By Lisa Girion
Los Angeles Times
June 7, 2009

One in an occasional series on healthcare reform.

Some may find it hard to believe that the U.S. health insurance industry supports making major changes to the nation’s healthcare system.

The industry, after all, scuttled President Clinton’s healthcare overhaul bid with ads featuring “Harry and Louise” fretting about change.

But this time, it turns out, the health insurance industry has good reason to support at least some change: It needs it.

Private health insurance faces a bleak future if the proposal they champion most vigorously — a requirement that everyone buy medical coverage — is not adopted.

The customer base for private insurance has slipped since 2000, when soaring premiums began driving people out. The recession has accelerated the problem. But even after the economy recovers, the downward spiral is expected to continue for years as baby boomers become eligible for Medicare — and stop buying private insurance.

Insurers do not embrace all of the healthcare restructuring proposals. But they are fighting hard for a purchase requirement, sweetened with taxpayer-funded subsidies for customers who can’t afford it, and enforced with fines.

Such a so-called individual mandate amounts to a huge booster shot for health insurers, which would serve up millions of new customers almost overnight.

“I think that’s why we’ve seen the industry basically trying to play the administration’s game,” said Jane DuBose, an analyst with industry tracking firm HealthLeaders-InterStudy. “They really could be licking their chops over the potential here.”

The industry says its interest in change flows not from narrow self-interest but from broader concerns.

“What’s driving this is we have 47 million people who don’t have access to the system, who get help through emergency rooms, and that results in higher costs and inefficient care,” said Robert Zirkelbach, a spokesman for industry trade group America’s Health Insurance Plans. “There’s both a social and economic reason to get everybody in the healthcare system.”

Jay Gellert, chief executive of Woodland Hills-based Health Net, said industry support for certain changes is driven by “a recognition that public frustration with many of the problems in the system [is] increasing pretty significantly. So I think there’s as much of a commitment to this because we’ve seen other industries where they haven’t dealt with issues early enough, like financial services and auto, and that’s not a happy place.”

Still, industry observers say, private insurers need the government’s help to transform some of the nation’s 45 million uninsured residents into paying customers.

Private insurers lost an estimated 9 million customers between 2000 and 2007. In many cases, people lost coverage because they or their employers could no longer afford it as premium increases outpaced wage growth and inflation.

Recession job losses are adding to the toll. Some economists estimate that every percentage-point increase in the jobless rate adds 1 million people to the ranks of the uninsured.

The industry’s real trouble begins in 2011, when 79 million baby boomers begin turning 65. Health insurers stand to lose a huge slice of their commercially insured enrollment (estimated at 162 million to 172 million people) over the next two decades to Medicare, the government-funded health insurance program for seniors.

“The rate of aging far and away exceeds the birth rate,” said Sheryl Skolnick, a CRT Capital Group healthcare investment analyst. “That’s got to be very scary. . . . This is the biggest fight for survival managed care has ever faced, at least since they went bankrupt in the late ’80s.”

With Democrats in power and public sentiment in favor of change, the industry can’t afford to flatly oppose it, said Julius Hobson, a Washington lobbyist for hospitals and insurers with the law firm Bryan Cave.

“This time, you get the sense something is going to happen,” he said. “So to stand up and just say no is probably not wise, because politically you could get run over.”

For insurers, getting “run over” would be the adoption of a so-called single-payer plan, in which the government pays all medical bills. Such a plan, though widely viewed as politically unfeasible this year, would wreak havoc on the private insurance market.

The best way for the industry to preserve the private insurance market — and derail the campaign for a single-payer system — may be to go along with more palatable proposals on the table now, said Jeffrey Miles, a healthcare analyst and president of the Miles Organization, a Los Angeles insurance brokerage firm.

“If healthcare goes down this year, you are going to end up with single-payer care much sooner than anyone expected,” he said.

But there is a limit to how much change the industry will abide. It draws the line at proposals, supported by President Obama and others, to offer consumers a public insurance alternative to private coverage.

The idea is that consumers could buy into a government-run health plan, such as or similar to Medicare or the federal employees insurance program.

Proponents say that if consumers are required to buy coverage, it is only fair to give them a public option.

In a recent letter to Senate Finance Committee Chairman Max Baucus (D-Mont.), for example, Jerry Flanagan of the Santa Monica-based advocacy group Consumer Watchdog wrote that adopting an individual mandate without a public alternative would amount to “a bailout for HMOs — whose greed, waste and indifference to our health have created the current mess.”

The industry fears that the government would force lower fees on hospitals and physicians, enabling a public health insurance plan to offer consumers a better bargain.

That, they say, would make it hard for private companies to compete for customers. Insurers also fear that a public option could easily be converted later into a single-payer healthcare system.

Health insurers don’t see a public plan “as the nose of the camel under the tent; they see it as the front half of the camel under the tent,” said Robert Laszewski, a former insurance company executive and industry consultant.

“They are interested in 45 million new customers,” he said, “but the first thing in everybody’s mind is preserving their right to do business in a way that can be profitable and meet shareholder needs.”

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lisa.girion@latimes.com

Letter to the Editor
The Washington Post
Wednesday, June 10, 2009

The June 6 news story “‘Single-Payer’ Supporters Challenge Democrats” put single- payer health care into the headlines where it belongs. But Sen. Max Baucus (D-Mont.) still won’t put it on the table. It’s viewed as not being politically feasible, even though it’s favored by huge numbers of doctors, nurses and members of the public. Who’s in charge here, lobbyists and special interests, or the public?

A private insurance company’s mission is to make a profit. Profit is best made by insuring the healthy, screening out the sick and denying health care to anyone unfortunate enough to get sick after enrolling. Managing all this wastes a significant portion of every dollar spent on health care.

It is time to demand meaningful health-care reform, and single-payer is the only proposal that can provide medical and dental care for everyone while saving hundreds of billions of dollars.

JERRY M. EARLL
Washington

The writer is a member of the advocacy group Physicians for a National Health Program.

By Steffie Woolhandler and David Himmelstein
The New York Times
Room for Debate
June 18, 2009

There are a variety of bad ways of paying doctors, but no particularly good ones. Fee-for-service health care rewards the overprovision of care; capitation (a set monthly fee per patient) rewards underprovision; and salaries reward just showing up. The minority of physicians (and hospital administrators) who are motivated mostly by money will find a way to game an incentive system rather than do the hard work of providing excellent care.

Even paying doctors based on quality measures (using data from medical records that the doctors themselves create) can be fudged. For example, if you pay doctors more for care of patients with diabetes with extra incentives for controlling blood sugar, some doctors will neglect to properly instruct patients to fast before their morning blood tests, falsely diagnosing them as ill. These false diabetics will appear to have superb outcomes since they weren’t sick to begin with.

At the same time, most of the myriad details of care and small kindnesses that make for good doctoring would inevitably go unrewarded, making their neglect essential to a doctor’s financial success.

The Medicare payment system illustrates the false hope of financial savings or improved quality through manipulating financial incentives. The system, which pays health care providers based on “diagnosis-related group,” altered hospitals’ incentives, rewarding short hospital stays instead of long ones. But hospitals quickly adapted, and while Medicare patients’ length of stay plummeted, costs continued to skyrocket.

Financial incentives are not necessary for cost control, and are expensive to administer. A single payer system like Canada’s — in which individuals choose their doctors and other health care providers, but the providers bill one agency for their services — limits entrepreneurial rewards and penalties, covers everyone, and saves much on bureaucracy and profits.

Many American doctors now support a single payer approach because it would improve health and remove the crushing paperwork burden that private insurers impose. Paperwork consumes 31 percent of U.S. health spending, nearly double that of Canada. Our nation wastes $400 billion annually on insurance overhead and useless bureaucracy, money that single-payer reform could shift to patient care. That’s enough to cover all of the uninsured, and to eliminate copayments and deductibles for everyone else. A single payer system would allow doctors to return to the patient-centered care that motivated us to go to medical school in the first place.

In contrast, the Senate Democrats’ proposal to require the purchase of coverage would leave private insurers in charge, and hence sharply increase costs while leaving millions uninsured, or covered by skimpy policies. In 2007, illness and medical bills contributed to 62 percent of personal bankruptcies; most of the medically bankrupt were middle-class families with private insurance. Copayments, deductibles, and loopholes that let insurers deny claims leave millions of Americans in financial ruin. The individual mandate now popular in Congress would merely force the uninsured to buy defective policies – boosting revenues for insurers but not protecting patients.

Unfortunately, adding a public plan option would not correct these flaws. The bureaucratic savings would be minuscule. Moreover, a public plan would be forced to either emulate the bad behavior of its private insurance competitors, or fail in the marketplace — swamped by private insurers that dumped sick, expensive patients onto the public. This kind of tinkering around the edges of our insurance company-dominated system won’t fix it.

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Steffie Woolhandler and David Himmelstein are associate professors of medicine at Harvard Medical School, primary care doctors in Cambridge, Mass., and co-founders of Physicians for a National Health Program.

http://roomfordebate.blogs.nytimes.com/2009/06/18/better-medical-care-for-less/

Letters
Wall Street Journal
June 17, 2009

You completely discount any administrative savings from a single-payer system.You also ignore the rising number of bankruptcies related to medical care. Every other country covers its citizens, the way it should be here.

Physicians for a National Health Program estimates savings of over $300 billion yearly in a single-payer plan. Why not debate its proposal on its merits and costs, not the derisive dismissal now taking place in Congress?

Thomas Clairmont, M.D.
Portsmouth, N.H.

By Lisa Girion
Los Angeles Times
June 7, 2009

One in an occasional series on healthcare reform.

Some may find it hard to believe that the U.S. health insurance industry supports making major changes to the nation’s healthcare system.

The industry, after all, scuttled President Clinton’s healthcare overhaul bid with ads featuring “Harry and Louise” fretting about change.

But this time, it turns out, the health insurance industry has good reason to support at least some change: It needs it.

Private health insurance faces a bleak future if the proposal they champion most vigorously — a requirement that everyone buy medical coverage — is not adopted.

The customer base for private insurance has slipped since 2000, when soaring premiums began driving people out. The recession has accelerated the problem. But even after the economy recovers, the downward spiral is expected to continue for years as baby boomers become eligible for Medicare — and stop buying private insurance.

Insurers do not embrace all of the healthcare restructuring proposals. But they are fighting hard for a purchase requirement, sweetened with taxpayer-funded subsidies for customers who can’t afford it, and enforced with fines.

Such a so-called individual mandate amounts to a huge booster shot for health insurers, which would serve up millions of new customers almost overnight.

“I think that’s why we’ve seen the industry basically trying to play the administration’s game,” said Jane DuBose, an analyst with industry tracking firm HealthLeaders-InterStudy. “They really could be licking their chops over the potential here.”

The industry says its interest in change flows not from narrow self-interest but from broader concerns.

“What’s driving this is we have 47 million people who don’t have access to the system, who get help through emergency rooms, and that results in higher costs and inefficient care,” said Robert Zirkelbach, a spokesman for industry trade group America’s Health Insurance Plans. “There’s both a social and economic reason to get everybody in the healthcare system.”

Jay Gellert, chief executive of Woodland Hills-based Health Net, said industry support for certain changes is driven by “a recognition that public frustration with many of the problems in the system [is] increasing pretty significantly. So I think there’s as much of a commitment to this because we’ve seen other industries where they haven’t dealt with issues early enough, like financial services and auto, and that’s not a happy place.”

Still, industry observers say, private insurers need the government’s help to transform some of the nation’s 45 million uninsured residents into paying customers.

Private insurers lost an estimated 9 million customers between 2000 and 2007. In many cases, people lost coverage because they or their employers could no longer afford it as premium increases outpaced wage growth and inflation.

Recession job losses are adding to the toll. Some economists estimate that every percentage-point increase in the jobless rate adds 1 million people to the ranks of the uninsured.

The industry’s real trouble begins in 2011, when 79 million baby boomers begin turning 65. Health insurers stand to lose a huge slice of their commercially insured enrollment (estimated at 162 million to 172 million people) over the next two decades to Medicare, the government-funded health insurance program for seniors.

“The rate of aging far and away exceeds the birth rate,” said Sheryl Skolnick, a CRT Capital Group healthcare investment analyst. “That’s got to be very scary. . . . This is the biggest fight for survival managed care has ever faced, at least since they went bankrupt in the late ’80s.”

With Democrats in power and public sentiment in favor of change, the industry can’t afford to flatly oppose it, said Julius Hobson, a Washington lobbyist for hospitals and insurers with the law firm Bryan Cave.

“This time, you get the sense something is going to happen,” he said. “So to stand up and just say no is probably not wise, because politically you could get run over.”

For insurers, getting “run over” would be the adoption of a so-called single-payer plan, in which the government pays all medical bills. Such a plan, though widely viewed as politically unfeasible this year, would wreak havoc on the private insurance market.

The best way for the industry to preserve the private insurance market — and derail the campaign for a single-payer system — may be to go along with more palatable proposals on the table now, said Jeffrey Miles, a healthcare analyst and president of the Miles Organization, a Los Angeles insurance brokerage firm.

“If healthcare goes down this year, you are going to end up with single-payer care much sooner than anyone expected,” he said.

But there is a limit to how much change the industry will abide. It draws the line at proposals, supported by President Obama and others, to offer consumers a public insurance alternative to private coverage.

The idea is that consumers could buy into a government-run health plan, such as or similar to Medicare or the federal employees insurance program.

Proponents say that if consumers are required to buy coverage, it is only fair to give them a public option.

In a recent letter to Senate Finance Committee Chairman Max Baucus (D-Mont.), for example, Jerry Flanagan of the Santa Monica-based advocacy group Consumer Watchdog wrote that adopting an individual mandate without a public alternative would amount to “a bailout for HMOs — whose greed, waste and indifference to our health have created the current mess.”

The industry fears that the government would force lower fees on hospitals and physicians, enabling a public health insurance plan to offer consumers a better bargain.

That, they say, would make it hard for private companies to compete for customers. Insurers also fear that a public option could easily be converted later into a single-payer healthcare system.

Health insurers don’t see a public plan “as the nose of the camel under the tent; they see it as the front half of the camel under the tent,” said Robert Laszewski, a former insurance company executive and industry consultant.

“They are interested in 45 million new customers,” he said, “but the first thing in everybody’s mind is preserving their right to do business in a way that can be profitable and meet shareholder needs.”

---

lisa.girion@latimes.com