PNHP

Cost-sharing: Effects on spending and outcomes

Cost-sharing: Effects on spending and outcomes

By Sarah Goodell, M.A. and Katherine Swartz, Ph.D.  
The Synthesis Project
Harvard School of Public Health
Publisher: Robert Wood Johnson Foundation
Published: December 2010

This brief examines how cost-sharing affects the use of services, whether some patients are more sensitive to cost-sharing than others, and whether reduced use of services as a result of cost-sharing has an effect on health outcomes. All of these issues factor into whether and how cost-sharing could be used to reduce the rate of growth of health care spending.

Click here to download the paper.

A pause

Instead of contemplating a health care Quote of the Day today, let’s take a moment to consider what each of us might do to harness the energy behind the forces that would destroy social solidarity, and bring us all together in efforts to heal our social problems such as our sick health care system that leaves so many suffering and dying.

U.S. has 'death panels'

By JOHNATHON ROSS
The Blade (Toledo, Ohio), Jan. 9, 2011

The American health care system is severely dysfunctional. We spend about twice as much per person on health care as other wealthy democracies, yet our medical outcomes are mediocre by comparison.

Some 45,000 Americans a year die because they lack health insurance. Thousands more needlessly suffer and die from preventable causes. Others go bankrupt because of medical bills.

Health-care reform is touted as a way to change what’s wrong with our system. But the law leaves private health insurers in the driver’s seat. That doesn’t augur well for change.

During the reform debate, the Tea Party gossip was that government “death panels” would pull the plug on Granny. That is nonsense.

New regulations simply allow me, a primary-care general internist, to bill the government for the time I spend discussing with my Medicare patients specific end-of-life issues, such as having a durable power of attorney for health care and a living will. These are common-sense things that any decent doctor should do.

But this isn’t to say that death panels that ration health care don’t exist. They do, in the forms of private health insurance companies and Republican-dominated state legislatures.

For insurers, denials of care are a matter of record. A California-based study in 2009 showed that big insurers denied one of every five claims. Every claim that is denied helps pad insurance companies’ bottom line. But the consequences of such denials can be catastrophic to real people.

In Texas, Republican Gov. Rick Perry and GOP legislative leaders say they are thinking about canceling their state’s participation in Medicaid. The Texas Medicaid program covers about 3.4 million poor people.

A decision to drop out of Medicaid would result in an estimated 3,400 annual deaths in Texas, on top of the 6,100 deaths in the state each year caused by a lack of health insurance, recent research suggests. And who knows how much suffering and disability would result for those who do not die, but go without needed care?

Arizona’s Republican-dominated Legislature has canceled Medicaid coverage for about 100 patients who need organ transplants. Two of those patients already have died, so this is truly the decision of a death panel.

Lawmakers claim the policy will save about $4.5 million. But what about the human cost? Just about all of these patients are likely to die over the next four years without coverage. At least some would survive if they kept Medicaid coverage and found matching donors.

There is a way out of this. We can insure all Americans at a reasonable cost by enacting a nonprofit, single-payer national health insurance program — an improved “Medicare for all.”

Clinical decisions would be made by doctors and patients, not by insurance company bureaucrats or bought-and-paid-for politicians. Administrative savings would allow comprehensive coverage for everyone, with no increase in U.S. health spending.

Single-payer financing would streamline the health-care bureaucracy, saving $400 billion a year on administrative and insurance overhead. That would be enough to insure everyone and still eliminate all co-pays and deductibles.

The health-care law defers state experimentation until 2017. But Ohio and other states should get to work now with single-payer reform. Let’s get moving. Our lives depend on it.

Johnathon Ross is past president of Physicians for a National Health Program and an executive committee member of the Single Payer Action Network in Ohio.

http://www.toledoblade.com/article/20110109/OPINION04/110109579

Single payer is tried, tested; it’s Mass. plan that’s risky

Letters
The Boston Globe, Jan. 9, 2011

On last Sunday’s editorial page, the Globe supports two courses toward controlling health care costs: It backs Governor Patrick’s efforts to change the health care industry’s fee-for-service system to “global payments,” and it suggests that Vermont’s plan to implement a single-payer health care system should be supported as an experiment, or “a laboratory of democracy.”

The Globe seems to have mixed up its rationales, as almost every developed nation in the world has a single-payer health care system or something close to it, and we have mountains of evidence that such a system works at controlling costs while delivering the same or better outcomes. The Massachusetts plan to implement payment reform, however, is highly experimental, and there is little evidence supporting the hope that it would effectively control our costs.

A 2009 Urban Institute survey of the evidence on global payment reform found that the concept would not be a game changer for cost control in the short run, but that further experiments would be welcome. Moreover, we know that fee-for-service is not causing our high and rising health care costs; two recent studies by the state both found that it is rising costs per service, not growing utilization of care, that are driving our costs.

The Globe is correct that Governor Patrick’s commitment to cost control is much needed. Now we need a path to cost control that is proven and not based on a misdiagnosis.

Benjamin Day
Executive director, Mass-Care: The Massachusetts Campaign for Single Payer Health Care
Boston

Vermont applauded for its Medicare-like move

Letters
The Boston Globe, Jan. 9, 2011

I APPLAUD The Globe for showcasing Vermont’s single-payer “laboratory’’ in its Jan. 2 editorial “Vermont: Creating a singular health system.’’ As a third-year medical student at Cambridge Health Alliance, I’ve found that it doesn’t take long to see that the current system is insufficient.

The shortcomings leave patients whom I follow longitudinally with less access to community health centers, substance abuse treatment, and specialty services and testing. Some patients with private insurance have medication bills so weighty that they choose other necessities over pills. A single-payer system would establish a government-run, publicly funded insurance program with privately delivered services that cover all necessary care for everyone.

By implementing a single-payer approach, Vermont would lead the nation toward a cost-effective system to eliminate health care-based inequalities. Though the Globe says doctors have been “wary’’ of single payer, a recent Massachusetts Medical Society survey of doctors in the state showed that more preferred single payer than the current public-private mix. Further, a national survey published in the Annals of Internal Medicine in 2008 showed that 59 percent of physicians support government action to establish national health insurance.

Physicians and medical students are no longer wary bystanders. We are advocates for Medicare for all.

Simeon Kimmel
Jamaica Plain

http://www.boston.com/bostonglobe/editorial_opinion/letters/articles/2011/01/09/vermont_applauded_for_its_medicare_like_move/

Blue Shield of California's rate hikes

Blue Shield of California seeks rate hikes of as much as 59% for individuals

By Duke Helfand
Los Angeles Times
January 5, 2011

Another big California health insurer has stunned individual policyholders with huge rate increases — this time it’s Blue Shield of California seeking cumulative hikes of as much as 59% for tens of thousands of customers March 1.

In all, Blue Shield said, 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October.

Nearly 1 in 4 of the affected customers will see cumulative increases of more than 50% over five months.

http://www.latimes.com/health/healthcare/la-fi-insure-rates-20110106,0,6975599.story

And…

Statement of HHS Secretary Kathleen Sebelius on Blue Shield of California’s proposed rate increase

U.S. Department of Health and Human Services
January 6, 2011

“The people of California have a right to be concerned when they see this kind of rate increase month after month. We have reached out to California Insurance Commissioner Dave Jones and know he is doing everything in his power to help consumers. We stand ready to assist him and the people of California in any way that we can.”

http://www.hhs.gov/news/press/2011pres/01/20110106b.html

And…

Statement by Blue Shield of California

Blue Shield of California
January 6, 2011

The rate increases reported today cover a period of more than one year and have almost nothing to do with the federal health reform law. These rates reflect trends that were building long before health reform. Our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are dropping coverage during a bad economy. Health reform will help slow down this trend by expanding coverage, which will keep healthier people in the system, and through quality and cost containment initiatives such as the Independent Payment Advisory Board, Center for Medicare and Medicaid Innovation, Patient-Centered Outcomes Research Institute and other incentives for prevention and coordinated health care.

Even with these rate increases, Blue Shield of California expects to lose tens of millions of dollars on its individual healthcare business in both 2010 and 2011. These new rates meet the federal requirement that 80 percent of premiums are spent on healthcare expenses.

https://www.blueshieldca.com/bsc/newsroom/pr/statement_rates_010611.jhtml

Comment:

By Don McCanne, MD

Last year California’s for-profit Anthem Blue Cross, a division of WellPoint, enraged everyone when they attempted to raise premiums as much as 39 percent. In contrast, Blue Shield of California is a non-profit insurer attempting to compete in a market in which the rules are established by investor-owned insurers, yet they are now calling for premium increases as high as 59 percent. As a provider or a patient, it is difficult to tell the California Blues apart.

That said, the brief statement released by Blue Shield of California explains the reasons for the increases: higher provider prices, increased utilization, and a decline in enrollment in a bad economy resulting in spiraling premiums due to adverse selection. In spite of these premium increases, Blue Shield expects to lose tens of millions of dollars on its individual health plans.

These premium increases are intolerable, but is Blue Shield really to blame? Keep in mind that the average working family of four now uses over $18,000 worth of medical care (Milliman Medical Index), and Blue Shield is trying to sell a product that covers those costs plus its own administrative expenses. With insurer administrative costs at 20 percent for the individual market, that’s about $22,500 that the premium would have to be. To lower the premium, costs are shifted directly to the family through deductibles, co-payments, coinsurance, and paring of benefits, but how much in direct costs can the family bear when median household income is about $50,000?

Blue Shield is facing an impossible situation. They cannot create a product that has both affordable premiums and adequate protection against out-of-pocket medical expenses.

That is why the Patient Protection and Affordable Care Act provides income-indexed subsidies for both premiums and cost sharing, but applying simple math to these subsidies will demonstrate that they are inadequate for the majority of low- and moderate-income families who have health care needs.

If we were to increase the subsidies to a level where they would be adequate, then you would be paying more than an improved Medicare for all would cost since the subsidies would have to pay not only for health care but for all of the administrative excesses of our fragmented system composed of a multitude of private and public plans. If taxpayers are going to pay the bill, we might as well pay the one that is a bargain.

The administrative team at Blue Shield of California is composed of fine people. We should thank them for their dedicated service and offer them job retraining to serve in our expanded and improved Medicare program. For the investors and administrative team at Anthem Blue Cross, we should show them the door.

‘Don’t repeal health law – go beyond it to single-payer Medicare for all’: doctors’ group

FOR IMMEDIATE RELEASE
Jan. 7, 2011
 
Contact:
Garrett Adams, M.D., president, PNHP
Margaret Flowers, M.D., congressional fellow, PNHP
David Himmelstein, M.D., co-founder, PNHP
Quentin Young, M.D., national coordinator, PNHP, (312) 782-6006
Mark Almberg, PNHP, (312) 782-6006, mark@pnhp.org

A nationwide organization of doctors who favor a single-payer health care system today rejected calls by Republican leaders to repeal the new health law, noting that the law contains modest benefits for patients that should not be spurned.

At the same time, the doctors said that the enactment of a single-payer, Medicare-for-all program is the only way to assure high quality, comprehensive care to all Americans and the only way to rein in skyrocketing health care costs.

“We reject the call by Republican leaders to repeal the Patient Protection and Affordable Care Act (PPACA), even as we recognize the new law is incapable of resolving our health care morass,” said Dr. Garrett Adams, president of the 18,000-member Physicians for a National Health Program.

“The health law is flawed because it continues our nation’s reliance on an inefficient and wasteful private-insurance-based model of financing care – a rickety structure that denies health care access to millions, bankrupts patients, ratchets up costs and frustrates efforts to improve quality,” he said.

“That’s why we need to move to a single-payer system,” he said. “In doing so, we’ll save about $400 billion annually by cutting out the unnecessary paperwork and bureaucracy inflicted on us by the private insurers. We’ll also gain the one-system bargaining power we need to negotiate lower prices for pharmaceutical drugs and medical supplies.”

Adams said the “modest” benefits in the administration’s health law include greater funding of community health centers, the expansion of Medicaid coverage, and “measures to restrict some of the most outrageous practices of the private health insurance companies like denying coverage because of pre-existing conditions or rescinding coverage when people get sick.”

“These beneficial measures could have been enacted separately,” Adams said. “But now that they’re part of the law, we cannot in good conscience support the repeal of any provisions that might conceivably benefit our patients.”

Adams said Republican leaders’ call to repeal PPACA is especially objectionable, given that they have no serious alternative to offer by way of health care reform.

“The GOP and conservatives urge greater reliance on the private sector and ‘free market’ mechanisms, including less regulation of the insurance industry,” Adams said. “Such measures include allowing people to purchase insurance across state lines, which would lead them to buy junk insurance policies from companies in states where consumer protections have been all but eviscerated. It would mean a race to the bottom to even skimpier insurance policies than people have now.”

He also dismissed claims by the Republican leadership that tort reform will significantly affect the U.S. health care scene, noting that research has shown malpractice suits have a marginal impact on the costs of medical care.
 
“The proposals emanating from the GOP leaders would do nothing to control costs or reduce the enormous administrative waste in our current health care system,” he said. “They would do nothing to reduce the number of uninsured. In fact, the number of uninsured, now at 51 million, would likely rise much higher – worsening an already catastrophic situation.”

Adams, a pediatric infectious disease specialist who resides in Louisville, Ky., said that, in his opinion, Republican leaders who are vowing to repeal the new health law are not really aiming to do so.

“Despite their bluster, GOP lawmakers don’t really want to repeal the law because some of their chief financial backers, the health insurance companies, like its basic provisions,” he said. “The insurers especially like PPACA’s requirement that millions of people buy insurance from them and that at least $447 billion in federal subsidies will be coming their way over the next 10 years as part of this arrangement.

“We reject such political posturing at the expense of human suffering and human lives,” Adams said. “We call for a real, sustainable solution to our health care woes. PPACA should be superseded by a comprehensive health reform that provides quality, affordable care to everyone – single-payer national health insurance, an improved Medicare for all.”

***

Physicians for a National Health Program (www.pnhp.org) is an 18,000-member organization advocating nonprofit, single-payer national health insurance for the United States. Dr. Garrett Adams is the newly elected president of PNHP. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.

Buckle Up for Round 2

By DAVID BROOKS
The  New York Times, January 6, 2011

The health care reform law was signed 10 months ago, and what’s striking now is how vulnerable it looks. Several threats have emerged — some of them scarcely discussed before passage — that together or alone could seriously endanger the new system. These include:

The courts. So far, one judge has struck down the individual mandate, the plan’s centerpiece. Future decisions are likely to break down on partisan lines. Given the makeup of the Supreme Court, this should concern the law’s defenders.

False projections. The new system is based on a series of expert projections on how people will behave. In the first test case, these projections were absurdly off base. According to the Medicare actuary, 375,000 people should have already signed up for the new high-risk pools for the uninsured, but only 8,000 have.

More seriously, cost projections are way off. For example, New Hampshire’s plan has only about 80 members, but the state has already burned through nearly double the $650,000 that the federal government allotted to help run the program. If other projections are off by this much, the results will be disastrous.

Employee dumping. This is the most serious threat. Companies and unions across America are running the numbers and discovering they would be better off if, after 2014, they induced poorer and sicker employees to move to public insurance exchanges, where subsidies are much higher.

The number of people in those exchanges could thus skyrocket, especially as startup companies undermine their competitors with uninsured employees and lower costs. The Congressional Budget Office projects that 19 million people will move to the exchanges at a cost of $450 billion between 2014 and 2019. But according to the economists Douglas Holtz-Eakin and James C. Capretta, costs could soar to $1.4 trillion if those who would be better off in the exchanges actually moved to them. The price of the health care law could double. C. Eugene Steuerle of the Urban Institute, who has been among those raising the alarms about this, calls the law’s structure “unworkable and unfair.”

Health care oligarchy. Since the law passed, there has been a frenzy of mergers and acquisitions, as hospitals, clinics and doctor groups have joined together into bigger and bigger entities. The drafters encourage this, believing large outfits would be more efficient. The downside to this economic concentration is there could be less competition and cost control. In many places, the political power of these quasi-monopolies would be huge, with unforeseeable results. The law bans doctors from starting up hospitals to increase competition.

Public hostility. Right now about 53 percent of Americans oppose the health care law and 43 percent support it, according to an average of the recent polls. Complaints are especially high among doctors. According to a survey by the Physicians Foundation, 60 percent of private practice doctors say the law will force them to close their practices or to restrict them to certain categories of patients.

Given this level of unhappiness, people will blame the Obama law for everything they hate about the health care system. Political opposition was fierce last November, and it could easily shape the 2012 election and lead to changes or repeal.

Over all, there is a strong likelihood that the current health care law will face an existential threat over the next five years. Each party should be preparing contingency plans.

When the crisis comes, Democrats will face an interesting choice — to patch the Obama system or try to replace it with something bigger. The administration may want a patch, but by a ratio of nearly 2 to 1, according to a CNN poll, Democratic voters would prefer a more ambitious law. Liberals could logically say that the mistake was trying to create a hybrid system, rather than moving straight to a single-payer one.

Republicans are going to have to move beyond their current “Repeal!” posture and cohere behind a positive alternative. One approach, which Tyler Cowen of George Mason University has written about, is to allow more state experimentation. Another approach, championed by Capretta, Yuval Levin of National Affairs and Thomas P. Miller of the American Enterprise Institute, revolves around the words “defined contribution.”

Under this approach, Republicans would say that the federal government has a role in subsidizing health insurance — a generous role, but not unlimited. The government would provide needy citizens with a predefined amount of money to spend on insurance and allow them to shop in a transparent, regulated, but not micromanaged marketplace.

After the trauma of the last two years, many people wish the issue would go away. But it’s not going away, especially since costs will continue to rise.

Some Congresses achieve health care; members of this Congress or the next one will have health care thrust upon them.

ObamaCare Repeal: GOP Should Be Careful What It Wishes For

The individual mandate is unpopular, but repealing it could open the door to future reform based on payroll taxes.

By ROBERT B. REICH
The  Wall Street Journal, January 7, 2011

Republicans in the House, now in the majority, say they’ll vote to repeal the health-care law on Jan. 12. It will largely be a symbolic vote: Even in the unlikely event that 60 senators agree, Republicans don’t have the votes to override President Obama’s certain veto.

A more likely scenario in the weeks and months to come will be the Republicans’ attempt to strip the Department of Health and Human Services of the money necessary to implement the law’s requirement that all Americans buy health insurance. This could easily precipitate a showdown with the White House—and a government shutdown later this year.

The individual mandate is the linchpin of the health-care law because it spreads the risks. Without the participation of younger or healthier people, private insurers won’t be able to take on older or sicker customers with pre-existing medical conditions, or maintain coverage indefinitely for people who become seriously ill. The result would be to unravel the health-care law, which presumably is what many Republicans seek.

On the surface, this is a smart strategy for the GOP. The individual mandate is the least popular aspect of the law. According to a Dec. 9-12 ABC/Washington Post survey, 60% of the public opposes the individual mandate. While they want help with their health-care bills, and over 60% want to prevent insurers from dropping coverage when customers become seriously ill, Americans simply don’t like the idea of government requiring them to buy something. It not only offends libertarian sensibilities, but it also worries some moderates and liberals who fear private insurers will charge too much because of insufficient competition in the industry.

The individual mandate is also most susceptible to legal challenge. Twenty states, led by Florida, have joined together in a lawsuit to argue that the mandate oversteps federal authority. Virginia and some interest groups are also challenging the mandate’s constitutionality in federal court. In the first major ruling, Commonwealth of Virginia v. Sebelius, on Dec. 13, Judge Henry Hudson of the federal district court in Richmond called the individual mandate an “unbridled exercise of federal police powers” and an overreach of the Constitution’s Commerce Clause. The U.S. government is now appealing that decision.

Defenders of the law argue that mandates aren’t unusual. After all, most states require people to purchase auto insurance in order to drive a car, and most lenders (including those underwritten by Fannie Mae or Freddie Mac) require potential homeowners to buy home insurance. But the analogy doesn’t quite hold. These requirements come from states or from banks—not directly from the federal government. More importantly, they rest on a basic act of volition. No one has to buy a car or a house. Not so with health insurance under the new law.

Nonetheless, there’s a great irony in the Republican assault. The federal government wouldn’t be nearly as vulnerable to these political and legal obstacles had the health-care law been built upon the framework of Social Security or Medicare—public insurance financed by payroll taxes—as many Democrats had initially urged. Not only are these programs enormously popular—”Don’t take away my Medicare!” was a rallying cry among some conservative populists during the debates over the health-care law—but they also rest on a more widely accepted relationship among the individual, the government and the market.

Americans are accustomed to paying for public insurance through their payroll taxes. Such payments aren’t viewed as federal mandates that encroach upon individual freedoms, or as payoffs to private companies likely to make even more money from mandatory purchases of their products, but as well-deserved entitlements.

Indeed, the biggest problem with Social Security and Medicare is they’re so popular that politicians have had a hard time trimming their benefits to match payroll tax revenues—a major contributor to the budget deficit in coming years. Had health care been added as more public insurance financed by payroll taxes, the challenge might be even greater, which may help explain the fierce resistance of Republicans to using Social Security and Medicare as templates for the new health-care law.

For 60 years, the battle over health-care reform has been waged over these two ways of spreading costs and risks: either through payroll taxes and public insurance, or mandated purchases from private insurers. For most of those six decades, Democrats advocated the former. Harry Truman’s initial plan for adding health insurance to Social Security was defeated, but Lyndon Johnson’s Medicare succeeded.

Apart from George W. Bush’s drug benefit, which was also based on this Democratic framework, Republicans have always been on the side of mandated purchases from private insurers. In 1974, Richard Nixon’s proposed Comprehensive Health Insurance Plan would have required private employers to provide their employees with comprehensive health insurance coverage purchased from private insurers. (An employer mandate is tantamount to an individual mandate in that employees are forced to pay it indirectly via lower wages.) Ted Kennedy simultaneously proposed universal coverage financed through Social Security taxes, essentially copying Medicare. Neither plan succeeded, but Nixon’s framework redefined the idea of national health insurance from then onward.

President Obama and a majority of Democrats in the last Congress opted for the Republican model even though many Democrats would have preferred Medicare for all, or at the very least a public option. Most polls showed that the public favored such an option. But the White House hoped for Republican support and wanted to ward off opposition from health insurers and pharmaceutical companies by promising them some 30 million additional customers.

Set against this background, the current Republican attack on mandatory coverage is curious because it raises the essential question of how society would otherwise spread health-care risks. If successful—either in Congress or in the courts—a Republican victory could turn into a Pyrrhic one by opening the way to the alternative model, based on the system Americans seem to prefer: payroll taxes and public insurance.

Mr. Reich, professor of public policy at the University of California at Berkeley and former secretary of labor under President Clinton, is the author, most recently, of “Aftershock: The Next Economy and America’s Future” (Alfred A. Knopf, 2010).

Blue Shield of California’s rate hikes

Blue Shield of California seeks rate hikes of as much as 59% for individuals

By Duke Helfand
Los Angeles Times
January 5, 2011

Another big California health insurer has stunned individual policyholders with huge rate increases — this time it’s Blue Shield of California seeking cumulative hikes of as much as 59% for tens of thousands of customers March 1.

In all, Blue Shield said, 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October.

Nearly 1 in 4 of the affected customers will see cumulative increases of more than 50% over five months.

http://www.latimes.com/health/healthcare/la-fi-insure-rates-20110106,0,6975599.story

And…

Statement of HHS Secretary Kathleen Sebelius on Blue Shield of California’s proposed rate increase

U.S. Department of Health and Human Services
January 6, 2011

“The people of California have a right to be concerned when they see this kind of rate increase month after month. We have reached out to California Insurance Commissioner Dave Jones and know he is doing everything in his power to help consumers. We stand ready to assist him and the people of California in any way that we can.”

http://www.hhs.gov/news/press/2011pres/01/20110106b.html

And…

Statement by Blue Shield of California

Blue Shield of California
January 6, 2011

The rate increases reported today cover a period of more than one year and have almost nothing to do with the federal health reform law. These rates reflect trends that were building long before health reform. Our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are dropping coverage during a bad economy. Health reform will help slow down this trend by expanding coverage, which will keep healthier people in the system, and through quality and cost containment initiatives such as the Independent Payment Advisory Board, Center for Medicare and Medicaid Innovation, Patient-Centered Outcomes Research Institute and other incentives for prevention and coordinated health care.

Even with these rate increases, Blue Shield of California expects to lose tens of millions of dollars on its individual healthcare business in both 2010 and 2011. These new rates meet the federal requirement that 80 percent of premiums are spent on healthcare expenses.

https://www.blueshieldca.com/bsc/newsroom/pr/statement_rates_010611.jhtml

Last year California’s for-profit Anthem Blue Cross, a division of WellPoint, enraged everyone when they attempted to raise premiums as much as 39 percent. In contrast, Blue Shield of California is a non-profit insurer attempting to compete in a market in which the rules are established by investor-owned insurers, yet they are now calling for premium increases as high as 59 percent. As a provider or a patient, it is difficult to tell the California Blues apart.

That said, the brief statement released by Blue Shield of California explains the reasons for the increases: higher provider prices, increased utilization, and a decline in enrollment in a bad economy resulting in spiraling premiums due to adverse selection. In spite of these premium increases, Blue Shield expects to lose tens of millions of dollars on its individual health plans.

These premium increases are intolerable, but is Blue Shield really to blame? Keep in mind that the average working family of four now uses over $18,000 worth of medical care (Milliman Medical Index), and Blue Shield is trying to sell a product that covers those costs plus its own administrative expenses. With insurer administrative costs at 20 percent for the individual market, that’s about $22,500 that the premium would have to be. To lower the premium, costs are shifted directly to the family through deductibles, co-payments, coinsurance, and paring of benefits, but how much in direct costs can the family bear when median household income is about $50,000?

Blue Shield is facing an impossible situation. They cannot create a product that has both affordable premiums and adequate protection against out-of-pocket medical expenses.

That is why the Patient Protection and Affordable Care Act provides income-indexed subsidies for both premiums and cost sharing, but applying simple math to these subsidies will demonstrate that they are inadequate for the majority of low- and moderate-income families who have health care needs.

If we were to increase the subsidies to a level where they would be adequate, then you would be paying more than an improved Medicare for all would cost since the subsidies would have to pay not only for health care but for all of the administrative excesses of our fragmented system composed of a multitude of private and public plans. If taxpayers are going to pay the bill, we might as well pay the one that is a bargain.

The administrative team at Blue Shield of California is composed of fine people. We should thank them for their dedicated service and offer them job retraining to serve in our expanded and improved Medicare program. For the investors and administrative team at Anthem Blue Cross, we should show them the door.

Blue Shield of California seeks rate hikes of as much as 59% for individuals

Insurer says the increases result from fast-rising healthcare costs and other expenses resulting from new healthcare laws. The move comes less than a year after Anthem Blue Cross tried and failed to raise rates as much as 39%.

By Duke Helfand
Los Angeles Times, Jan. 5, 2011

Another big California health insurer has stunned individual policyholders with huge rate increases — this time it’s Blue Shield of California seeking cumulative hikes of as much as 59% for tens of thousands of customers March 1.

Blue Shield’s action comes less than a year after Anthem Blue Cross tried and failed to raise rates as much as 39% for about 700,000 California customers.

San Francisco-based Blue Shield said the increases were the result of fast-rising healthcare costs and other expenses resulting from new healthcare laws.

“We raise rates only when absolutely necessary to pay the accelerating cost of medical care for our members,” the nonprofit insurer told customers last month.

In all, Blue Shield said, 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October.

Nearly 1 in 4 of the affected customers will see cumulative increases of more than 50% over five months.

While most policyholders received separate notices for the successive rate hikes, others were given the news all at once because they had contracts guaranteeing their rate for a year, Blue Shield spokesman Tom Epstein said.

Michael Fraser, a Blue Shield policyholder from San Diego, learned recently that his monthly bill would climb 59%, to $431 from $271.

“When I tell people, their jaws drop and their eyes bug out,” said Fraser, 53, a freelance advertising writer. “The amount is stunning.”

Like many people who hold individual policies, Fraser is self-employed. Others who carry such insurance include people who aren’t covered by employer plans or who have been laid off.

The Blue Shield increases triggered complaints to new Insurance Commissioner Dave Jones, and they could prove to be an early test of how the former Democratic state assemblyman deals with rate hikes and the insurance industry.

Anthem’s attempt to raise rates by up to 39% led to national outrage and helped President Obama marshal support for his healthcare overhaul. The insurer was ultimately forced to back down, accepting maximum rate hikes of 20%.

Jones said the Blue Shield move underscored the need for the Legislature to give the insurance commissioner legal authority to regulate insurance rates the same way he does automobile coverage.

At present, the commissioner can block increases only if insurers spend less than 70% of premium income on claims. Jones’ office said Blue Shield’s March 1 increase was under review.

“Blue Shield’s increases pose the same problem posed by Anthem Blue Cross last year and other health insurers as well,” Jones said in an interview. “My hope would be that Blue Shield would reexamine these rate hikes, particularly in the face of the impact they are having on individual policyholders.”

Blue Shield said the cost of health coverage was being driven up by large hospital expenses, doctors’ bills and prescription drug prices. Blue Shield’s Epstein said other factors also contributed to the three increases in five months.

On Oct. 1, he said, Blue Shield imposed increases averaging 18% and as high as 29%. Those hikes had been delayed for three months while state regulators examined Blue Shield’s filing, costing the company tens of millions of dollars.

Epstein said Blue Shield raised rates again Jan. 1 to pay for changes under the national healthcare overhaul and a new state law that bars insurers from charging women more than men. (Some policyholders will pay less under the state gender law, while others will pay more.)

A third round of hikes scheduled for March 1 comes in response to rising healthcare costs, Epstein said. Those increases will average 6.5% and be as high as 18%.

Some policyholders have seen their bills rise gradually over the last five months, while others will see the charges lumped together March 1.

“It’s unfortunate that they all came in a five-month period,” Epstein said. “Rates are going to continue to rise unless the cost of medical care is brought under control. We need to reduce what we pay to hospitals, medical groups and pharmaceutical companies.”

Despite the large increases, Epstein said Blue Shield would again lose “tens of millions of dollars” on its individual business in 2011.

Not included in the rate increases are 78,000 Blue Shield individual policyholders whose insurance is regulated by a second state agency, the Department of Managed Health Care. Those customers have seen two rate increases since October that together average 37%, Epstein said.

While Blue Shield’s cumulative rate increases are high, Anthem Blue Cross’ increases last year affected more people.

Anthem said Wednesday that it too expected to raise rates — an average of 9.8% for individual policyholders, effective April 1. That would come on top of increases in October averaging 14% that had been delayed for six months amid heightened scrutiny by state regulators.

Anthem is taking a cautious approach to its rate hikes given the controversy generated by last year’s plan for 39% hikes.

Spokeswoman Kristin Binns said the company priced its 2011 rates competitively, saying: “We understand that these are difficult economic times, and we are committed to working to moderate the impact of rate increases on our members.”

duke.helfand@latimes.com

http://www.latimes.com/health/healthcare/la-fi-insure-rates-20110106,0,6975599.story

Lowest rate of health spending increases still very high

Recession Contributes To Slowest Annual Rate Of Increase In Health Spending In Five Decades

Anne Martin, David Lassman, Lekha Whittle, Aaron Catlin and the National Health Expenditure Accounts Team
Health Affairs
January 2011

In 2009, US health care spending grew 4.0 percent — a historically low rate of annual increase — to $2.5 trillion, or $8,086 per person. Despite the slower growth, the share of the gross domestic product devoted to health spending increased to 17.6 percent in 2009 from 16.6 percent in 2008. The growth rate of health spending continued to outpace the growth of the overall economy, which experienced its largest drop since 1938. The recession contributed to slower growth in private health insurance spending and out-of-pocket spending by consumers, as well as a reduction in capital investments by health care providers. The recession also placed increased burdens on households, businesses, and governments, which meant that fewer financial resources were available to pay for health care. Declining federal revenues and strong growth in federal health spending increased the health spending share of total federal revenue from 37.6 percent in 2008 to 54.2 percent in 2009.

http://content.healthaffairs.org/content/30/1/11.full#aff-5

Comment: 

By Don McCanne, MD

How much are we spending on health care?

For 2009:

National health expenditures: $2.5 trillion

Percent of GDP: 17.6%

Spending per person: $8,086

Although the title of this article and the news reports stemming from it tout the fact that this is the slowest increase in health care spending in five decades, the 4.0 percent increase is well in excess of inflation and remarkably high considering that it occurred during the Great Recession.

Perhaps the most impressive number that demonstrates this increased spending on a background of the recession is the percent of federal revenues that were directed to federal health spending. Federal revenues decreased 18.2 percent while federal health spending increased 17.9 percent. Thus the federal revenues directed to federal health spending increased from 37.6 percent in 2008 to 54.2 percent in 2009. Over half of the recession-impacted federal revenues were spent on federal health programs!

These numbers demonstrate that even a severe recession was unable to reduce the increase in health care spending to anywhere near the rate of inflation nor the growth in GDP (gross domestic product).

Since the cost containment measures in the Patient Protection and Affordable Care Act (PPACA) are so weak, there is little hope for truly significant relief from escalating costs in the foreseeable future. Yet just the administrative savings alone of a single payer system would be much more effective, and there is no reason that an improved Medicare covering everyone couldn’t adopt some of the modest but beneficial cost-saving measures of PPACA so long as they have no detrimental policy impacts.

Instead of repealing PPACA, we need to retain the beneficial measures, but then replace the flawed financing component with one that will work – an improved Medicare for all.