PNHP

Are high premiums due to medical costs or insurer profits?

Are high premiums due to medical costs or insurer profits?

Insurance Industry Inflates Rates While Falsely Blaming New Health Care Law

Health Care for America Now! (HCAN)
June 2010

The health insurance industry argues that rising medical costs are to blame for runaway premiums, but it’s clear that they are constantly looking for excuses to raise rates and expand their cash flows.

Premium hikes have surpassed the growth of medical costs, wages and overall inflation. From 2000 to 2008, premiums for families enrolled in employer-sponsored health plans increased 97 percent, while rates for individuals in workplace health plans climbed 90 percent. During that same period, private insurers’ payments to health care providers rose only 72 percent, medical inflation increased 39 percent, wages grew 29 percent and overall inflation climbed 21 percent. Health insurers are basing increases on something other than medical inflation, wages or general inflation.

http://hcfan.3cdn.net/d8f62f1fc66d8e0224_q6m6bnff1.pdf

Comment: 

By Don McCanne, MD

If you look beyond the inflammatory anti-private insurance rhetoric of this report (mostly appropriate, some perhaps not), you can find a few real numbers to help understand rising insurance costs. From 2000 to 2008, overall inflation increased 21 percent, but medical inflation increased 39 percent, while employer-sponsored insurance premiums increased 90 percent for individuals and 97 percent for families.

The fact that medical inflation grew faster than overall inflation supports the position of the private insurers that rising health care costs have necessitated higher premiums, but that isn’t the whole story.

Private insurers’ payments to health care providers increased at 72 percent, considerably higher than the rate of medical inflation. This supports the insurers’ position that failure of government reimbursement rates to keep up with medical inflation, especially in the Medicare and Medicaid programs, has resulted in a cost shift to the private insurers who are paying more to make up the differences. However, some economists have suggested that this merely represents a failure of the private insurance industry to hold down excessive price increases.

Even with medical inflation and public-to-private cost shifting, premiums have increased at a significantly higher rate. This likely represents both higher administrative costs and greater profits. If the insurance industry were efficient, the percent dedicated to administrative costs should actually decline since higher prices would reduce the percentage of premiums absorbed by each unit of administrative service.

Although the insurance industry has been evasive about the portion of premiums that are consumed by administrative services, the for-profit insurers have been required to report their profits and their medical loss ratios. From the 2009 data (included in this report) we know that their administrative costs are outrageously wasteful, and that their profits are at an all time high.

Today President Obama told representatives of the insurance industry to not raise their prices so high. Do you think that they will listen? It seems that he would be much more effective if he were to tell the public stewards of an improved Medicare for all to get the prices right.

The following is to clarify a legitimate concern of one of the qotd subscribers.

From the 6/22/10 message:

21% – general inflation
39% – medical inflation
72% – increase in private insurers’ payments to health care providers
90% & 97% – premium increases for individual and family health plans

General inflation and medical inflation refer to increased prices. Payments to providers and insurance premium increases refer to increased prices modified by increased volume and intensity of services.

Though the numbers should not be compared on a single scale, the principles are still the same as stated earlier. The rate of medical inflation (prices) has continued to increase in excess of the rate of general inflation. Insurance premiums have continued to increase in excess of the payments (prices x services) to providers.

America Speaks Back: Derailing the Drive to Cut Social Security and Medicare

By Dean Baker
Co-Director of the Center for Economic and Policy Research
The Huffington Post, June 21, 2010

Next weekend will feature another milestone in the drive to cut Social Security and Medicare. The organization America Speaks will be hosting a series of 20 meetings in cities across the country. They will ask the people at these meetings, a cross section of the nation, to come up with proposals for dealing with the country’s projected long-term budget deficit.

The way the problem is outlined for these meetings virtually guarantees that most of the participants will opt for big cuts to Social Security and Medicare. The results of this song-and-dance exercise will then be presented to President Obama’s fiscal responsibility commission on June 30th, which will use it as further ammunition for plans by its co-chairs to gut these programs.

The rigged deck approach should come as no surprise. America Speaks is largely funded by Peter G. Peterson, the investment banker billionaire who has been on a decades long crusade to gut these programs. In recent years, Peterson has redoubled his efforts, committing more than a billion dollars to a wide variety of groups in addition to America Speaks. To advance his agenda Peterson has even set up a fake news service, the Fiscal Times. To fill the staff, Peterson’s son hired a number of reputable reporters who were displaced by the collapse of the newspaper industry.

Federal Budget 101, the guidebook for the discussion, follows a predictably shoddy path. The book discusses the budget in almost complete isolation from any larger discussion of the economy. There is virtually no discussion of the ways in which the budget fosters growth, for example by funding education, research and infrastructure; nor the way in which the pattern of growth affects the budget.

For example, the booklet never discusses the extent to which the economic mismanagement that allowed the unchecked growth of an $8 trillion housing bubble contributed to the debt that is its central concern. The downturn caused by the resulting economic collapse will eventually add more than $3 trillion to the country’s debt, according to the Congressional Budget Office’s projections.

The booklet also neglects to point out the extent to which the long-term budget disaster story is driven by our broken health care system. If per person health care costs in the United States were the same as in any other wealthy country, we would be looking at enormous budget surpluses in the long-term, not deficits.

Incredibly, the booklet does not even point out the fact that income is projected to grow over time. The average hourly wage is projected to buy 20 percent more in 2025 (the year for which participants are supposed to design a budget) than it does today.

This knowledge might affect how people view things like tax increases. For example, if we know that people will be on average 20 percent richer, we might be less concerned if their tax rate were to rise by 1-2 percentage points.

The booklet also never mentions the plunge in wealth that older workers have suffered as a result of the collapse of the housing bubble and plunge in the stock market. This has left the bulk of near retirees (those in their late 40s and 50s) facing retirement with almost nothing other than their Social Security and Medicare.

The booklet even gets its basic economics wrong, warning participants at the very beginning that rising deficits can lead to a weaker dollar. In the real econ 101, students learn just the opposite — that budget deficits can jack up interest rates leading to a stronger dollar. This is how a budget deficit can be tied to a trade deficit — by raising the value of the dollar. A higher dollar makes U.S. exports more expensive to foreigners and imports cheaper for people living in the United States.

People who want to see our trade deficit fall want a lower dollar. Getting the value of the dollar down (not up) is an argument that more serious people would give for a smaller budget deficit. Peterson should have been able to get a better product for his millions.

Finally, it is striking that not a single person connected with this project was among those who warned of the housing bubble before its collapse wrecked the economy. Ostensibly, America Speaks tried to include a diverse range of economists and policy analysts. Yet, in the category of people who recognized the biggest economic disaster of the last 80 years, America Speaks came up completely empty.

To put this in perspective, suppose Peter Peterson had funded this exercise back in 2004, when the housing bubble was already huge, but still at a point where it could have been deflated without devastating the economy. This group would have given us a great discussion of the 2020 deficit, but said nothing about the tsunami that was about to wreck the economy (and send the deficit skyrocketing).

Unfortunately, there is no reason to assume that the America Speaks crew’s understanding of the economy is any better today than it was in 2004. We need more serious analysis than this propaganda exercise as a basis for deciding the fate of essential programs like Social Security and Medicare.

http://www.huffingtonpost.com/dean-baker/america-speaks-back-derai_b_619465.html

Are high premiums due to medical costs or insurer profits?

Insurance Industry Inflates Rates While Falsely Blaming New Health Care Law

Health Care for America Now! (HCAN)
June 2010
The health insurance industry argues that rising medical costs are to blame for runaway premiums, but it’s clear that they are constantly looking for excuses to raise rates and expand their cash flows.
Premium hikes have surpassed the growth of medical costs, wages and overall inflation. From 2000 to 2008, premiums for families enrolled in employer-sponsored health plans increased 97 percent, while rates for individuals in workplace health plans climbed 90 percent. During that same period, private insurers’ payments to health care providers rose only 72 percent, medical inflation increased 39 percent, wages grew 29 percent and overall inflation climbed 21 percent. Health insurers are basing increases on something other than medical inflation, wages or general inflation.
http://hcfan.3cdn.net/d8f62f1fc66d8e0224_q6m6bnff1.pdf

If you look beyond the inflammatory anti-private insurance rhetoric of this report (mostly appropriate, some perhaps not), you can find a few real numbers to help understand rising insurance costs. From 2000 to 2008, overall inflation increased 21 percent, but medical inflation increased 39 percent, while employer-sponsored insurance premiums increased 90 percent for individuals and 97 percent for families.
The fact that medical inflation grew faster than overall inflation supports the position of the private insurers that rising health care costs have necessitated higher premiums, but that isn’t the whole story.
Private insurers’ payments to health care providers increased at 72 percent, considerably higher than the rate of medical inflation. This supports the insurers’ position that failure of government reimbursement rates to keep up with medical inflation, especially in the Medicare and Medicaid programs, has resulted in a cost shift to the private insurers who are paying more to make up the differences. However, some economists have suggested that this merely represents a failure of the private insurance industry to hold down excessive price increases.
Even with medical inflation and public-to-private cost shifting, premiums have increased at a significantly higher rate. This likely represents both higher administrative costs and greater profits. If the insurance industry were efficient, the percent dedicated to administrative costs should actually decline since higher prices would reduce the percentage of premiums absorbed by each unit of administrative service.
Although the insurance industry has been evasive about the portion of premiums that are consumed by administrative services, the for-profit insurers have been required to report their profits and their medical loss ratios. From the 2009 data (included in this report) we know that their administrative costs are outrageously wasteful, and that their profits are at an all time high.
Today President Obama told representatives of the insurance industry to not raise their prices so high. Do you think that they will listen? It seems that he would be much more effective if he were to tell the public stewards of an improved Medicare for all to get the prices right.
The following is to clarify a legitimate concern of one of the qotd subscribers.
From the 6/22/10 message:
21% – general inflation
39% – medical inflation
72% – increase in private insurers’ payments to health care providers
90% & 97% – premium increases for individual and family health plans
General inflation and medical inflation refer to increased prices. Payments to providers and insurance premium increases refer to increased prices modified by increased volume and intensity of services.
Though the numbers should not be compared on a single scale, the principles are still the same as stated earlier. The rate of medical inflation (prices) has continued to increase in excess of the rate of general inflation. Insurance premiums have continued to increase in excess of the payments (prices x services) to providers.

Whacking the Old Folks

By William Greider
The Nation, May 20, 2010

In setting up his National Commission on Fiscal Responsibility and Reform, Barack Obama is again playing coy in public, but his intentions are widely understood among Washington insiders. The president intends to offer Social Security as a sacrificial lamb to entice conservative deficit hawks into a grand bipartisan compromise in which Democrats agree to cut Social Security benefits for future retirees while Republicans accede to significant tax increases to reduce government red ink.

Obama’s commission is the vehicle created to achieve this deal. He ducks questions about his preferences, saying only that “everything has to be on the table.” But White House lieutenants are privately talking up a bargain along those lines. They are telling anxious liberals to trust the president to make only moderate cuts. Better to have Democrats cut Social Security, Obama advisers say, than leave the task to bloodthirsty Republicans.

The president has stacked the deck to encourage this strategy. The eighteen-member commission is top-heavy with fiscal conservatives and hostile right-wingers who yearn to dismantle the retirement program. The Republican co-chair, former Senator Alan Simpson, is especially nasty; he likes to get laughs by ridiculing wheezy old folks. Democratic co-chair Erskine Bowles and staff director Bruce Reed secretly negotiated a partial privatization of Social Security with Newt Gingrich back when they served in the Clinton White House, but the deal blew up with Clinton’s sex scandal. Monica Lewinsky saved the system.

Any recommendations require fourteen votes, and Obama has at least five loyalists who will protect him—Senators Dick Durbin and Max Baucus, Representatives Jan Schakowsky and Xavier Becerra, and former SEIU president Andy Stern. On the other hand, if Obama really wants to make a deal, these commissioners will very likely support him.

The people, once again, are kept in the dark. The Obama commission will not report its recommendations until after this fall’s elections—too late for voters to express objections. Both parties assume they can evade blame by holding hands and jumping together.

What’s extraordinary about this assault on Social Security is that a Democratic president is leading it. Obama is arm in arm with GOP conservatives like Wall Street billionaire Pete Peterson, who for decades has demonized Social Security as a grave threat to the Republic and has spread some $12 million among economists, think tanks, foundations and assorted front groups to sell his case. If Obama pulls the deal off, this will be his version of “Nixon goes to China”—a leader proving his manhood by going against his party’s convictions. Even if he fails, the president will get some protective cover on the deficit issue. After all, he is targeting Big Government’s most beloved and trusted program—the New Deal’s most prominent pillar.

Obama’s initiative rests on two falsehoods spread by Peterson’s propaganda—the notion that Social Security somehow contributes to the swollen federal deficits and that cutting benefits will address this problem. Obama and his advisers do not say this in so many words, but their rhetoric implies that Social Security is a big source of the deficit problem. Major media promote the same falsehoods. Here is what the media don’t tell you: Social Security has accumulated a massive surplus—$2.5 trillion now, rising to $4.3 trillion by 2023. This vast wealth was collected over many years from workers under the Federal Insurance Contributions Act (FICA) to pay in advance for baby boom retirements. The money will cover all benefits until the 2040s—unless Congress double-crosses workers by changing the rules. This nest egg does not belong to the government; it belongs to the people who paid for it. FICA is not a tax but involuntary savings.

As a candidate, Obama assured voters that any shortfall was in the distant future and could be easily resolved with minor adjustments. As president, he has abandoned this accurate analysis and turned rightward without explaining why. He faces an awkward problem, however. Despite conservative propaganda, cutting Social Security will have no impact on the deficit problem that so stirs public anxiety. The White House knows this, and some advisers admit as much. So why is the president targeting Social Security?

Paul Volcker, former Federal Reserve chair and adviser to the president, declares, “In my view, we can deal with the Social Security problem fairly promptly.” Cutting benefits, Volcker adds, “is not going to deal with the deficit problem in the short run, but it’s confidence building.” John Podesta of the Center for American Progress, another adviser, agrees but says, “Reforms could starkly demonstrate to skeptical debt markets that the United States is willing to take on a politically difficult fiscal issue.”

In other words, targeting Social Security is a smokescreen designed to reassure foreign creditors and avoid confronting the true sources of US indebtedness. The politicians might instead address the cost of fighting two wars on borrowed money or the tax cuts for the rich and corporations or the deregulation that led to the recent financial catastrophe and destroyed vast wealth. But those and other sources of deficits involve very powerful interests. Instead of taking them on, the thinking in Washington goes, let’s whack the old folks while they’re not watching.

This issue is a seminal fight with the potential to scramble party politics. If Democrats can no longer be trusted to defend Social Security, who can be? The people from left to right overwhelmingly support the program (88 percent), and a majority (66 percent) believe benefits should be increased now to cope with the loss of jobs and savings in the Great Recession.

Citizens can win this fight if they mobilize smartly. We can do this by arousing public alarm right now, while members of Congress face a treacherous election and before Obama can work out his deal. Some liberal groups are discussing a “take the pledge” campaign that demands senators and representatives sign commitments to keep Hands Off Social Security Benefits. If politicians refuse to sign, put them on the target list for November. Barack Obama is standing on the third rail of politics—let’s give him a warning jolt.

http://www.thenation.com/article/whacking-old-folks

How Social Security Can Gain Without Much Pain

By Greg Anrig
Vice President, Programs, at The Century Foundation
The Huffington Post, June 17, 2010

As Obama’s Fiscal Commission prepares for its June 30 hearing, the Roosevelt Institute’s New Deal 2.0 blog invited me to participate in its Social Security’s Fiscal Fitness series, which examines the soundness of the program, its relationship to the federal deficit, and the vital role it plays in America’s economic future.

Advocates of cutting Social Security benefits often argue ruefully that they wish that there was some other way to “save” the program. But, they say sadly, the only realistic choices involve shared sacrifice and pain. So they recommend changes like further delays in the age when full retirement benefits can be collected, reducing cost-of-living adjustments to Social Security payments, and other cuts that would reduce how much future retirees are scheduled to receive.

But in fact, Social Security’s currently strong finances could be sustained beyond a 75-year time horizon entirely through modest tax increases targeted toward high-income workers. Social Security provides vital protections that have been enormously successful in reducing poverty among the elderly and disabled, but its benefits are by no means overly generous. Compared to 30 OECD nations, the U.S. ranks 25th in the share of an average worker’s earnings that is replaced upon retirement by a country’s public pension program. Social Security’s annual benefit of about $13,860 a year for an average retired worker is only slightly above the poverty level of $10,830.

According to the projections of Social Security’s Trustees, the program will be able to continue paying promised benefits in full until 2037. After that point, payroll taxes will be sufficient to finance about three-fourths of promised benefits. Over the 75-year time frame that the Trustees are required to forecast, that gap between promised benefits and revenues amounts to about 0.7 percent of GDP. Closing it would require the equivalent of a 1 percentage point increase in the current Social Security payroll tax rate paid by employees and matched by employers. But the same amount of revenue could be raised in a variety of ways that would confine the extra burden to taxpayers who would be best able to afford it.

One easily defended way to do that would be to raise the cap on annual wages subject to the Social Security payroll tax, which is currently $106,800. Past Congresses have set the cap at a level where it equaled 90 percent of aggregate earnings in Social Security employment. But simply because the incomes of the higher paid have risen much more rapidly than average wages over the past few decades, the cap has declined to nearly the 80 percent level, without any action by Congress whatsoever. Gradually restoring it to the historic 90 percent baseline in and of itself would close about a third of the 75-year shortfall. In the process, only the 6 percent of workers earning above the cap would owe more and their payroll tax deductions would simply continue for a few days longer into the year than they do now. And those workers paying more would receive higher benefits as a result.

One way to close the entire remainder of the shortfall would be to remove the cap entirely just for the employer contributions to an upper income worker’s payroll taxes. That wouldn’t directly affect the paychecks of those employees, though it might somewhat dampen their future raises. Still, considering that the highest earners continue to prosper and enjoy far greater economic security than everyone else, the adjustment is a reasonably fair way to sustain the nation’s most important social insurance program.

An alternative that would more than completely eliminate the 2 percent of payroll shortfall would be to impose a small investment transactions tax (similar to Great Britain’s) of one-fourth of one percent on publicly traded stock, credit swap derivatives, and other financial instruments. Some economists have long supported the idea as a way of deterring economically wasteful “churning” in investment markets, and the cost again would largely be borne by individuals and Wall Street firms that can most afford it.

Other proposals, including earmarking estate revenues to Social Security, also could go a long way to bridging the long-term funding gap without imposing pain on average citizens. But the main reality to recognize is that, notwithstanding the dour “truth-telling” of alarmist politicians, anti-government ideologues, and misinformed journalists, Social Security can be sustained indefinitely without inflicting any pain whatsoever on the vast majority of Americans, and with only modest costs to upper-income taxpayers.

Cross-posted from New Deal 2.0.

http://www.huffingtonpost.com/greg-anrig/how-social-security-can-g_b_615811.html

Twenty percent average premium increase

Recent Premium Increases Imposed by Insurers Averaged 20% for People Who Buy Their Own Health Insurance, Kaiser Survey Finds

Kaiser Family Foundation
June 21, 2010

People who buy their own insurance report that their insurers most recently requested premium increases averaging 20 percent, according to a new Kaiser survey examining the experiences and views of people who buy health coverage in the non-group or individual market.

Most say they paid the increase, but 16 percent of all policyholders say they switched plans, either buying a less expensive policy from their current insurer or switching companies altogether. After these so-called “buy downs” are taken into account, people who faced a premium increase ended up paying 13 percent more than before.

Many people report being in plans with high deductibles, including one in four (26 percent) with an annual deductible of $5,000 or more and 6 percent with a deductible of $10,000 or more. 

Overall, the average deductible reported for single coverage is $2,498, almost four times the $634 deductible reported on average for employer-sponsored PPO coverage.  Those with family coverage whose deductibles must be met on a per-person basis report an average deductible of $2,959, while those with a family deductible (the total spending required across the entire family before coverage kicks in) report an average of $5,149.

More than one in five (22 percent) say over the past year they or a family member covered by their plan did not get needed medical care because of the cost, and a similar share (20 percent) say they skipped filling a prescription due to cost.

Nearly four in ten policyholders (38 percent) report at least one problem getting their insurer to pay a bill.

“With people in the individual market being hit with average increases of 20%, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases,” Kaiser Family Foundation President and CEO Drew Altman said.

http://www.kff.org/kaiserpolls/posr062110nr.cfm

Comment: 

By Don McCanne, MD

This survey is very important because it shows that outrageous insurance premium increases are not limited to the anecdotes that we have been hearing, but rather are a pervasive problem, inflicting the nation with an average 20 percent premium increase in the individual insurance market. Those who say that the Patient Protection and Affordable Care Act (PPACA) will fix this had better take a closer look.

With these increases, it is not surprising that many looked for less expensive plans, usually opting for higher deductibles. But look at the numbers. The average deductible for a family is now over $5000, and for some, $10,000 or more. In spite of all of the buy-downs to higher deductible plans, people still ended up this year paying an average of 13 percent higher premiums – paying more and getting less.

Will PPACA provide relief from these high deductibles that are impairing access to needed medical care? No. The plans will be required to have an actuarial value of only 60 percent, or 70 percent for the exchange plans eligible for premium credits. When the patients’ share averages 30 to 40 percent of the costs (plus the premium), it is inevitable that the plans will have high deductibles.

Will the cost sharing subsidies of the exchange plans adequately ameliorate the impact of the deductibles? No. Lower income individuals do not have adequate disposable income to meet their portion of the cost sharing, even with the subsidies. For those with incomes over 250 percent of the federal poverty level ($55,125 for a family of four), there are no cost sharing subsidies beyond the equivalent of a 70 percent actuarial value. The portion of the subsidized insurance premium that this family would still have to pay is $4438 (8.05 percent of income), so with a $5000 deductible, they would have to pay over 17 percent of their income before coverage begins (except for limited preventive services), and even then they would still have coinsurance payments plus costs for non-covered or most out-of-network services. By any definition, that is underinsurance, which will become the norm for the United States.

The problem is not the total cost of health care for our nation. We can afford it, though we are nearing our collective tolerance. The problem is the fragmented, dysfunctional financing system that results in tremendous inequities and runaway cost increases. A single payer national health program would fix this.

Recent Premium Increases Imposed by Insurers Averaged 20% for People Who Buy Their Own Health Insurance, Kaiser Survey Finds

Facing Such Increases, Some Enrollees Switched To Lower-Cost Coverage

People With Pre-Existing Conditions Much More Likely To Report Problems

Kaiser Family Foundation
News Release, June 21, 2010

MENLO PARK, CA –People who buy their own insurance report that their insurers most recently requested premium increases averaging 20 percent, according to a new Kaiser survey examining the experiences and views of people who buy health coverage in the non-group or individual market.

Overall roughly three in four people (77 percent) with non-group coverage report facing a premium increase with a current or previous insurer. Most say they paid the increase, but 16 percent of all policyholders say they switched plans, either buying a less expensive policy from their current insurer or switching companies altogether. After these so-called “buy downs” are taken into account, people who faced a premium increase ended up paying 13 percent more than before.

Many of those facing a premium increase who switched to a cheaper policy are now getting less comprehensive coverage than they were before. The survey found that those who switched are more than four times as likely to say their new plan offers worse benefits than their previous plan (49 percent) as they are to say their new plan’s benefits are better (11 percent).

“With people in the individual market being hit with average increases of 20%, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases,” Kaiser Family Foundation President and CEO Drew Altman said.

While most people in the U.S. get health insurance through their employer, about 14 million people under age 65 have coverage through the non-group or individual market, which has faced scrutiny recently in news reports about some insurers’ steep rate increases and in the market reforms in the new health reform law that will take effect in 2014. Kaiser’s Survey of People Who Purchase Their Own Insurance provides insight into the current state of the non-group market. It is based on a nationally representative random sample of 1,038 people ages 18-64 who purchase their own health coverage and was conducted between March 19 and April 2, during the final congressional debate and enactment of health reform legislation.

Premiums and deductibles

More than half (57 percent) of those with non-group insurance say that they are the only ones covered by their policy. This group reports average annual premiums of $3,606, less than the average $4,824 premium reported in 2009 for employer-sponsored coverage (which typically provides more comprehensive insurance). Among those whose policies cover not only themselves but also other family members, the average annual premiums are $7,102. With insurers generally varying premiums by age in the non-group market, older people report paying higher premiums than younger people, both for individual policies and for family policies.

Many people report being in plans with high deductibles, including one in four (26 percent) with an annual deductible of $5,000 or more and 6 percent with a deductible of $10,000 or more.

Overall, the average deductible reported for single coverage is $2,498, almost four times the $634 deductible reported on average for employer-sponsored PPO coverage. Those with family coverage whose deductibles must be met on a per-person basis report an average deductible of $2,959, while those with a family deductible (the total spending required across the entire family before coverage kicks in) report an average of $5,149.

Cost concerns among policyholders

Those who purchase their own coverage are much more likely to worry about being able to pay for health care than those with employer coverage.

For example, 40 percent of those who buy their own coverage say they are “not too confident” or “not at all confident” that they will be able to pay their usual medical bills, twice the share of those with employer coverage who said so in another Kaiser survey. Only 17 percent say they are “very confident” they could pay these usual bills, compared to 36 percent of those with employer coverage.

A similar disparity exists when asked about their ability to pay for a major illness or injury that requires hospitalization. Half (51 percent) of those who purchase their own coverage say they are “not confident” they could pay their bills in such circumstances, compared with a quarter (26 percent) of those with employer coverage.

This lack of confidence may reflect real problems policyholders have experienced. More than one in five (22 percent) say over the past year they or a family member covered by their plan did not get needed medical care because of the cost, and a similar share (20 percent) say they skipped filling a prescription due to cost. Those who report a pre-existing condition are twice as likely as those without to report skipping needed medical care because of the cost (31 percent vs. 15 percent) or not filling a prescription because of the cost (28 percent vs. 14 percent).

Nearly four in ten policyholders (38 percent) report at least one problem getting their insurer to pay a bill, either because the plan paid less than they expected (31 percent), the plan would not pay anything for a bill they thought was covered (22 percent), or they reached the limit of what the plan would pay for a specific illness or injury (7 percent).

Pre-existing conditions

Nearly half (47 percent) of those in non-group plans say that they or someone covered by their policy have what could be considered a pre-existing condition. This group is more likely than other policyholders to report difficulty in finding a plan that met their needs (49 percent vs. 27 percent) and are more likely to worry about losing that coverage if they become seriously ill (62 percent vs. 48 percent). These findings do not reflect the experiences of people with pre-existing conditions who could not find affordable coverage on their own at all — as the survey only captures the experiences of current policyholders.

Within this group, nearly half (49 percent) say they have had at least one problem getting their insurer to pay bills and one in five (21 percent) of those in the pre-existing group report that an insurance company denied them coverage in the past, compared to just 3 percent of other policyholders. The group is also more likely to say they are worried about the future stability of their insurance coverage.

Who buys individual coverage?

The survey finds that people who buy their own insurance on average are somewhat older than those with employer-sponsored coverage, but with similar incomes and health status.

When asked why they buy their own health coverage, nearly half (45 percent) say it is because they are self-employed and small business owners. One in four (25 percent) say they or their spouse work for an employer, but the employer either does not offer coverage or they are not eligible for, or cannot afford, the employer coverage.

When purchasing their current policy, eight in ten (79 percent) say they shopped around at different insurance companies — though fewer than half ended up applying to more than one insurer: 13 percent say they applied to two insurers, 28 percent to three or four, and 7 percent to 5 or more. Fifteen percent of those who shopped around (accounting for 12 percent of all those who purchase their own insurance) say that at least one insurance company refused to offer them a policy.

The vast majority (74 percent) of those who buy their own insurance say they’re likely to keep purchasing coverage on their own one year from now. Just over half (54 percent) think it would be difficult for them to switch plans if they wanted to. The most common reasons p
eople think it would be difficult to switch is that they or someone else on their plan has a pre-existing condition (42 percent of those who say it would be difficult), they wouldn’t be able to find a price as low as they have now (26 percent), and it would be too complicated to look for a new plan (18 percent).

METHODOLOGY

The Survey of People Who Purchase Their Own Insurance was designed, analyzed, and conducted by researchers at the Kaiser Family Foundation. In order to identify people who purchase their own insurance, screening interviews were completed with a nationally representative sample of 8,499 people ages 18-64. Respondents were drawn from the Knowledge Networks Panel, a large-randomly drawn representative national panel of households recruited by telephone and mail. A web-based survey among the 1,038 randomly selected individuals was conducted between March 19 and April 2, 2010. The margin of sampling error for results based on the full sample is plus or minus 4 percentage points. The full question wording, results, charts and a brief on the poll can be viewed online.

The Kaiser Family Foundation is a non-profit private operating foundation, based in Menlo Park, California, dedicated to producing and communicating the best possible analysis and information on health issues.

http://www.kff.org/kaiserpolls/posr062110nr.cfm

GOP Health Expert: Medical Industry to ‘Boom’ Under New Law

By Kay Tillow
FireDogLake, Saturday June 19, 2010

The Republican Party recently told its leaders to call the Obama administration’s new health law “Exhibit A” of a “runaway Washington government.”

But that’s not how longtime GOP health expert Thomas Scully sees it.

“The bill signed by Obama is not a big-government takeover,” Scully told a pro-business audience in Louisville, Ky., last month, adding the new law will result in “an explosive boom for the medical industry.”

Scully, a staunch Republican who worked in George H.W. Bush’s White House and was later President George W. Bush’s top administrator for Medicare and Medicaid, said, “The health care reform bill that passed in March is very much like the Bush 1 plan. I know. Richard Darman and I wrote that 1992 plan.”

Scully, who now works in the private sector, was the keynote speaker at a gathering of health industry entrepreneurs sponsored by the Health Enterprises Network, an affiliate of the local Chamber of Commerce, here on May 27.

Three of us from Kentuckians for Single Payer Healthcare attended the forum, curious to see what the reform looks like to those who seek financial fortune in the health industry.

For-profit companies win, taxpayers lose

Early in his talk, Scully projected a slide on a large screen with a smiley face over the left seven-eighths of the frame and a frowning face over the right eighth.

Under the smiley face were the “winners” under the health law, including the private health insurance firms, pharmaceutical companies, hospitals, dialysis and hospice companies, and disease management groups. Also listed were the device manufacturers who would pay a special tax but would simply pass it on to others and come out ahead. Home health care would take a hit in the short run but prosper in the long run, he said.

On the far right-hand side of the slide, under the frowning face, was the sole “loser”: the taxpayers. (In case you’re wondering, patients didn’t even make the slide.)

While complimenting the bill’s backers for their shrewdness (“The bill is politically smart — the doctors, drug companies and hospitals were bought off early”), he said the new law’s main weakness was its inability to control spending.

“In 10 years there will be $1.5 trillion in new spending,” a half-trillion dollars more than the administration has projected, he said. In short, the law is “a fiscal disaster,” and U.S. taxpayers will end up paying for it.

“Someone will have to raise the Medicare and Social Security age to 70, and we will have to have tax increases,” he said.

His prediction of devastating changes to these cherished social safety-net programs caused no stir in a room full of people sporting health industry badges.

Scully should have some insight into the implications of health reform for taxpayers and businesses. In 2003, when he was administrator for the Centers for Medicare and Medicaid Services (CMS), he withheld from Congress the real costs of the Medicare Modernization Act, which barely passed in an arm-twisting vote.

The bill blocked Medicare from negotiating prices with pharmaceutical companies, something that has since proven wildly lucrative for insurers and drug makers. The Medicare Modernization Act also gave away the store to the privatized Medicare Advantage plans.

Along these same lines, Scully told the audience, “We need to turn all of Medicare over to Medicare Advantage.”

Likes Obama plan

Scully said he was a big fan of the Obama plan, but he confessed that it was not his first choice in health reform: “Of course, the Wyden plan is really the best thing to do — it gets rid of Medicare and Medicaid — that is the totally right thing to do.”

The bill offered last year by Sen. Ron Wyden, D-Ore., would have put health care financing entirely in the hands of private insurers, with mandatory individual purchase taking the place of employer-sponsored coverage.

Nonetheless, Scully was clearly pleased with the bill passed by the Democrats, which reinforces, not undermines, profit-seeking in health care.

Scully’s last words at the meeting were, “All is driven by money.”

We left even more determined to build the movement for single payer.

Kay Tillow is a native of western Kentucky and is a leader of All Unions Committee for Single Payer Health Care–HR 676.

http://seminal.firedoglake.com/diary/55674

Im memory of Nicholas Matthew Skala — Hon. Dennis J. Kucinich

(Extensions of Remarks – September 10, 2009)

[Page: E2229]

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HON. DENNIS J. KUCINICH OF OHIO IN THE HOUSE OF REPRESENTATIVES

Thursday, September 10, 2009

    * Mr. KUCINICH. Madam Speaker, I rise today in memory of Nicholas Matthew Skala for his extraordinary service to our country. He dedicated his short life to advocating for full health care coverage for every man, woman and child in the United States.

    * Nick wielded a sharp intellect in his pursuit of single payer health care. I first met him when he was working for Physicians for a National Health Program (PNHP), where he quickly became a trusted and valuable source of knowledge. He was always ready with an answer to the hardest, most arcane questions and he had the references to back his answers up.

    * When Nick spoke about single payer health care, he was lucid and persuasive. He wielded complete command of a steady stream of facts and figures. He earned the respect of health care advocates of all stripes not only by making a persuasive case that single payer was needed, but also by working tirelessly and strategically to make it a reality.

    * When it came to social justice, when it came to making sure everyone had the best health care possible, when it came to standing up to powers and pressures that keep America without guaranteed health care for all, Nick was admirably uncompromising.

    * Born in Libertyville, Illinois on September 16, 1981 and raised in Spring Grove, Nick graduated from Richmond Burton High School and Columbia College. While in Texas, he founded and became the President of the University of Houston Campus Greens Chapter. After graduation, he became a Research Associate for PNHP between 2004 and 2007. Then he enrolled in law school at Northwestern University. He became active in the American Constitution Society. In the summer of 2009, he completed an internship in the Constitution, Civil Rights, and Civil Liberties Subcommittee of the House Judiciary Committee. He would have graduated from law school in 2010.

    * Madam Speaker and colleagues, please join me in celebrating and honoring the life of Nicholas Matthew Skala and in recognizing his contribution toward making the world a better place. Thank you, Nick.

Twenty percent average premium increase

Recent Premium Increases Imposed by Insurers Averaged 20% for People Who Buy Their Own Health Insurance, Kaiser Survey Finds

Kaiser Family Foundation
June 21, 2010
People who buy their own insurance report that their insurers most recently requested premium increases averaging 20 percent, according to a new Kaiser survey examining the experiences and views of people who buy health coverage in the non-group or individual market.
Most say they paid the increase, but 16 percent of all policyholders say they switched plans, either buying a less expensive policy from their current insurer or switching companies altogether. After these so-called “buy downs” are taken into account, people who faced a premium increase ended up paying 13 percent more than before.
Many people report being in plans with high deductibles, including one in four (26 percent) with an annual deductible of $5,000 or more and 6 percent with a deductible of $10,000 or more.
Overall, the average deductible reported for single coverage is $2,498, almost four times the $634 deductible reported on average for employer-sponsored PPO coverage.  Those with family coverage whose deductibles must be met on a per-person basis report an average deductible of $2,959, while those with a family deductible (the total spending required across the entire family before coverage kicks in) report an average of $5,149.
More than one in five (22 percent) say over the past year they or a family member covered by their plan did not get needed medical care because of the cost, and a similar share (20 percent) say they skipped filling a prescription due to cost.
Nearly four in ten policyholders (38 percent) report at least one problem getting their insurer to pay a bill.
“With people in the individual market being hit with average increases of 20%, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases,” Kaiser Family Foundation President and CEO Drew Altman said.
http://www.kff.org/kaiserpolls/posr062110nr.cfm

This survey is very important because it shows that outrageous insurance premium increases are not limited to the anecdotes that we have been hearing, but rather are a pervasive problem, inflicting the nation with an average 20 percent premium increase in the individual insurance market. Those who say that the Patient Protection and Affordable Care Act (PPACA) will fix this had better take a closer look.
With these increases, it is not surprising that many looked for less expensive plans, usually opting for higher deductibles. But look at the numbers. The average deductible for a family is now over $5000, and for some, $10,000 or more. In spite of all of the buy-downs to higher deductible plans, people still ended up this year paying an average of 13 percent higher premiums – paying more and getting less.
Will PPACA provide relief from these high deductibles that are impairing access to needed medical care? No. The plans will be required to have an actuarial value of only 60 percent, or 70 percent for the exchange plans eligible for premium credits. When the patients’ share averages 30 to 40 percent of the costs (plus the premium), it is inevitable that the plans will have high deductibles.
Will the cost sharing subsidies of the exchange plans adequately ameliorate the impact of the deductibles? No. Lower income individuals do not have adequate disposable income to meet their portion of the cost sharing, even with the subsidies. For those with incomes over 250 percent of the federal poverty level ($55,125 for a family of four), there are no cost sharing subsidies beyond the equivalent of a 70 percent actuarial value. The portion of the subsidized insurance premium that this family would still have to pay is $4438 (8.05 percent of income), so with a $5000 deductible, they would have to pay over 17 percent of their income before coverage begins (except for limited preventive services), and even then they would still have coinsurance payments plus costs for non-covered or most out-of-network services. By any definition, that is underinsurance, which will become the norm for the United States.
The problem is not the total cost of health care for our nation. We can afford it, though we are nearing our collective tolerance. The problem is the fragmented, dysfunctional financing system that results in tremendous inequities and runaway cost increases. A single payer national health program would fix this.

Public health care as sustainable as we want it to be

Claim that medicare is too costly to maintain is based on economic and political myths

By Robert G. Evans
Toronto Star, June 1, 2010

“There are stark and unpalatable choices that we face with respect to health care, but there is no magic solution. We absolutely must have an adult debate about how we deal with this.” That’s what David Dodge, former governor of the Bank of Canada and former deputy finance minister, told the Liberal policy conference last March.

Dodge joined a list of economists and other pundits who predict that public health care will be financially unsustainable in coming years as Canada faces an aging population and escalating costs for scientific advances in care and treatment. But an “adult debate” on the sustainability of public health care must start from who and what drives health-care spending.

It’s true that total health-care spending in Canada has risen in recent years, taking larger shares of both government revenues and budget allocations. This has led to accusations of “crowding out” other public programs by those favouring further privatization of health care.

The data tell a much more nuanced story. The central fact is that, recession years apart, medicare spending — hospitals and physicians’ services — has fluctuated between 4 per cent and 5 per cent of gross domestic product since 1975. After the introduction of medicare in the late 1960s these costs stabilized because universal, comprehensive coverage consolidated expenditures in the hands of a single payer. The cost of health services not covered by medicare has risen from 3 per cent of GDP in 1975 to 7 per cent in 2009.

Today, Canada’s expenditures on health care match those by other OECD countries. The public share of overall health costs in Canada is relatively low for high-income OECD countries, around 70 per cent. Private insurance, primarily for prescription drugs and dentistry, now accounts for 12.7 per cent of Canadian health spending, 14th highest in the world. The OECD outlier is the United States, where extensive private finance supports uncontrollable cost escalation (now over 16 per cent of GDP). Getting these costs under control will be the major task facing Obama’s health-care reform.

Provincial governments’ spending on health care over the past 15 years has taken increasingly larger bites out of their expenditure budgets. But this is a simple consequence of large cuts in non-health programs, not of out-of-control medicare spending. These cuts in non-health spending are traceable to substantial cuts in personal and corporate income taxes by the federal and most provincial governments, particularly since 1997. Between 1997 and 2004, these tax cuts removed an estimated $170.8 billion from public sector revenues. Total provincial revenues are by now roughly $35 billion per year less, or about half provincial spending on medicare. Cumulative federal cuts are at least as large.

The provinces’ revenue shortfalls were not all self-inflicted. The federal government’s large cuts in financial transfers since the mid-1990s also left big holes in provincial budgets. Subsequent increases have not fully made up the loss.

What are the real motives behind the claims of financial unsustainability? Two, I think. First, under Canada’s universal tax-financed medicare, higher-income people contribute proportionately more to supporting the health-care system, without receiving preferred access or a higher standard of care. Any shift to more private financing would reduce the relative burden on those with higher incomes and offer (real or perceived) better or more timely care for those willing and able to pay.

Second, every dollar of health-care expenditures is also a dollar of someone’s income. The Ontario government’s recent change in reimbursement for generic drugs made this clear: the shares of Shoppers’ Drug Mart fell 10 per cent overnight. Privatization is a way to avoid cost containment, reopening greater income opportunities for providers of care (and private insurers) outside public control. Expenditures would accordingly rise, as in the United States, but public budgets might (in the short term) be contained. “Unsustainable” public spending magically becomes sustainable when shifted from taxpayers to patients.

It is time, long past time, for an “adult conversation” about these motivations, and for a clear identification of the winners and losers from eroding or dismantling medicare. (Economists who evade this issue should be shamed.)

But it is also time for an adult conversation about the real drivers of cost escalation. Researchers have known for decades that population aging is a real but a minor factor. Its impact will certainly increase, but it will remain secondary to increases in intensity and costliness of care. This is the real issue. Where is the money going, both public and private, and are we getting value? Again the Ontario generic drug initiative makes the point. Rising expenditures are not a law of nature; several hundred millions will be cut at a stroke. The real issue is political; those millions are also cut from pharmacy’s incomes.

Are there other opportunities? Yes. Medical imaging and laboratory testing are currently the major sources of cost escalation. What are the benefits? No one knows. Ultrasound for low-risk pregnancies is up 50 per cent in 10 years. Why? Patterns of medical practice and hospital use vary widely across the country, for no apparent reason. Toronto’s Institute for Clinical Evaluative Science, among others, has tracked some of these large unexplained variations, but they are largely ignored. These are what we need to discuss, not “stark choices” about relieving the burdens on and improving the benefits for high-income taxpayers — and, incidentally, opening new markets for private insurers. Panic-mongering about a “grey tsunami” is simply a distraction.

Canadians consistently show that they support public health care. In May, a national poll by Nanos Research confirmed that 90 per cent of Canadians feel that health care is the most important national issue, and almost 90 per cent support public solutions to problems in the health-care system. They are right. Canada’s health-care system is as sustainable as we want it to be.

Robert G. Evans is University Killam Professor in the Department of Economics at the University of British Columbia. He is a member of UBC’s university’s Centre for Health Services and Policy Research. He is an officer of the Order of Canada, and a fellow of the Royal Society of Canada and the Canadian Academy of Health Sciences.

http://www.thestar.com/opinion/editorialopinion/article/817249–public-health-care-as-sustainable-as-we-want-it-to-be

Sherif Emil – an American physician in Canada

Commencement Address

Sherif Emil, MD, CM
The University of California, Irvine
School of Medicine
June 5, 2010

It is a profound honor for me to be here today at UCI to partake in the commencement ceremonies of a group of individuals who are destined to become 104 of the best doctors in America. My presence at this podium today is the most significant event in my medical and surgical career spanning two decades. It is so significant because the invitation to join you today came from a very special group of medical students, students whom I admire immensely, students who are my pride and joy, students who give me true hope in the future of medicine in this great country of ours, hope that American medicine’s best days are still ahead, that its most lasting accomplishments are still to be realized, that one day the best health care in the world will be available to all our citizens without regard to financial means, personal circumstances, or status in society.

Although I left UCI in 2008 and moved to a distinctly less pleasant climate (Canada), UCI has never left me.  My career in pediatric surgery began and matured at this university. I had wonderful mentors, and superb colleagues.

****

Finally, please, please stay involved in issues of health care policy. If you think we have passed health care reform, and can now rest easy, think again. We have not passed health care reform. We have only passed some health care expansion. It is too early to judge the effects of what just occurred, but it is not too early to be certain that much work still lies ahead. Make your voice heard in the national debate that started in your senior year, and will almost certainly rage on. It was interesting for me, as an American physician practicing in Canada, to see the recent negative depictions of the Canadian system in TV ads and lay media, depictions that bore absolutely no resemblance to the actual environment in which I practice daily. My reality is very different. I can see any patient and any patient can see me – total freedom of practice. My patients’ parents have peace of mind regarding their children’s health. If they change jobs or lose their job altogether in a bad economy, their children will still get the same care and see the same physicians. Micromanagement of daily practice has become a thing of the past for me. There are no contracts, authorizations, denials, appeals, reviews, forms to complete, IPA’s, HMO’s, or PPO’s. Our Division’s billing overhead is 1 %. My relationship with the hospital administration is defined by professional, not financial, standards. I have no allegiance to any corporate or government entity, nor does one ever get in between me and the patient. This environment, which some denigrate as the ever so scary system of “socialized medicine” allows for more patient autonomy and choice than was available to most of my patients in California. That is not at all to say that I practice in a medical utopia. There is no perfect health care system. The Canadian system has its own set of difficulties, challenges, and shortcomings, and Canadians are also looking to significantly reform their system. But as physicians, we have to enter the debate and we have to enter it objectively, salvaging it from the bias, misrepresentation, and demagoguery that has characterized it. Health care should not be a liberal or conservative issue, for disease, disability, and death do not recognize political affiliations. As a socially conservative Christian myself, my belief that health care is a fundamental human right, and my efforts on behalf of single payer universal health coverage stem from my faith, and not despite it. My faith calls for personal morality, but also for societal morality – how do we treat the sick amongst us, the weak amongst us, the least amongst us? 

Sherif Emil, MD, CM
http://www.thechildren.com/documents/medias-emil-bio.pdf

Comment: 

By Don McCanne, Md

The students know. They brought Sherif Emil back from Canada to give them their commencement address. The future of health care in America is in good hands.