PNHP

Defined contributions future for health care

Defined contributions future for health care

Orszag: Defined Contributions Define Health-Care Future

By Peter Orszag
Bloomberg, December 6, 2011

Over the next decade, we are likely to see a shift in health insurance in the U.S.: So-called defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers.

The market today is dominated by “defined-benefit” plans, under which companies determine a set of health-insurance benefits that are provided for employees. These will gradually be replaced by defined-contribution plans, under which companies pay a fixed amount, and employees use the money to buy or help pay for insurance they choose themselves.

The fundamental driver of this shift is the effort by American businesses to reduce their exposure to health-care costs. But the recent health-care-reform law may accelerate the shift.

The change in health insurance is already well under way in coverage for retirees. In the early 1990s, in response to accounting changes and rising costs, companies began to re- evaluate retiree health plans, and some capped the amount they were willing to pay at a multiple of existing costs. Over time, as those limits were reached, most companies declined to raise them, thereby effectively creating defined-contribution retiree health-insurance plans, with the company’s contribution set by the cap. Exchanges have been created to allow retirees to use these employer contributions to purchase their own health insurance.

For current workers, the precursor to a defined- contribution approach is the “consumer-driven” health plan. This typically has higher deductibles and co-payments than a traditional plan has, and it is often tied to a health savings account. It typically still provides generous insurance for catastrophic cases.

Some insurers are already anticipating the shift. Bloom Health Corp. will begin offering defined-contribution exchanges in 2012. Bloom, based in Minneapolis describes itself as “a leader in the defined-contribution health benefits marketplace,” and says it is “committed to assisting employers of all sizes move toward an employer-sponsored system that has effective cost predictability for employers and increased choice and personalization for employees.” In September, the company announced that Health Care Service Corp., Blue Cross Blue Shield of Michigan and WellPoint (WLP) Inc. had purchased a majority of its equity.

The inevitable transition to defined-contribution health insurance may get a little push from the new health-care-reform law. Indeed, the legislation may have a larger impact on the type of health-insurance plan that employers offer than on their decision about whether to drop health-care benefits altogether.

If most employers do retain their health plans, the state insurance exchanges created under the new federal health-care law will make the basic idea of a defined-contribution health plan more prevalent, and thus may speed its adoption. The regulations written to carry out the new law will determine how things play out. If defined-contribution plans that are sufficiently generous count as employer-based coverage – as is generally expected – the trend toward such plans will probably accelerate.

In any case, the bottom line is that a shift toward defined-contribution plans seems likely. I’d be willing to bet $1 that most large U.S. employer health-care offerings in 2020 will be defined-contribution plans. Any takers?

(Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)

http://www.bloomberg.com/news/2011-12-07/defined-contributions-define-health-care-ahead-commentary-by-peter-orszag.html

Comment:  

By Don McCanne, MD

One of the more important tools to enable the transfer wealth up the income ladder is to shift from defined benefit programs to defined contributions. With a defined contribution, a set dollar amount is contributed to the program regardless of what the future benefits may cost, whereas with a defined benefit program, the projected costs of the program must be fully funded so the benefits will always be there when needed.

In the case of pension plans, a defined contribution allows the employer to shift the risk of wage inflation and the risk of living longer from the employer to the employee. The latter is particularly a problem since many individuals will outlive the funds accumulated in their defined contribution pension plan. It is true that they could use those funds to buy an annuity, but fewer funds would be available because it is not a defined benefit plan, and converting to an annuity burns up even more of the retirement funds to pay for sales and administrative costs plus the costs of insuring against the risk of living longer.

How does this move wealth up the income ladder? Defined benefit pension plans were considered to be a standard part of the well-earned employee benefit package. These defined benefit plans were actually paid for by foregone wage increases. In the last couple of decades, contributions to the pension plans were limited by changing to defined contribution, yet wages remained flat. The foregone wages never came back. Workers suffered a net loss, while employer/owners kept the difference, thus an upward transfer of wealth.

Now we are seeing this same inequitable concept being applied to employer-sponsored health plans. Traditional health plans provided generous benefits and often had an actuarial value of 90 percent (the plan paid 90 percent of health care costs and the worker paid 10 percent). We are now seeing a decline in actuarial value. The most obvious contributing factor is the relatively abrupt increase in the adoption of high-deductibles for employer-sponsored plans, but also benefits covered are diminishing, often through less transparent, innovative changes to the plans. Once again, benefits are being reduced but without a commensurate return of forgone wages.

Particularly alarming in Peter Orszag’s article is the investment of WellPoint and Blue Cross Blue Shield of Michigan in Bloom Health Corporation. Bloom Health is “a leader in the defined-contribution health benefits marketplace.” They are committed to a system that has “effective cost predictability for employers,” but exposes employees to the ever higher costs and risks of health care.

This ongoing shift to defined contribution in health care is not limited to businesses. In a recent message, we reported that the Institute of Medicine is recommending that the essential health benefits for the state insurance exchanges under the Affordable Care Act “should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” “Predefined cost target” is a defined contribution.

Even Medicare is vulnerable. The New York Times, in a recent editorial, stated that for Medicare, “serious analysis and testing of premium support are clearly worth pursuing.” Premium support is a defined contribution that would be used to purchase a private Medicare plan. Medicare beneficiaries would be responsible for paying for the balance of the premium for whatever coverage they could get. Further, with tight control of the defined contribution, an increasing percentage of health care costs would be shifted to Medicare patients in the form of higher out-of-pocket spending.

What do all of these have in common? They are all methods of perpetuating the private insurance industry, while shifting risks from the insurers to the insured individuals. They reduce the financial commitment of employers and the government, but increase the financial burden for workers, their families, and reti
rees – most of us. However, it is a jobs program – for personal bankruptcy attorneys, as if our health care system didn’t give them enough work already.

Defined contribution is a nefarious conspiracy directed at the masses to benefit the well off. We can counter by demanding an end to a system dominated by private insurers and replacing it with a single, publicly-financed and publicly-administered national health program – an improved Medicare for everyone.

(After we fix Medicare, we may want to think about greatly reinforcing our publicly-financed, publicly-administered, defined benefit Social Security program so we wouldn’t have to put up with the abuses of our private, defined contribution pension plans. Really.)

Defined contributions future for health care

Orszag: Defined Contributions Define Health-Care Future

By Peter Orszag
Bloomberg, December 6, 2011

Over the next decade, we are likely to see a shift in health insurance in the U.S.: So-called defined-contribution plans will gradually take over the market, shifting the residual risk of incurring high health-care costs from employers to workers.

The market today is dominated by “defined-benefit” plans, under which companies determine a set of health-insurance benefits that are provided for employees. These will gradually be replaced by defined-contribution plans, under which companies pay a fixed amount, and employees use the money to buy or help pay for insurance they choose themselves.

The fundamental driver of this shift is the effort by American businesses to reduce their exposure to health-care costs. But the recent health-care-reform law may accelerate the shift.

The change in health insurance is already well under way in coverage for retirees. In the early 1990s, in response to accounting changes and rising costs, companies began to re- evaluate retiree health plans, and some capped the amount they were willing to pay at a multiple of existing costs. Over time, as those limits were reached, most companies declined to raise them, thereby effectively creating defined-contribution retiree health-insurance plans, with the company’s contribution set by the cap. Exchanges have been created to allow retirees to use these employer contributions to purchase their own health insurance.

For current workers, the precursor to a defined- contribution approach is the “consumer-driven” health plan. This typically has higher deductibles and co-payments than a traditional plan has, and it is often tied to a health savings account. It typically still provides generous insurance for catastrophic cases.

Some insurers are already anticipating the shift. Bloom Health Corp. will begin offering defined-contribution exchanges in 2012. Bloom, based in Minneapolis describes itself as “a leader in the defined-contribution health benefits marketplace,” and says it is “committed to assisting employers of all sizes move toward an employer-sponsored system that has effective cost predictability for employers and increased choice and personalization for employees.” In September, the company announced that Health Care Service Corp., Blue Cross Blue Shield of Michigan and WellPoint (WLP) Inc. had purchased a majority of its equity.

The inevitable transition to defined-contribution health insurance may get a little push from the new health-care-reform law. Indeed, the legislation may have a larger impact on the type of health-insurance plan that employers offer than on their decision about whether to drop health-care benefits altogether.

If most employers do retain their health plans, the state insurance exchanges created under the new federal health-care law will make the basic idea of a defined-contribution health plan more prevalent, and thus may speed its adoption. The regulations written to carry out the new law will determine how things play out. If defined-contribution plans that are sufficiently generous count as employer-based coverage – as is generally expected – the trend toward such plans will probably accelerate.

In any case, the bottom line is that a shift toward defined-contribution plans seems likely. I’d be willing to bet $1 that most large U.S. employer health-care offerings in 2020 will be defined-contribution plans. Any takers?

(Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)

http://www.bloomberg.com/news/2011-12-07/defined-contributions-define-health-care-ahead-commentary-by-peter-orszag.html

One of the more important tools to enable the transfer wealth up the income ladder is to shift from defined benefit programs to defined contributions. With a defined contribution, a set dollar amount is contributed to the program regardless of what the future benefits may cost, whereas with a defined benefit program, the projected costs of the program must be fully funded so the benefits will always be there when needed.

In the case of pension plans, a defined contribution allows the employer to shift the risk of wage inflation and the risk of living longer from the employer to the employee. The latter is particularly a problem since many individuals will outlive the funds accumulated in their defined contribution pension plan. It is true that they could use those funds to buy an annuity, but fewer funds would be available because it is not a defined benefit plan, and converting to an annuity burns up even more of the retirement funds to pay for sales and administrative costs plus the costs of insuring against the risk of living longer.

How does this move wealth up the income ladder? Defined benefit pension plans were considered to be a standard part of the well-earned employee benefit package. These defined benefit plans were actually paid for by foregone wage increases. In the last couple of decades, contributions to the pension plans were limited by changing to defined contribution, yet wages remained flat. The foregone wages never came back. Workers suffered a net loss, while employer/owners kept the difference, thus an upward transfer of wealth.

Now we are seeing this same inequitable concept being applied to employer-sponsored health plans. Traditional health plans provided generous benefits and often had an actuarial value of 90 percent (the plan paid 90 percent of health care costs and the worker paid 10 percent). We are now seeing a decline in actuarial value. The most obvious contributing factor is the relatively abrupt increase in the adoption of high-deductibles for employer-sponsored plans, but also benefits covered are diminishing, often through less transparent, innovative changes to the plans. Once again, benefits are being reduced but without a commensurate return of forgone wages.

Particularly alarming in Peter Orszag’s article is the investment of WellPoint and Blue Cross Blue Shield of Michigan in Bloom Health Corporation. Bloom Health is “a leader in the defined-contribution health benefits marketplace.” They are committed to a system that has “effective cost predictability for employers,” but exposes employees to the ever higher costs and risks of health care.

This ongoing shift to defined contribution in health care is not limited to businesses. In a recent message, we reported that the Institute of Medicine is recommending that the essential health benefits for the state insurance exchanges under the Affordable Care Act “should be defined as a package that will fall under a predefined cost target rather than building a package and then finding out what it would cost.” “Predefined cost target” is a defined contribution.

Even Medicare is vulnerable. The New York Times, in a recent editorial, stated that for Medicare, “serious analysis and testing of premium support are clearly worth pursuing.” Premium support is a defined contribution that would be used to purchase a private Medicare plan. Medicare beneficiaries would be responsible for paying for the balance of the premium for whatever coverage they could get. Further, with tight control of the defined contribution, an increasing percentage of health care costs would be shifted to Medicare patients in the form of higher out-of-pocket spending.

What do all of these have in common? They are all methods of perpetuating the private insurance industry, while shifting risks from the insurers to the insured individuals. They reduce the financial commitment of employers and the government, but increase the financial burden for workers, their families, and retirees – most of us. However, it is a jobs program – for personal bankruptcy attorneys, as if our health care system didn’t give them enough work already.

Defined contribution is a nefarious conspiracy directed at the masses to benefit the well off. We can counter by demanding an end to a system dominated by private insurers and replacing it with a single, publicly-financed and publicly-administered national health program – an improved Medicare for everyone.

(After we fix Medicare, we may want to think about greatly reinforcing our publicly-financed, publicly-administered, defined benefit Social Security program so we wouldn’t have to put up with the abuses of our private, defined contribution pension plans. Really.)

List of essential services under U.S. health reforms is ‘skimpy’ and dangerous, say doctors

By Jeanne Lenzer
BMJ, Dec. 5, 2011

A national doctors’ organization says that most of the authors of a federally sponsored report on recommended health insurance coverage have financial ties to insurers and drug companies and that the insurance scheme will leave many U.S. citizens without access to health care.

The Institute of Medicine, which was contracted by the federal government to write the report, brought in security guards at the institute’s annual meeting to prevent doctors from distributing leaflets outlining the financial conflicts of interest of the report’s authors. The doctors, former institute fellows and members of Physicians for a National Health Program, were registered at the meeting and tried to give the leaflets to colleagues attending it.

Danny McCormick, assistant professor at Harvard Medical School and a former fellow of the institute, distributed leaflets at the meeting. He has signed a protest letter sent to the U.S. secretary of health and human services, Kathleen Sebelius, along with more than 2,400 doctors, nurses, and health advocates, stating that the recommendations for “essential benefits” to be provided under the Affordable Care Act will provide “skimpy” care that would endanger the health of many citizens.

Although the report outlines 10 categories of benefits that insurers must cover, such as costs of hospitalization, preventive care, and ambulance transport, it does not prohibit insurers from shifting costs to patients through premiums, co-payments, deductibles, and cost sharing. In the event of a catastrophic illness or injury, patients could be hundreds of thousands of dollars in debt.

Dr. McCormick said that a serious pitfall of the recommended essential benefits is that they would give patients the illusion that they have “real insurance.” He said, “Most patients, no matter how well informed, have no idea what their insurance policy covers. It’s only when some catastrophic event occurs that they find out that they are not fully covered.”

Nor would the insurance scheme necessarily cut over-testing and over-treatment, which Dr. McCormick says should be cut. Although the report panel recommends establishing an independent “national health benefits council” to review scientific evidence regarding new technologies, the plan does not task the council with assessing current testing and treatment strategies that might be unnecessary or dangerous.

Howard Brody, a member of the Institute of Medicine and Physicians for a National Health Program, told the BMJ that the Affordable Care Act “is truly a game changer” that will extend coverage to more people. Nevertheless, he added, “It’s not enough.”

Dr. Brody called the act a “sop to the insurance industry” and a “political decision, not a scientific decision,” since a single-payer system is considered unacceptable in the United States. He said that the institute was assigned a narrow task of defining only “what absolutely must be covered.” Unfortunately, he said, nothing in the recommendations would prevent insurers from providing “shoddy” coverage.

Dr. Brody said that the institute’s actions to prevent doctors from leafleting about the panelists’ conflicts of interest were “indefensible.” He said, “The institute is supposed to be an educational organization, the elite of American medicine, yet they treat their own members as if they were children incapable of assessing the information for themselves.”

The institute said that it complied with its policy on conflicts of interest by promptly disclosing committee members with a conflict of interest but whose expertise was needed to fulfill the committee’s charge.

BMJ 2011; 343 doi: 10.1136/bmj.d7932 (Published 5 December 2011)

Cite ths as: BMJ 2011;343:d7932
http://www.bmj.com/content/343/bmj.d7932

Shocking growth of premiums – in a single interactive visualization

State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs

By Cathy Schoen, M.S., Ashley-Kay Fryer, Sara R. Collins, Ph.D., and David C. Radley, Ph.D., M.P.H.
The Commonwealth Fund, November 17, 2011

INCREASE IN PREMIUMS

Click on this link:
http://www.commonwealthfund.org/usr_doc/site_docs/slideshows/PremiumTrends2011/PremiumTrends2011.html

You will see an interactive map of “Employer Premiums as Percentage of Median Household Income for Under-65 Population, 2003 and 2010”

Near the top of the page, slowly drag the slider from 2003 to 2010.

In dark blue you now see the states in which employer health insurance premiums average over 20% of median household income. Over 20%! In 2010, 62% of the population lived in states where total premiums amounted to 20% or more of middle incomes!

A static slide of this change, showing the U.S. side by side in 2003 and 2010, can be downloaded at this link (slide number 2):
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/Nov/State%20Trends/PDF_Schoen_state_trends_premiums_deductibles_2003_2010_exhibits.pdf

INCREASE IN DEDUCTIBLES

In slide 4 at the same link, you will see that, in 2010, average deductibles for employer sponsored plans are $1,025 for a single-person plan and $1,975 for a family plan, nearly double that of 2003.

For the full Commonwealth Fund report, “State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs”:
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/Nov/State%20Trends/1561_Schoen_state_trends_premiums_deductibles_2003_2010.pdf

Comment: 

By Don McCanne, MD

More people receive their health insurance through their work than from any other source. The costs of employer-sponsored plans have been skyrocketing, as demonstrated by the increase in premiums. The coverage has eroded, as demonstrated by the increase in deductibles. The Office of the Actuary has predicted that “private insurance spending per person will increase faster than public programs over the next decade.” Yet the Affordable Care Act failed to provide measures which would have any significant impact on these trends in employer-sponsored plans.

Let’s restart the reform process, but this time let’s do it right. Let’s have only single payer at the table.

Health Exchange Benefits Should Be More Generous, Docs Say

By MARY ELLEN SCHNEIDER
The Oncology Report, Dec. 2, 2011

Physicians who support a single-payer health system are urging the federal government to reject the Institute of Medicine’s recommendations for designing the benefits package to be offered in the state-based health insurance exchanges.

Physicians for a National Health Program (PNHP) is leading the effort to cast off recommendations issued by the Institute of Medicine (IOM) in October, charging the panel was unduly influenced by the insurance industry. The IOM panel called on the Department of Health and Human Services to base the essential benefits package on the benefits typically offered by small employers. It also urged the agency to consider cost when designing the package of required benefits.

In a Dec. 1 letter to HHS Secretary Kathleen Sebelius, more than 2,400 physicians, nurses, and health advocates criticized the IOM recommendations, saying that they would provide “skimpy” coverage.

“The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness,” according to the PNHP letter. “Yet this strategy will not lower costs. Delaying care often creates even higher costs. Steadily rising copayments and deductibles over the past two decades have failed to stem skyrocketing medical inflation.”

“The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness,” according to the Physicians for a National Health Plan letter.

Dr. Steffie Woolhandler, a cofounder of PNHP and professor of public health at the City University of New York, said that the recommendations from the IOM panel are not what was envisioned by supporters of the Affordable Care Act. Instead, supporters had expected that the essential benefits package would be based on the more generous benefits offered by large employers.

The letter also attacked the IOM panel for including members who have “amassed personal wealth through their involvement with health insurers and other for-profit health care firms.”

Dr. Woolhandler, who served as an IOM fellow in 1990-1991, cited the inclusion of Sam Ho, executive vice president of UnitedHealthcare, and Leonard Schaeffer, former chairman and CEO of WellPoint.

Allowing individuals with financial ties to the insurance industry to serve on the IOM panel is contrary to the IOM’s own recommendations, issued in 2009, on minimizing conflicts of interest on panels that issue clinical practice guidelines, Dr. Woolhandler added.

Although Mr. Ho and Mr. Schaeffer have knowledge about the insurance business, there are many qualified experts without conflicts who could have been selected for the panel, she said. “A lot of people know about health insurance benefits,” she said.

The IOM stood by the panel and its recommendations. “The IOM report speaks for itself and details the solid rationale for each of its recommendations for achieving a balance between coverage and cost,” said Christine Stencel, an IOM spokeswoman.

The 18-member panel was chaired by Dr. John R. Ball, former executive vice president of the American Society for Clinical Pathology. The panel also included Dr. Alan Nelson, a health policy expert and retired internist/endocrinologist; Christopher F. Koller, health insurance commissioner for Rhode Island; and several policy experts.

http://www.oncologyreport.com/news/practice-trends/single-article/health-exchange-benefits-should-be-more-generous-docs-say/6b0ce428fd.html

Shocking growth of premiums – in a single interactive visualization

State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs

By Cathy Schoen, M.S., Ashley-Kay Fryer, Sara R. Collins, Ph.D., and David C. Radley, Ph.D., M.P.H.
The Commonwealth Fund, November 17, 2011

INCREASE IN PREMIUMS

Click on this link:
http://www.commonwealthfund.org/usr_doc/site_docs/slideshows/PremiumTrends2011/PremiumTrends2011.html

You will see an interactive map of “Employer Premiums as Percentage of Median Household Income for Under-65 Population, 2003 and 2010”

Near the top of the page, slowly drag the slider from 2003 to 2010.

In dark blue you now see the states in which employer health insurance premiums average over 20% of median household income. Over 20%! In 2010, 62% of the population lived in states where total premiums amounted to 20% or more of middle incomes!

A static slide of this change, showing the U.S. side by side in 2003 and 2010, can be downloaded at this link (slide number 2):
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/Nov/State%20Trends/PDF_Schoen_state_trends_premiums_deductibles_2003_2010_exhibits.pdf

INCREASE IN DEDUCTIBLES

In slide 4 at the same link, you will see that, in 2010, average deductibles for employer sponsored plans are $1,025 for a single-person plan and $1,975 for a family plan, nearly double that of 2003.

For the full Commonwealth Fund report, “State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs”:
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/Nov/State%20Trends/1561_Schoen_state_trends_premiums_deductibles_2003_2010.pdf

More people receive their health insurance through their work than from any other source. The costs of employer-sponsored plans have been skyrocketing, as demonstrated by the increase in premiums. The coverage has eroded, as demonstrated by the increase in deductibles. The Office of the Actuary has predicted that “private insurance spending per person will increase faster than public programs over the next decade.” Yet the Affordable Care Act failed to provide measures which would have any significant impact on these trends in employer-sponsored plans.

Let’s restart the reform process, but this time let’s do it right. Let’s have only single payer at the table.

Health reform devolves into ‘unaffordable under-insurance’

By Roger Bybee
In These Times, Nov. 30, 2011

Health care reform in the shape of the 2010 Affordable Care Act was supposed to relieve working Americans of the burdens of rising health care costs as they struggle to survive the jobless recovery.

Instead, working Americans are being confronted with a profound deterioration in the health care system and the emergence of a disastrous new stage in America’s downward slide on health care.

“‘Unaffordable under-insurance’ is rapidly becoming the new standard in the United States,” Dr. Don McCanne, senior health policy fellow for Physicians for a National Health Program, told workinginthesetimes.com.

BIG SYMPTOM: 17% DROP IN VISITS TO DOCTOR

One of the most telling symptoms of the “new normal”: visits to physicians’ office have dropped a stunning 17 percent from the second quarter of 2009 to the second quarter of 2011, according to a recent Kaiser Family Foundation, McCanne said.

This drop in doctor visits illustrates how the ever-growing burden of health care costs — in the form of out-of-pocket deductibles and co-pays — is making Americans reluctant to seek care despite having the supposed protection of health insurance. “We know that a lot of people are foregoing beneficial treatments for conditions like diabetes, or not getting vital preventive services like Pap smears,” McCanne observed.

SHORT-TERM SAVINGS FOR INSURERS

As people’s health conditions grow in severity because of a lack of care at an early stage, the eventual cost of treatment will be much more costly and the chances of a healthy outcome reduced. With high-deductible insurance plans proliferating among pattern-setting large employers like General Electric, this pattern of unaffordable under-insurance will be well-established by the time that the Affordable Care Act is fully implemented in 2014 with health care exchanges created at the state level.

According to Dr. McCanne, the various levels of coverage offered under the ACA will leave working families with the same problem of increasingly skimpy insurance coverage that is too expensive to actually utilize. “The ‘bronze’ plan will have an ‘actuarial value’ of 60 percent, meaning that people will be paying 40 percent of their health care costs,” said McCanne.

FAMILIES CAN’T AFFORD 40% OF THEIR HEALTH COSTS

Government subsidies and maximums on out-of-pocket costs will provide some assistance, but it still appears that the bronze plan will mean that consumers pay about 40 percent, he stated. The “silver” plan covers 70 percent [i.e. does not cover 30 percent] of health care costs, but the premiums will be higher, and most consumers will probably be drawn to bronze plan. But there is little likelihood that health care insurance premiums will remain stable under the bronze plan or any other option under ACA.

Even with usage of insurance declining, fueling huge profits, insurers in California and elsewhere have been jacking up premiums, noted McCanne.

Given the vast imbalance between workers and capital, corporations have been able to force workers to swallow the premium increases, with workers’ share of health care costs rising 63 percent between 2003 and 2007. With no effective cost controls contained in the Affordable Care Act — which, after all, was drafted by WellPoint insurance lobbyist Liz Fowler working alongside the insurers’ pet poodle Senate Finance Chair Max Baucus (D-Montana) — the problem of “unaffordable under-insurance” is only going to snowball as we head toward the era of “reform.”

DISAPPOINTING RESULTS FOR ACA THUS FAR

While the ACA has raised hopes that some of the worst abuses of the for-profit insurance industry will be curbed, McCanne and his colleagues at the PNHP caution that insurers are likely to easily circumvent regulations and that the ACA will be able to keep health care affordable.

For example, the ACA’s program for people with pre-existing conditions has enrolled a mere fraction of those expected to sign up, as insurance remains prohibitively expensive.

SYSTEM LIKELY TO BE MORE STRATIFIED BY INCOME

Overall, McCanne said, we appear to be headed toward a new health crisis where most people find themselves among the ranks of the “unaffordable under-insured” and health care is increasingly delivered in a rigidly-tiered system based on ability to pay.

Poor people depending on Medicaid will be especially hard-hit as the new breed of conservative governors exemplified by Wisconsin’s Scott Walker slash the Medicare rolls while increasing corporate tax breaks. The limitations of ACA-style reform – which which the Obama Administration chose to build around the mammoth and unproductive bureaucracy of the for-profit insurance industry – are becoming increasingly apparent. As PNHP leaders pointed out after the passage of the ACA, “The much-vaunted insurance regulations – e.g. ending denials on the basis of pre-existing conditions – are riddled with loopholes, thanks to the central role that insurers played in crafting the legislation. “

ACA’S OVER-TOUTED FEATURES

Some of the most highly-touted features of the ACA features contain built-in problems, they noted. For example, “Older people can be charged up to three times more than their younger counterparts, and large companies with a predominantly female workforce can be charged higher gender-based rates at least until 2017.”

Moreover, “About 23 million people will remain uninsured nine years” into ACA’s existence.

At the same time, the affordability and coverage of those with insurance will continue to deteriorate – until the bottom 99 percent start to rebel against a health system shaped to maximize the profits of insurers who seek to minimize care. The Occupy movement offers a hopeful sign that Americans are recognizing that the health care system, like other U.S. institutions, functions to benefit the top 1 percent at the expense of the vast majority, McCanne said.

For Dr. McCanne and fellow health professionals in Physicians For a National Health Program, the downward spiral in health care will finally end only with the U.S. installing a Canadian-style “Medicare for all” single-payer system that puts a halt to the machinations of for-profit insurers.

http://www.inthesetimes.com/working/entry/12348/health_reform_runs_into_unaffordable_under-insurance/

Clarification by Don McCanne:  It is correct that the actuarial value of the bronze plans offered by the state exchanges is 60 percent, meaning that the insurer does not pay for 40 percent of the allowed costs. For those with incomes under 400 percent of the federal poverty level, cost sharing subsidies are provided, indexed to income. Also, there is an annual limitation on the total amount of cost sharing for benefits covered by the exchange plans (based on coverage requirements for health savings accounts).

What is not included are any health care services and products that are not specified in the plan as covered benefits. Also, any services that are received from providers outside of the plan networks may be excluded. These omissions can result in very high additional costs for which the patient is 100 percent responsible. An example might be a $100,000 cancer drug that the insurer conveniently labels as “experimental” and therefore not covered. Non-covered and out-of-network services can easily result in the patient having to pay 40 percent or more of the total health care bill.

Less care for fewer and fewer

By Helen Redmond
Healthcare-Now blog, Nov. 29, 2011

Evidence of how bad the U.S. health care crisis has gotten continues to pile up. And with the federal government preparing to impose automatic cuts in the Medicare health program for the elderly and Medicaid health program for the poor, it will only grow worse – unless something is done to change the direction.

A new study by the Commonwealth Fund found that the U.S. ranks last among high-income nations in preventable deaths. Up to 84,000 people die every year because they lack access to health care.

The economic crisis has led to unprecedented numbers of people losing employment-based health coverage, alongside the meltdown of the Medicaid program because of ongoing cuts at the state level. Both are drivers behind another statistic: Over 51 million Americans are uninsured, an all-time high.

Meanwhile, there is an unrelenting, bipartisan attack on Medicaid and Medicare. Instead of putting Pentagon spending on the chopping block, ending the trillion-dollar war in Afghanistan or closing tax loopholes for corporations like General Electric, which paid no taxes on $5.1 billion in profits in 2010, political leaders are ready to accept major cuts in medical care for the poor and elderly as a way of cutting the deficit.

Congress’ “supercommittee” failed to reach an agreement on proposals to reduce the federal government’s budget shortfall by $1.2 trillion, as stipulated with the deal that ended the debt-ceiling debacle over the summer. As a result, automatic spending cuts will be triggered, starting in 2013.

During their meetings, the six Democrats on the supercommittee offered a mind-boggling package of deficit-reduction measures, worth between $2.5 trillion and $3 trillion, according to press reports. All told, the Democrats recommended $400 billion in Medicare “savings,” half of which would have come from reducing benefits.

The Democrats couldn’t get Republicans to go along with their proposals, which included some tax increases to reduce the deficit. But if the deal had gone through, the cuts proposed for Medicare would have devastated the program. Cost-sharing is already far too high a burden on retirees living on fixed incomes. The cuts being sold today as “savings” would force seniors to pay more out-of-pocket, and threaten to push more into poverty and bankruptcy.

For their part, the Republicans hoped to use supercommittee negotiations not only for deeper cuts, but to push ahead on privatizing Medicare.

Rep. Jeb Hensarling, the Republican co-chair of the supercommittee, offered to negotiate on the basis of a bipartisan proposal developed by former Sen. Pete Domenici, a Republican, and former Clinton administration budget official Alice Rivlin, a Democrat, that would give seniors a choice between traditional Medicare procedures and a voucher system to buy insurance on the private market.

That effort likewise failed when the supercommittee couldn’t reach a deal, but the direction of negotiations is clear: speed up the privatization of Medicare, transfer more taxpayer money to private insurers via “premium subsidies,” and get rid of the idea that health care for seniors is an entitlement guaranteed by the government.

– – – – – – – – – – – – – – – –

LIKEWISE, THE Medicaid health program for the poor and disabled is undergoing privatization measures on the state level all the time, with more and more recipients transferred into managed-care plans. In Illinois, for example, Democratic Gov. Pat Quinn forced 40,000 elderly and disabled Medicaid recipients into HMOs run by Aetna and Centene. HMOs are notorious for restricting and denying care in order to boost profits.

Every state is taking a knife to Medicaid, and hundreds of thousands of recipients have been cut off in the drive to balance state budgets–all with the approval of the federal government under the leadership of President Barack Obama.

In California, for example, the Obama administration recently gave approval for huge cuts to Medi-Cal, a state program covering 7.6 million people that already spends less per recipient than any other state. Payments to doctors, dentists, clinics and nursing homes will be reduced–thus accelerating the dangerous national trend of dwindling numbers of health care providers willing to accept Medicaid patients because of low reimbursement rates.

In Arizona, the Feds approved a series of changes that include more co-pays for services, a fee for missed appointments and elimination of screening and treatment benefits for 19- and 20-year-old childless adults.

Meanwhile, employers are shifting more of the cost of health care onto workers–when they aren’t eliminating coverage completely.

Wal-Mart’s famous slogan “Save money. Live better” certainly doesn’t apply to its employees. The company recently announced that future part-time workers who put in less than 24 hours a week will no longer be eligible for company insurance plans. Employees who work more hours can no longer add spouses to their health plans. As the /New York Times/ reported:

Barbara Collins, a sales associate at the Wal-Mart in Placerville, Calif., said that the premiums for the HMO plan for herself and her 5-year-old son would rise to $18 every two weeks from $10. Her big concern, she said, was that her deductible would jump to $5,000 a year, from $1,000 – a daunting amount considering she earns $19,000 a year. “I don’t know how I’ll be able to afford it if I go to a doctor or to physical therapy,” she said.  While Wal-Mart workers and their partners lose health coverage, or have to chose between paying a deductible or paying the rent, Alice Walton, heiress to the Wal-Mart fortune and certified member of the 1 percent, just opened Crystal Bridges Museum of American Art in Bentonville, Arkansas. The Walton Family Foundation contributed $800 million to build the museum – and Alice Walton reportedly paid $35 million for one painting.

As Wal-Mart shows, the employment-based system of health coverage is highly unstable and a disaster for workers because it links health care to having a full-time job. When the economy is booming, that’s less of a problem, but when the economy goes bust and unemployment rises, millions of workers lose coverage.

That’s when the health-care horror stories, of which there is never a shortage, begin to defy belief.

James Richard Verone’s horror story is both heartbreaking and infuriating. Afte
r 17 years at Coca-Cola, he was laid off from his job and lost his insurance. He developed a growth in his chest and had two ruptured discs in his back. The 59-year-old was in chronic pain. Desperate for relief, Verone planned a bank robbery, knowing that once incarcerated, he’d be entitled to health care. He quietly handed the bank teller a note demanding $1 and medical care. Verone then sat down and waited for the police to arrive.

– – – – – – – – – – – – – – – –

The much-ballyhooed Patient Protection and Affordable Care Act (PPACA), passed by Congress and signed into law by Barack Obama in 2011, is under attack.

An army of health insurance company lobbyists is working stealthily behind the scenes in every state – and openly with Health and Human Services Secretary Kathleen Sebelius at the federal level – to define the law’s regulations and gut any that limit the industry’s ability to determine benefits and make profits.

Wendell Potter, the former public relations director for insurance giant Cigna-turned-whistleblower, described one of the latest “interpretations” of the law that will benefit the industry:

Consumer advocates who have been in meetings at the White House in recent weeks say they believe the administration is bending over backward to accommodate the insurers. … They expressed concern that the final regulations would allow insurers to stack the decks against patients by allowing health plans to deem a second-level internal appeal of a denial as meeting the requirement for an independent external appeal.

One of the first provisions of the PPACA eliminated after the act became law was a long-term care benefits program called Community Living Assistance Services and Supports (CLASS).

Championed by the late Sen. Edward Kennedy, CLASS was meant to provide support so the elderly and disabled could stay at home, rather than move into nursing homes. The program was made a part of the PPACA as a tribute to Kennedy. But insurance industry lobbyists objected that the program was too costly, and Sebelius apparently agreed, announcing in October that the administration would not implement the CLASS program.

Meanwhile, the industry is on the verge of gutting the medical-loss ratio (MLR) rule. The MLR requires insurance companies to spend at least 80 percent of premiums on medical care – and if they don’t, the money must be rebated to policyholders.

Insurers hate the MLR rule for obvious reasons – they want to spend less on providing actual health care so they can increase returns for profits and salaries for executives. So lobbyists have been hard at work twisting arms at the state and federal level.

They may have gotten their way. The National Association of Insurance Commissioners (NAIC) – an organization representing the chief insurance regulators in all 50 states – voted to send a resolution to Congress in support of suspending or changing the calculation of the MLR.

If Congress agrees, $1 billion in expected rebates would be cancelled and the MLR rule voided. Lynn Quincy of the watchdog group Consumers Union said of the decision: “This is a serious setback in the struggle to protect consumers. … It is also a step back for working families.”

The insurance industry’s toxic influence can be seen as well in the actions of the prestigious Institute of Medicine (IOM).

The IOM was tasked by Sebelius with formulating a package of essential health benefits to be offered by private health plans sold through the state insurance exchanges that will be set up under the PPACA.

Incredibly, the IOM recommended a set of benefits modeled on the skimpy, high co-pay, high-deductible coverage that small businesses currently offer – and that millions of workers can’t afford. Physicians for a National Health Program (PNHP) sent an open letter with over 2,000 signatures to the Obama administration opposing the recommendations. It stated:

We protest the Institute of Medicine’s (IOM) recommendation that cost rather than medical need be the basis for defining the “essential benefits” that insurance policies must cover when the federal health reform law takes effect in 2014. … The inadequate coverage the IOM recommends would shift costs from corporate and government payers onto families already burdened by illness.  

So why did the respected IOM make such an awful recommendation? Could it have anything to do with the $2 million donation to the IOM from Leonard D. Schaeffer, CEO of insurance giant WellPoint?

– – – – – – – – – – – – – – – –

WITH THE PPACA, insurance companies won both a mandate forcing everyone to have health coverage and no working cost controls that would inhibit their profits. They will be happy to underinsure millions of people with the $447 billion in taxpayer subsidies that will be transferred to their coffers under the PPACA.

Underinsurance is guaranteed profits for the insurance companies – and guaranteed misery and financial hardship for patients.

Especially during next year’s election campaign, the Obama administration will claim that more Americans will be insured under the PPACA. That may be true – but the real question is whether it’s legitimate to describe as “health insurance” policies with $15,000 annual deductibles, with out-of-pocket expenses ranging into the thousands of dollars, without comprehensive coverage.

People “insured” under these policies will very easily find themselves pushed into bankruptcy if they get sick – no different than the current system.

Another highly touted gain in the PPACA is the expansion of eligibility for Medicaid – an estimated 20 million people will be added to the program. But how can that happen when Medicaid funding is being slashed to the bone, providers are leaving the program in droves, and state governments are coming up with new ways to push people off the Medicaid rolls?

Barack Obama’s health care legislation is fundamentally flawed. Any provisions that would do some good in extending coverage to more people and limiting insurance company abuses are being eviscerated – while the health care industry stands to make a windfall from other parts of the law.

That’s the reality of the health care crisis in the U.S. today. But the insurers aren’t having it all their way. The greed of the corporations that own and control health care has been pushed back into the spotlight by the Occupy Wall Street movement.

Like the banks, the insurance industry is being exposed as part of the profit-
gouging 1 percent that is ripping off the 99 percent. Health care as a human right is among the Occupy movement’s demands, and nurses, doctors and other health care providers have joined the occupations, marched with protesters, organized teach-ins and provided on-site medical care.

The slogan “Health care for the 99 percent” can direct more people to the need for a single-payer, nonprofit, national health care system that includes everyone.

– – – – – – – – – – – – – – – – –

This article originally appeared in the Nov. 29 edition of Socialist Worker.

http://www.healthcare-now.org/less-care-for-fewer-and-fewer/

Occupy welcomes physician sharing vision for single-payer health system

By Zack Rubin
The Daily Tar Heel (Chapel Hill, N.C.), Dec. 5, 2011

Dr. Steve Auerbach has shared his vision for a single-payer health system with Occupy movements nationwide, and on Friday he brought it to Chapel Hill.

Auerbach, a pediatrician and a leader of the advocacy group Physicians for a National Health Program, pointed at a handwritten sign reading “Corporate greed makes us sick” while speaking to a crowd in Alumni Hall.

“It’s not a moral statement, it’s a matter of fact,” he said.

After his speech at the University, Auerbach and a crowd moved on to Peace and Justice Plaza outside the town’s courthouse to continue the discussion.

Auerbach’s speeches were part of a series of “teach-ins” being held across the country by “Health care for the 99 percent,” a branch of the Occupy Wall Street movement. He also spoke Saturday in Durham and Greensboro.

Auerbach discussed the role of insurance companies and lobbyists in health care. He criticized the fact that insurance companies might not cover people with certain conditions.

“If you take home one message, it’s this: You can’t make money insuring sick people,” he said. “That’s insane, it makes no sense.”

He said a single-payer health care system — where medical care for the entire population is funded by one entity, such as a government-run organization — would solve the inequality.

Some veterans of the Occupy movement viewed the speech and participated in the walk to Occupy Chapel Hill, including freshman Laura Carroll.

“I had been to some of the Occupy events before the raids happened, and I wanted to see how the movement shifted,” she said.

Other attendees said they were simply curious.

“I’ve sort of been watching from afar,” said freshman Mariah Earle. “My family always ridiculed the single–payer system, so I learned some actual factual things.”

Junior Addison Evans said speakers like Auerbach can spark conversation on campus.

“It is important to have informed debate,” said Evans, who received extra credit from her professor for attending.

Auerbach said he was glad to be part of the tradition of doctors advocating in civil rights movements.

“I consider myself extremely patriotic,” he said. “Despite 30 years of propaganda, the American people get it.”

http://www.dailytarheel.com/index.php/article/2011/12/occupy_welcomes_physician_sharing_vision_for_single_payer_health_system

Michael Dukakis on ACOs: "We tried that, folks. It didn’t work."

Michael Dukakis on ACOs: "We tried that, folks. It didn’t work."

By Chelsea Conaboy
The Boston Globe, November 28, 2011

The creation of accountable care organizations or a global payment structure won’t fix the health care system in Massachusetts and make it more affordable, former governor Michael Dukakis told an audience at Harvard last week.

Speaking during the Harvard School of Public Health Voices from the Field series, Dukakis said urging the health care market to fix itself is “a colossal waste of time.”

Here’s an excerpt from the event:

“If we paid a little attention, it might be a good idea, to the experience of other countries around the world who are doing this and who, for some reason, seem to be able to provide rather good health care to their people at half the cost we do — whatever the siltstone, whether it’s Australian medicare or a multi-payer system in Germany or an essentially privatized system in Switzerland — every one of them regulates cost, without exception.

“What do we do? Come up with this ACO, global payment thing… We’ve done it. ACOs and global payments. What did we used to call them? HMOs and capitation. We tried that, folks. It didn’t work. Why are we doing it again?

“Now don’t get me wrong. Nobody loves having to regulate. We had something called the rate-setting commission when I was governor… We treated hospitals as public utilities. They couldn’t raise their rates a nickel unless they went to the rate-setting commission. We certainly didn’t have these huge disparities between what Partners gets and what the BI gets. Wouldn’t allow it. So, we’ve got to get on with the business of regulating costs. And I think the least bureaucratic way to do it, rather than getting into setting elaborate fee schedules and so forth, is essentially to use the authority we have in this state under the state insurance statutes to regulate the rate of increase and the cost of premiums… You’ve got to involve the key players – providers, consumers, legislators, and so forth – in the process of developing how we’re going to regulate and then carefully monitoring it so that, in point of fact, it works and works effectively and at the same time make sure that we provide people with excellent health care, which we do in this state.

“What I’m worried about is that we’re futzing around with new institutional arrangements, accountable care organizations.”

http://www.bostonglobe.com/lifestyle/health-wellness/2011/11/28/michael-dukakis-acos-tried-that-folks-didn-work/i6WTqNZOg8OB3fL170Y54I/story.html

Comment:

By Don McCanne, MD

Michael Dukakis certainly recognizes accountable care organizations as being merely a new variant of HMOs with capitation. He worries about us “futzing around” with ACOS, but we need to go him one better. Let’s quit “futzing around” with private insurers and establish an improved Medicare for everyone.

Michael Dukakis on ACOs: “We tried that, folks. It didn’t work.”

Michael Dukakis on ACOs: “We tried that, folks. It didn’t work.”

By Chelsea Conaboy
The Boston Globe, November 28, 2011

The creation of accountable care organizations or a global payment structure won’t fix the health care system in Massachusetts and make it more affordable, former governor Michael Dukakis told an audience at Harvard last week.

Speaking during the Harvard School of Public Health Voices from the Field series, Dukakis said urging the health care market to fix itself is “a colossal waste of time.”

Here’s an excerpt from the event:

“If we paid a little attention, it might be a good idea, to the experience of other countries around the world who are doing this and who, for some reason, seem to be able to provide rather good health care to their people at half the cost we do — whatever the siltstone, whether it’s Australian medicare or a multi-payer system in Germany or an essentially privatized system in Switzerland — every one of them regulates cost, without exception.

“What do we do? Come up with this ACO, global payment thing… We’ve done it. ACOs and global payments. What did we used to call them? HMOs and capitation. We tried that, folks. It didn’t work. Why are we doing it again?

“Now don’t get me wrong. Nobody loves having to regulate. We had something called the rate-setting commission when I was governor… We treated hospitals as public utilities. They couldn’t raise their rates a nickel unless they went to the rate-setting commission. We certainly didn’t have these huge disparities between what Partners gets and what the BI gets. Wouldn’t allow it. So, we’ve got to get on with the business of regulating costs. And I think the least bureaucratic way to do it, rather than getting into setting elaborate fee schedules and so forth, is essentially to use the authority we have in this state under the state insurance statutes to regulate the rate of increase and the cost of premiums… You’ve got to involve the key players – providers, consumers, legislators, and so forth – in the process of developing how we’re going to regulate and then carefully monitoring it so that, in point of fact, it works and works effectively and at the same time make sure that we provide people with excellent health care, which we do in this state.

“What I’m worried about is that we’re futzing around with new institutional arrangements, accountable care organizations.”

http://www.bostonglobe.com/lifestyle/health-wellness/2011/11/28/michael-dukakis-acos-tried-that-folks-didn-work/i6WTqNZOg8OB3fL170Y54I/story.html

Michael Dukakis certainly recognizes accountable care organizations as being merely a new variant of HMOs with capitation. He worries about us “futzing around” with ACOS, but we need to go him one better. Let’s quit “futzing around” with private insurers and establish an improved Medicare for everyone.