PNHP

A Serious Drug Problem: Paul Krugman Series, 5 of 7

A Serious Drug Problem: Paul Krugman Series, 5 of 7

By Paul Krugman
New York Times
May 6, 2005

There was a brief flurry of outrage when Congress passed the 2003 Medicare bill. The news media reported on the scandalous vote in the House of Representatives: Republican leaders violated parliamentary procedure, twisted arms and perhaps engaged in bribery to persuade skeptical lawmakers to change their votes in a session literally held in the dead of night.

Later, the media reported on another scandal: it turned out that the administration had deceived Congress about the bill’s likely cost.

But the real scandal is what’s in the legislation. It’s an object lesson in how special interests hold America’s health care system hostage.

The new Medicare law subsidizes private health plans, which have repeatedly failed to deliver promised cost savings. It creates an unnecessary layer of middlemen by requiring that the drug benefit be administered by private insurers. The biggest giveaway is to Big Pharma: the law specifically prohibits Medicare from using its purchasing power to negotiate lower drug prices.

Outside the United States, almost every government bargains over drug prices. And it works: the Congressional Budget Office says that foreign drug prices are 35 to 55 percent below U.S. levels. Even within the United States, Veterans Affairs is able to negotiate discounts of 50 percent or more, far larger than those the Medicare actuary expects the elderly to receive under the new plan.

After the drug bill’s passage, Jacob Hacker and Theodore Marmor of Yale University estimated that a sensible bill could have delivered twice as much coverage for the same price.

Needless to say, apologists for the law insist that the prohibition on price negotiations had nothing to do with catering to special interests – that it was a matter of principle, of preserving incentives to innovate. How can we refute this defense?

One way is to challenge claims that the pharmaceutical industry needs high prices to innovate. In her book “The Truth About the Drug Companies,” Marcia Angell, the former editor in chief of The New England Journal of Medicine, shows convincingly that drug companies spend far more on marketing than they do on research – and that much of the marketing is designed to sell “me, too” drugs, which are no better than the cheaper drugs they replace. It should be possible to pay less for medicine, yet encourage more real innovation.

Another answer is to point to the haste with which key players in the drug bill’s passage cashed in – making the claims that they wrote a pharma-friendly Medicare bill out of genuine concern for the public’s welfare look ludicrous.

Let’s look at just two examples.

Billy Tauzin, who shepherded the drug bill through when he was a member of Congress, now heads the Pharmaceutical Research and Manufacturers of America, the all-powerful industry lobby group, for an estimated $2 million a year. In his new job, he’s making novel arguments against allowing Americans to buy cheaper drugs from Canada: Al Qaeda, he suggests, might use fake Viagra tablets to get anthrax into this country.

Meanwhile, Thomas Scully, the former Medicare administrator – who threatened to fire Medicare’s chief actuary if he gave Congress the real numbers on the drug bill’s cost – was granted a special waiver from the ethics rules. This allowed him to negotiate for a future health industry lobbying job at the very same time he was pushing the drug bill.

If all this sounds like a story of a corrupt deal created by a corrupt system, it is. And it was a very expensive deal indeed. According to the Medicare trustees, the fiscal gap over the next 75 years created by the 2003 law – not the financing gap for Medicare as a whole, just the additional gap created by legislation passed 18 months ago – will be $8.7 trillion.

That’s about three times the amount President Bush proposes to save by cutting middle-class Social Security benefits.

In fact, I have a suggestion for Mr. Bush. One way to prove that he’s really sincere about addressing long-run fiscal problems, that his calls for benefit cuts aren’t just part of an ideological agenda, would be to put Social Security aside for a while and fix his own Medicare program. Oh, never mind.

Nonetheless, someone will eventually have to take on the health care special interests. Who might do that? I’ll write about that in the next installment of this series.

Always Low Wages. Always.: Paul Krugman Series, 6 of 7

By Paul Krugman
New York Times
May 13, 2005

Last week Standard and Poor’s, a bond rating agency, downgraded both Ford and General Motors bonds to junk status. That is, it sees a significant risk that the companies won’t be able to pay their debts.

Don’t cry for the bondholders, but do cry for the workers.

Standard and Poor’s downgraded GM and Ford sooner rather than later because it believes that the public is losing interest in S.U.V.’s. But the companies were vulnerable because they still pay decent wages and offer good benefits, in an age when taking care of employees has gone out of style. In particular, they are weighed down by health care costs for current and retired workers, which run to about $1,500 per vehicle at G.M.

So the downgrade was a reminder of how far we have come from the days when hard-working Americans could count on a reasonable degree of economic security.

In 1968, when General Motors was a widely emulated icon of American business, many of its workers were lifetime employees. On average, they earned about $29,000 a year in today’s dollars, a solidly middle-class income at the time. They also had generous health and retirement benefits.

Since then, America has grown much richer, but American workers have become far less secure.

Today, Wal-Mart is America’s largest corporation. Like G.M. in its prime, it has become a widely emulated business icon. But there the resemblance ends.
The average full-time Wal-Mart employee is paid only about $17,000 a year. The company’s health care plan covers fewer than half of its workers.

True, not everyone is badly paid. In 1968, the head of General Motors received about $4 million in today’s dollars – and that was considered extravagant. But last year Scott Lee Jr., Wal-Mart’s chief executive, was paid $17.5 million. That is, every two weeks Mr. Lee was paid about as much as his average employee will earn in a lifetime.

Not that many of them will actually spend a lifetime at Wal-Mart: more than 40 percent of the company’s workers leave every year.

I’m not trying either to romanticize the General Motors of yore or to portray Wal-Mart as the root of all evil. GM was, and Wal-Mart is, a product of its time. And there’s no easy way to reverse the changes.

What should be clear, however, is that the public safety net F.D.R. and L.B.J. created is more important than ever, now that workers in the world’s richest nation can no longer count on the private sector to provide them with economic security.

When they reach 65, most Wal-Mart employees will rely heavily on Social Security – if the privatizers don’t kill it. And many Wal-Mart employees already rely on Medicaid to pay for health care, especially for their children.

Indeed, a growing number of working Americans have turned to Medicaid. As the Kaiser Family Foundation points out, that’s why children have for the most part have retained health coverage, despite a sharp decline in employer-based health insurance since 2000.

Yet our current political leaders are trying to privatize Social Security and reduce benefits. And they are slashing funds for Medicaid even as they give big tax cuts to people like Mr. Lee.

The attack on the safety net is motivated by ideology, not popular demand. The public isn’t taken with the vision of an “ownership society”; it seems to want more, not less, social insurance. According to a poll cited in a recent Business Week article titled “Safety Net Nation,” 67 percent of Americans think we should guarantee health care to all citizens; just 27 percent disagree.

The question is whether the public’s desire for a stronger safety net will finally be seconded by corporations that haven’t yet adopted the Wal-Mart model of minimal benefits and always low wages.

Last year Richard Wagoner Jr., G.M.’s chief executive, gave a speech about the costs of America’s “Kafkaesque” health care system that sounded a lot like my recent columns. And his company has made it clear that it likes Canada’s system: in 2002 the president of General Motors of Canada and the head of the Canadian Auto Workers signed a joint letter declaring that “it is vitally important that the publicly funded health care system be preserved and renewed.”

But according to The Journal Register News Service, which covered Mr. Wagoner’s speech, he “stressed later to reporters that he was not proposing a national health care plan.” Why not?

B. Capell on RAND’s conclusions on CDHPs

Beth Capell, Ph.D. on the RAND conclusions on CDHPs:

Don:

There is a rather substantial literature (about 12 inches deep on my desk) demonstrating that people with high out of pocket costs fail to seek necessary and appropriate care.

To quote Health Access California:

Deductibles of $1000, $1500 or even $5000 per person exist. Out of pocket costs may be capped at several thousand dollars-or not at all. Numerous studies have shown that high deductible policies deter necessary care and put at risk the credit and solvency of average families. People with high deductible plans were:

· Twice as likely to skip medications,

· Twice as likely to fail to fill prescriptions,

· Twice as likely to avoid visiting a doctor for a problem, and

· Twice as likely to fail to get physician-prescribed care.

A deductible of only $1,000 caused a third of patients to spend more than 10% of income on out of pocket costs. Not surprisingly, patients with higher deductibles had more financial problems. Medical costs are involved in over half of bankruptcies–and most of those with medical bankruptcies were initially insured.

Beth Capell, Ph.D., for Health Access California

Comment: Dr. Capell is certainly correct. The RAND report is actually incorrect when it states that there is “mixed evidence on whether the financial incentives in the new plan designs will decrease use of necessary and desirable services.” The evidence is very clear. Financial disincentives do decrease access to beneficial health care products and services.

Canadian Supreme Court ruling a step toward two-tiered care

Top court strikes down Quebec private health-care law
CBC News (Canada)
June 9, 2005

The Supreme Court of Canada ruled Thursday that the Quebec government cannot prevent people from paying for private insurance for health-care procedures covered under medicare.

The plaintiffs in the case are a Montreal patient and a doctor. They wanted Canada’s top court to strike down sections of the Quebec Hospital Insurance Act that prevent people from buying health insurance for medical procedures covered by the public health plan.

In its ruling Thursday, the court said the provincial policy violates the Quebec charter. But they split 3 – 3 on whether it violated the Canadian Charter of Rights and Freedoms, meaning there is no immediate impact on the Canadian health-care system as a whole.

http://montreal.cbc.ca/regional/servlet/View?filename=qc-health20050609

Comment: Private health insurance in Canada has been limited to care not covered by their medicare program. The citizens in Canada emphatically agree with the concept that parallel private insurance for medicare covered services should not be allowed because it would allow wealthier Canadians to buy their way to the front of the queue (waiting time for non-urgent services). They support the egalitarian view that their health care system should be shared by everyone.

At the same time, they are not pleased with the development of excess queues and believe that the government should fund adequate capacity in the system.
Prime Minister Paul Martin was reelected on the promise of increasing federal funding to the provincial health systems. That process has begun.

Today’s decision represents a collision of those views. Although the complex ruling is still under study, the Court did rule that, when queues are truly excessive, a patient should be able to bypass the queue through private payment and a physician should be able to provide those services under a private fee arrangement.

The great fear is that this decision will allow affluent Canadians to buy their way to the front of the queue, and, in so doing, diminish their support of public funding of the system. For the average Canadian, diminished funding would result in longer queues and other problems that can arise from chronic underfunding. Such policies would result in a two-tiered system: for the wealthy the best that money can buy, and for the rest, mediocrity or worse.

It will be interesting to see if Canadians will accept this shift from an egalitarian system to one more like ours in the United States: if you don’t have money, don’t get sick.

The uninsured drive up premiums for the insured

Paying a Premium: The Added Cost of Care for the Uninsured
Families USA
June 2005

This study quantifies, for the first time, the dollar impact on private health insurance premiums when doctors and hospitals provide health care to uninsured people. In 2005, premium costs for family health insurance coverage provided by private employers will include an extra $922 in premiums due to the cost of care for the uninsured; premiums for individual coverage will cost an extra $341.

More than one-third (35 percent) of the total cost of health care services provided to people without health insurance is paid out-of-pocket by the uninsured themselves. Through this study, we found that the remaining $43 billion is primarily paid by two sources: Roughly one-third is reimbursed by a number of government programs, and two-thirds is paid through higher premiums for people with health insurance.

http://www.familiesusa.org/site/DocServer/Paying_a_Premium.pdf?docID=9241

Comment: The problem of cost shifting from the uninsured to others has long been recognized. This study adds to the understanding by quantifying the amount shifted to those paying insurance premiums. Because of the prevalence of employer-sponsored coverage, this study adds to pressures to reduce the obligation of employers to provide coverage for their employees.

To provide relief, the trend is to shift an inequitable and increasingly unaffordable portion of the costs to the employees themselves. Also, those purchasing individual plans are victims of cost shifting as well.

So what can we do about cost shifting? Many, including the leadership of Families USA, suggest that we merely need to cover almost everyone by expanding our present pluralistic system of funding care. But a parenthetical comment from this report should make us question that
approach:

“(These estimates do not include uncompensated care provided to insured people, who may be unable to pay because they face high deductibles, high copayments, uncovered services, and other out-of-pocket costs that people with insurance are sometimes unable to pay.)”

Individual plans are no longer adequate to ensure financial security in the face of significant medical costs. Because of the financial burden on employers, employer-sponsored plans also are shifting more costs to the employees. Medicare currently covers only about 45% of the costs of the beneficiaries. Medicaid is another source of cost shifting since it is chronically underfunded. Solutions that rely on the current system are fatally flawed for at least two major reasons. They fail to ensure affordable access to health care, and they are highly inequitable in determining just who would pay for our health care system.

A single payer system would not end cost shifting, but it would make cost shifting much more equitable by shifting some of the funding of the universal risk pool from those who cannot afford their share, to those who can easily afford far more than their share. Even more to the point, the common pool would shift costs from the fewer numbers of individuals who are sick and need more care, to the great multitude who are blessed with good health. Isn’t that what insurance is all about?

HMO profits on Medical Assistance hurt many in state

By Kip Sullivan
May 28, 2005

The Star Tribune reported that Minnesota’s health maintenance organizations make more money from Minnesota’s Medicaid program than from employers (“HMOs profit from aid by state” May 18).

But the damage being done to the taxpayer is far worse than the article suggested. The gradual takeover of the Medicaid program by HMOs, which began in 1985, raised Medicaid’s costs. This would have been true even if the HMOs had made a zero percent profit off Medicaid

The reason is that HMOs have huge administrative costs compared with the Department of Human Services, the state agency that runs Medical Assistance (MA), as Minnesota’s Medicaid program is known.

Prior to privatization (that is, before the Legislature let HMOs run MA), Human Services spent 4 to 5 percent of the tax revenues allocated to MA on administration of the MA program. But HMOs spend 20 percent of their revenues on administration, including marketing, second-guessing doctors, perks for executives, and lobbying.

For example, Mike Hatch’s audit of Medica, the state’s largest HMO, found that Medica spends 18 to 19 percent of its revenues on overhead.

So do the math. Human Services was passing on 95 percent of its revenues to doctors and hospitals before privatization. Now it is passing on 95 percent of its revenues to HMOs (and possibly less because supervising HMOs is costly), and the HMOs scrape off 20 percent before passing on the remaining 75 percent to doctors and hospitals.

Something has to give. Either doctors and hospitals have to accept lower fees, patients have to get fewer services, or taxpayers have to raise the amount allocated to MA to cover the HMOs’ high overhead costs.

The evidence indicates that patients are getting slightly fewer services and taxpayers are paying a lot more money to support Medical Assistance.

Some evidence indicates HMOs have made a slight reduction in emergency room use by Medicaid patients, but because ER expenditures amount to only 2 percent of total health expenditures, the reduction in medical costs was negligible.

The Kaiser Family Foundation and other experts have concluded that HMOs have been unable to deliver more preventive care to Medicaid patients, in part because the turnover rate among Medicaid enrollees is so high. HMOs, in short, have been unable to reduce use of medical services substantially enough to offset their high overhead costs.

A study recently published by a University of Maryland economist named Mark Duggan concludes that the privatization of California’s Medicaid program raised costs by 20 percent without improving quality.

In a letter this past August, Rep. Matt Entenza, DFL-St. Paul, asked Human Services Commissioner Kevin Goodno whether the agency had ever done research to determine whether privatization of MA harmed providers, patients or taxpayers. Goodno replied, without offering any evidence, that the introduction of HMOs into the MA program did not harm doctors or patients. He noted that Human Services had no studies on the subject of whether HMOs saved MA money.

Years ago, the agency did try to study the issue. In 1993, a Human Services employee (who later went to work for Blue Cross and Blue Shield) completed a study which suggested that the agency was overpaying MA HMOs.

According to a March 13, 1994, exposé in the Star Tribune, this report was deep-sixed by Human Services at the urging of several HMOs (“Study shelved after HMOs complained”).

The Star Tribune article referred to “a memo from a [Human Services] staff member [that] said some HMOs ‘have a vested interest in keeping information from [the agency] because a large profit currently is being made [off Medical Assistance]…”

Although the suppressed Human Services report called for further research to answer definitively whether HMOs were raising MA’s costs, the agency eliminated the job of the report’s author and, thereby, Human Services’ ability to settle the issue.

Gov. Tim Pawlenty and the Legislature need to do more than to reduce the excessive profits HMOs are making off MA. They need to kick the HMOs out of MA, as well as General Assistance Medical Care and MinnesotaCare. And they need to do this before they debate cutting one more human being from the rolls of these programs.

Kip Sullivan sits on the steering committee of the Minnesota Universal Health Care Coalition.

An Urgent Case For Fixing Health Care

By David S. Broder
Sunday, May 29, 2005

Nothing is more likely to be overlooked than news that breaks on a day when something totally unexpected occurs. That is exactly what happened last week when Senate negotiators struck the last-minute deal that averted a showdown vote over the “nuclear option” on judicial filibusters.

Earlier that day, the National Coalition on Health Care released a report on the potential savings to business, individuals and government from comprehensive reform of the beleaguered medical-insurance-hospital system.

The figures are startling — a projected saving of anywhere from $320 billion to $1.1 trillion in the first 10 years, even while insurance coverage is extended to every American and stronger quality measures are put in place.

Were it not for its source, this would seem like pie in the sky. But the organization that sponsored the briefing is one of the largest groups in the health care field, a coalition of 90 organizations with 150 million members or employees, ranging from AARP and the AFL-CIO to Blue Shield of California and such corporate giants as AT&T, Verizon and the Principal Financial Group.

The man who ran the numbers is Kenneth Thorpe, the former top economist at the Department of Health and Human Services and now chairman of the Health Policy and Management Department of Emory University in Atlanta. Few experts command broader respect in this field.

Thorpe took the principles laid down in the coalition’s blueprint for health reform — universal coverage, cost management and improved quality — and applied them to four “scenarios.”

One built on the existing employer-financed system, supplemented by requirements for individuals to self-insure. A second envisaged expansion of Medicare, Medicaid and other public programs. A third was a new program, with a variety of insurance options modeled on the current federal employees’ health benefits plan. And the fourth was a single-payer, government-financed design, similar to Canada’s or Britain’s.

The additional costs — primarily caused by covering the 45 million Americans currently without health insurance — run in the range of $75 billion a year. But the net savings — after deducting those costs — by the 10th year of such reforms range from $125 billion to $182 billion annually.

When everyone is insured, health problems can be dealt with at an early stage or prevented altogether, thus helping society avoid the expensive treatment that patients now find in emergency rooms or lengthy hospital stays. Universal coverage also can bring savings in administrative costs and, along with the introduction of information technology and systematic measurements of treatment outcomes, greatly increase the efficiency of health care delivery.

Underlining the advantage of systemic reform are Thorpe’s calculations of the likely consequences of doing nothing to change the current system. Without fundamental change, by 2015, the United States is likely to have 54 million uninsured — 20 percent more than today — and be spending 19 percent of its gross domestic product on health care, compared with 15.6 percent today.

Testimony from two top executives showed that this is not just an academic exercise. George Diehr, chairman of health benefits of the California Public Employees’ Retirement System (Calpers), whose $4 billion annual expenditure makes it the third-largest purchaser of health care in the nation, said that despite its bargaining power “we have been able to improve quality and control costs only at the margin.” Its costs are rising 10 percent a year.

S. Gary Snodgrass, executive vice president of Exelon Corp., one of the country’s largest public utilities, said health coverage for its employees and retirees is its fastest-growing expense. Between 2001 and 2004, he said, those costs rose 70 percent, forcing the company to shift more of the burden to its workers. “What I am here to tell you is that the steps we have taken are not enough” to fix “a health care delivery system that we perceive to be fundamentally broken. It will not be fixed by the incremental or piecemeal proposals that are on the table today” in Congress or the Bush administration.

More and more business leaders, academics and politicians are coming to the same conclusion. The Center for American Progress, a liberal think tank headed by former Clinton White House chief of staff John Podesta, recently outlined one approach to comprehensive health care reform. It would combine two of the scenarios tested in Thorpe’s analysis, with subsidies and cost controls for insurance policies purchased by employers and individuals and an expansion of the federal employees’ health care system to enroll outsiders.

When I interviewed Podesta recently, I told him that I thought that any such systemic reform would have to wait for a new administration. But Thorpe’s calculations, which I had not seen at that time, make the case for action now both more urgent and more practical.

davidbroder@washpost.com

British Doctor Opposes Corporate Healthcare in UK

Privatisation of the NHS is accelerating
Both patients and staff can resist the creeping corporate takeover
By Allyson Pollock
Tuesday May 24, 2005
The Guardian

When Malcolm Glazer took over Manchester United, fans reacted with horror. Some wore black at the FA Cup final, while others are boycotting the club’s merchandising and demanding the resignation of those board members they hold responsible.

Glazer took over United on May 10 – the day the Adam Smith Institute hosted a conference in the Commons for 100 of the country’s most senior NHS and private healthcare executives. Patricia Hewitt was represented by Stephen O’Brien, the NHS strategy director, who used to run the corporation that owns B&Q, and the Texan Ken Anderson, the NHS commercial director and formerly an employee of Amey, a PFI company that specialises in private finance initiatiatives.

“We created a market place,” a senior NHS official told the gathering. “It’s up to you now … Together we’ve created a new era of healthcare provision which can only get wider.”

Much has been made of the fact that the Department of Health has set aside £3bn to buy 1.7m operations from the private sector over the next five years; the emphasis has been on patient choice and extra capacity. But corporate representatives at the meeting were given a frank account of New Labour’s plans to privatise NHS services.

A transfer market is now emerging in doctors, clinical services and even patients (healthier ones are worth more than sick ones). As in football, there will be a premier league of foundation trusts and independent sector treatment centres (ISTCs) lording it over the rest. And as in football, commercial interests will prevail over all others.

Consider first the ISTCs, which will cream off £3bn of taxpayers’ money. At present the Department of Health does not require the same level of training for doctors working in ISTCs as in NHS units. Six surgeons working for the private sector on NHS cases have already been suspended for what are termed serious surgical errors.

ISTCs create incentives to direct care to the comparatively well at the expense of the comparatively less well. There have been reductions in waiting times for cataract surgery, but there have been dramatic increases for chronic eye conditions such as glaucoma, diabetic eye disease and age-related macular degeneration. Easy, cheap operations such as cataract procedures are what the ISTCs want to focus on. If the easy cases and trained NHS staff get swallowed up by the private sector then the market will indeed get “wider”, as more and more NHS providers get squeezed out by rising costs.

As for primary care, Department of Health officials told the businessmen on May 10 that private-sector involvement in elective surgery – the diagnostic and treatment centres – was “very much the starting point for the direction we now want to travel in primary care”. Under the Health and Social Care Act 2003, primary care trusts can contract out all aspects of primary medical services: from cancer screening and family planning to maternity services and minor surgery. By the end of 2005, 55% of GP out-of-hours services are expected to be delivered by companies like GP Plus and Asda.

Meanwhile, the government is creating opportunities to hand over services for multiple sclerosis, alcohol and drug misuse and depression, intermediate care, diagnostics and radiology. Much of this will be accomplished through local improvement finance trusts (Lifts) – the counterpart of PFI in primary care. According to the department: “Lifts transfer ownership of primary care premises from the public sector or GP practices to private investors.” At present Lift partnerships own only GP premises, but health corporations are being encouraged to find new medical-service niche markets to link into Lifts. A Department of Health official reassured the industry that it would be “ringfencing 10% of primary care trust budgets for innovative programmes”. Drawing a parallel with the BBC’s requirement to commission around 20% of its programming from independent producers, the official said this would promote creativity across the NHS.

Doctors are now being offered golden hellos of several hundred thousand pounds to abandon their patients and leave the NHS for life as a salaried employee of a transnational healthcare corporation.

If this were football, the media would full of it. But, to paraphrase Bill Shankly, it’s only life and death. Supporters of the NHS should take a leaf out of the Manchester United fans’ book. Patients should insist on being treated in NHS hospitals; NHS staff should refuse to work in the newly privatised sector; journalists and academics should monitor the impact of the private sector on entitlements to healthcare. And they should be willing to depose the board members – such as Blair and Hewitt – who brought in the hundreds of Malcolm Glazers who will bestride British healthcare like colossi.

Allyson Pollock is professor of public health policy at University College London and the author of NHS plc

allyson.pollock@ucl.ac.uk

Targeting incremental reforms to states falls far short of goals

Variations In The Impact Of Health Coverage Expansion Proposals Across States
By Sherry Glied and Douglas Gould
Health Affairs
June 7, 2005

Abstract:

Most estimates of the consequences of alternative health insurance proposals focus on national impact, but the extent of cross-state diversity in uninsurance rates, economic and labor-market characteristics, and health care markets suggests that the impact of strategies will also vary. We illustrate this variation by comparing the effects of standard tax credit and Medicaid expansion proposals across states. Some states do well (or poorly) under all policies; others benefit under some but not others. Across policies, state effects on uninsurance rates vary by at least a factor of 2.5. Uniform national strategies that target the uninsured do not generate uniform national outcomes.

From the report:

In this paper we examine the impacts of five types of insurance expansion policies on coverage by state. First, we consider refundable tax credits for the non-group market, a proposal of the type that has been advanced by the Bush administration. Next, we analyze tax credits for small-firm workers and their dependents. Finally, we consider three types of policies that increase the eligibility limits for Medicaid or the State Children’s Health Insurance Program (SCHIP): an expansion of Medicaid eligibility to include all low-income adults, an expansion to low-income uninsured children not now eligible for SCHIP, and an extension of Medicaid eligibility to all parents of SCHIP-eligible children.

Results:

Tax credits. Declines in the uninsurance rate by state vary by a factor of nearly 5: from 4.4 percent in New Hampshire to 20.5 percent in Utah.

Small-firm tax credits. The effect across states varies by a factor of 2.4: from 2 percent of the uninsured in Washington, D.C., to 4.7 percent in Montana.

Low-income expansion. …the decrease in the uninsured population ranges from no effect in states with existing adult Medicaid eligibility limits above 133 percent of poverty, such as Vermont, Utah, and Massachusetts, to a high of 18.3 percent in Alabama and West Virginia.

SCHIP eligibility levels. The range of effects on the entire uninsured population is expected to vary from zero in states, such as New Jersey, Missouri, and Maryland, where eligibility already exceeds this level, to 4.7 percent in states, such as South Carolina, with very low existing SCHIP eligibility.

Medicaid for parents of SCHIP-eligible children. The effects by state range from 0.7 percent of the uninsured in Tennessee to 10.3 percent in Arkansas.

Effects on range of uninsurance rates. Each of the proposals considered here would narrow the range of uninsurance rates across the states. All would have their greatest effects in the states with the highest uninsurance rates. But the extent of narrowing is modest, even for the three policies with the largest national effects. Prior to reform, the nonelderly uninsurance rates among the states had a range of 17.1 percentage points, varying from 9.2 percent to 26.3 percent. Under the expansion to parents of SCHIP children, the range would narrow by 2.4 percentage points. The tax credit reform would have more than twice as large an aggregate impact but slightly less effect on the range, narrowing it by just 1.4 percentage points. The expansion to low-income adults would have the largest effect on the number of uninsured people and would narrow the range of uninsurance rates by 2.3 percentage points.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.259

And…

Study: States need help with uninsured
By Marguerite Higgins
The Washington Times
June 7, 2005

“The message is that there is no single solution that will work for all the uninsured, so we need a variety of solutions,” said Sherry Glied, head author and a health policy professor at Columbia University.

http://www.washingtontimes.com/business/20050606-101052-2922r.htm

Comment: Is the primary message really that we need a variety of solutions?
Well, let’s see.

This study measured the potential relative impact of applying five of the most frequently recommended incremental expansions to each state. It does demonstrate that the impact of each model would vary from state to state. But by targeting the most effective of each of these reforms to the various states, there still is only a modest reduction in the range of uninsurance rates.

No effort was made to estimate the costs of each of these proposals, though prior studies indicate that all of them increase health care spending. Also no mention was made of the fact that each of these proposals increase the administrative burden of health care funding, which is widely recognized as one of the greatest flaws in the U.S. system.

But what should be most alarming about this report is that the very best result obtained by targeting the most effective program to any given state still leaves four-fifths of the uninsured without coverage!

Obviously the most important flaw in this study is that they left out the single payer model which would cover everyone while controlling costs and reducing the administrative burden.

Unfortunately, the lead author, Sherry Glied, received the wrong message from her own study. We don’t need a variety of solutions that won’t work; we need the one solution that will: a single payer system of national health insurance.

Insurers reviving reputation of limited benefit plans

Second look: High costs and insurer interest are reviving limited benefit medical plan reputation
By Karen Lee
Employee Benefit News
May 2005

In only a few short years, limited medical benefit plans have risen in perception from a status as low-selling bare-bones programs marketed by niche vendors to potentially viable solutions to today’s health care problems, including punishing health care costs and millions of working uninsured.

Large insurance carriers certainly have noticed the turning tide, and they do not want to miss out.

Indeed, the plans themselves do not come close to covering what a standard health care plan does. For example, a sample Aetna plan might have a relatively low deductible – $250 for an in-network provider, $350 out of network, and a low premium. However, it also has a $10,000 maximum benefit and a prescription drug card that covers a monthly maximum of $35.

Now, though, things have changed. Some states are considering rollbacks of the health care mandates that many believe are largely responsible for soaring health care costs.

The truth is, as health care experts continually point out, most people — even those who do not have high salaries – generate less than $1,000 in health care expenses per year, so insurers believe limited medical plans can take care of low-wage employees’ non-catastrophic expenses.

http://www.benefitnews.com/detail.cfm?id=7432

Today’s Los Angeles Times also addressed this issue:
http://www.latimes.com/features/health/la-he-insure6jun06,1,2827471.story

And…

bizjournals
May 23, 2005

House Speaker Dennis Hastert endorsed legislation to allow individuals to buy health insurance from any state, regardless of where they live.

The legislation would lower the cost of health insurance by allowing individuals to get around their state’s coverage mandates and pick a less-comprehensive plan, says Rep. John Shadegg, R-Ariz., the bill’s sponsor (H.R.2355).

http://albuquerque.bizjournals.com/extraedge/
washingtonbureau/archive/2005/05/23/bureau2.html

And…

H.R.2355 would require the following disclosure by the health insurance issuer:

Notice

This policy is issued by (health insurer) and is governed by the laws and regulations of the State of (primary state), and it has met all the laws of that State as determined by that State’s Department of Insurance. This policy may be less expensive than others because it is not subject to all of the insurance laws and regulations of the State of (secondary state), including coverage of some services or benefits mandated by the law of the State of (secondary state). Additionally, this policy is not subject to all of the consumer protection laws or restrictions on rate changes of the State of (secondary state). As with all insurance products, before purchasing this policy, you should carefully review the policy and determine what health care services the policy covers and what benefits it provides, including any exclusions, limitations, or conditions for such services or benefits.

http://thomas.loc.gov/ (Enter H.R.2355 and check “Enter bill number”)

Comment: In the rush to provide affordable insurance options, the insurers are defeating the very purpose of coverage: providing financial security for individuals with health care needs. Aetna’s plans with a maximum benefit of $10,000 (or as little as $1000 maximum according to the Los Angeles Times) are almost worthless for catastrophic acute or chronic problems. This might provide adequate coverage for individuals who remain healthy and rarely access the health care system. But pulling large numbers of healthy individuals out of the risk pools that do cover high cost patients greatly compounds the funding problems for health care.

To cover the 20% of individuals who utilize 80% of our health care services would require an average of $26,000 per patient (a total of about $1.5 trillion just for this 20% of our population). An insurance policy providing adequate coverage for this group as an isolated entity would have to have a premium in excess of $26,000 per individual. Those who remain healthy but wish to have comprehensive coverage obviously would find these premiums to be unaffordable (the “death spiral” of health insurance premiums). Clearly the only way insurance can work is by diluting the costs by including all healthy individuals as well.

So what is Congress proposing? They would remove individual state requirements that do require that insurance pools truly dilute risk. They would do this by allowing permissive states to market worthless insurance products in restrictive states. Then comprehensive coverage would be unaffordable for almost everyone for the reasons mentioned above. So what would those with significant health care needs do? Well, that’s their problem, but at least now they would own their own health care.

Italians reject private health insurance

Health: Italians Pay for the Doctor, Not for Private Insurance
Agenzia Giornalistica Italia (AGI)
June 2, 2005

Between 1991 and 2002 the trend towards private insurance among Italian families has been steadily growing but they still remain “under-insured” compared to the international standards. Mainly families with higher income from central and northern Italy tend to stipulate insurance policies, their family head often has a university degree or equivalent and is a manager or autonomous professional and his financial portfolio comprises stocks and life insurance. These are the results of a recent Ania study analysing Bank of Italy surveys on the finances of Italian families. In 2003 the ratio between insurance policies and GDP in Italy equalled 2.6 pct., about one percentage point less compared to the major European countries. The difference results to be even higher excluding car insurance policies from this comparison. The ratio then hardly reaches 1 pct. in Italy, whereas other countries have a ratio twice as high. Particularly low the demand of families for health insurance, despite the fact that Italians, notwithstanding coverage by the national health system, spend large amounts in private health services. Only a very small part of private expenses (about 1 pct. of the total) is attributable to the subscription of insurance policies, funds or other schemes. The main part of private expenses is directly goes into specialised medical exams and diagnosis for which the public health system often foresees very long waiting times.

http://www.agi.it/english/news.pl?doc=200506021550-1142-RT1-CRO-0-NF30&page=0&id=agionline-eng.bnessitaly

Comment: No national health system covers 100% of health care costs. Italy is no exception. But the adequacy of the public system may be reflected by the size of the market for private health insurance.

It appears that a major purpose of private coverage in Italy is to purchase a place at the front of the queues for specialized care. The low uptake of private insurance suggests that queues are not at a crisis level in Italy. Of course, this is not to say that excessive queues can be ignored. Public efforts must continue to ensure the funding of adequate capacity in the health care delivery system.

What about the United States? We do have a program of social insurance: Medicare. Do we supplement Medicare for the purpose of bypassing queues? Not really. Although there may be patchy areas of deficient capacity, in general our high rate of health care spending has ensured a generous capacity in our system, in fact, often an excess capacity that results in over-utilization.

Although excessive queues are not a major issue in the United States, over two-thirds of Medicare beneficiaries have some form of supplemental insurance. Why is that? It is because Medicare covers only about 45% of the beneficiaries’ total health care services. Thus our reason for a private supplemental insurance market is not to circumvent queues, but it is to provide the financial capability for accessing beneficial health care services.

Many suggest that we should expand Medicare coverage to include everyone. But if we do, we need to increase the benefits to cover closer to 70% of health care services if we are to provide adequate financial security in the face of health care needs. But that 70% is not quite as bad as it would seem. With a universal system we would dramatically reduce administrative waste and non-beneficial high-tech excesses.

We are almost there since 60% of our total health care spending is already funded through the tax system. But what waste! If we bump that up to 70% and demand that we replace our wasteful fragmented system of funding care with an efficient single payer, then, like the Italians, we could reject the efforts of private insurers to displace our own public system of funding health care.

When it comes down to who is going to handle our pooled health care funds, I’ll trust our own public administrators long before I’d trust the private bureaucrats.

For an April 2005 Medicare fact sheet from KFF:
http://www.kff.org/medicare/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=52974

Job-based health coverage falling apart

FALLING APART – Declining Job-Based Health Coverage for Working Families in California and the United States
UC Berkeley Labor Center and Working Partnerships USA Health Care
Policy Brief
June 2005
By Arindrajit Dube, Ph.D., Ken Jacobs, Sarah Muller, Bob Brownstein and Phaedra Ellis-Lamkins

To put it in context, the average growth in premium prices during the most recent period was 11% nationally and 13% in California.

If premium rates (in California) continue to rise 10% annually… Looking at the entire non-elderly population (adults and children) with incomes below 300% of FPL (the median American family income), more will be uninsured than have coverage through an employer by 2010, if current trends continue. Only 29% of individuals with incomes under 300% of FPL will have job-based coverage, 36% will be uninsured and 28% will have coverage through a public program.

Policy implications:

* Without major policy changes, employer-based coverage will continue to erode. – What used to be a fundamental component of the social contract for American workers across the income spectrum is now becoming a benefit enjoyed primarily by higher-income families.

* A continued decline in employer-sponsored insurance will shift additional health care costs from employers to the public sector, and increase the numbers of uninsured. – Unless immediate steps are taken to stem the decline in job-based coverage, significant new revenues will be needed to cover the increased demand for public health programs.

* Proposed cutbacks to Medicaid will jeopardize coverage for low-income adults. – Any cuts to public programs will threaten access to coverage for millions of low-income adults.

* Private insurance options are mismatched to those losing coverage. – Policies that rely on private insurance, such as individual mandates or health savings accounts, are mismatched to the economic realities of those losing insurance today.

http://laborcenter.berkeley.edu/healthcare/falling_apart.pdf

And…

Toyota to build plant in Canada – Nikkei
Reuters
May 29, 2005

Toyota Motor Corp. plans to build another plant in Canada, its seventh in North America… Toyota had considered building the plant in the United States but selected Canada because of lower labor costs, it said. Meanwhile, Toyota has started investigating suitable sites in the United States or Mexico for its eighth North American plant…

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=8637099

Comment: The opponents of national health insurance (NHI) have this one right. Policies designed to protect and expand our system of employer-sponsored coverage are doomed to failure because they fail to address the issue of affordability for employers, employees and taxpayers.

Even if the rate of premium increases dips below 10%, the decline in coverage for Americans below the median income level may not accelerate as rapidly as predicted in this study, but it will still continue. But the opponents of NHI would shift much of the financial risk to individuals, and on this one, they’re wrong.

So who is supporting the protection and expansion of employer-sponsored coverage? To no surprise, it is the incrementalists who believe that single payer reform is not politically feasible, and who believe that the only possible political path to universal or near-universal coverage is to expand on our current fragmented system of funding care.

Employer-sponsored premiums can be made affordable only by allowing employers and insurers to shift the costs of care away from the common risk pools and onto the backs of those individuals who need care, a disaster for both financial and health security. It is time to abandon the search for policies that would reduce premiums for private health plans!

Are we ready to start demanding policies that would ensure heath care access for everyone through affordable, comprehensive, universal coverage (i.e., NHI)? Or are we going continue to tremble about the prospect of political feasibility, as we drive around in our Toyotas from Canada and Mexico?