Economic and Social Research Institute
November 2002
Covering America: Real Remedies for the Uninsured
Volume II

Medicare for All

James A. Morone has proposed a single-payer approach to provide universal coverage with the following elements:

* The Medicare program with expanded benefits, including no cost sharing, would provide automatic coverage for all legal residents of every age.
* Funding would come solely from revenues raised by a new federal value-added tax.
* States could opt out (for residents under age 65) by proposing a program that meets federal guidelines and by paying 25 percent of the cost.
* Employers could offer coverage for additional benefits, with the employer-paid premium not subject to income tax.

http://www.esresearch.org/newsletter/booktwo/CovAm2.htm

Comment: Three new proposals for comprehensive health care reform have been added to the ten proposals presented last year by the Economic and Social Research Institute. Of great significance is the fact that this single payer, Medicare for All proposal has helped to place this concept back into the national debate over the various options for reform. This is another crucial breakthrough since the single payer option has often been explicitly excluded from the forums on reform (as it was in the ESRI report last year).

Some single payer advocates might be concerned about a few of the features of Professor Morone’s proposal, such as the value added tax (VAT) and an employer option for supplementary insurance. He ameliorates, to some degree, the regressive nature of the VAT by exempting food, medicine and shelter, and by expanding the earned income credit to families with incomes up to $45,000. Also he limits the employer supplement to extra benefits such as hospital amenities.

But rather than diverting attention to various details of his proposal, we should direct our efforts to being certain that the fundamental single payer message is included in all forums, discussions and deliberations. America can only benefit by making health care reform a fully informed process.

By D.R. Bahlman
Berkshire Eagle Staff
Monday, December 16, 2002

PITTSFIELD — Support for a single-payer health care insurance system appears to be gaining among health care providers in Berkshire County, according to a survey conducted by a Great Barrington physician.

Dr. David Lippman said that, of those who responded to his survey of all practicing physicians in the county, 86 percent stated that they might favor a single-payer system. The survey was sent to members of the Berkshire District Medical Society; he could not provide exact figures about the numbers of surveys sent out or returned. He noted that many of the county’s health care providers were not surveyed because they are not on the rolls of the medical society, which has about 200 members. He also said that a wide range of opinions were expressed.

“Some said they wanted the government out of it entirely,” he said.

Lippman and other members of MassCare, a statewide organization that advocates for a single-payer “universal” health care system, note that Massachusetts residents pay the highest health care costs in the nation — 30 percent above the national average per person, according to a 2000 study by two Boston University researchers — and that a single-payer system would reduce those costs substantially.

“The whole state will pay less for health care under a system that will cover every single person in the state,” said Jean Dillard of Lenox, a nurse who is a member of MassCare. “If such a system had been instituted in 2000, the state would have saved approximately $1.2 billion in that year alone.”

Citing the BU study, Dillard declared that “the biggest things we’re paying for now are administrative costs and the million-dollar salaries of CEOs of insurance companies and pharmaceutical companies.”

Under a single-payer system, said Dillard, “you could forget those costs, forget the costs of advertising that those companies and some hospitals and some doctors do, forget about costs of the bodily injury coverage in auto and homeowners’ insurance policies and the bodily injury portion of Workers’ Compensation.”

Citing statistics indicating that between 400,000 and 600,000 Massachusetts residents are currently without health insurance coverage, Dillard acknowledged that there would be a cost associated with entitling them to such coverage, “but they all won’t be sick at once.”

A “two-tier” system that combines state-funded universal health care with private health care-cost indemnity coverage wouldn’t work, said Dillard.

“The ‘healthy-wealthy’ will have the private coverage and that will leave all the expenses for the sick and poor,” she said. “The state has got to be the insurer.”

Lippman said that the benefits of a single-payer system also include uniformity of fees for service.

“It’s embarrassing that [universal access to government-funded health care] isn’t available in the world’s wealthiest nation. There’s something about medicine and something about money that’s like oil and water: They don’t mix,” he said.

Partnership for Solutions
A Project of Johns Hopkins University
and The Robert Wood Johnson Foundation
“Chronic Conditions: Making the Case for Ongoing Care”
December 2002

In the coming years, our health care system will devote increasing amounts of resources-both services and dollars-to care for people with chronic conditions. As a society, we need to ensure that these resources are spent as effectively and wisely as possible to maintain the health and enhance the individual functioning of this large segment of our population.

Care provided in the current system is not cost-effective and often leads to poor outcomes for patients with chronic conditions.

Providers, patients, and the public recognize that adjustments within the health care system are needed to improve chronic care in this country. In order to make these adjustments, health policymakers will need to reexamine how our current health care financing system values and pays for care received by people with chronic conditions, how we train health care providers to treat chronic conditions, and how the needs of people with chronic conditions are met.

http://www.partnershipforsolutions.com/

Comment:

From the Introduction:

This chartbook outlines the challenges the health care system continues to face in using its resources efficiently and effectively to provide access to high-quality, coordinated care and appropriate services that maintain health and functioning for people with chronic conditions.

By Jack Markowitz
FOR THE TRIBUNE-REVIEW
Sunday, December 15, 2002

For astronomical numbers, there’s no reason to look beyond earth. The head spins perfectly well contemplating health care in the United States, increasingly called a “crisis.”

We are spending $1.5 trillion on it this year, 15 percent of gross domestic product. Two decades ago, it was 8 percent. We outspend every other country in the world to stay — but more often to get — well. Five percent of us, when sick, generate 60 percent of the bills.

The cost approaches $5,000 a year for every man, woman and child, even though 42 million of us go out into the risky day without a dime of medical insurance.

Meanwhile, the average new doctor graduates from medical school $125,000 in debt, and veteran docs are retiring early as never before. Malpractice premiums are killing them. On the other hand, medical errors kill an estimate 500 people a day in this country, while our lawmakers drive up insurance costs by “mandating” more coverages that their voters want. Prescription drug subsidies are just over the horizon.

There’s a sense that something’s got to give. What if it should prove to be freedom?

Don’t think socialized medicine died in the defeat of Hillary Clinton’s 1993 national health scheme. It gets stronger legs every day under a new euphemism: “single-payer insurance.” The single-payer being the government. Meaning the taxpayers. All would pay for all under the illusion that insurance for everybody can somehow be “free” for the needy.

The University of Pittsburgh and Pfizer Inc. recently aired some of these paradoxes at a “mini-medical school” for members of the public.

Hospitals “make a lot of money at the end of life,” Jeffrey A. Romoff bluntly pointed out. “We make no profit on prevention.”

Romoff is president of UPMC Health System, Pitt’s medical offshoot that’s now the region’s largest employer: 36,000 jobs, 20 hospitals, annual research funding of $250 million. Next step for free marketers, he suggested, ought to be to recruit manufacturers of pharmaceuticals and medical devices. But marketplace solutions will appeal less in the giving of care itself. Consolidations of hospitals will continue (“the big are eating the little”) and medical insurance providers, even if private, are apt to come down to an oligopoly of “3, 4 or 5” giants.

Dr. Arthur S. Levine, dean of the Pitt medical school, said 75 percent of health care costs stem from “preventable illnesses” rooted in negative habits and life styles. If we’d all draw up “living wills” to discourage hopeless treatments for terminal illnesses, he said, the country might save enough “to insure all the uninsured.” Genetic research offers the hope of getting at 5,000 to 10,000 “targets” in the human cell to fight disease. All drugs currently on the market have only 300 such targets.

Among the forces driving health costs higher, Professor Judith R. Lave cited a backlash against 1990s-style managed care. But the aging population, although often blamed, does not seem to be a major factor. Baby boomers are no slouches as medical consumers.

By 2010, health care looks to absorb 16 percent of an ever larger GDP. This may be scarier than it sounds. We are, after all, a service economy; manufactured goods take fewer of our dollars. And some health costs are under personal control, by way of personal habits.

The “crisis” may turn out to be this: Can the values of free markets and personal liberty keep that single payer out of our lives?

By Liz Kowalczyk, Boston Globe Staff, 12/15/2002

During the past six months, Dr. Eugene Fierman and his two colleagues were showered with offers worth thousands of dollars.

At least once a week, the nation’s pharmaceutical firms invited them for ”educational evenings” at some of the city’s priciest restaurants, including cocktails and dinner at Radius paid for by Pfizer, an insomnia discussion at Locke-Ober, and a depression talk at Maison Robert – both on Wyeth’s tab.

Drug firms through intermediary companies paid for at least 50 hours of free continuing medical education courses, which the psychiatrists could complete by phone, mail, on the Internet, or at hotels – required courses for doctors that traditionally were the province of medical schools but now are increasingly funded by the industry.

Some pharmaceutical companies wanted to hire them as temporary advisers, including Forest Pharmaceuticals, which promised the doctors $500 each for listening to a Saturday morning talk about the firm’s new antidepressant, Lexapro, at a Cambridge hotel and then providing ”advice and feedback.”

And occasionally, drug company employees dropped off at the doctors’ rented office at Faulkner Hospital small gifts: a box of cookies from the Wyeth salesman, four classical CDs from the Pfizer representative.

With investigations into the industry’s sales tactics growing, and a new voluntary code of conduct in place that stresses educating rather than entertaining doctors, Fierman, Dr. Ann Potter, and Dr. Gregory Harris – like many of their colleagues throughout the medical profession – said sales representatives now rarely offer the most lavish gifts that were routine in past years: theater tickets, golf trips, and resort weekends.

Instead, drug makers are paying for or offering more consulting opportunities, even for one evening, continuing medical education courses, and dinners billed as educational events with specialist speakers. At the Globe’s request, the three doctors kept track of pharmaceutical-related invitations and offers they received over a five-month period. The material was enough to overflow a 1-foot-square, 2-foot-high box.

”It’s hard to resist all this money and free stuff floating around,” said Harris. ”But it’s a slippery slope, and I don’t want to be in the position of doing something that crosses the line.”

The shift in the tactics drug companies are using to establish close relationships with doctors was occurring even before the industry adopted the new guidelines in July. The amount of money pharmaceutical firms spent on meetings and events, including continuing medical education, teleconferences, dinners, symposia, and get-togethers with physician advisers, more than doubled over four years to $2.1 billion in 2001, according to Verispan, a company that tracks promotional spending.

Drug industry funding of continuing medical education courses alone last year totaled $540 million, and the national organization that accredits continuing medical education providers has become so concerned about potential bias that it plans to issue stricter rules as early as January.

Drug makers say these classes and gatherings provide physicians with crucial information about medicines that could help their patients – and allow doctors to speak to each other about their experiences. But Dr. Marcia Angell, former editor of the New England Journal of Medicine, said the danger is that companies simply disguise marketing as education, while slanting presentations toward their own products and helping to increase health-care costs.

”These companies are in the business of selling drugs, period,” Angell said. ”It’s ludicrous to think you’d look to a company for education about a product they’re trying to sell.”

Physician leaders also are concerned about what they see as a rise in consulting and question whether doctors are providing meaningful advice to the companies – something required by the new guidelines – or are merely being paid large sums to listen to a sales pitch. And federal law prohibits companies from offering doctors cash inducements to prescribe their drugs. Dr. Sidney Wolfe, director of Public Citizen Health Research Group in Washington, D.C., said some consulting fees have gotten so high that he believes they border on illegal inducements. He has referred several cases to the US inspector general.

With the focus on drug industry marketing intensifying, doctors are increasingly concerned about their interactions with sales reps, and some are taking steps to limit their visits – or keep them out of their offices entirely. But that – Fierman, Harris, and Potter discovered – is not so easy.

The doctors decline consulting offers, and they no longer attend dinners. The cookies go to Bill Johnston, the practice’s part-time receptionist, who brings them to his fellow band members. Their one concession: They accept drug samples for uninsured patients, a marketing tool on which the drug industry spent $10.5 billion last year.

In early summer, Potter felt the practice was overrun with Eli Lilly salespeople. One day, she found a 22-year-old sales representative in the waiting room talking to a patient. Potter called his manager and requested only one Eli Lilly sales visit a month. The manager said no. The reason: The doctors get too many samples, he said. They gave in to two visits a month – as long as they got to choose the sales rep – even though they know samples probably increase their prescribing of those particular drugs.

”You can’t totally drop out of this crazy system,” Fierman said.

`Dinners are exploding’

At least once a week between August and November, sales representatives invited Fierman, Harris, and Potter for cocktails and dinner. The most modest restaurants: Figs and the Newton Marriott. The most posh were Radius, the Ritz-Carlton, and the Four Seasons – all dinners they didn’t attend.

Dr. Ronald Katz, an internist in a large, busy practice on Beacon Street in Brookline, said ”dinners have exploded in the past couple of months,” which he believes are ”in lieu of trips and the most expensive things they used to do.”

The industry’s new code of sales conduct requires dinners be ”modest as judged by local standards” – a guideline some companies are complying with and others are not.

”This should not include the city’s most expensive restaurants,” said Jeff Trewitt, a spokesman for the industry trade group, the Pharmaceutical Research and Manufacturers of America. ”We want there to be no distractions. We want the focus to be on a meaningful conversation about a new medicine and its potential value and characteristics.”

Dr. Susan Black, a family practice doctor in Tewksbury, drove into the city one night this fall for a dinner and discussion at the Four Seasons on urinary incontinence in women, sponsored by Pharmacia, which makes a drug for overactive bladder called Detrol LA. She earned one hour of continuing medical education credit; Massachusetts doctors must earn 40 hours of medical education credits with an approved provider every two years to remain licensed.

”They were discussing their own research, the company’s research. And they were trying to show the drug was better than their competitor’s,” Black said. ”I thought I should go because this is a big issue for my older patients. There are some really good new physical therapy approaches and surgical approaches, but they didn’t discuss those.”

Executives at Pfizer, which has paid for dinners at pricey restaurants in Boston since July, said the choice of restaurant is a ”judgment call” made by local sales reps.

”The price of the meal is so inconsequential, given what we’re grappling with around the guidelines and what’s educational or not,” said Dr. Mark Horn, Pfizer director of medical alliances. ”I would focus on the speaker, the content, and the quality of the presentation. As long as it’s balanced and fair, I’m less concerned with the selection of the eateries.”

Many education courses

Last Thursday at 1 p.m., Fierman called a toll-free number to earn one hour of continuing medical education credit listening to a teleconference called ”Stabilizing the Dopamine-Seratonin System: A New Era in the Treatment of Psychosis” – one of dozens of free, pharmaceutical-company-funded continuing medical education courses offered to the practice during the past six months.

This course, which Fierman enrolled in at the Globe’s request, was organized by a private California company called Continuing Medical Education Inc. and paid for with an unrestricted grant from Bristol-Myers Squibb and Otsuka America Pharmaceutical. The companies in November received approval from the Food and Drug Administration for a new antipsychotic medication called Abilify.

As Fierman listened from his small office overlooking Arnold Arboretum of Harvard University, Dr. Peter Weiden, director of the Schizophrenia Research Program at SUNY Downstate Health Science Center in Brooklyn, began with a history of antipsychotics and a description of why newer drugs like Zyprexa and Risperdal are superior to older medications like Haldol. (Fewer side effects like tremors.) But he devoted more than half the hour to the benefits of Abilify, often referring to it as ”the new kid on the block.” Although companies are not allowed to promote unapproved drugs, Continuing Medical Education Inc. began offering the course before Abilify was approved, something allowed under continuing medical education rules.

Fierman said the science in the class was sound, and that Abilify might very well be the next blockbuster for the mentally ill. But he said advertising the course as an objective class on brain receptors was misleading. ”If this were a lecture saying we’re introducing our new drug, that would be fine,” he said.

Drug companies usually aren’t accredited continuing medical education providers themselves. They pay for the classes offered by medical schools and accredited third-party companies like Continuing Medical Education Inc. In this case, Continuing Medical Education Inc. suggested the class topic to the drug firms and they had no input into the content, said Steve Mandell, the company’s vice president of sales and business development.

But Dr. Murray Kopelow, chief executive of the Accreditation Council for Continuing Medical Education, which oversees the continuing medical education system for doctors, said third-party companies and medical schools may have grown so dependent on drug companies for their livelihood that they’re no longer independent providers and have lost control of the agenda – and sometimes the content.

”These relationships have complicated the situation,” said Kopelow, whose organization will consider sending physician volunteers to monitor the courses for commercial slant. ”There’s probably more bias than we know.”

Consulting offers grow

Pharmaceutical companies, physicians said, also are pushing to increase their consulting relationships with them. Drug firms for years have hired respected physicians, often referred to as ”thought leaders,” to speak about their drugs at conferences and serve on advisory boards. Some doctors earn thousands of dollars from these extracurricular activities.

But some doctors said drug firms are offering more small, one-time consulting opportunities. And Fierman, Potter, and Harris received dozens of requests from drug marketing research firms – whose clients are pharmaceutical companies – to provide their opinions for a fee on the effectiveness of proposed direct-to-consumer ads and even report on how often competitors’ sales reps visited their offices.

Other physicians reported similar offers: Novartis promised Dr. Richard Parker $300 to give ”feedback about hypertension” and Dr. Martin Solomon $500 to provide advice on hormone replacement therapy.

Eli Lilly promised Dr. Jonathan Moray $750 to attend a dinner meeting on therapy for attention deficit hyperactivity disorder and ”provide his perspective on … potential new treatment options.”

Novartis spokeswoman Christine Landy said the company ”needs this feedback to guide future marketing and research” and draw up written contracts – as required by the sales code – to clearly outline the doctor’s role. But most of these dinners include a presentation about a drug the company makes or is developing.

”The companies used to call it coming to dinner,” Solomon said. ”Now it’s called consulting.”

Potter attended a consultants dinner meeting in the spring for which she was paid $400. The company, which she did not want to name, asked physicians how to catch their attention so they would prescribe the firm’s antidepressant.

”I thought, `What am I doing here?’ It was advice,” she said, ”but it was advice on marketing.”

Alice Dembner of the Globe Staff contributed to this story.

This story ran on page A1 of the Boston Globe on 12/15/2002.
© Copyright 2002 Globe Newspaper Company.

Health Affairs
Web Exclusive
November 20, 2002
Consumer-Driven Health Plans: Are They More Than Talk Now?
Consumer-driven plans are catching on and could be in the mainstream of
health care in a few years.
by Jon R. Gabel, Anthony T. Lo Sasso, and Thomas Rice

Over the past year medical journals, business magazines, and major newspapers have boldly pronounced that the era of heavy managed care is over and that a new era of consumer-driven health care financing is beginning.

Consumer-driven and defined contribution are two terms often used interchangeably, although they have different meanings. Defined contribution refers to an employer contribution strategy whereby employers set a fixed contribution for health insurance and place the employee at risk for costs beyond that point.

The term consumer-driven or consumer-directed refers to health plan design. Such plans generally involve a greater role for employees in choosing providers and health plans and in designing their own benefit package while assuming greater financial risk.

At its heart, the consumer-driven health care movement seeks to combine incentives with information to enable consumers to make informed choices about non-life-threatening health care. …consumer-driven health care is an effort to put patients in a position to say no to themselves. This can happen only if consumers are aware of the true cost and have a personal stake in it, and if they have enough information and confidence to make treatment decisions.

For purposes of clarity, we classify consumer-driven plans into three loosely defined groups. The first group we term “health reimbursement arrangement” (HRA) plans because they establish an account from which consumers draw to make health care purchases. When the account is exhausted, enrollees must typically pay out of pocket until the annual deductible is met, after which the plan becomes a traditional major medical plan. A second class of consumer-driven plans allows employees to design their own networks and benefit packages. Employees’ network and benefit selections determine the premium for their individual plan, and employees bear the financial risk for these choices above some fixed contribution from the employer. A third class of consumer-driven plans, termed “customized package” plans, allows employees, using Web-based tools, to choose from a predetermined selection of network offerings and benefit packages, such as a narrow, medium, or broad network and a rich, medium, or thin benefit package.

From the Discussion:

The major limitation of this study is that our information is largely from persons with a clear self-interest to report favorable developments about consumer-driven plans. Since there is limited experience and no independent evaluations of these plans to date, we depend heavily upon start-up and health plan executives, employee benefit managers, and benefit consultants for information and insights.

At their best, consumer-driven plans will provide a mechanism to inject incentive-based reasoning on the part of consumers into non-life-threatening medical care decisions. Employees do not bear most of the costs associated with higher use of care or use of more costly delivery systems. Consumer-driven products thus would reestablish the link between service use and an employee financial liability. If, as a result, employees respond to these incentives and use the Web tools not just to make decisions regarding their plan but to select providers based on quality, make informed treatment decisions, and manage chronic conditions, quality of care should improve. Customized package plans can expand the number of plan choices available to workers at small firms.

At its worst, however, consumer-driven health care can destabilize risk pools and lead to a redistribution of health care services and income from the sick to the healthy. A system that controls costs through price rather than nonprice rationing will almost certainly be to the advantage of higher-income groups and to the disadvantage of low-income groups, who are more likely to delay care if they lack the resources to pay for it.

People may be capable of behaving like rational consumers when they are purchasing prescription drugs or selecting health plans, but such rationality may elude them when they are informed that they have cancer.

If there is one message that resonates loudly from our interviews, it is this: “Political partisans, hold your fire! More research and experience are needed!” Independent research is desperately required to address the many issues we have identified. Researchers need to measure the extent of risk selection through studies that examine employees’ health status before they enroll in consumer-driven plans and their competitors. Researchers should analyze the redistribution of out-of-pocket costs and services in HRA plans among the sick and healthy. We need to learn the extent to which employees are using Web tools and determine whether they are becoming better consumers and whether physicians are more or less likely to deliver care according to clinical guidelines. After controlling for risk selection, researchers need to analyze both the consumer-driven plans’ ability to control claims expenses and plans’ impact on health status and employee satisfaction. This is an ambitious research agenda, but surely one with a high rate of return, if the consultants and health plans are right about the future of the health benefits marketplace.

http://www.healthaffairs.org/WebExclusives/Gabel_Web_Excl_112002.htm

Comment: The very design of consumer-driven products has two precise goals: shift the costs of health care from the purchasers of the plans to the patients, and shift the risk of coverage from the insurers to the patients. This increase in cost and risk is disproportionately shifted to precisely those individuals that have the greatest health care needs. If there has ever been a non-starter in health care reform, this is it!

And we are being called on to “hold our fire,” and watch another decade of economic experimentation on the American patient? Can we stand a decade of observing and measuring the grief and suffering of those that not only are faced with major medical problems, but also must submit to the experimentation that will determine the effect of adding the burden of financial hardship? Are we so lame that we can’t anticipate the results?

There are winners. The healthy and wealthy will benefit. But do we want to establish policies that sacrifice those with greater health and financial needs for the benefit of the rest of us? Are we really that cruel?

No more experimentation! Health policy science has already established the fact that we can provide comprehensive services for everyone, while containing costs, simply by establishing a single, publicly-administered national health program. Let’s do it now!

By PATRICK ARMSTRONG,
Brattleboro Reformer Staff
Friday, December 13, 2002

BRATTLEBORO — Concerns, suggestions and possible solutions to the goal of obtaining a universal health-care system in Vermont were the topic of discussion at the second annual meeting of Vermont Citizens Campaign for Health Thursday night.

Virtually everyone present agreed that the current health-care system in the United States and Vermont does not work, including the three panelist speakers.

“It’s clear that the health-care system in this country is crumbling,” said panelist Rep. Carolyn Partridge, D-Windham. “I passionately believe we have to do something about it, but I’m afraid the system will really have to crumble and a disaster happen before we are able to make a change.”

“The disaster’s already here,” said VCCH board member Richard Davis later in the meeting. “It’s just a matter of how it gets portrayed.”

Panelist Dr. Chris Meyer, a doctor at Brattleboro Memorial Hospital and member of Physicians for National Health, told those in attendance that the United States pays far more than other industrialized countries for health care, and that Americans receive less health care for more money, primarily because of a prodigious amount of money spent on medical bureaucracy. In addition, there are substantial portions of the population that do not have insurance or are underinsured, said Meyer.

“There is an inherent conflict between what is best for business and what is best for us, the patients,” he added. “What is best for business is saving money, and business saves money by not delivering health care.”

“I don’t think it is morally right for people to make money off the sicknesses of other people,” said Rep. Michael Obuchowski, D-Rockingham.

Meyer said that he believed single-payer health care was the solution to the health-care situation, and suggested that the first step would be to draw up a budget, based on how much is currently paid per capita on health care, to let officials know how much money that budget would need. The best way to pay for health care would be to convert everything already paid — such as premiums, co-payments and prescription prices — and convert it to a tax, such as a payroll tax.

People would ask if this would be the government controlling health care, Meyer said. “No more, and probably much less, than the insurance companies do,” he said, adding that the government would only act as the payer for a single-payer system, and the current medical system would remain in place. Competition would still exist as well, Meyer said, because people would be able to choose their health-care provider based upon the quality of care given.

Partridge said that a payroll tax, such as having an employer pay 6 percent of an employee’s income and the employee paying 3 percent, would be much less than what most companies pay now. Many insurance packages cost as much as $8,000, said Partridge.

Using a 5 percent employer contribution as a model, VCCH board member Michael Daly said that an employee would have to be making $160,000 per year in order for a 5 percent contribution to equal the cost of an $8,000 insurance policy.

“We shouldn’t be scared of the numbers,” Daly said. “It is just amazing how they can scare us when the numbers show such great savings.”

Because companies would pay less, Partridge said, this could be used as an enticement for economic development, attracting businesses to Vermont because they would be paying less for health-care costs. A lower employer contribution would also mean property tax relief, as taxpayers would not be paying for high health insurance costs for municipal, state and school employees, she added.

Shoshana Rihn, a VCCH board member, said that small business owners had voiced concerns to her that a payroll tax could penalize employers who pay their employees well. Rihn said that it was important to include businesses in the discussion about single-payer health care, which Partridge agreed to.

“If it’s not a payroll tax, that’s fine with me, as long as it’s the most cost effective way of doing it,” Partridge added.

Marty Jezer said that a single-payer system is a complex issue that, to him, is still an abstraction. Jezer emphasized the need to find out how a single-payer system would work.

“I suggest over the next two years we have time until (Obuchowski) is governor, or someone else is governor, to do our homework,” said Jezer. He suggested bringing together people to write down all the options, send them out to businesses and health-care providers for their input, and in 2004 giving all the information to lawmakers.

“For God’s sake, let’s stop talking about single-payer as an abstraction and get it on paper,” Jezer added.

However, both Obuchowski and Partridge warned against getting into too much detail in single-payer legislation, and suggested that broader legislation would work better.

Obuchowski admitted that the status quo is “politically comfortable,” and that the biggest question is coming up with reasons to shake up the status quo. There is a lack of political will, Obuchowski said, but the way to get the political will to enact universal health care is for citizens to contact elected officials.

Health Affairs
Web Exclusive
November 20, 2002
Consumer-Driven Health Plans: Are They More Than Talk Now?
Consumer-driven plans are catching on and could be in the mainstream of
health care in a few years.
by Jon R. Gabel, Anthony T. Lo Sasso, and Thomas Rice

Over the past year medical journals, business magazines, and major newspapers have boldly pronounced that the era of heavy managed care is over and that a new era of consumer-driven health care financing is beginning.

Consumer-driven and defined contribution are two terms often used interchangeably, although they have different meanings. Defined contribution refers to an employer contribution strategy whereby employers set a fixed contribution for health insurance and place the employee at risk for costs beyond that point.

The term consumer-driven or consumer-directed refers to health plan design. Such plans generally involve a greater role for employees in choosing providers and health plans and in designing their own benefit package while assuming greater financial risk.

At its heart, the consumer-driven health care movement seeks to combine incentives with information to enable consumers to make informed choices about non-life-threatening health care. …consumer-driven health care is an effort to put patients in a position to say no to themselves. This can happen only if consumers are aware of the true cost and have a personal stake in it, and if they have enough information and confidence to make treatment decisions.

For purposes of clarity, we classify consumer-driven plans into three loosely defined groups. The first group we term “health reimbursement arrangement” (HRA) plans because they establish an account from which consumers draw to make health care purchases. When the account is exhausted, enrollees must typically pay out of pocket until the annual deductible is met, after which the plan becomes a traditional major medical plan. A second class of consumer-driven plans allows employees to design their own networks and benefit packages. Employees’ network and benefit selections determine the premium for their individual plan, and employees bear the financial risk for these choices above some fixed contribution from the employer. A third class of consumer-driven plans, termed “customized package” plans, allows employees, using Web-based tools, to choose from a predetermined selection of network offerings and benefit packages, such as a narrow, medium, or broad network and a rich, medium, or thin benefit package.

From the Discussion:

The major limitation of this study is that our information is largely from persons with a clear self-interest to report favorable developments about consumer-driven plans. Since there is limited experience and no independent evaluations of these plans to date, we depend heavily upon start-up and health plan executives, employee benefit managers, and benefit consultants for information and insights.

At their best, consumer-driven plans will provide a mechanism to inject incentive-based reasoning on the part of consumers into non-life-threatening medical care decisions. Employees do not bear most of the costs associated with higher use of care or use of more costly delivery systems. Consumer-driven products thus would reestablish the link between service use and an employee financial liability. If, as a result, employees respond to these incentives and use the Web tools not just to make decisions regarding their plan but to select providers based on quality, make informed treatment decisions, and manage chronic conditions, quality of care should improve. Customized package plans can expand the number of plan choices available to workers at small firms.

At its worst, however, consumer-driven health care can destabilize risk pools and lead to a redistribution of health care services and income from the sick to the healthy. A system that controls costs through price rather than nonprice rationing will almost certainly be to the advantage of higher-income groups and to the disadvantage of low-income groups, who are more likely to delay care if they lack the resources to pay for it.

People may be capable of behaving like rational consumers when they are purchasing prescription drugs or selecting health plans, but such rationality may elude them when they are informed that they have cancer.

If there is one message that resonates loudly from our interviews, it is this: “Political partisans, hold your fire! More research and experience are needed!” Independent research is desperately required to address the many issues we have identified. Researchers need to measure the extent of risk selection through studies that examine employees’ health status before they enroll in consumer-driven plans and their competitors. Researchers should analyze the redistribution of out-of-pocket costs and services in HRA plans among the sick and healthy. We need to learn the extent to which employees are using Web tools and determine whether they are becoming better consumers and whether physicians are more or less likely to deliver care according to clinical guidelines. After controlling for risk selection, researchers need to analyze both the consumer-driven plans’ ability to control claims expenses and plans’ impact on health status and employee satisfaction. This is an ambitious research agenda, but surely one with a high rate of return, if the consultants and health plans are right about the future of the health benefits marketplace.

http://www.healthaffairs.org/WebExclusives/Gabel_Web_Excl_112002.htm

Comment: The very design of consumer-driven products has two precise goals: shift the costs of health care from the purchasers of the plans to the patients, and shift the risk of coverage from the insurers to the patients. This increase in cost and risk is disproportionately shifted to precisely those individuals that have the greatest health care needs. If there has ever been a non-starter in health care reform, this is it!

And we are being called on to “hold our fire,” and watch another decade of economic experimentation on the American patient? Can we stand a decade of observing and measuring the grief and suffering of those that not only are faced with major medical problems, but also must submit to the experimentation that will determine the effect of adding the burden of financial hardship? Are we so lame that we can’t anticipate the results?

There are winners. The healthy and wealthy will benefit. But do we want to establish policies that sacrifice those with greater health and financial needs for the benefit of the rest of us? Are we really that cruel?

No more experimentation! Health policy science has already established the fact that we can provide comprehensive services for everyone, while containing costs, simply by establishing a single, publicly-administered national health program. Let’s do it now!