National Doctors’ Group Decries “State of the Union” Health Care Proposals
Bush Reforms Would Worsen Care, Bankrupt Sick Families
President Bush’s proposals for health reform would simultaneously: (1) worsen access to care for people who are already covered; (2) offer billions for new tax subsidies that will not expand coverage; (3) drive up bureaucratic costs and do nothing to control overall health spending; and (4) offer tax breaks targeted to the wealthiest Americans.
CONSUMER-DIRECTED HEALTH CARE
* “Consumer Directed Health Care” (CDHC) is simply another term for skimpy insurance. These plans shift costs from employers to workers by forcing them to pay huge deductibles — from $2000 to $20,000 — before insurance kicks in.
* Many plans exclude important services (e.g. maternity care) altogether, so spending for these doesn’t even count towards the deductible.
* High deductibles discourage needed as well as unneeded care, and particularly discourage preventive care. For instance, diabetic patients forego routine eye and foot care, and end up with amputations and blindness. Similarly, patients with high blood pressure skimp on treatment and end up with strokes and heart attacks.
* These plans effectively penalize the sick for being sick, and will drive an increasing number of middle class families into bankruptcy. While healthy people may pay a little less, the sick will pay far more. Of course, virtually everyone gets sick and has high health costs at some point in their life — costs that will drain whatever money middle class people will be able to put into an HSA.
TAX CREDITS FOR THE UNINSURED
* The tax credits the President would offer are so meager that they would not even cover the skimpiest of plans that are actually available. The average cost of family coverage is now about $10,000, while the President suggests offering the poor only a $3000 tax subsidy. Past experience with a similar subsidy program (under The Trade Adjustment Assistance Act) showed that only a tiny fraction of low income families were able to get coverage, even with a substantially more generous subsidy than Bush now proposes.
ADDED WASTE AND BUREAUCRACY
* CDHC plans will not control costs. More than 30 percent of health spending is already consumed by administrative waste. HSAs and high deductible plans save nothing on existing insurance bureaucracy because patients and insurers must still keep track of each health expenditure to know when the deductible is reached.
* CDHC will add a new layer of bureaucratic costs to the system. A consultant has estimated that additional account management fees, transaction fees etc. required because of HSAs will cost $1 billion annually by 2011 (Modern Healthcare January 16, 2006:16). Moreover, doctors and hospitals will have to spend even more than at present on their billing, since collecting cash from individual patients (many of whom will not be able to pay) is costlier than computerized billing of insurance plans. One consultant has estimates these increased collection costs at 0.5% of total practice revenues, which would amount to billions of dollars annually.
* Savings Account Plans encourage predatory lending to sick families. Already, insurance firms are chartering their own banks and investment firms are gearing up to manage HSA assets — for a fee. Moreover, insurers are planning to issue HSA debit and credit cards (with high interest rates).
* Nor will the incentives in CDHC contain overall health spending. First, about 70% of health costs are incurred by a relatively few very sick people who will quickly exceed their deductible limits and have no incentives to “comparison shop” or otherwise save on care. Second, by discouraging routine preventive care in the short term CDHC threatens to actually increase costs in the long run. Finally, research in other nations demonstrates that an increase in deductibles does not decrease system-wide costs. Doctors generally tell their sick patients how soon they need to return for a visit, how frequently lab tests should be monitored etc. In Saskatchewan, Quebec and Switzerland, co-payments merely shifted care from the poor toward the wealthy as doctors apparently kept themselves fully booked, and yielded no overall savings.
HEALTH CARE TAX CREDIT FOR THE WEALTHY
* The vast majority of CDHC tax breaks are sure to accrue to those who need them the least. The tax advantages of HSAs are far more valuable to people in high tax brackets than to the poor or middle class. In fact, early data shows that only one half of people choosing HSA plans have deposited any money in the account — presumably because they couldn’t afford to. Rich people choose these plans because they offer a big tax break, and poor people choose them because the premiums are lower — they look like a good deal until you get sick.
By contrast, single-payer national health insurance could provide high-quality, comprehensive coverage to every American by recovering more than $300 billion annually squandered on needless administration with a single, simplified payment system.
###
Physicians for a National Health Program is an organization of 14,000 physicians advocating for non-profit national health insurance. PNHP has chapters and spokespersons across the country. For contacts, call (312) 782-6006
Steffie Woolhandler, M.D. is an Associate Professor of Medicine at Harvard Medical School. She is the author of “Costs of Health Care Administration in the United States and Canada,” New England Journal of Medicine, August 21, 2003.
FOR MORE INFORMATION: “Impacts of Health Reform,” By Ken Thorpe, Ph.D., National Coalition on Health Care (available at: http://www.nchc.org/materials/studies/Thorpe%20booklet.pdf).
COMMENTS ON STATE OF THE UNION HEALTH PROPOSALS FROM PNHP MEMBER PROF. JAMES G KAHN
First Appeared Monday, 30 January ’06, UCSF Today
President’s State of the Union Likely to Address Health Care
James G. Kahn, MD, MPH, a professor at UCSF’s Institute for Health Policy Studies and in the Department of Epidemiology and Biostatistics, will be among those tuning in to hear the President’s State of the Union address on January 31.
Kahn, who researches health care costs and policies, recently published a study in Health Affairs that found that billing and insurance paperwork consume at least one out of every five dollars of private insurance health spending in California.
Kahn answered some questions regarding the President’s policies and what he expects to hear in the address on Tuesday night. The President will deliver his fifth State of the Union address before a joint session of Congress at 6 p.m.
Q: Do you expect any positive news regarding health care spending in the President’s address? A: Unfortunately, I expect more bad news than good. We’ve had a law in the US for a few years for people to set up Health Savings Accounts (HAS). Originally, if an individual did not use all of the money that he or she put aside, it would be contributed to a shared insurance pool for those who needed it. The rules were changed in the bill that implemented the Medicare drug benefit. Now, any remaining money goes into an Individual Retirement Account, rather than remaining in the pool. I expect that the President is going to recommend that the amount of money people can put into Health Savings Accounts be increased.
Q: You consider this a negative? A: For most people, yes. It’s great for the individual healthy person who does not use the money set aside, but it means there is less money for people who get sick; therefore the integrity of the shared insurance pool is compromised. It gives healthy, wealthy people a tax break and added retirement income. However, by shifting money away from health care, it compromises the ability to maintain in the insurance pool for people who are sick and have no reason or ability to get an HSA plan. With higher limits on these accounts, it is an exacerbation of what is already a bad policy.
Q: What about the expected proposal for tax breaks for medical spending? A: We have the same problem here. Who benefits most from tax deductions? – wealthier people. It’s once again helping individuals that least need the help. At least as important, when economists have looked at tax incentives for health insurance, they conclude that it is one of the least effective ways to use federal money: the fewest people insured per federal dollar spent. It costs the government lots of money and reduces pressure on employers to pay for health insurance for employees. So, overall you are shifting expenses from employers to the federal government, which is ironic in an era when the government says it wants to stay out of people’s business.
Q: What would you like to see the President propose? A: Within the current system, there are a few things that could happen. It would be great to propose that employers be mandated to offer reasonable health insurance – insurance that is comprehensive and affordable for employees. Another valuable proposal would be to increase public health insurance. The Children’s Health Insurance Program was very successful in getting children health coverage, stemming growth in the numbers of uninsured children, but unfortunately, this program has been cut back.
Further, Medicaid (Medi-Cal) reimbursements are being cut, and the federal government is giving the states more leeway to make it harder to use Medicaid. This administration is also pushing the privatization of programs, which will cost more in administrative costs and profits for insurers. The new Medicare drug program is a great example of that. It must be administered – by law – through pharmacy benefit plans. In addition, this scattered approach has resulted in a lot of confusion, with many seniors unable to get their medications.
What I’d really like to see is Presidential support for national health insurance – public funding of privately delivered care. There is ample evidence from here and Canada that this would increase system efficiency enough to allow comprehensive coverage for everyone, both healthy and sick. However, the current administration is philosophically committed to a total private sector solution – for health insurers as well as providers. Then again, remember that it was Nixon who went to China.
Kahn will offer his comments and reaction after the State of the Union address for UCSF Today.
