The New York Times
February 3, 2004
Companies Limit Health Coverage of Many Retirees
By Milt Freudenheim

Employers have unleashed a new wave of cutbacks in company-paid health benefits for retirees, with a growing number of companies saying that retirees can retain coverage only if they are willing to bear the full cost themselves.

The costs can be a shock. According to surveys by benefits consultants, companies that offer health benefits to retirees typically have subsidized about 60 percent of the premium. Losing that support all at once can mean hundreds of dollars a month in unexpected costs.

Moreover, in dropping their subsidies, many companies push retirees into insurance pools that are separate from those of younger, healthier workers, executives said. That lowers the company’s costs for insuring its current workers, while raising the premiums charged to retirees even further.

Last month, a study for the Kaiser Family Foundation by Hewitt Associates found that among employers that have maintained retiree coverage, about 15 percent have required at least some retirees to assume the full cost of their insurance in the last two years. Another 31 percent said they would probably adopt these so-called access-only health plans within the next three years.

“Twenty years from now, no company will offer retiree health care,” Uwe Reinhardt, a health economist at Princeton University, said.

Comment: Current policies are designed to defeat the purpose of risk pooling. Employers keep younger, relatively healthy, currently-employed individuals in the risk pools to which they contribute funds. But employers are placing older, higher-cost, retired individuals into separate risk pools. Premiums have to be much higher to adequately fund these risk pools. And now, more and more, employers are requiring retirees to pay the full premium if they wish to continue coverage.

If the employers are not contributing to the premium, why would a retiree participate? There are two reasons. Coverage is assured, which is not the case in the individual insurance market. And group plans tend to offer better benefits than the individual plans. But what good is this coverage if it is unaffordable because of the very high premiums that must be charged for a risk pool that concentrates high-cost patients?

We can anticipate further innovations in risk segmentation, cost shifting, individual segregated health accounts, adverse selection, and other measures
that are designed to provide coverage for low-cost individuals with few health care needs, while segregating or excluding precisely those high-cost individuals for whom risk-pooling is designed.

We won’t get it right until we accept the concept that we need one universal risk pool. Then we can decide on the most equitable method of funding that pool. Until we are ready to agree on this, we will watch health care becoming less and less affordable for those who need it the most.

Rocky Mountain News
January 30, 2004
Politics blamed for impeding health care
By Rachel Brand

Health insurance for all Americans is again likely to become a presidential campaign issue…

Support for the issue is “a mile wide and an inch thick,” said Ron Pollack, who spoke at the conference, which was sponsored by Health Affairs, a leading policy journal. Scratch deeper and you’ll find the issue rife with political gridlock, moral posturing and wary voters.

“Up until now the issue has been about altruism for a discrete part of the voting public,” said Pollack, executive director of Families USA, a consumer group. “It needs to be viewed as an issue of self-interest for middle-class, working families.”

Pollster Robert Blendon, professor of health policy and political analysis at the Harvard School of Public Health, said Americans increasingly are concerned about what would happen if they lost their insurance. They also support plans to help the uninsured, from tax credits to expanding public programs.

Yet that support drops dramatically when they’re told the cost of programs. “When you read voters a list of policies to cover the uninsured, they say, ‘Hey, let’s have it,’ ” Blendon said. “But if you make a single negative argument, it sinks their confidence.”

Blendon recommends that policy-makers embrace plans that include elements of
tax credits, expanding existing programs, and a few employer and individual
mandates, saying it would be less vulnerable to criticism.

Pollack and others said politicians need to get their egos out of the way. In years past, if their policy wasn’t adopted, they’d walk away without trying to compromise.

http://www.rockymountainnews.com/drmn/business/article/0,1299,DRMN_4_2615598,00.html

Comment: Blendon and Pollack again make the plea for compromising, while reiterating their long-standing opposition to uncompromising,ego-driven advocates (single payer advocates?).

Yet, Pollack, and to some extent Blendon, have been uncompromising in their
advocacy for their very specific model of reform: employer mandates (perhaps
with individual mandates), tax credits, and expansion of public programs
(especially Medicaid and S-CHIP). Their model has been analyzed extensively.
It is the most expensive model of reform at a time when affordability is the
number one public concern about our health care system. Their model also
falls short on comprehensiveness, equity, and even on universality. In contrast, the single payer model is the least expensive and most comprehensive model that does ensure true universality.

Is this the time to abandon discussion of fundamental health policy principles that might shed some light on the problems and potential solutions? Should we walk away from our great body of health policy science and follow the dictates of ego-driven individuals (as we all are) who have labeled their favorite model a “compromise,” when it is just another specific model in the list of options?

Is compromise the solution? Ignoring health policy science is not compromising, but it is abandonment of valuable tools that should be used to craft health care reform. We shouldn’t accept less than universality, comprehensiveness and affordability, which means that we shouldn’t compromise with special interests that would sacrifice these goals for their own benefit. That would not be compromise; that would be a cop-out.

Where can we compromise? How about compromising on the process? Actually,
we’ve already begun to do this. Cover the Uninsured Week, sponsored by the
Robert Wood Johnson Foundation, has already brought together diverse interests that now agree that we must provide coverage for everyone. That’s a crucial first step. And that was the easy part. But now we must encourage the special interests that have permeated this process to join in a sincere and dedicated effort to make this a reality.

It is time for each interest to decide how much of a compromise can be accepted on its own part to attain this universally-agreed-upon goal. The process should not allow compromise of universality, comprehensiveness and affordability, but rather it should be directed to negotiated compromises made between the various interests involved. Funding should be equitable, which means that we need to negotiate between businesses, individuals and the government the means by which the greatest equity could be achieved. Insurers must negotiate an end to their profound administrative waste as they transform themselves into essential health care partners by providing much-needed services such as an integrated information technology system (in partnership with the National Institutes of Health and the National Research Council). Health care providers should negotiate the establishment of a process that will cover their expenses while still providing a fair profit, and agree on a reasonable method of allocating resources.

We can provide affordable, comprehensive care for everyone, and we shouldn’t
compromise on that. But all interests need to sit down at the negotiating
tables and begin an open process of compromising on each of our own interests. The $1.6 trillion that we are already spending is enough to go around. Let’s negotiate a compromise on how we should spend it. After all, it is for the benefit of our patients. And isn’t that what it’s all about?

http://covertheuninsuredweek.org/

Uwe Reinhardt responds to Joel Segal’s comments on the moral outrage of our failure to enact a program of universal health care (which was in response to Reinhardt’s editorial):

I could not agree more. If the nation’s czar of morality Bill Bennett cared about such matters, he’d write another book entitled: Where’s the Outrage?

Alas, we live in America, and I merely reported in the editorial–and in the paper I reference therein–what I have learned about America in these past 35 years.

As I recently put it before a high level health-policy meeting in Washington, D.C.:
“One major source of our national economic strength –that is to say, our average GDP-per-capita-prowess–is a by international standards unusually high tolerance for misery among the nation’s economic losers, to wit:

1. people who made imprudent decisions somewhere along the way;

2. people who lack the intellectual acumen, or the education, or the training to fend for themselves in this highly demanding market economy;

3. people who are victims simply of pure bad luck (e.g., because they got sick, or wounded in combat, or hit by some accident, or were born into a household that was not supportive enough in the accumulation of human capital, etc).

For folks not falling into these three categories, this can be (and usually is) a truly fantastic country. Alas, for the folks who fall into these dire categories, it is a harsh, cruel and, in my own judgment, unjust country–whether we look at health care, education of our so-called ‘justice’ system.”

That is what I have learned about America in these past 35 years. I have come to accept it, as my editorial and my paper suggests.

Best,

Uwe

Uwe Reinhardt responds to Joel Segal’s comments on the moral outrage of our failure to enact a program of universal health care (which was in response to Reinhardt’s editorial):

I could not agree more. If the nation’s czar of morality Bill Bennett cared about such matters, he’d write another book entitled: Where’s the Outrage?

Alas, we live in America, and I merely reported in the editorial–and in the paper I reference therein–what I have learned about America in these past 35 years.

As I recently put it before a high level health-policy meeting in Washington, D.C.:
“One major source of our national economic strength –that is to say, our average GDP-per-capita-prowess–is a by international standards unusually high tolerance for misery among the nation’s economic losers, to wit:

1. people who made imprudent decisions somewhere along the way;

2. people who lack the intellectual acumen, or the education, or the training to fend for themselves in this highly demanding market economy;

3. people who are victims simply of pure bad luck (e.g., because they got sick, or wounded in combat, or hit by some accident, or were born into a household that was not supportive enough in the accumulation of human capital, etc).

For folks not falling into these three categories, this can be (and usually is) a truly fantastic country. Alas, for the folks who fall into these dire categories, it is a harsh, cruel and, in my own judgment, unjust country–whether we look at health care, education of our so-called ‘justice’ system.”

That is what I have learned about America in these past 35 years. I have come to accept it, as my editorial and my paper suggests.

Best,

Uwe

The Washington Post
January 25, 2004
Editorial
Unhealthy

For an insight into the inadequacy of the president’s health care proposals
put forward in his State of the Union speech last Tuesday, look closely at a
strike by supermarket workers in Southern California.

Labor leaders acknowledge that this is a national problem, one that they cannot solve at the negotiating table, even if the supermarkets ultimately improve their offer. But does the president acknowledge it? From his speech, it was hard to tell.

Mr. Bush did state that he remains opposed to a “government-run health system.” Fine — but if he wishes to avoid that outcome, Mr. Bush needs to
think more creatively about how he is going to keep the nation’s private health care system viable. A peculiar jumble of old ideas, long discussed but never acted upon, isn’t going to do it.

http://www.washingtonpost.com/wp-dyn/articles/A45228-2004Jan24.html

Comment: There is now near unanimous agreement that the funding crisis in
health care requires “a national solution.” There is no escaping the fact that this means federal action. Decades of social experimentation and advancement of health policy science have proven that “a peculiar jumble of old ideas” cannot possibly adequately address our problems in the funding health care.

Now that we accept the fact that a federal solution would be required, we must face squarely the real question. Do we move towards equity and affordability by adopting a federal solution, or do we accept the tragic status quo by rejecting reform through adherence to the politically divisive “government-run” rhetoric?

Let’s dump the rhetoric of the ideologues and get on with reform!

The Washington Post
January 25, 2004
Editorial
Unhealthy

For an insight into the inadequacy of the president’s health care proposals
put forward in his State of the Union speech last Tuesday, look closely at a
strike by supermarket workers in Southern California.

Labor leaders acknowledge that this is a national problem, one that they cannot solve at the negotiating table, even if the supermarkets ultimately improve their offer. But does the president acknowledge it? From his speech, it was hard to tell.

Mr. Bush did state that he remains opposed to a “government-run health system.” Fine — but if he wishes to avoid that outcome, Mr. Bush needs to
think more creatively about how he is going to keep the nation’s private health care system viable. A peculiar jumble of old ideas, long discussed but never acted upon, isn’t going to do it.

http://www.washingtonpost.com/wp-dyn/articles/A45228-2004Jan24.html

Comment: There is now near unanimous agreement that the funding crisis in
health care requires “a national solution.” There is no escaping the fact that this means federal action. Decades of social experimentation and advancement of health policy science have proven that “a peculiar jumble of old ideas” cannot possibly adequately address our problems in the funding health care.

Now that we accept the fact that a federal solution would be required, we must face squarely the real question. Do we move towards equity and affordability by adopting a federal solution, or do we accept the tragic status quo by rejecting reform through adherence to the politically divisive “government-run” rhetoric?

Let’s dump the rhetoric of the ideologues and get on with reform!

H.R.1
Medicare Prescription Drug, Improvement, and Modernization Act of 2003

Title X – Medicaid and Miscellaneous Provisions

Subtitle B – Miscellaneous Provisions

Sec. 1014 – Health Care that Works for All Americans: Citizens Health Care Working Group.

(b) Purposes – The purposes of this section are –

(1) to provide for a nationwide public debate about improving the health care system to provide every American with the ability to obtain quality, affordable health care coverage; and

(2) to provide for a vote by Congress on the recommendations that result from the debate.

(c) Establishment – The Secretary, acting through the Agency for Healthcare Research and Quality, shall establish an entity to be known as the Citizens’ Health Care Working Group (referred to in this section as the `Working Group’).

(d) Membership –

(1) Number and appointment – The Working Group shall be composed of 15 members. One member shall be the Secretary. The Comptroller General of the United States shall appoint 14 members.

f) Designation of the Chairperson – Not later than 15 days after the date on which all members of the Working Group have been appointed under subsection

(d)(1), the Comptroller General shall designate the chairperson of the Working Group.

http://thomas.loc.gov/ (In the “Bill Number” box insert “H.R.1″ and click Search”)

General Accounting Office
GAO Health Care Forum
January 13, 2004
Slide presentation
David M. Walker, Comptroller General of the United States

Slide 49:

The presence of insurance blunts sensitivity to the price of services and results in the tendency to overconsume.

Slide 51:

Tax incentives can serve to mask the cost of health care and impair achievement of desired cost-containment outcomes.

Administrative burdens reduce market efficiency and value to consumers.

Slide 52:

Reforms, although comprehensive, may need to be incremental in order to minimize disruptions and facilitate political consensus.

http://www.gao.gov/index.html (Under “From the Comptroller General” click “Slide presentation” for January 13, 2004. Then click “Health Care System Crisis: Significant Challenges Point to Need for Fundamental Reform.”)

Comment: An important provision in the Medicare Prescription Drug Bill is the requirement of “… a nationwide public debate about improving the health care system to provide every American with the ability to obtain quality, affordable health care coverage.” Further, the process provides for “… a vote by Congress on the recommendations that result from the debate.”

It is crucial that we closely observe this process that will result in a vote in Congress on systemic health care changes theoretically designed to bring quality care to every American.

The current Comptroller General, David Walker, will appoint 14 of the 15 members and the Chairperson of the Working Group. Since David Walker will be able to control the ideological complexion of the Working Group, we should try to understand his views.

Based on his health care forum presentation this month, it appears that he supports incremental reforms in the marketplace that place a greater emphasis on increasing price sensitivity for patients while decreasing the financial insulation provided by insurance.

Bill Thomas, as Co-Chair of the Bipartisan Medicare Commission helped to prove that it is nearly impossible to reach political consensus on important social issues through a bipartisan process. In drafting the Medicare Prescription Drug bill, Thomas and his colleagues made certain that the recommendations for comprehensive reform on which Congress will eventually vote will not be bipartisan, but will be produced by the independent Comptroller General (who just happens to share some of Thomas’ ideology on health care reform).

As structured, we have reason to anticipate that the Working Group will provide us with a unanimous recommendation for expanding health savings accounts, eliminating deductibility of employer-sponsored plans, Limiting tax deductibility to individually-owned catastrophic plans, shifting Medicare and Medicaid to private, marketplace plans with a commensurate reduction in the level of public funding, etc., etc.

It is unfortunate that this bill authorizes spending $6 million for this potentially phony partisan study when we really do need a consensus on comprehensive health care reform. Maybe we should approach David Walker in advance to see if he might consider allowing a true cross section of Americans to nominate the members of the committee. He is a man of integrity, even if biased, and he might consider a more democratic process.

(If you download the side show, be sure also to look at the other slides, especially slide 8. It demonstrates dramatically why some say that Social Security and Medicare spending will have to be dramatically reduced if we are to protect current tax cuts.)

From the office of Senator Edward Kennedy
For Immediate Release
January 22, 2004
Senator Edward M. Kennedy Introduces the Health Security and
Affordability Act

A new effort is… needed to end the crisis of the uninsured and provide comprehensive health insurance for all Americans. We can make health insurance affordable for individuals, businesses, and government.

I intend to introduce new legislation to do that-the Health Security and affordability Act. It will rely on the employer-based system to do that, because the most realistic way to reach this goal is through a combination of job-based coverage for workers and dependents where possible, and insurance through public and private programs where needed.

The cornerstone of universal health care should be a requirement that employers share in the responsibility to provide quality health insurance for employees and their dependents. Eighty percent of the uninsured are workers or family members of workers. Employer-based health insurance provides coverage for 170 million Americans today. We should improve it, not scrap it.

For decades, we have required employers to contribute to Social Security and
to Medicare. We require them to pay a minimum wage, and contribute to unemployment insurance. Now it is time to say that they also have an obligation to contribute to the cost of health insurance for their employees.

A solid majority of businesses already provide health insurance to their workers, and the rest should fulfill that obligation, too. The Health Security and Affordability Act will require all large businesses to provide coverage as good as the coverage now provided to every member of Congress and other federal employees. Small businesses will be asked to contribute to coverage based on their ability to pay.

In asking businesses to fulfill this obligation, government has an obligation too-to assist them in making health care affordable. Use of information technology, paying for results, improving quality, and a new emphasis on prevention will reduce health care costs for society as a whole. The bill I propose will include an additional guarantee. No employers will have to spend more than 12% of their payroll for health care for their employees. If health costs rise faster than a fair average of other costs, the government will cover the difference. We will protect America’s ability to compete in the world, and we will keep wages and profits from being consumed by health care costs.

For individuals without access to employment-based coverage, we will establish new options based on the Federal Employees Health Benefit Program-the program that provides good health insurance for members of Congress and Federal workers. The same options now available to members of Congress should be available to those not qualifying for coverage from other sources. Businesses can participate as well, so that they can make these choices available to their employees if they feel they offer better value.

Premiums for the plan will be based on ability to pay, including cost-sharing for low income families. It will also help low-income workers covered by their employer’s plan.

http://kennedy.senate.gov/

Comment: This is an historical moment. We are truly at a major fork in the road to comprehensive health care reform. The nation now agrees that reform is essential. We agree that health care must be affordable and accessible for everyone. Virtually all fully-informed observers of the health care scene recognize that the problems require a national solution. They agree that coverage must be universal. And most agree that now is the time to seriously address this problem.

The most important unresolved issue is whether universal coverage alone is an acceptable goal, or we need to include other goals such as equity and efficiency. It is a crucial decision. Reform has become an imperative. The model selected will not be a temporary measure to make do until we can enact something better. Although continuing refinements would be inevitable, the fundamental structure will be with of for decades, if not longer.

Sen. Kennedy’s proposal is a dramatic improvement over our existing system.
But, whether employer-sponsored plans or individual plans similar to the
federal employee options (FEHBP-type coverage), Sen. Kennedy’s proposal
will leave in place the current private health plans.

Private plan choices no longer include the option of comprehensive indemnity
coverage, but they are limited to variations of HMO or PPO managed care
plans plus self-insured programs. All plans today manipulate premiums, benefits (including restricted provider lists) and cost sharing to match the particular targeted patient populations. To ensure an equitable system of coverage for all, the federal government would have to mandate a comprehensive, accessible benefit package, set reasonable, modest limits on cost sharing, and ensure that premiums remain affordable. The Medicare + Choice options demonstrate that private plans cannot comply with such mandates without being granted extra taxpayer funds (as the Bush administration just did with the 10.6% increase for Medicare Advantage plans). Why should we lock into the system forever administratively-wasteful, superfluous, private plan bureaucracies? All studies confirm that a single, publicly-owned insurer would provide the administrative services much more efficiently. And we wouldn’t have private plans manipulating premiums, benefits and cost sharing to their own benefit.

Now that we have come to that fork in the road, let’s not merely follow Yogi
Berra’s advice and “take it,” but let’s intensify our efforts to be certain that policymakers and the public choose a path only as a fully-reasoned decision. One path offers universal coverage, and the other path adds equity, comprehensiveness, efficiency, affordability, a better framework for an integrated information technology system for error reduction and improved
resource allocation, and innumerable other important goals that we can achieve.

The administrative challenges of establishing our own public insurance program would not be much greater than those we faced when we established the Medicare and Medicaid programs. In contrast, we would face greater administrative issues for a complex program of large employer-mandated plans, separate small employer programs, multiple FEHBP-type individual plans, and an administrative nightmare of trying to match various employer and individual funding sources with the fragmented system of intermediary plans. It’s not the task of establishing a system of public funding, but it’s the special interests that continue to block reform.

As Sen. Kennedy says, “… let’s get it done-if not this year, then next year with a new Congress and a new Administration elected with a mandate to get it done.” He’s right. But let’s be sure that everyone understands what we are doing. We will have to live with it for a very long time.