PNHP

Book Review: Solving the Health Care Problem

Book Review: Solving the Health Care Problem

Solving the Health Care Problem:
How Other Nations Succeeded and Why the United States Has Not
By Pamela Behan
171 pp. Albany, State University of New York Press, 2006.
$60. ISBN 978-0-7914-6837-1.

Reviewed by Danielle Ofri, M.D., Ph.D.
New York University School of Medicine
For the New England Journal of Medicine

Status quo is a powerful determinant of both belief and behavior. Many of the things we do and the things we believe in transpire because they are what we have always done or believed. This is why incumbents win elections, why we always choose the same flavor of yogurt, why we take the same route to work, why we prescribe the same antihypertensive medications. For most Americans, our health care system is the way it is simply because this is the way it has been. The logic of changing doctors when you change insurance, changing insurance when you change jobs, and paying out of pocket when you do not have a job makes some sort of sense because this is simply the way things are.

A visitor from Mars, or Europe perhaps, would find this status quo shocking, much the way American tourists abroad are sometimes shocked to find that they are not supposed to dispose of toilet paper in some toilets. In this regard, Pamela Behan has something of an outsider’s view of America. The title of her book, Solving the Health Care Problem, assumes that the lack of national health insurance is the biggest problem in U.S. health care, which is what you learn once you read the book. This is surely what most Europeans would call the biggest problem in U.S. health care. But I’m sure that many Americans, even thoughtful ones, might think that other issues — the cost of prescription drugs, inequitable funding for research, Food and Drug Administration oversight — are the biggest problems. Even the book’s subtitle — How Other Nations Succeeded and Why the United States Has Not — assumes that the adoption of national health insurance is the definition of success in solving the biggest health care problem. I happen to agree with Behan that national health insurance is what the United States needs, but the title of her book and her approach make assumptions that might put off some of the intellectuals and policymakers who play an influential role in the future of American health care.

The book lays out a very specific methodology to answer the question that the subtitle poses. It chooses Canada and Australia as countries that are relatively similar to the United States, and it traces the paths these societies traveled to achieve national health insurance. Then it sketches the (unsuccessful) path that the United States has traveled. Approaching the problem as if it were a case-control study, the author attempts to compare these three experiences and calculate the differences, with the goal of explicating what the United States would need to do to obtain that holy grail.

Readers from the medical community are well aware of the limitations of caseĆ¢ā‚¬ā€œcontrol studies involving groups of human beings — even large, well-selected groups. But to compare three societies, with incalculable historical, political, and social differences that could conceivably outweigh their similarities, in the expectation of a clear finding is a tall order indeed. Aside from speculation, however, there are not many other research options out there, so Behan offers what is probably the most careful analysis that can be performed.

The first chapter of the book frames the basic research question in three brief pages; there is a casual mention that the last chapter “describes the study’s conclusion in layman’s terms, including the changes that may be needed to solve the problems of health care access and protection from its costs in the United States.” Were this an Agatha Christie mystery or a José Saramago novel, I wouldn’t dare peek at the last chapter. But in a book that intends to provide the all-embracing research details in the intervening chapters, nonacademicians are all but invited to skip to the plot’s climax. If suspense is important to your reading enjoyment, then stop reading this review now, because I will divulge the outcome. The answer is that in order to enact national health insurance, countries need to achieve four necessary conditions: both federal and financial authority in health care (that is, the national rather than the local government manages and funds the health care system), a multiparty system, a health care legislative legacy, and strong trade unions. Countries also need one of two sufficient conditions: labor-party power and lack of veto points (that is, the ability to block legislation — easily — from within or outside the system).

The United States comes up short on almost every one of these six counts. I found the discussion of the veto points the most interesting. For the past century, almost every legislative gesture was soundly defeated by an unelected body — the American Medical Association (AMA). Behan takes pains not to paint the AMA as the devil, since plenty of senators, representatives, and presidents added their own obstructionism. But the historical discussion reveals that the most consistent pressure came from within medicine itself.

The very nature of the American political system — the winner-take-all voting system, the free-market attitude toward lobbyists, the ability of legislators to compromise bills into nothingness — makes far-reaching social change almost impossible. The necessary and sufficient conditions needed to achieve universal health insurance seem constitutionally unachievable in American society. Behan’s sad conclusion is that “many of the chief blessings of democracy” — and health care as a right is clearly included here — “will, ironically, elude those pioneers of democracy, the American people.”

AFL-CIO statement on comprehensive reform

AFL-CIO Executive Council statement

AFL-CIO
Executive Council
March 6, 2007

The nation is once again focused on the crisis in health care and the American people are looking for a comprehensive solution, instead of the inaction and incredibly ineffective piecemeal approach of the past 10 years.

Nearly forty-seven million U.S. citizens are uninsured. Tens of millions more worry about losing the coverage they have. Workers fear changing or losing jobs because they are at risk of losing their health care coverage. American businesses that provide adequate health benefits are at a significant disadvantage, competing in the global marketplace with foreign companies that do not carry health care costs on their balance sheets. The same is true for businesses in domestic competition against employers that provide little or no coverage.

As a society, we all benefit from improvements in public health. We are a more creative, vibrant, productive and democratic nation because of it. We are all at risk of illness, injury or poor health, and we all suffer when individuals are denied needed care. The shortcomings of the American health care system–which ignores these fundamental realities–strain our nation’s social and economic fabric.

The time for talking about this crisis is past. All families deserve the security of a universal health care system that guarantees access based on need rather than income. Health care is a fundamental human right and an important measure of social justice.

As a nation, we need to exert the political will to enact comprehensive health care reform nationwide. There is strong evidence the crisis can be solved with tools at hand and at a cost that pales in comparison to the toll in human lives the current system exacts.

It is time to mobilize America behind a concrete plan to enact universal health care and the AFL-CIO commits its full resources to asserting leadership in this historic effort.

Universal health care does not mean mandating that everyone must buy a health insurance policy and then handing them the bills. Meaningful health care reform must be measured by the following tests:

Universal Coverage

* Everyone should have health care coverage, without exclusions or penalties.

* While the market has an important role to play, our government–as the voice of all of us–must play the central role in regulating, financing and providing health care.

* Coverage should be accessible through the largest possible groups that pool risk to ensure coverage regardless of gender, age, health status or other factors.

Comprehensive, Affordable Coverage

* Coverage should be affordable and comprehensive.

* Unions and employers should continue to play a role and retain the ability to supplement coverage.

Choice of Providers

* Individuals should retain the ability to select their own doctors and other health care providers.

Financing Through Shared Responsibility

* Because everyone faces the possibility of poor health, risks should be shared broadly to ensure fair treatment and equitable rates, and everyone should share responsibility for contributing to the system through progressive financing.

* A level playing field should be provided for all businesses. Every employer must participate in ensuring health coverage and no employer should be disadvantaged because of the age or health of its workforce or number of retirees.

Effective Cost Control

* Reform efforts must include effective mechanisms for controlling costs, requiring information on provider performance and enhancing efficiency.

* Investments should be made in systems and technology to reduce medical errors and costs, streamline administration and promote best practices.

* Employees who are frontline caregivers should have a protected voice in improving health care.

Do No Harm

* Until we have a comprehensive alternative for all Americans, reform efforts should not undermine existing coverage or put people at risk of unmet health care needs.

Our approach should be to build on what’s best in American health care. At the same time, we should draw from the best experiences of other countries that have achieved universal coverage at a fraction of U.S. health care costs.

One concrete plan that meets the test of comprehensive, universal health coverage would build on our nation’s successful universal health coverage plan for seniors: Medicare.

In its 40-year history, Medicare has delivered substantial advances for the health care of older Americans and people with disabilities. Medicare has guaranteed coverage, made health care more affordable, included a form of shared financial responsibility, significantly reduced administrative costs compared with those of private plans and has been the largely unheralded financer of America’s medical science advances. Medicare also has been a leader in advancing quality care and improvements in health care service delivery in the United States.

Such an approach would require updating and expanding Medicare benefits to fit the working population and children, as well as negotiating prices with physicians and providers that families–and the country–can afford. It would encourage innovation in health care services and medical technology. Employers’ responsibility for health care financing would be broadly and equitably shared, substantially reducing burdens on all businesses and reducing disadvantages currently faced in the global marketplace. In building on Medicare to move toward a universal program, we can find a practical, achievable and affordable solution to our country’s health care crisis.

We call on congressional leaders to unite behind such a plan.

Unlike our fragmented and flawed health care system, a successful universal health care system would provide benefits and cost savings for all stakeholders. The leadership to make comprehensive reform possible, then, must come from all quarters:

* Governments will have to forge the tough consensus that commits necessary public funding while paying only for care that is effective and efficient, based on the best science available.

* Employers must provide strong political support for a transition away from the current employment-based system and be willing to provide continuing financial contributions sufficient to responsibly contribute to the new funding requirements.

* Unions and other organizations that represent users of health services must make enactment of comprehensive health reform legislation a top priority and make a long-term commitment to improving health care service delivery.

* Health care providers and practitioners need to commit their leadership and lend their knowledge and experience to achieving necessary improvements in the quality and effectiveness of care, and use their considerable political clout to support the effort.

We will mobilize our members to build support for bold, meaningful and comprehensive reform and work to pass legislation that assures everyone affordable, comprehensive coverage. We will recruit employers to join us in achieving universal coverage. And we will evaluate the health proposals of candidates for president in 2008 based on the test we have outlined and their capacity to make meaningful change to meet this urgent goal.

Until comprehensive national reform is enacted, we will continue to defend the health benefits workers have fought and sacrificed to establish over the past 50 years, and we will strongly oppose President George W. Bush’s changes in the tax treatment of existing employer-provided coverage.

We also will continue to fight to preserve and expand the State Children’s Health Insurance Program (SCHIP) and Medicaid coverage, improve the Medicare drug benefit and alleviate the legacy health care costs that threaten coverage for millions of workers and retirees, as well as the health of the economy. And we will continue to push for comprehensive reforms at the state level, with the knowledge that other nations have built the political consensus for national reform by first enacting comprehensive care region by region.

http://www.aflcio.org/aboutus/thisistheaflcio/ecouncil/ec03062007.cfm

Comment:

By Don McCanne, MD

To repeat, “Universal health care does not mean mandating that everyone must buy a health insurance policy and then handing them the bills.”

It means abandoning the “incredibly ineffective piecemeal approach of the past 10 years,” and moving forward with meaningful reform that meets the tests of an equitable, efficient, high quality, affordable, comprehensive system that covers everyone.

WonderWoman: Rose Ann DeMoro

Bay Area BusinessWoman
Published: March, 2007
March 2007 Vol. 14 No. 6

Rose Ann DeMoro, executive director of the California Nurses Association (CNA), has been hailed as the “The Woman who met the Terminator’s match.” For the last 13 years, she has run the boisterous, nearly all female 70,000-member union that neutralizes its opponents, including actor-turned governor Arnold Schwarzenegger, with creative direct action, alliance building and media manipulation.

Under DeMoro’s helm, the CNA has tripled in size, and has become a major political player in the state. Now it’s taking its influence across the country, organizing RNs in 40 states and pushing for legislation making federally funded healthcare available for everyone.

DeMoro believes that she benefited from the courage of some strong and influential women in a period of time, the late ’60s and early ’70s when the country was questioning its political priorities and woman were demanding their rightful place at the table — giving her the capacity to fight and advocate for the too often undervalued women in the nursing profession.

After earning her degree in Women’s Studies from Southern Illinois University, DeMoro moved to Santa Barbara where she started working toward a PhD in sociology. But she abandoned her studies to cut her teeth in union organizing.

Fast-forward 20 years to the early ’90s when each nurse in California had ten or twelve patients and service was so terrible that some were calling 911 from their hospital beds. That’s when DeMoro took over the reigns of the nurses’ union and started pushing for a minimum nurse-to patient ratio.

She launched a huge 10-year fight against fierce opposition from powerful HMOs that climaxed with the enactment of the nation’s first nurse-to-patient safety law. Then Schwarzenegger, elected in November 2004, almost immediately tried to scrap the law. In response, DeMoro targeted Schwarzenegger in one of the most aggressive and colorful labor campaigns in decades.

The nurses also took the lead in forming a coalition with California’s other powerful unions enraged over Schwarzenegger’s call for a special election in November 2005 which featured ballot initiatives that would curtail their power. Schwarzenegger’s union-taming initiatives went down to massive defeat, and days later his administration quietly dropped its court battle to block the nurse-patient ratio law.

DeMoro and the CNA are not only grassroots heroes in California. Nurses nationwide are asking DeMoro for help in challenging the growing power of corporate hospital chains and other states’ anti-worker initiatives.

What’s the most important thing you learned in school — or in the “school of hard knocks?”

History does not reward timidity in bringing about social justice to the health care arena.

What has been your biggest challenge?

Fighting the misbegotten notion that our current health care un-system can be repaired through piece meal incrementalism of profit-based private health insurance.

What’s your favorite quotation?

“If there is no struggle there is no progress — power concedes nothing without a demand. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted.” — Frederick Douglass.

What achievement are you most proud of?

Playing a significant part in the reconceptualization of the lost historic role of the RN from bedside patient advocate to social advocate.

What’s your advice to girls and/or women who are interested in the Health Care profession?

Now is the singularly best historical moment to enter the profession and demonstrate that advocating for one’s patients is inseparable from advocating for social justice.

What does it take to be an effective activist for change?

To rebel against “conventional wisdom” that maintains the ‘dynamic status quo,’ to find courage to follow your beliefs to advocate for change when it seems hopeless. To be collective, creative, inclusive — and relentless.

AFL-CIO Endorses Medicare for All

AFL-CIO Executive Council statement
Health Care
March 06, 2007
Las Vegas

The nation is once again focused on the crisis in health care and the American people are looking for a comprehensive solution, instead of the inaction and incredibly ineffective piecemeal approach of the past 10 years.

Nearly forty-seven million U.S. citizens are uninsured. Tens of millions more worry about losing the coverage they have. Workers fear changing or losing jobs because they are at risk of losing their health care coverage. American businesses that provide adequate health benefits are at a significant disadvantage, competing in the global marketplace with foreign companies that do not carry health care costs on their balance sheets. The same is true for businesses in domestic competition against employers that provide little or no coverage.

As a society, we all benefit from improvements in public health. We are a more creative, vibrant, productive and democratic nation because of it. We are all at risk of illness, injury or poor health, and we all suffer when individuals are denied needed care. The shortcomings of the American health care system–which ignores these fundamental realities–strain our nation’s social and economic fabric.

The time for talking about this crisis is past. All families deserve the security of a universal health care system that guarantees access based on need rather than income. Health care is a fundamental human right and an important measure of social justice.

As a nation, we need to exert the political will to enact comprehensive health care reform nationwide. There is strong evidence the crisis can be solved with tools at hand and at a cost that pales in comparison to the toll in human lives the current system exacts.

It is time to mobilize America behind a concrete plan to enact universal health care and the AFL-CIO commits its full resources to asserting leadership in this historic effort.

Universal health care does not mean mandating that everyone must buy a health insurance policy and then handing them the bills. Meaningful health care reform must be measured by the following tests:

Universal Coverage

* Everyone should have health care coverage, without exclusions or penalties.

* While the market has an important role to play, our government–as the voice of all of us–must play the central role in regulating, financing and providing health care.

* Coverage should be accessible through the largest possible groups that pool risk to ensure coverage regardless of gender, age, health status or other factors.

Comprehensive, Affordable Coverage

* Coverage should be affordable and comprehensive.

* Unions and employers should continue to play a role and retain the ability to supplement coverage.

Choice of Providers

* Individuals should retain the ability to select their own doctors and other health care providers.

Financing Through Shared Responsibility

* Because everyone faces the possibility of poor health, risks should be shared broadly to ensure fair treatment and equitable rates, and everyone should share responsibility for contributing to the system through progressive financing.

* A level playing field should be provided for all businesses. Every employer must participate in ensuring health coverage and no employer should be disadvantaged because of the age or health of its workforce or number of retirees.

Effective Cost Control

* Reform efforts must include effective mechanisms for controlling costs, requiring information on provider performance and enhancing efficiency.

* Investments should be made in systems and technology to reduce medical errors and costs, streamline administration and promote best practices.

* Employees who are frontline caregivers should have a protected voice in improving health care.

Do No Harm

* Until we have a comprehensive alternative for all Americans, reform efforts should not undermine existing coverage or put people at risk of unmet health care needs.

Our approach should be to build on what’s best in American health care. At the same time, we should draw from the best experiences of other countries that have achieved universal coverage at a fraction of U.S. health care costs.

One concrete plan that meets the test of comprehensive, universal health coverage would build on our nation’s successful universal health coverage plan for seniors: Medicare.

In its 40-year history, Medicare has delivered substantial advances for the health care of older Americans and people with disabilities. Medicare has guaranteed coverage, made health care more affordable, included a form of shared financial responsibility, significantly reduced administrative costs compared with those of private plans and has been the largely unheralded financer of America’s medical science advances. Medicare also has been a leader in advancing quality care and improvements in health care service delivery in the United States.

Such an approach would require updating and expanding Medicare benefits to fit the working population and children, as well as negotiating prices with physicians and providers that families–and the country–can afford. It would encourage innovation in health care services and medical technology. Employers’ responsibility for health care financing would be broadly and equitably shared, substantially reducing burdens on all businesses and reducing disadvantages currently faced in the global marketplace. In building on Medicare to move toward a universal program, we can find a practical, achievable and affordable solution to our country’s health care crisis.

We call on congressional leaders to unite behind such a plan.

Unlike our fragmented and flawed health care system, a successful universal health care system would provide benefits and cost savings for all stakeholders. The leadership to make comprehensive reform possible, then, must come from all quarters:

* Governments will have to forge the tough consensus that commits necessary public funding while paying only for care that is effective and efficient, based on the best science available.

* Employers must provide strong political support for a transition away from the current employment-based system and be willing to provide continuing financial contributions sufficient to responsibly contribute to the new funding requirements.

* Unions and other organizations that represent users of health services must make enactment of comprehensive health reform legislation a top priority and make a long-term commitment to improving health care service delivery.

* Health care providers and practitioners need to commit their leadership and lend their knowledge and experience to achieving necessary improvements in the quality and effectiveness of care, and use their considerable political clout to support the effort.

We will mobilize our members to build support for bold, meaningful and comprehensive reform and work to pass legislation that assures everyone affordable, comprehensive coverage. We will recruit employers to join us in achieving universal coverage. And we will evaluate the health proposals of candidates for president in 2008 based on the test we have outlined and their capacity to make meaningful change to meet this urgent goal.

Until comprehensive national reform is enacted, we will continue to defend the health benefits workers have fought and sacrificed to establish over the past 50 years, and we will strongly oppose President George W. Bush’s changes in the tax treatment of existing employer-provided coverage.

We also will continue to fight to preserve and expand the State Children’s Health Insurance Program (SCHIP) and Medicaid coverage, improve the Medicare drug benefit and alleviate the legacy health care costs that threaten coverage for millions of workers and retirees, as well as the health of the economy. And we will continue to push for comprehensive reforms at the state level, with the knowledge that other nations have built the political consensus for national reform by first enacting comprehensive care region by region.

AFL-CIO Decides to Campaign for Medicare for All

AFL-CIO Backs Changing Health Care System, Expanding Medicare to Whole Country

By Mark Gruenberg
PAI Staff Writer
3/12/2007

WASHINGTON (PAI)–Armed with universal denunciation of the failing, creaky, expensive present employer-based insurance-company-run health care system, the AFL-CIO Executive Council unanimously voted March 6 to campaign for a massive change: Expanding Medicare to the entire country.

Union leaders ranging from AFSCME President Gerald McEntee to Steel Workers President Leo Gerard to leaders of building trades unions–even those with multi-employer health care plans jointly run by unions and management–blasted the present setup. “We’re getting killed by this stuff,” one said.

The vote puts the federation on record with a specific universal health care plan that would involve payments from individuals, government and business, with government running it to cut administrative costs and bargain prices, just as it now runs Medicare.

It also marks a notable break from the past, as unions helped construct the present system, but watched it become increasingly and overly expensive for workers and companies–even while 47 million people are uninsured and millions more are underinsured. Companies have dropped health care for workers and retirees, and health care is the #1 battle in bargaining.

And the AFL-CIO’s statement marks a new factor in the national debate about health care, as the nation’s leading labor federation has now weighed in with a specific proposal, insisting that health care cover all, and rejecting the present system.

“The time for talking about this crisis is past,” the federation said. “All families deserve the security of a universal health care system that guarantees access based on need rather than income. Health care is a fundamental human right and an important measure of social justice.”

The statement laid down principles of universal coverage, that “government, as the voice of all of us, must play the central role in regulating, financing and providing health care,” that coverage “should be accessible through the largest possible groups to ensure coverage” for all, and that everyone–including employers–must share responsibility for health care financing.

It then said that “one concrete plan that meets the test of comprehensive, universal health coverage would build on our nation’s successful universal health coverage plan for seniors: Medicare.”

“We tried to look for fundamental principles for cost-efficient, high-quality universal coverage, taking the load off employers, while we can create the largest pool” of clients “and have government play the lead role,” said Gerard, chair of the federation’s Legislation Committee.

“This is a roadmap to universal coverage, and I’m not interested in having Wal-Mart sell insurance so that people can go to a Kaiser Permanente clinic in the store,” he added.

After lauding Medicare, which has the federal government provide universal coverage, paid for through payroll taxes, and with seniors having a choice of doctors, the AFL-CIO adds expanding it to all “would require updating and expanding Medicare benefits to fit the working population and children, as well as negotiating prices with physicians and providers that families and the country can afford.”

In passing, the federation rejected anti-worker GOP President George W. Bush’s scheme to tax workers who get what Bush calls “gold-plated” health insurance. “Until comprehensive national reform is enacted, we will continue to defend health benefits workers have fought and sacrificed to establish over the last 50 years,” the federation said. Bush would tax those plans, pushing many companies to dump them.

While the leaders did not endorse any specific bill to change the nation’s health care system, AFL-CIO health care policy specialist Gerald Shea said several fit its proposal. They include the single-payer government-run health care system bill (HR 676) by Rep. John Conyers (D-Mich.) and Medicare-for-all bills crafted by Senate Labor Committee Chairman Edward M. Kennedy (D-Mass.), House Commerce Committee Chairman John Dingell (D-Mich.) and House Health Subcommittee Chairman Pete Stark (D-Calif.).

“Conyers would put single-payer in place, while the others would build on Medicare,” Shea said. Those other bills would extend Medicare to the whole country, but still leave a role for private insurers, said Walter and Kay Tillow, who handle communications for the Louisville-based Nurses Professional Organization/All-Unions Committee for Single-Payer Health Care.

That group has convinced at least four unions, including USW, the International Longshore and Warehouse Union and the Plumbers and Pipefitters, to back HR 676. Some 220 other union groups, with the latest being the Wisconsin AFL-CIO, back Conyers’ bill. The Tillows said their group welcomes the statement as “a big advance” over the present system, but criticized leaving a role for the private insurers.

Shea said the key to the federation’s getting support for extending Medicare to all is to recruit some employers. Employers in the aerospace, telecommunications, steel and paper industries have talked to their unions about backing the Medicare-for-all plan, but nothing has been put in writing.

Universal Health for Insurance Companies

by DrSteveB
Daily Kos
Thu Mar 01, 2007

Click here for the original post

Last week I outlined the generic components of so-called mandated or mandatory plans. This week we will, with the help of Professor Len Rodberg briefly outline some of specific national proposals that have been in the news lately:

* America’s Health Insurance Plans
* Better Health Care Together Campaign
* Health Coverage Coalition for the Uninsured
* Sen. Ron Wyden with SEIU & Safeway
* Federation of American Hospitals
* John Edwards

What they share is the goall to keep the insurance companies healthy… lets see how that works.

First a note about Len. Len is not only a great guy, but has been involved in numerous progressive health care reforms from numerous single payer plans going back at least to the Dellums bill (look it up), to early promotion of Community Health Centers, to compiling and analyzing of hospital statistics statewide. He is the only Urban Studies professor I know of with a PhD in Physics (seriously).

As we noted last week, “Universal” Health Care is back in the political arena, for the first time since Hillary-care crashed and burned in 1993-1994. This is mostly due to the fact that costs rising far faster than inflation: From 2000 to 2006 health insurance premiums have one up 87%, compared to 20% for overall inflation and 18% for workers earnings. In our primarily employer-based coverage system more companies are either dropping coverage altogether, or raising the amount paid by employees (contributions to premium, copays, deductibles, reduced coverage).

The national average premium cost for employer-provided insurance is now up to $4,024 per year for single coverage and $10,880 per year for family coverage. Compare that to an annual income at minimum wage of $10,300 and the alleged average annual of a Wal-Mart worker of $17,114. If you have to buy your own, even at the reduced group rate that companies get, there’s not much left over for food and housing.

Not surprisingly the numbers of uninsured have been going up dramatically: from 22 million in 1975, we broke 30 million in 1985, 40 million in 1995, and are now around 46-47 million.

So what about those plans…

* The Good News: “Universal health care” is accepted as the goal.
* The Bad News: This is defined to mean using tax dollars to help the uninsured buy private insurance from the existing high-overhead middlemen of the for-profit insurance companies.

1. America’s Health Insurance Plans & Federation of American Hospitals

* – aka: “the private insurance & private hospital protection plan.”
* Expand SCHIP and Medicaid eligibility for very low-income
* Provide federal and state subsidies and tax deductibility to encourage everyone else to buy private insurance
* In other words: Use taxes to cover some more of the poor high risk, then give more tax dollars to the unnecessary middlemen private for-profit industry that eats up 31% overhead, compared to 4-13% achieved in direct plans.

2. Better Health Care Together Campaign

* aka: “The Grand Coalition”
* Members: ATT (big biz), Kelly Services (temp company), Wal-Mart (bigger biz), SEIU & CWA (unions), Center for American Progress
* Principles but no Program:
* a. Quality affordable insurance coverage for everyone
* b. Individuals are responsible for maintaining and protecting their health
* c. Improved value for health care dollar
* d. “Shared Responsibility”: Businesses, government, individuals all contribute. By business they mean both employers and the private for-profit health care industry.
* Widely covered press Conference, but no real specifics.

3. Health Coverage Coalition for the Uninsured

* aka: “The Even Grander Coalition”
* Members: UnitedHealth, Blue Cross & Kaiser (insurers), American Hospital Association, American Medical Association, Chamber of Commerce & National Association of Manufacturers (biz lobbyists), Pfizer (pharmaceutical company), AFL-CIO (well national anyway; many states, councils and locals have been endorsing Conyers HR-676 “Medicare for All”single payer), SEIU (well Stern anyway, many locals endorsing Conyers HR-676 “Medicare for All”, AARP, Families USA (well Pollack anyway; he’s still feeling too burned by 1994)
* Coalition was so “Grand” that they could agree only on:
* a. Expanding coverage as a goal
* b. Expansion of SCHIP
* c. Tax credits for children’s insurance

4. Senator Wyden’s Healthy Americans Act

* aka: “Employer coverage is dying, so let’s kill it faster”
* Supporters: SEIU, Safeway, Families USA
* Eliminate the tax deductibility of employer-based insurance with goal to ends employer-based health coverage.
* Requires individual purchase of insurance
* Transitional payments by employers
* Subsidies to low-income individuals
* Relies on competition between private insurers to contain costs (but unclear how this would happen since no evidence that health insurers work that way… they only compete for who can get the healthy and wealthy).

5. John Edwards Plan

* I give him some credit for at least making a relatively specific proposal.
* but some do call it “individual mandate with a pretty face”
* essentially same as Jacob Hacker plan from Econimic Policy Institute (EPI)
* Interestingly Edward’s also offered a mandate plan when he ran in 2000.
* Employer mandate (“play or pay”)
* Individual mandate with community rating
* Government subsidies for low-income
* Regional purchasing plans (“Health Markets”)
* Choice of Government program (which is DISHONESTLY referred to as single-payer; shame on them) as well as Private Plans.
* Claim: For everyone: Shared responsibility
* Claim: For the fearful: Lets people keep what they have
* Claim: For those worried about cost: Everyone will work together to make the system more efficient
* Claim: For single payer advocates: Individuals and businesses can choose if they want the government plan; if so, the system will “evolve toward a single-payer approach.”
* No cost control!!!
* Requires additional taxes and expenditure above what we pay already
* by comparison: Single-Payer costs about 5% LESS than current expenditures to cover everybody with high-quality coverage and no out-pocket expenses. That what you can do with the $350 Billion in savings by cutting out the 31% bloat of the unneeded middlemen of the private for-profit insurers.

So, once again… What’s Wrong with an Individual Mandate?

Well among other things:

* Will not lead to universal coverage. Comparison to mandatory auto insurance where at least 10% don’t have.
* Enforcement is anti-public health
* Affordable premium vs half-decent coverage: can’t leave private for-profit insurers in the middle and still have both, as Massachussetts is discovering. Feds discovered this when tried to have Medicare Manged Care and privates could not make enough profit and dropped out, until offered 11% higher payments than regular Medicare!
* Employers will drop coverage (“crowd out”) if play or pay cutpoint is set at affordable level.
* Insurance companies resist community rating (same premium rate for everybody regardless of pre-existing conditions or risk) and mandatory coverage(have to take everybody regardless of pre-existing conditions or risk)
* Leaves in place the consumer nightmare of copays, deductibles, exclusions, denials, appeals.
* Expands the complexity (and humiliation) of Medicaid’s humiliation of means testing (not so easy for the majority of workers who are not on straight regular salary; usually require income tax return to be shown).
* Add new layers of bureaucracy such as the “Health Markets”.
* Additional high cost of about $120 Billion in Federal tax money and some unknown still for individuals.
* No cost control, just continuing rising costs!

Len goes on to argue that none of these plans will happen, because:

* They cost hundreds of billions of additional dollars
* They benefit only those with low incomes and those without insurance, who are politically weak.
* Does nothing for the 50% of middle- and lower-income adults who have insurance but still experience serious problems paying medical bills or insurance premiums.
* Does nothing for the people with insurance and still going into bankruptcy. 50% of bankruptcies due to medical bills and 75% of those folks had health insurance.
* Does nothing for the 12-18% of folks who are underinsured.
* They don’t solve any of the problems (especially rising costs) that concern everyone
* None envisions a real structural change.

In the 1940s and 1950s America moved forward with employer-based group health care coverage.

Going backwards to individual purchase of insurance is not the answer.

What is common to these plans is that they identify the wrong problem and then offer the wrong solution:

* Identification of the problem: too many uninsured.
* Their solution: Require everyone to have insurance
* Employers should contribute but not necessarily offer insurance
* Their real mission: Save the private insurers

The problem really is the Private For-Profit Insurance Industry:

* None of these plans does much about what is the real problem
* Excessive administrative costs
* Excessive complexity
* Continuously rising costs
* Lack of coordination, budgeting, and planning
* Regressive financing via premiums (premium is the same if you are rich or poor)
* Widespread underinsurance and bankruptcy
* Interference in physician decision-making
* The “hassle factor”: paperwork at every level, filing claims, automatic or phony denials, re-submitting claims…

Solution:

* Expand Medicare to cover everyone: The hassle difference between folks who use Medicare is astounding.
* Improve the coverage it offers (drugs, dental, mental)
* Eliminate private insurance
* Automatic enrollment in Medicare for All
* Income-based financing through employers and employees (yeah for “shared responsibility”), preferably through progressive income and corporate taxes, but possibly via deduction taxes (e.g., ~8% corporate; ~2.5% on individuals).

For more on how single-payer works: peviously I outlined and described in some depth how single payer works, and debunked some of the myths propagated against single payer.

Something else all those so-called “politically practical compromise plans” have in common.

* They are all are just inside the beltway elites and lobbyists talking to each other (the same ones over and over, as you may have noticed).
* None actually has any grassroots support.
* The one plan with a grassroots movement behind it is Rep. John Conyers HR-676 “Medicare for All”.

HR 676 has been endorsed by over 235 union organizations in 40 states including 60 Central Labor Councils and Area Labor Federations and 17 state AFL-CIOs (KY, PA, CT, OH, DE, ND, WA, SC, WY, VT, FL, WI, WV, SD, NC, MO & MN), as have many other civic and religious organizations. Including several locals of SEIU.

The bill garnered nearly 78 co-sponsors in the last Congress, more than any other reform proposal, including the chairman of Ways and Means (Rangel, D-NY) and the chair of Ways & Means health subcommittee (Pete Stark, D-CA). At least three of the newest members of Congress made support for single payer national health insurance a key issue in their campaigns. Senator Kennedy has been the Senate sponsor in past years.

HR 676 would institute a single payer health care system in the U.S. by expanding a greatly improved Medicare system to every resident: It would cover every person in the U. S. for all necessary medical care including prescription drugs, hospital, surgical, outpatient services, primary and preventive care, emergency services, dental, mental health, home health, physical therapy, rehabilitation (including for substance abuse), vision care, hearing aids, chiropractic and long term care. HR 676 ends deductibles and co-payments. HR 676 would save billions annually by eliminating the high overhead and profits of the private health insurance industry and HMOs.

HR 676 has been endorsed by 235 union organizations in 40 states including 60 Central Labor Councils and Area Labor Federations and 17 state AFL-CIOs (KY, PA, CT, OH, DE, ND, WA, SC, WY, VT, FL, WI, WV, SD, NC, MO & MN), as have many other civic and religious organizations.

So, here is what YOU can DO now:

1. Ask your congressperson to sign-up as a co-sponsor of HR-676!

* You can look-up your elected officials here

2. Get any organization you belong to — civic, religious, labor, community, etc. to pass an HR-676 endorsement resolution:

* Here is how to do that via Physicians for a National Health Program.
* or here hereif you prefer via a non-physician group.

Just do it!

The Des Moines Register on mandating private insurance

Mandating private health insurance is misguided

Taxpayer-financed health coverage is a better approach.

By the Register Editorial Board
The Des Moines Register
March 5, 2007

It sounds simple enough: Get everyone insured by requiring them to purchase health insurance. So-called “individual mandates” are part of Massachusetts’ plan to get all residents covered. They are included in a proposal by California Gov. Arnold Schwarzenegger. In a recent conversation about health reform in Iowa, state Sen. Jack Hatch said he supports individual mandates because they inject “personal responsibility” into health care.

But forcing people to purchase private-sector insurance is far from simple, especially considering the government absolutely must ensure the coverage it makes people buy is adequate.

Proceeding with this idea would be a mistake.

Just a few weeks ago, this editorial page told the story of Jan and Gary Clausen, who didn’t have the option of buying health insurance through an employer. They went out on their own and bought AARP-endorsed plans for about $700 a month. They were left with more than $200,000 in medical bills after Gary was diagnosed with cancer.

Some insurance.

If the state is going to force people to purchase insurance, it must guarantee necessary services are covered and the bills are paid when health disasters strike. It must require insurance companies to protect Iowans against catastrophic costs.

Of course, that’s where things really get complicated.

Will the state define coverage in private-sector insurance plans? Will it increase oversight of the insurance industry? Will it prohibit insurance companies from increasing prices? What is the definition of “affordable” insurance? Who will qualify for a public subsidy to purchase insurance, and how will that be paid for?

All these questions and more need to be answered.

But our greatest concern is that an individual mandate moves this country in the wrong direction by relying too heavily on the private sector to achieve universal coverage.

Private is not better than public when it comes to health insurance.

Private health-insurance companies spend a greater percentage of dollars on administrative costs than government programs such as Medicare. Private companies also use health dollars to pay outrageous CEO salaries. UnitedHealth Group Inc. paid a former CEO $8 million a year. He also had unrealized gains on company stock options totaling nearly $1.6 billion.

Try finding a government worker with a personal jet.

Private-sector insurance has been a financial failure in Medicare Advantage plans, where the government subsidizes insurance companies to take over the care of seniors rather than keeping them in less expensive traditional Medicare.

According to a study by The Commonwealth Fund, Medicare spent $922 more on each senior in private plans than it would have paid to cover those patients in traditional Medicare in 2005. That’s a total of more than 5.2 billion tax dollars that could have been saved or spent elsewhere if seniors would have remained in the basic, government plan.

Why push anyone into the more costly private sector?

A taxpayer-financed system of health care that offers basic coverage for all Americans is a better approach. It would be administered by the government, and it would save money.

According to the National Coalition on Health Care, the nation’s largest alliance working to improve care, a system like this could save 1.1 trillion health-care dollars over 10 years. Of four plans proposed by the coalition, a universal, publicly financed one was the best deal.

Of course, a national system would require those in Washington to get busy solving the problem rather than leaving states to scramble for ways to cover their residents – and pursue misguided ideas like individual mandates.

http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20070305/OPINION03/703050303/1035/OPINION

Comment:

By Don McCanne, MD

This is the message that the nation must hear. The private insurers are incapable of providing us with coverage that is both affordable and effective in preventing financial hardship for those with health care needs.

When an AARP-endorsed plan with a premium of $700 a month leaves a couple with $200,000 in medical bills, we know that private insurance is not the solution. Mandating participation in a fatally flawed system represents the worst of public policy proposals.

This editorial should be downloaded and distributed widely. Everyone needs to understand what will work, and what won’t.

Doctors call on Albany over health insurance

Business First of Buffalo
Monday, March 5, 2007

The New York State Academy of Family Physicians has called on Gov. Eliot Spitzer and the state Legislature to create a single payer health-care system.

Family physicians from across the state gathered in Albany Monday to lobby lawmakers. Their concerns include the fact that nearly 3 million New Yorkers are uninsured and many more are underinsured, while others have insurance that does not cover significant items like medications.

Rising costs have a growing number of employers either dropping or reducing coverage. The doctors also complain that dealing with multiple insurance plans, with their different rules, forms, and procedures, wastes an estimated 20 percent to 30 percent of the health care dollar.

The Academy, which represents about 3,000 family doctors and more than 700 medical students, would like have all payments funneled through a single payer, eliminating multiple rules and procedures, enrollment and eligibility problems.

“A single payer health plan is the best way to control costs and reduce administrative waste and thereby insure long-term survival of universal, affordable coverage,” said Dr. Linda Prine, chair of the Academy’s Commission on Public Health.

“In Albany, the attempts at expanding coverage and cost control, though laudable, only tinker with the current system. The weakness we all witness with tinkering is that New York has achieved neither universal coverage nor
effective cost control. Instead, we are bankrupting ourselves, making small dents only in adding broader coverage, and implementing even more administrative procedures. Moving to universal coverage is a big step. The current system is not working; we should not take a failed system and make it a bigger failure.”

http://buffalo.bizjournals.com/buffalo/stories/2007/03/05/daily4.html

Liberal Fables About Health Care

John Edwards' Big Lie

By CORPORATE CRIME REPORTER
March 6, 2007

When Ann Coulter used the f- word last week to describe John Edwards, she was just trying to sell Ann Coulter to her conservative base.

When Hillary Clinton morphed into a southern black preacher, she was desperately trying to sell Hillary Clinton to a southern black audience.

When John Edwards mailed out 70,000 DVDs advocating “universal health care” to Iowa voters this week, he was just trying to sell John Edwards to the corn belt.

All were scamming the public in pursuit of fame and fortune.

Coulter was her crass and calculating self.

Hillary deserves what that moment bought her.

As for Edwards, as the only avowed “populist” in the race, he wants voters to believe that his health insurance plan will lead to affordable universal coverage.

It won’t and he knows it.

But as a liberal Democrat, his hands are tied.

No liberal Democrat with a shot at the nomination can tell the truth about health care.

Because telling the truth means social insurance, single payer, Medicare for All.

Telling the truth means wiping out private insurance companies and their $350 billion in excess administrative costs–enough to cover the uninsured and underinsured–without paying anymore than we do now.

Today we spend $7,000 per person on health care in the United States–that’s twice as much as the rest of the industrialized nations.

Edwards’ plan is a complex brew of health markets, public incentives and private mandates.

Dr. Don McCanne of Physicians for a National Health Program has one word for Edwards’ plan–“lousy.”

“The idea of setting up a public plan to compete with private plans has been thoroughly discredited,” McCanne told Corporate Crime Reporter. “No matter what regulations are established, private plans will continue to select the healthy–especially the healthy workforce and their healthy families. The private plans cover the majority of us who are healthy and cost very little, while as taxpayers we pay most of the costs for health care for those with medical needs.”

The Edwards plan’s complex mixture of private and public plans will not wipe out the hundreds of millions of dollars in excess administrative costs needed to fund the uninsured.

McCanne believes social insurance–everyone covered by government insurance–is the best system–next to government sponsored medicine–like the Veterans Administration.

McCanne believes the Edwards plan was drafted by Yale University political scientist Jacob Hacker.

“Hacker is the darling of the progressive Democrats,” McCanne told Corporate Crime Reporter. “It is the same as the Edwards proposal. I suspect Hacker wrote the Edwards proposal.”

“Insurance has to do two things,” McCanne said. “In the past, all it had to do was transfer from the healthy to the sick. The medical costs of the sick were paid by the majority of people who were relatively healthy. Now, health care costs are so high that the healthy group can no longer afford the premiums. Now, we need a transfer from the wealthy to average income individuals and then continue a transfer downward. It is this transfer from the wealthy to average and lower income individuals that the Edwards’ fragmented model can’t accomplish.”

The country is bursting at the seams looking for leadership the to usher forth Medicare for All.

Sure, if you are bought into a corporate or government bureaucracy, you might be fine–for now.

In Tucson, Arizona, we ran into a young mother who got a job working part-time at Trader Joe’s just to get health insurance for her family.

But millions of Americans are uninsured and even buying into the system full-time won’t solve their problems.

Recently, a friend told us the story of a father of three in the Rust Belt who was training to be a technician with Comcast.

Comcast promised him 60 hours of work a week. He was really excited. But then he was told–no benefits.

No benefits at 60 hours a week?

How did they pull that one off?

“Well, they told him he would work 30 hours a week as an employee,” my friend related. “And 30 hours a week as a contractor.”

No insurance.

Edwards has a choice.

Reverse course, join the majority of the American people, and speak out for Medicare for All.

Or stick with the insurance industry and lose to the more experienced politicians in the race.

Corporate Crime Reporter is located in Washington, DC. They can be reached through their website.

Groups line up on health plan

Governor's proposal would cost billions

By Robert Manor
Chicago Tribune staff reporter
Published March 6, 2007

Although details of the proposal won’t be known until later this week, interest groups are already starting to take positions for or against Gov. Rod Blagojevich’s plans to expand health insurance to hundreds of thousands of people without medical coverage.

Some business groups don’t like the proposal, in part because it would cost them billions of dollars in new taxes.

The hospital industry likes the plan, in part because it means it would see fewer uninsured patients seeking care but lacking money to pay for it.

Meanwhile, some consumer advocacy groups back the plan as a first step toward insuring at least some of the state’s 1.4 million uninsured. But others say the plan is so complex it won’t work, nor does it go far enough.

“It’s too complicated,” said Dr. Quentin Young, chairman of Illinois Health Care for All and past president of the American Public Health Association. “It’s noble in concept but it is almost certain to fail.”

Blagojevich is expected to announce Wednesday that he supports a new $6 billion tax on corporations, with at least $2 billion going to provide medical coverage to 500,000 Illinois residents and the rest for other state purposes.

The plan is expected to include subsidies so workers could afford health plans. It would be financed by a tax of up to 2 percent on corporate gross receipts and a 3 percent payroll tax on companies that do not offer health insurance, according to early reports.

Insurers would be required to offer a standardized, comprehensive health insurance policy to the uninsured, without regard to existing health problems.

“This is monstrous, the largest tax increase in the history of the state of Illinois,” said David Vite, president of the Illinois Retail Merchants Association.

Vite said a tax on a company’s revenues, which is how he defined a gross receipts tax, is fundamentally unfair. For example, with a 2 percent tax, companies with $10 million in revenue would pay $200,000 a year, whether they were highly profitable, barely breaking even or losing money.

His association, which represents 23,000 retailers, has taken no stance on the idea of expanding health care to the uninsured, Vite said.

“We haven’t taken a position on the governor’s health care proposal because we have not seen it,” he said.

The Illinois Hospital Association, which represents 200 hospitals and health-care systems, is already pushing in favor of Blagojevich’s plan.

Association President Kenneth Robbins said the uninsured miss annual checkups and preventive care. Then they arrive in hospital emergency rooms when ill, often sicker than if they had regular medical attention.

“Many of the problems that the uninsured struggle with could have been prevented had they received the right care at the right time,” Robbins said.

At least one business doesn’t know what to think about the governor’s plan, but is going to study it closely.

“We are in kind of a unique position on this because it affects us not only as an employer but as a provider,” said Michael Polzin, a spokesman for Walgreen Co. “If people have some sort of insurance, they are more likely to get their prescription filled.” Prescriptions are highly profitable to Walgreens.

Polzin said that Walgreens’ 10,000 to 15,000 Illinois employees receive company health insurance if they work more than 30 hours a week.

Some see expanded health insurance, paid for by business, in stark terms.

“I think it’s a big mistake,” said Tom Gimbel, chief executive of The LaSalle Network, a large provider of temporary workers.

He said many employers will react immediately when confronted with higher taxes.

“They will let somebody go,” Gimbel said.

Jenny Wittner, associate director of Women Employed, an advocacy group for the economic advancement of women, wants to know more details about the governor’s plan. “We just know that we are for health care for all,” Wittner said. She noted that the majority of workers in low-wage jobs without health care are women.

And Young, a long-time health-care activist who has pushed for expanded health insurance, sees the governor’s proposal as deeply flawed.

He said Illinois needs to follow the model of Medicare, where the government uniformly provides health insurance to people 65 and over. Illinois should do the same thing, only cover everyone, he said.

“Medicare is a remarkably cost-effective, successful, program,” Young said.

rmanor@tribune.com

Copyright (C) 2007, Chicago Tribune

Editorial: Unions should lead on health

The Capital Times
Madison, WI.
March 6, 2007

The AFL-CIO executive board is this week considering where the labor movement as a whole should line up on health care, which Americans tell pollsters is their No. 1 domestic policy concern. Hopefully, the labor leaders who gather in Las Vegas starting today will follow the lead of the Wisconsin AFL-CIO and go for the bold.

Wisconsin’s state labor federation backs the United States National Health Insurance Act (HR 676), which would establish a single-payer health insurance system with guaranteed coverage for all Americans. Sponsored by U.S. Rep. John Conyers, D-Mich., the act would create a publicly financed, privately delivered health care system by expanding access to the existing Medicare program to all U.S. residents.

Advocates say the goal of the legislation is to ensure that all Americans, regardless of employment, income or health care status, will have a legal guarantee for access to the highest quality and most cost-effective health care services.

Honest measures, from Canada and other developed nations, suggest that a single-payer system is superior to the current U.S. system, which fails to cover 47 million Americans and provides inadequate coverage to a similar number of their fellow citizens.

But Americans do not need to borrow a plan from Canada or elsewhere. As supporters of HR 676 remind us: America already has a great single-payer system, Medicare. It simply needs to be expanded.

In addition to Wisconsin’s federation of labor, state federations in 16 other states have backed HR 676. So too have 63 regional labor councils and hundreds of local unions. Four international unions, including the United Auto Workers, an important player in Wisconsin, have joined the call.

Under Wisconsin AFL-CIO President David Newby, our state federation has been a leader for real health care reform.

Now the national AFL-CIO must become a leader on these issues.

It should do so not for reasons of symbolism or rhetoric. It should do so because, with an election year coming, Democratic candidates for president will be angling for the AFL-CIO endorsement.

The AFL-CIO should sign on for a single-payer system. Then the national federation should in combination with state and local union leaders make it abundantly clear to New York Sen. Hillary Clinton, Illinois Sen. Barack Obama, former North Carolina Sen. John Edwards and others pursuing the Democratic nomination that it is impossible to seek the presidency as a champion of labor without embracing HR 676 and campaigning on a promise to stop tinkering around the edges of the health care crisis and address it head-on.

When he was speaking vaguely the other day about the need for fundamental reform of our health care system, Obama said, “We can’t afford another disappointing charade in 2008, 2009 and 2010. It’s not only tiresome, it’s wrong.”

That’s right. But even Obama has failed to take a bold stand in favor of single-payer.

Labor needs to show Obama the way, just as it must similarly aid Clinton, Edwards and the others in the race for the presidency. The Democratic nominee for president in 2008 must offer us the promise of real reform not just rhetoric. And labor can make that happen.

The Myth of Value-Based Pricing — So Far

BIOTECH


Posting by Donald Light, PhD
Princeton University
Health Affairs blog
February 20, 2007

At last policymakers and readers are being set straight that the prices of drugs are not related to the immense costs of research and development but to “what the market will bear,” as James Robinson put it in his Health Affairs Blog post last fall. Never mind that pharmaceutical executives told Congress and everyone else the opposite for 50 years to wrest government protections from the normal price competition. Apparently we’ve all been duped since the Kefauver hearings over 45 years ago, and industry-supported analysts keep issuing ever higher estimates of $1.2 billion and $1.7 billion R&D cost per average new drug. Since industry data show full recovery of R&D costs, with strong profits, year after year, does this mean these estimates are exercises in false rhetoric?

How can the market know what it will bear if pricing is usually covert and value unknown? Why does the “free market” in the United States result in the highest prices in the world, according to the recent report by the Congressional Budget Office? Do those prices reflect true value? This is impossible because, as Robinson writes, “No one knows how to define value in health care,…much less how to measure it.” Thus biotech and pharmaceutical prices cannot be based on value.

Meantime, the sellers are busy recruiting and supporting health economists to define value, measure it, and produce articles “proving” that the value of their drugs is two to four times greater than current prices. In their hands, the value of a life-year has quadrupled in the past five years, thus inflating the value of products. So far then, “value-based pricing” means the sellers define and measure value, tell us how valuable their products are, and provide the basis for still higher prices.

Is this why Robinson writes that we should not feel sticker shock when companies charge $35,000 per year for Herceptin, $50,000 for Avastin, or $120,000 for Erbitux? We now know that such prices are not based on sunk R&D costs. And we’ve learned they can’t be based on undefined and unmeasured value; so what are these prices based on? Many physicians and patients feel they are based on the exertion of pure power by drug companies who have the drugs that people need.

One common answer by economists is that price is related to expected R&D costs, but then expected costs can be whatever the seller says they are, like the $1.2 billion estimate, which is based on trial costs about 12 times greater than companies report to the IRS in audited statements and trial sizes 4 times greater than independent sources like the FDA. Divide the industry-claimed costs by 12 and then 4 and you get cost-estimates 1/48th as large. For biotech companies and investors, the best indication that future R&D is worth the cost and risk is how rapidly and profitably they recover their past investments in R&D. But that brings us full circle back to what we are told prices are not based on, and it’s a completely different argument than value pricing. More important, pharmaceutical and biotech companies never provide figures to show how prices or revenues are actually related, either to past or future R&D costs. This is the beauty of using theories to describe how reality works! The advantage of economic sociology is that it starts with detailed description and draws empirical conclusions.

For these reasons, “value-based pricing” is a myth, at least so far. To make it a reality we would need at least something like the tables in Consumer Reports Best Buy Drugs. They compare effectiveness, safety and price for different classes of drugs. Take statins for people with a mild cholesterol problem who want to lower their LDL cholesterol less than 30% without changing their lifestyle. Several drugs are rated as equally effective and safe. Patients or their plan could buy Lovastatin 40mg for $58 a month. Or for 59% more they could pay $92 for Lipitor and achieve comparable results. The price for an equivalent supply of Zocor is 79% higher ($104), and for Mevacor the price is 164% higher ($153). But Mevacor 40 is just Lovastatin 40 with a brand name. Apparently the name is worth $95 more.

If we compare how much physicians prescribe each of these five statins, we will get an indication of how far we are from buying on value, even when comparing price and value is simple. Something quite different is going on. It’s time to forget arguments based on theory and look closely at the organization and dynamics of the multi-level, segmented markets involved.

Click here to read Donald Light’s Original Post