American Journal of Public Health
January 2003
Medical Care for All the People
By Henry E. Sigerist

The idea of social insurance is by no means new but has a history of over sixty years. It is not a revolutionary but, on the contrary, a basically conservative issue. It does not tend to overthrow the existing economic order but provides a corrective mechanism that mitigates its hardships.

The provision of medical services to the population has two aspects, one economic and one medical. Both must be considered and studied together because they are inseparable. Indeed the best economic plan defeats its own purpose if the money is used to finance a poor type of medical service, and on the other hand the best medical plan must collapse if it is not properly financed. Illness is an unpredictable risk for the individual family, but we know fairly accurately how much illness a large group of people will have, how much medical care they will require, and how many days they will have to spend in hospitals. In other words, we cannot budget the cost of illness for the individual family but we can budget it for the nation. The principle must be to spread the risk among as many people as possible and to pool the resources of as many people as possible. In other words, we must apply the principle of insurance, with which everybody in America is familiar. . . .

The experience of the last fifteen years in the United States has, in my opinion, demonstrated that voluntary health insurance does not solve the problem of the nation. It reaches only certain groups and is always at the mercy of economic fluctuations. . . . . Hence, if we decide to finance medical services through insurance, the insurance system must be compulsory.

http://www.ajph.org/cgi/content/full/93/1/57

Comment: Henry E. Sigerist was the director of the Johns Hopkins University Institute of the History of Medicine. His comments above are excerpted from an article published in the Canadian Journal of Public Health in 1944. The Canadians understood what he had to say. Will we ever understand?

The Henry J. Kaiser Family Foundation
January 2003
Paying for Choice:
The Cost Implications of Health Plan Options for People on Medicare
By Rani E. Snyder, Thomas Rice, and Michelle Kitchman

Medicare coverage alone does not provide sufficient financial protection for many program beneficiaries. Thus, the vast majority obtains supplemental coverage from four main sources: former employers, individual “Medigap” insurance policies, Medicaid, and Medicare+Choice plans.

This report examines the financial implications associated with these different choices by calculating how much people on Medicare would spend annually out-of-pocket on costs including-premiums, cost-sharing requirements, and spending for uncovered services-under different supplemental insurance arrangements.

Findings from this report show that the insurance choices that Medicare beneficiaries make have substantial and often dramatic effects on their out-of-pocket medical spending. We found that a number of factors affect how much a person on Medicare would likely spend out-of-pocket.

First, and perhaps not surprisingly, is health status.

Second, type of plan matters in determining beneficiary healthcare costs.

Third, within a particular insurance type, the specific plan chosen affects costs as well.

Fourth, there is a great deal of variation in costs for non-covered services like pharmaceuticals.

Finally, in some instances there are large differences in costs by geographic areas.

Of particular importance is that fact that these costs differences are often hidden because they are not reflected in the premiums paid, but rather through cost-sharing requirements and uncovered services. Thus, when engaging in comparison-shopping, consumers may put too much emphasis on cheaper premiums without considering the more difficult to assess cost-sharing requirements for covered services and costs for other non-covered services.

The supplemental insurance market presents opportunities for Medicare beneficiaries to insure themselves against future health care costs, but the choice is neither easy nor risk-free – particularly for those living on fixed incomes. There are no steadfast rules for beneficiaries to make the “right” choice in selecting a supplemental insurance plan.

http://www.kff.org/content/2003/6060/6060.pdf

Comment: The traditional Medicare program fails to provide sufficient financial protection. Most Medicare beneficiaries who have significant health care needs must rely on supplemental plans to reduce financial barriers to care. This report makes it clear that, in spite of efforts to regulate the supplemental market, beneficiaries are exposed to risk, especially through uncertainties in cost-sharing and in services covered. And current trends are further increasing risk through greater cost-sharing and through a reduction in benefits.

Current political efforts are aimed at preventing any improvement in the traditional Medicare program. The most visible effort is to continue to prohibit pharmaceutical coverage, but to offer this benefit only in the private health plan marketplace. Our politicians wish to use drug coverage as a lure to entice individuals to leave the traditional Medicare program.

Shoving Medicare beneficiaries into the private marketplace can only compound the problems presented in this report. Uncertainties and risk will only increase as the market experiments with variations in premiums, cost-sharing and benefits covered.

Instead of compounding the deficiencies in the Medicare program, let’s fix them. In the traditional Medicare program, let’s provide comprehensive benefits and eliminate financial barriers to care. Then we can also eliminate the supplemental market that has been increasing costs, but without a commensurate increase in financial and health security.

The Henry J. Kaiser Family Foundation
January 2003
Paying for Choice:
The Cost Implications of Health Plan Options for People on Medicare
By Rani E. Snyder, Thomas Rice, and Michelle Kitchman

Medicare coverage alone does not provide sufficient financial protection for many program beneficiaries. Thus, the vast majority obtains supplemental coverage from four main sources: former employers, individual “Medigap” insurance policies, Medicaid, and Medicare+Choice plans.

This report examines the financial implications associated with these different choices by calculating how much people on Medicare would spend annually out-of-pocket on costs including-premiums, cost-sharing requirements, and spending for uncovered services-under different supplemental insurance arrangements.

Findings from this report show that the insurance choices that Medicare beneficiaries make have substantial and often dramatic effects on their out-of-pocket medical spending. We found that a number of factors affect how much a person on Medicare would likely spend out-of-pocket.

First, and perhaps not surprisingly, is health status.

Second, type of plan matters in determining beneficiary healthcare costs.

Third, within a particular insurance type, the specific plan chosen affects costs as well.

Fourth, there is a great deal of variation in costs for non-covered services like pharmaceuticals.

Finally, in some instances there are large differences in costs by geographic areas.

Of particular importance is that fact that these costs differences are often hidden because they are not reflected in the premiums paid, but rather through cost-sharing requirements and uncovered services. Thus, when engaging in comparison-shopping, consumers may put too much emphasis on cheaper premiums without considering the more difficult to assess cost-sharing requirements for covered services and costs for other non-covered services.

The supplemental insurance market presents opportunities for Medicare beneficiaries to insure themselves against future health care costs, but the choice is neither easy nor risk-free – particularly for those living on fixed incomes. There are no steadfast rules for beneficiaries to make the “right” choice in selecting a supplemental insurance plan.

http://www.kff.org/content/2003/6060/6060.pdf

Comment: The traditional Medicare program fails to provide sufficient financial protection. Most Medicare beneficiaries who have significant health care needs must rely on supplemental plans to reduce financial barriers to care. This report makes it clear that, in spite of efforts to regulate the supplemental market, beneficiaries are exposed to risk, especially through uncertainties in cost-sharing and in services covered. And current trends are further increasing risk through greater cost-sharing and through a reduction in benefits.

Current political efforts are aimed at preventing any improvement in the traditional Medicare program. The most visible effort is to continue to prohibit pharmaceutical coverage, but to offer this benefit only in the private health plan marketplace. Our politicians wish to use drug coverage as a lure to entice individuals to leave the traditional Medicare program.

Shoving Medicare beneficiaries into the private marketplace can only compound the problems presented in this report. Uncertainties and risk will only increase as the market experiments with variations in premiums, cost-sharing and benefits covered.

Instead of compounding the deficiencies in the Medicare program, let’s fix them. In the traditional Medicare program, let’s provide comprehensive benefits and eliminate financial barriers to care. Then we can also eliminate the supplemental market that has been increasing costs, but without a commensurate increase in financial and health security.

Modern Physician
Jan. 23, 2003
Breaux unveils universal coverage plan
By Elizabeth Thompson Beckley

Every American citizen would be required to purchase a basic level of health insurance in a new plan for universal coverage unveiled today by Sen. John Breaux (D-La.) at a health policy conference in Washington.

The framework of the Breaux plan would give every American the right and the accountability to purchase health insurance at an affordable group rate through policies such as union, church or employer-based plans or coverage pools created by the states. States would get some federal grants to help in organizing these pooling arrangements and the federal government itself would provide fallback plans.

Additionally, every policy would be required to offer a standard benefits package comparable to the plan offered to Congress and federal employees. The federal government would continue to provide financial help for low-income citizens to offset the burden of cost sharing. A new, refundable tax credit would be available in advance for premium subsidies for the poor.

Penalties would exist for those who do not enroll themselves or their children. Breaux cites the possible loss of the personal child tax exemption as a potential example.

He says because the proposal is coming from a “moderate to conservative” Democrat, more Republicans may be willing to take a look at his plan.

http://modernphysician.com/

Comment: Everyone agrees that universal coverage must be the goal. But how you get there and what you have after you are there are absolutely crucial. An individual mandate, with all of the administrative waste of our current system of multiple health plans, using tax credits, and penalizing those who cannot afford to participate is an approach that will significantly increase costs and fall far short of universal coverage.

Comprehensive reform should be supported on the basis of sound policy, and not merely because it is a compromise proposal of a “moderate to conservative Democrat.” Compromise, in which flawed policies are adopted because they seem to fall between the extremes supported by the factions, should be rejected, especially when it is possible to agree on sound policies. Instead of negotiating compromise, the factions should be cooperating in achieving desirable goals that all of us support.

The goals in health care reform should include universality, comprehensiveness, assured access, affordability, free choice of providers, efficient administration, and an end to excessive cost escalation. These concepts should not be opposed by moderates merely because of the perception that they originated from the left. Freedom of choice, administrative efficiency, and containing public costs are concepts that are claimed by the political right. So let’s reject the mediocrity that is inevitable with compromise and instead begin cooperating on reform that is in the best interests of all of us.

American Journal of Public Health
January 2003
Editorial

Universal Health Insurance in the United States: Reflections on the Past, the Present, and the Future

By Bruce Vladeck, PhD

… advocates of universal health insurance need to reject the proposition that their goals can be achieved through a series of incremental steps. When the concept of incrementalism first began appearing in the political science literature in the United States, the model was the Social Security Act, which began in 1935 in quite a limited form. The original law was confined to old-age benefits and Aid to Families with Dependent Children, but it didn ‘t have survivor benefits, federal disability benefits, or much in the way of benefits for spouses, and of course didn’t contain Medicare or Medicaid. In the 67 years the Social Security Act has been in existence, it has been amended 40 times, and most years the program has had some incremental improvement. Since the founding fathers of Medicare and Medicaid were primarily alumni of the Social Security system’s development, it is not surprising that they adopted a similar strategy toward health insurance.

But somehow, over time, this particularistic strategy has been transformed into a normative imperative about how to do politics in the United States. According to this view, the only possible change is incremental: expanding health insurance can only be achieved in incremental steps. But over the last 35 years, incremental expansions in public health insurance have not been sufficient to reduce the number of the uninsured. The private health insurance system has been unraveling at a pace roughly equal to that of expansions in public programs, while population growth has largely been driven by immigration-immigration to a country in which a widely disproportionate share of new Americans lack health insurance.

Meanwhile, as proponents of universal health insurance have been incrementally trudging “sideways,” advocates of nonincremental strategies in other spheres of politics and public policy have scored some notable successes, at least from their point of view. For instance, in the mid-1990s the Economic Opportunity Act was repealed, along with many other valuable remnants of the Great Society’s legislative outburst of 1965 to 1966. Major parts of the infrastructure through which civil rights were enforced in the 1970s and 1980s have been dismantled. In 1995 to 1996, Congress eliminated entitlement for cash benefits for low-income mothers and their children, along with a whole range of entitlements for legal immigrants. In addition, Congress came very close to eliminating the entitlement status of Medicaid. There have been very significant nonincremental changes in other areas of public policy as well.

Those who worked most strenuously for all those changes had no patience for incrementalism as a prescriptive theory: they always felt that it was a much better strategy to go for broke. They asked for too much, they overreached, on the theory that you are only going to get a fraction of what you ask for anyway, but if you don’t ask for enough to start with, you certainly won’t get enough.

This is an old political debate, but whatever the advocates of universal health insurance have been doing for the last 30 or 35 years, it obviously hasn’t worked very well. There is very little to lose from trying something different. One of the different things that might be tried is to determine in very broad terms what the goals and principles of universal health insurance are by deciding on a set of defining ethical and moral principles and insisting that those goals and objectives be part of every conversation until they are achieved. Perhaps the “Rekindling Reform” initiative will help shape such goals and principles for universal health insurance.

http://www.ajph.org/cgi/content/full/93/1/16

The January issue of the American Journal of Public Health is dedicated to “Rekindling Health Care Reform.”

The Kaiser Commission on Medicaid and the Uninsured
The Medicaid Resource Book
July 2002
By Andy Schneider, et al

In total, the states spent $6.6 billion (federal and state funds combined) on (Medicaid) program administration in FY 1997, representing $163 per enrollee and 3.9% of total Medicaid spending.

… these estimates do not include the administrative costs incurred by Medicaid managed care plans. In some states, administrative outlays are folded into capitation payments to MCOs (managed care organizations). These outlays reflect the costs attributable to activities such as utilization review, quality improvement, and data collection and reporting. Although these amounts are not included in the data states report to CMS, one study has reported that HMOs participating in Medicaid had administrative cost ratios of over fourteen percent in 1998. The same study found that HMOs that did not participate in Medicaid had administrative cost ratios of just under 16 percent for that same year.

A… point is made on the managed care side of the program. The increase in state contracting with MCOs on a risk basis, it is argued, creates the need for more, not fewer, administrative resources: “the movement by Medicaid officials to contract with large managed care companies does not, as many originally thought, mean that the staffs of state governments can easily be streamlined. To the contrary, the effective management of managed care puts pressures on state agencies to hire additional personnel. Failure to do so seriously threatens the access of Medicaid enrollees to health care of adequate quality. Whether state agencies will be able to build and sustain adequate staffs to deal with managed care in an era dominated by the dogma of downsizing remains an open question.”

For both states and the federal government, Medicaid is a challenging program to administer. Medicaid bears all of the administrative responsibilities of a traditional insurer, which range from determining the scope of benefits it offers to processing claims to monitoring the quality of services it purchases. In addition, Medicaid pays for a much broader array of benefits than private insurers or Medicare and must make income and resource eligibility determinations that those payers do not. Finally, states and the federal government must carry out these responsibilities in an environment of rapid change in the health care marketplace and ever-increasing fiscal stakes.

http://www.kff.org/content/2003/2236/

Comment: Publicly administered health insurance programs have much lower administrative costs than do private health plans. But it is important to realize that much of the efficiency of public programs is lost in our fragmented, duplicative method of funding health care. By using private managed care organizations, significant percentages of public funds are being diverted to private administrative costs. But what is not commonly realized is that the public administrative costs are also increased even more because of the requirement for additional state oversight of the managed care organizations. And this doesn’t even take into account the greater administrative burden and costs placed on the providers of health care.

Reform advocates who reject the single payer model because of lack of political feasibility usually support increases in public programs to fill in the voids in coverage. They must keep in mind the fact that advocacy for this model of reform comes at the very high cost of perpetuating and expanding the egregious administrative waste of our system.

Reasonable solutions can be achieved only after the problem is precisely defined. Administrative waste is one of the greatest and most serious problems of our current system. A satisfactory solution must reduce this waste. The single payer model is clearly the most administratively efficient system of funding health care. The burden should be on advocates of other models of reform to prove the superiority of their approach. Lacking that, we should move forward and enact a single payer system now.

The Providence Journal
1/21/03
Editorial
A National Health System

The United States already has a national health plan. It’s called Medicare. Medicare does not, of course, cover everyone, but it could. And perhaps someday it will.

The big advantage of a nonprofit, government-run insurer like Medicare is that it spends relatively little on administrative costs.

The problem with American health care… isn’t that we’re not spending enough. It’s that we’re wasting resources.

It is possible to have a medical system that delivers top-quality care for everyone without spending more money. It only requires the political courage to displease some powerful interests and an electorate demanding change. Granted, that is a tall order.

http://www.projo.com/opinion/editorials/content/projo_20030121_21edmed.cd19c.html

Los Angeles Times
January 17, 2003
The Unmanaging of Health-Care Costs
By Uwe E. Reinhardt

In referendum after referendum, Americans have shown their distaste for the single-payer approach, such as Canada’s, that can control health spending while protecting people from bankruptcy over medical bills with rationing of some high-tech care. Americans showed equal disdain for the Clinton health plan, which sought to control spending more gently with privately managed care, regulated by government.

Now Americans have defeated managed care by employers, virtually the only cost-effective quality approach left for employees.

What Americans want is really quite simple: all the health care they or their doctors can imagine, virtually free, without added taxes for health care and without higher out-of-pocket costs for their “employer-provided” health insurance. That’s all. Call it part of the American dream.

As the dreamers watch health care chewing up their paychecks, and as their out-of-pocket payments for health care rise inexorably, the dreamers will stomp their booties in despair and look for a culprit. They need not look beyond the mirror.

http://www.latimes.com/news/opinion/commentary/la-oe-reinhardt17jan17,0,6534 372.story?coll=la%2Dnews%2Dcomment%2Dopinions

Comment: Are the dreamers of their own personal health care utopia the real culprits?

Our message to them has been quite clear. Absolutely everyone can have affordable access to virtually all reasonable, beneficial health care services if only we replaced our flawed, wasteful system of funding care with a more efficient, publicly-administered, single insurance program. That is what they hear from us, but, from their perspective, what is really the truth?

They are intelligent. They know that you cannot add over 40 million individuals to the insurance pool without greatly increasing costs. And they know who will have to pay for that care since most of those without insurance cannot afford to pay their full share now. They also know that if you allow everyone to have all of the care they want, costs will skyrocket because people will automatically overutilize the health care system. Since the system would be publicly funded, people will be taxed to death. The economy will deep six because American businesses cannot afford the high taxes required by such an expensive health care system. Many understand that limiting costs would stifle technological innovation, threatening access to unknown but surely life-saving care at some vague time in the future. And, finally, the government can’t do anything right and would wreck our health care system with its burdensome and inefficient bureaucracy.

Any single payer advocate can refute each of these points. But most of us are totally ineffective in convincing individuals that their factual data base is corrupted, and that we have a new information data base that will replace their flawed knowledge with the “real” truth.

Whom do we blame? Is it the dreamers who want health and financial security based on inadequate and untruthful information but on the facts as they understand them? Is it the vested interests that profit from continuing their campaigns of misinformation? Is it the advocates of reform who have failed to communicate adequately the true facts made available to us through health policy science? Is it the politicians who do understand the issues but who are more driven by polls and elections than by policies that would benefit their constituencies? Though this list is incomplete, it seems that we are all culprits.

Is there any hope? The recent Romanow process in Canada revealed that a nation can have a very good grasp of rational health care policy and can maintain solid support of their system in spite of intense political efforts at sabotage. How did Canada manage to arrive at this level of support for their system? It’s really quite simple. They’ve lived with their system for decades, and, through personal experience, they know exactly what it is and how it works. They are not swayed by the vested interests and ideologues that disseminate untrue statements about their system.

Can we ever have that level of understanding in the United States? We can, but it will take a massive grassroots effort in which we all must participate. If we do our best, we will no longer have to accept a share of the blame. On the other hand, if we fail to be a part of the solution, then we will continue to be a part of the problem.

The New York Times
January 16, 2003
Frist and Health Care

To the Editor:

Re “Weapon in Health Wars: Frist’s Role as a Doctor” (Political Memo, Jan. 11):

I am a practicing pediatrician and emergency physician in a large urban hospital. Accepting Senator Bill Frist as a spokesman for health care reform is difficult for me. He is a businessman-physician who did transplant surgery and made a lot of money in corporatized medicine – not exactly a mainstream medical practitioner.

Most doctors in poll after poll favor a single payer system and are dismayed at the continuing privatization of medical care. It’s time for physicians and patients to have the courage to publicly support health care as a right; lacking this principle, our current nonsystem will continue to implode. Does anyone really believe anymore that the marketplace medicine that Dr. Frist represents is working?

David A. Poleski, M.D.
Grosse Ile, Mich.

http://www.nytimes.com/2003/01/16/opinion/L16FRIS.html