PNHP

Uwe Reinhardt on the economists' letter to President Obama

Uwe Reinhardt on the economists' letter to President Obama

November 23, 2009

The Quote of the Day for November 18 (www.pnhp.org) was a letter to President Obama from twenty-three prominent economists urging that four specified elements to control costs be included in the health reform legislation. Following is my original response to the letter, discussing each of the four elements. Princeton economist Uwe Reinhardt, one of the signers of the letter, has responded to my comments.

Comment on  economists’ letter by Don McCanne, MD with response by Uwe E. Reinhardt, PhD (highlighted in red):

For socially conscious health care reform advocates, the primary goal of reform is to see that every individual receives the health care that he or she needs. But what has really driven the reform process has been the concern over the very high costs of health care that have challenged individuals, employers and the stewards of our government health programs.

In this late phase of the reform process many have expressed doubts over the adequacy of the various policies in the reform proposal that allegedly are designed to control health care costs well into the future. In response, twenty-three of the nation’s most distinguished economists have signed on to this letter addressed to President Obama expressing support for four elements that they believe are of critical importance and should be included in the reform legislation. Let’s look closer at these four elements.

Deficit neutrality

The economists call for budget neutrality initially, to be followed by deficit reduction. Of course they are referring only to the federal government budget and not to private sector spending. The great risk of limiting consideration to public spending is that, in the absence of effectively controlling actual health care costs, the government budget can be controlled only by shifting the costs to the private sector. Individuals and businesses certainly do not want to see an increase in their health care spending, especially while the government is reducing its spending in the later phase, that of deficit reduction.

UER responds: Economists have trouble with the cost-shift argument. It assumes, implicitly, that health care costs are dictated by God and not subject to management by humans. If that were so, then, yes, whatever God-given cost is not paid by government will have to be paid by the private sector.

Economists do not share that religion. We believe that health-care costs are not God-given, but determined by the behavior of humans. There is no law in either the Bible or in economics according to which the private sector must pick up whatever health-care costs government does not pay. If the private sector were able and willing to say no to the alleged cost shift, then the providers of health care would have no choice but to manage their costs against whatever revenue they manage to extract from the rest of society.

Of course, if the private insurance sector tells us that it is powerless to resist the cost shift, then they are telling us that they cannot resist any cost increase shoved their way by providers for whatever reason. In that case, costs will keep going up in the private sector until it collapses of its own weight.

The next decade will tell.

Isolating health care spending for budget neutrality while continuing with deficits in other government programs (war, financial institution bailouts, interest on the debt, expanding our prison population, etc.) does not seem just. Appropriate use of debt is fundamental to any business, and there is no reason that reasonable debt should not be a part of the government’s management of its financial obligations to health care.

Current operations should be financed out of tax revenues. Longer-term investments (e.g., in infrastructure) can and should be debt financed. A part of health care, especially if rendered to young people, can be viewed as an investment. Conducting war may or may not be investment. WWII certainly was a highly productive investment.  One has to debate fiscal policy along these lines.

That said, our total government debt is the result of prior devious efforts to reduce revenues (i.e., taxes) in order to force the reduction in funding of government programs. With inadequate revenues and with exploding debt, deficit hawks in Congress can be relied upon to underfund crucial programs such as health care, but theirs is a pathological process since they only look at spending and refuse to consider revenues.

Agreed. Republicans collectively have lost the moral ground on deficit financing. They have been promiscuous and utterly shameless on this score, starting, alas, with Ronald Reagan.

Those who argue that taxes collected for government health care spending remove money from the economy are flat out wrong. Health care is one of the most important and beneficial components of our economy, constituting over 17 percent of our GDP (Gross Domestic Product). Those taxes are moved back into our economy.

That, too, is a valid point. I have written a NYT blog post on it. It is ludicrous to say that producing another SUV is good job creation but giving health care to the hitherto uninsured is not.

Those who scream that we are being taxed to death need another dose of reality. The average total tax revenues of OECD nations (Organization for Economic Cooperation and Development) was 35.9 percent of GDP in 2006. For the United States, the total tax revenue was 28.0 percent of GDP, placing us near the bottom of OECD nations. (OECD Tax Database)

Suppose we increased our tax revenues to the average of OECD nations, which would still be far, far short of those nations with more highly socialized systems. At 7.9 percent (35.9 average minus 28.0 U.S.) of our GDP of about $13.8 trillion, that would increase government revenues by about $1.1 trillion in a single year, ten times the amount they are considering for health care reform. Our entire federal spending is about $3 trillion. We could eliminate entirely the deficits and provide surpluses while keeping tax revenues at well below the OECD average, if only the deficit hawks would look at the revenue side of the ledger.

Excise tax on high-cost insurance plans

Why would any health insurance plans have very high premiums? One reason is that insurers use medical underwriting to assess high premiums for individuals with preexisting disorders. It would be unfair to tax those premiums for an individual with other burdens, but with adequate regulatory reform medical underwriting should be eliminated anyway.

The more common reason for high premiums is that the plan covers other services and products such as dental care, eye care, maternity benefits, mental health services, and pharmaceuticals. Applying an excise tax to these premiums would result in eliminating such benefits from the plans and shifting these expenses to the individual in the form of greater out-of-pocket spending. The proposals under consideration place a cap on out-of-pocket expenses for covered services, but that cap is unaffordable for many, and these expenses would not apply to the cap. Thus they would impose an even greater financial burden.

Since the excise tax would discourage access to these important health care services, it should be rejected as the flawed policy concept that it is.

Valid points. A better approach would have been to say: Up until an income of $75,000 we do not add employer-paid health insurance to your W-2. From $75,000 to $150,000, we add 50% to your W-2, etc. But that is not in the cards. Besides, in implementation, the act
uarial adjustments Don calls for most probably will be made.

Medicare Commission

Although the Medicare Commission purportedly would be to improve quality and value, its primary purpose would be to limit spending within the Medicare program. Medicare has already served as a leader in innovations to reduce health care spending, with the private insurance industry following. In fact, many providers believe that Medicare has been too aggressive, often resulting in lower reimbursement rates than in the private sector. Granting the Commission more power to use newer innovations to further reduce spending will inevitably increase the animosity held towards Medicare by the providers. A decline in willingness to accept Medicare beneficiaries could further impair access.

This is not to say that the concept of a commission is a bad idea. If the commission worked with the entire health care delivery system in applying potentially beneficial innovations, higher quality and greater value are possible. If the commission became too aggressive, the push-back by providers and their patients would moderate their excesses.

If the power of the Medicare Commission were limited only to Medicare, then there is a potential that cost-cutting aggressiveness might threaten to convert Medicare into a quasi-welfare program not unlike Medicaid, a transformation that would not please our Medicare beneficiaries. It is more likely that the Commission simply would be enmeshed in studies of relatively ineffectual measures that would have little net impact on costs.

We would need a universal Medicare for all program for the Commission to have a real impact that would be both beneficial and cost saving.

The idea here is not to shoot for the unattainable best, but for the attainable second best. If the choice is between letting Congress be in charge of Medicare spending or a Commission, I’d opt for the latter.

Delivery system reforms

These economists recommend that we reward health professionals for providing better care. The problem is that we don’t know how to do that. They recommend funding research into what tests and treatments work and which ones do not, as if that isn’t what research has been all about anyway. Maybe it would be helpful to directly compare expensive patent drugs to generics, but the overall spending impact will be modest since this year’s patented drugs are next year’s generics.

They also recommend bundled payments, accountable care organizations, plus penalties for re-admissions, hospital acquired infections and other PACs (potentially avoidable costs). In my message two days ago (November 16) I already discussed the reasons why these measures cannot be relied upon to reduce health care costs.

Is this really the best that these noted economists can come up with? They have made the same mistake as the politicians. Their perception of reform is to build on our existing dysfunctional financing system (an egregiously flawed concept that you would think our leading economists would understand).

If we had an improved Medicare for all we could have 1) deficit neutrality through global budgeting, 2) rational tax policies that are equitable, 3) public administration using the guidance of commissions as appropriate, and 4) our own beneficent monopsony that can realign incentives to promote the delivery system reform that we need. And, oh yes, every single person would be included. It doesn’t take an economist to understand that.

Economists do understand this: Until yesterday (November 20), three Democrats in the Senate have been able to toy shamelessly with the prestige of their President and of the Senate leadership on the decision whether or not even to allow an admittedly limited health-reform bill to be debated on the Senate floor. That is the reality of America.

And in the great wisdom Americans claim uniquely for themselves, they are likely to punish the legislators who gave them at least this much—the previous Administration and Congress having given them nothing.

Don is a Mensch, but a dreamer. Let’s face it, this very limited bill, should it pass into law, is the very best Americans can hope for. This country will never have a sensible, efficient health-care system, and perhaps not even a totally humane one. For better or for worse, we must get used to it.

The trouble with economists is that we understand America – one reason, perhaps, why they call ours a “dismal science.”

Comment:

By Don McCanne, MD

Are we going to accept this… proud to be Menschen while supporting only a dream?

We can have a sensible, efficient, and humane health care system for all, but the current process is not going to bring it to us. We need to change the process, but we’re not going to do that by sitting around and dreaming of what could be.

Uwe Reinhardt on the economists’ letter to President Obama

November 23, 2009

The Quote of the Day for November 18 (www.pnhp.org) was a letter to President Obama from twenty-three prominent economists urging that four specified elements to control costs be included in the health reform legislation. Following is my original response to the letter, discussing each of the four elements. Princeton economist Uwe Reinhardt, one of the signers of the letter, has responded to my comments.

Comment on  economists’ letter by Don McCanne, MD with response by Uwe E. Reinhardt, PhD (highlighted in red):

For socially conscious health care reform advocates, the primary goal of reform is to see that every individual receives the health care that he or she needs. But what has really driven the reform process has been the concern over the very high costs of health care that have challenged individuals, employers and the stewards of our government health programs.

In this late phase of the reform process many have expressed doubts over the adequacy of the various policies in the reform proposal that allegedly are designed to control health care costs well into the future. In response, twenty-three of the nation’s most distinguished economists have signed on to this letter addressed to President Obama expressing support for four elements that they believe are of critical importance and should be included in the reform legislation. Let’s look closer at these four elements.

Deficit neutrality

The economists call for budget neutrality initially, to be followed by deficit reduction. Of course they are referring only to the federal government budget and not to private sector spending. The great risk of limiting consideration to public spending is that, in the absence of effectively controlling actual health care costs, the government budget can be controlled only by shifting the costs to the private sector. Individuals and businesses certainly do not want to see an increase in their health care spending, especially while the government is reducing its spending in the later phase, that of deficit reduction.

UER responds: Economists have trouble with the cost-shift argument. It assumes, implicitly, that health care costs are dictated by God and not subject to management by humans. If that were so, then, yes, whatever God-given cost is not paid by government will have to be paid by the private sector.

Economists do not share that religion. We believe that health-care costs are not God-given, but determined by the behavior of humans. There is no law in either the Bible or in economics according to which the private sector must pick up whatever health-care costs government does not pay. If the private sector were able and willing to say no to the alleged cost shift, then the providers of health care would have no choice but to manage their costs against whatever revenue they manage to extract from the rest of society.

Of course, if the private insurance sector tells us that it is powerless to resist the cost shift, then they are telling us that they cannot resist any cost increase shoved their way by providers for whatever reason. In that case, costs will keep going up in the private sector until it collapses of its own weight.

The next decade will tell.

Isolating health care spending for budget neutrality while continuing with deficits in other government programs (war, financial institution bailouts, interest on the debt, expanding our prison population, etc.) does not seem just. Appropriate use of debt is fundamental to any business, and there is no reason that reasonable debt should not be a part of the government’s management of its financial obligations to health care.

Current operations should be financed out of tax revenues. Longer-term investments (e.g., in infrastructure) can and should be debt financed. A part of health care, especially if rendered to young people, can be viewed as an investment. Conducting war may or may not be investment. WWII certainly was a highly productive investment.  One has to debate fiscal policy along these lines.

That said, our total government debt is the result of prior devious efforts to reduce revenues (i.e., taxes) in order to force the reduction in funding of government programs. With inadequate revenues and with exploding debt, deficit hawks in Congress can be relied upon to underfund crucial programs such as health care, but theirs is a pathological process since they only look at spending and refuse to consider revenues.

Agreed. Republicans collectively have lost the moral ground on deficit financing. They have been promiscuous and utterly shameless on this score, starting, alas, with Ronald Reagan.

Those who argue that taxes collected for government health care spending remove money from the economy are flat out wrong. Health care is one of the most important and beneficial components of our economy, constituting over 17 percent of our GDP (Gross Domestic Product). Those taxes are moved back into our economy.

That, too, is a valid point. I have written a NYT blog post on it. It is ludicrous to say that producing another SUV is good job creation but giving health care to the hitherto uninsured is not.

Those who scream that we are being taxed to death need another dose of reality. The average total tax revenues of OECD nations (Organization for Economic Cooperation and Development) was 35.9 percent of GDP in 2006. For the United States, the total tax revenue was 28.0 percent of GDP, placing us near the bottom of OECD nations. (OECD Tax Database)

Suppose we increased our tax revenues to the average of OECD nations, which would still be far, far short of those nations with more highly socialized systems. At 7.9 percent (35.9 average minus 28.0 U.S.) of our GDP of about $13.8 trillion, that would increase government revenues by about $1.1 trillion in a single year, ten times the amount they are considering for health care reform. Our entire federal spending is about $3 trillion. We could eliminate entirely the deficits and provide surpluses while keeping tax revenues at well below the OECD average, if only the deficit hawks would look at the revenue side of the ledger.

Excise tax on high-cost insurance plans

Why would any health insurance plans have very high premiums? One reason is that insurers use medical underwriting to assess high premiums for individuals with preexisting disorders. It would be unfair to tax those premiums for an individual with other burdens, but with adequate regulatory reform medical underwriting should be eliminated anyway.

The more common reason for high premiums is that the plan covers other services and products such as dental care, eye care, maternity benefits, mental health services, and pharmaceuticals. Applying an excise tax to these premiums would result in eliminating such benefits from the plans and shifting these expenses to the individual in the form of greater out-of-pocket spending. The proposals under consideration place a cap on out-of-pocket expenses for covered services, but that cap is unaffordable for many, and these expenses would not apply to the cap. Thus they would impose an even greater financial burden.

Since the excise tax would discourage access to these important health care services, it should be rejected as the flawed policy concept that it is.

Valid points. A better approach would have been to say: Up until an income of $75,000 we do not add employer-paid health insurance to your W-2. From $75,000 to $150,000, we add 50% to your W-2, etc. But that is not in the cards. Besides, in implementation, the actuarial adjustments Don calls for most probably will be made.

Medicare Commission

Although the Medicare Commission purportedly would be to improve quality and value, its primary purpose would be to limit spending within the Medicare program. Medicare has already served as a leader in innovations to reduce health care spending, with the private insurance industry following. In fact, many providers believe that Medicare has been too aggressive, often resulting in lower reimbursement rates than in the private sector. Granting the Commission more power to use newer innovations to further reduce spending will inevitably increase the animosity held towards Medicare by the providers. A decline in willingness to accept Medicare beneficiaries could further impair access.

This is not to say that the concept of a commission is a bad idea. If the commission worked with the entire health care delivery system in applying potentially beneficial innovations, higher quality and greater value are possible. If the commission became too aggressive, the push-back by providers and their patients would moderate their excesses.

If the power of the Medicare Commission were limited only to Medicare, then there is a potential that cost-cutting aggressiveness might threaten to convert Medicare into a quasi-welfare program not unlike Medicaid, a transformation that would not please our Medicare beneficiaries. It is more likely that the Commission simply would be enmeshed in studies of relatively ineffectual measures that would have little net impact on costs.

We would need a universal Medicare for all program for the Commission to have a real impact that would be both beneficial and cost saving.

The idea here is not to shoot for the unattainable best, but for the attainable second best. If the choice is between letting Congress be in charge of Medicare spending or a Commission, I’d opt for the latter.

Delivery system reforms

These economists recommend that we reward health professionals for providing better care. The problem is that we don’t know how to do that. They recommend funding research into what tests and treatments work and which ones do not, as if that isn’t what research has been all about anyway. Maybe it would be helpful to directly compare expensive patent drugs to generics, but the overall spending impact will be modest since this year’s patented drugs are next year’s generics.

They also recommend bundled payments, accountable care organizations, plus penalties for re-admissions, hospital acquired infections and other PACs (potentially avoidable costs). In my message two days ago (November 16) I already discussed the reasons why these measures cannot be relied upon to reduce health care costs.

Is this really the best that these noted economists can come up with? They have made the same mistake as the politicians. Their perception of reform is to build on our existing dysfunctional financing system (an egregiously flawed concept that you would think our leading economists would understand).

If we had an improved Medicare for all we could have 1) deficit neutrality through global budgeting, 2) rational tax policies that are equitable, 3) public administration using the guidance of commissions as appropriate, and 4) our own beneficent monopsony that can realign incentives to promote the delivery system reform that we need. And, oh yes, every single person would be included. It doesn’t take an economist to understand that.

Economists do understand this: Until yesterday (November 20), three Democrats in the Senate have been able to toy shamelessly with the prestige of their President and of the Senate leadership on the decision whether or not even to allow an admittedly limited health-reform bill to be debated on the Senate floor. That is the reality of America.

And in the great wisdom Americans claim uniquely for themselves, they are likely to punish the legislators who gave them at least this much—the previous Administration and Congress having given them nothing.

Don is a Mensch, but a dreamer. Let’s face it, this very limited bill, should it pass into law, is the very best Americans can hope for. This country will never have a sensible, efficient health-care system, and perhaps not even a totally humane one. For better or for worse, we must get used to it.

The trouble with economists is that we understand America – one reason, perhaps, why they call ours a “dismal science.”

Comment:

By Don McCanne, MD

Are we going to accept this… proud to be Menschen while supporting only a dream?

We can have a sensible, efficient, and humane health care system for all, but the current process is not going to bring it to us. We need to change the process, but we’re not going to do that by sitting around and dreaming of what could be.

Before You Carve that Turkey: All In for Bernie Sanders

By Donna Smith
Common Dreams, Monday, November 23, 2009

Those millions of us who support a Medicare for All, single-payer, reform for the healthcare crisis in this nation have some work to do over the next few days.  Senators areon their way to their home states for the one-week Thanksgiving recess – and they need a little up close and personal constituent attention before dinnertime on Thursday.

Senator Bernie Sanders of Vermont is a stalwart supporter of doing the right thing for his state, our healthcare system and this nation – and he has said repeatedly that moving toward a just and economically sound system is possible through Medicare for All, single-payer.  In the purest sense of giving patients control over their own healthcare, single-payer gives us all control over our choice of providers – and it gives our healthcare professionals the freedom they need to advise us on the basis of health rather than payment source.

So, even though the current Senate bill is not what we want – Senator Sanders will offer an amendment that would be a substitute for that bill and is mirrored on S. 703, The American Health Security Act.

We need to make it clear before our Senators are immersed in their own holiday events and then in traveling  back to Washington, DC, that we want them to support Senator Sanders’ amendment. 

Call today, call tomorrow and keep calling until the home offices of the Senators close for the holidays – and many will stay open until Wednesday at noon.  Tell the staff you want to talk turkey about the Senate effort.

Time is drawing short for our Senators to hear from us.  Debate will begin on November 30 on the current Senate bill.  Senator Sanders needs support.  He has already told us that he does not expect a win on his amendment.  But we are all laying groundwork for this nation to move in the right direction before long – we know that the current bills do not “bend the cost curve” enough and we know they certainly do not bend the death or bankruptcy curve nearly enough to make the bills what this nation needs.

Additionally, we want the legislation to contain language that will allow states that opt in to a single-payer system to be able to do so with the appropriate waivers from federal legal provisions which might otherwise present obstacles to doing so. 

So, the ask of our Senators – each and every one, liberal, centrist or conservative – is two-fold and urgent:

1.    Vote with and for Sanders’ S. 703 substitute amendment; and
2.    Support state single-payer enabling language in the final bill.

Calls to DC won’t be effective this week.  We can all return to that effort next week.  Thanksgiving week calls must go to your Senators’ offices in your state.  Look them up here, using your zip code: http://www.votesmart.org/

Tell friends, neighbors and relatives.  This year, talk a little turkey about healthcare.  Ask folks how thankful they would be to have healthcare as a basic human right for their neighbors and for themselves.  And then help them look up their Senators’ contact information and tell them how easy it really is to call and log your concerns and your expectations for an affirmative vote for the Sanders’ amendment.

Oh, and don’t forget to thank one another for caring enough to join in the struggle.  It matters.   Everybody in, nobody out.  Thank you all for believing that together we can change this, because we can.

Single player — Arrested doctors say health care reform debate has been one-sided

By Stephen Janis
Investigative Voice, Nov. 22, 2009

Sitting in the Common Ground coffee shop in Hampden Friday afternoon, pediatrician Eric Naumberg displays the low-key mannerisms of a doctor who could heal the sick simply by imparting a bit of his own personal serenity.

But Dr. Naumberg’s calm bedside manner, the result of years of delivering babies in the Baltimore region, did not dissuade officials at Maryland Care First from having the physician arrested and tossed into the city’s Central Booking facility during a protest in October over health care reform at the company’s Canton offices.

Naumberg, and his colleague Dr. Margaret Flowers, also a pediatrician, were cuffed and charged with trespassing after they sat down on the floor in the lobby, refusing to leave.

Now, having just completed their community service Friday at the city’s 28th Street dumping station, both doctors said they were forced to endure the blunt end of the U.S. justice system to call attention to the fact that the debate over health care reform is lacking.

“The real solution is a single-payer system,” Naumberg said. “It provides universal access to care, and saves money.”

They argue much of the U.S. spending on health care goes to fatten the pockets of highly paid health care executives, not to the care of patient. With a single-payer system, hospitals, doctors and other health care providers would bill the same government-run organization, similar to the way Medicare operates. Proponents say the system would reduce paperwork, and most importantly save money by eliminating the so-called corporate middleman, who soaks up between 15 to 30 cents of every health care dollar spent in the United States for administrative costs.

“Doctors spend on average $70,000 per year just processing paperwork for insurance companies,” said Flowers, who has been arrested twice for protesting,

“The estimate is that we would save $400 billion a year if we went to a single-payer system,” Naumberg said.

But since the democratic party leaders abandoned the single-payer idea early in the health care reform debate, both doctors said health care providers who support a single-payer system have been left out of the debate.

That’s why the two physicians joined a group of nearly 17,000 health care providers nationwide who believe the single-payer system is the answer. Unfortunately the organization has had a tough time getting a seat at the table.

“There were 41 health care lobbyists and insurance company representatives who testified in front of Senator Max Baucus’ Finance committee,” Flowers noted.

“But they wouldn’t let one person from our organization testify.”

Thus Flowers staged a sit-down protest in the Senate in August, resulting in her first of two arrests. The first for which she pled guilty.

“I’m still on probation,” she said.

Much of the problem, the doctors argue, has been media coverage that has failed to adequately inform the public about the benefits of the single-payer system.

Former Green Party candidate Kevin Zeese agrees. “No question. Television and newspapers [both struggling] are dependent on insurance and pharmaceutical advertising and there is a great deal of interlocking boards between the industry and newspapers,” said Zeese, now executive director of a web site called the Prosperity Agenda.

The savings from using a single-payer system, Zeese said, would be more than enough to offset the cost of insuring the 41 million Americans who currently do not have health insurance.

“The U.S. has double the number of insurance agents than doctors. Hospitals often have one insurance billing agent per bed, more administrators than nurses [who are very overworked],” Zeese said.

“Doctors spend 3.5 weeks a year dealing with the insurance industry and 20% of their overhead. Businesses also have overhead with insurance. And, consumers have to fight to get covered, wasting a lot of their time. Medicare’s overhead is 3%, in comparison.”

Emails seeking comment from executives at the national lobbying headquarters of Blue Cross Blue Shield, one of the nation’s largest private health insurance companies, were not immediately returned. Publicly lobbyists for the health insurance industry have argued that in its current state, the health reform bill before Congress would increase premiums by forcing taxpayers to subsidize coverage for people who currently cannot afford it.

But Zeese said the true beneficiaries of the current bill will be insurance companies, not the uninsured.

“It should be called The Insurance Enrichment Act because it is primarily a massive giveaway to the insurance industry. It will result in hundreds of billions in annual new revenue to the industry.”

Still., Naumberg said he believes there would be wide public support for a single-payer system if people knew the facts, a notion confirmed during his eight-hour stint behind bars at Central Booking.

“Once the other inmates knew what we were doing, they were very supportive,” he said.

“The irony is in prison it is illegal to deny someone health care,” Flowers added. “Outside of jail, you’re on your own.”

sjanis@investigativevoice.com

http://investigativevoice.com/index.php?option=com_content&view=article&id=1620:single-player-arrested-doctors-claim-insurance-companies-high-jacked-healthcare-debate&catid=25:the-project&Itemid=44

Reproductive choice and a common lifeboat

By Drs. David Himmelstein and Steffie Woolhandler
The following letter was submitted to the Washington Post on Nov. 18.

To the Editor,

As Ms. Maggie Mahar admits in “If conservatives ran health care” (Nov. 15, 2009), government employees’ policies do, in fact, cover birth control, and did so while many private insurers were still refusing to. Similarly, she seems oblivious to the fact that Medicare is the major payer for hospice and other palliative care.

If anything, her argument points up the fact that tax-funded programs like these that enroll middle-class people are far better protected than ghettoized programs like Medicaid or the puny public option in the bills before Congress. The reason some private policies cover abortion is that women have demanded it. The voices of middle-class women have been important in this regard.

The constituency for maintaining reproductive choice will be broad if middle-class women rely on the same system as the poor and near-poor. Because the new Medicaid and subsidized coverage will go to lower-income people, the middle class has little reason to be threatened by restrictions on abortions in that coverage. The lifeboat is kept in better repair if everyone — rich and poor alike — must rely upon it.

The public option will enroll very few people, so again, the political constituency for reproductive choice in that option will be small. In contrast, both Medicare and the federal employees program have been harder to attack because assaults on these programs affect large and powerful elements of the population.

Ms. Mahar does point up an important lesson of this year’s health policy debate. We must all stay involved in discourse on health policy (with or without passage of a single-payer bill) lest the process, and our health system, be hijacked by ideologues of the far right.

David Himmelstein, M.D.
Steffie Woolhandler, M.D.
Cambridge, Mass.

The authors are co-founders of Physicians for a National Health Program (www.pnhp.org).

Uwe Reinhardt on the economists' letter to President Obama

November 23, 2009
The Quote of the Day for November 18 (www.pnhp.org) was a letter to President Obama from twenty-three prominent economists urging that four specified elements to control costs be included in the health reform legislation. Following is my original response to the letter, discussing each of the four elements. Princeton economist Uwe Reinhardt, one of the signers of the letter, has responded to my comments.
Comment on economists’ letter by Don McCanne, MD with response by Uwe E. Reinhardt, PhD (highlighted in red):
For socially conscious health care reform advocates, the primary goal of reform is to see that every individual receives the health care that he or she needs. But what has really driven the reform process has been the concern over the very high costs of health care that have challenged individuals, employers and the stewards of our government health programs.
In this late phase of the reform process many have expressed doubts over the adequacy of the various policies in the reform proposal that allegedly are designed to control health care costs well into the future. In response, twenty-three of the nation’s most distinguished economists have signed on to this letter addressed to President Obama expressing support for four elements that they believe are of critical importance and should be included in the reform legislation. Let’s look closer at these four elements.
Deficit neutrality
The economists call for budget neutrality initially, to be followed by deficit reduction. Of course they are referring only to the federal government budget and not to private sector spending. The great risk of limiting consideration to public spending is that, in the absence of effectively controlling actual health care costs, the government budget can be controlled only by shifting the costs to the private sector. Individuals and businesses certainly do not want to see an increase in their health care spending, especially while the government is reducing its spending in the later phase, that of deficit reduction.
UER responds: Economists have trouble with the cost-shift argument. It assumes, implicitly, that health care costs are dictated by God and not subject to management by humans. If that were so, then, yes, whatever God-given cost is not paid by government will have to be paid by the private sector.
Economists do not share that religion. We believe that health-care costs are not God-given, but determined by the behavior of humans. There is no law in either the Bible or in economics according to which the private sector must pick up whatever health-care costs government does not pay. If the private sector were able and willing to say no to the alleged cost shift, then the providers of health care would have no choice but to manage their costs against whatever revenue they manage to extract from the rest of society.
Of course, if the private insurance sector tells us that it is powerless to resist the cost shift, then they are telling us that they cannot resist any cost increase shoved their way by providers for whatever reason. In that case, costs will keep going up in the private sector until it collapses of its own weight.
The next decade will tell.
Isolating health care spending for budget neutrality while continuing with deficits in other government programs (war, financial institution bailouts, interest on the debt, expanding our prison population, etc.) does not seem just. Appropriate use of debt is fundamental to any business, and there is no reason that reasonable debt should not be a part of the government’s management of its financial obligations to health care.
Current operations should be financed out of tax revenues. Longer-term investments (e.g., in infrastructure) can and should be debt financed. A part of health care, especially if rendered to young people, can be viewed as an investment. Conducting war may or may not be investment. WWII certainly was a highly productive investment. One has to debate fiscal policy along these lines.
That said, our total government debt is the result of prior devious efforts to reduce revenues (i.e., taxes) in order to force the reduction in funding of government programs. With inadequate revenues and with exploding debt, deficit hawks in Congress can be relied upon to underfund crucial programs such as health care, but theirs is a pathological process since they only look at spending and refuse to consider revenues.
Agreed. Republicans collectively have lost the moral ground on deficit financing. They have been promiscuous and utterly shameless on this score, starting, alas, with Ronald Reagan.
Those who argue that taxes collected for government health care spending remove money from the economy are flat out wrong. Health care is one of the most important and beneficial components of our economy, constituting over 17 percent of our GDP (Gross Domestic Product). Those taxes are moved back into our economy.
That, too, is a valid point. I have written a NYT blog post on it. It is ludicrous to say that producing another SUV is good job creation but giving health care to the hitherto uninsured is not.
Those who scream that we are being taxed to death need another dose of reality. The average total tax revenues of OECD nations (Organization for Economic Cooperation and Development) was 35.9 percent of GDP in 2006. For the United States, the total tax revenue was 28.0 percent of GDP, placing us near the bottom of OECD nations. (OECD Tax Database)
Suppose we increased our tax revenues to the average of OECD nations, which would still be far, far short of those nations with more highly socialized systems. At 7.9 percent (35.9 average minus 28.0 U.S.) of our GDP of about $13.8 trillion, that would increase government revenues by about $1.1 trillion in a single year, ten times the amount they are considering for health care reform. Our entire federal spending is about $3 trillion. We could eliminate entirely the deficits and provide surpluses while keeping tax revenues at well below the OECD average, if only the deficit hawks would look at the revenue side of the ledger.
Excise tax on high-cost insurance plans
Why would any health insurance plans have very high premiums? One reason is that insurers use medical underwriting to assess high premiums for individuals with preexisting disorders. It would be unfair to tax those premiums for an individual with other burdens, but with adequate regulatory reform medical underwriting should be eliminated anyway.
The more common reason for high premiums is that the plan covers other services and products such as dental care, eye care, maternity benefits, mental health services, and pharmaceuticals. Applying an excise tax to these premiums would result in eliminating such benefits from the plans and shifting these expenses to the individual in the form of greater out-of-pocket spending. The proposals under consideration place a cap on out-of-pocket expenses for covered services, but that cap is unaffordable for many, and these expenses would not apply to the cap. Thus they would impose an even greater financial burden.
Since the excise tax would discourage access to these important health care services, it should be rejected as the flawed policy concept that it is.
Valid points. A better approach would have been to say: Up until an income of $75,000 we do not add employer-paid health insurance to your W-2. From $75,000 to $150,000, we add 50% to your W-2, etc. But that is not in the cards. Besides, in implementation, the actuarial adjustments Don calls for most probably will be made.
Medicare Commission
Although the Medicare Commission purportedly would be to improve quality and value, its primary purpose would be to limit spending within the Medicare program. Medicare has already served as a leader in innovations to reduce health care spending, with the private insurance industry following. In fact, many providers believe that Medicare has been too aggressive, often resulting in lower reimbursement rates than in the private sector. Granting the Commission more power to use newer innovations to further reduce spending will inevitably increase the animosity held towards Medicare by the providers. A decline in willingness to accept Medicare beneficiaries could further impair access.
This is not to say that the concept of a commission is a bad idea. If the commission worked with the entire health care delivery system in applying potentially beneficial innovations, higher quality and greater value are possible. If the commission became too aggressive, the push-back by providers and their patients would moderate their excesses.
If the power of the Medicare Commission were limited only to Medicare, then there is a potential that cost-cutting aggressiveness might threaten to convert Medicare into a quasi-welfare program not unlike Medicaid, a transformation that would not please our Medicare beneficiaries. It is more likely that the Commission simply would be enmeshed in studies of relatively ineffectual measures that would have little net impact on costs.
We would need a universal Medicare for all program for the Commission to have a real impact that would be both beneficial and cost saving.
The idea here is not to shoot for the unattainable best, but for the attainable second best. If the choice is between letting Congress be in charge of Medicare spending or a Commission, I’d opt for the latter.
Delivery system reforms
These economists recommend that we reward health professionals for providing better care. The problem is that we don’t know how to do that. They recommend funding research into what tests and treatments work and which ones do not, as if that isn’t what research has been all about anyway. Maybe it would be helpful to directly compare expensive patent drugs to generics, but the overall spending impact will be modest since this year’s patented drugs are next year’s generics.
They also recommend bundled payments, accountable care organizations, plus penalties for re-admissions, hospital acquired infections and other PACs (potentially avoidable costs). In my message two days ago (November 16) I already discussed the reasons why these measures cannot be relied upon to reduce health care costs.
Is this really the best that these noted economists can come up with? They have made the same mistake as the politicians. Their perception of reform is to build on our existing dysfunctional financing system (an egregiously flawed concept that you would think our leading economists would understand).
If we had an improved Medicare for all we could have 1) deficit neutrality through global budgeting, 2) rational tax policies that are equitable, 3) public administration using the guidance of commissions as appropriate, and 4) our own beneficent monopsony that can realign incentives to promote the delivery system reform that we need. And, oh yes, every single person would be included. It doesn’t take an economist to understand that.
Economists do understand this: Until yesterday (November 20), three Democrats in the Senate have been able to toy shamelessly with the prestige of their President and of the Senate leadership on the decision whether or not even to allow an admittedly limited health-reform bill to be debated on the Senate floor. That is the reality of America.
And in the great wisdom Americans claim uniquely for themselves, they are likely to punish the legislators who gave them at least this much—the previous Administration and Congress having given them nothing.
Don is a Mensch, but a dreamer. Let’s face it, this very limited bill, should it pass into law, is the very best Americans can hope for. This country will never have a sensible, efficient health-care system, and perhaps not even a totally humane one. For better or for worse, we must get used to it.
The trouble with economists is that we understand America – one reason, perhaps, why they call ours a “dismal science.”

Are we going to accept this… proud to be Menschen while supporting only a dream?
We can have a sensible, efficient, and humane health care system for all, but the current process is not going to bring it to us. We need to change the process, but we’re not going to do that by sitting around and dreaming of what could be.

The public option ain't what it used to be

There's almost nothing left to give away in a healthcare compromise

By Robert Reich
Salon
Thursday, Nov 19, 2009

First there was Medicare for all 300 million of us. But that was a nonstarter because private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it was too much like what they have up in Canada — which, by the way, cost Canadians only 10 percent of their GDP and covers every Canadian. (Our current system of private for-profit insurers costs 16 percent of GDP and leaves out 45 million people.)

So the compromise was to give all Americans the option of buying into a “Medicare-like plan” that competed with private insurers. Who could be against freedom of choice? Fully 70 percent of Americans polled supported the idea. Open to all Americans, such a plan would have the scale and authority to negotiate low prices with drug companies and other providers, and force private insurers to provide better service at lower costs. But private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it would end up too much like what they have up in Canada.

So the compromise was to give the public option only to Americans who wouldn’t be covered either by their employers or by Medicaid. And give them coverage pegged to Medicare rates. But private insurers and … you know the rest.

So the compromise that ended up in the House bill is to have a mere public option, open only to the 6 million Americans not otherwise covered. The Congressional Budget Office warns this shrunken public option will have no real bargaining leverage and would attract mainly people who need lots of medical care to begin with. So it will actually cost more than it saves.

But even the House’s shrunken and costly little public option is too much for private insurers, Big Pharma, Republicans and “centrists” in the Senate. So Harry Reid has proposed an even tinier public option, which states can decide not to offer their citizens. According to the CBO, it would attract no more than 4 million Americans.

It’s a token public option, an ersatz public option, a fleeting gesture toward the idea of a public option, so small and desiccated as to be barely worth mentioning except for the fact that it still (gasp) contains the word “public.”

And yet Joe Lieberman and Ben Nelson mumble darkly that they may not even vote to allow debate on the floor of the Senate about the bill if it contains this paltry public option. And Republicans predict a “holy war.”

But what more can possibly be compromised? Take away the word “public”? Make it available to only 12 people?

Our private, for-profit health insurance system, designed to fatten the profits of private health insurers and Big Pharma, is about to be turned over to … our private, for-profit healthcare system. Except that now private health insurers and Big Pharma will be getting some 30 million additional customers, paid for by the rest of us.

Upbeat policy wonks and political spinners who tend to see only portions of cups that are full will point out some good things: no preexisting conditions, insurance exchanges, 30 million more Americans covered. But in reality, the cup is 90 percent empty. Most of us will remain stuck with little or no choice — dependent on private insurers who care only about the bottom line, who deny our claims, who charge us more and more for co-payments and deductibles, who bury us in forms, who don’t take our calls.

I’m still not giving up. I want every senator who’s not in the pocket of the private insurers or Big Pharma to introduce and vote for a “Ted Kennedy Medicare for All” amendment to whatever bill Reid takes to the floor. And if this fails, a “Ted Kennedy Real Public Option for All” amendment. Let every Senate Democrat who doesn’t have the guts to vote for either of them be known and counted.

The public option ain’t what it used to be

There’s almost nothing left to give away in a healthcare compromise

By Robert Reich
Salon
Thursday, Nov 19, 2009

First there was Medicare for all 300 million of us. But that was a nonstarter because private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it was too much like what they have up in Canada — which, by the way, cost Canadians only 10 percent of their GDP and covers every Canadian. (Our current system of private for-profit insurers costs 16 percent of GDP and leaves out 45 million people.)

So the compromise was to give all Americans the option of buying into a “Medicare-like plan” that competed with private insurers. Who could be against freedom of choice? Fully 70 percent of Americans polled supported the idea. Open to all Americans, such a plan would have the scale and authority to negotiate low prices with drug companies and other providers, and force private insurers to provide better service at lower costs. But private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it would end up too much like what they have up in Canada.

So the compromise was to give the public option only to Americans who wouldn’t be covered either by their employers or by Medicaid. And give them coverage pegged to Medicare rates. But private insurers and … you know the rest.

So the compromise that ended up in the House bill is to have a mere public option, open only to the 6 million Americans not otherwise covered. The Congressional Budget Office warns this shrunken public option will have no real bargaining leverage and would attract mainly people who need lots of medical care to begin with. So it will actually cost more than it saves.

But even the House’s shrunken and costly little public option is too much for private insurers, Big Pharma, Republicans and “centrists” in the Senate. So Harry Reid has proposed an even tinier public option, which states can decide not to offer their citizens. According to the CBO, it would attract no more than 4 million Americans.

It’s a token public option, an ersatz public option, a fleeting gesture toward the idea of a public option, so small and desiccated as to be barely worth mentioning except for the fact that it still (gasp) contains the word “public.”

And yet Joe Lieberman and Ben Nelson mumble darkly that they may not even vote to allow debate on the floor of the Senate about the bill if it contains this paltry public option. And Republicans predict a “holy war.”

But what more can possibly be compromised? Take away the word “public”? Make it available to only 12 people?

Our private, for-profit health insurance system, designed to fatten the profits of private health insurers and Big Pharma, is about to be turned over to … our private, for-profit healthcare system. Except that now private health insurers and Big Pharma will be getting some 30 million additional customers, paid for by the rest of us.

Upbeat policy wonks and political spinners who tend to see only portions of cups that are full will point out some good things: no preexisting conditions, insurance exchanges, 30 million more Americans covered. But in reality, the cup is 90 percent empty. Most of us will remain stuck with little or no choice — dependent on private insurers who care only about the bottom line, who deny our claims, who charge us more and more for co-payments and deductibles, who bury us in forms, who don’t take our calls.

I’m still not giving up. I want every senator who’s not in the pocket of the private insurers or Big Pharma to introduce and vote for a “Ted Kennedy Medicare for All” amendment to whatever bill Reid takes to the floor. And if this fails, a “Ted Kennedy Real Public Option for All” amendment. Let every Senate Democrat who doesn’t have the guts to vote for either of them be known and counted.

Talking points on HR 3962 with some comparisons to the Senate (Reid) bill in bold and Obama’s proposal in blue.

Charts comparing the three plans from The New York Times and The Chicago Tribune are below.

By Ida Hellander, MD
Updated on February 24, 2010

Overall –

  • The House bill is completely inadequate in expanding coverage and controlling costs.  It is essentially an insurance industry bailout. Most provisions to expand coverage don’t even go into effect until 2013 (2014 in the Senate), after which it still leaves at least 17 million Americans uninsured. The Senate bill would have even less impact, leaving at least 24 million Americans uninsured.  Similarly, Obama’s proposal would delay coverage expansions until 2014, and even then would leave at least 24 million Americans with no coverage and tens of millions more underinsured.
  • It forgoes over $400 billion annually in potential savings on overhead and bureaucracy in the health system – enough to cover all 47 million uninsured – by retaining profit-driven private health insurers instead of replacing them with a streamlined, more efficient, Medicare for All system.
  • It makes private health insurance mandatory for middle-income working people, forcing them to buy a defective product.  It will become a federal crime to be uninsured, with a penalty of 2.5 percent of income, starting in 2013. The fines in the Senate bill are lower, starting at $95 a year in 2014 and rising to $750 by 2019.  Obama proposes that fines for failure to buy private coverage rise from $95 or 1 percent of income (whichever is greater) in 2014 to $695 to 2.5 percent of income in 2016.  Thereafter, they would rise with inflation. Families with incomes under $18,700 are exempt from the requirement to purchase coverage, as are those who would face premiums higher than 8 percent of income.
  • Families of very modest means, at 200-400 percent of poverty, will be required to spend an unaffordable 8-12 percent of their incomes (8-9.5 percent under Obama’s proposal) on insurance premiums if they don’t have employer-sponsored coverage.  Additionally, the basic benefits are very skimpy and the cost-sharing requirements are high, meaning that families of very modest means could spend 20 percent or more of their incomes on premiums and cost-sharing before receiving any benefits. In the Senate, the lowest-cost plan would only cover 60 percent of health care costs. 
  • A Medicaid expansion (to families with incomes under 133 percent of poverty) will cover more low-income Americans, but coverage gains – both in Medicaid and for people receiving tax assistance to buy coverage – will be short-lived because the cost is unsustainable as we’ve seen in several states that have attempted reform in recent years.
  • The insurance industry hijacked the process:  Private insurers get millions of mandatory new customers and $605 billion in taxpayer subsidies.  This will have the effect of making the health insurance lobby even more powerful, and more able to hijack political processes in the future. The Senate bill provides $447 billion in taxpayer subsidies to insurers.  Obama’s plan provides somewhat more than the Senate bill for subsidies.
  • To pay for subsidies to insurers, the bill cuts payments to safety net hospitals that serve a large number of low-income patients.  The Senate bill cuts payments to safety-net hospitals by $43 billion.
  • We will have a nation of underinsured families and businesses who will be paying money they can hardly afford for health plans that will never meet their needs.  Globally, the U.S. economy will continue to be at a competitive disadvantage.
  • People in other developed nations all use some form of non-profit national health insurance to get better care for less money.  Their average per capita cost of healthcare is about half what it is in the United States, yet people in Canada and western Europe live about two years longer and have lower infant mortality. As with our traditional Medicare program, they have completely free choice of doctor and hospital. We need to start from scratch with a Medicare-for-all, single-payer approach.

On private insurers

  • Private health insurance is an overpriced, defective product, and this bill won’t change that. The majority of Americans who face medical bankruptcy start their illness with private health insurance, but are bankrupted anyway by gaps in coverage, like co-payments, deductibles and uncovered services.
  • Individuals and families with incomes up to 400 percent of poverty ($73,240 for a family of 3) are eligible for skimpy subsidies to buy coverage through a new “insurance exchange.”  Families of very modest means (200-400 percent of poverty) are still responsible for paying an unaffordable 8-12 percent of their income (8-9.5 percent under Obama’s proposal) towards health insurance premiums.
  • Obama’s proposal would create a new “Health Insurance Rate Authority” under HHS with the power to block an insurance company’s premium increases in states where they are not already regulated. Insurance commissioners in 27 states already have the power to regulate premium hikes, but have been ineffective in controlling health care costs.
  • The bill bans denials of coverage based on pre-existing conditions (starting in 2013)(2014 in Obama’s proposal) and recissions (retro-active cancellation of coverage) immediately.  But insurers are still allowed to deny claims, and two industry whistleblowers (Dr. Linda Peeno and Wendell Potter) have testified before Congress that the industry is now so sophisticated in its ability to deny claims, control care, and cherry-pick that these protections are essentially worthless.
  • Similarly, caps on out-of-pocket expenses (at $5,000 for individuals and $10,000 for families) don’t prevent medical bankruptcy because they don’t include expenses for uncovered services.  Obama’s proposal doesn’t cap out-of-pocket expenses, but it does raise the share of benefits covered by insurance for the lowest-income families (under $33,000) from 70 percent to 94 percent.  However, families could still face bankruptcy from uncovered services, out-of-network care, etc.
  • Insurers are supposed to spend 85 percent of premiums on care, but experience from Minnesota shows that insurers are able to circumvent this rule easily by categorizing administrative expenses as “clinical” or “quality improvement.”
  • Obama’s plan assesses a $67 billion fee on insurers over 10 years, starting in 2014.

On Medicaid and community health center expansion

  • The bill expands Medicaid after 2013 to additional low-income Americans (up to 150 percent of poverty), which is good, but you don’t need this bill to expand Medicaid.  Also, rising costs, and a lack of funds for Me
    dicaid at the state level, will quickly erode any gains in coverage.  The Senate bill only expands Medicaid to up to 133 percent of poverty.  The CBO estimates that states will need to contribute $34 billion (House bill) 2010-2019 to fund the expansion.  Obama’s proposal expands Medicaid up to 133 percent of poverty starting in 2014 and pays at least 90 percent of costs for newly eligible individuals through 2020.
  • The bill increases funding (by $11 billion) for community health centers, which again, is good, but this could be done independently.
  • The House bill eliminates the Children’s Health Insurance Program in 2014, routing the beneficiaries into Medicaid (under 150 percent of poverty) or into the purchase of private coverage), adding hassle and possibly disrupting care arrangements for these children.  Obama’s proposal would maintain CHIP until 2019, but only authorizes funding through 2016.
  • As a welfare program, representing a population without an audible political voice, Medicaid is chronically underfunded.
  • Inadequate reimbursement rates due to inadequate funds results in a lack of willing providers. Too many physicians are not willing to accept the losses under this program. This lack of providers impairs access to care.
  • Many states are struggling with budgets burdened by massive Medicaid spending. Although this expansion would use federal funds initially, some of the financing burden would be shifted to the states even though they do not have the budget flexibility of the federal government.
  • On paper, Medicaid looks like a great program. It provides a generous benefit package for lower-income individuals who cannot afford to purchase private health plans. In reality, most Medicaid patients do not have the same access to essential specialized services that wealthier privately insured individuals do, and access to even basic services is often compromised.
  • Expanding the Medicaid program further locks in a tiered health care system, effectively providing less for the least amongst us. In health care, that’s simply not acceptable.

On the public option

  • The public plan option is a sham. According to the Congressional Budget Office, the premiums will actually be higher than premiums in the private sector, and fewer than 2 percent of Americans (6 million people) will enroll.
  • Payment rates would not be tied to Medicare.  Instead, the government has to negotiate payment rates with providers.
  • So the public plan option will be an expensive, tax-funded subsidy to private health insurance, because the public plan option will take the sickest patients off their hands. It won’t expand coverage or decrease costs. Obama’s proposal has no public option.

On the employer-mandate

  • Starting in 2013, employers with payrolls over $500,000 are required to provide coverage and pay a share of the premiums (72.5 % for individual, 65% for family coverage) or pay an 8 percent payroll tax.  The Senate bill places the burden on individuals, not employers, to obtain coverage.  Employers would only pay a $750 penalty per worker for employees who sought subsidized coverage.  Under Obama’s proposal, employers with more than 50 workers would pay a penalty if any of their workers obtained subsidized coverage.  The penalty would be larger than in the Senate bill, $2,000 for each worker in the company minus the first 30 workers.  Since employer-sponsored coverage is costly ($4,824 for individual and $13,375 for family coverage in 2009), it would still be cheaper for employers to pay the fine than provide coverage. 
  • Employers with fewer than 25 workers and average wages under $50,000 would be eligible for tax credits to help them provide coverage to their workers.  Obama’s proposal provides $40 billion for tax credits for business.
  • Employers are not required to meet benefit standards until 2018, but even then are only required to help fund the “lowest cost plan” that meets the “essential benefits package,” and so may offer very skimpy coverage.   The “basic plan” on the insurance exchange, for example, is only required to cover 70 percent of benefit costs (60 percent of benefit costs in the Senate).   As there are no cost controls, coverage will deteriorate further, leading to a rise in underinsurance nationwide.
  • Millions of working Americans will continue to lack coverage.  In Hawaii, which has had an employer mandate since the 1970’s, many employers circumvent the requirement by hiring part-time employees or using consultants.  Also, small businesses are not required to provide coverage (but receive a paltry tax credit for two years if they do).

On the insurance exchange and tax subsidies

  • The bill creates a national insurance exchange (in Obama’s proposal, the “exchange” is state-based), a marketplace where individuals and small business would go (after 2013, 2014 in the Senate bill and Obama’s plan) to buy insurance. If you have subsidized coverage, you would have to buy your insurance through the exchange. Like the “Connector” in Massachusetts, the exchange will add another layer of bureaucracy to the health system, and an additional 4 percent overhead to every health plan.  Under Obama’s proposal, there is no national exchange.  Instead, each state would operate its own insurance exchange, increasing bureaucracy and reducing the potential for spreading risk and moderating costs even farther.
  • Subsidies for low-income people to purchase coverage will be hopelessly complex, requiring verification of income, citizenship, employer size, etc.
  • Millions will have their subsidies change as they change or lose jobs.  Imagine finding a job, losing your insurance subsidy, then being laid off your job and applying for a subsidy all within a year.  How would this work?

On evidence that this bill won’t reduce the number of uninsured or control costs

  • The coverage gains from the bill won’t last.  What’s happened in the past when bills like this have passed in the states is that they run out of money very quickly, healthcare is simply unaffordable, and then you start to see the coverage expansions cut back. The subsidies shrink, the Medicaid shrinks, and then you’re back at square one, where you’ve spent a lot of money and not made any progress. And we’ve seen this over and over in the United States—in Massachusetts in 1988, in Oregon in 1992, in Washington 1993—passed bills virtually identical to what’s being passed in the House right now, and there was no durable improvement in the number of uninsured in those states. Healthcare was not affordable ten years after those bills were passed.
  • The Massachusetts plan is the model for this bill. Massachusetts expanded Medicaid (which again, is good, but you
    don’t need this bill to expand Medicaid) and passed an individual mandate that makes it illegal to refuse to purchase private health insurance. The fine is up to $1,068.  The plan has been very expensive.  The state has opted to pay for that by taking money from safety net clinics and hospitals, so that safety net providers that care for immigrants, the mentally ill, people with substance abuse, that provide primary care, they’ve seen their funds shrunken, so that money could be handed over to purchase insurance policies.
  • Insurance commissioners in 27 states already have the power to regulate premium hikes, but have been ineffective in controlling health care costs.

On the anti-abortion provisions

  • The bill applies restrictions to policies sold through the insurance exchange to undermine women’s rights.  It creates an insurance exchange, a marketplace where you would go to buy your insurance. If you have subsidized coverage, you would have to buy your insurance through the exchange.  And any insurance plan purchased through the exchange would have to exclude coverage of abortion. So, for the first time, Congress has stepped in and said that even with your own money, with private money, it’s illegal for insurance to cover abortion. It’s a tremendous step backwards for women’s rights.
  • Under Obama’s plan, the existing ban on using federal money for abortions would apply.  Thus, as in the Senate bill, people buying subsidized coverage through the exchanges would likely have to make two separate monthly premium payments:  one for all coverage except abortion and one for abortion coverage.

On prescription drug costs

  • It fails to lower drug costs for the majority of Americans and those unable to afford expense medications.  Drugmakers have raised wholesale prices on brand name drugs by 9 percent this year alone in anticipation of reform.
  • Biotech firms receive a windfall 12 year patent on new drugs.
  • A very small share of the population, Medicare recipients who are in the doughnut hole, will receive a discount on brand-name medications.
  • The doughnut hole is reduced in size until it is eliminated in 2019 in the House, but not the Senate, version.  Obama’s plan would eliminate the doughnut hole in 2020 and would give a $250 rebate to beneficiaries who reach the doughnut hole in 2010. 
  • Obama’s plan would prohibit “pay for delay” practices that drug companies use to keep generics off the market.
  • Obama’s plan would assess $33 billion fee on the pharmaceutical industry over 10 years, starting in 2011.  The medical device industry would be subject to an excise tax starting in 2013 and yielding $20 billion.
  • Overall, the pharmaceutical industry is thrilled with the bill, and Wall Street has rewarded them by driving up the value of their stocks.

On undocumented immigrants

  • Requires verification of citizenship to apply for subsidies for the purchase of insurance.  Thus, the bill mandates that immigrants buy insurance, but leaves it unaffordable for them.
  • The Senate bill is even more onerous, prohibiting undocumented immigrants from using their own money to purchase health insurance through the insurance exchange.  Obama’s proposal also prohibits undocumented immigrants from buying coverage through the exchanges, even if they pay the full cost without federal subsidies.

Medicare Advantage Plans

  • The bill phases out overpayments to Medicare Advantage plans. The Senate calls for a bidding process that will save $118 billion. The House bill also requires them to spend at least 85 percent of premiums on care, but as shown in states like Minnesota, insurers can easily circumvent this rule.  Obama’s plan calls for a bidding model for Medicare Advantage plans similar to that in the Senate, but phases in the changes over time, saving less.

Community Living Assistance Services and Supports

  • The bill calls for the establishment of a “voluntary federal program for long-term care insurance” that would pay a cash benefit to help fund home-based services.
  • The CBO estimates that the revenues in the Senate version of this new program would exceed premiums by $72 billion in its first years of operation, and these revenues could be used to fund the bill.  In other words, $72 billion of the funding for taxpayer subsidies of private insurers would come from raiding a new federal long-term care insurance plan. 
  • This is just one example of how completely inadequate the bill is at addressing the real crisis in access to health care, including access to long-term care services.

Summary of commendable features – some may not make it into final bill

  • Medicaid expansion (delayed until 2013, 2014 in Obama plan) to 150 percent of poverty (House) and 133 percent of poverty (Senate and Obama).  Obama’s plan would also increase funding for community health centers by $11 billion over ten years and increase funding for other community programs like home visiting programs.
  • Increased funding for primary care health professional education
  • Phasing out of doughnut hole in Medicare prescription drug plan by 2019 and Medicare Advantage plan overpayments. Restores government discounts on purchase of drugs for low-income seniors.  Allows government to negotiate drug prices with pharmaceutical companies.
  • Eliminating pre-existing conditions (2013, 2014 in Obama plan) and recissions (2010)
  • Ban on annual and lifetime limits; cap out-of-pocket costs at $5,000 for an individual and $10,000 for a family.  Obama’s plan would reduce cost-sharing in plans purchased on the exchange by families with incomes under $55,000; plans for this income group would cover between 94 and 73 percent of health care costs, up from 70 percent for families earning $55,000 to $88,000 and 60 percent for higher-income families.
  • Extending health benefit tax benefits available to married couples to domestic partners
  • Extending parental coverage to children aged 26-27.  Obama’s plan would cover adult dependents up to age 26.
  • Progressive tax on the wealthy for funding instead of taxing health plans that are comprehensive (so-called “Cadillac” plans). In contrast, the Senate places a 40 percent tax on health plans with premiums over $8,500 for an individual and $23,000 for family, attacking comprehensive coverage of older, sicker workers.  Obama’s proposal uses similarly reg
    ressive financing, with some minor modifications (e.g. the excise tax is delayed until 2018, and applies to policies over $10,200 for individual and $27,500 for family coverage).       
  • The Senate also raises the Medicare payroll tax to 1.95 percent on wages over $200,000 for individuals, jeopardizing solidarity for the Medicare program.  Similarly, the Obama proposal raises the Medicare payroll tax to 2.35 percent and imposes an additional 2.9 percent tax on unearned income for individuals earning over $200,000 and couples earning over $250,000.   
  • Immediate creation of a temporary high-risk insurance pool for people who’ve been denied coverage because of a pre-existing condition, with $5 billion in funding.  Eliminated in 2013, when the regulations on insurers go into effect.

From the New York Times

From The Chicago Tribune (click to enlarge)

Health IT savings projections are baseless

Hospital Computing and the Costs and Quality of Care: A National Study

By David U. Himmelstein, MD, Adam Wright, PhD, Steffie Woolhandler, MD, MPH
The American Journal of Medicine
November 20, 2009

BACKGROUND

Many believe that computerization will improve health care quality, reduce costs, and increase administrative efficiency. However, no previous studies have examined computerization’s cost and quality impacts at a diverse national sample of hospitals.

DISCUSSION

We used a variety of analytic strategies to search for evidence that computerization might be cost-saving. In cross-sectional analyses, we examined whether more computerized hospitals had lower costs or more efficient administration in any of the 5 years. We also looked for lagged effects, that is, whether cost-savings might emerge after the implementation of computerized systems. We looked for subgroups of computer applications, as well as individual applications, that might result in savings. None of these hypotheses were borne out. Even the select group of hospitals at the cutting edge of computerization showed neither cost nor efficiency advantages. Our longitudinal analysis suggests that computerization may actually increase administrative costs, at least in the near term.

The modest quality advantages associated with computerization are difficult to interpret. The quality scores reflect processes of care rather than outcomes; more information technology may merely improve scores without actually improving care, for example, by facilitating documentation of allowable exceptions.

Why has information technology failed to decrease administrative or total costs? Three interpretations of our findings seem plausible. First, perhaps computerization cannot decrease costs because savings are offset by the expense of purchasing and maintaining the computer system itself. Although information technology has improved efficiency in some industries (eg, telecommunications ), it has actually increased costs in others, such as retail banking.

Second, computerization may eventually yield cost and efficiency gains, but only at a more advanced stage than achieved by even the 100 “Most Wired” hospitals.

Finally, we believe that the computer’s potential to improve efficiency is unrealized because the commercial marketplace does not favor optimal products. Coding and other reimbursement-driven documentation might take precedence over efficiency and the encouragement of clinical parsimony. The largest computer success story has occurred at Veterans Administration hospitals where global budgets obviate the need for most billing and internal cost accounting, and minimize commercial pressures.

CONCLUSIONS

Whatever the explanation, as currently implemented, health information technology has a modest impact on process measures of quality, but no impact on administrative efficiency or overall costs. Predictions of cost-savings and efficiency improvements from the widespread adoption of computers are premature at best.

http://www.amjmed.com/home

PNHP press release:
https://pnhp.org/news/2009/november/projections-of-savings-from-health-it-are-baseless-harvard-researchers-say

VA’s VistA:
http://www.innovations.va.gov/

Comment:

By Don McCanne, MD

As currently implemented, health information technology (HIT) has no significant impact on administrative efficiency or overall costs, even in the “100 Most Wired” hospitals. Members of Congress should quit pretending that expanding HIT will produce savings that will help pay for the increased spending called for in their legislation.

This should not be interpreted as a blanket condemnation of HIT. The system used by the Veterans Administration hospitals has improved quality, though their system was designed specifically to enhance patient care. Profitable, proprietary, commercial HIT systems are usually designed to improve billing and cost accounting (and to make money for the vendors), whereas patient care information management in these proprietary systems is designed to mesh with these business functions that are given a higher priority.

We should really think about whether we want to continue to use our public funds to promote private, entrepreneurial HIT systems that have a business orientation, or if we should use those funds for further development of less expensive, open-source HIT systems designed specifically to enhance the quality of patient care, just as the VA health system has done. Their award-winning system, VistA, is available for use in the private sector (VA’s VistA – link above). Isn’t it more logical to look at a system that actually works, and one that that’s already paid for and that we own?

The following is from the PNHP release (link above):

Dr. Steffie Woolhandler, professor of medicine at Harvard and study co-author, said several factors may explain why health IT has failed to reduce administrative costs.

“Any savings may have been offset by the costs of purchasing and running new computer systems,” she said. “In addition, most software is designed around the accounting and billing needs of hospitals, not the clinical side.”

She noted that a computer success story in recent years has been at the Veterans Administration, where global budgets eliminate most billing and internal cost accounting, allowing physicians to focus instead on delivering care.

“The VA system now has our nation’s highest quality and patient approval ratings,” Woolhandler said. “Congress should take note: to get the most benefit from our health care dollars and from health IT, we should adopt a single-payer, Medicare-for-all program. Nothing short of that will allow us to reap the full potential of computerization or to provide comprehensive, quality and affordable care to all.”

Study: No Cost Savings With Electronic Medical Records

By SACHA PFEIFFER
WBUR Radio / NPR, Nov. 20, 2009

BOSTON — A new Harvard study finds that computerized medical records don’t save money or make hospitals more efficient, despite claims that health information technology could generate huge financial returns.

The study has major implications for national health reform. Congress is counting on savings from health I.T. to help fund the cost of revamping the health care system, and the Obama administration plans to use about $30 billion in federal stimulus money to spur the nationwide adoption of health I.T., such as electronic medical records.

But Harvard Medical School professor Steffie Woolhandler says an analysis of 4,000 hospitals nationwide found no cost benefit from computerization.

“If people think we’re going to pay for health reform off of savings on hospital computerization, they’re really sorely mistaken,” said Woolhandler, one of the study’s co-authors. “There are no savings we were able to find looking at five years of information.”

The researchers examined data from 2003 to 2007, including from hospitals on the “100 Most Wired List” compiled by Hospital and Health Networks magazine. They analyzed the data for evidence of increased quality, cost savings, or improvements in administrative efficiency.

Besides finding no indication that computerization lowers costs, the researchers found that some hospitals actually saw administrative costs rise after computerizing, probably due to the expense of buying and maintaining equipment and paying for technology staffs.

And those increased administrative expenses weren’t just one-time upfront costs of purchasing computer systems; those expenses remained elevated even several years after computerization had taken place.

In addition, the research showed that computerization hasn’t helped hospitals become more efficient, although it may have “modestly improved the quality of care for heart attacks,” according to the study.

One reason computerization may not be improving efficiency and quality of care: many medical software programs are designed primarily to help hospitals with their billing, accounting and registration needs, not their clinical work.

When hospital computer systems are designed with clinical care in mind, Woolhandler said, they can help prevent medication errors, flag a patient’s drug allergies, and ensure that prescriptions are written properly.

“I’m still a believer in computerization; I’m not a total Luddite,” Woolhandler said. “But I think computerization is very often done wrong. And, certainly from a cost perspective in the U.S., it’s done wrong more than it’s done correctly…so I think we need to be smarter about the way we computerize in this country.”

The study appears online in the American Journal of Medicine.

http://www.wbur.org/2009/11/20/medical-records

No hospital savings with electronic records: study

By Susan Heavey
Reuters, Fri Nov 20, 2009

WASHINGTON (Reuters) – New electronic record systems installed in thousands of U.S. hospitals have done little to rein in skyrocketing healthcare costs, Harvard University researchers said in a study released on Friday.

A review of roughly 4,000 hospitals from 2003 to 2007 found that while many had moved away from the paper files that still dominate the U.S. healthcare system, administrative costs actually rose, even among the most high-tech institutions.

Advocates of such technology have been pushing for greater use of computerized health records to prevent costly errors and allow greater coordination among caregivers and patients. But adoption has been slow, prompting Congress to offer $19 billion in incentives as part of an economic stimulus bill.

The results, published in The American Journal of Medicine, come as the Senate presses ahead with legislation to expand access to healthcare. While the bill does not provide funds to buy necessary equipment, it does aim to facilitate their use and boost standards.

President Barack Obama has pointed to greater utilization of e-health records to help generate savings at a time when the nation’s healthcare costs far outpace inflation.

But lead author Dr. David Himmelstein, an associate professor at Harvard Medical School, and his team found so far the savings are not there.

“Our study finds that hospital computerization hasn’t saved a dime, nor has it improved administrative efficiency,” said Himmelstein, who oversees clinical computing at Cambridge Hospital in Massachusetts. “Claims that health IT will slash costs and help pay for the reforms being debated in Congress are wishful thinking.”

The push for wider electronic medical records affects companies like Microsoft Corp and Google Inc to others such as McKesson Corp and Allscripts Misys Healthcare Solutions Inc.

National government standards for many health IT products are due next month. But even with the passage of the stimulus bill’s funds, many experts expect it to take years before most Americans have an electronic health record.

The researchers found administrative costs increased slightly from 24.4 percent in 2003 to 24.9 percent in 2007, with facilities that computerized the most quickly seeing the largest jump. Hospitals with the highest costs tended to be smaller, for-profit, non-teaching ones in cities, they added.

Computerized records have yet to prove more efficient “because the commercial marketplace does not favor optimal products,” creating programs to focus more on codes and billing than doctors’ needs and patient care, they said.

Electronic records did show some improvements in tracking the quality of care delivered in cases of heart attacks, but it was unclear if those measure actually translated into improvements in patients’ health, they said.

The researchers analyzed data from the industry’s Healthcare Information and Management Systems Society, hospital reports on costs incurred through the Medicare insurance program for the elderly and the 2008 Dartmouth Health Atlas, which compiles government health data.

Their study was released by the nonprofit Physicians for a National Health Program, which backs a single-payer U.S. health insurance.

(Editing by Chris Wilson)

http://www.reuters.com/article/domesticNews/idUSTRE5AJ0MQ20091120