PNHP

Health care money pits

Health care money pits

Janet K. Seeley, M.D., Ph.D
The Coloradoan
October 30, 2007

Thirty percent of your health care dollars does not go to health care. Instead, they pour into the money pits of multiple risk pools and high administrative costs. That’s $30 of every $100 you think you are spending on health care! An affordable solution sought by the Colorado Blue Ribbon Commission for Health Care Reform (208 Commission) is impossible unless these cost drivers are controlled (www.colorado.gov/208commission).

Fortunately, the publicly funded, privately delivered (single-payer) proposal shrinks these cost drivers; the other four proposals ignore them.

The concept of risk pool is a key principal of insuring any population. The larger and healthier the group (pool), the lower the cost. Right now, the Colorado population is fractured into hundreds of risk pools. Insurance companies evaluate the risk by looking at the health history and past claims made by individuals in the group. So, the smaller the group and the higher the possibility that members will get sick, the higher each member’s premium. This is why smaller companies and individuals are faced with higher premiums. On the other hand, when a large group, such as the population of Colorado, is covered by the same financing plan, the risks are shared by healthy and sick alike, the cost is lower and health care is there when needed. This is single payer financing.

The second cost driver is administrative costs. Today’s complex mixture of private and government plans requires multiple, confusing and often duplicative levels of administration and paperwork. Imagine the crazy quilt of administrative costs for employers, individuals, insurance companies, doctors, hospitals and public programs. This extremely expensive, wasteful maze robs health care services. “Choice,” so often cited as an important feature of the U.S. system, amounts to a choice only among wasteful plans!

The patchwork of insurance and government plans in four of the 208 proposals is at least as complex as our current system and does little to curb future costs. We will all pay more with those four proposals. The single payer proposal dramatically reduces administrative costs with a public financing system to cover all Colorado residents with comprehensive, privately delivered health care. The independent Lewin Group cost analysis estimates that the single-payer plan actually saves Coloradans $1.4 billion/year in health care costs.

The single-payer proposal for Colorado health care reform solves the problem of multiple risk pools and reduces administrative costs by setting up a publicly financed trust fund. Yes, public financing means state health care taxes, but they are more than offset by the savings in current state and federal taxes for public programs, insurance premiums, high copays, deductibles and many out-of-pocket health expenses. For most of us, that would be less expensive than what we spend today. The comprehensive benefit package, including long term care, covers all Colorado residents and may be supplemented with private plans if desired. Health care delivery remains private, with your choice of provider and hospital.

So, do I think that the Single Payer 208 proposal is the only way to help Colorado meet the goals of the 208 Commission of reducing costs and covering Coloradans? It is the best one I see. Will it need improvement as it goes? Certainly.

Janet K. Seeley, M.D., Ph.D, is a Fort Collins physician and a speaker for Health Care For All Colorado. Reach her at jkseeley@webaccess.net or www.healthcareforallcolorado.org/?p33speakersbureau.

Almost 2 Million U.S. Vets Lack Health Insurance

Income levels bar many from VA health services, researcher says

By Steven Reinberg
Health Day
Posted 10/30/07

TUESDAY, Oct. 30 (HealthDay News) — Almost 2 million veterans are without health insurance, along with 3.8 million members of their households, a new study finds.

Among the 1.8 million uninsured veterans, 12.7 percent are under 65. In addition, the number of uninsured veterans has increased by 290,000 between 2000 and 2004, according to the report in the Oct. 30 online edition of the American Journal of Public Health.

“The Bush Administration has been sending Americans overseas asking them to fight for their country, and yet, when people come home, they have no guarantee of health care,” said study co-author Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School and a member of the advocacy group Physicians for a National Health Program. “The most basic human right of health care is being denied to our veterans, along with other Americans — and that’s a disgrace.”

“Over 1 million veterans have no health insurance and no access to veterans’ hospitals,” Woolhandler added. “I think that’s shocking to most people. It was certainly shocking to us.”

Many of these veterans were members of working families that earned too much to qualify for programs such as Medicaid or Veterans Administration care, Woolhandler said. “Yet, they earned too little to be able to afford private coverage,” she said.

Woolhandler noted that the Veterans Administration health-care system is not open to all veterans. Many uninsured veterans can’t get any VA care because the Bush Administration stopped enrollment of most middle-income veterans in 2003, she said.

“Any veteran with a service-connected disability can get access to the VA,” Woolhandler said. “That’s a minority of veterans. For everybody else, VA care is means-tested — veterans earning more than $30,000 a year will not be eligible for VA care.”

According to the U.S. Department of Veterans Affairs Web site, the financial income threshold is $27,790 for a veteran with no dependents and the range graduates upward to $38,948 for four dependents. Each additional dependent raises the annual income ceiling $1,866.

In the study, Woolhandler and her colleagues analyzed data from U.S. government surveys from 1988 and 2005. Veterans were classified as uninsured if they didn’t have health insurance or receive care at Veterans Health Administration hospitals or clinics.

A preliminary review of 2006 data shows little change in the number of uninsured veterans since 2004, Woolhandler noted.

Woolhandler’s team found that 645, 628 uninsured veterans were old enough to have served in Vietnam. More than 1 million (1,105,891) served at other times, including in Iraq and the first Gulf War — 56.5 percent were older than 44.

Among uninsured veterans, 26.5 percent said they couldn’t get medical care because of costs, 31.2 percent delayed care due to costs, and 49.1 percent hadn’t seen a doctor within the past year. In addition, two-thirds didn’t receive preventive care. Yet, almost two-thirds were employed, the researchers found.

Others reasons veterans can’t get VA care include waiting lists at VA hospitals, high co-payments for VA specialty care and a lack of a VA facility in their community, the researchers noted.

“Veterans deserve a right to health care,” Woolhandler said. “We think that every American deserves a right to health care.”

One expert thinks that the uninsured veterans are in no worse shape than the rest of the uninsured population.

“I don’t think the VA was ever supposed to be a health insurance program for all veterans,” said Greg Scandlen, the founder of Consumers for Health Care Choices. “I don’t think the VA is doing something it’s not supposed to do.”

“Veterans face the same problems as everyone else,” Scandlen said. “They don’t get any special treatment when it comes to private coverage,” he said.

Attempts by HealthDay to reach Veterans Administration officials for comment were unsuccessful.

Humana Shares Fall as UBS Challenges 2008 Forecast

By Avram Goldstein
Bloomberg News

Oct. 29 (Bloomberg) — Humana Inc., the No.2 provider of U.S.-sponsored health plans, fell the most in a month after an analyst downgraded the stock, saying the company may not reach a newly announced forecast for 2008.

Humana’s third-quarter earnings rose 90 percent, including a $69 million one-time gain before taxes, the Louisville, Kentucky-based Humana said today. Humana derives about two- thirds of its profit from the Medicare program, which pays premiums for elderly and disabled Americans to receive coordinated care and discounted drugs.

Justin Lake, an analyst at UBS Securities in New York, downgraded Humana to “sell” from “neutral,” saying the company’s 2008 enrollment forecast of at least 200,000 added Medicare customers is optimistic, and that the profitable government payments can’t last. Members of the U.S. Congress and consumer groups said the amount of profit was excessive.

“We continue to see this operating environment as temporary, and now that strong earnings/guidance are behind us, investor focus is likely to shift to potentially unsettling items,” including efforts by presidential candidates and members of Congress to trim Medicare payments, Lake said in a note to clients today.

Lake recommended investors “take advantage of current enthusiasm and sell into strength.”

Third-quarter net income climbed to $302.4 million, or $1.78 a share, from $159.2 million, or 95 cents, a year earlier, the company said in a statement. Excluding a $69 million one- time gain before taxes, profit beat analysts’ estimates, as did revenue.

Stock Turnaround

Humana fell $1.81, or 2.4 percent, to $73.75, at 4:01 p.m. in New York Stock Exchange composite trading, after being up as much as 7.9 percent earlier in the day. The company has climbed 33 percent this year, leading the six-member S&P 500 Managed Health Care Index.

“Humana’s Medicare Advantage program continues to fleece taxpayers, even as the company spends less and less on seniors’ actual health care,” said Representative Pete Stark, a California Democrat who chairs the Ways and Means health subcommittee, in an e-mail. “The company’s quarterly results confirm what I’ve been saying for years — overpayments to private plans benefit shareholders, not patients.”

Medicare will pay U.S. insurers $76.3 billion in health- plan premiums in 2007, about $9.2 billion more than the federal agency would pay for direct coverage of the same population, according to government estimates.

Analysts’ Estimates

Profit excluding some items beat the $1.49-a-share average of 16 analysts surveyed by Bloomberg. Revenue rose to $6.32 billion, surpassing the average expectation of $6.11 billion.

The 90 percent gain in third-quarter net income compared with increases of 15 percent reported for UnitedHealth Group Inc., of Minnetonka, Minnesota; 7 percent for Indianapolis-based WellPoint Inc.; and 4.3 percent for Aetna Inc. of Hartford, Connecticut.

The company, in a statement today, raised its earnings forecast for the full year 2007 to $4.75 to $4.80 a share, up from a July 18 outlook of $4.40 to $4.50.

The revised target includes a one-time third-quarter gain of 25 cents a share generated mostly by its drug plan for the elderly. Humana said the $69 million pretax gain came partly from recording as income money it had set aside earlier, and didn’t actually need, to pay to Medicare.

Forecast

Humana gave its first 2008 outlook, forecasting $5.30 to $5.50 in earnings per share, compared with the $5.19 average estimate in a Bloomberg survey.

America’s Health Insurance Plans, a trade group based in Washington, has urged Congress to leave the rates alone. Last week it paid for Advantage members to visit Capitol Hill from across the U.S. to urge lawmakers to back off.

Humana investors shouldn’t wobble under the political pressure, said Chief Executive Officer Mike McCallister during a conference call today.

“If a headline out of Washington that says they’re looking at cutting funding to Medicare Advantage bothers you, then you’re probably in the wrong stock, because it’s going to be like this the rest of our time here,” he said.

Gross Margins

In the third quarter, premium revenue in the Medicare Advantage managed-care plan grew 19 percent from a year earlier to $2.8 billion, outstripping a 15 percent enrollment gain.

Medicare Advantage plans generate annual gross margins of about $1,650 per Humana beneficiary, more than 10 times the profit from drug plans, said Carl McDonald, an analyst with CIBC World Markets in New York. Gross margin is revenue minus the cost of goods or services.

In the third quarter, Humana’s ratio of medical expenses to premiums from Medicare health plans decreased to 81.3 percent from 84.1 percent a year earlier, helped by the $69 million one- time gain.

Taxpayers should question why Medicare is rewarding Humana with a “hand-out” and “blockbuster profits” as the program plans physician-fee cuts, said American Medical Association board member Ardis Hoven in an e-mail.

The Medicare Rights Center complained that Humana will raise premiums 69 percent for its 2008 discount-drug plans for 2.1 million of its more than 3 million members and that Advantage plans are overpaid.

“Humana has exploited the Medicare market with great business skill, but its services to beneficiaries leave much to be desired,” said Bob Hayes, the president of the New York- based group.

To contact the reporter on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net .

Zycher’s dishonest report on administrative costs

Medicare for All?

Editorial
The Wall Street Journal
October 29, 2007

The frequent claim is that eliminating profits and private administrative expenses would more than pay for the cost of covering all the uninsured.

Well — no, as demonstrated in a new study by Benjamin Zycher, a senior fellow at the Manhattan Institute and a former senior economist for the Reagan Council of Economic Advisers. He estimates that the real economic costs of moving to single payer would be at least twice those of today’s semimarket patchwork.

“Administrative” costs, generally speaking, are those not directly funding medical care but instead spent to deliver insurance benefits. Sure enough, on paper Medicare’s are about 3% of outlays, compared to 11% to 14% for the private system. But Mr. Zycher notes that a more accurate measure of Medicare’s administration would include other indirect federal services, such as tax collection, which round them up by about double. Fold in the incentives for the uninsured to consume more medical services under single-payer than they do now, and those “savings” are revealed as make-believe.

Mr. Zycher also points out that the adverse effects of the increased taxation required for “Medicare for all” more than outweigh the potential efficiencies. It costs the economy more than a dollar — the bottom-rung estimate is 20% — to send a dollar to Washington, so in the end Medicare clocks in substantially above private insurance.

The analysis also offers some reality about what those supposedly wasteful private administrative expenses actually do. Underwriting — i.e., the pricing of premiums in accordance with risks and health status — is often assailed by politicians, but the administrative scrutiny leads to an efficiency. It allocates costs in proportion to benefits: You get, in other words, what you pay for.

http://online.wsj.com/article/SB119362351042074490.html

And…

Comparing Public and Private Health Insurance: Would A Single-Payer System Save Enough to Cover the Uninsured?

By Benjamin Zycher
Manhattan Institute for Policy Research
October 2007

The public discussion of prospective reform of the U.S. health-care system has focused in substantial part on the question of how to extend insurance coverage to those now uninsured, and on how to deal with the attendant increased costs for the system as a whole. Some argue that a single-payer system similar to Medicare would realize savings in administrative costs sufficient to extend insurance coverage to all of the uninsured. The central objective of this study is a comparison of the administrative and other important non-benefit costs of private health-insurance plans with those of Medicare, which is used as a prototype for a large single-payer (that is, government-financed) insurance system.

The lowest plausible assumption about the excess burden engendered by the federal tax system–20 percent–raises the true cost of delivering Medicare benefits to about 24-25 percent of Medicare outlays, or about double the net cost of private health insurance. A more realistic assumption — say, 50 percent — raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.

http://www.manhattan-institute.org/html/mpr_05.htm

Comment:

By Don McCanne, MD

Normally we wouldn’t respond to a dishonest study like this since it would give it further unwarranted exposure and provide it with a limited degree of credibility merely because we thought it was worth our time to comment on it. Unfortunately, The Wall Street Journal has granted it their editorial stamp-of-approval, and the conservative and libertarian non-think tanks are gearing up to be certain that the conclusions in Zycher’s report are widely distributed. We will be hearing more about this, and we should be prepared to respond.

Although this study is presented under the guise of comparing administrative costs between Medicare and the private insurance plans, it is important to note that Zycher states that “a term perhaps more useful than ‘administrative’ costs might be ‘non-benefit’ costs.” Thus, primarily for the Medicare model, he includes much more than administrative costs.

Let’s look at how he adjusts the explicit administrative costs of Medicare. As an example, look at how he measures the amount of administration of justice in the Medicare program. He notes that Medicare spending ($356 billion for 2005) is 17.1 percent of federal non-defense spending ($2081 billion). Thus, he concludes, because of the costs of investigating Medicare fraud, Medicare consumes a prorated 17.1 percent of the government costs of the administration of justice. The dollar amount involved in this calculation alone increases the administrative costs of Medicare from 3.1 percent to 5.1 percent. Considering Dr. Zycher’s training as an economist, stating that Medicare consumes 17.1 percent of the government’s administrative costs for justice is not simply a distortion of the facts; it is a blatant lie.

The most egregious fraud in Zycher’s analysis is the cost of Medicare that “appears nowhere in government budgets,” and that is “the real economic cost of the distortions created by the tax system.”

Zycher quotes Martin Feldstein as his authority, to wit, “The traditional method of analyzing the distorting effects of the income tax greatly underestimates its total deadweight loss as well as the incremental deadweight loss of an increase in income tax rates. … The true deadweight losses are substantially greater than [prior] conventional estimates because the traditional framework ignores the effect of higher income tax rates on tax avoidance through changes in the form of compensation… and through changes in the patterns of consumption…”

This concept ignores completely the fact that government services are an integral part of our total economy, and the (greatly exaggerated) deadweight losses from taxing the private sector are more than recovered through the higher value of services provided in the public sector (certainly a pompous statement, but no more so than Feldstein’s).

It is primarily this “economic cost of the distortions created by the tax system” that leads Zycher to his conclusion that “a more realistic assumption — say, 50 percent — raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.”

Another outrageous concept in Zycher’s study is his description of how the administrative services of the private insurance industry provide market “efficiency.” He indicates that cross subsidies in insurance are anti-competitive because insurers would have to charge those with fewer health care needs higher premiums than are warranted based on their use of services. The purchasers of insurance are receiving benefit from the administrative services such as medical underwriting that are used to prevent cross subsidies from the healthy sector to the sick sector. As he states, “the administrative costs borne by insurers seeking to align premiums with costs are efficient, in the sense that they provide a somewhat subtle service valued by consumers: avoidance of premiums that subsidize others.”

Imagine the possibilities of using innovative economic theory to analyze the real costs of the private insurance industry. As did Zycher, we’ll use both the administrative costs and the “non-benefit” costs.

What is the dollar value of a human body and soul? That is almost impossible to quantify, but we can get a relative estimate based on our recent tragic fires here in Southern California. Victim after victim, many of whom lost million-dollar homes and all their possessions, stated they were so fortunate to escape with their lives and their health, and all the rest of it was just “things.” A million dollar home is nothing compared to your family.

So what is the body and soul component of health care worth? It is a value that would appear nowhere in a budget. But what would that component be in an $80 office visit? Considering quality of life gained through medical care and other factors such as being able to return to work earlier, it would not be unreasonable to place that value at around $800. Or what about a $20,000 hospitalization? A marked improvement in quality of life and perhaps even prevention of premature death could easily have a value of around $200,000. The victims of the fire might suggest that even a million dollars wouldn’t cover it, but it seems fair to say, by this reasoning, that the value of medical care ministered to the body and soul can be estimated to be about ten times the cost of that care.

So how might this apply to the “non-benefit” costs of the private insurance industry? Although they insure about two-thirds of us, they pay only about one-fourth of our health care costs. Thus the private sector insurance industry has used the power of the market successfully to avoid paying for about three-fourths of our $2.2 trillion health care expenditures, shifting about $1.7 trillion to us as individuals and as taxpayers. The “non-benefit” cost to us of the care they have avoided covering is about $17 trillion! That is more than our $13 trillion GDP!

Enough of these silly games! What we need to carry on the health reform debate are the true facts and legitimate analyses of the policy implications. What we don’t need is to read more dishonest reports while the ideologues opposed to health care justice snicker in the background.

Partnership with government can provide health care for all

By JIM McDERMOTT
The Atlanta Journal-Constitution
Published on: 10/29/07

The fundamental role of government is to protect and serve the people and the fundamental role of business is to produce a profit and serve its shareholders. When it comes to providing health care, we can fuse the best of both worlds to provide health care to the American people.

Let’s look briefly at where we are. The number of uninsured Americans is rising while the number of U.S. companies offering a health care benefit to employees is falling. Health care premiums have risen 78 percent in the last six years but wages have risen only 19 percent. The financial health of the American middle class deteriorates every month because of soaring health care costs.

Up against this harsh reality, more Americans have been forced to accept reactive care in an emergency room, because they can’t afford access to preventive care. This costs more in dollars and in health. And make no mistake, everyone pays. You may not be the person forced to seek medical treatment in the emergency room, but you are paying for that visit through higher premiums.

For years we’ve been told the answer to this crisis rests solely with the private sector. Special interests have funded multimillion-dollar fear and smear campaigns to frighten the American people into accepting hype instead of health care. But let’s recognize just three facts left out of all those ads: SCHIP, Medicaid and Medicare.

The ads don’t tell you that these and other programs of care and dignity were created by the government because the private sector failed to provide care for millions of people because it wasn’t profitable. Does anyone think we ought to cancel Medicare and let senior citizens go it alone, or not care for poor kids or vulnerable families?

Government led the way before and government must lead the way again. We know from history that good and decent programs like SCHIP and Medicare had to be created by government.

If anyone tells you that you can’t trust government, ask them who they trust to protect America from terrorist threats, protect consumers from unsafe products in the marketplace, protect airline travelers by ensuring we have safe skies.

Government can provide the leadership and free the private sector to provide the services, innovation and efficiency. A universal plan would cover every American’s care, financed publicly, but implemented privately.

In any insurance program, rates are determined by the risk pool — fewer people in the pool equates to higher risk — and higher prices since companies have a duty to make a profit. Today, risk is divided into thousands, if not millions of individual segments across America, which drives up prices and drives people out of the system as rates soar.

But an American health care program would create a national risk pool including every American — driving risk down to the lowest possible point. The efficiencies and savings would be enormous.

The irony is that the more people we cover, the lower the cost per person to provide health care. The system would eliminate uncompensated care, which every private provider faces today — and the rest of us pay for through higher rates. By providing a national risk pool, we bring enormous clout to the marketplace that benefits everyone.

Under a universal plan we don’t interfere with the delivery of health care services by the private sector, but we do provide the financial support to drive the system to achieve maximum efficiencies and lower costs. Public and private sectors working together actually work. We do it in time of war. We do it in time of national crisis. We need to do it now, because health care has become a national crisis.

Say yes to national health care

By Michael Hochman and David Himmelstein
Baltimore Sun
October 29, 2007

Michael Moore’s film Sicko gave a big boost to the movement for single-payer national health insurance this year. But even those turned off by Mr. Moore’s less-than-subtle style will find many reasons to support a single-payer system. As the number of uninsured and underinsured Americans continues to rise and medical costs spiral out of control, these reasons are increasingly compelling.

As doctors at an urban hospital, we see uninsured patients in the emergency room with serious illnesses that easily could have been prevented with appropriate preventive care. We waste countless hours filling out unnecessary insurance forms. And we listen to patients complain about the complexities and hassles of navigating the health care system.

This is why an increasing number of us on the front lines have started calling for meaningful change in the form of a single-payer system in which the government funds health care.

Next weekend, proponents of single payer will gather in Washington for the annual convention of Physicians for a National Health Program. Our group has proposed giving every U.S. resident a health care card entitling him or her to all medically necessary services. The new program would be funded by an increase in taxes, but that would be fully offset by savings from abolishing insurance premiums and many out-of-pocket health care costs. Those wanting cosmetic and other medically unnecessary services could still pay out of pocket.

Opponents of a single-payer system argue that single payer could be even more inefficient and bureaucratic than the current system. They point to other countries, such as Canada, that have national health insurance and yet have long wait times to see doctors.

But research supports the opposite conclusion. For example, a 2003 study published in The New England Journal of Medicine found that the average overhead of U.S. insurance companies is 11.7 percent, compared with 3.6 percent for Medicare and 1.3 percent for Canada’s national health insurance program. And the waits in Canada are a result of Canada’s low level of health spending – on a per capita basis, about half that in the United States. The efficiency of Canada’s national health insurance program coupled with our current high level of health funding would yield the world’s best health care system.

There is no reason to expect, as some people do, that reckless use of health care resources would increase under a single-payer system. Other countries that offer free health care spend much less than we do, and even now, most Americans don’t “feel” the cost of health care because insurance companies pay many of the bills.

Some also suggest that the quality of health care would decline under a single-payer system. But again, this is unlikely. Life expectancy is shorter and infant mortality rates are higher in the United States compared with most nations with a single-payer system, and a comprehensive analysis has found that Canadians receive care at least as good as most insured Americans. The only difference would be that instead of sending bills to private insurance companies – a difficult and time-intensive process – doctors and hospitals would bill the national health insurance program.

Medical innovation would also continue unfettered. The vast majority of basic science in the United States is publicly funded, and incentives for drug development would remain strong.

Despite the merits of a single-payer system, none of the major 2008 presidential candidates supports it. Instead, they have put forth a creative array of meaningless, incremental reforms that would do little for our failing system.

For example, Mitt Romney’s Massachusetts Health Reform – which requires citizens to purchase health insurance or face a fine – is proving far more complicated and far less comprehensive than many had hoped.

Proposals from Democratic Sens. Barack Obama of Illinois and Hilary Rodham Clinton of New York also fall far short. Under both of their plans, only low-income citizens who qualify for Medicaid or the State Children’s Health Insurance Programs would be guaranteed health care. The rest would be required to buy their own, effectively criminalizing the uninsured.

Although few mainstream politicians endorse single payer, we see reason for optimism. A recent survey of Massachusetts physicians found that almost two-thirds favor single payer, and we believe health care providers are coming around nationwide as well. We hope the political thrust for single payer will come soon. If it doesn’t, we face a future of more wasteful spending, more inefficiency – and ever more Americans struggling to get by without health insurance.

Dr. Michael Hochman is a member of the Massachusetts chapter of Physicians for a National Health Program, and Dr. David Himmelstein is a co-founder of that organization.

AHIP's deceptive release on CDHC

New Study Shows Lower Costs, Increased Consumer Engagement in Account-Based Health Plans

HealthDecisions.org
October 23, 2007

HealthPartners today released results of a study that provide new evidence that members who have health savings accounts and health reimbursement accounts have lower medical costs and are more engaged in seeking out more cost effective care. The analysis shows that even when adjusted for illness burden, health care costs were 4.4 percent lower for HealthPartners members in these consumer directed health plans compared to members in traditional plans.

http://www.healthdecisions.org/HSA/News/default.aspx?doc_id=139052

Consumer Directed Health Plans Analysis

HealthPartners
October 2007

As demand for consumer-directed health care increases, this study adds to evidence from national studies about the impact of consumer-directed health plans. Several studies show that consumer-directed plans are associated with increased consumer engagement and lower costs.

CDHPs are associated with lower costs and more efficient care

The cost of care for members in CDHPs was more than 4.4 percent lower than the cost of care for members in traditional plans after accounting for differences in illness burden.

Cost of Care by Product:

$210 – HSA

$194 – HRA

$216 – Traditional without deductible

http://www.healthpartners.com/files/39058.pdf

Comment:

By Don McCanne

This study released by America’s Health Insurance Plans shows that consumer-directed health plans using health savings accounts are effective in reducing health care costs (confirming the theory that patient-consumers will be more careful in spending funds from their own health savings accounts).

Wait a minute. That’s what the press release would have you believe. But what did this study really show?

Individuals with their own health savings accounts (HSA) spent $6 less than those with traditional plan without a deductible (2.8% less). That’s not very impressive.

But what about those with health reimbursement arrangements (HRA)? The funds in those accounts revert to the employer if they are not spent by the patient-consumers. Under the consumer-directed theory, health care spending should not decrease under HRAs since it is not the patients’ money, and the employees would eventually lose access to the funds if they didn’t spend them. Yet those individuals spent $22 less (10.2% less). Both the HSA and the HRA products combined resulted in 4.4% decrease in costs, but the real savings was with the HRAs and not the HSAs.

So what is the conclusion? Patients who need care will freely spend their own money out of their HSAs, but they will hold back on care if its their employers’ money that they’re spending. This, of course, is the exact opposite of what this press release and the advocates of consumer-directed health care would have you believe.

Of course this is all nonsense. The real issue is that high-deductible health plans are replacing more comprehensive coverage, and these deductibles are making health care access less affordable. Hiding behind the rhetorical diversion over health savings accounts, to which two-thirds of employers don’t even contribute, hardly advances the cause of affordable, comprehensive health care for all.

AHIP’s deceptive release on CDHC

New Study Shows Lower Costs, Increased Consumer Engagement in Account-Based Health Plans

HealthDecisions.org
October 23, 2007

HealthPartners today released results of a study that provide new evidence that members who have health savings accounts and health reimbursement accounts have lower medical costs and are more engaged in seeking out more cost effective care. The analysis shows that even when adjusted for illness burden, health care costs were 4.4 percent lower for HealthPartners members in these consumer directed health plans compared to members in traditional plans.

http://www.healthdecisions.org/HSA/News/default.aspx?doc_id=139052

Consumer Directed Health Plans Analysis

HealthPartners
October 2007

As demand for consumer-directed health care increases, this study adds to evidence from national studies about the impact of consumer-directed health plans. Several studies show that consumer-directed plans are associated with increased consumer engagement and lower costs.

CDHPs are associated with lower costs and more efficient care

The cost of care for members in CDHPs was more than 4.4 percent lower than the cost of care for members in traditional plans after accounting for differences in illness burden.

Cost of Care by Product:

$210 – HSA

$194 – HRA

$216 – Traditional without deductible

http://www.healthpartners.com/files/39058.pdf

Comment:

By Don McCanne

This study released by America’s Health Insurance Plans shows that consumer-directed health plans using health savings accounts are effective in reducing health care costs (confirming the theory that patient-consumers will be more careful in spending funds from their own health savings accounts).

Wait a minute. That’s what the press release would have you believe. But what did this study really show?

Individuals with their own health savings accounts (HSA) spent $6 less than those with traditional plan without a deductible (2.8% less). That’s not very impressive.

But what about those with health reimbursement arrangements (HRA)? The funds in those accounts revert to the employer if they are not spent by the patient-consumers. Under the consumer-directed theory, health care spending should not decrease under HRAs since it is not the patients’ money, and the employees would eventually lose access to the funds if they didn’t spend them. Yet those individuals spent $22 less (10.2% less). Both the HSA and the HRA products combined resulted in 4.4% decrease in costs, but the real savings was with the HRAs and not the HSAs.

So what is the conclusion? Patients who need care will freely spend their own money out of their HSAs, but they will hold back on care if its their employers’ money that they’re spending. This, of course, is the exact opposite of what this press release and the advocates of consumer-directed health care would have you believe.

Of course this is all nonsense. The real issue is that high-deductible health plans are replacing more comprehensive coverage, and these deductibles are making health care access less affordable. Hiding behind the rhetorical diversion over health savings accounts, to which two-thirds of employers don’t even contribute, hardly advances the cause of affordable, comprehensive health care for all.

Oberlander on learning from failure

Learning from Failure in Health Care Reform

By Jonathan Oberlander, Ph.D.
The New England Journal of Medicine
October 25, 2007

The Clinton administration’s misadventure carries several broader lessons about the politics of health care reform. First, no matter how much momentum it seems to have, no matter how many signs point to change, there is nothing inevitable about health care reform in the United States. In U.S. health policy, the status quo is deeply entrenched and, despite all its failings, the system is remarkably resistant to change, in part because many constituencies profit from it. Thus, although everyone decries the amount of money spent on health care, the political reality is that national health care expenditures represent income to health industry stakeholders, whose interests lie in ensuring even greater spending.

Second, many Americans are satisfied with their own health care arrangements, so reforms that threaten to unsettle those arrangements risk running afoul of the voting public. Health care reformers must thread the needle by persuading the anxious insured that reform is in their best interest and that the uninsured can be covered without disturbing (and ideally, while enhancing) their coverage.

Third, expanding government authority over a health care system that accounts for more than $2 trillion and one sixth of the economy in a country that is ambivalent about public power is an inherently controversial exercise. No universal coverage plan, no matter how clever, can evade that ideological debate.

Fourth, paying for health care reform remains a formidable challenge. The Clinton plan collapsed largely because the administration could not secure congressional support for an employer mandate, but no obvious financing alternatives have emerged in the ensuing years, and persistent antitax politics and federal deficits constrain the options for reform.

Fifth, U.S. political institutions limit presidential power, foster divisions in Congress, create opportunities for those with vested interests to block change, and generally complicate the adoption of health care reform.

Finally, the window for enacting a comprehensive plan for health care reform never stays open for long, so failure comes at a high price — namely, the loss of political will to do anything meaningful about the uninsured for some time to come.

NEJM Audio Interview with Jonathan Oberlander:

I really believe that for health reform to pass things have to get worse, and they have to get much worse for the middle class. As long as this is an issue about people on the other side of the tracks, it’s not going to pass. It has to be a case where the president and members of Congress are really hearing that their middle class constituents who, after all are the ones who are voting, are hurting, and I’m afraid actually that’s exactly where we’re headed.

http://content.nejm.org/cgi/content/full/357/17/1677

Comment:

By Don McCanne, MD

It would be a shame to see so much more suffering occur before we could achieve reform. What would the healthy want to hear now, before their personal finances are threatened by medical costs, that would make them want to change to a public program ?

They need to be convinced that the coverage would be superior to what they have, with greater benefits, fewer out-of-pocket costs, and free choice of their health care professionals.

Perhaps even more persuasive would be the assurance of permanent health security. No longer would individuals potentially be one paycheck away from losing their insurance merely because of loss of employment or the desire for early retirement. A public program would be there for them for their entire lives.

So we should ask Americans whether they want to wait for the pain, or prevent the pain. If they want to prevent it, they need to let Congress and the president know.

Competing health insurance plans equally flawed

By Malinda Markowitz
San Jose Mercury News
10/25/2007

It’s time to wave the warning flag on the steamroller demanding action on health care this year – no matter what it is. Rather than resulting in sound policy, the drumbeat could just as easily produce a hastily designed “compromise” that perpetuates our state’s health care crisis while stalling real reform for years to come.

Consider Massachusetts, whose mandatory health insurance law is the model for Gov. Arnold Schwarzenegger’s proposal and which provided much of the inspiration for a similar legislative proposal vetoed by Schwarzenegger earlier this month.

The Massachusetts law was hurriedly rushed through its Legislature last year amid clamor for passage of a law that its advocates could claim solved their health care morass while burnishing the credentials of politicians such as Gov. Mitt Romney, then in the final stages of preparing his candidacy for president.

Today the law remains a mess. Despite tax penalties for failure to buy insurance, only 20 percent of the uninsured have purchased the mandatory plans – and 94 percent of those who have enrolled received full or partial public subsidies.

One reason so many are willing to accept the fines is the law’s failure to control costs.

Even the cheapest plans have high deductibles and co-pays, and huge gaps in coverage have eroded existing benefits for many families with modest incomes.

Massachusetts officials admit 18 percent of the uninsured cannot afford insurance, notes a report by the Santa Monica-based Foundation for Taxpayer and Consumer Rights. As Ben Day, director of Mass-Care, a vocal critic of the law, points out, “many of those who supported it are now saying the law will never work.”

Why does Massachusetts matter? Because both the latest Schwarzenegger proposal, and the alternative favored by Assembly Speaker Fabian Núñez and some of his allies, repeat the mistakes of the Massachusetts law.

Neither approach constrains skyrocketing premiums, deductibles, co-pays, drug costs or hospital charges. That’s a fatal flaw. Millions of Californians are likely to end up with junk insurance that increases their health insecurity with policies that will jeopardize their financial health if they use medical care or encourage them to self-ration and not use the care they still have to pay for.

Proponents of the two versions say they are cracking down on insurers by requiring them to provide coverage to everyone, but massive loopholes make that promise illusory.

The governor’s latest plan, for example, allows health plans to require information on a patient’s health status or history and permits them to raise rates further for “risk adjustment.” The Núñez bill permitted insurers to dump people with “serious medical conditions” into a public pool that would probably be bankrupted by having to pay for the sickest patients.

Two issues, both ominous for California working families, appear to be holding up the final back-room deal.

The first is a Massachusetts-style mandate forcing all uninsured individuals to buy insurance. As in Massachusetts, the price tag for the cheapest plans in the governor’s proposal is enormous deductibles and other high out-of-pocket costs, and a required minimum that a family must spend on its health plan which together could financially devastate many California families.

While Núñez and his allies have opposed the individual mandate, it seems likely a deal will be cut providing financial offsets for some middle-income families. But, as the Massachusetts experience proves, without effective cost controls, any offsets on an individual mandate are meaningless.

A second point of contention is how much tax will be levied on employers who don’t provide health coverage for workers. But both the amount favored by the governor, and the one in the Núñez bill that was vetoed, are substantially less than what the average California business offering health plans now pays, a clear incentive for businesses to reduce coverage or drop benefits entirely and just pay the tax.

Sadly, the main beneficiaries of a rushed “compromise” will be the same insurance companies that created the present crisis. They would harvest millions of new customers, with the government using its power and the public purse to further an insurance industry that will continue to be able to profiteer and deny care.

We don’t have to turn just to Massachusetts to see an example of how this can lead to disastrous public policy. A decade ago, the same “consensus” pushed the hurried passage of energy deregulation. That was followed by blackouts, skyrocketing energy costs for consumers, financial calamity for the state, and open thievery by Enron and other energy corporations.

Californians should demand that legislators pull the plug before we plunge into another disaster.

MALINDA MARKOWITZ is a member of the Council of Presidents of the California Nurses Association/National Nurses Organizing Committee and a registered nurse at Good Samaritan Hospital in San Jose. She wrote this article for the Mercury News.

Rewarding physicians for providing less care

Physicians Cite Reasons Incentives Are Onerous

By Scott Shepard
The Daily News
October 24, 2007

A plan by two insurance companies to reward Memphis doctors based on efficiency and cost effectiveness has doctors upset. And it’s not a problem with working under incentives, which have existed for years in health care, but with rating doctors based on their billing histories.

Representatives from both United HealthCare and Cigna have been making the rounds in West Tennessee explaining their new incentive programs, which will rate doctors who make the grade with higher reimbursements.

In an environment in which costs continue to escalate, carriers are under extreme pressure to rate providers who give the best dollar value, said physician Robert McLaughlin, medical director of Cigna HealthCare of Tennessee.

Insurance companies have mountains of billing information on every doctor, noted Richard Lachiver, an occupational medicine physician and market medical director of Tennessee and Arkansas for United. Billing data may contain some bias, but when aggregated it still shows clear patterns and points out opportunities for improvement.

It’s unfortunate, he said, that this has become known as an incentive plan. Carriers would rather it be treated as an information-sharing project doctors could embrace. Physicians have been too slow to change, and the economics now are driving the system.

http://www.memphisdailynews.com/Editorial/StoryLead.aspx?id=99512

Comment:

By Don McCanne, MD

Since reimbursement rates are already set by contracts between insurers and physicians, this can’t be about the specific fees that are billed since they are automatically adjusted down to contracted rates.

By using “mountains of billing information,” the “best dollar value” will be determined by the frequency and intensity of services. Physicians who see their patients less frequently, do fewer procedures, and provide fewer intensive visits will be paid more for the services that they do deliver. The physicians who are most successful at selecting a larger number of healthy patients and dumping the sick ones will receive the highest compensation.

This is precisely the marketplace mentality that we have come to expect from the private insurance industry. In contrast, a public insurance program would be designed to be certain that those who really need health care would receive it.

The insurers say that this isn’t an “incentive plan,” but rather, in consumer-directed lingo, it is an “information-sharing project.” In more traditional rhetoric, “when they say it isn’t about the money, it’s about the money.”

Big N.Y. Union, Gore Back Government Run Single-Payer Health Care

Press Associates, Inc. (PAI)
10/22/2007

ALBANY, N.Y. (PAI)–A big New York state union, the 58,000-member Public Employees Federation, has joined the growing group that backs government-run single-payer health care. And former Vice President Al Gore does, too.

A 2-sentence endorsement PEF delegates added at their recent convention said it “supports the expansion of Medicare described in bill HR676–the United States National Health Insurance Act. This legislation would provide not-for-profit, single-payer health care to all Americans.”

That adds single-payer health care to a detailed PEF federal agenda that includes preservation of Social Security, transportation funding, and other issues.

Meanwhile, the California Nurses Association, one of at least six AFL-CIO unions that back single-payer, reported Gore’s statement, aired on cable television.

Gore, who won the 2000 presidential election against GOP nominee George W. Bush, but who was deprived of the job by GOP theft, called the present health care system “incredibly ridiculous.” Gore just shared the Nobel Peace Prize for his work on alerting the world to the dangers of global warming. That gives him added credibility.

“I strongly support universal, single-payer, government-provided-for, government-funded health care,” Gore said. “It doesn’t mean the government runs it, it has competition among different providers. But I just think that we’ve long since reached the stage that it’s immoral to put people in a situation where they cannot get the medical care they need because their incomes aren’t high enough.

“I think it ought to be a matter of right and our current system just doesn’t work. It’s way too expensive. The quality of health care is excellent for those who have enough money to buy the very best, but lower-income and low middle-income Americans are not getting good health care and so many now can’t afford the private health insurance that they’re going without insurance,” Gore explained.

PEF is a joint affiliate of AFT and the Service Employees, neither of which has endorsed the government-run single-payer health care proposal. That legislation, by veteran Rep. John Conyers (D-Mich.) would abolish any role for the private insurance companies, as well as their co-pays, deductibles, denial of care and deaths caused by refusal to pay for patient care.

In other news from the New York unionists’ convention, the delegates endorsed home-state Sen. Hillary Clinton (D) for the Democratic presidential nomination. New York’s primary, like 24 others nationwide, is on Feb. 5. AFT has also endorsed Clinton, but SEIU left endorsement decisions up to its locals.