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Study: Most Personal Bankruptcies Caused By Medical Bills, Illness

Study: Most Personal Bankruptcies Caused By Medical Bills, Illness

By DIANE LEVICK
The Hartford Courant
June 4, 2009

Medical bills or illness contributed to more than 62 percent of personal bankruptcies in 2007, a new study says, showing a nearly 50 percent increase from 2001 and not even reflecting the growing number of people who are losing their jobs and insurance in the recession.

The national study by researchers at Harvard University and Ohio University follows their five-state 2005 study that found medical problems contributed to at least 46.2 percent of bankruptcies in 2001. When identical definitions are applied, the share of bankruptcies involving medical issues has risen 49.6 percent since then.

“The U.S. health care financing system is broken, and not only for the poor and uninsured,” said the new report, which will appear in the August issue of the American Journal of Medicine and online today. “Middle class families frequently collapse under the strain of a health care system that treats physical wounds, but often inflicts fiscal ones.”

Medical bankruptcies will total an estimated 866,000 this year and involve 2.3 million Americans, based on the current bankruptcy filing rate, the report says.

Most medically bankrupt families were middle class. About 60 percent attended college and more than 66 percent owned a home.

Out-of-pocket medical expenses averaged $17,943 for medically bankrupt families — $26,971 for uninsured patients and $17,749 for those who had private insurance — at least initially. Some lose coverage when they became too sick to work, the report says.

The researchers voiced disdain for private insurance and support for a single-payer national health insurance system.

“Private health insurance is a defective product, akin to an umbrella that melts in the rain,” said lead author Dr. David Himmelstein, associate professor of medicine at Harvard. “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy.”

The study surveyed a random national sample of 2,314 bankruptcy filers in 2007, examined their court records, and interviewed 1,032 of them.

The research was done by researchers at Harvard Law School, Harvard Medical School and Ohio University, and supported by a grant from the Robert Wood Johnson Foundation.

http://www.courant.com/business/hc-bankruptcies-medical-bills-study-0604,0,6923001.story

How Much Do Life Insurers Profit from Tobacco?

By Kathleen Kingsbury
Time Magazine
Thursday, Jun. 04, 2009

In an era of corporate wellness programs and socially screened investment funds, some of the world’s largest life-insurance companies still own billions of dollars in tobacco-industry stocks, Harvard physicians assert in a new report.

These latest findings, published this week in a letter to the New England Journal of Medicine (NEJM), suggest that several life and disability insurers, both in the U.S. and abroad, have yet to acquiesce to calls from the American Medical Association and others to divest their holdings in companies such as Reynolds American, Lorillard and Philip Morris. Many insurers cited in the letter say the study wildly overstates their investments, but the authors disagree. “Insurers continue to put their profits above people’s health,” said Dr. J. Wesley Boyd, the lead author of the report. “It’s clear their top priority is making money, not safeguarding people’s well-being.” (See pictures of vintage cigarette ads touting their “healthiness.”)

It can be argued, of course, that life- and disability-insurance companies have everything to gain from customers who live long and healthy lives — and continue to pay their premiums. So it would not be in the insurers’ interest to support tobacco use. But the authors argue that in fact, insurers profit both ways. “Although investing in tobacco while selling life or health insurance may seem self-defeating,” the authors write, “insurance firms have figured out ways to profit from both. Insurers exclude smokers or, more commonly, charge them higher premiums. Insurers profit — and smokers lose — twice over.”

The new study is a follow-up to a similar one conducted in 1995. For the new report, Boyd and his Harvard colleagues used a proprietary database called Osiris, which updates its financial data daily, to cull information on the major shareholders of tobacco-related equities. The researchers cite New Jersey–based insurer Prudential Financial as a typical example of what they discovered. Prudential, which sells both life and long-term-disability insurance, owned about $264 million in the stocks of Reynolds American, which makes Camel cigarettes, and Philip Morris International, which manufactures the Marlboro brand.

A Prudential spokesperson acknowledged that this figure is “reasonably accurate.” But other insurers named in the study strongly dispute its claims. The NEJM letter states that, for instance, Canadian firm Sun Life Financial, which offers life, health and disability insurance, holds just over $1 billion in tobacco investments. In an e-mail to TIME, however, Sun Life spokesman Michel Leduc called this number “categorically incorrect.” Although he would not disclose specific holdings, Leduc said that of the company’s $100 billion investment portfolio, less than 0.005% was exposure to tobacco stocks. “Sun Life’s investments in renewable-energy projects are over $1.2 billion. We also invested about $1 billion in the last three years to help build or renovate about 20 hospitals and long-term-care facilities,” Leduc added. “Together, these two categories alone amount to nearly 500 times the size of tobacco stocks.”

Two other U.S.-based insurers, Northwestern Mutual and MassMutual, also question the study’s data. The NEJM letter places Milwaukee-based Northwestern’s tobacco-stock holdings at $235 million in Reynolds, Philip Morris and Lorillard, which produces Newport cigarettes. But spokeswoman Jean Towell says the insurer’s investments are actually one-tenth that figure, less than $24 million.

At MassMutual, the gap is even bigger. The study claims the firm’s tobacco holdings to be $585 million. That is “absolutely incorrect,” says Mark Cybulski, a MassMutual spokesman. “Massachusetts Mutual Life Insurance Company has virtually no equity holdings in companies whose offerings include tobacco-related products. As of December 31, 2008, MassMutual’s holdings of tobacco-related equities are approximately $548,000, representing less than 0.001% of consolidated statutory cash and invested assets of $86.2 billion.”

Such discrepancies are hard to explain. The Harvard researchers’ data, gathered from the Osiris database, was reviewed by both NEJM and TIME and found to be accurate as of March 26, 2009. Osiris, for its part, collects financial information from yet another financial database, FactSet Research Systems, which sources its records directly from public filings by the tobacco firms and the insurers to the Security and Exchange Commission. “I think the numbers in the Osiris database are aggregate numbers from every division of a company like Northwestern, whereas Northwestern might be looking at a subset of their total holdings,” Boyd says. Similar questions arose from his 1995 findings, which were ultimately substantiated.

All the insurers in question also sell mutual funds and other retirement products alongside their insurance businesses. That means at least some of their exposure to tobacco stocks stems from client assets in index funds, such as those pegged to the S&P 500, which, of course, includes firms like Philip Morris and Lorillard. Many of the insurers contacted by TIME declined to outline the specifics of their investment portfolios, but a Prudential spokesman, Darrell Oliver, noted that as a policy, Prudential does not invest in tobacco stocks for its own portfolios: “Some Prudential entities hold tobacco stocks. Those stocks are primarily part of index-related strategies managed for separate accounts or other portfolios managed for third parties.”

Another life insurer, TIAA-CREF, the largest U.S. education retirement fund, has long been criticized for its billion-dollar investments in tobacco stocks. It now allows clients to opt to avoid such equities through special socially conscious funds. This is an option nearly all insurers now include in their portfolios. “As a TIAA-CREF participant, you do not have to own shares in tobacco companies if you choose not to,” says spokesman Chad Peterson.

Purely from an investor’s standpoint, however, buying tobacco stocks is a solid long-term bet that historically pays regular dividends. “We ultimately have a fiduciary responsibility to our clients,” says Towell, who puts about 5% of Northwestern’s tobacco equities in index funds.

Yet that profit-making duty is what troubles the Harvard doctors. Boyd and his colleagues believe that their findings call into question whether insurers ought to have a voice in the ongoing debate in Washington over health-care reform. “These data raise a red flag about the prospects of opening up vast new markets for private insurers at public expense, as has happened in our state of Massachusetts, an oft-cited model for national health reform,” the researchers write in their NEJM letter.

The health-insurance industry, by contrast, has largely divested tobacco holdings since the 1990s and has offered to compromise with lawmakers in the health-care debate. In a letter to Congress on March 24, several health insurers indicated they would be willing to stop charging higher premiums to people with a history of medical problems if all Americans were required to purchase health plans. Perhaps the next step will be for life and disability insurers to look at their tobacco stocks and, as they say, kick the habit.

Life, health insurers invest big in tobacco

Agence France-Presse (AFP)
June 4, 2009

WASHINGTON (AFP) — Major US, Canadian and British life and health insurance companies have billions of dollars invested in tobacco companies, a study published Wednesday in the New England Journal of Medicine said.

Wesley Boyd, the study’s lead author, found that at least 4.4 billion dollars in insurance company funds are invested in companies whose affiliates produce cigarettes, cigars and chewing tobacco.

“Despite calls upon the insurance industry to get out of the tobacco business by physicians and others, insurers continue to put their profits above people’s health,” said Boyd, a faculty member of Harvard Medical School.

“It’s clear their top priority is making money, not safeguarding people’s well-being,” he wrote.

Tobacco is considered the leading cause of lung cancer and a major risk factor for heart attack, stroke, pulmonary disease and cancer.

According to the World Health Organization, it is a contributing factor in 5.4 million deaths a year.

Researchers first revealed that health and life insurance companies had major investments in tobacco companies in 1995 in an article in the British medical journal Lancet.

“Although investing in tobacco while selling life or health insurance may seem self-defeating, insurance firms have figured out ways to profit from both,” Boyd wrote.

“Insurers exclude smokers from coverage or, more commonly, charge them higher premiums. Insurers profit — and smokers lose — twice over.”

According to the study, US insurer Prudential Financial Inc. has 264.3 million dollars invested among three US tobacco companies, including Reynolds America and Philip Morris.

Canadian insurer Sun Life Financial Inc., which sells life, disability and health insurance, has a stock portfolio with more than one billion dollars in two tobacco companies, including 890 million dollars in Philip Morris.

Prudential Plc, which sells health and disability insurance, has 1.38 billion dollars in two tobacco companies, including British American Tobacco.

The study also details the substantial tobacco investments of the US firms Northwestern Mutual and Massachusetts Mutual Life, and the Scottish firm Standard Life Plc.

Charity care not answer, doctor says

Judy Dasovich says reformed system wouldn't be socialist

Mike Penprase
News-Leader (Springfield, MO)
May 31, 2009

Dr. Judy Dasovich got national attention with her arrest during a recent Senate hearing in Washington, but she was more intent at a Saturday rally on getting attention paid to others.

Go talk to the family who had a mountain of medical bills that wasn’t covered by their insurance, the volunteer physician at The Kitchen told reporters during a “High Noon for National Health Care” rally.

The rally might have been impromptu and involved fewer than two dozen people, but Dasovich said she was pleased.

“We started organizing this in the middle of the week,” she said.

The Physicians for a National Health Program that Dasovich belongs to and other groups have advocated adoption of a single-payer or Medicare-for-all system, but Dasovich said she tells the curious there’s a simpler explanation.

Americans should pay for health insurance like they pay for interstate highways, she said.

Money that now goes for insurance premiums and co-payments should go to a nationwide tax that would support a health insurance system, she contends.

Instead of health insurance premiums going to insurance company profits and outright waste, the money would go for treating people, she said.

Dasovich said critics who contend such a system would be socialized medicine are mistaken because reform she wants to see would change the way money is spent and wouldn’t affect how doctors treat patients or how patients select doctors.

Anyone who has fought an insurance company over a bill or who has been forced to move from one physician to another because an employer changed health care coverage would understand, she said.

Her stance — and her trip to Washington that resulted in a misdemeanor arrest — didn’t come after one case of seeing someone needing health care who didn’t have insurance, she said.

Along with several other health insurance reform advocates, Dasovich was held for several hours after they demonstrated during a session of the Senate Finance Committee headed by Sen. Max Baucus.

“Charity care is not a solution,” she said. “I’ve seen that firsthand. This is the next step that needs to be taken.”

People attending the rally said they appreciate Dasovich’s commitment to reform.

“She’s wonderful,” Vicki Chapman said while holding baby daughter Kylie. “Judy is Kylie’s hero.”

As for her Washington arrest, Dasovich said she’s ready to deal with that soon.

Dasovich said she’s scheduled to return to Washington to respond the misdemeanor charge next week and expects a hearing to be held in another month.

Study Links Medical Costs and Personal Bankruptcy

Harvard researchers say 62% of all personal bankruptcies in the U.S. in 2007 were caused by health problems--and 78% of those filers had insurance

By Catherine Arnst
BusinessWeek
June 4, 2009

Medical problems caused 62% of all personal bankruptcies filed in the U.S. in 2007, according to a study by Harvard researchers. And in a finding that surprised even the researchers, 78% of those filers had medical insurance at the start of their illness, including 60.3% who had private coverage, not Medicare or Medicaid.

Medically related bankruptcies have been rising steadily for decades. In 1981, only 8% of families filing for bankruptcy cited a serious medical problem as the reason, while a 2001 study of bankruptcies in five states by the same researchers found that illness or medical bills contributed to 50% of all filings. This newest, nationwide study, conducted before the start of the current recession by Drs. David Himmelstein and Steffie Woolhandler of Harvard Medical School, Elizabeth Warren of Harvard Law School, and Deborah Thorne, a sociology professor at Ohio University, found that the filers were for the most part solidly middle class before medical disaster hit. Two-thirds owned their home and three-fifths had gone to college.

But medically bankrupt families with private insurance reported average out-of pocket medical bills of $17,749, while the uninsured’s bills averaged $26,971. Of the families who started out with insurance but lost it during the course of their illness, medical bills averaged $22,658. “For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse,” said lead author Himmelstein. “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy.”

The study underscores President Barack Obama’s arguments in calling for health-care reform legislation this year. In a letter to Democratic Senate leaders this week, the President said: “Health-care reform is not a luxury. It’s a necessity we cannot defer. Soaring health-care costs make our current course unsustainable. It is unsustainable for our families, whose spiraling premiums and out-of-pocket expenses are pushing them into bankruptcy and forcing them to go without the checkups and prescriptions they need.”

Highest Costs for Diabetes, Neurological Illness

The study was funded by the Robert Wood Johnson Foundation and published online June 4 by the American Journal of Medicine. It will appear in the Journal’s August print edition. The researchers examined the court records of a random sample of 2,314 bankruptcy filings across the nation during early 2007, and also contacted those filers for written explanations. The researchers then followed up with extensive phone interviews of 1,032 of those filers.

They found that a number of medical factors contributed to a family’s financial disaster. More than 90% of medically related bankruptcies were caused by high medical bills directly or medical costs that were so high the family was forced to mortgage their home. The remaining 8% went bankrupt because a medical problem caused them to lose income. The authors were not able to track credit-card defaults caused by medical bills, but a 2007 study found that, of low- and middle-income households with credit-card debt, 29% used their plastic to pay off medical expenses.

Individuals with diabetes, one of the most common chronic diseases in the U.S., and those with neurological illnesses such as multiple sclerosis had the highest costs, an average of $26,971 and $34,167, respectively. Hospital bills were the largest single expense for half of all medically bankrupt families.

Dr. Woolhandler, an advocate of a single-payer health-care system, said lawmakers in Washington should reconsider health-care reform in light of the study. “Covering the uninsured isn’t enough,” she said. “Reform also needs to help families who already have insurance by upgrading their coverage and assuring that they never lose it.”

Arnst is a senior writer for BusinessWeek based in New York.

Democrats Start With Compromise on Health Care Reform

Michele Swenson
Huffington Post
Posted: June 3, 2009

Democrats at the fore of shaping health care reform policy concede the issue from the start by failing to put forth the best possible case for reform. Instead, they have begun the discussion with compromise.

Even as Democrats fail to frame the issue, the failed U.S. multipayer health insurance industry that siphons hundreds of billions of health care dollars to profit and administrative costs is at the center of health reform discussion, defining the terms of the debate.

Inclusion of the one reform model — single payer — that could save $400 billion annually, restore the U.S. primary care infrastructure and provide the health care that everyone needs, has been declared off the table.

When Gov. Howard Dean appeared in Denver last week to promote a parallel public health option, he elicited audible groans from his progressive audience when he rhetorically asked, wasn’t Medicare Part D a “good” reform for seniors? The 2003 reform was good for the corporate lobbies, but not so much for those trapped in the doughnut hole, or in plans with changing formularies, or forced to pay premium prices for medications because Medicare is prohibited from negotiating bulk drug rates. Nor is it a bargain for taxpayers, forced to subsidize for-profit insurances at higher cost.

Perhaps indicative of the insularity of Washington, there exists a real disconnect between many in the Capitol (whose health coverage is largely subsidized by taxpayers) and those in the hinterland. Medicare prescription drug reform should be reformed, and it doesn’t deserve to be a model for reform in 2009.

Senate Finance Committee chair Sen. Max Baucus declared Single-Payer health care “the only thing that’s not on the table because it cannot pass,” thus perpetuating self-fulfilling prophecy and the continued suppression of full debate around the single payer model of health care reform. The adjective “politically unfeasible” speaks more to the lack of political will of legislators to frame the debate, instead conceding the issue to the monied lobbies. Doctors and others who protested the exclusion of single payer model from the dialogue have been brought up on charges by Sen. Baucus.

Even a parallel public plan option is marginalized by some Democrats, including Sen. Baucus, as a “fallback option.” Baucus has indicated that a public option might merely serve as a bargaining chip to nudge the health insurance industry into “less disruptive” market-based reforms. Still on the table, he has said the public plan “might be a bit on the side of the table.”

Sen. Schumer proposes a watered down public plan, reducing it to just one more private insurance. Sen. Ted Kennedy has made the strongest statement for a public plan: “Americans want the choice of enrolling in a health insurance program backed by the government for the public good, not private profit.” If Democrats seriously want to end up with a true parallel public plan — vs. a publicly subsidized private plan — it is a simple rule of negotiation that you don’t start with your compromise position.

If ever there was a time for systemic reform, now is the time for our leaders to make the most compelling case for comprehensive health care access with huge dollar savings in the face of devastating economic crisis and its ripple effects — rampant job layoffs with lost health coverage, escalating mortgage foreclosures, and failing auto and other U.S. industries.

Republican think tanks and cultural warriors understand the principle of negotiation — over four decades they have advanced the most extreme right-wing positions in every area in order to push every political outcome far to the right.

Reminiscent of “Harry and Louise” fearmongering in the ’90s, the corporate lobby invokes the single payer bogeyman and short circuits debate with corrupted language around “choice,” “competition” and “rationing,” even though rationing is the norm within the current multi-payer health insurance bureacracy.

This year’s poster child for beleaguered health insurance CEOs is disgraced former Colombia/HCA hospital CEO and multimillionaire Rick Scott, who in the name of “Conservatives for Patient Rights” is promoting “free market” notions of “choice” and “competition.” Ironically, only the single payer health care model offers full choice of providers and competition based on quality of care.

U.S. primary care infrastructure has been decimated by the burden of insurance paperwork. Wrote a family physician of 47 years, “Health care insurers are more bureaucratic than any government agency. They often deny choice of doctor, and refuse to pay for care.” Furthermore, the bureaucracy is exponentially multiplied as each insurer has a different set of rules.

The shortage of primary care providers is pushing not only the uninsured, but also the insured, into ERs. Sen. Patrick Leahy (D-VT) recently noted that too many insured Vermonters go to the emergency room for everyday health care needs, due to a lack of primary care physicians to handle demand for services.

Massachusetts reform has also crashed upon the shoals of reality. Even as more are insured, growing numbers of insured report they cannot afford needed treatment. In Massachusetts also, the shortage of primary care physicians drives the insured into emergency rooms for non-emergency care. Authors of an annual Massachusetts health care survey cite a lack of cost controls that have significantly compromised health care. A Massachusetts commission is reportedly drafting a system of global payments to networks of doctors, hospitals and other providers — operating as a single payer model would. The goal is to incentivize keeping patients healthy, instead of paying by numbers of procedures, thus incentivizing unnecessary treatment.

Thus far Democratic leaders have conceded the framing of health care reform debate to Republican corporate interests seeking to maintain their profit advantage. For-profit primary health insurances are forbidden in most industrialized nations because they compromise health care access, primary care infrastructure and quality of care.

If Democrats want to end up with a true public plan option or any meaningful reform, they should lead with the best model, making the best case for reform. The question has to be asked: “What are we insuring — health care access or the bottom line?”

Illness, medical bills linked to nearly two-thirds of bankruptcies: Harvard study

Harvard study finds 50 percent increase from 2001

Most of those bankrupted by illness were middle class and had insurance

EMBARGOED until:
June 4, 2009, 12:01 a.m. EDT

Contacts:
David Himmelstein, M.D.
Steffie Woolhandler, M.D., M.P.H.
Elizabeth Warren, J.D.
Deborah Thorne, Ph.D.
Mark Almberg, (312) 782-6006, cell: (312) 622-0996, mark@pnhp.org

Medical problems contributed to nearly two-thirds (62.1 percent) of all bankruptcies in 2007, according to a study in the August issue of the American Journal of Medicine that will be published online Thursday. The data were collected prior to the current economic downturn and hence likely understate the current burden of financial suffering. Between 2001 and 2007, the proportion of all bankruptcies attributable to medical problems rose by 49.6 percent. The authors’ previous 2001 findings have been widely cited by policy leaders, including President Obama.

Surprisingly, most of those bankrupted by medical problems had health insurance. More than three-quarters (77.9 percent) were insured at the start of the bankrupting illness, including 60.3 percent who had private coverage. Most of the medically bankrupt were solidly middle class before financial disaster hit. Two-thirds were homeowners and three-fifths had gone to college. In many cases, high medical bills coincided with a loss of income as illness forced breadwinners to lose time from work. Often illness led to job loss, and with it the loss of health insurance.

Even apparently well-insured families often faced high out-of-pocket medical costs for co-payments, deductibles and uncovered services. Medically bankrupt families with private insurance reported medical bills that averaged $17,749 vs. $26,971 for the uninsured. High costs – averaging $22,568 – were incurred by those who initially had private coverage but lost it in the course of their illness.

Individuals with diabetes and those with neurological disorders such as multiple sclerosis had the highest costs, an average of $26,971 and $34,167 respectively. Hospital bills were the largest single expense for about half of all medically bankrupt families; prescription drugs were the largest expense for 18.6 percent.

The research, carried out jointly by researchers at Harvard Law School, Harvard Medical School and Ohio University, is the first nationwide study on medical causes of bankruptcy. The researchers surveyed a random sample of 2,314 bankruptcy filers during early 2007 and examined their bankruptcy court records. In addition, they conducted extensive telephone interviews with 1,032 of these bankruptcy filers.

Their 2001 study, which was published in 2005, surveyed debtors in only five states. In the current study, findings for those five states closely mirrored the national trends.

Subsequent to the 2001 study, Congress made it harder to file for bankruptcy, causing a sharp drop in filings. However, personal bankruptcy filings have soared as the economy has soured and are now back to the 2001 level of about 1.5 million annually.

Dr. David Himmelstein, the lead author of the study and an associate professor of medicine at Harvard, commented: “Our findings are frightening. Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy. For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when prolonged illness causes job loss – precisely when families need it most. Private health insurance is a defective product, akin to an umbrella that melts in the rain.”

“For many families, bankruptcy is a deeply shameful experience,” noted Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard and a study co-author. Professor Warren, a leading expert on personal bankruptcy, went on: “People arrive at the bankruptcy courts exhausted – financially, physically and emotionally. For most, bankruptcy is a last choice to deal with unmanageable circumstances.”

According to study co-author Dr. Steffie Woolhandler, an associate professor of medicine at Harvard and primary care physician in Cambridge, Mass.: “We need to rethink health reform. Covering the uninsured isn’t enough. Reform also needs to help families who already have insurance by upgrading their coverage and assuring that they never lose it. Only single-payer national health insurance can make universal, comprehensive coverage affordable by saving the hundreds of billions we now waste on insurance overhead and bureaucracy. Unfortunately, Washington politicians seem ready to cave in to insurance firms and keep them and their counterfeit coverage at the core of our system. Reforms that expand phony insurance – stripped-down plans riddled with co-payments, deductibles and exclusions – won’t stem the rising tide of medical bankruptcy.”

Dr. Deborah Thorne, associate professor of sociology at Ohio University and study co-author, stated: “American families are confronting a panoply of social forces that make it terribly difficult to maintain financial stability – job losses and wages that have not kept pace with the cost of living, exploitation from the various lending industries, and, probably most consequential and disgraceful, a health care system that is so dysfunctional that even the most mundane illness or injury can result in bankruptcy. Families who file medical bankruptcies are overwhelmingly hard-working, middle-class families who have played by the rules of our economic system, and they deserve nothing less than affordable health care.”

*****

A copy of the study is available at https://pnhp.org/new_bankruptcy_study or through the American Journal of Medicine, ajmmedia@elsevier.com, (212) 633-3944. The authors have also prepared a supplementary “Fact Sheet” and a “Q&A” on medical bankruptcy, both of which detail the study’s methods and findings. See same link above.

“Medical bankruptcy in the United States, 2007: Results of a national study,” David U. Himmelstein, M.D; Deborah Thorne, Ph.D.; Elizabeth Warren, J.D.; Steffie Woolhandler, M.D., M.P.H. American Journal of Medicine, June 4, 2009 (online).

Physicians for a National Health Program (www.pnhp.org), a membership organization of over 16,000 physicians, supports a single-payer national health insurance program. To contact a physician-spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.

Will WellPoint support any reform?

Health Insurers Balk at Some Changes

By Reed Abelson
The New York Times
June 2, 2009
The insurance industry says it wholeheartedly embraces a health care overhaul, promising Congress and the president that it will make it much easier for individuals to buy insurance on their own.
Insurers, for example, have agreed to sell policies even to people with pre-existing medical conditions, and to stop basing prices on how healthy or sick someone is.
But so far, the industry has made no such promises about another segment of the health insurance market, one responsible for many people being uninsured in the first place: the market for small employers. By some estimates, about half of the nation’s uninsured are people who are self-employed or work for a small business.
Employer-provided medical insurance remains the bedrock of the nation’s health care system. And yet, while most big employers still provide health benefits, soaring premiums have meant many small businesses can no longer afford to cover their workers. But the small-employer market remains one of the most profitable segments of health insurance, which may be why the industry is not eager to overhaul this lucrative part of the business.
… one of the biggest insurers, WellPoint, opposes changing the way coverage is sold to small employers.
“Those markets generally work today,” said Bradley M. Fluegel, the chief strategy officer for WellPoint, which is a big operator of Blue Cross plans and a major player in the small-business market.
Much of the Congressional talk about health care has not yet focused on what federal oversight, if any, might be necessary for the small-business market. Proposals before the Senate Finance Committee seem to envision the same kind of rules for both the individual and small-business markets.
Mr. Fluegel, the WellPoint executive, warned that if the federal government intervened in the small-business market so that insurance companies could no longer assign the highest premiums to employers with the highest medical costs, insurers would be forced to spread the costs over all their small-business customers.
http://www.nytimes.com/2009/06/03/business/smallbusiness/03insure.html?ref=business&pagewanted=all

WellPoint/Anthem/Blue Cross has become the largest provider of private health plans through its highly successful business model that has kept their premiums very competitive. How have they done that? In the individual market, they have limited their exposure to risk by medical underwriting – not selling policies to individuals who might need health care. In the small-business market, they also limit loss by increasing premiums to unaffordable levels for any business that has an unfavorable claims experience, causing those firms to drop coverage.
The insurance industry’s offer to agree to guaranteed issue in the individual market is dependent on a mandate to require every uninsured individual to purchase insurance. That would distribute risk broadly even if it doesn’t specify how such coverage could be paid for. Guaranteed issue has been opposed by WellPoint since it is not compatible with its business strategy of selling only to the healthy.
What about guaranteed issue in the small-business market? Since current proposals also would permit the continuation of the employer-sponsored market, insurers such as WellPoint would remain successful only if they could continue to use underwriting and premium flexibility in the small-business market. If they were required to issue coverage to every small business that applied, then they would have to have a mandate for all small businesses to purchase coverage. Though that would distribute risk more evenly in the small-business market, it still would defeat WellPoint’s successful strategy of keeping premiums competitive by selling their products to healthy individuals and only to small businesses with healthy employees.
WellPoint worked very hard to defeat reform efforts in California since it would have destroyed its dominance as the insurer of the healthy. There is every reason to believe that WellPoint likewise will oppose reform on a national level if Congress includes measures that would require private insurers to participate in a regulated social insurance program.
Yesterday President Obama told Democratic Senators that he would like Congress to take broad action before the August recess. Can you imagine Congress creating a program of private sector social insurance by then? Right now I’d rate WellPoint stock a very strong BUY!

Will WellPoint support any reform?

Health Insurers Balk at Some Changes

By Reed Abelson
The New York Times
June 2, 2009

The insurance industry says it wholeheartedly embraces a health care overhaul, promising Congress and the president that it will make it much easier for individuals to buy insurance on their own.

Insurers, for example, have agreed to sell policies even to people with pre-existing medical conditions, and to stop basing prices on how healthy or sick someone is.

But so far, the industry has made no such promises about another segment of the health insurance market, one responsible for many people being uninsured in the first place: the market for small employers. By some estimates, about half of the nation’s uninsured are people who are self-employed or work for a small business.

Employer-provided medical insurance remains the bedrock of the nation’s health care system. And yet, while most big employers still provide health benefits, soaring premiums have meant many small businesses can no longer afford to cover their workers. But the small-employer market remains one of the most profitable segments of health insurance, which may be why the industry is not eager to overhaul this lucrative part of the business.

… one of the biggest insurers, WellPoint, opposes changing the way coverage is sold to small employers.

“Those markets generally work today,” said Bradley M. Fluegel, the chief strategy officer for WellPoint, which is a big operator of Blue Cross plans and a major player in the small-business market.

Much of the Congressional talk about health care has not yet focused on what federal oversight, if any, might be necessary for the small-business market. Proposals before the Senate Finance Committee seem to envision the same kind of rules for both the individual and small-business markets.

Mr. Fluegel, the WellPoint executive, warned that if the federal government intervened in the small-business market so that insurance companies could no longer assign the highest premiums to employers with the highest medical costs, insurers would be forced to spread the costs over all their small-business customers.

http://www.nytimes.com/2009/06/03/business/smallbusiness/03insure.html?ref=business&pagewanted=all

Comment:

By Don McCanne, MD

WellPoint/Anthem/Blue Cross has become the largest provider of private health plans through its highly successful business model that has kept their premiums very competitive. How have they done that? In the individual market, they have limited their exposure to risk by medical underwriting – not selling policies to individuals who might need health care. In the small-business market, they also limit loss by increasing premiums to unaffordable levels for any business that has an unfavorable claims experience, causing those firms to drop coverage.

The insurance industry’s offer to agree to guaranteed issue in the individual market is dependent on a mandate to require every uninsured individual to purchase insurance. That would distribute risk broadly even if it doesn’t specify how such coverage could be paid for. Guaranteed issue has been opposed by WellPoint since it is not compatible with its business strategy of selling only to the healthy.

What about guaranteed issue in the small-business market? Since current proposals also would permit the continuation of the employer-sponsored market, insurers such as WellPoint would remain successful only if they could continue to use underwriting and premium flexibility in the small-business market. If they were required to issue coverage to every small business that applied, then they would have to have a mandate for all small businesses to purchase coverage. Though that would distribute risk more evenly in the small-business market, it still would defeat WellPoint’s successful strategy of keeping premiums competitive by selling their products to healthy individuals and only to small businesses with healthy employees.

WellPoint worked very hard to defeat reform efforts in California since it would have destroyed its dominance as the insurer of the healthy. There is every reason to believe that WellPoint likewise will oppose reform on a national level if Congress includes measures that would require private insurers to participate in a regulated social insurance program.

Yesterday President Obama told Democratic Senators that he would like Congress to take broad action before the August recess. Can you imagine Congress creating a program of private sector social insurance by then? Right now I’d rate WellPoint stock a very strong BUY!

The Massachusetts Model: Massive Spending On Nonbenefit Costs

by Merton Bernstein
Health Affairs Blog
June 2nd, 2009

Plummeting coverage and soaring costs characterize the nation’s health insurance crisis. With much coverage for the nonelderly based on employment, job loss contributes to this misfortune. In response, Congress seems headed to emulate the 2006 Massachusetts “reform.” That’s an unpromising prescription because it seriously increases costs — just the opposite of what President Barack Obama cogently and correctly asserts that we need.

The “reform” requires all adult residents to obtain medical care insurance through individual purchase if they are not covered by an employer-provided plan, Medicaid — called MassHealth and limited to those with very low incomes — or CommonwealthCare, a means-tested subsidized program for those with income above MassHealth’s limit but below 300% of the poverty line.

The Massachusetts Reform Model: Increasing Costs, Not Reducing Them

None of these programs produces efficiencies. The design does not reduce total health insurance outlays. Rather, CommonwealthCare adds massive costs to determine eligibility and then the amount of subsidy due, on top of the subsidies themselves. Those individualized determinations must be done hundreds of thousands of times in Massachusetts (many million times if applied nationally), not once but again and again because incomes don’t hold still.

Moreover, the “reform” does nothing to reduce the untamed costs of matching hundreds of thousands of billings with thousands of plans containing differing, confusing rate schedules. Hordes of provider personnel must generate the billings, and then hordes of insurer administrators process them and pay — or often reject — billed items and then frequently wrangle over them with providers and patients. These procedures consume hundreds of billions of nonbenefit dollars a year. CommonwealthCare imposes not only premiums, but also deductibles and copays, which further complicate and add costs to processing bills. Those features often prevent the “insured” from using their insurance.

Individuals and families with incomes above 300% of the poverty level get no subsidy, but they must participate in their employer’s insurance plan, if there is one. Many employees have declined employment-based insurance because they could not afford the premiums, deductibles, and copays required. Under the “reform,” with those costs rising, they must participate or incur a penalty — over $1,000 in 2009. They can obtain an exemption only by persuading the Commonwealth Connector, the entity administering the program, that they cannot afford the least costly available policy. Success means no penalty — and no insurance.

The Connector, which solicits policies from private insurers, rejected all of the initial proposals as unaffordable. The insurers responded with policies with lower premiums but higher deductibles and copays. The law permits annual deductibles up to $2,000 for an individual or $4,000 for a family. Little wonder that the Connector has so far exempted more than 62,000 employees.

So the “reform” increases nonbenefit costs by the tens of billions (that would be hundreds of billions if used nationally) to ascertain eligibility, more tens of billions to ascertain how much subsidy each applicant qualifies for, plus the tens of billions for those subsidies. Then add the estimated 4 percentage points of cost to operate the Connector.

Subsidies Through Tax Credits: Dishonest And Inefficient

Reportedly the Senate Finance Committee favors providing the subsidies through tax credits, a favorite legislative dodge to hide the costs. (Tax expenditures, the government revenue lost through targeted favorable tax treatment, are the functional equivalent of direct government expenditures for purposes of determining deficits but are much less efficient.) And they require people to apply. Many people simply do not know what’s available and how to navigate the bureaucratic maze. So the tax dodge incurs costs and discourages participation.

On top of these obvious inadequacies, the cost of medical care insurance continues to rise for employers and employees. State and local governments see increased costs for their own employees and for government programs. The Massachusetts individual mandate does not reduce the second major factor in our crisis – out-of-control costs. It does just the opposite.

President Obama sensibly proposes that we build our economy on rock, not sand. But few programs are so shifting as means-tested programs, as the history of Medicaid demonstrates. State governments repeatedly downsize such plans when the economy worsens, demand for benefits increases, and tax revenues to pay for them shrink.

If Massachusetts Can’t Afford Its Reforms, Who Can?

As candidate Obama pointed out repeatedly, individual mandates are costly and hard to enforce. The commonwealth is struggling to meet the costs of the program, which are running higher than originally projected. Massachusetts has a high-wage economy that generates above average-tax revenues. But that income is proving insufficient to pay for the “reform”; as a result, the state is poaching on the funding for other health programs. If wealthy Massachusetts is in a bind to pay for this brand of reform, what can we expect of less fortunate states?

Massachusetts provides subsidized coverage to individuals and families with incomes up to 300% of the federal poverty level. Only nine other states have equally generous limits. With state budgets now stressed by falling income and property tax revenues and increased outlays caused by growing unemployment, it is dubious that other states could afford to match Massachusetts’ level of subsidies even if they wanted to. Nevertheless, the House reportedly is fashioning a Massachusetts-like measure with subsidies available up to 400% of the federal poverty level.

The Massachusetts “reform” that congressional committee chairs seem about to advocate will neither provide universal coverage nor rein in costs. Nor will the toothless “pledge” by the “health care industry” to save two trillion dollars “voluntarily.” Announced by President Obama on a Monday, the pledge had been disowned by hospital, insurer, pharmacy, and doctor participants by Thursday.

Until we confront the billions wasted by matching hundreds of thousands of bills with thousands of differing plans, we will not achieve the savings needed to pay for covering everyone comprehensively. Our present course seems headed for reform in name only.

A Better Way: Medicare For All

There is a better, easier way: simply expand Medicare to non-aged and non-disabled Americans. Medicare has been up and running for over four decades, has a better cost-restraint record than both private insurance and public means-tested programs, and actually put reasonable limits on provider payments. It would cover everyone without the huge costs of means-testing. Medicare uses private insurers for administration and should continue to employ thousands of their experienced employees. Eliminating the nonbenefit costs of private insurance — commissions, Wall-Street-size executive compensation, and advertising — would save tens of billions of dollars. Simplifying billing — by using one payment schedule instead of thousands — would save hundreds of billions.

Medicare for All offers the most practical way to achieve universal coverage and reduce per capita costs. Now that’s reform we can believe in.

Baucus soothes single-payer backers

By Carrie Budoff Brown
Politico
June 3, 2009 02:36 PM EST

Senate Finance Committee Chairman Max Baucus (D-Mont.) told leading advocates of a government-financed health care system that he made a mistake by not giving their proposals more consideration in the reform debate, according to participants in a meeting Wednesday.

He also vowed to use the “power of his office” to make sure charges are dropped against about a dozen people who protested after advocates of a government-backed plan were excluded from recent Finance Committee hearings, the participants said.

“That was concrete movement. Unfortunately, there was not very much in the way of other concrete movement,” said Dr. David Himmelstein, co-founder of Physicians for a National Health Program and associate professor medicine at Harvard Medical School.

“While he did say it was probably a mistake not to have given a full hearing to single payer in the past, he announced no intention of opening up the hearings on single payer in the future and we will therefore need to continue to press him,” Himmelstein said.

Baucus has faced sustained pressure from advocates of so-called single-payer health care, a system in which government is the sole provider of health insurance. And concession that it was a mistake not to include single payers is notable shift for the lead Senate negotiator on health care.

Baucus spokeswoman Erin Shields did not address the participants’ take on the meeting in a statement.

“Senator Baucus met privately with single-payer advocates today and discussed their shared goals of providing quality, affordable health care to every American,” the statement read. “Senator Baucus asked them to work together with him to pursue that goal this year.”

Baucus has often said every proposal is on the table — except single payer health care because there is no way Congress would go for it. President Barack Obama, who said in 2003 that a single payer system is “what I would like to see,” has also said the option isn’t politically feasible.

Those involved in the health care negotiations say single payers have been elevated precisely because Baucus excluded them. Baucus has been able keep almost every interest group involved in the process from speaking out against the ideas under consideration. But because they are not involved, single payers have been one of the only vocal constituencies hammering away at Baucus.

The virtual shut-out has emboldened the movement.

After being left off the invite list for the White House health care forum in March, single payer advocates alerted the media and won a seat at the table. They disrupted each of the Finance Committee’s three roundtables on health care in April and May.
And last week in Montana, single-payer advocates flooded town halls arranged by his Senate office, earning significant local media attention. Baucus did not attend the meetings, and sent staff and a videotaped message instead.

“Senator Baucus was working and had commitments that prevented him from attending the town halls,” Baucus spokesman Tyler Matsdorf said.

Wednesday’s meeting was arranged by Sen. Bernie Sanders (I-Vt.), who supports single-payer health care, and included representatives from the California Nurses Association and Physicians for a National Health Program.

(c) 2009 Capitol News Company, LLC

Health, life insurers hold billions in tobacco stocks: NEJM article

Harvard researchers say insurers put profits over health

Embargoed until:
June 3, 2009
5 p.m. EDT

Contacts:
J. Wesley Boyd, M.D., Ph.D.
David Himmelstein, M.D.
Steffie Woolhandler, M.D., M.P.H.
Mark Almberg, (312) 782-6006, cell: (312) 622-0996, mark@pnhp.org

More than a decade after Harvard researchers first revealed that life and health insurance companies were major investors in tobacco stocks – prompting calls upon them to divest – the insurance industry has yet to kick the habit, they say.

A new article on insurance company holdings, published in today’s New England Journal of Medicine, shows that U.S., Canadian and U.K.-based insurance firms hold at least $4.4 billion of investments in companies whose subsidiaries manufacture cigarettes, cigars, chewing tobacco and related products.

Tobacco products currently contribute to the deaths of 5.4 million people worldwide annually, according to the World Health Organization. Tobacco use is a major risk factor for stroke, heart attack, lung disease and cancer.

“Despite calls upon the insurance industry to get out of the tobacco business by physicians and others, insurers continue to put their profits above people’s health,” said Dr. J. Wesley Boyd, the lead author of the article. “It’s clear their top priority is making money, not safeguarding people’s well-being.”

To illustrate their point, Boyd and his colleagues point to Newark, N.J.-based Prudential Financial Inc., which sells life insurance and long-term disability coverage. With total tobacco holdings of $264.3 million, Prudential Financial is a major investor in three tobacco firms, including Reynolds American, whose subsidiary R.J. Reynolds manufactures Camel and Pall Mall cigarettes, and Philip Morris, maker of the popular Marlboro brand.

Sun Life Financial Inc., based in Toronto, sells life, health, disability and long-term care insurance. It also owns slightly over $1 billion in stock in two tobacco companies, including $890 million in Philip Morris.

London-based Prudential Plc, which offers health, disability, and long-term care insurance, has holdings of $1.38 billion in two tobacco companies, including British American Tobacco, which markets Kent and Lucky Strike cigarettes.

The researchers also itemize the substantial tobacco holdings of Northwestern Mutual of Milwaukee and Massachusetts Mutual Life of Springfield, Mass., along with those of Standard Life Plc, a health and life insurer based in Edinburgh, Scotland. (See table; all data current as of March 26.)

Boyd and his co-authors, Drs. David Himmelstein and Steffie Woolhandler at the Cambridge Health Alliance and Harvard Medical School, culled their data from Osiris, a proprietary database of industrial, banking and insurance companies. Osiris draws upon Securities and Exchange Commission filings and news reports from providers like Dow Jones and Reuters.

“Although investing in tobacco while selling life or health insurance may seem self-defeating,” the authors write, “insurance firms have figured out ways to profit from both. Insurers exclude smokers from coverage or, more commonly, charge them higher premiums. Insurers profit – and smokers lose – twice over.”

The same researchers, all of whom are affiliated with Physicians for a National Health Program, first published data about the “tobacco-insurance company connection” in 1995 in the medical journal Lancet. They say that because private, for-profit insurers have repeatedly put their own financial gain over the public’s health, readers in the United States, Canada and the United Kingdom should be wary about insurance firms’ participation in care.

They add, “These data raise a red flag about the prospects of opening up vast new markets for private insurers at public expense, as has happened in our state of Massachusetts, whose recent health care reform is often cited as a model for national reform.”

Insurance Company

Reynolds American

Imperial Tobacco

British American Tobacco

Lorillard

Philip Morris

Total
In millions of dollars

Prudential PLC

 

513.2

871.4

 

 

1,384.6

Prudential Financial

69.4

 

 

8.8

186.1

264.3

Mass Mutual

17.3

 

 

155.4

412.6

585.3

New York Life

13.0

 

 

0

 

13.0

Northwestern Mutual

22.8

 

 

10.8

202.2

235.8

Standard Life

 

307.0

641.2

 

 

948.2

Sun Life

 

 

 

125.7

889.9

1,015.6

Total

122.5

820.2

1,512.6

300.7

1,690.8

4,446.8

Download table: https://pnhp.org/tobacco/Insurance-Company-Tobacco-Investments.doc

********

Copies of the study are available at https://pnhp.org/tobacco/tobacco_article.pdf

“Insurance industry investments in tobacco,” J. Wesley Boyd, M.D., Ph.D.; David U. Himmelstein, M.D; Steffie Woolhandler, M.D., M.P.H. New England Journal of Medicine, June 4, 2009.

Physicians for a National Health Program (www.pnhp.org), a membership organization of over 16,000 physicians, supports a single-payer national health insurance program. To contact a physician-spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.