Citigroup Smith Barney
Affluent Investor Poll
May 17, 2006

The cost of health care is a major concern for affluent investors, more so than quality of care available perhaps because investors believe they will bear the brunt of on going drug and insurance costs while they discount the probability of being subject to an on going need for doctor and hospital care. The national health care issues of greatest concern are the cost of prescription drugs, the cost of health insurance, and the cost of long-term care (with about half of all investors saying they are very concerned about each of these issues). Only about one in four express strong concern about the quality of care provided by doctors or hospitals.

Health insurance companies, pharmaceutical companies, lawyers, and the federal government all share some of the blame for what investors see as the problems in the nation’s health care system, with the largest shares naming attorneys (23%) and the federal government (21%) as most responsible. The most affluent group of investors are noticeably less likely than others to assign blame to health insurance companies or pharmaceutical companies, and are noticeably more likely to say that lawyers are a major contributor to the problems in the health care system.

Vast majorities would support any type of change to the current health care system, with most saying they strongly favor the idea of malpractice limits (56% strongly favor), allowing small companies and individuals to join together to purchase health insurance at better group insurance rates (69%), and allowing low and middle income workers to deduct the cost of health insurance premiums from their taxes (50%). Nearly as many favor easing restrictions on imported prescription drugs and establishing tax incentives for those who use high deductible health plans.

Affluent investors were also asked about the health insurance reform recently passed in Massachusetts, in which all citizens are required to have some type of health coverage. While two out of three overall express support for this type of plan, the most affluent do not necessarily feel that way. Those who have assets of $1 million or more are more likely to oppose this idea (46%) than they are to support it (43%).

http://www.smithbarney.com/pdf/pollMay06.pdf

Comment:

By Don McCanne, M.D.

Since the wealthy have greater political influence, it is important to understand their views of our health care system and its reform.

It is not surprising that affluent investors are not well informed on the problems with our health care system, as their biased views reflect those that are prevalent in the pages of the Wall Street Journal and other similar resources.

What is clear is that, like the rest of us, they do want affordable access to comprehensive care. The solutions they support fail to address the real cost drivers and will leave them facing ever escalating costs. Those costs will not be contained until we agree to adopt structural reform of health care funding that addresses the actual inefficiencies and waste in our system.

The problem is that the affluent do not know what they do not know. It is our task to educate them on the real problems and the various policy approaches available. It just happens that the most effective policies that would achieve their goal of health care value are the same policies that would achieve our additional goals of universality, comprehensiveness and equity. They need to understand that.

Amid War, Troops See Safety in Reenlisting By Faye Fiore
Los Angeles Times
May 21, 2006

(Staff Sgt. Matthew Kruger) looked around the job market, and it didn’t take long to figure out that leaving the Army held its own perils. Nothing offered him the financial security of his military job – especially the generous health coverage for his wife and three small children.

“We had nothing. We were scared,” (his wife) Maggie said recently… “We suddenly realized there was no way to take the kids to the doctor or dentist for any little reason, as we had been used to.”

For Kruger, who returned to a war zone for his third tour in December, the danger of losing his family’s health insurance was more real and immediate than the danger of dying in combat.

http://www.latimes.com/news/nationworld/nation/la-na-enlist21may21,0,3414020,full.story?coll=la-home-headlines

Comment:

By Don McCanne, M.D.

…. (silence)

Medicare Beneficiary Out-of-Pocket Costs: Are Medicare Advantage Plans a Better Deal?
By Brian Biles, Lauren Hersch Nicholas and Stuart Guterman
The Commonwealth Fund
May 2006

(Medicare Advantage) plans may be able to provide more benefits than traditional fee-for-service Medicare because the Medicare Modernization Act included provisions that set MA payments greater than per capita fee-for-service costs in every county in the nation. These extra payments to MA plans averaged over 11 percent ($800 per enrollee) in 2005.

The analysis reported here indicates that the benefit packages offered by MA plans often result in substantial out-of-pocket costs for beneficiaries in poor health: in more than 20 percent of the MA plans we examined, located all across the nation in 15 cities in 10 states, enrollees in poor health would have had greater out-of-pocket costs in 2005 than if they had been in traditional fee-for-service Medicare with Medigap Plan F. If not for the extra payments provided to MA plans across-the-board, this pattern could have been even more pronounced.

Even with the completion of the transition to fully risk-adjusted MA payment rates and planned improvements in the risk adjustment methodology, the incentives for plans to avoid enrollees in poor health are unlikely to disappear. Moreover, as increased pressure to control Medicare spending makes continuation of the current level of extra payments to MA plans more difficult to justify, the incentive to shift costs from healthy to sick enrollees will become stronger.

Issue Brief:
http://www.cmwf.org/usr_doc/927_Biles_MedicarebeneOOPcosts_MA_ib.pdf

KFF webcast:
http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1743

Comment:

By Don McCanne, M.D.

The cruelest mechanism of containing health care costs is to increase out-of-pocket spending for those with the greatest health care needs. It is shocking to see that many of the private Medicare Advantage plans, in spite of being granted extra payments by the government, are shifting more of the costs to sick enrollees than they would have to pay in the traditional Medicare with Medigap program, despite the well-documented shortcomings of Medigap coverage. In contrast, the Medicare Advantage programs have lower out-of-pocket costs for their targeted market – healthy Medicare beneficiaries who use few services.

In the KFF webcast on the release of this report, Karen Ignagni, president and CEO of America’s Health Insurance Plans, supported repeal of the lock-in to allow patients the freedom to “vote with their feet” whenever their plans displeased them. Obviously, the greater success the plans have in placing a financial burden on sicker patients, the quicker they would exit thereby relieving the plans of the need to cover them.

Private health plan strategy is, and always has been, to insure the healthy and dump the sick. The private Medicare Advantage plans are no different.

And for this the taxpayers are rewarding them with extra payments?! Enough!!

Clinton warns Canadians against letting ‘finance tail wag health care dog’
By Angela Pacienza
The Canadian Press
May 15, 2006

Asked about the growing interest by some for a privatization of the health-care system, former U.S. president Bill Clinton said Monday night that Canadians should think long and hard before making any move.

But (at the inaugural World Leaders Forum in Toronto) Clinton said the last thing anyone would want to do is let the “health care finance tail wag the health care dog.”

He said America did just that and the system is a mess.

He said the U.S. spends 34 per cent of its health-care costs on administration, equalling $280 billion “to pay two million people to go to work every day for all the providers and insurers and play tug-of-war.”

“It is insane,” said Clinton. “It is a colossal waste of money. Don’t go down that road. Don’t do anything that will lead to increased administrative costs.”

http://www.canada.com/topics/news/national/story.html?id=bb96af6f-595b-406f-8ba1-115627805cc2&k=51462

Comment:

By Don McCanne, M.D.

Now President Clinton gets it. But he’s no longer president.

The important question: Does Senator Clinton get it? Or for that matter, do any of the other would-be presidents?

Science For Life: A Conversation With Nobel Laureate David Baltimore By Barbara J. Culliton
Health Affairs
May 16, 2006

(David Baltimore is the new president of the American Association for the Advancement of Science, soon-to-retire president of the California Institute of Technology, former president of Rockefeller University, and founding head of the Whitehead Institute at the Massachusetts Institute of Technology.
Baltimore shared the Nobel Prize in Medicine in 1975.)

Barbara Culliton: One of the questions is this: If the economists, the health policy people, and the health services research people could talk to the scientists, might we devise entirely new ways of approaching projects and problems?

David Baltimore: We might. It’s worth trying. Let me comment on one place where I think this is critical. We talk about universally available health insurance that would not depend on a person’s particular history but would provide health care coverage for everyone-the arguments that are made about this are arguments about availability, about cost. There’s another argument, which overwhelms all of those; it has to do with what the genomics revolution will produce in the future. The genomics revolution that we’re just living through is making it clear that we are all genetically hamstrung in one way or another. And the only way to treat people who have genetic diseases, and we all do, is to think about universal coverage. We can’t hold individuals responsible for their genetics. We must insure them nationally.
If we do hold people responsible for their individual genetics, then we will have a completely unacceptable level of discrimination. It’s inevitable, because insurance companies will say, I need to know your genetic constitution before I insure you. And they’re right.

Culliton: That is what the insurance industry does.

Baltimore: That’s what they’re about. That’s what they’re trying to do. That’s what they’ve always tried to do. And now we’ve given them this very powerful tool that could enable them to really discriminate. I think the implications of that powerful tool are that there should no longer be an insurance system that holds people responsible for inherited diseases, whether they be so-called Mendelian diseases, such as sickle cell or cystic fibrosis or Tay-Sachs, or complex diseases, such as cancer or heart disease.

Culliton: So that means you’d go to universal health insurance?

Baltimore: Absolutely, I think that it does.

http://content.healthaffairs.org/cgi/content/full/hlthaff.25.w235v1/DC1

Comment:

By Don McCanne, M.D.

“We must insure (everyone) nationally.”

Tinkering incrementalists, listen up!

The Dartmouth Atlas of Health Care
In the News
May 16, 2006

New Study Shows Need for a Major Overhaul of How United States Manages Chronic Illness

Staggering variations in how hospitals care for chronically ill elderly patients indicate serious problems with quality of care and point toward unnecessary spending by Medicare. Lower utilization of acute care hospitals and physician visits could actually lead to better results for patients and prolong the solvency of the Medicare program, according to a new study by the Center for the Evaluative Clinical Sciences (CECS) at Dartmouth Medical School.

Three issues drive the differences in the cost and quality of care, according to principal investigator John E. Wennberg, M.D., M.P.H.

“Variation is the result of an unmanaged supply of resources, limited evidence about what kind of care really contributes to the health and longevity of the chronically ill, and falsely optimistic assumptions about the benefits of more aggressive treatment of people who are severely ill with medical conditions that must be managed but can’t be cured,” said Wennberg.

The Dartmouth Atlas Project studied the records of 4.7 million Medicare enrollees who died from 2000 to 2003 and had at least one of 12 chronic illnesses. The study demonstrates that even within this limited patient population, Medicare could have realized substantial savings – $40 billion or nearly one third of what it spent for their care over the four years – if all U.S. hospitals practiced at the high-quality/low-cost standard set by the Salt Lake City region.

The new research is based on Medicare claims data for more than 4,300 hospitals in 306 regions, released today in a new database available at www.dartmouthatlas.org.

“The problem of overuse of acute care hospitals and medical specialists in the management of chronic illness is rapidly getting worse,” said Wennberg.

He points to finding that the resources per capita allocated to managing chronic illness during the last two years of life are increasing steadily each year. For example, the nation’s health care providers were using 13.6 percent more ICU beds in 2003 than they did in 2000. Physician labor used to manage chronic illness also increased substantially: 13.4 percent for medical specialists and 7.7 percent for primary physicians. The acceleration was greatest in regions that were already using the most care, so the gap between high and low rate regions grew greater over the four years.

Both doctors and patients generally believe that more services – that is, using every available resource such as specialists, hospital and ICU beds, diagnostic tests and imaging etc. – produces better outcomes.

Based on this assumption, the supply of resources – not the incidence of illness – drives utilization of the services. In effect, the supply of hospital beds, ICU beds, and specialty physicians creates its own demand, so areas with more resources per capita have higher costs per capita.

“This report should end the ‘more is better’ myth in health care,” said Donald M. Berwick, M.D., M.P.P., president and CEO of the Institute for Healthcare Improvement (IHI) and a leading national authority on health care quality and improvement issues. “The nation can do a lot to improve the quality and lower the cost of health care once providers, policymakers, payers and the public share an understanding that ‘more care’ is not by any means always ‘better care,’ and that new technologies and hospital stays can sometime harm more than they help.”

Press release:
http://www.dartmouthatlas.org/press/2006_atlas_press_release.shtm

>From the Executive Summary

The reallocation of resources from the acute care sector to create a population-based, community-wide integrated system for managing severe chronic illness is today only a thought experiment. It should become a national goal. Realizing the savings that better organized care can bring requires building community-wide systems of coordinated care. In most communities, such systems do not now exist. The benchmarks from efficient practice indicate that Medicare already invests more than enough money to build and maintain such a system. The problem is that the resources are now largely locked in by Medicare’s reimbursement policy. To meet their payrolls and amortize their debts, acute care hospitals are dependent on utilization; reduced utilization results in loss of income. In many regions the reduction in utilization required to meet efficiency benchmarks would have serious – indeed, devastating – consequences for acute care hospitals. Finding a solution will require payers, particularly Medicare, to develop new methods of financing care that provides a fiscal “safe landing” for hospitals and retained savings for use in building community-based systems for managing severe chronic illness. It will also require accountability for system integration. With proper reform of financial models, large group practice and integrated care systems should be able to provide this accountability for the populations they serve in regions where such practices exist.

Through economic incentives, existing large group practices might be persuaded to accept responsibility for organizing such care in regions where it does not now exist. Traditionally, hospitals have served as the focus for coordinating community resources. They are the only locus of organized care available throughout the United States; perhaps acute care hospitals could take on the mission of integrating providers into community-based systems for managing chronic illness.

Executive Summary:
http://www.dartmouthatlas.org/atlases/2006_Atlas_Exec_Summary.pdf

The full report (121 pages);
http://www.dartmouthatlas.org/atlases/2006_Chronic_Care_Atlas.pdf

Comment:

By Don McCanne, M.D.

Can you imagine the private insurance industry leading the process to reform the management of chronic illness? Our fragmented model of competing payers is not capable of promoting system integration. Not even Medicare has the clout to reorganize the health care delivery system.

If we had a single, publicly-administered national health insurance program, a Medicare-for-All, then we would be in a position to allocate our health care spending in a manner that would integrate our entire health care delivery system. If that would result in a savings for Medicare alone of $40 billion over three years, just think of how much that would save for our entire health care system. And that doesn’t even include the other savings possible though a single payer system such as reduction of administrative waste and efficiencies through negotiated purchasing.

This report makes it clear that action is mandated. It is difficult to see where we could begin without the crucial first step of establishing a program of national health insurance.

Tough health care medicine for Target workers
By Chris Serres
Star Tribune
May 11, 2006

Stung by rising health costs, Target Corp. is now offering private health accounts funded in large part by individual employees. The Minneapolis-based retailer also is considering taking the unusual step of dropping its traditional health insurance coverage altogether for high-deductible plans coupled with private savings accounts.

One of Target’s two new alternatives is a high-deductible plan coupled with health savings accounts (HSAs), which let users set aside money in accounts to spend as they see fit on medical needs. Unspent money stays with the employee from year to year and job to job and grows tax-free.

The other option is a high-deductible plan coupled with health reimbursement accounts, which are similar to HSAs, except these accounts are funded by the employer and do not transfer if a worker changes employers. This plan has much higher premiums, but the deductibles are lower than in Target’s HSA.

(For the HSA option) Target annually will contribute $400 for individual employees and $800 for families. Monthly premiums will drop to as little as $20 for individuals with Target covering the rest of the insurance plan premiums.

But deductibles will be much higher than Target’s traditional plan: up to $5,000 for families, including Target’s contribution. So a Target worker who incurs a $5,000 medical bill but has only $1,000 socked away in a health savings account must pay the remaining $4,000. Target pays 80 percent of expenses beyond the deductible and all expenses once a maximum out-of pocket level is reached — up to $8,800 for families.

Documents provided by Target employees to the Star Tribune offer a rare, detailed window into how one company is trying to resolve the problem. In the documents, Target touts the changes as part of a broader effort to encourage employees to take increased responsibility for their health care spending, which the company believes will help reduce costs.

“Think of it like the retail business — when people are spending their own money, they want the best value at the best price,” says a guide given to employees.

http://www.startribune.com/535/story/427778.html

Comment:

By Don McCanne, M.D.

So Target wants its employees to “take increased responsibility for their health care spending.” How many Target employees do you suppose can afford to pay $4200 out-of-pocket after the $800 health savings account is depleted? Target is really asking them to take personal responsibility for the medical debt they accrue.

The decline in protection provided by private insurance plans is a one-way street. It will only get worse.

California Democratic Party
2006 Platform
Adopted At The Democratic Party State Convention, April 30, 2006

California should lead the nation in providing comprehensive quality health care to all our people by transitioning to a single-payer public health care system.

http://www.cadem.org/atf/cf/{BF9D7366-E5A7-41C3-8E3F-E06FB835FCCE}/2006_platform_final.pdf

Comment:

By Don McCanne, M.D.

When the largest political party in the largest state in the nation explicitly endorses single payer, political feasibility becomes ever more real.

Now that the business community is beginning to understand better the benefits of the single payer model, maybe there will be interest in placing it in the Republican platform as well. We don’t want to hold our breath yet, but…

Let’s keep working to be sure that the business community fully understands all options for reform. A model that finally truly contains costs while allowing the additional luxury of providing comprehensive coverage for everyone just might be what they are looking for. Let’s be sure that they know what single payer really does, and that it’s available now.