PNHP

Financial burden of Medigap and Medicare Part D

Financial burden of Medigap and Medicare Part D

Funding Savings Needed for Health Expenses for Persons Eligible for Medicare

By Paul Fronstin, Dallas Salisbury, and Jack VanDerhei
Employee Benefit Research Institute
December 2010

This report provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement.

Men who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $100,000 if comfortable with a 50 percent chance of having enough savings; to increase their odds to 90 percent, they would need $187,000.

Women who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $131,000 if comfortable with a 50 percent chance of having enough savings, while those who prefer a 90 percent chance of having enough savings would need $213,000.

Persons currently age 55 will need even greater savings when they turn 65 in 2020. Needed savings for men range from $109,000–$354,000, while needed savings for women range from $147,000–$406,000 depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50 percent, 75 percent, or 90 percent chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.

Nearly 90 percent of Medicare beneficiaries have some form of insurance coverage to supplement Medicare Parts A and B. As employers continue to move away from providing retiree health benefits, more of the retirees who have had subsidized employment-based coverage in the past will have to assume for themselves the financial risk associated with longevity.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_12-2010_No351_Savings3.pdf

Comment: 

By Don McCanne, MD

Medicare is not a complete program. Individuals turning 65 in 2020 will find that, to have a 90 percent chance of having enough savings to pay Medigap and Part D drug premiums and out-of-pocket health care expenses, they will have to have up to $350,000 (men) or $400,000 (women) in reserves in addition to their basic living expenses and any other expenses they might face in retirement. This does not even cover potential long-term care expenses.

Medicare cost sharing, private Medigap plans, and private Part D drug plans all increase administrative complexities and waste in the Medicare program. Since most seniors do not have enough reserves to meet these potential costs, these programs also create further financial barriers to care (keeping in mind that Medigap and Part D premiums are in themselves financial barriers since they are not prepaid before age 65, but are paid out of retirement funds).

Medicare would be a much better program if we were to 1) eliminate the middleman Medigap plans and roll these benefits into Medicare, 2) eliminate the middlemen Part D pharmacy benefit managers and roll drug benefits into Medicare, and 3) eliminate deductibles, coinsurance and copayments.

This would reverse the current trend of shifting health care costs from large risk pools to individuals who have health care needs, a trend bound to increase in Medicare if the deficit hawks claiming that Medicare is bankrupt have their way.

Yes, that would require more funds for the Medicare risk pool, but there are valid reasons why that would be a much better approach. First, an effective health care financing system should be designed to eliminate financial barriers to care, not create them. So the financing of the system should not be linked to access. Second, it is much easier to finance health care equitably if a single large risk pool is established and funded through equitable (progressive) tax policies. Third, it is not the size of the Medicare budget that matters, but rather it is the total health care spending on the Medicare beneficiaries that is important. The efficiencies of a streamlined Medicare program frees up funds that can be used for beneficial health care that becomes more readily accessible with the removal of the financial barriers. Single payer advocates understand that the savings from streamlining the existing Medicare program would be quite modest compared to the tremendous savings we could attain by replacing our entire health care financing system with a single improved Medicare for all program.

An additional potential benefit is that the administratively complex program for those eligible for both Medicare and Medicaid could be eliminated if long-term care were also folded into Medicare. For those who claim that we can’t afford to do that, we already do once we deplete the reserves of those who need nursing home care.

Some contend that wealthier individuals should pay more in Medicare premiums and cost sharing. That is already beginning to take place. But that unnecessarily increases the administrative complexity of Medicare, and it increases the risk of a two-tiered system as the wealthy turn to private options. Once again, the financing of Medicare should be totally separated from the Medicare benefits program. Higher income individuals can increase their contributions through equitable taxes without disrupting the efficient delivery of Medicare benefits.

These are just some of the more important reasons why we refer to an improved Medicare when we advocate for Medicare as a model for a single payer national health program. Medicare alone, as it is, won’t get us to where we need to be, at least not without $400,000 subsidies.

Financial burden of Medigap and Medicare Part D

Funding Savings Needed for Health Expenses for Persons Eligible for Medicare

By Paul Fronstin, Dallas Salisbury, and Jack VanDerhei
Employee Benefit Research Institute
December 2010

This report provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement.

Men who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $100,000 if comfortable with a 50 percent chance of having enough savings; to increase their odds to 90 percent, they would need $187,000.

Women who supplement traditional Medicare with Medigap and Medicare Part D and who have relatively high prescription drug expenses will need $131,000 if comfortable with a 50 percent chance of having enough savings, while those who prefer a 90 percent chance of having enough savings would need $213,000.

Persons currently age 55 will need even greater savings when they turn 65 in 2020. Needed savings for men range from $109,000–$354,000, while needed savings for women range from $147,000–$406,000 depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50 percent, 75 percent, or 90 percent chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.

Nearly 90 percent of Medicare beneficiaries have some form of insurance coverage to supplement Medicare Parts A and B. As employers continue to move away from providing retiree health benefits, more of the retirees who have had subsidized employment-based coverage in the past will have to assume for themselves the financial risk associated with longevity.

http://www.ebri.org/pdf/briefspdf/EBRI_IB_12-2010_No351_Savings3.pdf

Medicare is not a complete program. Individuals turning 65 in 2020 will find that, to have a 90 percent chance of having enough savings to pay Medigap and Part D drug premiums and out-of-pocket health care expenses, they will have to have up to $350,000 (men) or $400,000 (women) in reserves in addition to their basic living expenses and any other expenses they might face in retirement. This does not even cover potential long-term care expenses.

Medicare cost sharing, private Medigap plans, and private Part D drug plans all increase administrative complexities and waste in the Medicare program. Since most seniors do not have enough reserves to meet these potential costs, these programs also create further financial barriers to care (keeping in mind that Medigap and Part D premiums are in themselves financial barriers since they are not prepaid before age 65, but are paid out of retirement funds).

Medicare would be a much better program if we were to 1) eliminate the middleman Medigap plans and roll these benefits into Medicare, 2) eliminate the middlemen Part D pharmacy benefit managers and roll drug benefits into Medicare, and 3) eliminate deductibles, coinsurance and copayments.

This would reverse the current trend of shifting health care costs from large risk pools to individuals who have health care needs, a trend bound to increase in Medicare if the deficit hawks claiming that Medicare is bankrupt have their way.

Yes, that would require more funds for the Medicare risk pool, but there are valid reasons why that would be a much better approach. First, an effective health care financing system should be designed to eliminate financial barriers to care, not create them. So the financing of the system should not be linked to access. Second, it is much easier to finance health care equitably if a single large risk pool is established and funded through equitable (progressive) tax policies. Third, it is not the size of the Medicare budget that matters, but rather it is the total health care spending on the Medicare beneficiaries that is important. The efficiencies of a streamlined Medicare program frees up funds that can be used for beneficial health care that becomes more readily accessible with the removal of the financial barriers. Single payer advocates understand that the savings from streamlining the existing Medicare program would be quite modest compared to the tremendous savings we could attain by replacing our entire health care financing system with a single improved Medicare for all program.

An additional potential benefit is that the administratively complex program for those eligible for both Medicare and Medicaid could be eliminated if long-term care were also folded into Medicare. For those who claim that we can’t afford to do that, we already do once we deplete the reserves of those who need nursing home care.

Some contend that wealthier individuals should pay more in Medicare premiums and cost sharing. That is already beginning to take place. But that unnecessarily increases the administrative complexity of Medicare, and it increases the risk of a two-tiered system as the wealthy turn to private options. Once again, the financing of Medicare should be totally separated from the Medicare benefits program. Higher income individuals can increase their contributions through equitable taxes without disrupting the efficient delivery of Medicare benefits.

These are just some of the more important reasons why we refer to an improved Medicare when we advocate for Medicare as a model for a single payer national health program. Medicare alone, as it is, won’t get us to where we need to be, at least not without $400,000 subsidies.

Judge’s Decision on Health Insurance Shows Why Medicare for All Is the Solution

By Matthew Rothschild
The Progressive, December 14, 2010

A Virginia judge’s decision to throw out a central plank of the health insurance reform law underscores how ill considered was the Obama plan.

Forcing people to buy coverage from costly, unreliable and often unscrupulous private insurance companies was, in fact, a coercive approach, as Judge Henry Hudson ruled. And it was one that the insurance companies loved, because they were guaranteed tens of millions of new customers whom they could gouge.

By ruling this approach unconstitutional, Hudson has set up a showdown at the Supreme Court, since other judges have ruled the mandate constitutional. It’s unclear how the Supremes will referee this one, but I wouldn’t bet the hospital that the conservative majority will uphold that part of the Obama law.

And if Roberts, Scalia, et. al., reject it, the Obama hope to limit health care costs would be dashed.

“Without the requirement that everyone be included, the risk pools are subject to adverse selection (only those with greater health care needs enroll),” says Dr. Don McCanne, senior health policy fellow at Physicians for a National Health Program. As a result, he says, premiums would “skyrocket.”

Rather than coercing everyone into the private insurance market, Obama should have proposed universal, comprehensive, and affordable health care, which is provided, as a right, to all citizens.

This Medicare For All program—or, at a minimum, Medicare For All Who Want It—would not have been the boondoggle to the private insurance companies that the current law is.

And it would have been impervious to court challenges.

“After almost half a century of success, only a fool would challenge the constitutionality of Medicare,” says Dr. McCanne.

There may be a couple of fools on the Supreme Court who would try. But it’s unlikely there would be five.

Obama chose, however, to maintain the system of private insurance. He imposed no federal limits on what insurance companies can charge, so they are already able to raise rates exorbitantly. And if “everybody in” is ruled unconstitutional, you can expect your rates to become totally unaffordable very soon, if they aren’t already.

At which point, the American public will have to rise up and demand what Obama should have given us already, and what other advanced countries already have: Medicare for All

http://www.progressive.org/wx121410.html

Ezra Klein on the constitutional single payer path

Health reform advocates have little to fear from judge's ruling

By Washington Post Staff Writer (Ezra Klein, per Wonkbook)
The Washington Post
December 14, 2010

U.S. District Judge Henry E. Hudson, a George W. Bush appointee (and part-owner of a Republican campaign-consulting firm that fought the health-care overhaul legislation), has, as expected, ruled the individual mandate unconstitutional. So why are reform advocates so unexpectedly pleased?

The individual mandate began life as a Republican idea. Its earliest appearances in legislation were in the Republican alternatives to the Clinton health-care bill, where it was co-sponsored by such GOP stalwarts as Bob Dole, Orrin G. Hatch and Charles E. Grassley. Later on, it was the centerpiece of then-Gov. Mitt Romney’s health-reform plan in Massachusetts, and then it was included in the Wyden-Bennett bill, which many Republicans signed on to.

It was only when the individual mandate appeared in President Obama’s legislation that it became so polarizing on the right. The political logic was clear enough: The individual mandate was the most unpopular piece of the bill (you might remember that Obama’s 2008 campaign plan omitted it, and he frequently attacked Hillary Clinton for endorsing it in her proposal). But as a policy choice, it might prove disastrous.

The individual mandate was created by conservatives who realized that it was the only way to get universal coverage into the private market. Otherwise, insurers turn away the sick, public anger rises, and, eventually, you get some kind of government-run, single-payer system, much as they did in Europe, and much as we have with Medicare.

If Republicans succeed in taking it off the table, they may sign the death warrant for private insurers in America: Eventually, rising cost pressures will force more aggressive reforms than even Obama has proposed, and if conservative judges have made the private market unfixable by removing the most effective way to deal with adverse selection problems, the only alternative will be the very constitutional, but decidedly non-conservative, single-payer path.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/13/AR2010121305475.html

Ezra Klein’s Wonkbook:
http://voices.washingtonpost.com/ezra-klein/2010/12/wonkbook_tax_plan_proceeds_wit.html#more

Comment: 

By Don McCanne, MD

It would be gratifying poetic irony if conservative legislators and conservative judges pushed us into single payer reform by either repealing or ruling unconstitutional the individual mandate.

As I said on KPFA/KPFK yesterday, “Nobody is going to argue that Medicare is unconstitutional..  We should fix it so it works better and then provide it to everyone.”

Shumlin names health care “dream team”

By Anne Galloway
Vtdigger.com, Dec. 13, 2010

On Monday, Gov.-elect Peter Shumlin chose the members of the “dream team” who will lead his signature effort to create a single-payer health care system in Vermont.

The four members of the team will manage different facets of the reform from key positions in state government.

Anya Rader Wallack, a health care policy expert, will be a special assistant to Shumlin and in that role will lead the reform. Steve Kimbell, a retired lawyer and lobbyist, is the commissioner-designee for the Department of Banking, Insurance, Securities and Health Care Administration. Dr. Harry Chen, a physician and former representative, will be the new commissioner of the Department of Health. Susan Besio, a health care administrator, will continue to serve as the head of the Department of Vermont Health Access.

Shumlin campaigned on the idea that a centralized, Medicare-style state medical plan would control the skyrocketing cost of health care in part by eliminating duplicative administrative costs. If Shumlin is able to pull it off, Vermont would be the first state in the nation to offer a government-administered, universal health care benefit to all residents. In order to do so, he must obtain several federal waivers.

At a press conference held at the transition offices, Shumlin took a page from his stump speech in his opening remarks.

“If Vermont continues to spend $1 million more tomorrow than we did today on health care, which is what we’re doing now, we will bankrupt small business, we will discourage job growth and we will bankrupt the middle class,” Shumlin said.

Shumlin told reporters that the four administration officials he has selected have the expertise to help make a single-payer system possible in Vermont, in spite of the very difficult challenges of implementing a system that will likely meet stiff resistance from doctors, hospitals, the pharmaceutical industry and others. Dr. William Hsiao, a health care economist from Harvard University, has been charged with designing three health care systems for the state, including a single-payer system. He will unveil his recommendations in mid-January to the Legislature; tomorrow, he is scheduled to speak at 2 p.m. in Room 10 of the Statehouse before the Vermont Health Care Reform Commission.

“We as a team are committed to leading our way out of this challenge by bringing together insurers, hospitals, healthcare providers, consumers and business people to write a plan that will work for Vermont and hopefully be a shining example to the rest of the country,” Shumlin said. “Our promise is we will work as hard as we can on a single payer health care system that contains costs and provides every Vermonter affordable health care.”

In order to move ahead with a single payer plan, Vermont will need a waiver to get around requirements under the Affordable Care Act that it participate in health insurance “exchanges”; it will also need a waiver to bypass the Employee Retirement Income Security Act, the law that protects employer rights to dictate the terms of their benefit plans. Both waivers would require congressional action.

Shumlin doesn’t see either waiver as an insurmountable obstacle.

“The goal is to have a health care system where health care follows the individual that is not the obligation of the employer,” Shumlin said. “That would be really attractive to … ERISA providers.”

Nor does he see potential problems with out of state providers, such as Dartmouth-Hitchcock Medical Center in Lebanon, N.H., as an issue. Shumlin said patients who use state subsidized programs such as Dr. Dynasaur already have access to Dartmouth, and the reform measures wouldn’t prevent patients from using the New Hampshire hospital.

Shumlin has long advocated for a digital medical card that would contain a patient’s records and billing information; he envisions a payment system in which bills would be adjudicated immediately. He also said the medical industry should be rewarded for prevention efforts.

He said he does not want to place limits on access to care, by dictating how many times a patient can access the emergency room in a given year, for example, as a way to control costs.

“One of the big mistakes we make when we talk about reforming health care is that we’re somehow talking about rationing health care,” Shumlin said. “We want every Vermonter to have access to quality health care to keep them healthy and lead productive lives. It’s more about choices we make during our lives that cost us money, than it is about access to care. It’s how we eat, what we eat, how we exercise, how we lead our lives, the choices we make about tobacco, alcohol and other substances. We have a lot of work to do but it’s got to be a holistic approach to keeping Vermonters healthy. We’re really talking about how we deliver the care.”

Shumlin supports “end of life choices,” but he said the issue will not be part of his health care reform initiative.

“We need to have a much more open conversation about how we spend our health care dollars and how we ensure that any Vermonter that lives here not only has an extraordinary start in life but also has a say in how they end their life,” Shumlin said. “I think individuals with their physicians when they are terminally ill ought to be able to make choices about how they spend the last two or three weeks of life, but I don’t think that’s related to health care reform.”

At this point, Shumlin argued, letting the system continue as it is will lead to significant problems. He said doctors are leaving rural parts of the state and hospitals are under “tremendous economic stress” because of reimbursement rates.

“We will crumble of our own weight if we don’t act,” Shumlin said. “So the question is, will it be a failure if we don’t act in two years with a thoughtful bill that helps to reinvent the system? Of course it will be a failure. We have an obligation to get this right, but let’s be mindful of where the minefields are. They’re at every corner, every step. That’s why we put this dream team together to help us wade through it.”

Anya Rader Wallack will serve as a special assistant to the governor and lead the single-payer implementation effort. Wallack, president of Arrowhead Health Analytics, a Massachusetts-based health policy consulting firm, has several decades of experience in the private and public health care sectors. Wallack was part of Hillary Clinton’s health care task force in 1993, and she was a policy director and deputy chief of staff for Gov. Howard Dean. She recently served as a president of the BlueCross BlueShield of Massachusetts Foundation and executive director of the Massachusetts Medicaid Policy Institute. Wallack’s salary as a member of the Shumlin administration will be $125,000.

Wallack said she first started thinking about the merits of single-payer health care 20 years ago, though then, as now, figuring out how “we get from here to there” remains the biggest challenge.

“I think what I’ve learned over the last 20 years is you can do a lot of progressive policy work at the state level, but the impact is fairly marginal and we really need to do something dramatically different if we want to provide coverage for everybody with a cost that’s sustainable,” Wallack said.

Steve Kimbell, who recently retired from Kimbell Sherman Ellis, a prominent Montpelier-based public affairs firm, will be the commissioner of the Department of Banking, Insurance, Securities and Health Care Administration. Kimbell founded KSE in 1987 with Bob Sherman and ran the affiliated law firm Kimbell Storrow Buckley Hughes. He managed statewide campaigns for Madeleine Kunin in 1978 and 1982. Kimbell will earn $127,000 a year as commissioner of BISHCA.

Kimbell said: “I can say to the regulated community what they can expect from me as commissioner is a consistent, predictable and collaborative approach to regulation of these key industries.”

Dr. Harry Chen, an emergency room physician with the Rutland Regional Medical Center, is the commissioner-designee for the Department of Health. Chen served four years in the Vermont House of Representatives and was vice chair of the House Health Care Committee. Dr. Chen’s salary will be $115,000.

Susan Besio, the current commissioner of the Department of Vermont Health Access, will continue to manage Vermont’s Medicaid, State Children’s Health Insurance Program, Catamount Health and VHAP. She previously served as deputy commissioner then commissioner of the Vermont Department of Developmental and Mental Health Services from 1996 to 2004. She was the director of planning and operations for the Agency of Human Services from 2004 to 2006. Her salary will be $100,714.

http://vtdigger.org/2010/12/13/shumlin-names-health-care-%E2%80%9Cdream-team%E2%80%9D-kimbell-to-lead-bishca/

Background on Medicare’s founding and ease of expanding Medicare to all Americans with a simple majority vote

Excerpted From Thom Hartmann, “Medicare Part ‘E’ for Everybody”

12/13/10

It took a full year for President Obama and the Democrats to push, pull, and shove through Congress a relatively modest set of changes in the way that health insurance is administered in the United States. The bill that Obama eventually signed on March 22, 2010—titled the Patient Protection and Affordable Care Act—had been sufficiently watered down so that it posed no threat to the profits of the insurance companies and the pharmaceutical companies. The changes were so benign from the point of view of the health insurance industry that its stock prices actually went up the day after the legislation was passed. Ditto for the drug giants.  esident Obama was so fixed on getting “bipartisan” approval (he did get one Republican senator – Olympia Snowe of Maine – to vote for the bill in committee), that long before any bill came to a vote he embarked on a strategy to buy his own insurance, so to speak, for passage of the bill by addressing the concerns of the health insurance and pharmaceutical companies so that they would not lobby against it on Capitol Hill.

To buy their silence, if not their support, he made a series of major concessions: there would be no “public option” to compete with them to lower premiums (thus protecting insurance company profits and CEO salaries), there would be limits on importing drugs from abroad (thus protecting drug company profits and CEO salaries), and Medicare would be allowed to negotiate drug prices with Big Pharma only on a very limited basis over an extended period of time (more drug company profits). What’s more, the insurance mandate would send 30 million new Americans to the industry as customers. No surprise, then, that stock prices rose upon passage of the bill.

Reforming health insurance in the United States was probably a bigger job than reforming health care would have been. The reason is because the process required building entirely new structures of regulation and management. Such new laws and institutions required a supermajority of 60 of the Senate’s 100 senators to overcome a continuous filibuster, something the Republicans began using quite freely since Obama’s election.

Ironically, it’s much easier to expand an existing program. If legislation is considered in the Senate that only adjusts the amounts of revenue coming in or going out, it can be done through a process called “reconciliation,” which requires only a simple majority – 50 votes – to pass, with the vice president to break a tie.

For example, George W. Bush and the Republicans used reconciliation – majority rule – to push through his huge cuts in taxes on the richest Americans three different times in the first decade of this century. They were not creating a new program but simply adjusting the revenue figures. Ronald Reagan had done the same. If legislation has to do only with revenue or scale adjustments to existing programs, 50 votes in the Senate are enough.

Therein lies the greatest – and the simplest – opportunity to truly reform health care.

We already have Medicare, which is a fairly comprehensive basic health insurance/health-care program that covers nearly all Americans over 65 years of age. It is, in essence, a single-payer health-care program. Obama and the Democrats could easily push to expand the Medicare program to allow Americans of all ages to participate in it, and all they’d need is a simple majority, not a supermajority.

And here’s the most amazing part: this would be totally consistent with what President Lyndon B. Johnson and the folks in his administration and Congress had in mind when they created Medicare in July 1965.

The Birth of Medicare

Robert M. Ball was the commissioner of Social Security through the administrations of three presidents – John F. Kennedy, Lyndon B. Johnson, and Richard M. Nixon. He’d worked his way up in the Social Security Administration to become its head guy, spending 30 years of his life there; and then, after he retired, he was tapped by Ronald Reagan to be on the commission that, in 1983, overhauled Social Security to keep it solvent through the Baby Boomer retirement phase.

Medicare was established as an add-on to Social Security, not as a standalone program, so Ball was intimately involved in its creation as commissioner of Social Security throughout the Johnson years. He sat in on the meetings with members of the House and the Senate, he was involved in the writing of the Medicare legislation, and he was the man charged with helping implement it after LBJ signed it into law on July 30, 1965. He even ceremonially presented the first Medicare cards to Harry and Bess Truman.

Given his catbird seat during this entire process, Ball felt it important to put his recollections into the historical record, which he did in a 1995 article for Health Affairs journal titled “Perspectives on Medicare.” “Because I was deeply involved in the development, enactment, and implementation of the [Medicare] program,” he wrote, “my recollections may be of use in rounding out the historical record.” His article was appropriately subtitled “What Medicare’s Architects Had in Mind.” (Robert M. Ball, “Perspectives on Medicare,” Health Affairs 14, no. 4 (1995), http://content.healthaffairs.org/cgi/reprint/14/4/62.pdf)
Perhaps the most important thing the drafters had in mind, Ball wrote, was that Medicare was the first step in a more far-reaching solution to America’s healthcare problem:

For persons who are trying to understand what we were up to, the first broad point to keep in mind is that all of us who developed Medicare and fought for it—including Nelson Cruikshank and Lisbeth Schorr of the AFL-CIO and Wilbur Cohen, Alvin David, Bill Fullerton, Art Hess, Ida Merriam, Irv Wolkstein, myself, and others at the Social Security Administration—had been advocates for universal national health insurance. We saw insurance for the elderly as a fallback position, which we advocated solely because it seemed to have the best chance politically. Although the public record contains some explicit denials, we expected Medicare to be a first step toward universal national health insurance, perhaps with “Kiddicare” as another step.

In his article Ball talks about how national health insurance had actually once been advocated by the American Medical Association (AMA), whose leaders “were favorably impressed by the systems that had been established in Germany (1883) and Britain (1911), and several other countries around that time.” This was 1916, he notes, and “ironically, much of the American labor movement in 1916 was opposed” to national health insurance, as “Samuel Gompers, president of the American Federation of Labor (AFL), preferred collective bargaining to political solutions and feared that if workers began leaning on government, they might begin to look generally in that direction, rather than to unions, for help.”

A decade later, Ball notes, the AMA and AFL positions had reversed and stayed that way up to and through the development of Medicare. The AMA was so vehemently opposed to government-offered health insurance that it even hired Hollywood actor and tobacco industry spokesman Ronald Reagan to produce an LP record titled Ronald Reagan Speaks Out against Socialized Medicine, which would be played at coffee klatches held by doctors’ wives nationwide to generate letters to Congress against the Medicare plan.

“The AMA’s opposition approached hysteria,” Ball wrote, noting that during the Truman administration the advocacy of the president for a national single-payer system so frightened the AMA that “members were assessed dues for the first time to create a $3.5 million war chest—very big money for the times
—with which the association conducted an unparalleled campaign of vituperation against the advocates of national health insurance.” This was, he notes, “a warm-up for the later campaign against Medicare.”

So how did Medicare get passed?

Ball lays it out quite simply: old people were not profitable for the health insurance companies, so they were happy to get them off their rolls and onto the government’s. “[The elderly] used, on average, more than twice as many hospital days as younger persons used but had, on average, only about half as much income. Private insurers, who set premiums to cover current costs, had to charge the elderly much more, and the elderly could not afford the charges.”

This set the stage for Medicare, and the health insurance companies were at first enthusiastic about it. But in the final days of the development of the Medicare program, word got out that the people putting it together, including President Johnson, saw it as a system that could easily be modified to cover all Americans by the simple process of lowering the eligibility age, presumably incrementally over a decade or two. This pushed the insurance companies over the edge, prompting on their part a “fervent desire to keep government from penetrating further into the insurance business.” Ball adds, “Although most business groups opposed Medicare, the insurance industry was the AMA’s main ally [in that opposition].”

But because people knew and trusted Social Security, and this was just a health-benefit add-on to that existing program, it was easy to sell in Congress and to the American people. It was one of the most important legislative accomplishments of the Johnson administration.

It’s been more than 45 years since Medicare was legislated into existence, and it was established with the idea that one day it would be slightly tweaked to become the national single-payer health insurance program for the United States of America.

In Vermont, single-payer health care in a single state

By Josh Goodman
Stateline.org, Tuesday, December 14, 2010

Congress never really considered a single-payer health plan run by the government. Vermont is planning for one. This isn’t some liberal fantasy. Vermont lawmakers are serious. To understand how serious, you only have to look at the resumes of William Hsiao and Jonathan Gruber.

Hsiao, a Harvard economist, is credited with designing Taiwan’s single-payer system. Gruber, an M.I.T. economist, helped design Massachusetts’ near-universal health care system and the federal health care reform law itself. They’re on the team that the Vermont legislature contracted with this year to explain how single-payer would work there. In other words, the nation’s 49th most populous state is deploying some of the world’s leading experts to redesign its health care system. Their report is due early next year, after which Vermont will decide whether to become America’s first single-payer state.

If Vermont decides on that course of action, the experiment will serve as a test of whether more aggressive government intervention can improve health care and reduce costs. Long before the results of that experiment would be known, Vermont’s project could serve as a test of something that even the state’s conservative counterparts elsewhere are interested in finding out: just how much power states have over their own health care systems.

Containing costs

Vermont is perhaps an unlikely place to try something dramatically new in health care. That’s because by most standards, Vermont’s health care system already is one of the nation’s best. The United Health Foundation has ranked Vermont the healthiest state in the country four years in a row. Fewer than 10 percent of Vermonters lack health insurance, one of the lowest rates in the country.

If the state’s only concern were getting insurance to the comparatively few people who lack it, Vermont could sit back and wait for the new federal law, with its promise of near-universal coverage, to kick in. But expanded access is only part of what the state wants — and it isn’t the part that officials tend to mention first.

“For Vermont, it’s all about containing costs,” Peter Shumlin, the governor-elect, told Stateline. He points out that the annual cost of health care in Vermont — for individuals, businesses and government — has doubled to roughly $5 billion a year over the past 8 years. “It’s killing small businesses,” Shumlin says, “kicking the middle class in the teeth.”

Vermont’s problems paying for health care aren’t much different than the problems other states face. What makes Vermont different is that many of its top officials believe the solution is to have only one entity providing health insurance. In their boldest schemes, they’re hoping to drive private health insurance providers out of existence and to free employers from the responsibility of providing health insurance to their employees.

That includes Shumlin, who led the state Senate when it approved the legislation approving the study that Hsiao is leading. The five-way Democratic primary for governor had other single-payer supporters, but none was more forceful than Shumlin. He won the primary by 203 votes, then won the general election by 2 percent.

Providing health insurance to everyone is, of course, a very costly endeavor. But Shumlin and many of the Democrats who run the legislature think single-payer can save money in a couple of ways. For one, they note that hospitals and doctors’ offices spend a lot of money filling out paperwork and coding claims for insurers. These administrative costs aren’t especially high in Vermont compared to many other states, but supporters of the single-payer plan believe that if health care providers could deal with one insurer, they’d be able to focus more on providing care and less on processing claims.

Supporters also see single-payer as an antidote to the fragmentation of Vermont’s health care system. For example, state Representative Mark Larson, who’s expected to chair the House Health Committee next year, laments that his local hospital, Fletcher Allen Health Care in Burlington, is planning to sell off its outpatient dialysis units.

Fletcher Allen made the move because it was losing money on dialysis. The reimbursements it was receiving from all of Vermont’s various public and private health insurance providers weren’t enough to pay for the costs. In the current system, even if it were clear that the cheapest and best way to care for dialysis patients was for Fletcher Allen to own the units, the state’s power to do anything is limited. The structure of health care is subject to the vagaries of Medicare and private insurers, not coherent planning.

Under single-payer, that would change. “It’s very hard to direct a strategy for accomplishing long-term savings in health care — to manage care better, to minimize unnecessary procedures, to invest in strategies that have demonstrated savings in quality and cost — without some system of financing and payments to direct those efforts,” Larson says.

One-state experiment

There remains one huge question: Can wholesale reform work in a single small state? State Representative George Till, a member of the legislature’s Health Care Reform Commission, is skeptical of single-payer.

Till points out all the different entities that provide health insurance to Vermont patients. There are the state’s private insurers. There’s the state itself, through Medicaid and through its coverage of state employees. There’s the federal government, separately through Medicare and the Veterans Health Administration. There are some larger companies, such as IBM, that self-insure. And there are many people whose health insurance isn’t even based in Vermont. “At the hospital that I work for, we deal with 14 different insurers from New York,” says Till, who is a doctor.

Due to those complications, what Vermont is trying to do is, at its heart, a test of the power of state government. Can a state wrest total control of health insurance from the federal government and private companies?

The simple answer is that it can’t without federal permission. Companies that insure their own employees at their own expense are exempted from state health care regulation under the federal Employee Retirement Income Security Act, known as ERISA. Medicare and the VA, of course, fall under federal purview. The new federal health care law forbids states from receiving waivers from its provisions until 2017, although some senators are working to change that date to 2014, when the law’s most consequential provisions kick in.

If those efforts succeed, states would gain a lot more freedom to do what they please. For now, though, the definition of single-payer is in doubt, even among the people who are designing Vermont’s programs. “The last thing we want to do is create the perfect policy that can’t be implemented,” says Steven Kappel, a Vermont-based health care researcher who is part of the Hsiao-Gruber team.

The question is whether single-payer without Medicare patients or without VA patients or any other piece of the pie would really be single-payer at all — and whether leaving a piece out would undermine the advantages of the change that Vermont expects. The researchers are charged with developing other plans beyond single-payer: One is a government plan open to all Vermonters with conventional private insurance as an alternative. Despite Shumlin’s commitment to single-payer, it’s possible another option might look more appealing in the end.

Chance to lead

For now, though, those obstacles haven’t compromised the incoming governor’s commitment to the single-payer concept. In fact, he doesn’t think he h
as much of a choice.

Shumlin’s view is that health care interests are powerful enough in Washington that aggressive cost containment isn’t really possible there. “I believe that the states will have to lead true, meaningful health care reform,” he says. “We have a real opportunity to lead the country in health care if we have the courage.” But Shumlin and others also argue that, despite some of the difficulties, Vermont is the perfect place to try.

The biggest advantage Vermont has is the political environment in the state. Blue Cross Blue Shield Vermont, the state’s largest private insurer, has stayed neutral on single-payer. “We don’t think it’s our role,” says Kevin Goddard, the company’s vice president of external affairs. Even the state chamber of commerce, while somewhat dubious of the concept in its purest form, isn’t actively opposed yet.

What everyone agrees upon is that some very smart people are thinking about the best way to structure Vermont’s health insurance system. The initial report is due next month. Even critic Till says, “I think people will listen very carefully to what Dr. Hsiao comes back with.”

Contact Josh Goodman at jgoodman@pewtrusts.org

http://www.stateline.org/live/details/story?contentId=535073

Ezra Klein on the constitutional single payer path

Health reform advocates have little to fear from judge’s ruling

By Washington Post Staff Writer (Ezra Klein, per Wonkbook)
The Washington Post
December 14, 2010

U.S. District Judge Henry E. Hudson, a George W. Bush appointee (and part-owner of a Republican campaign-consulting firm that fought the health-care overhaul legislation), has, as expected, ruled the individual mandate unconstitutional. So why are reform advocates so unexpectedly pleased?

The individual mandate began life as a Republican idea. Its earliest appearances in legislation were in the Republican alternatives to the Clinton health-care bill, where it was co-sponsored by such GOP stalwarts as Bob Dole, Orrin G. Hatch and Charles E. Grassley. Later on, it was the centerpiece of then-Gov. Mitt Romney’s health-reform plan in Massachusetts, and then it was included in the Wyden-Bennett bill, which many Republicans signed on to.

It was only when the individual mandate appeared in President Obama’s legislation that it became so polarizing on the right. The political logic was clear enough: The individual mandate was the most unpopular piece of the bill (you might remember that Obama’s 2008 campaign plan omitted it, and he frequently attacked Hillary Clinton for endorsing it in her proposal). But as a policy choice, it might prove disastrous.

The individual mandate was created by conservatives who realized that it was the only way to get universal coverage into the private market. Otherwise, insurers turn away the sick, public anger rises, and, eventually, you get some kind of government-run, single-payer system, much as they did in Europe, and much as we have with Medicare.

If Republicans succeed in taking it off the table, they may sign the death warrant for private insurers in America: Eventually, rising cost pressures will force more aggressive reforms than even Obama has proposed, and if conservative judges have made the private market unfixable by removing the most effective way to deal with adverse selection problems, the only alternative will be the very constitutional, but decidedly non-conservative, single-payer path.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/13/AR2010121305475.html

Ezra Klein’s Wonkbook:
http://voices.washingtonpost.com/ezra-klein/2010/12/wonkbook_tax_plan_proceeds_wit.html#more

It would be gratifying poetic irony if conservative legislators and conservative judges pushed us into single payer reform by either repealing or ruling unconstitutional the individual mandate.

As I said on KPFA/KPFK yesterday, “Nobody is going to argue that Medicare is unconstitutional..  We should fix it so it works better and then provide it to everyone.”

Court ruling against the individual mandate

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

ATTORNEY GENERAL OF THE COMMONWEALTH OF VIRGINIA, Plaintiff
v.
SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant

MEMORANDUM OPINION

VII.

On careful review, this court must conclude that Section 1501 of the Patient Protection and Affordable Care Act – specifically the Minimum Essential Coverage Provision – exceeds the constitutional boundaries of congressional power.

VIII.

Accordingly, the court will sever only Section 1501 and directly-dependent provisions which make specific reference to Section 1501.

IX.

The Commonwealth appears to concede that if the Secretary is duty-bound to honor this Court’s declaratory judgement, there is no need for injunctive relief. In this Court’s view, the award of declaratory judgement is sufficient to stay the hand of the Executive branch pending appellate review.

X.

In the final analysis, the Court will grant Plaintiff’s Motion for Summary Judgement and deny Defendant’s similar motion. The Court will sever Section 1501 from the balance of the ACA and deny Plaintiff’s request for injunctive relief.

Henry E. Hudson, United States District Judge
December 13, 2010
Richmond, VA

http://documents.nytimes.com/health-care-law-ruled-unconstitutional?ref=policy

Comment:

By Don McCanne, MD

Although this is only the beginning of a protracted legal process, Judge Hudson’s decision defines the nature of the constitutional challenge to the Patient Protection and Affordable Care Act (PPACA). The challenge is limited to Section 1501 which is the mandate for individuals to purchase health insurance. The remainder of the Act remains intact.

This is a serious challenge. Without the requirement that everyone be included, the risk pools are subject to adverse selection (only those with greater health care needs enroll) which cause them to become unstable as premiums skyrocket. Even if Section 1501 survives this challenge, there are so many other flaws in the PPACA scheme that we can never hope to achieve universality and affordability – the two reasons that prompted the reform process in the first place.

Instead of a protracted battle in the courts, our government should pursue an approach that remains within the constitutional boundaries of congressional power and would actually work to provide everyone with affordable health care – an improved Medicare for all. After almost half a century of success, only a fool would challenge the constitutionality of Medicare.

Court ruling against the individual mandate

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

ATTORNEY GENERAL OF THE COMMONWEALTH OF VIRGINIA, Plaintiff
v.
SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant

MEMORANDUM OPINION

VII.

On careful review, this court must conclude that Section 1501 of the Patient Protection and Affordable Care Act – specifically the Minimum Essential Coverage Provision – exceeds the constitutional boundaries of congressional power.

VIII.

Accordingly, the court will sever only Section 1501 and directly-dependent provisions which make specific reference to Section 1501.

IX.

The Commonwealth appears to concede that if the Secretary is duty-bound to honor this Court’s declaratory judgement, there is no need for injunctive relief. In this Court’s view, the award of declaratory judgement is sufficient to stay the hand of the Executive branch pending appellate review.

X.

In the final analysis, the Court will grant Plaintiff’s Motion for Summary Judgement and deny Defendant’s similar motion. The Court will sever Section 1501 from the balance of the ACA and deny Plaintiff’s request for injunctive relief.

Henry E. Hudson, United States District Judge
December 13, 2010
Richmond, VA

http://documents.nytimes.com/health-care-law-ruled-unconstitutional?ref=policy

Although this is only the beginning of a protracted legal process, Judge Hudson’s decision defines the nature of the constitutional challenge to the Patient Protection and Affordable Care Act (PPACA). The challenge is limited to Section 1501 which is the mandate for individuals to purchase health insurance. The remainder of the Act remains intact.

This is a serious challenge. Without the requirement that everyone be included, the risk pools are subject to adverse selection (only those with greater health care needs enroll) which cause them to become unstable as premiums skyrocket. Even if Section 1501 survives this challenge, there are so many other flaws in the PPACA scheme that we can never hope to achieve universality and affordability – the two reasons that prompted the reform process in the first place.

Instead of a protracted battle in the courts, our government should pursue an approach that remains within the constitutional boundaries of congressional power and would actually work to provide everyone with affordable health care – an improved Medicare for all. After almost half a century of success, only a fool would challenge the constitutionality of Medicare.

Germany's lesson on in-house disease management

German Diabetes Management Programs Improve Quality Of Care And Curb Costs

By Stephanie Stock, Anna Drabik, Guido Büscher, Christian Graf, Walter Ullrich, Andreas Gerber, Karl W. Lauterbach and Markus Lüngen
Health Affairs
December 2010

Abstract

This paper reports the results of a large-scale analysis of a nationwide disease management program in Germany for patients with diabetes mellitus. The German program differs markedly from “classic” disease management in the United States. Although it combines important hallmarks of vendor-based disease management and the Chronic Care Model, the German program is based in primary care practices and carried out by physicians, and it draws on their personal relationships with patients to promote adherence to treatment goals and self-management. After four years of follow-up, overall mortality for patients and drug and hospital costs were all significantly lower for patients who participated in the program compared to other insured patients with similar health profiles who were not in the program. These results suggest that the German disease management program is a successful strategy for improving chronic illness care.

From the Discussion

The quest to reorganize care for chronically ill beneficiaries has led to different approaches in the United States and Germany. While US Medicare invested in regional pilots that differ in their structure of care delivery and may use disease management vendors, German health plans decided on an approach with a heavy emphasis on quality assurance and the primary care physician as the program manager. The emphasis is on educating both the patient and the care provider. Characteristics of care considered desirable in a patient-centered medical home, such as coordination, integration, timeliness, efficiency, and effectiveness as well as the patient-centeredness of care, improved markedly.

http://content.healthaffairs.org/content/29/12/2197.abstract

Comment: 

By Don McCanne, MD

The Germans have demonstrated what disease management should be all about. Using primary care medical homes as a base, the physicians and their in-house teams provided coordinated and integrated care for their diabetic patients with the result that physician-patient relationships were enhanced, costs were lower, major complications were fewer, and mortality was reduced in half compared to the control group.

The phenomenal success was no doubt in a large part due to placement of the disease management process precisely where it belongs – within the team at the patient’s own primary care medical home. This is a model based on patient service.

In contrast, the U.S. uses a business model, often with intrusive, fragmented interventions by outside vendors and private insurers. The U.S. model compounds our administrative excesses, fails to recover the additional costs of these outside, for-profit business entities, and yet has not demonstrated the dramatic benefit that this German approach has.

What is our problem here in the United States? Why do we keep insisting that “the market can do it better,” whatever that means? It is blatantly obvious that diseases are best managed by the patient’s own medical team – a team that is, gee, trained to manage diseases, and a team who knows the patient’s medical and cultural background. Yet we passively accept an expensive, intrusive, ineffectual insurance industry and their vendors because, somehow, we are mesmerized by the meme that the market can do it better, as if private practices weren’t the health care market that actually matters.

Of course, now the insurers claim that disease management should not be counted as an administrative service, but should be classified as a health care service so that it provides them with a more favorable medical loss ratio. Thus the insurers are claiming, in effect, that they are partially usurping the role of the health care team in providing health care services themselves, and they are even being paid for it with fees that they explicitly classify as health care expenses under the medical loss ratio.

Haven’t we had enough? Let’s throw them out and establish our own public national health program that will redirect our funds toward reinforcing our primary care infrastructure so that our physicians and their teams will be there to manage our diseases when we need them managed.

Germany’s lesson on in-house disease management

German Diabetes Management Programs Improve Quality Of Care And Curb Costs

By Stephanie Stock, Anna Drabik, Guido Büscher, Christian Graf, Walter Ullrich, Andreas Gerber, Karl W. Lauterbach and Markus Lüngen
Health Affairs
December 2010

Abstract

This paper reports the results of a large-scale analysis of a nationwide disease management program in Germany for patients with diabetes mellitus. The German program differs markedly from “classic” disease management in the United States. Although it combines important hallmarks of vendor-based disease management and the Chronic Care Model, the German program is based in primary care practices and carried out by physicians, and it draws on their personal relationships with patients to promote adherence to treatment goals and self-management. After four years of follow-up, overall mortality for patients and drug and hospital costs were all significantly lower for patients who participated in the program compared to other insured patients with similar health profiles who were not in the program. These results suggest that the German disease management program is a successful strategy for improving chronic illness care.

From the Discussion

The quest to reorganize care for chronically ill beneficiaries has led to different approaches in the United States and Germany. While US Medicare invested in regional pilots that differ in their structure of care delivery and may use disease management vendors, German health plans decided on an approach with a heavy emphasis on quality assurance and the primary care physician as the program manager. The emphasis is on educating both the patient and the care provider. Characteristics of care considered desirable in a patient-centered medical home, such as coordination, integration, timeliness, efficiency, and effectiveness as well as the patient-centeredness of care, improved markedly.

http://content.healthaffairs.org/content/29/12/2197.abstract

Comment: 

By Don McCanne, MD

The Germans have demonstrated what disease management should be all about. Using primary care medical homes as a base, the physicians and their in-house teams provided coordinated and integrated care for their diabetic patients with the result that physician-patient relationships were enhanced, costs were lower, major complications were fewer, and mortality was reduced in half compared to the control group.

The phenomenal success was no doubt in a large part due to placement of the disease management process precisely where it belongs – within the team at the patient’s own primary care medical home. This is a model based on patient service.

In contrast, the U.S. uses a business model, often with intrusive, fragmented interventions by outside vendors and private insurers. The U.S. model compounds our administrative excesses, fails to recover the additional costs of these outside, for-profit business entities, and yet has not demonstrated the dramatic benefit that this German approach has.

What is our problem here in the United States? Why do we keep insisting that “the market can do it better,” whatever that means? It is blatantly obvious that diseases are best managed by the patient’s own medical team – a team that is, gee, trained to manage diseases, and a team who knows the patient’s medical and cultural background. Yet we passively accept an expensive, intrusive, ineffectual insurance industry and their vendors because, somehow, we are mesmerized by the meme that the market can do it better, as if private practices weren’t the health care market that actually matters.

Of course, now the insurers claim that disease management should not be counted as an administrative service, but should be classified as a health care service so that it provides them with a more favorable medical loss ratio. Thus the insurers are claiming, in effect, that they are partially usurping the role of the health care team in providing health care services themselves, and they are even being paid for it with fees that they explicitly classify as health care expenses under the medical loss ratio.

Haven’t we had enough? Let’s throw them out and establish our own public national health program that will redirect our funds toward reinforcing our primary care infrastructure so that our physicians and their teams will be there to manage our diseases when we need them managed.