PNHP

Medicare ‘Rip-Off’ Hits Elderly as Obama Maps Changes

Medicare ‘Rip-Off’ Hits Elderly as Obama Maps Changes

By Avram Goldstein
Bloomberg News
February 4, 2009

Just as President Barack Obama prepares to overhaul the U.S. medical system, providers of U.S.- backed health plans for the elderly are raising prices.

Humana Inc., Health Net Inc. and other providers increased 2009 premiums by 13 percent on average, or more than five times as much as last year, for people who use the Advantage version of Medicare, according to Avalere Health, a consulting company in Washington. The elderly say higher costs for the Advantage plans, which add features such as drug coverage to Medicare, are reducing money for groceries and utilities.

Obama has vowed to control spending in the $2.6 trillion U.S. health-care system while extending coverage to more people, and, during his campaign, criticized the costs of Advantage plans to taxpayers. The premium increases, charged directly to the elderly rather than the government, are further evidence that insurers’ need for profits is ballooning patients’ expenses and reducing the efficiency of care, said Arnold Relman, former editor of the New England Journal of Medicine.

“Medicare Advantage is a rip-off,” said Relman, 85, who is also a professor emeritus at Harvard Medical School in Boston, in a telephone interview on Jan. 23. “I cannot see that they do anything better than public insurance does, and they do a lot of things worse.”

Medicare will spend 14 percent more this year, on average, for Advantage enrollees than for beneficiaries with basic coverage, according to a staff report in December by the Medicare Payment Advisory Commission, an independent agency that advises Congress.

Obama’s Stance

Obama considers the government payments “excessive,” said Jen Psaki, a spokeswoman now on the White House staff, in a Jan. 5 e-mail. During his campaign Obama promised to cut subsidies to Advantage by as much as $15 billion a year, or about 15 percent from last year’s total of $100 billion.

In addition, insurers collected about $5 billion in Advantage premiums from consumers last year, said Thomas Scully, the former top administrator of the U.S. Centers for Medicare & Medicaid Services, with headquarters in Baltimore.

Scully, who helped design the Advantage program, said that he doesn’t consider the premiums excessive and that Advantage is less expensive than alternatives. Scully is a lawyer for the New York private equity firm Welsh, Carson, Anderson & Stowe, and for the Atlanta law firm Alston & Bird.

“I don’t think you’re going to see a mass exodus from Medicare Advantage,” Scully said in a Jan. 9 interview.

Bundling Options

Medicare is the U.S. health plan for the disabled and those over 65. Basic Medicare, with a monthly fee of $96, lets patients use any U.S. doctor or hospital. Beneficiaries can also buy separate private policies to cover prescription drugs and expenses exempted from standard benefits. Advantage, which covers 10.5 million people, bundles those options.

“There are almost 11 million people who have chosen to participate in Medicare Advantage because they feel they’re good plans,” said Richard Barasch, chief executive officer of Universal American Corp., an insurer in Rye Brook, New York, in a telephone interview. “Medicare Advantage is a great value to them.”

The Advantage premiums paid by Blair Law and his wife, Mary, soared to $50 a month this year, up from zero under the policy’s initial terms.

“These guys have you by the short hairs,” said Blair Law, 77, a retired construction-company executive now living in Fort Myers, Florida, in a telephone interview. “They know you’re disinclined to shift to another plan, so they keep ratcheting the cost up.”

Rebates End

In 2007, the Laws joined an Advantage plan provided by Universal Health Care Corp. of St. Petersburg, Florida. Initially, the plan charged no monthly premium, and the insurer rebated the couple’s basic-Medicare premiums, according to the Laws. The rebate ended last year, and this year the company began charging the couple an additional $50 a month.

Pinched for funds, Law said he doesn’t eat as much beef as before, uses less air conditioning, and will cut back travels to see relatives across the country.

“That’s a real hardship,” Law said.

Universal Health Care Chief Executive Officer Akshay Desai didn’t respond to a request for comment. Many Advantage policies had no monthly payments first, according to analysts.

The absence of premiums was a “come-on” to spur enrollment for many insurers and was “unsustainable,” said Uwe Reinhardt, a professor of political economy at Princeton University in New Jersey. Advantage plans serve about 23 percent of Medicare enrollees, up from about 12 percent in 2003, according to Medicare officials.

Insurers’ ‘Dream’

“The insurers’ dream was that maybe 80 percent of the elderly would enroll in Medicare Advantage and then traditional Medicare would just die, and these private health plans could do what they want,” Reinhardt, whose specialty is health-care issues, said in a telephone interview on Jan. 23.

Investors, favorable toward price increases yet wary of the threat of cuts in U.S. subsidies, aren’t sure if there is money to be made in stocks of Advantage providers, said Carl McDonald, an analyst with Oppenheimer & Co. in New York. Most of the companies, in any case, also have other profit centers, and their fate isn’t tied wholly to Advantage.

On average, the almost 200 companies selling Advantage policies raised prices 13 percent this year for enrollees, to $41.40 a month, according to Avalere Health. In 2008, premiums rose 2.5 percent, Avalere found.

Doubling Premiums

Humana, based in Louisville, Kentucky, more than doubled average premiums for its Advantage clients, to $30 from $14, the largest percentage jump identified in the Avalere analysis conducted for Bloomberg News. Universal American had the second- largest rise among publicly traded companies, moving up average monthly premiums 44 percent to $39. Health Net, of Woodland Hills, California, increased the monthly fee 24 percent to $51.

In calculating the averages, Avalere compared premiums for plans offered in both 2008 and 2009 and weighted each company’s average increase by membership.

Health Net, Humana and other insurers also are requiring elderly plan members to pay more for ambulance rides and hospital stays or raise the amount people must spend before 100 percent coverage kicks in, according to Medicare data.

Humana, with 1.44 million Advantage members on Dec. 31, said yesterday it expects to add no more than 75,000 people to the plans this year, after gaining 293,000 last year. Health Net said yesterday its Advantage enrollment may fall as much as 2 percent this year, from 295,000 at the end of last year.

UnitedHealth

Not all companies are raising premiums. UnitedHealth Group Inc. dropped what it said were unprofitable Advantage plans for the chronically ill and increased out-of-pocket costs in other Advantage plans. The company, based in Minnetonka, Minnesota, is the largest Advantage provider, with 1.6 million members.

UnitedHealth is counting on competitors’ premium increases to drive the elderly to its policies, said Simon Stevens, former head of the insurer’s Medicare plans, in an e-mail. The company added at least 97,000 customers for policies that began on Jan. 1, according to U.S. government figures.

Meanwhile, Martha Baker, 74, said her Health Net plan increased her share of costs for ambulance care and other services this year. Her premium also went up, to $38 a month from zero.

“What’s disheartening is, I’m a person who has never taken from the system,” said Baker, who retired after directing the women’s ministry at a Tucson, Arizona, church. “I’ve always paid into it, and now it seems to be failing me.”

To contact the reporter on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net.

New Report Highlights Health Care System’s Financial Squeeze on Cancer Patients

Experiences of Cancer Patients Illustrate Potential Problems With Private Health Coverage For People With Life-Threatening Illnesses

Kaiser Family Foundation
News Release
February 5, 2009

WASHINGTON, DC — Cancer patients can face severe challenges in paying for life-saving care — running up large debts, filing for personal bankruptcy and even delaying or forgoing potentially life-saving treatment — even when they have private health insurance, according to a new report by the Kaiser Family Foundation and the American Cancer Society.

The report profiles 20 patients and illustrates the potential difficulties people diagnosed with cancer or other serious illnesses have in maintaining affordable health insurance and paying for their health care. The patients in the report and accompanying video were selected to illustrate typical cases from the many people who call the American Cancer Society’s Health Insurance Assistance Service, which helps families affected by cancer who encounter problems navigating the health care system.

For these patients, having private health insurance at the time of their cancer diagnosis did not protect them from high out-of-pocket costs — leaving them with large debts to cover their treatment costs and forcing some to skip or delay necessary treatments.

“The stories of people with cancer in this study and video documentary show what our earlier survey work found: that the insurance system often fails people when they need it most, when they get really sick,” said Kaiser Family Foundation President and CEO Drew Altman, Ph.D.

“Cancer patients too often find out that their insurance doesn’t protect them when they need care the most,” said John R. Seffrin, Ph.D., national chief executive officer of the American Cancer Society. “High out-of-pocket costs coupled with the high cost of insurance premiums can force cancer patients to incur huge debt, and to delay or forgo life-saving treatments.”

The report, which was released today at a briefing in Washington, D.C., highlights five key gaps in the health care system that can leave people with cancer and other life-threatening diseases in financial jeopardy as a result of their diagnosis:

* High cost-sharing, caps on benefits leave cancer patients vulnerable. The various types of cost-sharing and limits on benefits found in some insurance plans may quickly lead to high out-of-pocket costs once cancer treatment begins. For instance, Jamie Drzweicki of Miami ran up more than $75,000 in debts after her breast-cancer treatment costs exceeded her policy’s annual limit.

* Those with employer-sponsored coverage may not be protected from catastrophically high health care costs if they become too sick to work. Most people get their health coverage through their employers, which often pay most of the premiums. Under existing law, people who lose their jobs because they are unable to work generally must decide within 60 days whether to temporarily retain their employer-sponsored coverage through COBRA by paying the full premium costs. Phyllis Miller of Johnstown, Pa., who has been unable to work since having emergency surgery for late-stage colon cancer, missed the 60-day deadline and has struggled since then to afford the premiums and cost-sharing of her less comprehensive individual policy.

* Cancer patients and survivors are often unable to find adequate and affordable coverage in the individual market. Cancer survivors who have been in remission for years and have a good long-term prognosis may still have trouble finding coverage or pay higher premiums in the individual market. For instance, 10 years after Thomas Olszewski of Graham, Texas was treated for early prostate cancer, he still is unable to find affordable health coverage and pays one-fourth of his family’s income in premiums for a high-deductible plan.

* High-risk insurance pools are not available to all cancer patients, and some find the premiums difficult to afford. High-risk pools, which are designed to help cancer patients and others who are uninsurable, are not available in all states, and when they are available, they are often much more expensive than most other plans in the individual market. For example, high costs have prevented breast cancer survivor Mardel Budreau of West Lafayette, Ind. from enrolling in a high-risk pool after learning her individual insurance policy only paid $250 toward her radiation treatment.

* Waiting periods, strict restrictions on eligibility, or delayed application for public programs can leave people who are too ill to work without an affordable insurance option. Cancer patients too sick to work may qualify for Social Security Disability Insurance income and, after two years of receiving this income, may qualify for Medicare coverage. During the waiting period, patients typically have reduced incomes and may not be able to afford private insurance coverage. This happened to David Young, a truck driver from Godwin, N.C., who has not worked since being diagnosed with late-stage kidney cancer. Young became eligible for Social Security disability benefits in October 2007 but does not yet qualify for Medicare benefits.

The report, Spending to Survive: Cancer Patients Confront Holes in the Health Insurance System, was jointly authored by researchers at the Kaiser Family Foundation and the American Cancer Society. The Kaiser Family Foundation also released a separate video documentary profiling three of patients featured in the report.

The report and video are available online at www.kff.org and www.cancer.org. In addition, a webcast of today’s briefing will be available online after 5 p.m. ET today.

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

The American Cancer Society is dedicated to eliminating cancer as a major health problem by saving lives, diminishing suffering and preventing cancer through research, education, advocacy and service. Founded in 1913 and with national headquarters in Atlanta, Georgia, the Society has 13 regional Divisions and local offices in 3,400 communities, involving millions of volunteers across America. For more information anytime, call toll free 1-800-ACS-2345 or visit www.cancer.org.

Baucus and Reinhardt on single payer

Sen. Baucus Discusses Prospects for Health Care Overhaul This Year

Kaiser Daily Health Policy Report
February 4, 2009
(Sen. Max) Baucus also said that he does not believe a single-payer health care system is the right model for the U.S. at this time because the shift would be too big of a change and would place too much of the private sector under control of the government. He said, “We’re constituted differently than European countries” with single-payer systems, adding, “There’s more of an entrepreneurial sense” in the U.S. “So we’ve got to come up with a uniquely American result. And a uniquely American result will be a combination of public and private insurance,” Baucus said (CQ HealthBeat, 2/3).
http://www.kaisernetwork.org/Daily_reports/print_report.cfm?DR_ID=56795&dr_cat=3

And…

The Biggest Idea in Health Care

By Andy Louis-Charles
The Motley Fool
February 3, 2009
Andy Louis-Charles: Your thoughts on a single-payer system? Should health care be treated any different than police, fire, or postal services?
Uwe E. Reinhardt: Many countries with single-payer systems (Canada, Taiwan, etc.) ask that question. Those countries do view health care like fire protection and elementary and secondary education, and they structure their health system accordingly. We are rather an exception, viewing health care as basically a private-consumption good, but we don’t quite believe that either — hence the coexistence of unbridled kindness and unbridled callousness in our health system. We do not have our head straight on this issue. Other countries have.
http://www.fool.com/investing/general/2009/02/03/the-biggest-idea-in-health-care.aspx

So with Tom Daschle stepping out of the picture, Sen. Max Baucus is maneuvering to take the lead on reform by advocating for a “uniquely American result” with “more of an entrepreneurial sense” since “we’re constituted differently than European countries.”
Uwe Reinhardt quite correctly characterizes the U.S. exceptionalism as “the coexistence of unbridled kindness and unbridled callousness in our health system.” It really is time that we learn from other countries so that we can get “our head straight on this issue.”

Baucus and Reinhardt on single payer

Sen. Baucus Discusses Prospects for Health Care Overhaul This Year

Kaiser Daily Health Policy Report
February 4, 2009

(Sen. Max) Baucus also said that he does not believe a single-payer health care system is the right model for the U.S. at this time because the shift would be too big of a change and would place too much of the private sector under control of the government. He said, “We’re constituted differently than European countries” with single-payer systems, adding, “There’s more of an entrepreneurial sense” in the U.S. “So we’ve got to come up with a uniquely American result. And a uniquely American result will be a combination of public and private insurance,” Baucus said (CQ HealthBeat, 2/3).

http://www.kaisernetwork.org/Daily_reports/print_report.cfm?DR_ID=56795&dr_cat=3

And…

The Biggest Idea in Health Care

By Andy Louis-Charles
The Motley Fool
February 3, 2009

Andy Louis-Charles: Your thoughts on a single-payer system? Should health care be treated any different than police, fire, or postal services?

Uwe E. Reinhardt: Many countries with single-payer systems (Canada, Taiwan, etc.) ask that question. Those countries do view health care like fire protection and elementary and secondary education, and they structure their health system accordingly. We are rather an exception, viewing health care as basically a private-consumption good, but we don’t quite believe that either — hence the coexistence of unbridled kindness and unbridled callousness in our health system. We do not have our head straight on this issue. Other countries have.

http://www.fool.com/investing/general/2009/02/03/the-biggest-idea-in-health-care.aspx

Comment:

By Don McCanne, MD

So with Tom Daschle stepping out of the picture, Sen. Max Baucus is maneuvering to take the lead on reform by advocating for a “uniquely American result” with “more of an entrepreneurial sense” since “we’re constituted differently than European countries.”

Uwe Reinhardt quite correctly characterizes the U.S. exceptionalism as “the coexistence of unbridled kindness and unbridled callousness in our health system.” It really is time that we learn from other countries so that we can get “our head straight on this issue.”

Now Is The Time For Universal Health Care

By Kamyar Kalantar-Zadeh, MD, PhD, MPH
Renal and Urology News
Commentary
February 03 2009

The Medicare End-Stage Renal Disease (ESRD) Program is one of the most significant developments in the history of U.S. health care and an unqualified success. To be eligible for coverage, patients diagnosed with ESRD need to be insured under Social Security or a dependent family member of a Social Security beneficiary. ESRD patients not yet eligible for Social Security benefits usually are covered by Medicaid, which offers outpatient dialysis coverage comparable to that of Medicare. Even illegal immigrants with ESRD can enjoy almost full benefits in such states as California, where the MediCal program provides generous dialysis treatment coverage. Thus, virtually all of the 400,000 ESRD patients in the United States have access to maintenance dialysis treatment and inpatient services regardless of age or other comorbid condition.

It is unfortunate that the 35-year-old Medicare ESRD program remains our nation’s only universal health coverage not dependent on age, albeit limited to ESRD. The program has worked well, and its success should provide the impetus for replacing our present fractured health-care financing system with one that provides universal coverage for all U.S. residents regardless of age.

Typically, most universal health-care costs are met via a single-payer health-care system or national health insurance program such as the National Health Services program in the United Kingdom or the Gesundheitskasse AOK in Germany. The United States–where more than 45 million people have no health insurance and millions more are underinsured–is the only industrialized nation not to have universal health care. Even some developing countries have universal health care. Private health insurance premiums have become extremely expensive. In this era of financial turmoil and other historical challenges confronting our nation, it would be in our best interest to support a system of health care for all, be it a single-payer model or a subsidized alternative. The Medicare ESRD program has been working. The time has come to expand the universal coverage it provides to the rest of the uninsured population.

Kamyar Kalantar-Zadeh, MD, MPH, PhD, is Medical Director, Nephrology, Renal & Urology News, and associate professor of medicine and pediatrics, UCLA Division of Nephrology and Hypertension.

Jacob Hacker is a nice guy, but…

Getting Health Reform Right: A Q&A With Jacob Hacker

RJ Eskow
The Huffington Post
February 2, 2009
Professor Hacker’s proposal, Health Care for America, is based on two simple principles: First, that both the employer-based private system and publicly-funded Medicare are essentially working for their members. Second, that every uninsured American (or legal resident) should be able to buy into a Medicare-like public program at affordable rates, with need-based subsidies.
The plan has been well-received across the center/left spectrum, even receiving a friendly review from Don McCanne, MD, a Senior Fellow with single-payer advocacy group Physicians for a National Health Program (PHNP).
http://www.huffingtonpost.com/rj-eskow/getting-health-reform-rig_b_163270.html

And…

Getting Health Reform Right: According to Jacob Hacker

By DrSteveB
Daily Kos
February 3, 2009
There is a must read interview with Jacob Hacker, the re-inventor of the individual mandate bulding blocks plan for liberals (it originally came from center-right think tanks) which is the same core as Obama/Baucus/Daschle et al, summarized on HuffPo and in full at Richard Eskow’s the Sentinel Effect blog.
As Don McCanne and other Single Payers advocates have been pointing out:
Leaving the private insurers in place perpetuates the administrative waste of those insurers and the administrative burden on the providers. Intense regulatory oversight of the private insurers would be even more imperative since they would increase their efforts to game the system through surreptitious favorable selection and other clandestine market expediencies. The public program would likely concentrate lower-income individuals initially, risking a political transformation into a welfare program. Also his plan includes features of both an employer mandate and an individual mandate, each with its own policy problems, though he does ameliorate the impact to a certain extent with some of the other features of his plan. From a single payer perspective, it would be far better to totally cut the link between financing and coverage. A system of equitable tax funding of the entire risk pool is more efficient than a system of premiums linked to the individual.
nativist posts:
I read that post, and like this author, I think Mr. Hacker is incorrect as to the effectiveness of private healthcare.
I’m surprised Don Mcanne is supposed to be onboard with the features of Hacker’s proposals. Speaking broadly, yes it’s good to have Medicare or a close clone compete against trad insurers. Perhaps half a loaf is better than none in his view.
DrSteveB posts:
Don was being polite in Jan 2007… Don is always polite with our erstwhile incrementalist reformist friends
http://www.dailykos.com/story/2009/2/3/72018/39311/226/692345

My response, as follows, was posted on both blogs (edited to under 250 words for Huffington Post):
Jacob Hacker deserves our respect, even if wrong
DrSteveB is right. I was being polite. Jacob Hacker is a highly respected political scientist who supports social justice. I have greatly admired his work.
In his proposal he was looking for a political solution to satisfy those with good employer-sponsored plans who are uncomfortable with trading them in for a public plan that has not yet been precisely defined (since any proposed public plan must clear the hurdles in Congress). In so doing he compromised on policy, trading away many of the advantages of the single payer model.
Since I wrote the comments above, the public option described by Hacker has come under intensive attack by Enzi and his fellow Republicans, by AHIP, and by the U.S. Chamber of Commerce. It has been singled out as the most important feature that the Democrats will have to trade away if they expect the Republican support and industry support that they will need.
At best, “universal” coverage will be FEHBP plans with unaffordable premiums. Obama understood that an individual mandate cannot work, though efforts are being made to require that. According to the Milliman Medical Index, an average working family is already paying $15,600 for health care. That’s average, so many are paying more. Using private plans with premiums indexed to the average costs of individuals and their families is an obsolete model of financing health care.
Health care costs are now so high that only an administratively efficient, equitably funded universal risk pool will work. It would automatically include everyone, with financing based on ability to pay. As a single payer, the program would be a single purchaser (monopsony), finally providing us with a mechanism that would ensure value in our health care purchasing.
(I’ll add here that a social insurance model using private plans would also “work,” but is a far more expensive model of reform that trades away administrative efficiency, equity and true universality. Perpetuating unfairness, waste, and leaving some out is not the definition of what works, in my book.)
Don McCanne

Jacob Hacker is a nice guy, but…

Getting Health Reform Right: A Q&A With Jacob Hacker

RJ Eskow
The Huffington Post
February 2, 2009

Professor Hacker’s proposal, Health Care for America, is based on two simple principles: First, that both the employer-based private system and publicly-funded Medicare are essentially working for their members. Second, that every uninsured American (or legal resident) should be able to buy into a Medicare-like public program at affordable rates, with need-based subsidies.

The plan has been well-received across the center/left spectrum, even receiving a friendly review from Don McCanne, MD, a Senior Fellow with single-payer advocacy group Physicians for a National Health Program (PHNP).

http://www.huffingtonpost.com/rj-eskow/getting-health-reform-rig_b_163270.html

And…

Getting Health Reform Right: According to Jacob Hacker

By DrSteveB
Daily Kos
February 3, 2009

There is a must read interview with Jacob Hacker, the re-inventor of the individual mandate bulding blocks plan for liberals (it originally came from center-right think tanks) which is the same core as Obama/Baucus/Daschle et al, summarized on HuffPo and in full at Richard Eskow’s the Sentinel Effect blog.

As Don McCanne and other Single Payers advocates have been pointing out:

Leaving the private insurers in place perpetuates the administrative waste of those insurers and the administrative burden on the providers. Intense regulatory oversight of the private insurers would be even more imperative since they would increase their efforts to game the system through surreptitious favorable selection and other clandestine market expediencies. The public program would likely concentrate lower-income individuals initially, risking a political transformation into a welfare program. Also his plan includes features of both an employer mandate and an individual mandate, each with its own policy problems, though he does ameliorate the impact to a certain extent with some of the other features of his plan. From a single payer perspective, it would be far better to totally cut the link between financing and coverage. A system of equitable tax funding of the entire risk pool is more efficient than a system of premiums linked to the individual.

nativist posts:

I read that post, and like this author, I think Mr. Hacker is incorrect as to the effectiveness of private healthcare.

I’m surprised Don Mcanne is supposed to be onboard with the features of Hacker’s proposals. Speaking broadly, yes it’s good to have Medicare or a close clone compete against trad insurers. Perhaps half a loaf is better than none in his view.

DrSteveB posts:

Don was being polite in Jan 2007… Don is always polite with our erstwhile incrementalist reformist friends

http://www.dailykos.com/story/2009/2/3/72018/39311/226/692345

Comment:

By Don McCanne, MD

My response, as follows, was posted on both blogs (edited to under 250 words for Huffington Post):

Jacob Hacker deserves our respect, even if wrong

DrSteveB is right. I was being polite. Jacob Hacker is a highly respected political scientist who supports social justice. I have greatly admired his work.

In his proposal he was looking for a political solution to satisfy those with good employer-sponsored plans who are uncomfortable with trading them in for a public plan that has not yet been precisely defined (since any proposed public plan must clear the hurdles in Congress). In so doing he compromised on policy, trading away many of the advantages of the single payer model.

Since I wrote the comments above, the public option described by Hacker has come under intensive attack by Enzi and his fellow Republicans, by AHIP, and by the U.S. Chamber of Commerce. It has been singled out as the most important feature that the Democrats will have to trade away if they expect the Republican support and industry support that they will need.

At best, “universal” coverage will be FEHBP plans with unaffordable premiums. Obama understood that an individual mandate cannot work, though efforts are being made to require that. According to the Milliman Medical Index, an average working family is already paying $15,600 for health care. That’s average, so many are paying more. Using private plans with premiums indexed to the average costs of individuals and their families is an obsolete model of financing health care.

Health care costs are now so high that only an administratively efficient, equitably funded universal risk pool will work. It would automatically include everyone, with financing based on ability to pay. As a single payer, the program would be a single purchaser (monopsony), finally providing us with a mechanism that would ensure value in our health care purchasing.

(I’ll add here that a social insurance model using private plans would also “work,” but is a far more expensive model of reform that trades away administrative efficiency, equity and true universality. Perpetuating unfairness, waste, and leaving some out is not the definition of what works, in my book.)

Don McCanne

Small Payroll, but Big Woes on Insurance

By KEVIN SACK
The New York Times
February 3, 2009

BELLAIRE, Tex. — When the bottom fell out of the automotive market last year, Amberly Allen’s fast-growing direct-mail firm hit a wall in a hurry.

As orders from car dealerships fell by half, Ms. Allen deferred plans to hire more sales representatives. She put off buying the building she now leases in this Houston suburb. And in November, both she and her husband, one of her four employees, stopped drawing salaries.

Still that may not be enough to keep the four-year-old company afloat. Determined not to lay off any of her tight-knit band of workers, Ms. Allen is now agonizing over an equally unappealing option: whether to terminate the health benefits she provides for her employees and herself.

Even before the recession, owners of the smallest businesses had struggled to absorb the inexorable annual rise in health premiums. The share of firms with fewer than 10 workers that offer health benefits has declined by 16 percent since 2001, to 49 percent, according to an annual survey by the Kaiser Family Foundation and the Health Research and Educational Trust, while the rate in larger firms essentially stayed flat.

The economic downturn has only accelerated the pressure on small-business owners to pinch every penny, and many feel they have few options but to go after employee health coverage.

Surveys suggest that rising premiums have prompted more than half of small businesses to reduce benefits, raise deductibles or require workers to shoulder a larger share of an ever more expensive pie.

Workers in firms with fewer than 25 workers are now twice as likely to be uninsured as those in larger firms, according to the Employee Benefits Research Institute. For those small-business employees who do have insurance, the share with high deductibles has more than doubled in the last two years.

Yet for many small-business owners, it can be excruciating to reduce or eliminate benefits for employees who have long been treated as family and who continue to work at their sides, every day.

“When it’s a small business, it’s personal, and the impact is more emotional,” Ms. Allen said. “It’s not just about dollars and cents. These are actual people, and they’re very important to me. And I care about them.”

With the help of her insurance broker, Ms. Allen is exploring whether her employees could afford individual health policies if she provided them with stipends equal to about half of what she now pays for their health care. She is also researching whether it may make sense to shift her workers to a personnel leasing firm with more affordable group coverage, and then rent them back.

With her current insurance policy up for renewal on April 1, the clock is ticking.

“Either way, I’m going to make sure they have coverage,” said Ms. Allen, whose sales were stagnant in 2008 after two years of exponential growth. “That’s very important — to make sure they don’t feel I’m just cutting expenses and pulling the rug out from under them.

“I have a good team in place and they take care of me. They’re loyal, they work very hard, they’re honest, and with the extra effort they put in, I want them to know it will be reciprocated, that I will take care of them.”

Ms. Allen’s current small-group policy with UnitedHealthcare costs the company $19,575 a year, equal to 17 percent of her payroll expenses. Although her workers have filed few reimbursement claims, premiums were set to rise 16 percent this year, said Carolyn L. Goodwin, her broker in Dallas.

“You can’t cut your rent unless you move, you can’t cut your Internet, you can’t cut your phone — so where do you cut?” Ms. Allen, 28, said. “When you’re not taking a dime out of the company, at some point you have to question whether you’re just working to pay everyone else’s bills.”

Many small-business owners, like Monty J. Friebel, who co-owns a wood fabricating shop in Shelby, Ohio, have significantly increased the share of premiums that employees must pay, in his case to 46 percent from 15 percent a decade ago. Others, like Thomas L. Fritts, proprietor of T. L. Fritts Sporting Goods in Winnetka, Ill., have ended coverage for the children and spouses of employees and moved to plans with high deductibles.

Lenin A. Paredes, owner of a title insurance company in Elizabeth, N.J., recently raised his employees’ contributions and added a $1,000 deductible to their plan. Will L. Neilson, owner of a bistro in Bath, Me., said he had been reduced to manipulating the schedules of part-time workers so that they fell below his 30-hour-a-week threshold for benefits. Mark H. Jacobs, a partner in a family-owned sawmill in McMinnville, Tenn., finds himself considering replacing older, more experienced workers who leave with younger ones who would be cheaper to insure.

Ms. Allen’s employees at Direct Innovations — the bulk of its business deals with automotive direct mail — said in interviews that they understood the need to cut expenses. Each expressed confidence that she would find a way to protect their health coverage.

“If I was just a number, Employee No. 384, it might make me nervous, but with Amberly, I’m not worried at all,” said Melissa G. Ornelas, 51, who signed on as vice president for business development at least partly because Ms. Allen had agreed to pay 95 percent of her health premiums. “If it took her last penny, she would take care of me.”

Mark D. Jones, 26, a production assistant who had been uninsured before Ms. Allen hired him, splits the cost of his coverage with the company. “I can’t foresee her saying, ‘Sorry, I can’t give you health insurance; hope you don’t get sick,’ ” Mr. Jones said.

None of the employees suffer from a chronic condition, although two are smokers, and none said that losing coverage alone would prompt them to leave the company. “I’m just happy to have a job,” Mr. Jones said. “The thought of finding another one makes me cringe, because times are tough.”

But it was also clear in interviews that the employees, and perhaps Ms. Allen herself, have not fully considered the potential consequences of ending employer-sponsored insurance — even if a stipend replaces it.

A few weeks ago, Ms. Allen’s broker provided her with quotes for individual policies from Aetna that would ostensibly save $6,235 a year in premiums for three of her workers. The premiums for each would be cut nearly in half. (With individual and small-group coverage, unlike large-group policies, customers can be charged varying rates based on their age, health status and claims experience.)

But the prices do not tell the whole story. Aetna cannot guarantee it will cover the three workers until it reviews detailed medical histories. Then the insurer could rule out coverage for certain conditions, or charge more to include them. The quoted rates, Ms. Goodwin explained, could rise by as much as 50 percent.

There would also be tax implications. When employers pay for a worker’s health insurance, that portion of compensation is not taxed as income. That would not be the case if Ms. Allen instead paid her workers a stipend for insurance.

In addition, Ms. Allen might not be able to fatten her workers’ stipends enough to offset future increases in premiums. The deductibles and annual out-of-pocket maximums for the individual policies would be less generous. And mental health treatment and maternity care would not be covered.

That poses a particular problem for Ms. Allen and her husband, Brian Dubiski, 40, who said they hoped to start a family soon. They said they might be forced to seek full coverage through another small business that Mr. Dubiski operates.

A number of states have started programs to lighten the health care burden on small businesses through tax credits, pooling mechanisms and insurance regulation. President Obama, in his campaign, called for federal tax credits to encourage small businesses to provide coverage but also threatened to tax “all but the smallest businesses” if they did not contribute to their employees’ health care. Mr. Obama has not yet formally proposed a health plan.

The aid cannot come fast enough for businessmen like Mr. Fritts, of the Illinois sporting goods business. He saw his company’s health costs rise 30 percent last year even as its sales plummeted by nearly 60 percent. He said it had been devastating last month to tell workers who had been with him for 15 years that they would have to start paying half of their premiums and that he could no longer insure their spouses and children.

“It was absolutely the toughest thing I’ve had to do as a business owner,” Mr. Fritts said. “It was heart-wrenching for my employees, very emotional. You feel like you’re failing them. But it was either this or don’t stay in business.”

http://www.nytimes.com/2009/02/03/us/03insure.html

Part D insurers overcharging

Insurers overcharged Medicare for prescriptions, report finds

By David Goldstein
The Miami Herald
February 1, 2009
If you buy medicine through Medicare’s prescription drug program, you could be paying too much.
The taxpayers who finance Medicare aren’t doing too well, either.
Insurance companies involved in the Medicare prescription drug benefit have overcharged subscribers and taxpayers by several billion dollars, according to the inspector general for the Department of Health and Human Services. Eighty percent of the participating insurance companies owe the program an estimated $4.4 billion for 2006 alone.
Medicare, however, has been slow to do something about it. In fact, the agency doesn’t even know how much money the insurance companies owe taxpayers because it hasn’t begun most of the financial audits needed to determine that.
Inspector General Daniel Levinson found a number of problems. Among them:
A quarter of all bid audits done for the years 2006 and 2007 had errors that resulted in higher profits for the insurance companies, higher costs for Medicare and higher premiums or fewer benefits for the beneficiaries.
Some administrative and marketing costs also were “unreasonably high.”
Costs charged by companies in some cases were questionable because the supporting financial data was “poor” and “inadequate.”
However, none of the findings resulted in changes to the program, the inspector general found, because the bid audits are done after the contracts with the insurance companies are signed and beneficiaries are enrolled.
The insurance companies never faced penalties for their mistakes and overcharges because the bid audits don’t say whether errors are “misrepresentations” or honest mistakes.
That means problems haven’t been fixed, the inspector general said.
“Bid audits are not designed to lead to sanctions,” the report says. “However, without any consequences … their deterrent effect is limited.”
http://www.miamiherald.com/news/politics/AP/story/882606.html

The determination of the Bush administration and the Republican-controlled Congress to turn the Medicare Part D drug program over to private insurers produced no surprises. Medicare was overcharged, and the patients were overcharged.
One more consequence of electing a president and members of Congress who don’t believe in government is that appropriate oversight has been lacking. Limiting oversight to sanction-free audits long after the fact is an open invitation to abuse and wink-of-the-eye fraud.
Even if rigid oversight were introduced, these private intermediaries will always find innovative ways of shifting an excessive amount of public funds and patient funds into their own coffers. Patch one leak in the system, and they’ll punch three more into it.
Those who believe in Medicare understand that we need to fold the drug benefit into the traditional Medicare program and eliminate these wasteful, intrusive intermediaries. Now that we have elected a Congress and an administration whose members believe in government, how can we distract them from their intense conversations with the insurance and pharmaceutical lobbyists who helped elect them?

Part D insurers overcharging

Insurers overcharged Medicare for prescriptions, report finds

By David Goldstein
The Miami Herald
February 1, 2009

If you buy medicine through Medicare’s prescription drug program, you could be paying too much.

The taxpayers who finance Medicare aren’t doing too well, either.

Insurance companies involved in the Medicare prescription drug benefit have overcharged subscribers and taxpayers by several billion dollars, according to the inspector general for the Department of Health and Human Services. Eighty percent of the participating insurance companies owe the program an estimated $4.4 billion for 2006 alone.

Medicare, however, has been slow to do something about it. In fact, the agency doesn’t even know how much money the insurance companies owe taxpayers because it hasn’t begun most of the financial audits needed to determine that.

Inspector General Daniel Levinson found a number of problems. Among them:

A quarter of all bid audits done for the years 2006 and 2007 had errors that resulted in higher profits for the insurance companies, higher costs for Medicare and higher premiums or fewer benefits for the beneficiaries.

Some administrative and marketing costs also were “unreasonably high.”

Costs charged by companies in some cases were questionable because the supporting financial data was “poor” and “inadequate.”

However, none of the findings resulted in changes to the program, the inspector general found, because the bid audits are done after the contracts with the insurance companies are signed and beneficiaries are enrolled.

The insurance companies never faced penalties for their mistakes and overcharges because the bid audits don’t say whether errors are “misrepresentations” or honest mistakes.

That means problems haven’t been fixed, the inspector general said.

“Bid audits are not designed to lead to sanctions,” the report says. “However, without any consequences … their deterrent effect is limited.”

http://www.miamiherald.com/news/politics/AP/story/882606.html

Comment:

By Don McCanne, MD

The determination of the Bush administration and the Republican-controlled Congress to turn the Medicare Part D drug program over to private insurers produced no surprises. Medicare was overcharged, and the patients were overcharged.

One more consequence of electing a president and members of Congress who don’t believe in government is that appropriate oversight has been lacking. Limiting oversight to sanction-free audits long after the fact is an open invitation to abuse and wink-of-the-eye fraud.

Even if rigid oversight were introduced, these private intermediaries will always find innovative ways of shifting an excessive amount of public funds and patient funds into their own coffers. Patch one leak in the system, and they’ll punch three more into it.

Those who believe in Medicare understand that we need to fold the drug benefit into the traditional Medicare program and eliminate these wasteful, intrusive intermediaries. Now that we have elected a Congress and an administration whose members believe in government, how can we distract them from their intense conversations with the insurance and pharmaceutical lobbyists who helped elect them?

Let's Expand Medicare

William Thar, MD
New York Times
Letter to the editor
February 1, 2009

To the Editor:

Paul Krugman (column, Jan. 30) is right: the time for universal health care is now! Universal health care would be a huge boost to the economy if done right.

Employers should stop paying for health care, and it should be paid for by tax revenues designed to spread the burden equitably. This would immediately reduce business expenses, and the savings would show up as increased salaries and investment. Health care cost burdens for individuals and families would be reduced, freeing more money for consumption and savings.

The best way to save a lot of money and provide universal coverage is to expand Medicare to everyone. The system, widely supported by more than 60 percent of Americans, has the lowest overhead in American health care and works for more than 40 million elderly people.