The Washington Post
July 7, 2002
By Michelle Singletary

My family has health insurance through my job. But what if I were pink-slipped because of some accounting irregularity that caused my company to go bankrupt? What if my company decided that the best way to pump up its stock price was to announce major layoffs?

I’ll tell you what I would do: I’d immediately sign up to continue my coverage through COBRA.

In theory, COBRA is a good law. In practice, most workers can’t afford to pick up the coverage. Only 7 percent of unemployed workers or their families used COBRA in 1999, according to the Kaiser Commission on Medicaid and the Uninsured.

I understand why so many people, faced with the high cost of this coverage, decide not to take advantage of their COBRA rights. If you and your dependents are healthy and money is tight, paying the mortgage or the car loan is your priority.

But life has a way of shifting priorities and problems. Many people who file for bankruptcy protection do so because they can no longer handle the crush of medical bills as a result of a catastrophic illness.

Is it fair that in a country as rich as ours there is anyone who has to worry about being denied health care because of its cost?

Absolutely not. All of us should be concerned, and we should work to change a system in which receiving good health care often comes down to the jobs we hold.

But until things do change, you need to prepare for the worst. In addition to saving at least three months’ living expenses, pump up that bank account to include the possibility that you may have to pay your full health insurance premium.

… if you have a good income, learn to live on less. Stop buying things you don’t need so when a crisis hits — medical or otherwise — you have some financial resources to fall back on, at least for a little while.

http://www.washingtonpost.com/wp-dyn/articles/A31306-2002Jul6.html

Comment: And if you don’t have a good income?

Universal insurance is the only answer.

The Washington Post
July 7, 2002
By Michelle Singletary

My family has health insurance through my job. But what if I were pink-slipped because of some accounting irregularity that caused my company to go bankrupt? What if my company decided that the best way to pump up its stock price was to announce major layoffs?

I’ll tell you what I would do: I’d immediately sign up to continue my coverage through COBRA.

In theory, COBRA is a good law. In practice, most workers can’t afford to pick up the coverage. Only 7 percent of unemployed workers or their families used COBRA in 1999, according to the Kaiser Commission on Medicaid and the Uninsured.

I understand why so many people, faced with the high cost of this coverage, decide not to take advantage of their COBRA rights. If you and your dependents are healthy and money is tight, paying the mortgage or the car loan is your priority.

But life has a way of shifting priorities and problems. Many people who file for bankruptcy protection do so because they can no longer handle the crush of medical bills as a result of a catastrophic illness.

Is it fair that in a country as rich as ours there is anyone who has to worry about being denied health care because of its cost?

Absolutely not. All of us should be concerned, and we should work to change a system in which receiving good health care often comes down to the jobs we hold.

But until things do change, you need to prepare for the worst. In addition to saving at least three months’ living expenses, pump up that bank account to include the possibility that you may have to pay your full health insurance premium.

… if you have a good income, learn to live on less. Stop buying things you don’t need so when a crisis hits — medical or otherwise — you have some financial resources to fall back on, at least for a little while.

http://www.washingtonpost.com/wp-dyn/articles/A31306-2002Jul6.html

Comment: And if you don’t have a good income?

Universal insurance is the only answer.

The New York Times
July 6, 2002
By Milt Freudenheim

With Congressional passage of a Medicare drug benefit still far from certain, about half the states are at least considering joining a Bush administration program that will provide federal matching money to extend drug coverage to elderly people whose incomes are modest but too high for Medicaid.

Some states are shunning the program, however, warning of financial risks for their Medicaid budgets and the low-income people they already serve.

So why are some states concerned? Because under the new federal program, which will provide each participating state a waiver from Medicaid law, there will be a federal subsidy ceiling that will rise no higher, over the five-year span of the waiver, than the total federal contribution for Medicaid that a state received before the new drug program.

In other words, from Washington’s perspective the new program will be “budget neutral”: for each dollar that a state receives under the program, it must find a dollar of savings elsewhere in the government’s contribution to Medicaid.

Cindy Mann, a Medicaid expert at the Kaiser Family Foundation:

“The waivers put all the risks onto the states and the beneficiaries. That is a fundamental change in the way the Medicaid program is normally financed.”

http://www.nytimes.com/2002/07/06/politics/06PLAN.html

Comment: The policy implications are important from two perspectives: the implications for the current Medicaid and Medicare programs, and the implications in the future once we have a universal program of health insurance.

Medicaid is a critically under-funded program. Since states must participate in the funding, the current state budget crises are only compounding the problem. The insistence of the Bush administration that this expansion of prescription coverage be budget-neutral within the Medicaid budget merely pulls more funds away from already critically under-funded Medicaid services. Providers will bail out not because their profits are diminished, but rather because they cannot sustain the increasing losses. Starving a program of funds is a devious method of assuring its demise.

Unfortunately, the administration has established a similar policy for our Medicare program. They insist that any changes be budget-neutral. For instance, they have stated that any new Medicare prescription benefit must be paid for out of reductions to other providers. With a 5.4% decrease in physician payments this year, and more cuts scheduled for each of the next few years, further reductions though the budget-neutrality policy simply cannot be tolerated. Thus Medicare will be further starved of funds, easing the way to the administration’s goal of turning Medicare over to the marketplace. Spartan benefits with unaffordable cost-sharing will be inevitable for the majority of beneficiaries.

What about budget-neutrality once we have a program of universal health insurance? Isn’t one of the promises of a single, universal program that we can control health care costs into the future? Global budgeting promises budget neutrality, with appropriate adjustments for inflation (and for technological expansion, if that is our priority).

Why is global budgeting acceptable in a single payer program, but undesirable in our existing Medicare and Medicaid programs? The answer is very simple. We have more than enough resources to fund comprehensive services for everyone, but first we would have to eliminate the administrative waste characteristic of our current system. Maintaining expenditures at the current 14.7% of our GDP would assure adequate funding for health care forever.

But then why is global budgeting failing for Medicare and Medicaid? The answer is that we have failed to adequately fund the two most expensive risk pools in the nation, Medicare, composed of the high-cost elderly population and those with long-term disabilities, and Medicaid, composed of low-income individuals with greater medical needs. If we are to isolate high-cost individuals in exclusive risk pools, we must fund those pools much more generously than we do the risk pools for the remaining healthy individuals. But we don’t do this. We under-fund Medicare, and critically under-fund Medicaid, while we over-fund private health plans in order to generously support this superfluous industry.

We see where our national policy priorities currently lie. Isn’t it time to re-prioritize?

The Philadelphia Inquirer
July 5, 2002
By James Kuhnhenn
Inquirer Washington Bureau

Almost 10 years after President Bill Clinton tried to overhaul the nation’s health-care system, the American people appear ready to try again.

The plight of the uninsured is edging back into political consciousness, say lawmakers, lobbyists and pollsters, creating fertile ground for a new push toward universal health insurance.

The new direction – away from incremental measures and toward more ambitious goals such as universal coverage – is politically significant, as Republicans and Democrats struggle for control of Congress in November’s elections. Health care could compete with President Bush’s war on terrorism for voters’ attention.

Ayres (Republican pollster Whit Ayres) detected the new trend in public sentiment in a nationwide poll of 1,000 people he conducted March 18-20. He was struck by the response to the question: Would you like to see a government-owned, government-run health-care system in America?

Forty percent of the respondents said yes. “It’s a little higher than I expected,” Ayres said. The poll had a margin of error of 3 percentage points.

Democrats, who had abandoned plans for an ambitious health-care restructuring, are reassessing their strategy of tackling health-care issues in small bites. Those efforts, most notably prescription-drug benefits for seniors and patient-friendly HMOs, have led to huge partisan rows in Congress but no real solutions to help Americans get affordable access to doctors and medicines.

Senate Majority Leader Tom Daschle (D., S.D.):

“You have to address cost, access and quality from a comprehensive point of view. And while we failed 10 years ago, I think you could say we failed in the 10 years since to deal with these issues incrementally. There isn’t any outstanding success story to talk about.”

http://www.philly.com/mld/philly/news/nation/3604633.htm

Comment: It is not surprising to see that a Republican pollster would characterize universal health care coverage as not only a government-run but also a government-OWNED health care system. Americans would surely emphatically reject socialized medicine. Yet 40% supported this, the most extreme version of comprehensive reform!

Ironically, the moderate position now is to support national health insurance while continuing to support our existing private and public ownership of the health care delivery system. Supporting incrementalism while rejecting any consideration of comprehensive approaches has now become an extreme position.

It is now our task to be certain that the public and our political leaders have a clear understanding of the equity, efficiency, and comprehensiveness of a publicly administered program of universal health insurance. In this election season, our politicians must hear this message.

The Philadelphia Inquirer
July 5, 2002
By James Kuhnhenn
Inquirer Washington Bureau

Almost 10 years after President Bill Clinton tried to overhaul the nation’s health-care system, the American people appear ready to try again.

The plight of the uninsured is edging back into political consciousness, say lawmakers, lobbyists and pollsters, creating fertile ground for a new push toward universal health insurance.

The new direction – away from incremental measures and toward more ambitious goals such as universal coverage – is politically significant, as Republicans and Democrats struggle for control of Congress in November’s elections. Health care could compete with President Bush’s war on terrorism for voters’ attention.

Ayres (Republican pollster Whit Ayres) detected the new trend in public sentiment in a nationwide poll of 1,000 people he conducted March 18-20. He was struck by the response to the question: Would you like to see a government-owned, government-run health-care system in America?

Forty percent of the respondents said yes. “It’s a little higher than I expected,” Ayres said. The poll had a margin of error of 3 percentage points.

Democrats, who had abandoned plans for an ambitious health-care restructuring, are reassessing their strategy of tackling health-care issues in small bites. Those efforts, most notably prescription-drug benefits for seniors and patient-friendly HMOs, have led to huge partisan rows in Congress but no real solutions to help Americans get affordable access to doctors and medicines.

Senate Majority Leader Tom Daschle (D., S.D.):

“You have to address cost, access and quality from a comprehensive point of view. And while we failed 10 years ago, I think you could say we failed in the 10 years since to deal with these issues incrementally. There isn’t any outstanding success story to talk about.”

http://www.philly.com/mld/philly/news/nation/3604633.htm

Comment: It is not surprising to see that a Republican pollster would characterize universal health care coverage as not only a government-run but also a government-OWNED health care system. Americans would surely emphatically reject socialized medicine. Yet 40% supported this, the most extreme version of comprehensive reform!

Ironically, the moderate position now is to support national health insurance while continuing to support our existing private and public ownership of the health care delivery system. Supporting incrementalism while rejecting any consideration of comprehensive approaches has now become an extreme position.

It is now our task to be certain that the public and our political leaders have a clear understanding of the equity, efficiency, and comprehensiveness of a publicly administered program of universal health insurance. In this election season, our politicians must hear this message.

Statesman Journal
June 28, 2002
By Susan Tom

Oregon is one step closer to possibly becoming the first state in the country to have universal health care.

Health Care for All – Oregon, sponsors of a proposed initiative that would pay all necessary medical expenses for all Oregon residents, turned in 81,891 signatures Thursday. It needs 66,786 valid signatures to make the November ballot.

Under the Oregon Comprehensive Health Care Finance Plan, a new state government-funded nonprofit corporation would be set up to pay all medically necessary services, including emergency care, dental, vision, mental health, alternative medicine and long term care. No one can be excluded from the plan because of a pre-existing condition.

The plan would be financed with additional income and payroll taxes as well as federal money spent on health care and individual dollars spent on deductibles and co-payments.

http://news.statesmanjournal.com/article.cfm?i=44242

“The legislation to cover some drug benefits under Medicare passed by the US House of Representatives late on June 27 is the most cynical, misguided, disrespectful, insensitive and inappropriate, demeaning political pabulum yet. It requires about a $400 a year premium and $250 a year deductible to be funneled through private insurers. It is “means tested” to allow subsidies to poorer patients (earning less than 175% of poverty level – does anyone know what percentage of people over 65 fall into this category?); leaves a gap in coverage for any pharmacy expenses between $2001 and $3700; and avoids any impact on pharmaceutical costs and pricing. This legislation will markedly change the social insurance model of the Medicare program, provide less than adequate pharmaceutical coverage from even the middle class point of view (involving up to $2350 in out of pocket expenses for medicines alone before the government picks up the full cost), requires an expensive administrative nightmare to not just keep track of pharmaceutical expenditures, but also to intrusively inquire into the level of every beneficiaries’ income, while providing an incredible financial windfall to the insurance and pharmaceutical industries. Everyone interested in a solution to our current health system collapse must use the perversities of this proposal to demonstrate how a single payer, universal coverage, comprehensive health system is the only meaningful reform.”

Comment: For the first $3700 of prescription coverage the Medicare beneficiary must pay a $33/month premium ($396), a $250 deductible ($250), 20% of costs up to $1000 ($150), 50% of costs up to $2000 ($500), and 100% of costs up to $3700 ($1700). The out-of pocket expense is $2996 for a $3700 benefit. Thus the beneficiary is paying 81% to receive a 19% insurance benefit. With the beneficiary providing the primary funding and the insurance company paying nominal cost-sharing, this reverses the ratios of traditional health care insurance. And this is to purchase an insurance product in the private market that the insurance industry has stated will not be offered.

Jeoff Gordon is right. We must use the perversities of this proposal to demonstrate that a comprehensive, universal, single-payer plan is the only meaningful reform.

Amarillo Globe-News
June 24, 2002
By Dr. Ted Nicklaus

The ethics of medical care has gained increasing public attention as scientific and technological advances force us to face the difficult decisions affecting life and death.

“Medical care” deals with treating individual patients or specific medical conditions. In contrast, “health care” … refers to the delivery of medical care in society.

Health care is usually discussed in terms of economics, logistics and politics. The emotion of such discussions tend to drown out ethical viewpoints, and the ethics of health care is seldom considered publicly. But, health care in this country has become disjointed and frustrating for both patients and those who provide medical care. For many, the current deficiencies of health care delivery have impaired their health and even determined life and death. It is time to include ethics in the health care debates.

It is time to recognize that our system is inappropriately expensive, fragmented, unjustly distributed and frustrating to both providers and patients. The frustrations are most evident when the logistics and decisions are profit-driven and politically protected. In any discussion of reform, ethical considerations should not be ignored.

Discussions and study of ethics in the medical care of individuals has significantly benefited patients and physicians alike during the last several decades.

We can no longer exclude ethical perspectives in our discussions of providing health care for our citizens. To do so would defeat the very purpose of medical service in society.

http://www.amarillonet.com/stories/062402/fea_viewhealth.shtml

Comment: Although these excerpts from Dr. Nicklaus’ article emphasize the importance of ethics, not only for individual patients but also for the entire health care system, the full article expands on this topic and should be read in its entirety. It should be downloaded and distributed widely.

Amarillo Globe-News
June 24, 2002
By Dr. Ted Nicklaus

The ethics of medical care has gained increasing public attention as scientific and technological advances force us to face the difficult decisions affecting life and death.

“Medical care” deals with treating individual patients or specific medical conditions. In contrast, “health care” … refers to the delivery of medical care in society.

Health care is usually discussed in terms of economics, logistics and politics. The emotion of such discussions tend to drown out ethical viewpoints, and the ethics of health care is seldom considered publicly. But, health care in this country has become disjointed and frustrating for both patients and those who provide medical care. For many, the current deficiencies of health care delivery have impaired their health and even determined life and death. It is time to include ethics in the health care debates.

It is time to recognize that our system is inappropriately expensive, fragmented, unjustly distributed and frustrating to both providers and patients. The frustrations are most evident when the logistics and decisions are profit-driven and politically protected. In any discussion of reform, ethical considerations should not be ignored.

Discussions and study of ethics in the medical care of individuals has significantly benefited patients and physicians alike during the last several decades.

We can no longer exclude ethical perspectives in our discussions of providing health care for our citizens. To do so would defeat the very purpose of medical service in society.

http://www.amarillonet.com/stories/062402/fea_viewhealth.shtml

Comment: Although these excerpts from Dr. Nicklaus’ article emphasize the importance of ethics, not only for individual patients but also for the entire health care system, the full article expands on this topic and should be read in its entirety. It should be downloaded and distributed widely.

In a prior quote, Victor R. Fuchs, Ph.D., Professor of Economics (Emeritus), Stanford, stated, “National health insurance will probably come to the United States after a major change in the political climate – the kind of change that often accompanies a war, a depression, or large-scale civil unrest.”

Theodore R. Marmor, Ph.D., Professor of Public Policy and Management and Professor of Political Science, Yale University School of Management, responds:

“I am always amused to read the political analysis of economists. Fuch’s heart is in the right place, but his suggestion that war, etc. will be needed is, I believe, just plain wrong. It did not take war or depression to get Medicare; it took a shift in the political balance of power, which might have emerged from such tragedy, but did not in that instance. This is why Oberlander and I wrote the piece we did on progressive reform. Note that if these were the preconditions, we all should either stop thinking about it or push for tragedy. It is a call for hopelessness in part. The discussion of the rise of menu health insurance is much more useful.”

USA Today
June 26, 2002
IRS rule may foster new type of health plan By Julie Appleby

New types of health insurance plans aimed at getting patients to act more like shoppers could get a crucial boost from the Internal Revenue Service this week.

The IRS is widely expected to formally allow employees to roll over, tax-free, money employers give them each year to help pay the out-of-pocket costs for certain high-deductible health care insurance policies.

Here’s how the plans work: Employers provide high-deductible health insurance policies, whose premiums are cheaper than those for typical low-deductible health insurance. At the same time, companies also give employees a set dollar amount in individual worker accounts to help cover those deductibles. If the worker’s account falls short of the deductible, the worker makes up the difference.

Any money left in the accounts at the end of the year generally rolls over to the next, an added incentive for employees to be judicious about their use of health care services.

Jon Camola of the Wye River Group, a think tank that promotes the policies as a way to slow rising health costs:

“We’ve learned the IRS wants to support what’s currently taking place in the market.”

http://www.usatoday.com/money/health/2002-06-26-irs-plan.htm

Comment: Is this health policy or tax policy or something else? Let’s look at some numbers. It is important to note that, although these numbers are hypothetical, they very accurately demonstrate the nature of the distortion of the insurance risk pool that takes place when switching from a single risk pool to a combination of personal health accounts and a catastrophic risk pool.

Hypothetical assumptions:

Health care costs average $5000/person (actually $5427 per CMS)

Our hypothetical pool contains 200,000 people

Therefore, the health care costs for this pool are $1 billion

40% of funds are placed in the personal health accounts -$400 million

The other 60% pays for catastrophic coverage – $600 million

The insurance plans have administrative costs of 20% -$120 million Thus $480 million is available to pay catastrophic health care costs

80% of the insured are healthy and account for 20% of costs – $200 million 20% are unhealthy and account for 80% of costs – $800 million

The 20% that are unhealthy use their own accounts – $80 million And they use the catastrophic funds – $480 million Spending the total of available funds – $560 million

But, their costs are $800 million This leaves a deficit of $240 million

To cover the deficit, with added administrative costs, catastrophic premiums would increase by $300 million Adding to the original $600 million, total catastrophic premiums would be $900 million This is 90% of the total health care costs

But the claim is that catastrophic insurance is cheap, priced at maybe only about half of the amount paid for more traditional insurance. Yet we see that the premiums charged in this hypothetical example would save only about 10%. How could that be?

The fundamental principle is very simple. Equitable insurance risk pools are funded by everyone, with each paying a modest amount to assure the financial security of those with high health care needs. The individuals with high costs consume a large percentage of the health care funds. Removing the personal health account funds from the risk pool significantly reduces the total funds available. The funds in these personal accounts are permanently sequestered away from the global risk pool, and, presumably, the healthy would eventually divert them to other personal uses. Yet the health care costs must be met. That means that these sequestered funds must be replaced by higher premiums, or worse, by making care unaffordable for those with high needs through increased out-of-pocket expenses.

This is not good health policy and it’s not good tax policy. Let’s reject this terrible idea and adopt an equitably-funded universal risk pool. We’re already paying for it. We should have it.

Clarification – Health Reimbursement Arrangements (HRAs)

Today the Department of the Treasury released its rulings on Health Reimbursement Arrangements (HRAs). HRAs that meet specified requirements are not taxable, and the funds can be carried forward even into retirement. However, if the funds are used for other purposes, they become taxable. They are not the same as Flexible Spending Arrangements (FSAs).

In today’s Quote of the Day message, reference was made to “personal health accounts.” A few of the details included might not apply to the HRAs. Nevertheless, these programs do remove funds from insurance risk pools and segregate them for individual use. So the analysis presented, demonstrating the negative impact on the insurance risk pool, still definitely applies.

Regardless of their tax treatment, the high-deductible plans associated with these products will either require higher premiums, or will shift costs to individuals that have high health care needs. They are not a solution for any of the major health care problems that we face today, and are detrimental for those with severe acute and chronic disorders.

For the Department of the Treasury release on HRAs:

http://www.ustreas.gov/press/releases/po3204.htm

“We also, of course, think the data strongly support all efforts to achieve universal coverage. An additional exhibit, number 34, shows the devastating impact of lack of coverage on people with chronic illnesses — and the effectiveness of Medi-Cal in helping to meet their needs.”

Comment: Although the report of Dr. Brown and colleagues did demonstrate that MediCal patients do report a poorer level of health than the uninsured, the importance of having this coverage cannot be understated. Unhealthy populations clearly benefit from coverage, even when the programs are under-funded (as is MediCal). Quoting from the text accompanying exhibit number 34 of their report:

“CALIFORNIANS WITH PARTICULAR HEALTH PROBLEMS”

“In addition to querying respondents about their overall health and use of services, CHIS (California Health Interview Survey) asked a battery of questions among those with particular illnesses or health problems. We report selected findings for asthma, diabetes, high blood pressure, and heart disease. The survey asked several questions (depending on the type of illness); in this section we show how the results correlate with health insurance. To simplify the presentation, we provide figures for just the three largest insurance categories: the uninsured, those with Medi-Cal or Healthy Families, and those with job-based coverage.

“Exhibit 34 shows these results for ages 18-64. The uninsured show a somewhat lower symptom prevalence of asthma than those on Medi-Cal/Healthy Families or with job-based coverage. Among those reporting asthma, however, the uninsured have similar rates of taking asthma medication as individuals with job-based coverage, but are far less likely than those with Medi-Cal. Just 41.3% of the uninsured with asthma take medications, compared to 45.1% for those with job-based coverage and 67.8% for those with Medi-Cal or Healthy Families.

“A similar trend exists among people with diabetes. Again, prevalence rates are lower for the uninsured, but among those who report having diabetes, far fewer are taking insulin or pills: 57.8% of the uninsured compared to 75.4% and 75.7% of those with Medi-Cal/Healthy Families and those with job-based coverage, respectively.

“Among people with high blood pressure, again the pattern is the same. Fewer uninsured report having high blood pressure, but there is a dramatic difference by insurance status in whether they take medication for this problem. Only 29.5% of the uninsured with high blood pressure take medications, about half that for those with Medi-Cal/Healthy Families (61.3%) or job-based coverage (53.1%).

“Finally, the data on heart disease exhibits the exact same pattern. Although fewer uninsured report having heart disease, those with this condition are much less likely to take medications. Just 27.2% of the uninsured indicate that they take medication for it, compared to 60.1% of those with Medi-Cal/Healthy Families and 42.4% of those with job-based coverage.

“Overall, then, we see that insurance coverage is strongly correlated with taking medication for chronic diseases. In addition, it is noteworthy that for three of the four chronic diseases (asthma, high blood pressure, and heart disease), far more individuals with Medi-Cal take medication than those with private coverage. This indicates how important Medi-Cal coverage can be for improving health behaviors. Although it is not possible to prove that uninsurance causes Californians to refrain from taking needed medications without controlling for confounding variables, such a sequence of events is highly likely given the high price of medicines and the relatively low incomes of uninsured individuals and families. Combined with our findings from the previous subsection that showed lower health status, utilization, and lack of regular sources of care, it is clear that the uninsured face numerous obstacles in attempting to use California’s health care system.”

Further comment: An important feature of MediCal, from the patient’s perspective, is that it provides comprehensive benefits with virtually no out-of-pocket expenses. From the perspective of the health system, the under-funding creates problems for everyone because of significant cost shifting, and it threatens the financial solvency of MediCal providers. So access is improved by the elimination of individual financial barriers to care, but it is impaired by the failure provide enough funding to assure broad participation by the providers of care, though this study indicates that the former plays a much, much greater role. Since MediCal does play a very crucial role in providing access to care it must be vigorously supported until a universal system is in place. But, also, we can’t let up on our efforts to attempt to replace this flawed system with an equitable, comprehensive program of health care coverage for everyone.