PNHP

Outsourcing Medicine: Letter From Mexico

Outsourcing Medicine: Letter From Mexico

A haven south of the border
Douglas Bower – For the Atlanta Journal-Constitution

Guanajuato, Mexico — I had become too sick to live in America.

Even with private insurance, even with Medicare, we couldn’t keep up with my medical bills. So we found a country where we could, and we left.

Picture this: A childless, middle-aged couple, both gainfully employed, both college-educated, living a frugal but happy life near Kansas City. The husband is diagnosed with a chronic, incurable illness. He has to quit work because the illness is very serious.

But, not to worry: After four long years and a legal battle, he gets on Social Security disability and therefore qualifies for Medicare. There is also the added security of the wife’s health insurance to cover the expensive prescriptions and everything else Medicare doesn’t. Everything will be fine because they are insured, and they will continue to live a happy yet frugal life. Or will they?

By the fall of 2002, my wife and I could no longer afford my illness. I was afflicted with fibromyalgia syndrome, a pain and fatigue disorder that eventually leaves most of those afflicted unable to work. The decrease in my income, plus the 10 prescriptions I took (not counting the drugs my wife had to take), were breaking us financially. We were insured, but the co-pays, deductibles and non-covered expenses were eating away at our financial security, bite after bite.

We found a sort of bitter consolation in the fact that millions of Americans share our plight. It turns out that more than 50 percent of bankruptcies filed in 2001 were medically related and were by middle-class homeowners who not only had an income but also health insurance. The prevailing myth that most bankruptcies are related to credit card debt is not true. Less than 1 percent of filed bankruptcies result from credit card debt.

All-too-common plight

Researchers found that 1.9 million to 2.2 million U.S. residents filed a “medical bankruptcy.” The average person filing for bankruptcy during 2001 spent $13,460 on co-payments, deductibles and uncovered services even though they had private insurance.

“Our study is frightening. Unless you’re Bill Gates you’re just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection,” said Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School who led the study.

Another one of the study’s authors, Elizabeth Warren, said, “It doesn’t take a medical catastrophe to create a financial catastrophe. A larger share of American workers are going to have insurance that’s like a paper umbrella. It looks good, and it might even protect you in a sprinkle, but it melts away in a downpour.”

In the fall of 2002, the sprinkle on our paper umbrella turned into an unstoppable downpour. We had to do something before it tore the paper umbrella to shreds and our lives along with it. Little did we suspect that our search for more affordable prescriptions would not only find us financial relief but also end up changing our lives.

An attractive option

We heard rumors that prescription drugs were cheaper in Canada and Mexico. Our research showed this was indeed true. But this, to be honest, was a scary proposition. I also read that the U.S. government was trying to shut down many of the Web sites through which you could order these drugs.

That’s all I needed — to get arrested for smuggling drugs through the U.S. Mail. Many Americans who live in border towns simply cross the border to get a prescription filled at substantially lower prices with no hassles. Moving to a border town was not what we wanted to do. But what did catch my eye was that, in Mexico, not only were my prescription drugs cheaper. Just about everything else was, too.

Digging deeper, we discovered that a large population of American expatriates, about 1 million, already live in Mexico, taking advantage of a significantly lower cost of living. This was a stunning revelation to us. Moving to Mexico hadn’t been a remote possibility; now it appeared to be salvation.

We began our new lives in a beautiful colonial city, the capital of Guanajuato state, also called Guanajuato, in August 2003.

We stepped into a new reality where everything— prescription drugs, housing, utilities, food, transportation, entertainment — is 25 percent to 75 percent cheaper than it is in America. My Social Security disability income more than adequately covers our expenses here in Guanajuato. An example is that I can buy all my needed prescriptions for less than the co-pay I forked over for one drug in the United States. I get a month of Prozac for less than $16. Same drugs, only affordable.

Is moving to Mexico an alternative for everyone? I doubt it. But it is working for us on so many levels that we have no plans anytime soon to return to the land of our birth.

The solution? I don’t know. What I do know is that we, and many other Americans, cannot sit idly by waiting for our elected officials to work it out. We had to take action, drastic as it was. That paper umbrella won’t last long.

Robert Reischauer on single payer

San Francisco Chronicle
February 20, 2005
Medicare not easy to salve
By David Lazarus

“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank– and former director of the Congressional Budget Office.

…Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.

“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/02/20/BUG27BDFVP1.DTL&type=business

Comment: If more individuals of the caliber of Robert Reischauer join with him in speaking up, the political obstacles will melt away.

Taiwan's Healthcare System

Hsieh outlines his strategy
Taipei Times, Monday, Feb 21, 2005,Page 3

Premier Frank Hsieh defines the goals of his Cabinet as promoting negotiation and stability. `Taipei Times’ staff reporters Ko Shu-ling and Jimmy Chuang recently spoke with the former DPP chairman and Kaohsiung City mayor to find out more about his views on how he plans to approach `negotiation,’ especially on divisive issues such as health insurance, tax reform and cross-strait relations

(excerpt)

TT: Some have criticized as “unfair” your plan to increase the ceiling on indexed health insurance premiums and let the rich pay more. What do you think of this criticism?

Hsieh: A recent opinion poll shows that over 73 percent of voters support the measure. As the national health insurance program is, to some extent, a social insurance mechanism, I believe, as do other highly paid Cabinet officials, that it makes sense to have better-off Taiwanese pay more. The bottom line is that the program is only beneficial as long as society is stable, which is a more important consideration than how much the rich pay in their premiums.

If criticism of the new measure is justified, I’d like someone to explain how. I am not an expert on this, but I listen to the experts’ opinions and do the calculations myself. It’s not a good thing to listen to one person’s opinion and assume that something is wrong.

The change should be made based on three convictions. First, the national health insurance program must continue to work because it is extremely convenient, especially for the underprivileged. Second, because national health insurance is a social program, government intervention is necessary and we are obliged to shoulder certain financial burdens. Finally, we have to come up with strategies not only to save money, but to generate more. I firmly believe our national health insurance policy is among the world’s best.

In a bid to generate more money, we believe it is good to let the better-off pay a little more. While the current ceiling on indexed health insurance premiums is NT$87,600, it will be increased to NT$131,700. In other words, those who make NT$10 million a month will pay the same health premium as those who make NT$131,700.

I also believe the costs of promoting better health, education and disease prevention should be paid by the government rather than the health insurance program.

In addition, we have decided to raise the “health tax” on cigarettes. Our plan is to increase it from NT$5 to NT$10 per pack. It is estimated that such an increase will bring in an extra NT$1.5 billion to NT$2 billion each year. About NT$2 billion from air pollution fees will also be injected into the program.

In addition, we are considering requiring those responsible for public disasters, food poisoning, and major traffic accidents to pay the medical expenses of the victims. However, I don’t think it is right to channel lottery revenues into the program.

I hope to finalize the measure on how to better execute the hospital transfer system and its supplementary plan by July 1 or Jan. 1.

With the implementation of all the measures, I hope we will be able to keep the health insurance program afloat for two or three more years before the second-generation health insurance policy is in place. I believe most people will approve of the measure

Taiwan’s Healthcare System

Hsieh outlines his strategy
Taipei Times, Monday, Feb 21, 2005,Page 3

Premier Frank Hsieh defines the goals of his Cabinet as promoting negotiation and stability. `Taipei Times’ staff reporters Ko Shu-ling and Jimmy Chuang recently spoke with the former DPP chairman and Kaohsiung City mayor to find out more about his views on how he plans to approach `negotiation,’ especially on divisive issues such as health insurance, tax reform and cross-strait relations

(excerpt)

TT: Some have criticized as “unfair” your plan to increase the ceiling on indexed health insurance premiums and let the rich pay more. What do you think of this criticism?

Hsieh: A recent opinion poll shows that over 73 percent of voters support the measure. As the national health insurance program is, to some extent, a social insurance mechanism, I believe, as do other highly paid Cabinet officials, that it makes sense to have better-off Taiwanese pay more. The bottom line is that the program is only beneficial as long as society is stable, which is a more important consideration than how much the rich pay in their premiums.

If criticism of the new measure is justified, I’d like someone to explain how. I am not an expert on this, but I listen to the experts’ opinions and do the calculations myself. It’s not a good thing to listen to one person’s opinion and assume that something is wrong.

The change should be made based on three convictions. First, the national health insurance program must continue to work because it is extremely convenient, especially for the underprivileged. Second, because national health insurance is a social program, government intervention is necessary and we are obliged to shoulder certain financial burdens. Finally, we have to come up with strategies not only to save money, but to generate more. I firmly believe our national health insurance policy is among the world’s best.

In a bid to generate more money, we believe it is good to let the better-off pay a little more. While the current ceiling on indexed health insurance premiums is NT$87,600, it will be increased to NT$131,700. In other words, those who make NT$10 million a month will pay the same health premium as those who make NT$131,700.

I also believe the costs of promoting better health, education and disease prevention should be paid by the government rather than the health insurance program.

In addition, we have decided to raise the “health tax” on cigarettes. Our plan is to increase it from NT$5 to NT$10 per pack. It is estimated that such an increase will bring in an extra NT$1.5 billion to NT$2 billion each year. About NT$2 billion from air pollution fees will also be injected into the program.

In addition, we are considering requiring those responsible for public disasters, food poisoning, and major traffic accidents to pay the medical expenses of the victims. However, I don’t think it is right to channel lottery revenues into the program.

I hope to finalize the measure on how to better execute the hospital transfer system and its supplementary plan by July 1 or Jan. 1.

With the implementation of all the measures, I hope we will be able to keep the health insurance program afloat for two or three more years before the second-generation health insurance policy is in place. I believe most people will approve of the measure

Medicare not easy to salve(SF Chronicle)

By David Lazarus

There’s no simple or straightforward solution to Medicare’s funding woes. At least with Social Security’s looming troubles, the remedies can be narrowed down to three fundamental (albeit unpleasant) options: raise taxes, reduce benefits or borrow a big pile of money.  It’s not so easy with Medicare.

“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank — and former director of the Congressional Budget Office.

Medicare and Social Security are plagued by the same demographic challenge– the pending retirement of millions of Baby Boomers. Both programs face huge funding shortfalls as fewer workers pay into each system and more retirees take money out.

In the case of Medicare, however, the fiscal difficulties come sooner and are considerably larger. Also, Medicare’s situation is greatly exacerbated by runaway prices for medical treatment and medication.”You can’t solve this by looking at Medicare alone,” Reischauer said. “There are systemic issues that have to be addressed as well. That’s the real problem.”
  
Medicare is the $350 billion-a-year federal health insurance program primarily for people over 65 or those with disabilities. It has about 42 million beneficiaries. (Medicare’s sister program, Medicaid, provides health coverage for about 44 million low-income recipients.)

As I reported Friday, Medicare costs are expected to surpass those of Social Security by 2024. By 2078, Medicare’s annual expenditures will be twice as large as Social Security’s.

The portion of Medicare that pays for hospital stays — the largest component of the program — is expected to be in the red five years from now. It will then have to start spending reserve funds.

By 2019, those reserves are expected to be gone and the program will no longer be able to pay full benefits. Medicare’s deficit over the next 75 years is projected to run as high as $27.7 trillion, compared with a $3.7 trillion shortfall for Social Security over the same period.

Leslie Norwalk, deputy administrator of the Centers for Medicare & Medicaid Services, the government agency overseeing Medicare, said a funding gap of nearly $28 trillion appears daunting, but “within a 75-year window, a lot can happen.”

“There’s a long time between now and then,” she said. “When you think about how much the health care system has changed, it’s very hard to sit in my chair and imagine how things will be 75 years from now.”

Much could happen, Norwalk believes, that could bring down the cost of health care for future generations. But Robert Moffit, director of the Center for Health Policy Studies at the conservative Heritage Foundation, said it’s far more likely that researchers will come up with new drugs and new treatments that will further extend people’s life spans.

“These kinds of breakthroughs will be terribly expensive,” he said. “This will only add to Medicare’s costs.” Reischauer at the Urban Institute said he would tackle Medicare’s issues by effectively reinventing the nation’s health care system.

“I would start at ground zero,” he said. “I would spend a significant amount of money on an independent body charged with evaluating all the procedures and devices in health care and writing practical guidelines.”
  
By following such national guidelines, Reischauer argued, health plans and health care providers throughout the country would be able to eliminate redundancies and introduce new efficiencies.

“We need to begin building a new system brick by brick, and the system needs to be evidence-based,” he said. That’s all well and good, responded Heritage’s Moffit, but it’s not politically realistic to think that the United States can simply throw its existing health care system out the window and start again from scratch.
  
“We can’t do it all at once,” he said of fixing Medicare’s problems. “It’s too big to do all at once.” Moffit’s solution involves changing the Medicare program at first only for the Baby Boomers — those turning 65 after 2010. He would replace the average $6,500 now spent annually on Medicare beneficiaries with a yearly subsidy, perhaps in the form of a tax credit.

Recipients in turn would use the money to choose their own health care plan based on individual needs. If someone wants to spend all his cash on Viagra — which is covered under President Bush’s costly new Medicare drug benefit — that would be his decision.

“This would address some of the long-term cost issues,” Moffit said. “It would not be an open-ended entitlement. “We’re going to be spending a lot more on the Baby Boomers than we did on the World War II generation,” he pointed out. “There’s just a lot more of them. ”

Medicare’s Norwalk called Moffit’s suggestion “a very interesting proposal.” But, she added, “I don’t see it as politically viable.” Ida Hellander, executive director of Physicians for a National Health Program, a Chicago advocacy group, said Medicare’s woes demonstrate the need for universal medical coverage in the United States.

The clear solution, she said, is a so-called single-payer system similar to national health plans in Canada and elsewhere. “You can’t control costs,” she said, “until you have a uniform system.”

Under a single-payer system, any citizen could be treated by any doctor at any hospital. Payroll taxes would replace all existing premiums,deductibles and co-pays.
  
Medicare could serve as the bedrock for creation of a single-payer system. Between that program, Medicaid and Veterans Affairs, Hellander said, taxpayer funds already account for about 60 percent of U.S. health spending.

In California, state Sen. Sheila Kuehl, D-Santa Monica, plans to introduce legislation this week that would establish a single-payer system for state residents.

A recent report by the Lewin Group, a well-regarded health care consulting firm, determined that universal coverage along the lines of what Kuehl is proposing would reduce health care spending in California by $8 billion next year alone.

It also would provide coverage for the nearly 6 million uninsured people statewide and result in lower costs for virtually all California companies now providing insurance to employees, Lewin found.

Heritage’s Moffit rejected the notion of a single-payer system in this country. “That’s exactly the way to go if you want to reduce quality and personal freedom,” he said.
  
However, Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.

“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”
  
There it is again — politics. Proposals for improving health care from both the left and right are routinely dismissed as being politically unrealistic.

All that remains is a sense of chronic crisis and a leadership vacuum when it comes to tackling some of the most important issues facing this country.

Medicare, like Social Security, can be salvaged. It won’t be easy. It will be damned painful, in fact. But we’ll never know how painful unless we try. David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.”

Send tips or feedback to: dlazarus@sfchronicle.com.

Copyright 2005 SF Chronicle

Medicare for all is not socialized medicine

By Dr. James Cockey

It’s wonderful to see the recent interest by The Daily Times in health care policy. Our current health care financing system is simply not working. It costs too much and is giving us far too little in return.

I do want to correct The Daily Times’ editorial of Feb. 11, in which the following statement was made: “If we expect coverage for everything, we should take another look at socialized medicine.”

The only socialized medicine model I have seen in the United States with full centralized government control is the Veterans Health Administration system.

No one I know is advocating full government control of health care. Many of us are advocating universal health care coverage, along the lines of Medicare. No one currently considers Medicare “socialized medicine,” although its detractors used this epithet in 1965 when it was being created.

I appreciate the comments of my friend and colleague, Dr. Frank Arena. I do, however, dispute a few of his positions. While the health care of the VHA system has historically not always been the best, recent studies in major medical journals document its superiority to community hospitals on most quality indicators, largely due to extensive use of computerization to meet quality standards.

I also disagree on the relative complexity of Medicare billing. Billing the multitude of private insurers is far more difficult, requiring more employee expertise and time, than the comparatively straightforward and uniform Medicare regulations.

Our patients also have the added advantage of knowing Medicare will cover expected services and do not face the horror of huge uncovered bills due to fine print exclusions of coverage.

The virtues of high deductible health insurance are not as clear to me as they are to Arena. As soon as we advance the idea that “your premiums are fixed and you can’t be canceled as long as you pay the premium,” we are out of a marketplace insurance system and instituting a variation on national health insurance, with premiums fixed either by the government or some quasi-governmental organization. The for-profit health insurance industry depends on risk and premium stratification to maintain profitability.

A high-deductible, catastrophic coverage health plan creates the illusion of increasing consumer choice. It works for well-off, healthy people who can afford the high deductible for routine care and low-cost procedures. It does not work well for poor people, who can barely afford housing and food for their families. It does not work at all for sick people, who would be priced out of the catastrophic market.

Arena’s letter described single-payer, universal health care as “Utopian socialist.” “Utopian” literally means “nowhere.” Variations on single-payer, universal health care are firmly in place every where — in every other industrialized nation on earth. The United States is the only industrialized nation on earth that does not have such a system.

We also spend twice as much per capita on health care as most of the rest of the industrialized world, with health outcomes that place us low compared to other countries. It’s difficult for me to see where universal health care is any more “socialist” than universal public school education or universal rights to libraries or public roads.

Our health care system endangers our economic competitiveness. It bankrupts too many of our friends and neighbors, and does not effectively protect our health compared to the rest of the world. The only reform on the table which addresses all these problems is a single-payer, universal health care system: Medicare for all.

I hope there will be more articles in The Daily Times about health care financing, more letters to the editor and increased pressure on our politicians to act on this very real crisis.

* Dr. James Cockey lives and practices medicine in Salisbury.

A. Calman responds on the sustainable growth rate

Andy Calman, MD, PhD responds to the message on physician behavior under the Medicare Sustainable Growth Rate:

Wow. Where to begin? Time does not permit a full response so I’ll summarize.

You equate “cost-effectiveness” with “noble” behavior. The fact is that technology enables us to help people who previously could not be helped.

This month, in my field of ophthalmology, a new drug was approved for macular degeneration, the leading cause of legal blindness in Medicare-age Americans. This treatment is inordinately expensive ($1000 per injection just for the drug cost, and about $200 to the doc). But should we withhold this treatment, which is the first to offer the possibility of actual visual improvement? Would it be noble to do so? How would I explain this to my father-in-law, an engineer now blinded and unable to practice his profession because such treatments did not exist when he lost his vision to this disease?

Don’t assume that performing more service is ignoble or equates to “gaming the system” or “lacking integrity”. We pay more than we used to, and we get more than we used to (we pay more than other countries do, but that is a different issue). Whether it’s hip replacements, cataract surgery, arthritis meds, psychotherapy, or laparoscopic surgery, the recipients of these services are generally delighted that they are able to get on with healthier lives as a result. They do not view their physicians as ignoble because they made these services available.

Policymakers need to make rational decisions about how much it is worth to society to have the benefits of advanced medical care. I am not swayed by the arguments that we devote increasing amounts of our GDP to healthcare. We get real benefits for large numbers of people as a result of this investment. Sure, we could spend more of our GDP on other things that people want, like consumer electronics and SUV’s, but is this automatically the best public policy?

Also, be careful how strongly you defend the SGR. The SGR has some serious flaws: it does not adequately account for the increase in the over-80 demographic,it inappropriately ties services to GDP, and it includes in-office prescription drugs in the calculation — a component which has tripled in the last several years in its percentage of overall part B services.

I’m with you in general, but this editorial really turned me off. I want to see universal access to healthcare just as much as you do, and am working hard to help bring it about. But demonizing the physicians (or ennobling our critics) will not gain you many converts among our ranks. And universal access to substandard care is only marginally better than what we have now.

Andy Calman MD PhD
Founder and National Chair
Physicians for a Democratic Majority

Don’s response: We emphatically agree that beneficial technological advances are clearly desirable and should be incorporated into the payment structure of the health care system, even if that results in an increase in the health care component of the GDP.

The dispute is over whether the increases in physician spending represent the increased costs in technological advances. Keep in mind that we are addressing physician compensation only, which excludes most of the capital investments in operating rooms, imaging centers, specialty hospitals, and the purchase of prosthetic devices or of most drugs. From the physicians’ perspective, most of the impact of new technology is on the time and effort that the physicians devote to added services necessitated by the technology.

For 2003, this was estimated to be about a 1.5% increase, and another 1% for
2004. Intuitively about 1.25% per year seems reasonable since there has
not been an explosion of technology in the past two years that required an inordinate increase in physician effort. In fact, because of time constraints, some older, less effective interventions are abandoned, freeing up more time for the new.

Beginning with 100% of physician spending in 1996, a target level of spending was recalculated yearly by adding adjustments for demographics, for inflation, and for increased physician time and expense for newly approved technological advances (as above). The target amount for 2004, including the factor for technological advances, was $77.1 billion, but actual physician spending was $84.9 billion. It seems highly unlikely that physicians increased their effort an additional 15% over that which already includes a correction for new technology. And we know that they didn’t increase their working hours by 15%.

I think that it is much more likely that the physician adjustment factor (PAF) demonstrates what we feared: that physicians are pushing the limit on coding in an attempt to achieve income levels to which they believe they are entitled. I do not believe that this represents unethical behavior, but, rather, represents the fact that they are making the most of the somewhat flawed system that we have. I still stand by my position that we should investigate whether we could make changes that, instead, incentivize the most noble behavior on the part of physicians.

Uncovered medical expenses are leading to bankruptcies(SF Chronicle)

Back-breaking bills/Uncovered medical expenses are leading to bankruptcies
By Victoria Colliver, Chronicle Staff Writer

Jeannie Brewer is a physician married to a surgical resident. She and her family have health insurance. She’s not the kind of person you’d expect to be pushed to the verge of financial collapse by medical expenses. Yet Brewer is considering filing for bankruptcy, and part of the reason is the $16,500 in health care costs her family incurs each year that are not paid for by insurance.

“I have got creditors all over me. I am at the point where I don’t know what else to do,” said Brewer, 44, of Alameda. Brewer is one of a growing number of Americans who are discovering that health insurance doesn’t protect them from financial troubles caused by medical expenses. There are several reasons for the trend. Employers have been offering skimpier health care benefits and requiring their workers to pay more for coverage. Policies with high deductibles have become increasingly popular as a way for employers to manage unaffordable premiums.

Between copayments, requirements to pay certain percentages of medical bills and services that just aren’t covered, large numbers of people with insurance are facing burdensome out-of-pocket expenses. Many of them wind up in debt. And a significant percentage of those turn to bankruptcy Court for relief.

“There is a trend toward insurance being viewed as sort of catastrophic protection,” said Jeff Morris, resident scholar at the American Bankruptcy Institute. “The problem, of course, is it doesn’t take a lot of hours at a hospital to generate a bill that is very difficult to pay.”

In Brewer’s case, financial problems stem in part from her daughter’s diabetic condition. Three-year-old Lara must be constantly monitored and tested at least eight times a day. That has prevented Brewer from working normal hours for her employer, Alta Bates Summit Medical Center in Oakland, and held her income to just $35,000 last year.

Her credit card debt has spiraled to about $140,000, including some medical bills, but mostly daily expenses. She and her husband, who earns a modest salary as a resident, also have a combined $360,000 in medical school debt.

Brewer said that if she files for bankruptcy, she will do so as an individual to preserve her husband’s credit rating.

Loopholes in insurance

A Harvard University study of medical bankruptcy released earlier this month found that financial hardship caused by medical bills is not a problem that affects only the uninsured. Most people who file for personal bankruptcy because of health care expenses, like Brewer, actually have health insurance, the study found.
  
“Even the best policies in this country have so many loopholes, it’s easy to build up thousands of dollars in expenses,” said Dr.Steffie Woolhandler, a Harvard associate medical professor and one of the study’s authors.

The study looked at 1,771 bankruptcies filed in 2001 in five states,including California. Almost half of those filers — 46.2 percent — cited illness and medical bills as a major cause of bankruptcy. More than three-quarters had insurance at the onset of illness.

The problem seems to be largely a middle-class phenomenon. Typical medical bankruptcy filers are in their early 40s and have children. Most have at least some college education and own their homes.

Even if people have health insurance to begin with, many lose coverage because they are unable to keep their jobs because of medical problems.

Need for disability insurance

The health insurance industry says the lack of proper disability income protection could be the primary reason for medical-related financial problems.

Disability insurance “doesn’t pay your doctor, but gives you income for food,” said Susan Pisano, spokeswoman for America’s Health Insurance Plans, a trade group for the health insurance industry.

Pisano said it’s difficult to separate medical debt from other financial pressures associated with a health problem, especially loss of income due to an individual’s inability to work full time or to keep a job at all.
  
Even if bankruptcy is averted, the financial strain of an illness can set finances back for years. Berkeley resident Connie Taylor found herself $38,000 in debt when her daughter had to be hospitalized for a psychiatric condition. She didn’t realize that the treating physician was not among her health insurance company’s covered network of doctors.

Extra expenses

“I thought if you had insurance, you had insurance. You would be OK,” said Taylor, 53, a hospital housekeeper. She said she did not know there was such a thing as an out-of-network provider under her policy and was not informed that her daughter’s doctor would cost extra.

The hospital, through its collection agency, placed a lien on her home. Although the episode occurred in 1993, Taylor did not pay off the bill until 2001, with the help of her church and her ex-husband.

For San Francisco resident Anna Chavez, the event that prompted her financial woes was a happy one: the birth of her first child in 2000. While she was glad to get pregnant, it was unplanned. She and her husband had just opened a restaurant in San Mateo and had bare-bones insurance through Blue Cross that didn’t cover childbirth. Unable to change her policy after becoming pregnant, Chavez figured that the couple would be responsible for about $4,000 in out-of-pocket insurance expenses and $1,000 in physician fees.

The couple balked when the hospital charged them $2,300 more than they had estimated. Chavez said she asked the hospital to arrange a payment plan. Instead, she said, the hospital filed a lawsuit, which the couple lost by default. She estimates that after the attorney’s fees and court expenses, the birth of their child cost the couple $10,000.

Understand the terms

A Blue Cross spokeswoman declined to comment on Chavez’s situation, citing privacy concerns. She said customers should work carefully with their brokers to understand the terms of their policies.

Chavez, 35, who is currently uninsured, has since qualified for the state’s Healthy Families program, which covers low- to moderate-income children. She had her second child essentially for free under another state program. That makes her uncomfortable. “I just feel like I was rewarded for not having insurance, and I was not rewarded for trying to do the right thing,” Chavez said.
  
Jeannie Brewer, MD is a CaPA member
E-mail Victoria Colliver at vcolliver@sfchronicle.com.

Costly medical bills can bury families under a mountain of debt

By Elizabeth Ziegler – Journal Writer

Two winters ago, Cheryl Alvarez received a phone call from her son telling her that he had been in a car crash. Now Alvarez lives in a nightmare of debt that she won’t be able to escape for years.

The brain trauma and liver damage suffered by her son, Miguel Luna, eventually healed. But Alvarez, a single mother of five, has $200 taken from every paycheck for medical debt. And even with her wages garnisheed, Alvarez still earns too much to qualify for assistance from the state.

The bills from two area hospitals that treated her son’s injuries forced her to declare bankruptcy and rely upon the charity of friends. “It’s been a struggle. Any time you’re raising five kids on your own with no child support, it’s hard to prepare for things like this,” she said. “It is hard asking for help, but there are so many people who have been so good to us -that’s how you get through medical bankruptcy.”

Miguel dropped out of school at age 17 and took a full-time job to help. Now, at 18, he has a GED along with a family of his own to support. He plans to attend Idaho State University in the fall. “When I look at him with his three little kids, I am so thankful. I am so proud of him,” she said. “He’s fine now … it’s a miracle.”

Alvarez’s story is common among the roughly 4,500 personal bankruptcies resulting from unpaid medical bills in Idaho last year. That’s just over half of the personal bankruptcies filed in 2004 in the state. According to a Harvard Medical School Study released two weeks ago, Idaho’s statistics are in line with national figures. The study found that half of all personal bankruptcies in the United States are caused, at least in part, by unpaid medical bills.

Because Alvarez had medical insurance coverage for her son through her job as a clinical assistant and lactation educator for the health department, her story further parallels the study’s findings. According to the Harvard researchers, three-quarters, or 75.7 percent, of the medically bankrupt actually have insurance at the onset of the bankrupting illness or accident. Sixty-eight percent still had medical insurance when they filed for bankruptcy and 62 percent had continuous coverage, as did Alvarez.

But her medical plan had a high deductible and co-pay and she ended up thousands of dollars in debt. “The people out there who are middle-class and have health insurance believe that it will keep them from financial ruin if they should get sick. The reality is that ain’t so,” said Dr. Bill Woodhouse, a physician for Pocatello Family Medicine and a member of Physicians for a National Health Program.

Health West Director Stephen Weeg said often, unexpected medical expenses propel a family into poverty. “An emergency health issue is always an unplanned expense,” Weeg said. “Especially if you are middle to lower income, most folks end up with their budgets pretty tight, so there’s not a lot of discretionary money available.”

The cost of the illness is complicated by lost wages and the fact that many people live paycheck to paycheck. And when you’re maxed out already, Weeg said medical bills can tip you over the edge into bankruptcy. “For a lot of people, going bankrupt is only a matter of a few thousand dollars,” said Scott Greaves, director of the Bannock County Indigent Office. “If you go into the hospital and spend one night, the bill comes out to be $3,000 to $4,000. One night can put some people over the edge.”

For many who are insured and wind up bankrupt, high co-pays and deductibles in addition to paying the costs that exceed coverage limits often are the culprits.
“You are looking at insurance covering $30,000 of the bill, but then you are still owing thousands of dollars,” Greaves said. “Some insurances are 50 percent co-pay, and a lot of deductibles are up to the $2,000 to $3,000 range. And depending on your financial situation, just the deductible can put you over.”

When people can’t pay medical bills, they often end up in the Bannock County Indigent Office, where Greaves sees 400 to 450 cases a year. In Idaho, a state law makes counties responsible for the medical expenses of people unable to pay medical bills. The county pays the bills, a lien is put on the person’s property and eventually the cost of the bills is repaid to the county.

The indigent wear a lot of different faces, Greaves said. They are the unemployed, the working poor and increasingly, middle-class people. “That is who we see in our office -average, middle-class people who don’t have insurance,” Greaves said.

Because the cost of medical insurance rises incessantly, many healthy, middle-class people are opting out of medical insurance and many employers are priced out of offering comprehensive coverage to employees.

“The number of uninsured people is increasing, and nationally, one of the fastest growing segments of uninsured are those who have an income of over $50,000,” said Georganne Benjamin, spokesperson for Regence BlueShield of Idaho.”When people say uninsured, they think of the poverty-stricken, but they might be a college student who just graduated, who is uninsured short-term until he or she is employed.”

Idaho has one of the highest uninsured rates in the nation. Eighteen to 20 percent of Idahoans have no health insurance, compared to 16 percent nationally. The increase in uninsured people adversely affects the cost of medical insurance, Benjamin said, because in order for insurance companies to keep costs down, they need to have virtually everyone share the costs.

“We are trying to raise the number of people who have insurance, because the last thing we want is more uninsured,” Benjamin said. “The more people we have covered, the better it is for everyone overall.” But for many, paying for insurance seems like a waste of money. Benjamin said increasing numbers of typically younger, healthy people are opting to go without insurance. “They are opting out of the insurance market, because to them, it is not worth paying for the services. They don’t see the value,” Benjamin said. “But in order for the system to work appropriately, everyone needs to pay in preparation for a catastrophic event that may happen later down the road.”

People with chronic diseases know better than to opt out of the system, Greaves said, because insurance saves them thousands of dollars. With the pool of insured people growing increasingly sicker, and more expensive to cover, insurance companies raise their premiums, which causes even more healthy people to drop out. At this time last year, Greaves said medical insurance premiums increased about 45 percent.

To compensate, employers and individuals are stuck with a difficult decision: Either pay higher premiums, or pay the same amount for a skimpier policy. For those people who can’t pay more, the policy they can afford is essentially an umbrella with a hole in it, and they are depending on luck. The situation has representatives from both sides of the political divide re-evaluating medical care in the United States.

Some say a national health care system is the answer, and others say medical savings accounts can salvage the present system. “Rising health care costs are a critical concern for us,” Benjamin said, speaking on behalf of Regence BlueShield. “We have to look at product options for our members that still allows them to have insurance at an affordable price, and so, the newest thing is health savings accounts.”

Health savings accounts work, Benjamin said, because money put into the account that isn’t needed one year, rolls over into the next. Over the years, people would save enough money to provide a safety net in case of a medical emergency.

The savings account would work in conjunction with a health insurance policy, she said, to help pay off the deductible, co-pay or the cost of services above a coverage limit.

But critics of the system claim that would not help the growing number of people who cannot afford medical insurance. “I think that is an excellent idea for people who can afford that and take that risk upon themselves,” Woodhouse said. “But we know already that one in five people cannot afford health insurance.” And, it’s not just liberal/progressives who doubt that medical savings accounts can save the current health care system.

Woodhouse is a self-proclaimed conservative, and represents a number of people in the medical field who advocate for a single-payer national health program. “While many claim that we have the best health care system in the world, I know of nobody who believes we have the best way of paying for health care, as evidenced by the high number of the uninsured and medical bankruptcies,” Woodhouse said. “I feel our health care financing system has failed everyone, including the providers. It’s an extractive industry right now. I’ve very reluctantly come to believe in the single payer national health program. I am a pretty conservative person, but this is one thing in which the free market has failed.”

Failure to cover eligible children

Health Services Research
February 2005
From Medicaid to Uninsured: Drop-Out among Children in Public Insurance Programs
By Benjamin D. Sommers

Of the children enrolled in Medicaid or CHIP, 27.7 percent were no longer enrolled 12 months later. Of those, 45.4 percent dropped out despite apparently remaining eligible and having no other insurance-corresponding to 3.0 million children annually.

Drop-out from Medicaid and CHIP is a significant policy concern and helps explain the persistence of uninsurance among millions of eligible children.

http://www.ingentaconnect.com/content/bpl/hesr/2005/00000040/00000001/art00006

Comment: We have a fragmented system of health care coverage that depends on multiple factors such as income, age, employment status, dependent status, disability, military service, incarceration, Native American heritage, union membership, employers’ dedication to the welfare of their employees, and innumerable other factors which result in instability in the adequacy of health care coverage and whether it will even be there when needed.

If we had a single, universal, cradle-to-grave program of health care coverage, we would not have to be worrying about these three million eligible but uninsured children who have dropped out of Medicaid or CHIP.Nor would we have to worry about health care coverage for anyone else.

Now isn’t it ludicrous that we are still talking about this very simple concept and not doing anything about it? Well, no. If it were ludicrous, it would be laughable. This isn’t.

Taming the Medicaid monster

By Robert Kuttner  

AT DINNER, two sets of parents of college seniors are discussing their dreams for their soon-to-be newly minted graduates. Doctor? Lawyer? Scientist? Entrepreneur?

”I just hope she gets a job with health insurance,” says one mom, breaking the spell. ”The insurance cuts off the day they graduate.” A dad chimes in: ”COBRA coverage costs over $400 a month.” (COBRA is an acronym for a consolidated budget act that allows you to keep your coverage by paying the premium costs out of pocket. It is well named.)

In a country with a rational system of health insurance, your coverage would not be subject to the quirks of when you graduated college, where you worked, or whether you had been sick earlier in your life. But the American system is a patchwork mess of coverage, noncoverage, and inadequate coverage, slightly tempered by well-intentioned efforts to fill in the cracks, which only add to the fragmentation and cost.

Meanwhile, President Bush’s budget proposes to cut some $45 billion out of Medicaid funding over 10 years. The Massachusetts share of the loss would be $1.26 billion.

Medicaid is becoming the monster that’s devouring the rest of state budgets. In recent years, Medicaid costs have been rising at between 9 and 12 percent while state budgets are just about keeping pace with inflation.

But Medicaid costs are rising not because states are becoming more generous with what they cover or because states are liberalizing Medicaid eligibility rules. On the contrary, rules are being tightened and coverage restricted. The Urban Institute finds that actual Medicaid per-patient costs are growing at only about half the rate of private insurance, and a study by the Kaiser Family Foundation reports that 23 states have already taken actions to freeze enrollment or cut benefits.

So why is Medicaid such a drain on state treasuries? Because it is the health insurance of last resort. As fewer employers provide coverage that employees can afford, more and more people are being dumped into the Medicaid pool, leaving states holding the bag.

Not content to cut the federal share, Bush also proposes to turn the program into a capped block grant, which would pass even more of the costs to the states. This, in turn, would lead to even further benefit cuts and more people going without basic medical care or flooding emergency rooms.

Another government health program, the State Children’s Health Insurance Program, was intended to cover kids whose parents made a little too much money to qualify for Medicaid. There are millions of families where one or both parents have inadequate employer-provided insurance or no insurance and the kids are covered under SCHIP. And because parents’ income fluctuates, kids can be bounced from program to program — SCHIP, Medicaid, private insurance — with different eligibility rules and different doctors.

Continue the tour of our absurdly fragmented health system. As part of the same 2005 budget proposal, the president admits that his crown-jewel program, drug coverage under Medicare, will cost not the $400 billion over 10 years that he projected when he jammed the bill through Congress in 2003 but $1.2 billion. Bush officials helpfully explain that with changes in various formulas — in other words, benefit cuts — the cost can be held to a mere $720 billion.

The Medicare drug law, which doesn’t even become effective until 2006, is so outlandishly expensive because it was written to drug industry specifications. The law explicitly prohibits the government from negotiating bulk discounts with drug companies the way VA hospitals and the Canadian national health insurance program do. Seniors covered by Bush’s Medicare drug program and their partner, the American taxpayer, will pay sticker price.

Gentle reader, this is all insane. We have the world’s most expensive medical system and the least reliable insurance coverage. Yes, I know Clinton-care was a political disaster, but it wasn’t true national health insurance. Clinton naively tried to give the insurance companies a big piece of the action, and they gratefully responded by spitting in his eye.

Ordinary people are absolutely sick of the health insecurity and the endless and wasteful paper chase. So, by the way, are doctors. We have what the political scientist Walter Dean Burnham calls a ”politics of excluded alternatives.” If some nervy politician, or group of politicians, called for true universal national health insurance, they would get broad public support. It’s called leadership.

Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe.

Insurance premiums a burden in retirement

The Urban Institute
January 2005
Understanding Expenditure Patterns in Retirement
By Barbara A. Butrica, Joshua H. Goldwyn and Richard W. Johnson

Health Care Expenditures
For typical older adults, budget shares for health care expenses are second to housing costs. However, health care expenditures warrant special attention because they tend to be much more unpredictable than housing costs, especially for those without private supplemental health insurance.

In this section, we break out the health care expenditures of older adults. Health insurance premiums represent the largest health care spending category (8 percent of total expenditures) for married individuals. Additionally, they spend 6 percent on prescription drugs, 4 percent on health services, and 1 percent on medical supplies. This finding is consistent with Rubin and Nieswiadomy (1997) who found that the increase in health care expenditures between the 1980s and 1990s was driven primarily by insurance premiums, followed by drugs and medical supplies, and health services.

Older married adults in poor health allocate twice as much of their overall spending to prescription drugs than those in excellent or very good health. As expected, individuals with nongroup insurance spend a larger-than-average share of their overall expenditures on health insurance premiums, but they also spend a larger-than-average share on prescription drugs. These patterns are very similar for nonmarried adults.

http://www.urban.org/UploadedPDF/411130_expenditure_patterns.pdf

Comment: It is important to realize that health insurance premiums represent the largest health care spending category in retirement. For many individuals, the premium paid is for Medicare supplemental insurance (Medigap). With the decline in employer-sponsored group coverage for retired individuals, the need for Medigap coverage is increasing.

It is instructive to look closely at the actual benefits provided by the Medigap plans. For most individuals, the amount of claims payment for which the insurer is obligated is nominal. That is because, by Medicare regulations, most of the balance of the medical charges must be adjusted off by the provider of services. Medigap pays only that small amount which is the difference between the Medicare payment and the Medicare allowed charges, an amount far less than the charges billed.

With typical PPO plans, such as those offered by Blue Cross and Blue Shield, the premium pays not only for the allowed charges, but it also pays for the insurer’s administrative costs in contracting with providers for lower rates. With Medigap plans the allowed charges are set by Medicare, so the insurer is providing almost no additional value when it offers lists of contracted providers. And since the primary payment is made by Medicare, the Medigap plan is paying only the very modest coinsurance and deductible.

This Urban Institute study confirms that health insurance premiums in retirement are very significant. Yet the Medigap policies offer amongst the poorest values in health care coverage. Using my own coverage as a typical example, the Senior Classic F Medigap policy of Blue Cross of California had a loss ratio of 62% (2001). That means that they kept 38% of the premium.

That administrative waste is on top of the administrative burden that our fragmented system places on the providers of care. The combined administrative waste amounts to over one-half of the Medigap premium!

Medigap policies are only one more example of the private insurance industry fulfilling its mission to sell us excessive, wasteful administrative services, in this instance placing a major financial burden on retired seniors (and anger each time the premium notice arrives). We can do far better financially by throwing out the private plans, fixing Medicare so it works better, and then establishing Medicare for All.