Sick: The Untold Story of America’s Health Care Crisis–and the People Who Pay the Price

www.sickthebook.com

By Jonathan Cohn
TPMCafe Book Club

Health care: The case for thinking big
By Jonathan Cohn

One of the most fascinating products of researching my new book, Sick, was also one of the most depressing: the realization that we’ve been here before.

If you go back to the late 1920s and early 1930s, you’ll find a situation that looks more than vaguely familiar. As medical care was becoming more expensive, large numbers of people were finding they literally could not afford to get sick. Many of these people weren’t indigent in the narrow sense of the word. They had homes. They had jobs. And yet when they got sick, their lives unraveled. Some went into debt to pay for it. Some rationed their own care. The result was financial misery, medical hardship, or both.

That situation eventually gave birth to the insurance system we have today – a system, based primarily upon job-provided private insurance, that is now faltering as the price of medical care rises. If you read the eight stories in the book, you’ll get a sense not just of how devastating loss of insurance can be today, but also of how vulnerable to this problem even the middle class has become – just like it was nearly a century ago.

It’s this increasingly vulnerability that has provoked a new debate about universal health care – and given would-be reformers some cause for optimism. But now that this debate is unfolding, it’s brought us to yet another familiar place: The argument about what kind of system to create.

On one extreme of the progressive political spectrum you have…

(Continued at this link)

http://bookclub.tpmcafe.com/blog/bookclub/2007/apr/10/health_care_the_case_for_thinking_big

And…

Response to Jonathan Cohn’s “case for thinking big” on health care

By Don McCanne

Okay. If we’re going to get anywhere in our discussion on how to fix our health care system, we’d better look at some numbers that will give us a better perspective of the problem.

This year, according to CMS, our projected health care spending is $2.2 trillion, or $7500 per each individual in the United States. With a median household income of about $46,000, it is easy to understand why a family of four would have difficulty paying its equal (not equitable) share of $30,000. (Before you divert the debate into the subject of apples and oranges, keep in mind that that the topic is health care reform, and the numbers are being used to demonstrate merely the magnitude of the problem.)

When there is general agreement that everyone should be covered, these numbers lead us to the insurance function of pooling risk – for all of us. Traditionally, health insurance provided for a transfer from the many who are healthy to the few with significant health care needs. Distributing costs evenly over the risk pool worked.

Something happened in the interim. Health care costs skyrocketed, but we were caught off guard because they were gradually phased in at high single or low double digit annual rates. But here we are. At $7500 per person, health care simply costs too much for average income individuals to pay their equal (again, not equitable) share of any system of universal coverage. Like it or not, we are now faced with the need to transfer not only from the healthy to the sick, but also from the wealthy to average- and lower-income individuals with health care needs.

Our current fragmented system of multiple private plans and public programs is not serving us well in this transfer function. Economists may not have a definition of unaffordability, but polls show that over 90 percent of us recognize it when we see it in our health care system.

Actually, we could resolve this problem quite readily by establishing a single national risk pool and fund it equitably through progressive tax policies. Not only would that make health care affordable for each individual, based on ability to pay, it would also establish a single payer that could use its monopsony powers to slow health care inflation to a more sustainable rate (which raises other issues that may be covered this week).

Regarding reform, there are two basic models under consideration. Either we could establish a single national health insurance program, or we could build on our current system of private plans and public programs (with many sub-variations such as employer mandate, individual mandate, Medicaid and SCHIP welfare programs, or a new Medicare-as-an-option program available to everyone).

A crucial question is how well would private plans serve us in a universal system? Well, let’s see how they are serving us now. 59 percent of us are insured through our employment, yet employer-sponsored plans are paying only 19 percent of our health care costs. Already we have a problem. Private insurers have skimmed off the healthiest sector of our society – healthy, gainfully employed individuals and their young, healthy families – and they are sticking us with the other four-fifths of our nation’s health care bill. The insurers have already defeated the insurance function of transferring funds from the many who are healthy to the few who have significant health care needs.

And how efficient are the insurers in performing this transfer function for their cream-skimmed risk pools of healthy individuals? In 2005, the six largest private insurers in the nation had an average medical-loss ratio of about 80 percent. This means that they used about 20 percent of health insurance premiums for their own intrinsic purposes – administrative functions and profits. Further, about 12 percent of premiums were used by physicians and hospitals to pay for the administrative burden of billing and insurance functions related to the private plans. So one-third of these private insurance premiums were burned up in administrative costs. Who says that the private market is always more efficient than the government?

This leads us to one of the most important questions facing those concerned about the reform process. When private insurers have abandoned their crucial function of transferring risk, and they have demonstrated their profound administrative inefficiencies, why would any policymaker insist that private insurers must be a part of any model of reform? The resources we waste on them would be far better spent on health care for the uninsured and underinsured.

http://bookclub.tpmcafe.com/blog/bookclub/2007/apr/10/response_to_jonathan_cohns_case_for_thinking_big_on_health_care

Comment:

By Don McCanne, MD

This week, TPMCafe Book Club features an ongoing discussion on health care reform led off by Jonathan Cohn, timed with release of his new book, “Sick: The Untold Story of America’s Health Care Crisis—and the People Who Pay the Price.”

The online discussion will feature such notables as Jonathan Cohn, Jacob Hacker, Ezra Klein, Matthew Holt, Roger Hickey, Diane Archer, Don McCanne and others (incomplete list). Responses of readers are welcome.

With the renewed enthusiasm for reform, this discussion is very timely and should be very informative, if not provocative. You can follow it at:

http://bookclub.tpmcafe.com/

By Ruth Pollard and Mark Metherell
The Sydney Morning Herald
April 6, 2007

In just 10 years, the health system many were dreading has arrived. Spurred by the Federal Government’s campaign to push Australians into private health insurance and exacerbated by difficulties in finding care in public hospitals, the balance has tipped in favour of private hospitals. Our system is now a genuinely two-tiered model: the wealthy and privately insured get timely health care and the rest, unless they are critically ill, can wait.

In the past decade, a clear division of labour has evolved: public hospitals are now dominant in emergency surgery and medicine, while private hospitals rule in elective surgery, accounting for 55.7 per cent of all operations.

“Since 1982-83, Australia’s hospital system has witnessed a massive shift of activity to the private sector,” Bill Nichol, an assistant director in the federal Department of Health, writes in the study.

“The private sector’s role has increased to dominant player” in several categories of care, including eye, cancer, ear, nose and throat and the male and female reproductive systems, Nichol says.

The worrying thing is that many seem to have thrown up their arms in despair, a kind of “Oh, well” about the death of equity in the health system.

Bruce Armstrong, the director of research at the Sydney Cancer Centre and a professor of public health at the University of Sydney, believes there has been no attempt to prevent a two-tier health system from developing.

“Equity is a real issue … a proportion of the Australian population which is not inconsequential is not going to get that care because if you go to a private hospital you need private health insurance and even then, there [are] always going to be gap payments.”

A disturbing trend to emerge despite the establishment of Medicare in 1983 is the widening disparity between the well-off and the poor in mortality rates from avoidable diseases. The Australian way of death means the prosperous are significantly less likely to die from avoidable disease than those on low incomes.

In 1986 the rate of death from “avoidable” causes such as treatable and preventable conditions like heart disease among the have-nots was 50 per cent higher than for the haves. By 2002 that difference had stretched to a twofold gap, according to research published in the International Journal of Epidemiology.

The report concludes that “advantaged people have obtained a disproportionate benefit of health care, contributing to widening relative health inequalities”.

“A universal health-care system does not guarantee equality in health-care-related outcomes,” says the article, whose lead author was Rosemary Korda of the National Centre for Epidemiology and Population Health at the Australian National University.

The Health Minister, Tony Abbott, having presided over multibillion-dollar infusions into the private sector through Medicare payments to private doctors and the private insurance rebate, acknowledges states are bearing a larger share of public hospital costs.

But he says that if there is an equity problem, it’s for state governments to fix. “It may sound like I am playing the blame game, but state governments are responsible for public hospitals,” Abbott says.

He would welcome further growth in private insurance, which he suggests many more people could afford given that more than 1 million people on incomes of less than $20,000 pay for cover.

“No doubt having private health insurance confers additional benefits [like avoiding public waiting lists], but you do have to pay for it,” Abbott says.

It was inevitable that we would end up at this point, says Professor Jeffrey Braithwaite, the director of the Centre for Clinical Governance Research at the University of NSW.

“This is a health system responding to policy measures – those measures are the caps in the public hospital system and the incentives provided in the private system,” he says.

“The real question is, is this the health system that we want, that people desire?”

http://www.smh.com.au/news/national/the-private-life-of-health-care/2007/04/05/1175366414296.html?page=fullpage#

Australian Health Review – Abstract (Nichol):
http://www.aushealthreview.com.au/publications/articles/issues/ahr_31_1_0407/ahr_31_1_s004.asp

International Journal of Epidemiology – Abstract (Korda et al):
http://ije.oxfordjournals.org/cgi/content/abstract/dyl282v1

Comment:

By Don McCanne, MD

Australia’s experiment with a public Medicare program and private insurance plans has provided a very important policy lesson for the United States: Establishing policies that encourage the purchase of private insurance while simultaneously limiting the funding of public insurance will inevitably result in a two-tiered system. More affluent individuals will have the best care money can buy, whereas those remaining in an underfunded public program will have impaired access and impaired health outcomes. Keep in mind that impaired health outcomes means chronic suffering and death.

The private Medicare Advantage insurance options in our Medicare program are intended to reproduce this same two-tiered system in the United States. Currently the Medicare Advantage plans are provided with more taxpayer funds so that they can attract individuals by providing better benefits. Once the private plans are well established, the government can start reducing the funding of both the traditional program and the private plans. But the private plans will be able to continue to offer greater benefits merely by increasing premiums and cost sharing. Thus more affluent individuals will select the private plans whereas individuals with more modest means will be relegated to the underfunded public program. Without a surge in political activism, this outcome is inevitable.

There is an even more important lesson from the Australian experience. We now have a consensus that we must reform health care in America. The two main options are to either establish an equitable national health insurance program, or build on the current fragmented system to achieve universality. Numerous attempts at patching our current system have fallen short, so some politicians and policymakers are now supporting a public Medicare-like program as a safety-net alternative. Because health care costs are a leading concern of virtually everyone, efforts will be made to keep the funding of the Medicare-like option to a minimum. Imagine a minimally funded program that attracts people with low incomes and with significant health care needs; talk about stretching resources. Anyone who can buy their way out of that program will. Like Australia, a two-tiered system would be inevitable.

As Professor Braithwaite says, “The real question is, is this the health system that we want, that people desire?”

Business Wire
April 2, 2007

U.S. Congressmen Michael C. Burgess, M.D. (R-TX) and Bart Stupak (D-MI) have introduced bipartisan legislation to stop insurance companies from denying payments for injuries incurred while participating in certain legal recreational and transportation activities, such as motorcycling and riding all-terrain vehicles (ATV). Identical legislation has been introduced in the Senate by Senators Susan Collins (R-ME) and Russ Feingold (D-WI).

The legislation (H.R. 1076, S. 616) would close a loophole created by the Department of Health and Human Services’ regulations implementing the Health Insurance Portability and Accountability Act (HIPAA) of 1996. As written and implemented, the regulations provide that an employer may not refuse health care coverage to an employee on the basis of participation in recreational activities, but may deny health care benefits if the employee is injured while participating in these activities.

The current regulations would allow health insurers to deny payment for injuries sustained by motorcyclists and ATV riders despite the fact that the individual carried health insurance. This clearly contradicts the intent of the regulation, which was meant to ensure nondiscrimination in health care coverage. This legislation would reinstate the original intent and close the loophole that unfairly discriminates against motorcyclists, ATV riders and other recreationists.

http://insurancenewsnet.com/article.asp?n=1&neID=20070402290.2_1d780008c2416e26

Comment:

By Don McCanne, MD

Think about this for a minute. Private insurers have found a loophole that would allow them to refuse to pay for medical care for an individual for whom they have provided coverage and collected premiums. They don’t even have to refund the premiums. They merely make an arbitrary judgement that their insured shouldn’t have engaged in hazardous recreation, and decide that they shouldn’t have to pay for care for injuries that result from those activities.

Where next? Reject claims for sexually transmitted diseases? Obviously they result from very hazardous activities. And lung cancer or emphysema in smokers? Or HIV infection in individuals with chemical dependencies? Or pregnancy – which, of course, is preventable? Or obesity, diabetes or heart disease in individuals who placed themselves at greater risk by falling short of engaging in an optimal level of exercise?

Looking for loopholes to get out of paying claims for legitimate medical services is a behavior unique to the private insurance industry. That would never happen with Medicare; nor would it happen with a national health insurance program that covered everyone.

Why do we continue to reward the private insurance industry so handsomely for excessive administrative services designed to defeat the very reason for their existence – paying for health care? More importantly, why are we even listening to policymakers who insist in including these thieves in their models of reform?

The private life of health care

By Ruth Pollard and Mark Metherell
The Sydney Morning Herald
April 6, 2007

In just 10 years, the health system many were dreading has arrived. Spurred by the Federal Government’s campaign to push Australians into private health insurance and exacerbated by difficulties in finding care in public hospitals, the balance has tipped in favour of private hospitals. Our system is now a genuinely two-tiered model: the wealthy and privately insured get timely health care and the rest, unless they are critically ill, can wait.

In the past decade, a clear division of labour has evolved: public hospitals are now dominant in emergency surgery and medicine, while private hospitals rule in elective surgery, accounting for 55.7 per cent of all operations.

“Since 1982-83, Australia’s hospital system has witnessed a massive shift of activity to the private sector,” Bill Nichol, an assistant director in the federal Department of Health, writes in the study.

“The private sector’s role has increased to dominant player” in several categories of care, including eye, cancer, ear, nose and throat and the male and female reproductive systems, Nichol says.

The worrying thing is that many seem to have thrown up their arms in despair, a kind of “Oh, well” about the death of equity in the health system.

Bruce Armstrong, the director of research at the Sydney Cancer Centre and a professor of public health at the University of Sydney, believes there has been no attempt to prevent a two-tier health system from developing.

“Equity is a real issue … a proportion of the Australian population which is not inconsequential is not going to get that care because if you go to a private hospital you need private health insurance and even then, there [are] always going to be gap payments.”

A disturbing trend to emerge despite the establishment of Medicare in 1983 is the widening disparity between the well-off and the poor in mortality rates from avoidable diseases. The Australian way of death means the prosperous are significantly less likely to die from avoidable disease than those on low incomes.

In 1986 the rate of death from “avoidable” causes such as treatable and preventable conditions like heart disease among the have-nots was 50 per cent higher than for the haves. By 2002 that difference had stretched to a twofold gap, according to research published in the International Journal of Epidemiology.

The report concludes that “advantaged people have obtained a disproportionate benefit of health care, contributing to widening relative health inequalities”.

“A universal health-care system does not guarantee equality in health-care-related outcomes,” says the article, whose lead author was Rosemary Korda of the National Centre for Epidemiology and Population Health at the Australian National University.

The Health Minister, Tony Abbott, having presided over multibillion-dollar infusions into the private sector through Medicare payments to private doctors and the private insurance rebate, acknowledges states are bearing a larger share of public hospital costs.

But he says that if there is an equity problem, it’s for state governments to fix. “It may sound like I am playing the blame game, but state governments are responsible for public hospitals,” Abbott says.

He would welcome further growth in private insurance, which he suggests many more people could afford given that more than 1 million people on incomes of less than $20,000 pay for cover.

“No doubt having private health insurance confers additional benefits [like avoiding public waiting lists], but you do have to pay for it,” Abbott says.

It was inevitable that we would end up at this point, says Professor Jeffrey Braithwaite, the director of the Centre for Clinical Governance Research at the University of NSW.

“This is a health system responding to policy measures – those measures are the caps in the public hospital system and the incentives provided in the private system,” he says.

“The real question is, is this the health system that we want, that people desire?”

http://www.smh.com.au/news/national/the-private-life-of-health-care/2007/04/05/1175366414296.html?page=fullpage#

Australian Health Review – Abstract (Nichol):
http://www.aushealthreview.com.au/publications/articles/issues/ahr_31_1_0407/ahr_31_1_s004.asp

International Journal of Epidemiology – Abstract (Korda et al):
http://ije.oxfordjournals.org/cgi/content/abstract/dyl282v1

Comment:

By Don McCanne, MD

Australia’s experiment with a public Medicare program and private insurance plans has provided a very important policy lesson for the United States: Establishing policies that encourage the purchase of private insurance while simultaneously limiting the funding of public insurance will inevitably result in a two-tiered system. More affluent individuals will have the best care money can buy, whereas those remaining in an underfunded public program will have impaired access and impaired health outcomes. Keep in mind that impaired health outcomes means chronic suffering and death.

The private Medicare Advantage insurance options in our Medicare program are intended to reproduce this same two-tiered system in the United States. Currently the Medicare Advantage plans are provided with more taxpayer funds so that they can attract individuals by providing better benefits. Once the private plans are well established, the government can start reducing the funding of both the traditional program and the private plans. But the private plans will be able to continue to offer greater benefits merely by increasing premiums and cost sharing. Thus more affluent individuals will select the private plans whereas individuals with more modest means will be relegated to the underfunded public program. Without a surge in political activism, this outcome is inevitable.

There is an even more important lesson from the Australian experience. We now have a consensus that we must reform health care in America. The two main options are to either establish an equitable national health insurance program, or build on the current fragmented system to achieve universality. Numerous attempts at patching our current system have fallen short, so some politicians and policymakers are now supporting a public Medicare-like program as a safety-net alternative. Because health care costs are a leading concern of virtually everyone, efforts will be made to keep the funding of the Medicare-like option to a minimum. Imagine a minimally funded program that attracts people with low incomes and with significant health care needs; talk about stretching resources. Anyone who can buy their way out of that program will. Like Australia, a two-tiered system would be inevitable.

As Professor Braithwaite says, “The real question is, is this the health system that we want, that people desire?”

By Angela Fowler-Brown, Giselle Corbie-Smith, Joanne Garrett and Nicole Lurie
Journal of General Internal Medicine
April, 2007

OBJECTIVE: To determine the relationship between insurance and cardiovascular outcomes and the relationship between insurance and selected process measures.

DESIGN AND PARTICIPANTS: We used data from 15,792 participants in the Atherosclerosis Risk in Communities Study, a prospective cohort study.

RESULTS: Persons without insurance had higher rates of stroke and death, but not myocardial infarction, than those who were insured. The uninsured were less likely to report routine physical examinations; more likely to be unaware of hypertension and hyperlipidemia; and more likely to have poor blood pressure control.

CONCLUSIONS: Lack of health insurance is associated with increased rates of stroke and death and with less awareness and control of cardiovascular risk conditions. Health insurance may improve cardiovascular risk factor awareness, control and outcomes.

http://www.springerlink.com/content/f4301627w3354417/?p=80d6e4d4ae67466fbb1022b9f1a725a1&pi=12

Beth Israel Deaconess release:
http://www.bidmc.harvard.edu/?node_id=1000&mainFrameSrc=/tools/newsnow/pr_out.asp?pr_id=1552

And…

Universal healthcare’s dirty little secrets

By Michael Tanner and Michael Cannon (Cato Institute)
Los Angeles Times
April 5, 2007

Simply saying that people have health insurance is meaningless.

Supporters of universal coverage fear that people without health insurance will be denied the healthcare they need. Of course, all Americans already have access to at least emergency care. Hospitals are legally obligated to provide care regardless of ability to pay, and although physicians do not face the same legal requirements, we do not hear of many who are willing to deny treatment because a patient lacks insurance.

http://www.latimes.com/news/opinion/la-oe-tanner5apr05,0,2227144.story?coll=la-opinion-rightrail

Comment:

By Don McCanne, MD

Lack of health insurance maims and kills. How can anyone with the slightest sense of decency state that that is meaningless?

By Alice Rivlin (Brookings Institution) and Joseph Antos (American Enterprise Institute)
Post-Bulletin
March 29, 2007

We cannot stop the inexorable rise of health-care spending, but we should be able to slow it down without sacrificing the care we all want.

Progress can be made, but only if we get past the ideological debate over market-oriented versus regulatory approaches. Both markets and regulations play a necessary role in our health care system, and we must improve both. Giving consumers more understandable information about costs and effectiveness can help them choose more efficient providers and spend their health dollars more wisely, especially on routine or elective procedures. But a patient with a serious acute illness may not be in a position to make informed choices. Public and private insurers must adjust their payments to reward best practices and discourage wasteful and ineffective providers.

President Bush’s recent proposal to make employer contributions to employee health insurance taxable would discourage employers from offering over-generous health coverage that fosters wasteful health spending. The president would offer a standard deduction for health insurance to help taxpayers buy coverage either through their employer or in the market.

Congress should treat the president’s proposal as an opening bid, convert the standard deduction to a refundable tax credit available to everyone, and help the states make affordable coverage available to all through high-risk pools and more sensible regulation.

One thing is certain. Slowing the rise of health spending to a sustainable pace and getting more health for our money is going to take all of us. Patients and doctors, hospitals and insurers, governments and the private sector all have to work together. It won’t be easy, but unless we try everything and keep trying, we will have poorer than necessary health care at higher than necessary cost.

http://www.postbulletin.com/newsmanager/templates/localnews_story.asp?a=288963&z=12

Comment:

By Don McCanne, MD

The pressure is on for health care reform, and politicians and the policy community clearly understand that. The consensus seems to be that everyone should have the health care that they need, without having to face the added burden of financial hardship. That is a view from the political left that is now shared by an increasing number of moderates and even some from the right.

The right understands that changes are absolutely inevitable, and the lack of an enthusiastic reception of their concepts means that they will not be able to unilaterally dictate the policies to be adopted. The left understands that, at least until now, the rationality of a program of national health insurance has not been enough to drive reform.

Thus there has been a move to set ideology aside and to work together to tackle our health care problems. We are seeing unprecedented coalitions from across the political spectrum forming to advocate for comprehensive reform. Unfortunately, so far all that they have been able to produce is hot air, since they have not been able to agree on how reform is to be accomplished. That is, they have been unable to set ideology aside. (Massachusetts is not an exception, as it is an example of the process described in the next paragraph.)

So now we are seeing intellectuals such as Alice Rivlin and Joseph Antos trying to meet on a common ground while professing to set ideology aside. But where do they actually meet? Do they try to meet halfway between a government insurance program and private plans in the marketplace? No. They are meeting in the marketplace, deciding whether we’ll have private plans with modest regulation, or private plans controlled more by market forces. When universal health insurance is a concept from the left, why would we move over to the right to negotiate it?

The right will never give up their ideology. In insisting on market-oriented reform through private plans, they are willing to give up on covering everyone, give up on ensuring that people would get all of the care that they need, and give up on preventing financial hardship (since that is their most important tool for controlling spending).

Can the left set aside ideology? Not if we accept the position of the right that affordable, reasonably comprehensive health care for everyone is a left wing concept. But let’s try to do it anyway by redefining Medicare-for-All national health insurance as being as truly American as Mom and apple pie. American ideology is so much more comfy than partisan ideology.