need only refer to the supposedly numerous Canadians flocking to America to pay considerably more for services virtually all of them could get for far less in Canada.

Again, McCain argued during the debate that any serious reform of our system would deny these good Canadians a place to come to receive adequate health care, though he later implied that Canadians shouldn’t reform their system or Americans would be denied a far less expensive source for prescription drugs.

In 2004 the U.S. and Canadian governments conducted a joint survey to determine the level of satisfaction citizens in both nations had with their respective health-care systems. Thirteen percent of Americans reported having “unmet medical needs during the past 12 months,” while only 11 percent of Canadians reported the same. Not a statistically significant difference, but not a statistic that leads one to believe any more Canadians are coming here than Americans are likely to be heading north for needed treatment.

Thirty-two percent of the 11 percent of Canadians complaining of an “unmet need” cited the much ballyhooed waiting period as the barrier to treatment – or about 3 percent of the total population. Of the slightly larger segment complaining of unmet needs in the U.S., 53 percent cited cost as being a barrier to receiving care they felt they needed. This does not sound like a nation sending hundreds, if not thousands of patients south to have “unmet needs” met here.

The point of all this is not simply that claims regarding the excellence of the American system are exaggerated at best, though obviously they are. The point is, Americans and the media need to wake up to where claims regarding the inadequacies of other systems are coming from and why they are being offered to the American electorate as fact. The insurance, pharmaceutical and other lobbies with a huge financial stake in maintaining the status quo want us to believe, as bad as our system may be, it is better than all other alternatives tried.

No health-care system is or can be perfect. However, politicians who are willing to simply parrot the false talking points offered by the insurance industry and others intent on preserving record profits, often at the expense of human life, are not the type of people we want dealing with our growing health-care crisis.

Trusting them with health-care reform is truly turning the hen house over to the foxes, and we can ill afford the continued luxury of believing their rhetoric regarding the alleged virtues of the status quo in the United States when it comes to health care.

CRAIG AXFORD has worked as an environmental activist, ran for Congress in 2002 and currently works for the Democratic National Committee as party organization director for Utah.

Don’t believe claims of America’s health-care superiority

By Craig Axford
The Salt Lake Tribune
01/17/2008

What constitutes a great health-care system?

Watching the Republican candidates during their final debate in New Hampshire I was hardly surprised by their statements regarding America’s health-care system. To a man, they all insisted we had “the best health-care system in the world”.

This has become predictable rhetoric, particularly from the right. To the extent flaws within our health-care system are acknowledged, the focus is on cost, frequently with particular emphasis on the cost to business as opposed to the very real and painful, sometimes even fatal implications for average Americans.

To be sure, the cost of health care in America does set us apart from the rest of the world. What puzzles me is how one can argue that a health-care system is best that covers least while also costing most?

France, Germany, the United Kingdom and Canada all spent 10.5 percent or less of their gross domestic product on health care in 2004. All provided universal coverage for their citizens. The United States spent 15.4 percent of its GDP on health care that year, while roughly 15 percent of our population went uncovered.

Sen. John McCain spoke for a more “outcome”-focused system. Most, if not all, of the industrialized world has lower infant mortality rates and longer life expectancies. When it comes to health-care outcomes, a longer life should be an “outcome” of paramount importance. Any system that falls short in that regard can hardly be argued to be the “best.”

According to a study released since the New Hampshire debates the United States ranks 19th in treating preventable illnesses. Health Affairs reported on Jan. 8 that the United States ranks behind Australia, Greece, Ireland and Portugal, among others. This, as health-care spending in America broke $2 trillion for the first time in 2006.

America will never solve its health-care problem so long as we insist on arguing our crisis is inferior to the crisis everywhere else and therefore our system is superior to everyone else’s. One is not being unpatriotic when pointing out other nations have managed to do some things better.

A case in point is our neighbor to the north. When wanting to diminish the threat a health-care reform proposal poses to the insurance or pharmaceutical lobbies, one need only refer to the supposedly numerous Canadians flocking to America to pay considerably more for services virtually all of them could get for far less in Canada.

Again, McCain argued during the debate that any serious reform of our system would deny these good Canadians a place to come to receive adequate health care, though he later implied that Canadians shouldn’t reform their system or Americans would be denied a far less expensive source for prescription drugs.

In 2004 the U.S. and Canadian governments conducted a joint survey to determine the level of satisfaction citizens in both nations had with their respective health-care systems. Thirteen percent of Americans reported having “unmet medical needs during the past 12 months,” while only 11 percent of Canadians reported the same. Not a statistically significant difference, but not a statistic that leads one to believe any more Canadians are coming here than Americans are likely to be heading north for needed treatment.

Thirty-two percent of the 11 percent of Canadians complaining of an “unmet need” cited the much ballyhooed waiting period as the barrier to treatment – or about 3 percent of the total population. Of the slightly larger segment complaining of unmet needs in the U.S., 53 percent cited cost as being a barrier to receiving care they felt they needed. This does not sound like a nation sending hundreds, if not thousands of patients south to have “unmet needs” met here.

The point of all this is not simply that claims regarding the excellence of the American system are exaggerated at best, though obviously they are. The point is, Americans and the media need to wake up to where claims regarding the inadequacies of other systems are coming from and why they are being offered to the American electorate as fact. The insurance, pharmaceutical and other lobbies with a huge financial stake in maintaining the status quo want us to believe, as bad as our system may be, it is better than all other alternatives tried.

No health-care system is or can be perfect. However, politicians who are willing to simply parrot the false talking points offered by the insurance industry and others intent on preserving record profits, often at the expense of human life, are not the type of people we want dealing with our growing health-care crisis.

Trusting them with health-care reform is truly turning the hen house over to the foxes, and we can ill afford the continued luxury of believing their rhetoric regarding the alleged virtues of the status quo in the United States when it comes to health care.

CRAIG AXFORD has worked as an environmental activist, ran for Congress in 2002 and currently works for the Democratic National Committee as party organization director for Utah.

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