PNHP

Junk Medicaid

Junk Medicaid

By Alex Gerber
Washington Times
January 29, 2006

Medicaid, the government health-care plan for low-income people, has been targeted by congressional mediators as a prime source for savings in a bloated federal budget.

Medicaid’s costs have increased a staggering 54 percent in the past five years. This has been deemed “unsustainable.” Jointly financed by the federal and state governments, the program now accounts for an average 25 percent of state budgets, threatening many with insolvency.

A lowering of Medicaid costs by $6.9 billion is proposed over the next five years, which will decrease benefits and raise out-of-pocket expenses for the 47 million Americans covered by Medicaid. The nonpartisan Congressional Budget Office predicts an appreciable number of Medicaid recipients, finding the additional costs unaffordable, will join the ranks of the medically uninsured. The adverse morbidity and mortality statistics of the uninsured are well documented.

Medicaid’s problems were far from anticipated in 1965 when passed into law under the jurisdiction of the former federal Department of Health, Education and Welfare (HEW). At the time, I was a health care consultant to HEW Commissioner Dr. Ellen Winston and remember well the department’s euphoria over Medicaid’s prospects. All the public charity hospitals were to be phased out within 10 years, and “second-class care” was to be eliminated as Medicaid recipients were shunted into the private care “mainstream.”

But within three years, a federal commission was investigating gross fraud and an explosion of Medicaid costs. The program continued downhill as doctors’ fees were slashed, benefits cut and only about 50 percent of the poverty class and the working class near poverty remained in the program.

Few are happy with Medicaid today. Patients are unhappy with eligibility red tape and the declining number of doctors willing to treat them. Doctors are unhappy with the mountains of paper work and unrealistically low fees. Most hospitals are unhappy because Medicaid’s reimbursement doesn’t cover the cost of patient care so they only remain afloat by shifting costs to private patient insurance plans. But unhappiest of all are government agencies struggling to control costs that have escalated far beyond their original projections. Meanwhile, the public hospitals are alive but not well.

Medicaid is simply another example of medical socioeconomics not keeping pace with brilliant advances of medical science and technology. After 40 years, we must reluctantly conclude Medicaid has been a well-intentioned program that has fallen short of expectations and that further Band-Aid efforts to resuscitate the program should be abandoned.

The great majority of Americans, however, believe health care should be a fundamental right and a public rather than a private good. A single standard of health care, regardless of ability to pay, is in concert with the beliefs of most Europeans and Canadians. What, then, should replace Medicaid?

The easiest answer is to include health care for the medically indigent in the badly needed reform of our “broken health-care system,” which has become a crisis.

Our outmoded, employer-based, privately financed, multipayer health-care system — a holdover from World War II wage-and-price controls — is an anachronism in the 21st century. The world’s richest and mostt powerful nation is unique in not sponsoring government-controlled Universal Health Insurance (UHI) other industrialized nations have enjoyed for decades.

Unlike Medicaid, Medicare — UHI for the elderly — has been a resounding success. Medicare, though also targeted by Congress for budget cuts by increassing patient-out-of pocket payments, is indeed widely recognized as the most important advance of the last century in our health-care socioeconomics. Medicare for our entire population is probably the most likely answer to Medicaid’s “meltdown.”

I have previously advocated on these pages a change to the Canadian, single-payer health-care plan funded by national health insurance. The need to find a substitute for Medicaid provides an opportune time to hasten this change.

Briefly, Canada’s health-care system provides one standard of care for its entire population under a plan funded by tax dollars, and there are no additional expenses at the time of treatment. Canada’s medical results equal ours at a huge savings.

Perhaps the superiority of Canada’s health-care system was best expressed by a Harris Interactive Poll among the leading industrial societies that evaluated patient satisfaction with their system: Canada ranked first and the U.S. last. Moreover, 50 percent of Americans favor the Canadian health-care system and only 8 percent of Canadians prefer ours. Significantly, The new Conservative government in Canada did not advocate major changes in the UHI program.

Of interest is a comparison of prescription drug prices in the U.S. and Canada. Our new Medicare Prescription Drug legislation, with some 40 plans to choose from, is a mishmash of confusion and a rich source of material for cartoonists and late-night TV comedians.

The attempt to constrain skyrocketing drug prices was hamstrung from the beginning by President Bush’s insistence there be no price negotiations with pharmaceutical companies. Thus, our Medicare population, 41 million strong, has been denied the advantage of bulk-buying economies of scale. Imagine the uproar if Hertz and Avis were, by law, denied discounted prices on autos they purchased in huge lots.

Since 1987, Drug prices in Canada have been regulated by the Patented Medicine Price Review Board, a quasijudicial body that negotiates prices with the drug industry. Prices are held in check because they are geared to the Consumer Price Index. The drug houses know the rules; only four times in the last 18 years has legal action been taken to force drug prices lower.

The future for national health insurance looks bleak. The issue has never been on President Bush’s agenda. Indeed, during his governorship, 24½ percent of Texans were medically uninsured — the highest of the 50 states. During his presidency, the uninsured have increased by 4 million and continue rising 100,000 monthly.

A major reform of our wasteful health-care system will help put the brakes on an inexorably rising national debt that will eventually fall on our children and grandchildren.

It would be well to recall an admonition from George Washington’s 1796 Farewell address: “by vigorous exertion to discharge the debt” — not ungenerously throwing upon posterity the burden which we ourselves ought to bear.

Alex Gerber, M.D., clinical professor of surgery, emeritus at the University of Southern California, is a former health-care consultant to the White House and the U.S. Department of Health and Human Services.

Third Building & Construction Trades Council Endorses HR 676

Collinsville, IL A third AFL-CIO Building and Construction Trades Council has endorsed legislation that would institute a single payer health care system in the U.S. by expanding Medicare to cover everyone.

The Southwestern Illinois Building & Construction Trades Council joined two other building Trades Councils in St Louis, MO and Cape Girardeau, MO endorsing the legislation introduced by Cong. John Conyers (D-MI).

HR 676 now has 62 congressional co-sponsors in addition to John Conyers Jr. (D-MI). It would institute a single payer health care system in the U.S. by expanding a greatly improved Medicare system to every resident.

HR 676 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, chiropractic and long term care. HR 676 ends deductibles and co-payments. HR 676 would save billions annually by eliminating high overhead and profits of the private health insurance industry and HMOs.

Support swells for universal health care: Ky. panel endorses plan for U.S. system

By Laura Ungar
Monday, January 30, 2006
The (Louisville, KY) Courier-Journal

It is the paradox of America’s medical system: While hands can be transplanted and the tiniest babies kept alive, many people cannot afford to see a doctor and live with the threat of financial ruin if they get sick.

Francene Shepard of Louisville had a heart attack in 1999, needed stents to open blocked arteries and ran up about $50,000 in medical bills that went unpaid.

Ian Copeland, a 27-year-old self-employed carpet cleaner who lives in Louisville, goes to the emergency room when he’s sick because he cannot afford a private doctor.

“It’s a gamble,” said his mother, Michelle Copeland. “If something happens, it could be devastating.”

Such stories are increasingly common and are leading to growing support among some politicians and medical groups for implementing a national health system offering care for all, including the 45 million Americans and more than half a million Kentuckians without health insurance.

Earlier this month, the Kentucky House Health and Welfare Committee voted to urge Congress to pass a bill, introduced by Democratic Rep. John Conyers Jr. of Michigan, that would expand Medicare to cover all Americans.

The bill would create a “single-payer” health-care system, publicly financed and privately delivered. All Americans would have access regardless of employment, income or health. Each year, the program would set reimbursement rates for health-care providers and negotiate the cost of prescription drugs.

Critics say such a measure would be too costly and unwieldy, but the passion of supporters was evident when the Kentucky House committee vote was called, and Rep. Kathy Stein, D-Lexington, answered: “Hell, yes!”

Conyers’ office and the group Physicians for a National Health Program are watching Kentucky and hoping that the General Assembly will back the effort.

“It would be historical to have a Southern state endorse universal health care and medicine for all,” said Joel Segal, a legislative assistant for Conyers who handles health-care issues. “This is a life-and-death crisis for many people.”

A possible groundswell

A 2002 report by the Institute of Medicine, which advises the federal government on health issues, said 18,000 adults die each year because they lack health insurance. Overall, the United States has a lower life expectancy than several countries, including Canada and the United Kingdom, that have national systems.

“The health-care system is in a deepening crisis,” said Dr. Steffie Woolhandler, an associate professor of medicine at Harvard University and co-founder of Physicians for a National Health Program. “The public is quite fed up.”

There are signs that the idea of a national system has increasing support here:

A poll last year by the Pew Research Center found that 65 percent of Americans favor national health insurance, even if it means higher taxes.

An Indiana University poll, published in the Annals of Internal Medicine in 2003, said 49 percent of doctors support government legislation to establish national health insurance, while 40 percent oppose it.

Membership in Physicians for a National Health Program, meanwhile, has risen from about 10,000 to 14,000 in recent years.

City councils have passed resolutions in support of the Conyers’ bill in Morehead, Ky.; Baltimore; and Erie, Pa.

Locally, Conyers’ proposal has gained support from the Kentucky Psychiatric Medical Association, the Louisville-based Falls City Medical Society, and Dr. Adewale Troutman, director of the Louisville Metro Health Department.

A faction of the Kentucky Medical Association also supports the idea of a national health system, said its president, Dr. Daniel Varga.

And although Varga and others say they doubt that the United States will be ready, philosophically, to enact a national health plan anytime soon, experts say the debate points to a growing dissatisfaction with the status quo.

That sentiment has been reflected in polls such as one released last week by the Center for American Progress and the Service Employees International Union, which found that nearly nine out of 10 Americans think the current system is broken.

Opposition to proposal

Although opponents agree that the problem of the uninsured must be addressed, they say a national system would drive up taxes, stifle medical innovation and lead to waits for services.

“If you think you can get free health care and you don’t have to pay for it in some way, you’re being naïve,” said Robert Moffit, director of the center for health policy studies at the Heritage Foundation, a Washington-based conservative think tank.

Moffit pointed to a proposal for a state-level universal plan in Oregon that would have required a new personal income tax of as much as 8 percent and a payroll tax for businesses of 3 percent to 11.5 percent.

In addition to tax increases, Moffit said, “once the health-care dollar becomes a part of the federal budget, it competes with education and other priorities.”

State Rep. Bob DeWeese, R-Prospect, a retired physician who voted against the Conyers resolution in the Kentucky House committee, also expressed concern about rising taxes.

He said something must be done about the growing number of uninsured Americans, but “we don’t have to change the whole system to fix this problem.”

Proponents argue that a national health plan would save money. In recent years, increases in insurance premiums have far outpaced inflation. A summary of the Conyers bill says 95 percent of families would pay less for health care under the plan than they do today.

Moffit argued that ultimately, the quality of care would suffer with a national setup, partly because such systems generally don’t invest as much in medical technology.

He also pointed to waits for services. One recent survey by a Canadian economic think tank called the Fraser Institute — which seeks to bring attention to the issue of market competition — found that waiting times there between referrals and treatment averaged 17.7 weeks across specialties last year.

Proponents of national health care say that concern is overblown.

But Julia Costich, chairwoman of the department of health services management at the University of Kentucky, said the Conyers bill stands little if any chance of passing, partly because it calls for such sweeping change.

“I applaud their ambition,” Costich said of proponents, “but it seems very far-fetched.”

Idea spreading

Kentucky is not the first state to show support for a government-run health system. Some states have gone so far as to move toward their owns plans. In Oregon, where voters rejected a single-payer proposal in 2002, supporters are pushing for another measure in 2008.

In Ohio, a coalition claims it has collected tens of thousands of signatures in support of such a plan and hopes to put the issue on the ballot next year.

Maine already has a program offering affordable health-care coverage that aims to cover all uninsured residents eventually.

Dr. Garrett Adams, a retired physician who heads up the Kentucky chapter of Physicians for a National Health Program, said universal health care is a matter of fairness and humanity. His group prefers a national system to state efforts.

Adams said the problems faced by the uninsured are particularly acute in Kentucky, which was shown in a recent Courier-Journal investigation to be among the least healthy states in the nation.

“This is so wrong,” Adams said. “They’re real lives. They’re people.”

Shepard, a 51-year-old home health aide who spoke before the state House Health and Welfare Committee, said that since her heart attack, she has been diligent about getting care at the Family Health Centers’ Portland clinic.

But with a low income, specialized care can be a struggle.

A national program would help her “and others like me who fall through the cracks,” she said in an interview.

One patch of common ground for supporters and opponents is the belief that the current U.S. system has serious problems.

A 2003 ABC News/Washington Post poll showed that more than half of Americans are dissatisfied with the quality of health care, the first majority in three polls since 1993.

Sandie Limpert of Louisville, a 53-year-old graduate student who has gone half her adult life without health insurance, said she believes the system is in such disarray that a major overhaul would be better than small reforms.

“It’s like we’re trying to plug our fingers into the dam,” she said. “But it’s only a matter of time before the whole thing cracks and explodes.”

Reporter Deborah Yetter contributed to this story.

HSAs as IRAs, and The Economist's take on the Bush plan

Savings Accounts for Health Costs Attract Wall Street
By Eric Dash
The New York Times
January 27, 2006

Even after the Bush administration began pushing for the creation of health savings accounts with the Medicare Modernization Act of 2003, the banking industry mainly stayed on the sidelines.

“Put it this way, the impact of this law did not really become clear to them until after it passed,” said Mr. Perrin, the H.S.A. Coalition director. Once they understood how the accounts worked, however, the big banks realized the next I.R.A. had landed at their feet.

Now, some financial institutions are urging the Bush administration and Congress to raise the tax-deductible contribution limit to encourage consumers to put more money in their accounts – a proposal that President Bush is expected to endorse in his State of the Union speech.

Banks are already champing at the bit. “We happen to be in the camp that the H.S.A. is a second retirement account to be used for medical expenses,” said Nancy Todor, an executive who will oversee health savings accounts when Citigroup introduces them this year.

http://www.nytimes.com/2006/01/27/business/27health.html?hp&ex=1138424400&en=433af284a9e52683&ei=5094
&partner=homepage

Comment: By Don McCanne, M.D.

Health savings accounts (HSAs) represent a hybrid of tax policy, health policy and pension policy. To understand them better, they should be viewed as individual retirement accounts (IRAs) with a special penalty-free exemption for early withdrawals that are used for authorized health care expenses.

They represent regressive tax policy. As with an IRA, contributions are made with before-tax income, effectively providing higher-income individuals with a taxpayer subsidy that lower-income individuals do not receive. The poor pay the full amount of the contribution while the rich receive a significant discount at taxpayer expense. Demonstrating how this really is an IRA, higher-income individuals who have maxed-out their 401k contributions are turning to HSAs to expand their pension contributions.

In his attempts to reform Social Security, President Bush stressed the importance of personal retirement accounts as an important component of the “ownership society.” HSAs, as specialized IRAs, provide individuals with another similar opportunity to save for their retirements. By increasing personal accounts, the dependency on Social Security would diminish. But who benefits? Cumulative pensions will be reinforced for healthy individuals who accumulate significant funds in these accounts. Individuals who have the misfortune of having significant health problems will have to deplete their specialized IRAs (HSAs). Their health care miseries will be compounded further by the fact that they also will lose these pension funds. They are then left with only a high-deductible health plan that leaves them even more vulnerable to health care costs.

Thus HSAs represent highly flawed health policy, flawed tax policy and flawed pension policy. What is of even greater concern is the Bush administration’s intent to accelerate this shift towards consumer-directed health care. We should heed the following comments excerpted from a new report in The Economist.

America’s health-care crisis
Desperate measures
The Economist
January 26, 2006

The world’s biggest and most expensive health-care system is beginning to fall apart. Can George Bush mend it?

Mr Bush wants to accelerate the trend towards consumer-driven health care.

The truth is that the shift to consumer-directed health care and greater cost-sharing involves a culture change that may take decades. It will also come at the price of greater inequality. The burden of health spending will be shifted on to those who are sick, and not just because people will pay a greater share of their health costs themselves. High-deductible insurance policies are attractive to the young and healthy. But as these workers leave traditional insurance, the risk pool in other insurance plans will worsen and premiums will rise even faster. The real losers will be poorer workers with chronic illnesses.

American health care has already become more unequal as employers have cut back, and this will continue. The Bush team argue that “fairer” tax treatment will slow cost rises and enable more people to get basic insurance. The opposite is more likely. Bigger tax subsidies for health care are, if anything, likely to raise overall spending. Worse, since most tax breaks benefit richer people most, more tax incentives are likely to bring more inequality. They will also reduce tax revenue and worsen the budget mess.

Mr Bush’s health-care philosophy has a certain political appeal. It suggests incremental change rather than a comprehensive solution. It reinforces existing industry trends. And it promises to be pain-free. Unfortunately, it will not work. The Bush agenda may speed the reform of American health care, but only by hastening the day the current system falls apart.

http://www.economist.com/world/displaystory.cfm?story_id=5436968

Healthcare on the critical list

Los Angeles Times
January 26, 2006

Re “Health Plan to Revive Debate,” Jan. 23

The problem with healthcare in the United States isn’t that Americans are over-insured — as claimed by many conservatives — but that private health insurers take up to 30% as administrative costs. Compare this with administrative costs of 2% for Medicare. America spends more on healthcare than any other country and doesn’t have results to show for it, as measured by leading health indicators as diverse as infant mortality and the number of uninsured people.

Healthcare is not a product that most people can compare and purchase, as one would a television or cellphone-service provider. Allowing people to save money from their personal health savings accounts by forgoing a clinic appointment, for example, will result in larger problems down the line, driving up costs and resulting in worse health outcomes.

Clearly, as people more knowledgeable than myself have proposed, the answer to the growing U.S. healthcare problem is universal single-payer coverage. The private insurance route is clearly not working. President Bush proposes more of the same.

Arman Afagh, MD
Riverside

More HSAs, but where's the money?

HSAs Triple in 10 Months
America’s Health Insurance Plans
January 26, 2006

At least three million consumers currently receive health coverage through high-deductible health insurance plans offered in conjunction with health saving accounts (HSAs), according to preliminary results of a new study by America’s Health Insurance Plans (AHIP).

“HSAs are a remarkable success story and they are proving to be especially attractive to many who might not otherwise be able to afford coverage,” said AHIP president and CEO Karen Ignagni.

http://www.ahip.org/content/pressrelease.aspx?docid=14641

And…

Prognosis Is Mixed for Health Savings
By Milt Freudenheim
The New York Times
January 26, 2006

President Bush has made “consumer-directed” health savings plans a cornerstone of his policy for addressing runaway medical costs, and he plans to push them again in the State of the Union address next week. But so far there is little evidence that the approach is helping many consumers come to grips with the high price of health care.

… in many cases, people have evidently signed up not because they are eager to direct their own medical spending but because the plan looked cheap or they had no other insurance option. And at least half of those enrolled have not put money in their health savings accounts.

Pat Schoeni, executive director of the National Coalition on Health Care, a group seeking better, more affordable medical care, said, “The savings accounts are not designed to help people pay for health care; they are designed to help employers unload their health care costs.”

http://www.nytimes.com/2006/01/26/business/26accounts.html

Comment: By Don McCanne, M.D.

One percent of Americans now have health savings accounts, and half of them are not funded. Maybe an empty savings account is affordable, but the care that it will purchase is not.

In his State of the Union address, President Bush will propose the expansion of health savings accounts. Hopefully he’ll explain to us how unfunded accounts will make health care more affordable.

Pay up: Group urges Kentucky legislators to support federal bill pushing universal health care

By Mat Herron
January 24, 2006

The last time Sandie Limpert had a job that paid for her health insurance, Ronald Reagan was in the Oval Office and a bunch of college hockey players whipped the Soviet Union at the Lake Placid Winter Olympics.

It was 1980.

Since then, aside from a brief stint on Medicaid, Limpert, 53, has gone without. Now she is an activist working to draw attention to the concept of universal health care in the United States.

“For me, this is a serious issue,” Limpert told representatives on the state’s Health and Welfare Committee last week.

She was one of more than two dozen members of the interest group Kentuckians for Single Payer Healthcare who drove to Frankfort to encourage the passage of HCR 40, a resolution urging the U.S. Congress to pass the National Health Insurance Act sponsored by Rep. John Conyers, D-Mich.

KSPH got what it came for — the committee passed HCR 40 by a vote of 9-3 — but the victory was merely ceremonial.

There are numerous figures that proponents of universal health care can cite: 46 million Americans without health care — 582,000 of them in Kentucky alone. Roughly 18,000 people die each year without health insurance, according to the Institute of Medicine.

Still, the concept of nationalized health care is a lightning rod issue. Republican committee members countered that HR 676, the health insurance act proposed by Conyers, is nothing more than socialized medicine, and that the government would administer health care inefficiently. But it’s not.

Under Conyers’ bill, HR 676, a single-payer system would allow a patient to choose his or her health care provider, who would then be reimbursed with government funds. According to data included with the bill, single-payer plans would save the federal government $150 billion on paperwork and $50 billion by allowing bulk-purchasing of prescription drugs, which is prohibited under federal law. Employers who pay 8.5 percent of their payroll toward employees’ health coverage would pay 3.3 percent, and private insurers would be prohibited from providing health insurance that duplicates the proposed benefits.

Garrett Adams, a retired doctor who specializes in infectious diseases in children and a member of Physicians for a National Health Plan, described single-payer health care as publicly financed health care delivered by private doctors. The plan would save money, he said, by eliminating the 20 percent to 30 percent of each health care dollar that goes toward the marketing and administrative costs of for-profit health insurance companies.

“Health care is not a marketable commodity,” Adams said. “It’s a social good.”

He compared what the United States spends on health care with the amount spent by the United Kingdom, Sweden, France, Japan and Germany.

Conclusion: Americans spend more than all of them combined.

“Even now, there’s enough public money to fund a national health insurance plan in this country,” Adams said.

Legislators agreed that the health care system needs improvement, but they disagreed on how it should be fixed. Committee Chairman Tom Burch, who voted for the resolution, sees the single-payer option as inevitable. “Our biggest investment is our people,” he said. “It’s gonna happen.”

Rep. Scott Brinkman, R-Louisville, pressed Adams, who also testified, for hard numbers on the cost to taxpayers to join such a plan. Adams said that 95 percent of Americans would pay less for health care under Conyers’ bill because it would eliminate co-pays for doctors’ visits, deductibles and premiums.

Compared with other countries, state Republican legislators said government-financed health care has had mixed results in countries like Canada.

Rep. Addia Wuchner, R-Burlington, said she’s traveled with physicians there and met a woman who had to wait two years to see an orthopedic surgeon.

“I’m not sure that government can do a better job,” she said. But Ewell Scott, a doctor from Morehead, Ky., cautioned people not to mischaracterize a nationalized health care system as “socialized medicine.”

Patients can still have private doctors under single-payer, which he described as a fee-for-service program, paid for by the government. Without this, insurance companies will continue to discriminate, leaving more and more people without health insurance.

“We want teachers to have health care benefits,” he said. “But what about other classes of people?”

For her part, Limpert believes it’s only a matter of time before the United States joins the rest of the industrialized world and adopts some form of universal health care. She sees state and federal legislators’ opposition to it as proof of their allegiances to health insurance and pharmaceutical companies with strong lobbying arms in Washington.

And she won’t feel bad if, in the course of America adopting single-payer plans, health insurance companies lose business.

“Some of these companies are big enough to reinvent themselves,” she said.  

Contact the writer at leo@leoweekly.com

Single-payer: what it is

Despite what insurance companies and other naysayers might have you believe, single-payer health care is not socialized medicine. Nor should it call to mind long white beards, waiting room delays or Karl Marx. The difference is simple: Socialized medicine is when the government employs doctors and hospitals. It’s like that in England, Spain and here, with Veterans’ Affairs, for instance.

With single-payer, on the other hand, the government simply pays the same private sector health care providers that your insurance company currently does. Instead of 1,500 different plans and myriad for-profit providers, the government holds all the cards. And everyone is covered. That’ll help about 46 million U.S. citizens get in to see a doctor, with no co-pay. No deductible. A slight tax increase anchored by the richest 5 percent of Americans. It’s something like a level playing field, which means it’s probably way too good to be true.

—Stephen George

Specialty hospitals reveal the perversities of pseudo-markets

Do Specialty Hospitals Promote Price Competition?
By Robert A. Berenson, Gloria J. Bazzoli, Melanie Au
Center for Studying Health System Change
January 2006

In three Center for Studying Health System Change (HSC) sites with significant specialty hospital development-Indianapolis, Little Rock and Phoenix-recent site visits found that purchasers generally believe specialty hospitals are contributing to a medical arms race that is driving up costs without demonstrating clear quality advantages.

Price Competition

Although previous research indicates that purchasers believe specialty hospitals have lower unit costs, some believe that referring physicians, especially those with a financial interest in the specialty hospital, increase volume by inducing patient demand for elective procedures. The higher volume more than offsets the savings achieved from lower prices from competition, leading to increased aggregate costs. Health plans indicated they had few tools to restrain the induced utilization that physician ownership of specialty hospitals can engender.

Focused Factories or Risk Skimmers?

Some health plans and employers believe that physicians referred relatively easy cases to specialty hospitals and more complex patients to general hospitals, whether out of quality concerns or financial considerations.

Competitive Juices Flow

Although there was some evidence of increased price competition, respondents observed that the more important outcome was the perceived need for general hospitals to compete aggressively with the new physician-owned specialty hospitals by developing similar dedicated centers, as distinct hospitals-within-hospitals or freestanding facilities.

Thus, in the views of purchasers and other market observers, physician-owned specialty hospitals caused general hospital competitive juices to flow, but most of those juices flowed toward capacity expansion for lucrative services and enhanced specialty service branding and not necessarily toward improved quality and efficiency.

Policy Implications

Some assert that specialty hospitals represent desirable competition for general hospitals and, therefore, public policy should consistently foster competition provided by new market entrants, including specialty hospitals.

These commentators call for reliance on antitrust enforcement, resist expansion of CON (Certificate of Need) laws that would limit specialty hospitals and oppose general hospital efforts to restrict the hospital privileges of physicians with ownership interests in competing specialty hospitals.

Others believe that specialty hospitals add unneeded, expensive capacity to the health care system, make it more difficult for general community hospitals to cross subsidize the care provided to the uninsured and underinsured, and intensify the problems associated with physician self-referral for economic gain. These advocates would design public policy to discourage the development of new specialty hospitals.

It is striking that purchasers and their health plan agents, some of which themselves are for-profit, entrepreneurial ventures, who might be expected to favor increased hospital competition, generally do not view the development of specialty hospitals positively. They believe that specialty hospitals add to health care costs and have not demonstrated clear quality advantages. Further, purchasers are concerned about the opportunity for physician owners to induce demand through self-referral, to cherry pick among the patient population and to threaten community hospitals’ reliance on profitable services to make up for shortfalls in other areas. To some extent, purchasers seemed implicitly to accept general hospitals’ need for insured patients to subsidize care for the uninsured and underinsured, and profits from well-compensated services to support unprofitable services.

In most sectors of the economy, specialized producers foster market competition. In the airlines industry, for example, leaner point-to-point air carriers have forced aggressive price competition and dramatic changes in the traditional cost structure of the major airlines, for better or worse. In contrast, in the case of specialty hospitals, the ability of providers with market power to tie particular specialty service prices to other contracted services; the seeming acceptance by at least some purchasers that general hospitals have a legitimate need to cross subsidize services because of uncompensated care burdens; and the lack of useful measures by which purchasers can differentiate the quality and efficiency of cardiac, orthopedic and other specialty hospital services contribute to a very different result. The findings again confirm that even a competitive health care system does not function like most other sectors of the economy.

It is important to note that purchasers also have described a medical arms race focused on the promotion and marketing of specialty services involving general hospitals in areas where there is no specialty hospital competition.

Indeed, increased competition among local hospitals and between hospitals and physicians for profitable services, including cardiac, orthopedic and cancer care, has been observed across the 12 HSC sites. This service-line competition has involved new facilities and dedication of existing hospital space to profitable specialty services and is taking place whether or not there are specialty hospitals, suggesting that the policy focus on specialty hospitals per se might be somewhat misplaced.

Marked disparities in the relative profitability of certain services under both Medicare and private plan payment policies appear to be a major force driving competition for these profitable services. These pricing distortions are contributing to the current emphasis on specialty service differentiation and to escalating health care costs generally, with specialty hospitals being one prominent manifestation of such distortions.

Indeed, proponents of greater provider competition and proponents of greater regulation to restrict new specialty facilities agree that distorted pricing policies create an unlevel playing field and influence providers’ resource-allocation decisions for the worse. CMS has indicated that it will revise its payment systems for both inpatient and ambulatory services to reduce the artificial financial advantage that specialty hospitals currently enjoy because of the limited range of services they provide.

http://www.hschange.org/CONTENT/816/

Comment: By Don McCanne, M.D.

Most policy analysts concede that free, unfettered markets do not exist in health care, and, consequently, market competition cannot be relied on to bring us higher quality care at a lower cost. Specialty hospitals are an exception, the physician-investors would have us believe. By developing technologically-advanced, streamlined hospitals, these investors contend that they force the general hospitals in the community to compete by both improving the quality of the specialized services and by providing greater value through lower prices.

The proponents do have a reach to try to convince us. Duplicating services that already exist in the community is very expensive. We are not talking about the marginal costs of improving existing services, with a full support structure already in place. We are talking about beginning anew with incorporation costs, venture capitalist costs, architect and building contractor costs, the costs of construction, the costs of the most advanced and most expensive high-tech equipment, the costs of support services required, the costs of a new set of operating expenses, and, not the least, the costs of the return on investment.

The magic of the marketplace is supposed to reduce costs, but it is inconceivable that the investors could ever conjure up enough magic to meet these expenses while providing a nifty profit. While competitively-contracted prices may provide the appearance of lower costs, this report confirms that there is no magic. The per-unit cost might be slightly lower, but John Wennberg and his colleagues have demonstrated repeatedly that increased capacity for high-tech services drives up untilization and total costs, without a commensurate return in quality or outcomes. Specialty hospitals increase total health care costs and do so while placing a greater economic burden on our community hospitals.

If our teenage driver is in a major collision, we want a trauma center to be there, backed up by a full service hospital. If our granddaughter develops meningitis, we want facilities available with a pediatric intensivist and appropriate infectious disease support. If a respected and endeared community activist blows a berry aneurysm, we want the neurosurgical team available and accessible to save her brain and her life. We will always want a fully equipped and well staffed general hospital to be there for us whenever we need it.

A boutique specialty hospital surely would provide us with elegant surroundings, gourmet meals, high-tech equipment in the latest designer styles, and all of the other amenities that we should expect from an organization dedicated to Profits through Patient-Pleasing.

Is that really worth the trade-off? Do we want to cater to the wealthy who value such niceties for their elective surgeries? Or do we want to use those funds to support a strong health care infrastructure that would be there for all of us whenever we need it?

Private solutions inject into the process the type of thinking that brings us boutique hospitals. This is a public problem, and it requires a public solution. Single-payer national health insurance would provide a public funding structure that would ensure that our health care funds are spent on our health care.

Pull health care out of crisis mode

Letters

Outside America, most health care systems provide medications from one comprehensive formulary to all citizens. There are no restrictions or economic credentialing, and all citizens are included.

In addition, the rest of the world’s health care systems negotiate the prices of their drugs.

We seem to relish going from crisis to crisis. Many now face the economic decision of purchasing food or medications. There is, however, a solution.

The next time you hear the words “national health insurance” or “single-payer health care,” take note that this kind of system will cost less than our current system and cover all Americans with much less red tape.

Speaking of red, we are not talking about socialized medicine. It is American medicine for all Americans, by all Americans. For more information, visit www.pnhp.org/

Charles Katzenberg, M.D.
Physicians for a National Health Program, Tucson

http://www.azstarnet.com/allheadlines/112633

$22 billion taxpayer gift to private Medicare Advantage plans

Closed-Door Deal Makes $22 Billion Difference
By Jonathan Weisman
The Washington Post
January 24, 2006

House and Senate GOP negotiators, meeting behind closed doors last month to complete a major budget-cutting bill, agreed on a change to Senate-passed Medicare legislation that would save the health insurance industry $22 billion over the next decade, according to the nonpartisan Congressional Budget Office.

Since managed-care companies first began working through Medicare in the 1990s, the government has recognized an issue in the way the companies are paid for their participation. Private insurers attract healthier seniors than the traditional government-run Medicare system, so their payment rates — based on the elderly population as a whole — exceed the actual cost of treatment.

In 2003, the government began lowering payments to Medicare HMOs to account for their healthier population of beneficiaries. But to keep those HMOs from fleeing the system, the Bush administration added a “hold harmless” payment that negated that cut.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/23/AR2006012301700_2.html

Comment: By Don McCanne, M.D.

Although the details of the CBO analysis are somewhat technical, the fundamental perversity is not. The Medicare Advantage private insurance programs are paid at a rate which assumes that patients enrolled in their programs have the same health care needs as the average patient remaining in the traditional Medicare program. That is not the case. The Medicare Advantage programs are successful in selectively marketing to a healthy subset of Medicare patients. Thus the private plans are overpaid when compared to payments for comparable patients within the traditional program.

This overpayment is vital to the Medicare Advantage plans. Without it, they could not meet their higher administrative costs. New private plans would not enter the market, and once rates are adjusted to match risk, existing plans would exit the market.

Even though Democrats were excluded from the behind-closed-doors sessions, the intent of these overpayments is no secret. In 2010, a process will begin which is designed to reduce payments in the traditional Medicare program. It will be important to have in place a market of private Medicare Advantage plans as patients begin to flee from an underfunded public program. That market of private plans cannot develop unless Congress and the administration pays this $22 billion bribe of taxpayer funds.

The Washington Post article also states, “Republican aides involved in the change dismiss its significance, saying the CBO is reading too much into it.” A $22 billion bribe may be insignificant to Republican aides, but the rest of us certainly should be concerned. That’s our tax money and our Medicare program that they’re messing with!

Health Care Is Broke, How Do We Fix It?

FOR IMMEDIATE RELASE:

Contact:
John Wasik at 847-223-9814, johnwasik@ameritech.net.
Stan Rosenberg at 847-543-1202, bcbarn@prairiecrossing.com.

A Prairie Crossing Public Forum

Saturday, February 4, 2006, 1:00 p.m.
Byron Colby Barn, Route 45 and Jones Point Road, Grayslake, IL

Affordable and accessible health care is a serious national problem that impacts everyone, yet it rarely tops the agenda for most politicians (Note: President Bush will mention health care in his upcoming State of the Union speech). Nevertheless, the topic needs to be aired, focusing on the following questions:

* Why is the U.S. losing the economic battle (jobs, factories) to compete worldwide because of its crippled health care system?

* Why is the single-payer Canadian health-care system being attacked so vigorously by American special-interest groups? What makes the Canadian system work?

* Why does the U.S. provide some of the most extensive healthcare and still lag behind industrialized countries despite having the highest gross domestic product on earth?

* Why are 45 million Americans without health insurance and 20 million underinsured?

* Why is it extremely difficult to find affordable coverage if you’re a part-timer, contract worker, small business employee or have serious pre-existing health conditions or are between jobs?

* Why are most employers cutting back on healthcare benefits, forcing you to pay more out of pocket?

At the Byron Colby Barn, we will have a number of expert speakers who will examine the current situation and propose solutions. There will be a question-and-answer session in which you can ask questions and enter into intelligent discussions concerning the alternatives to our present system. Here are some of the exciting and informed speakers you can expect to hear:

– One of our lead speakers will be Dr. Quentin Young with Physicians for a National Health Care Program. Dr. Young is the former chairman of Medicine at Cook County Hospital and a well-known authority on health care. He is a regular commentator on WBEZ-FM.

– Joining us from Canada will be Dr. Robert McMurtry, an expert on the Canadian health program and orthopedic surgeon (see bio below). Dr. McMurtry is a leader in efforts to reduce waiting times in the Canadian system. This is a great opportunity to learn the facts about health care in Canada, get your questions answered, and discuss evidence-based health care reform with a brilliant, committed, practicing physician from north of the border.

– We’ll also feature a speaker from the Illinois Health Care Referendum 2006, a statewide effort to ask the voters if they want lawmakers to improve our health care system. Citizen Action Illinois will also be presenting the “Healthy Illinois” proposal, a plan to provide health care to everyone in the state through partnerships with private insurers. As President Bush and other leaders embark upon a national dialogue to discuss health care, be a part of the discussion and debate.

Bio of Dr. Robert McMurtry

Dr. Robert McMurtry is a graduate of the University of Toronto in Medicine in 1965 and a Fellow of the Royal College of Physicians and Surgeons of Canada.

During his residency in Orthopedic Surgery, he spent 2 years in Africa, first in a mission hospital in Sekhukhuniland (South Africa) and then with the Canadian International Development Agency in Uganda. Following his residency, Dr. McMurtry did a fellowship in Hand Surgery at the University of Iowa. He started his practice at the former Sunnybrook Hospital (now Sunnybrook and Womens Health Centre) in 1975. It was there that Dr. McMurtry founded and directed Canada’s First Trauma Unit and the multi-disciplinary Hand Unit.

In 1987, he was appointed Professor and Chair of Surgery at the University of Calgary and Chief of Surgery at Foothills Hospital. In 1992, he became Dean of Medicine at the University of Western Ontario and subsequently Dean of Medicine and Dentistry, a post he held until 1999. In 1999, he became the first Cameron Visiting Chair at Health Canada – a post carrying the responsibility for providing policy advice to the Deputy Minister and Minister of Health for Canada.

Dr. McMurtry is the founding Assistant Deputy Minister of the Population and Public Health Branch of Health Canada. He was appointed to the Romanow Commission in 2002 as a Special Advisor to Commissioner Romanow.

Presently, Dr. McMurtry is Professor of Surgery at the University of Western Ontario and Orthopedic Consultant at St. Josephs Health Care in London, Ontario. His work involves an active clinical practice as well as teaching and research In December 2003, he was appointed to the Health Council of Canada and is Chair of the Wait Times and Accessibility Work Group. In June of 2003, he received the Presidential Award of Excellence from the Canadian Orthopedic Association.

Tami understands

An email that I received this morning from my daughter-in-law, Tami, who lives in Berkeley:

i thought of you this weekend as i was taking a training workshop for a clinic i will be volunteering at. the clinic serves low income women with cancer. it was extremely heart wrenching to see and hear their stories.

women who had to take public transportation to their chemo appts, living in cars while going through cancer and treatments, etc. and the #1 reason for the current poverty situation was lack of health care or not enough of it.

many or most had good or decent jobs prior to their diagnoses but because of deteriorating health they lost their jobs and then lost their insurance, or some just didn’t have it before and the diagnosis and bills, etc. put them into utter poverty. your mission for the need for universal health care slapped me in the face!

Comment: Tami understands.