The New York Times
December 12, 2001

To the Editor:

“A New Health Plan May Raise Expenses for Sickest Workers” (front page, Dec. 5) points out the downside of a new approach to corporate expense reduction. The employers’ share of a new health care product would decrease, as would the average premium, but the burden would be shifted to sick people!

This is unwise public policy. When seriously ill, most patients are not working, and their families are burdened by additional expense already. And if the major costs of modern medicine are shifted directly to patients, they are more likely to defer diagnostic procedures and filling prescriptions, and therefore get sicker. Sooner or later, we will all get the bill.

When are we going to realize the humanity, and the wisdom, of community-wide risk pools, which would spread the burden fairly to all? When will we realize the economy and efficiency of a national insurance system?

Steven Wolfson, M.D.

New Haven, CT

http://www.nytimes.com/2001/12/12/opinion/L12HEAL.html

The Times-Standard Eureka, California
December 09, 2001
by Jennifer Morey

“When an insurance company executive has the audacity to admit to a state senator that his company doesn’t offer drug and alcohol treatment coverage because it simply doesn’t want to spend the money, it’s a clear illustration of the severity of the health care crisis. Studies have shown that treatment is cost-effective and saves companies millions of dollars, but that doesn’t matter to this executive.”

California state Sen. Wesley Chesbro, quoting the executive:

“It’s fairly simple. We are an investor-owned company. The decision is based on actuarial data. By the time the catastrophic costs are incurred, the person will no longer be employed.”

http://www.times-standard.com/Stories/0,1002,2896%7E264943,00.html

Comment: Sen. Chesbro’s hearing was held in rural Humboldt County, a region that is partially dependent on the fragile economy of the fishing and lumbering industries. Managed care plans have failed to enable affordable access to care in Humboldt County and in other rural areas of California. Rather than seeking solutions on how to make managed care plans work for rural communities, we should be advocating for equitable distribution of our resources. A publicly administered program of universal health insurance would assure rural communities that adequate health care resources would always be available to them, and to the rest of us as well.

The Times-Standard Eureka, California
December 09, 2001
by Jennifer Morey

“When an insurance company executive has the audacity to admit to a state senator that his company doesn’t offer drug and alcohol treatment coverage because it simply doesn’t want to spend the money, it’s a clear illustration of the severity of the health care crisis. Studies have shown that treatment is cost-effective and saves companies millions of dollars, but that doesn’t matter to this executive.”

California state Sen. Wesley Chesbro, quoting the executive:

“It’s fairly simple. We are an investor-owned company. The decision is based on actuarial data. By the time the catastrophic costs are incurred, the person will no longer be employed.”

http://www.times-standard.com/Stories/0,1002,2896%7E264943,00.html

Comment: Sen. Chesbro’s hearing was held in rural Humboldt County, a region that is partially dependent on the fragile economy of the fishing and lumbering industries. Managed care plans have failed to enable affordable access to care in Humboldt County and in other rural areas of California. Rather than seeking solutions on how to make managed care plans work for rural communities, we should be advocating for equitable distribution of our resources. A publicly administered program of universal health insurance would assure rural communities that adequate health care resources would always be available to them, and to the rest of us as well.

American College of Physicians American Society of Internal Medicine (ACP-ASIM)

Available at the link below is “a draft seven-year sequential plan for expanding access to health insurance for all Americans. Your review of this document is requested. The Health and Public Policy Committee of the American College of Physicians – American Society of Internal Medicine has developed this draft policy paper with the view that a sequential series of steps within a specific time frame are needed to achieve the goal of access to health insurance coverage for all Americans.”

“We would appreciate your comments by January 11, 2002, so that we may incorporate them into a final draft that will be further reviewed by our committee in February 2002 and then brought to our Board of Regents for final approval.”

The ACP-ASIM request for comments is available at: http://www.acponline.org/hpp/seq_plan01.htm?hp

And from the draft of the proposal:

“We recognize that some will argue that the College’s proposed reforms don’t go far enough… Others will likely argue that they go too far… Some will question the political feasibility… ”

“ACP-ASIM welcomes such comments, but requests that those who disagree with some or all of the steps recommended in this paper present an alternative plan of action that would achieve affordable coverage for all Americans within the next seven years. Debate should no longer center on whether all Americans should have access to affordable coverage, but on the means to achieve that end within a reasonable period of time.”

“ACP-ASIM also recommends that the ideas in this paper, as well as alternative proposals to achieve the same objective, be discussed in community forums throughout the country. History has shown that health care reform cannot be a top down proposal emanating from Washington, D.C. Rather, the changes that are needed must be understood, guided, and supported by citizens in communities throughout the country.”

The full draft of the proposal is available at: http://www.acponline.org/hpp/seq_plan01.pdf

Comment: ACP-ASIM proposes a seven year sequential path to reform as follows: (1) A sense of the Congress resolution, (2) Expansion of Medicaid to all below 100% of poverty, and premium subsidies for public or private programs for those up to 200% of poverty, (3) Covering all remaining uninsured through premium subsidies of plans offered and approved by purchasing groups, using FEHBP as the model, and, finally, (4) Enacting legislation “to discourage individuals from voluntarily choosing not to obtain coverage” (individual mandates enforced by financial penalties).

ACP-ASIM is very serious about leading the charge to universal coverage. Although they previously supported a single payer approach, they are now adopting the Clinton approach that we must bring all parties together, including the health plans. This approach can only perpetuate the waste and inequities that are inherent in our fragmented system.

It is easy to respond to the ACP-ASIM proposal with a critique of the flawed health policies perpetuated by their plan. The ACP-ASIM policy committee already fully understands the implications of its proposals, both positive and negative. They need to hear much more from us than a mere critique. They have challenged us to provide “an alternative plan of action that would achieve affordable coverage for all Americans,” a plan that “must be understood, guided, and supported by citizens in communities throughout the country.”

The challenge is ours. We have the policy. We understand the policy applications that would bring equity to health care, while maintaining affordability. We now need to create a specific action-plan document that we can present to the ACP-ASIM, and, more importantly, to the nation. The alternative is sequential incrementalism that will address only the issue of coverage while perpetuating and solidifying the inequities and flawed policies of our current system. For us to accept sequential incrementalism by default would be a greater moral transgression than that of those that are merely manipulating our system for their own personal gain.

United States House of Representatives
Committee on Ways and Means
December 4, 2001

Representative Pete Stark (D-CA):

“I’d say, Madam Chair, that it’s perhaps time that we recognize that less than 15 percent of the seniors have signed up for these Plus Choice plans. They have caused more problems than all the rest of Medicare put together. The premium support plan that the Medicare Commission came up with is a blatant attempt to shove people into these Medicare Plus Choice plans. So when you don’t have one in eight people who like them, why don’t we just can them, use the money to support the Medicare system, provide perhaps a federal Medigap policy that would cover all of our beneficiaries fairly? And, one of these days, we might even get around to a drug benefit, if we stop giving big tax breaks to wealthy people.”

http://www.kaisernetwork.org/health_cast/uploaded_files/ACF2D.pdf

The New York Times
December 5, 2001
by Milt Freudenheim

“Pressed by employers, some of the nation’s biggest insurers are introducing a new kind of health plan that would significantly change the way employees are reimbursed for ordinary medical expenses.”

“Most working families, who have relatively low medical bills, could save money under the plans. But those with several thousand dollars in medical expenses could wind up paying much more.”

“The new plans typically require a family to pay an annual premium of $1,000 to $1,400, slightly lower than the cost of traditional managed care. Families then receive an allowance of $2,000 to $3,000 each year to spend on medical expenses, including drugs.”

“But after they have spent that, they have to cover every cost above that cap, sometimes up to $5,000 or more. After the higher amount is reached, the employer picks up most of the bills.”

“A family that keeps its medical bills lower than the allowance can roll over any unspent money to pay medical bills in future years.”

“But for a family that uses up the allowance, the plans stop paying entirely until a ceiling is reached… If they go to doctors outside the network, their deductible could rise even higher.”

“Insurance and insurance rates are usually designed around the idea of a pool of risk – the chance that a few members of a group will have high claims that can be covered by the premiums paid by everyone else. But the new plans move away from that notion, effectively penalizing people with higher medical costs and rewarding those with lower expenses.”

“Indeed, when employers offer both the new plans and traditional managed care, the new savings accounts may attract largely young, healthy members, while sicker people stick with plans that cover more of their medical costs. Eventually, however, consultants expect many employers to offer only the new type of plan.”

Uwe E. Reinhardt, an economist at Princeton University:

“The effect will be to shift more of the costs into the pockets of the sick people. The insurance industry has decided that if you are sick, you ought to eat the costs. It’s a very dubious social policy.”

http://www.nytimes.com/2001/12/05/business/05CARE.html

Comment: These new health plans represent a convergence of ideas. Employers want lower health care costs and now are quite willing to shift those costs to their employees. The insurance companies want lower risk and now are shifting risk to their beneficiaries. Both trends are being touted as a method of empowering the patient-employee-beneficiary-consumer. By becoming sensitive to health care costs, patients will reduce their utilization of “unnecessary” services (but, more importantly, also will reduce utilization of beneficial services).

A highly touted model that would accomplish these goals is the medical savings account (MSA) combined with catastrophic insurance. But the insurance industry really didn’t want to hold on to the catastrophic business while the Wall Street money managers walked away with the bread and butter funds in the MSAs.

And so they came up with the perfect solution, that is, perfect for them and for the employer-purchasers of their plans. Instead of medical saving accounts, they have developed the “health savings account product” as Aetna has labeled it. Let’s call it “Health SAP.” The Health SAP functions like an MSA, but it leaves the funds under the control of the health plan. To understand the implications of the Health SAP, we should look at the winners and the losers.

The insurance industry is the big winner. Shifting the bulk of up-front costs to the beneficiaries reduces both medical losses and administrative costs. Up-front costs are paid by fund accounts already delegated for care, or by the patients’ own personal funds. In essence, for the bulk of routine expenses, the insurance companies are paying nothing except modest administrative costs. The savings more than offset the reduction in “premiums” collected. Yet, for catastrophic losses, the plans still benefit by controlling rates for contracted panels or providers. By paying a portion of the first dollar out of the fund accounts, the health plans create a perception of “full coverage with deductibles,” when, in reality, patients really have only catastrophic coverage.

Employers are also winners. Because a large amount of the up-front costs are shifted to the patients, the costs to the employers are limited to the catastrophic coverage and the funding of the accounts, an amount that is less than the costs of the more comprehensive plans now dominating the market. There is risk that the catastrophic costs will increase significantly, but employers may well increase the deductible threshold, especially once the average amount retained in the savings accounts increases. (This would compound the difficulties for those that must spend down their accounts.)

The greatest losers are the patients. The healthy, who do not require much care, will be fine. The wealthy will have no financial barriers to care. But the moderate and low income individuals who do require care for chronic or catastrophic disorders will rapidly deplete their disposable income. This will erect financial barriers to access. For those with the greatest needs, Health SAPs will ration care based strictly on the ability to pay, the most inhumane form of rationing.

The providers are losers. Physicians have been in strong support of MSAs with catastrophic indemnity coverage. Although they claim that they support this model because it empowers consumers, their interest actually has been quite self-serving. With cash pools of MSAs and a backup of indemnity-type catastrophic plans, physicians believe that they would be free to charge any rates and provide unlimited services, returning to the “Golden Age of Medicine.”

But instead of MSAs, physicians are going to be the saps of Health SAPs. Their fees will still be rigidly controlled, and a much larger number of their patients will no longer be able to pay their up-front expenses. Physicians will find that many of their routine services will no longer be paid for by the insurance plans, and will be uncollectable from patients that have no disposable income. In supporting MSAs, physicians had no grasp of the astute business ingenuity of the MBAs in the health plans. Doctors, you’ve been snookered again.

The government and taxpayers are losers. The pool of patients unable to afford needed care will be significantly larger than it already is. In health care, the government always is the payer of last resort. Taxpayers will be forced to fund necessary care through a fragmented system of various public programs that lack the efficiency and equity that would be inherent in a unified program of universal health insurance.

What will be the response of the patients to this? The majority, who will remain relatively healthy, will believe that they have the security of health care coverage. But, more significantly, they will watch their health savings accounts grow and, with their new found wealth, will become avid supporters of the Health SAPs.

Individuals that do require health services will be relieved to see that the health plans are no longer intruding into their care. The more traditional physician-patient relationship will be renewed. But they will not understand why they are broke at the end of the month, with unpaid bills stacking ever higher.

Sadly, the majority will be smugly satisfied, and the vulnerable will be dejected, not realizing that they should be outraged instead. The insurance industry wins again, but this time at a terrible cost in health care equity and justice.

New Haven Register
December 4, 2001
by Dr. Steven Wolfson

“Nearly three months after the start of our national trauma, it is clear that we did not generate a rapid response to an attack that used a microorganism rather than a plane.”

“On a national or regional basis, essential clinical information that should be distributed quickly finds no avenue to reach doctors, hospitals, pharmacies, or clinical laboratories. Our health care system has no infrastructure! Less than half of the doctors in our country have computer skills. Fewer use this source of information on a regular basis. Fewer still are connected in any organized fashion with their local hospitals.”

“There are many reasons for this. One is that information systems able to incorporate the mass of data generated by modern medicine have developed late, are still being “debugged,” and are very expensive. Another is that the funding for their deployment cannot be found in the health care industry. It has been removed by a more than decade-long national effort to systematically downsize health care delivery so as to reduce cost. This effort has been led by managed care organizations who have, in the process, developed large bureaucracies, sizable administrative budgets, and shareholders who demand profits.”

“The private sector, represented by managed care organizations, has failed to deliver on its promise to reform the health care system, and has retreated from those programs and those localities whose health care has not generated profit.”

“There is an essential role for our government here. It alone has the resources and the authority to develop uniform standards for computer technology. It alone has the resources and authority to fund deployment of medical information systems and training of medical personnel nationwide. This funding could be in the form of direct grants, or tax incentives. Whatever the path taken to this end, construction of an infrastructure would permit the health care system to respond to the needs of traditional care as well as to the new threats to our health.”

http://www.zwire.com/site/news.cfm?newsid=2726917&BRD=1281&PAG=461&dept_id=7581&rfi=6

American Medical News
December 10, 2001
by Markian Hawryluk

“… a new type of Medicare+Choice option that more closely resembles traditional fee for service is winning converts.”

“The product differs little from the traditional Medicare fee-for-service program but offers greater administrative simplicity for physicians. Doctors need only collect the co-payment for the beneficiary and bill the Medicare allowable rate to the plan. There’s no primary and secondary payer to worry about as there often is with traditional Medicare.”

“Beneficiaries are free to choose from any Medicare-eligible physician, allowing patients who sign up for the private fee-for-service option to continue seeing their doctors.”

“So how can Sterling and Humana make money paying full Medicare rates while HMOs are unable to cover their costs? For one, they don’t offer additional benefits such as prescription drugs or eyeglasses, or a zero premium. Premiums for both plans are somewhat higher than the Medicare Part B premium but offer medigap-type coverage at a lower price”

“The plans also are taking advantage of idiosyncrasies in payment policies for Medicare+Choice. Prior to 1997, plans were paid 95% of the average cost of treating a beneficiary in the fee-for-service program in the same county. But plans flocked to urban areas where the rates were higher than the national average, leaving rural beneficiaries with little choice in Medicare coverage.”

“In an effort to attract plans to underserved areas, Congress in 1997 set a floor for payment to plans and limited the increase in high-payment counties. Lawmakers again raised the floor in 2000.”

“As a result, in some counties, payments to Medicare+Choice plans now exceed the average fee-for-service payment. The private fee-for-service option was a prime candidate to serve these mainly rural, floor-payment counties.”

“Three-quarters of the counties in which Sterling operates are floor-payment counties, and it is withdrawing from areas that accounted for 20% of its enrollment in non-floor counties in 2001.”

Murray Ross, PhD, executive director of the Medicare Payment Advisory Commission:

“On the one hand, such plans represent an alternative to traditional Medicare that the Medicare+Choice program was intended to provide. On the other hand, the lack of care management means that additional benefits provided by such plans come not from efficiency in the provision of medical care, but from higher-than-needed payments.”

http://www.ama-assn.org/sci-pubs/amnews/pick_01/gvsb1210.htm

Comment: It is astounding to observe the extent to which Congress is attempting to resuscitate the Medicare + Choice program. This particular option is simply the traditional fee-for-service Medicare program turned over to private health plans to administer. This is probably the ultimate demonstration of the relative effectiveness of private versus public administrative bureaucracies.

There are two primary differences between the public and private fee-for-service models. The private sector charges the Medicare beneficiary higher premiums. And the private plans direct their marketing to counties with a “floor payment” rate that exceeds that of the traditional fee-for-service program. The “success” of the private models is based on the fact that Medicare beneficiary pays a higher premium, and the taxpayer pays a higher rate. Since the Medigap-type benefits of these programs are negligible and subject to change, both the Medicare beneficiary and the taxpayer are not receiving value for their additional investment.

Traditional Medicare, as a publicly administered program of social insurance, has served us well. Instead of misguided efforts to privatize Medicare, wouldn’t it be better to direct our efforts to providing publicly administered social insurance for everyone? The need lies with patients, not health plans.

The Washington Post
November 30, 2001
by Rebecca Cook, Associated Press Writer

“In a groundbreaking proposal that could set a national precedent, Washington state has asked the federal government’s permission to make some Medicaid recipients pay for services and cap enrollment for some programs.”

“If the Bush administration approves Washington’s request for a waiver of the normal Medicaid rules, it would give states new cost-cutting powers.”

“Details would be subject to legislative approval, but state officials say no Medicaid family would pay more than about 5 percent of their yearly income.”

Dennis Braddock, the head of Washington’s Department of Social and Health Services:

“We have a lot of programs more important than health insurance. There are greater costs to society than someone not getting their physical.”

http://www.washingtonpost.com/wp-dyn/articles/A41468-2001Nov30.html

Comment: Now that we are exiting the age of managed care and are entering the age of the “empowered consumer,” more and more of the costs of health care are being shifted to the individual patient. Current trends suggest that the affordability of health care for average income individuals will soon be threatened. While our nation’s policy makers are ignoring that threat, they contend that, as least for low income individuals, protection from cost sharing is afforded by the Medicaid program. The proposed solution for Washington state would eliminate that protection.

Cost sharing by low income individuals will erect an insurmountable financial barrier to care. Medicaid’s primary deficiency is under-funding. States are being challenged by budget deficits. But states cannot address their fiscal problems by policies that prevent access to medical care for their most vulnerable populations.

Because of chronic under-funding, Medicaid has been shifting costs to other sectors. But these sources have been squeezed dry. The only realistic option for ending under-funding and cost shifting is to establish a universal risk pool and boost funding by eliminating the waste of the fragmented system of private health plan bureaucracies. With our great wealth, we could provide high quality, comprehensive health care for everyone merely by establishing equity in the funding and in the allocation of our health care resources. A publicly administered program of universal health insurance would do just that.

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