By Dr. Susanne L. King
Berkshire Eagle

Tuesday, April 11

LENOX

MANY PEOPLE have been cheering the new health care bill that was passed by the Massachusetts Legislature, which is supposed to provide universal health care coverage for our state. The bill has three provisions to expand health care coverage to the uninsured. The first is to expand Medicaid eligibility, by allowing more people to qualify for this government program. The second is to offer government subsidies to low-income individuals. And the third is to require those making more than three times the poverty level (about $30,000 for a single person), to buy insurance or pay a fine. The politicians want us to believe that this is a home run, but I am not cheering.

Extending health care to the uninsured so that everyone is covered (universal health insurance) is an important aspect of health care reform. However, it is unclear whether this bill will be able to achieve that goal. In addition, universality is only the first of the five criteria proposed by the Institute of Medicine for health care reform. The other four criteria are not addressed in the current bill: that health care be continuous, i.e., not tied to a job (2); affordable for individuals and families (3); affordable for society (4); and equitable and patient-centered (5).

Politicians have assumed that only 500,000 people in Massachusetts are uninsured. However, the Census Bureau reports 748,000 uninsured, 50 percent more people than were counted in the Legislature’s figure-crunching for the bill. That leaves out a lot of people from the new bill, or costs a lot more money than the Legislature anticipated.

Since health care insurance will still be tied to jobs with this health care bill, it is not possible for it to be continuous. One of the thrusts of the current legislation is to make businesses accountable in supplying health care insurance to their employees. When your health care insurance is tied to a job, it is not portable if you change jobs; and you are forced to change insurance if your employer shifts to a different carrier.

Is the current legislation affordable for Massachusetts? The funding for the bill is nebulous. The state hopes to retain the federal Medicaid dollars that were in jeopardy without an expansion of coverage, but that is a small portion of the current $59 billion health care budget, which is estimated to increase by $25 billion over the next three years. Businesses with more than 10 employees may have to pay $295 per employee if they don’t offer insurance, but Medicaid hikes to hospitals (provided in the bill) will triple the amount garnered from businesses. And the bill projects savings from “market reform” and patients being treated in doctors’ offices instead of emergency rooms. These savings may be imaginary.

Another false assumption is that people will be able to buy affordable insurance. None of the insurance companies have yet offered such plans, but the estimate from the Statehouse is that these low-cost plans may set an individual back about $325 a month. Along with the insurance plan deductible allowed by the legislation, this would work out to more than 20 percent of the income from an individual making $30,000, scarcely an affordable plan.

Is this legislation equitable and patient-centered? Patients still will not have their choice of doctors or hospitals: the insurance plans will continue to dictate who you can see and where you can go for your health care. The promises that the uninsured would be offered comprehensive care through this legislation is also an empty one: the only way to get cheaper plans, and still maintain insurance company profits, is to boost deductibles and co-payments, and provide fewer covered services. Comprehensive coverage is not a feature of this bill. It remains to be seen what devastating gaps will be created. Equitable insurance would be for everyone in the state to have the same health care benefits that our elected representatives have.

Finally, is this legislation affordable for Massachusetts? It does nothing to contain the skyrocketing costs of health care in our state. Instead, it gives new infusions of cash to the private insurers and some big hospitals. The Boston Globe reported that lobbyists for insurance companies, some hospitals, and other major players in the health care industry were paid at least $7.5 million in 2005, as the Legislature took up this bill. This is not health care reform: this is business as usual for the private health care insurance industry.

And as usual, the insurance industry will not just maintain, but will increase, its profits. The American Medical News reported that health plans made more money, and spent less on health care in 2005, than in previous years. While the insurance companies make money providing coverage for the healthy workforce and their young healthy families, we taxpayers foot the bills for those segments of the population with greater health care needs.

If we were to take the $9,100/ year per person that we spend in Massachusetts (more than any state or country in the world), and use it for health care rather than insurance company profits, we would be able to provide truly universal, affordable, continuous, equitable and comprehensive care to the citizens of the commonwealth. We need a single-payer health care system, in which the government collects and administers the funds for health care, eliminating the insurance company middlemen.

That would be a spectacular home run for the state of Massachusetts.

for a printable pdf version of this letter (click here)
for a fact sheet on the Massachusetts bill (click here)

Governor Mitt Romney
State Capitol
Boston, MA 02133

November 3, 2005

Dear Governor Romney, Speaker DiMasi and Senate President Travaglini:

We urge you to abandon your ill-conceived proposals for health care reform and to adopt, instead, a single payer program of universal coverage for the Commonwealth.

As physicians and health professionals, we witness the heavy toll of unnecessary suffering endured by patients who delay care and even forego vital treatment due to costs. While the uninsured bear the heaviest burden, many with insurance also find care unaffordable due to co-payments, deductibles and restrictions on coverage. Reforms should address the grave problems of both groups.

Your plans to loosen regulations on health insurance, allowing ever-skimpier coverage, would perpetrate a cruel hoax. Such cut-rate policies would cost families thousands of dollars yet offer miserly care and little protection from financial ruin in the face of serious illness. Many who currently enjoy adequate coverage would doubtless be forced into plans with gaping holes and onerous restrictions on choice. If there is one thing worse than being uninsured it’s paying dearly for worthless coverage.

Your view that we can achieve universal coverage by forcing people to buy themselves insurance ignores the most basic facts about who is uninsured. Only 12.4% of the 748,000 uninsured in our state are both young enough to qualify for low-premium plans (under age 35) and affluent enough (family incomes greater than 499% of poverty) to readily afford them. Yet even this 12.4% figure may be too high if insurers are allowed to charge higher premiums for persons with health problems; only half of uninsured persons in those age and income categories report that they are in “excellent health” (The statistics in this paragraph were obtained by analyses of data that the Census Bureau collected on Massachusetts residents in March 2005).

Proposals to raid the existing free care pool in order to partially subsidize cut-rate policies would actually worsen the plight of many who are currently uninsured. Under such reforms, patients now eligible for free or low-cost services would often face greater restrictions on care and higher out-of-pocket costs. The only real winners would be the private insurers who would surely gain millions from the sale of near-useless policies.

Replaying Dukakis’ failed employer mandate, i.e. making employers pony up more money for coverage, will not lead to universal coverage. As Dukakis found, relentlessly rising health costs quickly stir rebellion among powerful employers, making the program unsustainable.

While we welcome the expansion of Medicaid as a stopgap measure to cover more poor families, we know that this strategy ultimately leads to a dead end. Inevitably, the next economic downturn will bring a flood of additional families pushed onto the Medicaid rolls just as state tax revenues fall. As in the past, Medicaid will be cut when the need is greatest.

In contrast, a single payer reform would create a stable long-term financing mechanism for health care. It could cut costs by streamlining health care paperwork, making universal, comprehensive coverage affordable. The Commonwealth’s three largest private insurers spend more than $1.3 billion annually on billing, marketing, high executive salaries and other administrative costs. That’s ten times as much overhead per enrollee as Canada’s national health insurance program. And hospitals and doctors spend billions more fighting with insurers over payments for each aspirin tablet, x-ray and doctor’s visit. If we cut bureaucracy to Canada’s levels we could save at least 14% of current health expenditures, enough to cover all of the uninsured in Massachusetts and to improve coverage for the rest of our patients as well.

And single payer is popular. Sixty-two percent of Massachusetts doctors support it (according to a recent study in the Archives of Internal Medicine), joining the Massachusetts Nurses Association and dozens of other labor, seniors and consumer groups.

We recognize that a single payer reform threatens the multi-billion dollar insurance industry, and would force down the high profits enjoyed by drug companies. But such interests must not be placed ahead of the health of the people of Massachusetts. Only a single payer system can assure universal and comprehensive coverage at an affordable price. The people of the Commonwealth deserve no less.

Sincerely,

Dr. Nancee Bershof, Greenfield
Dr. J. Wesley Boyd, Cambridge
Dr. John Day, Boston
Dr. Tina Furcolo, Springfield
Dr. Kathleen Grandison, Shelburne Falls
Dr. Audrey Guhn, Springfield
Dr. David Himmelstein, Cambridge
Dr. Mike Kaplan, Lenox
Dr. Suzanne King, Lenox
Dr. Sarah Kremble, Leyden
Dr. Richard McGinn, Greenfield
Dr. Kathleen McGraw, Montague
Dr. George Milowe, Malden
Dr. Ruth A. Potee, Boston
Dr. Vikas Saini, Hyannis
Dr. John Walsh, Worchester
Dr. Steffie Woolhandler, Cambridge

And The 290 Undersigned Massachusetts Physicians

For a fact sheet on the bill, click here

Letter to the Editor
Huntsville Times
Published Monday, March 27, 2006

The Association Health Plans proposed by President Bush and now being considered by Congress will not be of any help to middle-class and working families. It is a plan for the rich who can already afford health care.

Here is what it would do:

Increase the number of uninsured by up to a million workers.

Increase premiums for 86 percent of small businesses.

Deny coverage to older and sick people.

Dodge state coverage requirements, like childhood vaccinations.

Allow exemptions from mandated benefits, like cancer screening.

Eliminate our power to appeal rejected claims.

Hard-working families need relief from the rising costs of health care, not a plan making our insurance less affordable, less accessible and less secure.

We refused to let Bush “privatize” Social Security. We can refuse to let him mess up the health care we have.

What we need is a single-payer, national health care system that covers everybody.

It’s shameful that one-fifth of our population have no health care.

Reese Danley-Kilgo
Huntsville, 35802

Opinion
Daily Gazette, Schenectady, NY
Published Sunday, March 26, 2006

Advocates of a new state law that would mandate medium- to large-sized employers to pay for their workers’ health insurance have cause to be frustrated by the status quo in health care: It’s an inadequate system that in New York alone has pushed hundreds of thousands of low-wage workers onto the Medicaid rolls and left even more without any insurance. Still, their pro posal would be ruinous for thousands of New York businesses, and driving them into bankruptcy or across state lines would hardly do the working poor – or state and local governments – much good.

The bill would be incredibly expensive, forcing businesses to pay $3 per working hour for each employee. Some of these workers – in the retail sector, for example – may only be making $8 or $9 an hour; so the bill would effectively raise their employers’ payroll costs by a third. In a competitive business world, that kind of hit could be fatal. If the business were near a border and had to compete across state lines, for example, they couldn’t raise prices enough to cover their costs. And even if they could, would the resulting inflation be good for the economy?

In addition, the bill would be a disincentive for small- to medium-sized companies – those with fewer than 100 workers – to keep growing, lest they crossed the threshold and had to start paying for health insurance.

Health insurance is an enormous burden on whoever has to pay for it – individual, employer, employee or government. While ideally, all employers would offer their workers some coverage, the idea of forcing them to is flawed – especially when the plan would be so expensive and when only certain employers would have to go along.

It pretty much has to be an all-or-nothing proposition, and all is clearly preferable. But to be done properly, it should be offered by a single payer – the U.S. government – which would allow far greater economies of scale than any other option.

By Milt Freudenheim
The New York Times
Published March 31, 2006

Critics who say the private insurance industry got too big a role in the new Medicare prescription drug program may not know the half of it.

For patients, the program’s rollout has had mixed reviews, with many happy customers but more than a few tales of woe. But for many big insurers, the new Medicare program is shaping up as a great opportunity. And prescription drugs may be only a starting point.

So far, about 18 million Americans are participating in the new drug program, known as Medicare Part D. If things play out the way some big insurers hope, the drug program could prove to be a feeder system into a much greater private presence in Medicare — a longstanding goal of the Bush administration.

Insurers like Humana, which says it has signed up 1.7 million Medicare drug plan members, know that the real money is not in providing drug insurance. The rewards are much richer in other types of Medicare policies, including complete managed care plans called Medicare Advantage, which are operated by the private insurers but subsidized by Medicare. Michael B. McCallister, Humana’s chief executive, refers to the new Medicare Part D drug program as part of a broader “Medicare opportunity” for his company.

“There’s going to be a lot of people that are going to have Part D cards that are going to become interested in a Medicare Advantage plan,” said Mr. McCallister, who has been unusually candid about the springboard strategy.

In January and February, which were the first months of the Part D drug program, Humana was also able to add more than 140,000 new Medicare Advantage customers to its rolls.

One of them was Frank Stallings, 78, a retired college professor in Highland Heights, Ky., who recently switched from a Part D plan to a Humana Medicare Advantage plan.

“So far, Part D has worked O.K.,” he said. “I felt like I needed something else to help me out with other things not covered by Medicare.”

Unlike his Part D drug plan, which carried a monthly premium of $26, there is no premium for his full-coverage Medicare Advantage plan — although his drug co-payments are a bit higher, and there will be co-payments for some other medical services.

Other big insurers like Wellpoint and the UnitedHealth Group — the Part D leader so far, with 4.5 million enrollees — are also recruiting members for Medicare Advantage, as well as customers for Medigap, another type of Medicare-related policy. Medigap is a supplemental policy that helps with the remainder of medical expenses not fully covered by conventional Medicare.

While the stand-alone Part D drug plans are expected to give insurers a small profit, the margins are likely to be thin — 1 percent to 3 percent before taxes, Humana estimates. That is partly because Humana is offering low premiums and co-payments to attract customers. And the federal subsidy for each customer in a stand-alone Medicare drug plan is only about $75 a month.

But for providing a full Medicare Advantage health policy to a patient, the government pays the insurer $900 to $2,000 a month beyond whatever premium, if any, the patient pays. With that revenue, come bigger profit margins — 3 percent to 5 percent, according to James H. Bloem, Humana’s chief financial officer.

For UnitedHealth, the Part D drug business by itself would not be particularly lucrative, adding only 5 to 7 cents to earnings a share, according to Jason Nogueira, an analyst who tracks health care companies for the investment firm T. Rowe Price. That would be no more than 2 cents on the sales dollar for UnitedHealth, which had $45 billion in 2005 revenue and expects profit of $2.90 a share this year.

So the real financial opportunities lie in upgrading Part D enrollees to other Medicare-linked policies. In essence, the high federal subsidies for Medicare Advantage policies are the government’s reward to insurers for taking people out of traditional, federally supervised Medicare and into the commercial world of managed care. In fact, Medicare now pays private insurers 15 percent more, on average, to take a patient than it spends in a traditional government program for each patient.

Critics of Medicare’s approach, including a number of senior Democrats in Congress, have asked the Congressional Budget Office to examine the issue. The budget office estimated that Medicare could save more than $40 billion over the next 10 years if subsidies to insurers were scaled back to the levels the program now pays directly to doctors and hospitals.

Representative Pete Stark of California, the senior Democrat on the Ways and Means Committee, said in an interview that insurance agents “are out trying to promote seniors into Medicare Advantage plans, and switch them out of plans they are in.”

The Medicare law that created the Part D program, Mr. Stark said, “was written by insurance company lobbyists with the help of pharmaceutical company lobbyists.”

In a telephone interview, Michael O. Leavitt, the secretary of health and human services, defended the administration’s market-based approach to Medicare, saying that market forces were pushing prices lower and that any kinks in Part D would be worked out.

“The market will become simplified because consumers want that,” Mr. Leavitt said.

As long as the incentive of federal subsidies stays at current levels, insurers have every reason to pursue them, especially as the industry struggles with slowing growth in its traditional core business of managing employer-sponsored health benefits.

Charles Boorady, a health care securities analyst at Citigroup, said that by expanding Medicare-subsidized offerings, the insurance industry had a potential revenue opportunity of more than $450 billion a year “or enough to almost double the revenue of the managed care industry.”

Even before the new drug plan went into effect in January, some insurers had significant numbers of Medicare Advantage customers. Humana, for example, had 558,000. UnitedHealth had 1.1 million in Medicare Advantage; it also had an additional 2.5 million AARP customers with Medigap cards, and most of them have added the Part D coverage that UnitedHealth is offering through AARP.

By the end of February, Humana had already raised its total of Medicare Advantage members to 700,000 and had set a goal of 900,000 to 1.1 million by Dec. 31. The company expects to add more in 2007. New figures released by Medicare last week indicate that 6.3 million of the 18 million people enrolled in Plan D voluntarily signed up for the drug program; in all, 43 million people are eligible for it. An additional 5.7 million in the program are people who were subscribers to Medicare Advantage health plans that did not cover prescription drugs but they added the coverage.

The government’s real gift to the insurers was 6.4 million low-income people on Medicaid or other public-assistance programs who were automatically assigned to Part D or Medicare Advantage plans. They were allocated among insurers ready to meet Part D rules, with most going to those that had Medicare Advantage plans throughout the United States.

Under this allocation, the government gave UnitedHealth 1.2 million Medicaid assignees; the next biggest were Humana and Wellpoint, which each got about 600,000.

Those insurers can be sure of collecting 100 percent of the premium from the government for the lowest-income enrollees, and they are paid on a sliding scale if the enrollees are eligible for other state assistance.

Not everyone, though, sees a huge opportunity in the industry using the Medicare drug program as a springboard into fuller lines of coverage.

Ed Kroll, an analyst at the investment research firm SG Cowen, notes that in the past, prescription drug coverage was a major reason people signed up for a Medicare Advantage managed care plan. Now, with Part D, people can have their drugs paid for without joining a broader plan, he said, and can simply let plain old Medicare benefits cover their other health needs.

Aetna, the third-largest insurer, after Wellpoint and United, has not made a big push into Part D. The company has only 375,000 Part D drug plan enrollees so far. Aetna — like Cigna, the No. 4 insurer — is more concerned with commercial customers and is “not strategically focused on Medicare or Medicaid,” Mr. Boorady of Citigroup said.

Even for companies like Humana, which do have that focus, the big challenge will be overcoming the bad publicity the Part D program has tended to receive in the early going. And for those who do agree to trade up, insurers will not be able to take their loyalty for granted.

Florence Bryan 65, a retired grocery worker in Winchester, Va., met a Humana saleswoman in a Wal-Mart store late last year; she was promoting Part D and Medicare Advantage. “I went on her recommendations,” said Ms. Bryan, who joined a Humana Medicare Advantage plan in January. Now, she has her “first glitch.” Her Humana plan covers only half her monthly requirement of 60 Prevacid pills, which she for stomach problems. “The Humana representative said the doctor should call an 800 number to get an authorization,” she said. “But the doctor’s office said the insurance company needs to fill out a form and send it to the doctor.” When contacted, a Humana spokesman said the company intended “to resolve this issue for Mrs. Bryan as soon as possible.”

The Incredible Vanishing Push for Universal Health Insurance in Massachusetts
By Alan Sager, Ph.D., Professor of Health Services
Commentary, WBUR-FM Boston Broadcast 20 March 2006

For months, most of us have thought that the Legislature was debating how to cover the three-quarters of a million people in Massachusetts who lack health insurance. But legislation expected to be released this week suggests that when it comes to improving coverage, state government conceived an elephant but gave birth to a mouse.

Let’s follow the money. Over the next three years, business will pay about 144 million dollars more to help cover uninsured employees, while hospitals and others will get 540 million dollars more through Medicaid rate hikes. At the same time, the increase in overall total health spending to finance business as usual will be 25 billion dollars here in Massachusetts.

Why did the goal of insuring people get lost?

Here are some of the reasons.

Support for expanding health insurance has been broad but shallow.

Powerful hospitals and insurers did a better lobbying job than access advocates.

Health care costs so much that no one could find enough money to finance good insurance for people who can’t afford it. Instead, I expect, the legislature will pass the buck and compel individuals to buy flimsy but costly insurance. Business groups said the state’s economy would suffer if employers had to spend a lot more to cover people. But 540 million dollars more for hospitals and 25 billion dollars more for business as usual? No problem.

That’s a cruel double standard.

Since 1987, when our state last tried to insure everyone, health costs have risen by 40 percent as a share of our state’s economy. And 80 percent more people are uninsured—mainly because of higher premiums.

Access advocates ignored cost control for fear it would antagonize powerful hospitals, and that it’s too complicated for legislators. Gov. Romney and Pres. Bush take different approaches but essentially have the same cost control plan—bad insurance that makes sick people pay more out of their own pockets. That won’t encourage careful shopping. It will turn patients into the victims of a cost control war.

Higher out-of-pocket payments plus flimsy insurance will satisfy Washington’s demand that more people look insured on paper, permitting the state to retain special Medicaid payments. But higher out-of-pocket payments won’t cut waste. About half of our state’s 59 billion dollars in health care spending this year will be wasted—on administration, unnecessary care, excess prices, and
outright theft.

Our state’s 25,000 doctors decisions control almost all health spending. Past cost controls have failed because doctors didn’t support them.

Let’s negotiate a trustworthy deal with doctors.

Here’s the deal’s outline. Doctors, if you agree to take care of all of us with the 59 billion dollars already available—that’s over 9,000 dollars per person—we’ll eliminate malpractice suits and 90 percent of your paperwork.

All of us seek medical security—high-quality and timely care, without worries about bills or losing insurance.

We already pay enough. U.S. health spending is four times defense spending. And Massachusetts per person health spending is the world’s highest.

Rising health costs put us all at-risk. Let’s contain cost before the next bad recession and state fiscal crisis hit. Because when the economy stops short, Massachusetts health care will crash through the windshield.

Alan Sager is the Director, Health Reform Program Boston University School of Public Health

Insurers’ medical-cost ratios are lower than ever
By Jonathan G. Bethely, AMNews staff
Published March 6, 2006

If physicians needed any more indication of tightening reimbursement, how about this — not only did profits for the biggest health plans go up last year, but those plans also continued to cut the percentage of revenue they spend on care.

The medical-cost ratio — also called the medical-loss ratio or medical-care ratio — is the key number for health plans in terms of their level of profitability. That ratio, simply, is the percentage of dollars the companies spend on health care, including physician reimbursement.

Whereas 10 years ago many plans had medical-cost ratios in the high 80s or 90s, now the highest percentage among large, publicly traded health insurers is Health Net, at 83.9%. Aetna, which had a medical-cost ratio well into the 90s when CEO John Rowe, MD, took over in 2000, recorded a ratio of 76.9% in 2005, Dr. Rowe’s final full year before his retirement. That was the lowest medical-cost ratio for the nation’s largest publicly traded plans.

Health plans say they’ve been able to cut their medical-cost ratios through the use of technology and other means to allow for more judicious, health-effective spending. But the AMA and others have argued that health plans have kept a lid on costs because their market power allows them to unfairly dictate reimbursement terms to physicians.

In the eyes of some Wall Street analysts, plans might have pushed medical-cost ratios as low as possible. In part, that’s because efficiencies due to mergers are not expected to go further.

ADDITIONAL INFORMATION:

More in, less out
Profits for the largest plans went up

Aetna
Revenue 2004: $19.9 billion
Revenue 2005: $22.5 billion +13%
Earnings 2004: $2.3 billion ($7.15 per share)
Earnings 2005: $1.6 billion ($5.40 per share) -24%
2004 results included a $775 million tax refund for businesses sold

Cigna
2004 Revenue: $18.2 billion
2005 Revenue: $16.7 billion -8%
2004 Earnings: $1.4 billion ($10.46 per share)
2005 Earnings: $1.6 billion ($12.52 per share) +21%
2005 results are for all business

Health Net
2004 Revenue: $11.6 billion
2005 Revenue: $11.9 billion +2.6%
2004 Earnings: $42.6 million ($0.38 per share)
2005 Earnings: $229.8 million ($1.99 per share) +439.4%
2004 total reflects monies paid toward settling RICO lawsuit against health plans

Humana
2004 Revenue: $13.1 billion
2005 Revenue: $14.4 billion +10%
2004 Earnings: $47.1 million ($1.72 per share)
2005 Earnings: $64.6 million ($1.87 per share) +9%

United-Health Group
2004 Revenue: $37.2 billion
2005 Revenue: $45.4 billion +22%
2004 Earnings: $2.6 billion ($1.97 per share)
2005 Earnings: $3.3 billion ($2.48 per share) +26%

Well-Point
2004 Revenue: $20.8 billion
2005 Revenue: $45.1 billion +116%
2004 Earnings: $960.1 billion ($3.05 per share)
2005 Earnings: $2.5 million ($3.94 per share) +29%
2005 revenue includes Anthem-WellPoint, WellPoint-WellChoice mergers

Medical-cost ratios — the percentage of dollars spent on health care, including physician reimbursement — are in the low 70s or high 80s. (Cigna’s 2005 ratio reflects commercial HMO business only.)

Aetna
2005: 76.9%
2004: 77.8%
Change: up 0.9 percentage points

Cigna
2005: 82.3%
2004: 82.4%
Change: essentially flat

Health Net
2005: 83.9%
2004: 88.0%
Change: up 4.1 percentage points

Humana
2005: 83.2%
2004: 84.1%
Change: up 0.9 percentage points

UnitedHealth Group
2005: 78.6%
2004: 80.2%
Change: up 1.6 percentage points

WellPoint
2005: 80.6%
2004: 82.0%
Change: up 1.4 percentage points

Source: Company 10-K, year-end filings with the Securities and Exchange Commission