PNHP

The fantasy numbers of the Schwarzenegger/Nunez proposal

The fantasy numbers of the Schwarzenegger/Nunez proposal

California Legislative Analyst's report on the Health Care Security and Cost Reduction Act, ABX1 1 (Nunez/Schwarzenegger compromise) and the proposed funding initiative

By Elizabeth G. Hill
Legislative Analyst

We then estimated the fiscal impact of HCR (health care reform) using two different assumptions of premiums: $250 per month per person (which is what the proponents have assumed for their estimates) and $300 per month per person because, as we explain later, there are reasons to believe that a $250 premium level may be difficult to achieve. Based on our estimates, we conclude that under the $250 premium scenario, there are sufficient revenues to support the program in the first year of operation (2010-11). However, by the fifth year of the program (2014-15), annual costs exceed revenues by $300 million.

Under the $300 premium assumption, costs exceed revenues by $122 million in the first year of operation and this shortfall increases to $1.5 billion by the fifth year of the program.

… according to the 2007 California Employer Health Benefits Survey, the average monthly premium for individuals with employer coverage was $374. In order to provide premium levels of $250 pmpm, the state will need to either negotiate a much lower rate than the average employer, or set the minimum benefit level substantially below the average employer-provided benefit level.

http://www.lao.ca.gov/2008/hlth/health_reform/health_reform_012208.pdf

Comment:

By Don McCanne, MD

Although this analysis was done for the compromise reform legislation currently under consideration in California (ABX1 1), the general principles apply to all comprehensive proposals that would mandate individuals to purchase private insurance plans.

Let’s look at the real numbers first. The average premium paid in California in 2007 for individuals with employer coverage was about $4500 ($374/month). Keep in mind that this is an average, so premiums were higher for roughly half of the individuals (not adjusted for skew). Those with higher premiums were likely receiving benefits that were more generous, yet still below the level expected for a single payer program. More importantly, also keep in mind that these are premiums for the comparatively healthy workforce without including higher risk individuals. So even $4500 would be a conservative estimate for the level of premiums required for universal coverage.

Those negotiating the policies behind ABX1 1 recognized the difficulty of financing private plans at premiums in that range. So they accepted the fantasy concept that the private insurers could provide us with reasonably comprehensive products at affordable premiums. They selected a premium of $3000 ($250/month), and decided that they would figure out later what they could buy with that once the program is enacted. It appears that they would have to give up one-third of the health care benefits which today’s insured workers are receiving. That’s not acceptable. We’ll use the $4500 estimate, which is still conservative.

Most reform proposals would provide either public programs (Medicaid, SCHIP) or insurance subsidies for individuals with incomes up to 250% of the federal poverty level (FPL), and sometimes 300% for families. No proposal suggests subsidies for those over 400% FPL. Let’s use 400% as the level at which a person would be expected to fund his/her own coverage under an individual mandate to purchase coverage. Using the 2008 federal poverty guidelines, 400% FPL for an individual is an income of $41,600. A premium of $4500 is 10.8% of income, considered by health policy analysts to be a “high burden” health expense. Add to this out-of-pocket expenses including deductibles, coinsurance, and services and products not covered by the plan, then you have worse-than-high-burden expenses.

And for families? The average employer-sponsored family coverage is now over $12,000, and 400% FPL for a family of four is $84,000. Thus the premium alone, without out-of-pocket costs, is 14.1% of income. And don’t even think about anyone in the family suffering serious illness or injury.

Why do these fools keep insisting that private health plans must be the foundation of any comprehensive reform proposal? They don’t work! Get over it!

Miracle Worker?

By Peter Freyne
7 Days – Vermont’s Independent Voice
Inside Track
1/23/08

Surprise, surprise! Rep. Topper McFaun’s health-care-reform bill — the one the powers-that-be said was absolutely, positively not coming off the committee-room wall — is going to get two days in the spotlight next week, after all!

H.304, the Vermont Hospital Security Plan, would guarantee hospital coverage for all Vermonters while cutting $60 million in annual spending. Pretty radical stuff, eh?

In what some would call a miraculous reversal of political fortune, H.304 will be on the table before the Senate Committee on Health and Welfare and the House Committee on Health Care on the afternoons of January 29 and January 30. “Expert” witnesses are being scheduled, mostly critics with six-figure salaries, we’re told, but supporters of the bill, too.


Dr. Deb Richter | Photo by Peter Freyne

Cool.

Support for the reform legislation has been building outside the Statehouse at public meetings held in small towns around the state in recent months. They’ve been hosted by Barre Republican McFaun and the “Joan of Arc” pushing health-care reform in the Green Mountains, Dr. Deb Richter.

Richter is admired even by those who don’t sing from the same health-care hymnal she does. One is Peter Sterling, executive director of the Vermont Campaign for Health Care Security Education Fund. That’s the outfit selling the new stopgap Catamount Health Plan to the state’s working uninsured — http://www.catamounthealth.org.

Catamount is the compromise, Jim Douglas-supported plan that offers to sell health insurance to working Vermonters who lack it. Admittedly, Dr. Richter is not a big fan of Catamount; she predicts it will experience a financial collapse within a couple years. But even Sterling concedes, “Beyond a doubt, Deb Richter has done the most in this state to make health-care reform happen. No one can question her credentials and dedication.” Dr. Deb, he said, “is so steadfast in her resolve that people feed off that energy.”

Dr. Deb “does say Catamount is good for some people,” said Sterling, but he admitted, “It just doesn’t solve the big problem, and we know that.”

Richter, who’s been promoting showings of Michael Moore’s illuminating health-care flick Sicko around the state, says that a single-payer health-care system like the rest of the civilized modern world is where we will end up . . . eventually. It’s just a matter of when, eh? And of how long we can prop up the for-profit health-insurance market and hospital CEOs making $750,000?

The big problem, of course, is that health care in our country costs twice as much as in the rest of the civilized world and isn’t as good. Also, people have to shell out $5000 to $10,000 deductibles as well as co-pays. Working people often go without. One can be “covered” by insurance and still be broke.

But, surprise, surprise. H.304 is coming off the committee room wall.

Why is this happening?

“This is happening this week,” Dr. Deb told yours truly, “because of public pressure. People realize this is actually a very decent idea and a pretty good deal for the people of Vermont.”

Richter, a Montpeculiar resident and Cambridge family practioner, calls it a bill “that would do something for everybody and give them peace of mind while actually costing less.”

The Legislative Joint Fiscal Office, she said, ran some numbers and found that, with all of us in the pool together, Vermonters would have to fork out $60 million a year less than what we’re currently spending on hospital bills. H.304 also drew more than 150 regular folks to rally at the Statehouse and lobby lawmakers. They plan to return on February 7.

Richter told “Inside Track” she is “pleasantly surprised,” but “not shocked” that the legislative health-care committees have reversed course and decided to shine some light on H.304 after all.

“The pent-up desire for something like this is overwhelming,” said Richter. “You can feel it everywhere.”

Even “behind the scenes” said the Cambridge physician, “if you talk to hospital executives who aren’t allowed to be in favor of it, you find out they really are, especially at the smaller hospitals.”

This legislation would provide a global budget for the state’s hospitals while guaranteeing every Vermonter’s hospitalization would be covered, said Dr. Richter.

“This would guarantee the hospital CEOs,” she said, that they could pay for the cost of doing business, could pay their staff. “They would not have to worry about chasing the money,” said Dr. Deb.

Interesting.

Topper’s bill, said Richter, would provide “emergency surgery” to a broken health-care system “and help everybody in the bargain.”

But in order to pay for it, “You’ve got to raise a tax,” said Richter, “and that is politically why it’s a challenge, and why they’ve been trying to avoid it like the plague.”

Four or five taxes have been suggested, she said, including a 5.5 percent payroll tax and a $220 annual fee on working folks.

But look at the upside, noted Dr. Richter. “It’s not an increase in spending [it would be a decrease in hospital spending], and everybody gets the security of hospital coverage. So why wouldn’t we do that?” she asked rhetorically.

You know why.

“People advocating for this are not politicians,” said Dr. Deb. “They’re ordinary Vermonters who are hurting and in need of help, and they need help now. They can’t wait until it’s the right time in the political world. They just can’t.”

At the moment, H.304 is not drawing rave reviews from the hospital and insurance execs with the six-figure salaries. Several will testify against the legislation at the hearings next week.

“It’s going to take a while for them to warm up to it,” Dr. Deb said, but, she predicted, “They’ll be begging for it in a few more years. They will!”

But can Vermont really lead the whole nation on health-care reform? Doesn’t it have to be a national program?

“We’ve done it in other areas,” said Dr. Deb, citing the abolition of slavery and welfare reform as two examples.

“New ideas are done at the state level all the time. This isn’t even a new idea. This is how Medicare started,” Richter noted. “They gave everyone over 65 hospital coverage and, ironically enough, they did it because hospitals were having a hard time paying their bills.”

Interesting.

Medical Research Increased Throughout Decade of PharmaCare Reference Pricing

Media Release
The University of British Columbia
Jan. 23, 2008

Ten years after BC PharmaCare implemented spending limits for equivalent prescription drugs — a policy known as reference pricing — investments in British Columbia medical research are as strong as ever and continue to increase, according to a UBC study.

The findings from the UBC Centre for Health Services and Policy Research (CHSPR) demonstrate B.C.-based pharmaceutical R&D grew from $16 million in 1994, the year before B.C. changed its policy on drug coverage, to $50 million in 2005. This news comes one week before a special task force is to report on drug coverage policy in B.C.

“The research disproves claims that pharmaceutical cost-controls impact investment in local research and development initiatives,” says CHSPR’s Steve Morgan, lead author on the study published today in Healthcare Policy. “These potentially surprising results are actually consistent with business fundamentals: firms locate R&D based on the cost and productivity of scientific activity in a given area.”

Beginning in the 1990s, BC PharmaCare — the provincial government drug plan in B.C — refused to pay more for newer brand-name drugs unless manufacturers could prove that such products produced better results than older generic ones.

The UBC researchers studied whether pharmaceutical R&D in B.C. had fallen behind other Canadian provinces as a result of the policy change. On a per capita basis, pharmaceutical R&D grew more rapidly in B.C. than in the rest of Canada, suggesting that reference pricing did not affect R&D investments.

The UBC researchers also reviewed international economic literature and compared both pharmaceutical and non-pharmaceutical R&D data from other provinces. The economic literature showed that the location of R&D is driven by the availability and cost of scientific infrastructure and skilled workforces, and the proximity to pharmaceutical headquarters. The data also demonstrated that B.C.-based biotechnology investment far surpassed most other provinces, putting B.C. among the top centers for biotech research worldwide.

Spending on prescription drugs in Canada topped $21 billion in 2006, or nearly $650 per capita. Prescription drug costs in B.C. are just under $570 per capita, or 12 per cent below the national average. “Reference pricing and other government policies are among the reasons for relatively low spending in B.C.,” added Morgan. “Government estimates suggest that reference pricing has saved approximately $10-million per year since its introduction in the mid 1990s.”

A 2002 study by Canada’s Patented Medicine Prices Review Board had shown that global pharmaceutical R&D is highly concentrated in specific countries. In 2000, pharmaceutical companies invested the equivalent of $30 per capita on R&D conducted in Canada, compared to $52 per capita in Germany, $75 per capita in France, $108 per capita in the UK, $118 per capita in the US, $164 per capita in Sweden and $386 per capita in Switzerland.

According to Morgan, “While B.C. can’t change its geographic location relative to dominant pharmaceutical industry centres, it has been wise to control drug spending while simultaneously investing public funds into the scientific infrastructure and personnel necessary to attract world-calibre investment into strategically focussed areas like biotechnology.”

The article is available for free at the journal’s website:
Healthcare Policy / Politiques de Santé: Longwoods Publishing
www.longwoods.com/pages.php?pageid=108&cat=247.

Cost of health initiative up $400m

Number expected to seek coverage exceeds earlier estimate

By Alice Dembner
The Boston Globe
January 24, 2008

Spending on the state’s landmark health insurance initiative would rise by more than $400 million next year, representing one of the largest increases in the $28.2 billion state budget the governor proposed yesterday.

The biggest driver of the cost increase is projected growth in the number of people signing up for state-subsidized insurance, which now far exceeds earlier estimates.

State and federal taxpayers are expected to bear nearly all of the additional cost.

Although the price tag for the initiative is ballooning, the governor yesterday reaffirmed the state’s commitment to ensuring that nearly every resident is covered.

“We have fully-funded healthcare reform,” Governor Deval Patrick said at a news conference. Patrick listed the initiative among several programs started by previous administrations that he supports.

But the long-term cost of the insurance initiative continues to concern pol icy makers and analysts, who are worried that it may become unaffordable.

“These increases are more than anticipated, so we absolutely have to find ways to hold down the rate of growth in future years,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded budget watchdog that has supported the initiative.

This year the state is expected to exceed the initial budget for the health insurance initiative by about $245 million, and next year’s budget would boost spending by another $400 million.

The budget now goes to the Legislature, which last year accepted the governor’s recommendations on funding the health insurance initiative. A final budget is expected to be approved by the end of June.

The state’s top budget official, Leslie Kirwan, said yesterday that projecting costs for the health insurance initiative is difficult because the state is in “uncharted territory.”

“We’re ultimately working with a lot of uncertainty about the number of uninsured that remain out there in the population,” said Kirwan, secretary of administration and finance and chairwoman of the state panel overseeing the health insurance initiative. “Every significant decision we’ve made in healthcare reform” that draws on enrollment projections is based on “our best educated guess.”

The administration is currently working to develop a better way to count the uninsured.

When the law mandating that nearly all Massachusetts residents have health insurance was signed into law by then-governor Mitt Romney in April 2006, the state estimated that about 400,000 residents were uninsured.

Census estimates of the uninsured were far higher – about 650,000 – and many independent observers suggest that the truth lies somewhere in between.

Officials had projected that about 140,000 would enroll in the new state-financed insurance plan, called Commonwealth Care, which provides full or partial subsidies.

But by the end of last month, 169,000 people had signed up for Commonwealth Care, and the state is now estimating enrollment will reach 225,000 by June 2009, the close of the next fiscal year.

More than 70,000 have obtained Medicaid coverage since the law passed expanding eligibility, and the cost for covering those additional people, plus rate increases for hospitals, doctors, and others, is projected to grow significantly above this year’s spending.

Those who don’t qualify for subsidies or Medicaid are expected to buy private insurance or remain uninsured. Illegal immigrants are not subject to the insurance mandate or eligible for state insurance, but they can qualify for free care.

When the initiative was approved, the state expected that over time there would be a significant drop in spending on healthcare for the uninsured. The initial funding plan counted on shifting a significant portion of those “free-care” costs to pay for insurance subsidies.

But that shift is not going to happen to any large extent in 2009, according to the proposed budget.

To fund the overall increases, the state is counting on getting about half from the federal government. But officials have just begun negotiations on how much Massachusetts will actually receive.

Patrick said he is optimistic about federal support, but acknowledged that “nothing is certain.”

Separately, the state is counting on $5 million in revenue from businesses that don’t provide insurance for their employees, down from the $24 million included in this year’s budget that has not materialized.

Alice Dembner can be reached at Dembner@globe.com.

Initiating a market for organs

Economists' study says paying for organs would cut wait lists

Kidney and liver sales would add 10% to 15% to the cost of transplants, a study says. Others say organ markets would exploit poor donors.

By Kevin B. O’Reilly
American Medical News
January 28, 2008

Nearly 100,000 Americans are waiting for an organ transplant. Every day, the wait for 17 of those people ends in death.

It is a wait that could be drastically shortened or even eliminated if a market for live and cadaveric organs were allowed to operate, according to a paper co-authored by Nobel Prize-winning economist Gary S. Becker, PhD, and published last year in the Journal of Economic Perspectives.

Dr. Becker and co-author Julio Jorge Elias, PhD, estimate that a $15,000 payment for kidneys would increase the number of transplants by 44%, to about 20,000 a year. It would take nearly $40,000 in cash to donors to net a two-thirds jump in the number of liver transplants, to more than 8,600 a year.

In the case of kidney transplants, the donor payment would add just 9.5% to the cost of a transplant, while liver transplants would cost 11.2% more.

The authors based their estimates on how much it would take to convince a person earning the median American salary of $35,000 to become a donor, considering the actuarial value of a statistical life, the small risk of death in surgery, the quality-of-life impact and the value of the time spent in recovery.

Benjamin Hippen, MD, is a nephrologist specializing in renal transplantation at the Carolinas Medical Center in Charlotte, N.C. He supports paying organ donors — or “vendors,” as he calls them.

http://www.ama-assn.org/amednews/2008/01/28/prsb0128.htm

Comment:

By Don McCanne, MD

Vendors? Of their own organs?

Those who support treating health care as a commodity surely didn’t imply that we should go to this extreme. Or did they?

Emergency Room Delays

Note: The following New York Times editorial on emergency room delays (January 19, 2008) is based on research by PNHP member Dr. Andy Wilper, PNHP co-founders Drs. Steffie Woolhandler and David Himmelstein, and other Harvard researchers.

Editorial
New York Times
January 19, 2008

The nation’s failure to provide health insurance for all Americans seems to be harming even many of those who do have good health coverage. That is one very plausible interpretation of a disturbing increase in waiting times at emergency rooms that are often clogged with uninsured patients seeking routine charity care.

An analysis by researchers at the Cambridge Health Alliance and Harvard Medical School, found that the median waiting time to see a physician in hospital emergency departments jumped from 22 minutes in 1997 to 30 minutes in 2004.

For the sickest heart attack patients, according to results published in the journal Health Affairs, wait times more than doubled. In 1997, half of them got to see a doctor within eight minutes; in 2004 it took 20 minutes. For a quarter of the heart attack patients, the wait reached 50 minutes or more — a particularly disturbing lag when every minute of delay increases the likelihood of death.

The researchers attribute the longer waits primarily to an increase in the number of emergency room visits coupled with the closure of many emergency rooms. Both factors are driven by the lack of universal health coverage. Uninsured patients — and those who have no primary care doctor — flock to emergency rooms for routine coverage, clogging the system. Meanwhile, hospitals lose so much money dispensing charity care through emergency rooms that many collapse into bankruptcy or give up emergency care.

Emergency rooms are further overburdened, caring for seriously ill patients who can spend hours or even days there waiting to be admitted to inpatient or intensive care units. That is because many hospitals are either short on beds or have decided to allocate many beds to patients who pay top dollar for elective care.

The Institute of Medicine, a unit of the National Academy of Sciences, warned two years ago that the nation’s emergency rooms were at a breaking point. It called for better systems to route patients to the least crowded emergency rooms and an infusion of money to bolster emergency care. The Cambridge Health Alliance doctors call for expanding insurance coverage and primary care for the poor to provide alternatives to overcrowded emergency rooms for those seeking routine care. That is the best way to ensure that all the people who truly need emergency care get it when they need it.

National Medicare is the answer, not the bogeyman

Letter to the Editor
Palm Beach Post
Wednesday, January 23, 2008

The writer of “Candidates give too few details on universal care” (Dec. 19 letter) marshals forceful arguments based on false assumptions.

1) “A national plan would undoubtedly require restrictions on doctors’ incomes … ” The universal health-care plan drawn up in HR 676 would have the contrary effect. The U.S. National Health Insurance Act, if enacted, would eliminate the excessive drainage of money that has nothing to do with providing care. The huge sums now going to the sales forces, advertising budgets, lobbying campaigns, shareholder dividends, and huge executive salaries and bonuses would be saved. These expenditures are the root cause of the present attempt to reduce the fees Medicare pays doctors. Their elimination would halt the process. The writer’s use of the word undoubtedly magnifies the assumption’s baselessness.

2) “In a national plan, millions of Americans would not be able to obtain the same level of medical care they now enjoy … ” I can’t calibrate the level of care the 47 million uninsured Americans now enjoy. I do know, from my experiences on the lecture platform, that the over-65 generation feels blessed with the level it enjoys. When the question is put, the response is a practically unanimous, enthusiastic “God bless Medicare!” The goal of the plan is to make everyone lucky enough to be included in that same plan.

3) “It is bad enough that Congress refuses to deal with the Medicare … crisis, but to ask them to legislate a national health insurance plan as a replacement … is hard to imagine … ” I agree. It is hard to imagine, since the proposal isn’t to replace it but to make it Medicare for everyone. He is wrong about the “huge tax increase that would be required.” According to the Congressional Budget Office, eliminating all of the excessive administrative spending in our current system would save up to $400 billion. The prospect of a huge tax increase scares people, but the reality is that there is no need for it.

Let’s stop muddying the waters and trying to scare people with nonexistent goblins. The urgent need is the adoption of the same type of responsible program the rest of the developed nations have. We can’t afford to allow our elected officials to propose feeble patchwork instead of the expansion of Medicare. Let’s demand a show of leadership that will get us a system already in operation that we know works well and that can easily become the entire, one-tier national system.

H. DAVID PRENSKY
Palm Beach

Prior authorization without payment authorization

CMA Asks DOI to Pull the Plug on United Healthcare's New Notification Protocol

California Medical Association
January 18, 2008

CMA has asked the Department of Insurance to require that United Healthcare rescind its new Advance Notification Protocol. This onerous protocol requires physicians to notify United before admitting patients to the hospital and mandates that if physicians don’t comply, they won’t be paid.

United is calling this “notification” rather than “preauthorization,” but is requiring physicians to provide the exact same information that other insurers require for preauthorization, without a guarantee of payment. In our request to the DOI, CMA set forth several problems with the protocol, including United’s failure to notify physicians in a timely manner of a material change to their contracts, as required by law. CMA believes the protocol is an attempt by the insurer to improperly insert itself into decisions regarding patient treatment.

CMA also believes that it unreasonable to expect a busy physician practice to allocate the time and resources necessary to comply with United’s protocol without a guarantee of payment. In order to be compliant with the protocol and to be eligible for payment, physicians may be forced to divert resources from patient care to administrative tasks.

This protocol is one of a series of policies recently announced by United that CMA believes are unfairly onerous, punitive to physicians, and detrimental to patient care, and that we are seeking to have overturned.

http://www.calphys.org/html/cc597.asp

Supporting documents:
http://www.calphys.org/assets/applets/poizner_letter_012108.pdf

Comment:

By Don McCanne, MD

UnitedHealthcare’s “Advance Notification” protocol is very similar to established preauthorization protocols in that the insurer can deny payment if the process is not followed prior to the provision of health care services. The physician must submit the same information, in advance, that is required for preauthorization. The important difference is that fulfilling this identical notification requirement no longer ensures that the physician will be paid.

This appears to be yet another wasteful administrative burden placed on the physician that serves no purpose other than using a technicality to relieve UnitedHealthcare from the responsibility of paying for legitimate services.

Actually, it is much more than that. It is a return to the intrusive managed care policies of the 1990s that were so offensive to patients and physicians alike. Following is an excerpt from a document from UnitedHealthcare on “Advance Notification” (accessible at the “Supporting documents” link, above):

12. Why does UnitedHealthcare require notification for certain services and inpatient admissions?

Notification facilitates the ability for UnitedHealthcare to provide supportive clinical support and education, such as:

* Perform pre-op education for the patient and ensure adherence to nationally recognized guidelines in order to maximize quality and cost-efficiency

* Facilitate post-op discharge planning to optimize clinical outcomes, e.g. facilitated treatment plans post-hip and knee replacement surgery or spine surgery in order to reduce unnecessary variation in health care delivery

* Refer patients to Centers of Excellence (e.g., congenital heart disease)

* Refer patients to appropriate in-network physicians, other health care professionals or facilities

* Refer patients to our case management and disease management programs

Notification also enables UnitedHealthcare to assist with non-clinical support and education, such as:

* Educate network physicians, other health care professionals or facilities regarding enrollee benefits (e.g., some services are not covered under certain benefit plans)

* Educate network physicians, other health care professionals or facilities regarding the impact of directing enrollees to out-of-network providers (including explanation of increased patient out of pocket costs for out-of-network services) and assisting with identification of available alternative network physician, other healthcare professional or facilities

* Maximize enrollee benefits (out-of-network services may be paid at in-network benefit levels under certain special circumstances)

Don't believe claims of America's health-care superiority

By Craig Axford
The Salt Lake Tribune
01/17/2008

What constitutes a great health-care system?

Watching the Republican candidates during their final debate in New Hampshire I was hardly surprised by their statements regarding America’s health-care system. To a man, they all insisted we had “the best health-care system in the world”.

This has become predictable rhetoric, particularly from the right. To the extent flaws within our health-care system are acknowledged, the focus is on cost, frequently with particular emphasis on the cost to business as opposed to the very real and painful, sometimes even fatal implications for average Americans.

To be sure, the cost of health care in America does set us apart from the rest of the world. What puzzles me is how one can argue that a health-care system is best that covers least while also costing most?

France, Germany, the United Kingdom and Canada all spent 10.5 percent or less of their gross domestic product on health care in 2004. All provided universal coverage for their citizens. The United States spent 15.4 percent of its GDP on health care that year, while roughly 15 percent of our population went uncovered.

Sen. John McCain spoke for a more “outcome”-focused system. Most, if not all, of the industrialized world has lower infant mortality rates and longer life expectancies. When it comes to health-care outcomes, a longer life should be an “outcome” of paramount importance. Any system that falls short in that regard can hardly be argued to be the “best.”

According to a study released since the New Hampshire debates the United States ranks 19th in treating preventable illnesses. Health Affairs reported on Jan. 8 that the United States ranks behind Australia, Greece, Ireland and Portugal, among others. This, as health-care spending in America broke $2 trillion for the first time in 2006.

America will never solve its health-care problem so long as we insist on arguing our crisis is inferior to the crisis everywhere else and therefore our system is superior to everyone else’s. One is not being unpatriotic when pointing out other nations have managed to do some things better.

A case in point is our neighbor to the north. When wanting to diminish the threat a health-care reform proposal poses to the insurance or pharmaceutical lobbies, one need only refer to the supposedly numerous Canadians flocking to America to pay considerably more for services virtually all of them could get for far less in Canada.

Again, McCain argued during the debate that any serious reform of our system would deny these good Canadians a place to come to receive adequate health care, though he later implied that Canadians shouldn’t reform their system or Americans would be denied a far less expensive source for prescription drugs.

In 2004 the U.S. and Canadian governments conducted a joint survey to determine the level of satisfaction citizens in both nations had with their respective health-care systems. Thirteen percent of Americans reported having “unmet medical needs during the past 12 months,” while only 11 percent of Canadians reported the same. Not a statistically significant difference, but not a statistic that leads one to believe any more Canadians are coming here than Americans are likely to be heading north for needed treatment.

Thirty-two percent of the 11 percent of Canadians complaining of an “unmet need” cited the much ballyhooed waiting period as the barrier to treatment – or about 3 percent of the total population. Of the slightly larger segment complaining of unmet needs in the U.S., 53 percent cited cost as being a barrier to receiving care they felt they needed. This does not sound like a nation sending hundreds, if not thousands of patients south to have “unmet needs” met here.

The point of all this is not simply that claims regarding the excellence of the American system are exaggerated at best, though obviously they are. The point is, Americans and the media need to wake up to where claims regarding the inadequacies of other systems are coming from and why they are being offered to the American electorate as fact. The insurance, pharmaceutical and other lobbies with a huge financial stake in maintaining the status quo want us to believe, as bad as our system may be, it is better than all other alternatives tried.

No health-care system is or can be perfect. However, politicians who are willing to simply parrot the false talking points offered by the insurance industry and others intent on preserving record profits, often at the expense of human life, are not the type of people we want dealing with our growing health-care crisis.

Trusting them with health-care reform is truly turning the hen house over to the foxes, and we can ill afford the continued luxury of believing their rhetoric regarding the alleged virtues of the status quo in the United States when it comes to health care.

CRAIG AXFORD has worked as an environmental activist, ran for Congress in 2002 and currently works for the Democratic National Committee as party organization director for Utah.

Don’t believe claims of America’s health-care superiority

By Craig Axford
The Salt Lake Tribune
01/17/2008

What constitutes a great health-care system?

Watching the Republican candidates during their final debate in New Hampshire I was hardly surprised by their statements regarding America’s health-care system. To a man, they all insisted we had “the best health-care system in the world”.

This has become predictable rhetoric, particularly from the right. To the extent flaws within our health-care system are acknowledged, the focus is on cost, frequently with particular emphasis on the cost to business as opposed to the very real and painful, sometimes even fatal implications for average Americans.

To be sure, the cost of health care in America does set us apart from the rest of the world. What puzzles me is how one can argue that a health-care system is best that covers least while also costing most?

France, Germany, the United Kingdom and Canada all spent 10.5 percent or less of their gross domestic product on health care in 2004. All provided universal coverage for their citizens. The United States spent 15.4 percent of its GDP on health care that year, while roughly 15 percent of our population went uncovered.

Sen. John McCain spoke for a more “outcome”-focused system. Most, if not all, of the industrialized world has lower infant mortality rates and longer life expectancies. When it comes to health-care outcomes, a longer life should be an “outcome” of paramount importance. Any system that falls short in that regard can hardly be argued to be the “best.”

According to a study released since the New Hampshire debates the United States ranks 19th in treating preventable illnesses. Health Affairs reported on Jan. 8 that the United States ranks behind Australia, Greece, Ireland and Portugal, among others. This, as health-care spending in America broke $2 trillion for the first time in 2006.

America will never solve its health-care problem so long as we insist on arguing our crisis is inferior to the crisis everywhere else and therefore our system is superior to everyone else’s. One is not being unpatriotic when pointing out other nations have managed to do some things better.

A case in point is our neighbor to the north. When wanting to diminish the threat a health-care reform proposal poses to the insurance or pharmaceutical lobbies, one need only refer to the supposedly numerous Canadians flocking to America to pay considerably more for services virtually all of them could get for far less in Canada.

Again, McCain argued during the debate that any serious reform of our system would deny these good Canadians a place to come to receive adequate health care, though he later implied that Canadians shouldn’t reform their system or Americans would be denied a far less expensive source for prescription drugs.

In 2004 the U.S. and Canadian governments conducted a joint survey to determine the level of satisfaction citizens in both nations had with their respective health-care systems. Thirteen percent of Americans reported having “unmet medical needs during the past 12 months,” while only 11 percent of Canadians reported the same. Not a statistically significant difference, but not a statistic that leads one to believe any more Canadians are coming here than Americans are likely to be heading north for needed treatment.

Thirty-two percent of the 11 percent of Canadians complaining of an “unmet need” cited the much ballyhooed waiting period as the barrier to treatment – or about 3 percent of the total population. Of the slightly larger segment complaining of unmet needs in the U.S., 53 percent cited cost as being a barrier to receiving care they felt they needed. This does not sound like a nation sending hundreds, if not thousands of patients south to have “unmet needs” met here.

The point of all this is not simply that claims regarding the excellence of the American system are exaggerated at best, though obviously they are. The point is, Americans and the media need to wake up to where claims regarding the inadequacies of other systems are coming from and why they are being offered to the American electorate as fact. The insurance, pharmaceutical and other lobbies with a huge financial stake in maintaining the status quo want us to believe, as bad as our system may be, it is better than all other alternatives tried.

No health-care system is or can be perfect. However, politicians who are willing to simply parrot the false talking points offered by the insurance industry and others intent on preserving record profits, often at the expense of human life, are not the type of people we want dealing with our growing health-care crisis.

Trusting them with health-care reform is truly turning the hen house over to the foxes, and we can ill afford the continued luxury of believing their rhetoric regarding the alleged virtues of the status quo in the United States when it comes to health care.

CRAIG AXFORD has worked as an environmental activist, ran for Congress in 2002 and currently works for the Democratic National Committee as party organization director for Utah.

Americans lack understanding of their private health plans

New Survey Shows Americans Lack Understanding of Their Health Coverage and Basic Health Insurance Terminology

eHealthInsurance
January 3, 2008

According to a survey commissioned by eHealth, Inc., the parent company of eHealthInsurance, most consumers lack a basic understanding of even the most common health insurance terms as well as the particulars of their own health insurance coverage.

Less than a quarter of respondents (23 percent) reported that they were very sure of what the terminology used in their health insurance policy actually means.

Even basic terms proved difficult, with few respondents reporting an understanding of acronyms such as HMO (36 percent), PPO (20 percent) or HSA (11 percent).

Even though PPOs are the most common type of health insurance offered by U.S. employers, only a fifth (20 percent) know what PPO stands for.

“It’s clear Americans lack a basic understanding of health insurance terms, which may prevent them from selecting the health plan best suited to their individual needs,” said Sam Gibbs, senior vice president of eHealth, Inc.

http://phx.corporate-ir.net/phoenix.zhtml?c=201232&p=irol-newsArticle&ID=1090963&highlight=

Comment:

By Don McCanne, MD

Although this survey was designed to be used in the promotion of eHealthInsurance, an online health insurance broker, it does provide information that is useful to health care reform advocates.

The opponents of a national health insurance program insist that the preferred solution is to make patients better health care shoppers by having them spend their own funds on health care, through the use of high-deductible health plans and health savings accounts.

Most concede that this trend has not had much of an impact yet on controlling health care spending, with some blaming information asymmetry. The purchaser of health care has only very limited access to useful pricing and quality information about the providers. So it is contended that more transparency is required.

Yet the private insurance industry claims that they have been successful in providing individuals with choice of a variety of health plans so that they don’t need to pay for any more coverage than they will actually use (as if anyone could possibly predict that). eHealthInsurrance is frequently cited as a resource that has made greater transparency in health plan purchasing a reality.

So how much does the health insurance shopper know? More importantly, how much does the health insurance purchaser know about the plan that they have in hand that actually specifies their coverage? Not much.

Even though PPOs are the most common type of employer-sponsored insurance, four-fifths don’t even know what PPO stands for. How many of those realize that PPOs take away choice of providers, and assess severe financial penalties for using providers outside of the plan?

Most individuals would prefer a health program with comprehensive benefits, free choice of providers, and the elimination of financial barriers to care (features of a single payer national health program). You won’t find such a plan at eHealthInsurance.

Instead of looking for transparency in the private health insurance marketplace, we should look for more transparency in the political process. Or do insurance and pharmaceutical industry funds create only an illusion of conflict of interest?

Understanding insurer profits

Health Insurers Battle Rising Costs

By TheStreet.com Ratings Staff
TheStreet.com
January 16, 2008

Health insurers continued to boost profits in the second quarter, even as they struggled to raise premiums in line with health care costs. TheStreet.com Ratings’ review of the financial performance of the 648 health insurers it tracks found that total net income rose by 27.5% during the first six months of 2007 to $8.8 billion, up from $6.9 billion the prior year.

Investment gains helped bridge the gap. They comprised 43.4% of industry profits, up from 35.7% the prior year, growing 55% to $3.8 billion through June 30, 2007 — up from $2.5 billion a year earlier. By comparison, profits from insurer’s core underwriting business increased just 9.1% to $5.8 billion through June 30, 2007, up from $5.3 billion the prior year.

(The study is based on the latest available statutory filings with the National Association of Insurance Commisssioners.)

Donna O’Rourke, senior financial analyst with TheStreet.com Ratings, explains.

Q. Are rising health care costs the biggest risk for insurers?

A. On the one hand, insurers are dealing with rising health costs, and on the other hand — as a result of competitive pressures and unwillingness by consumers to absorb more premium rate increases — the ability to raise additional revenue to cover those costs.

But the industry also does business in an uncertain political environment. Revamping the financing of health care is a hot topic among the presidential hopefuls and many state governors.

The industry has also recently placed a lot of its efforts on the unstable Medicare line of business that is often the target of cost-cutting and heavy oversight by the federal government.

Q. But if profits are rising, should investors — and consumers — be worried?

A. The industry has been going strong for several years, really since 2003, when we came out of the last recession.

This continued profitability and strong market capitalization is reflected in the latest rating review; we upgraded 27 insurers and only downgraded four. This follows first-quarter ratings upgrades of 21 insurers and nine downgrades.

But health care costs continue to rise at a faster pace than revenue, because insurers struggle with raising premiums, and this is starting to affect their bottom line.

Q. Should we be concerned about a rise in investment gains? Are insurers making riskier investments?

A. Not necessarily. Normally, the industry makes some of its money by investing its liquid assets gained through prior years gains in various investments while making most of its profits from the actual business of health insurance.

An increase in investment income is not in itself a bad thing. But in an environment where margins on the core business are starting to narrow, it could become a concern in the future. What we see happening is an uptick in the percentage of profits coming from investments.

Health insurers, which are highly regulated, typically don’t own high-risk investments. If they continue to hold low-risk investments, the income generated from them may not be sufficient to offset a decline in their business.

If insurers choose to raise the risk profile of their portfolios, they will need to make sure they have sufficient capital in place to pay out claims if their bets move in the wrong direction.

Q. Where are the largest areas of growth for health insurers?

A. The Medicare line of business, both the Medicare Advantage business and Medicare Part D, has had the biggest impact in terms of growth on the industry. Margins are very high and have been compensating for the highly competitive employer health insurance market. While this is still very small, we are also seeing growth in the individual private insurance market, and insurers continue to expand their offerings to self-funded employers.

Q. This competition should be good news for consumers, though, right?

A. That’s right. Competition in these lines of business means more choice for consumers and downward pressure on premiums.

http://www.thestreet.com/s/health-insurers-battle-rising-costs/newsanalysis/ratings/10398943.html?

Comment:

By Don McCanne, MD

A few observations:

* The $12 billion or so in annual profits from the insurers’ core underwriting business is a comparatively small proportion of our $2260 billion national health expenditures. If we eliminated these profits, we would not see much change in the overall health care budget. That said, $12 billion would buy a lot of health care and certainly should not be ignored. And it is a $12 billion expenditure that is an inappropriate use of funds designated for health care spending.

* The $8 billion or so of annual investment income is often excluded from discussions of improving financing efficiency. But should it be? That income is derived from the investment of our premium dollars that the insurers are holding in trust for our future health care. Since those are our funds, shouldn’t the investment income accrue to us? If we established our own public health insurance program, the investment return on the reserve funds would be used to reduce the taxes that finance the program.

* Although the diversion of health care profits to the private insurers makes us angry, we have to keep in mind what the greater problem is. The private insurers are a major component of our highly flawed, fragmented, multi-payer system of financing health care. Between the administrative excesses of the insurers and the administrative burden placed on the providers of health care, we waste about $350 billion that could be recovered by changing to an administratively efficient single payer system. We do want to recover that $12 billion from the core underwriting business, but it is far more important to recover the $350 billion through structural reform of our system of health care financing.

* The greatest growth for the private insurers has occurred with Medicare Advantage and Medicare Part D. Margins have been very high in these programs – much higher than in the employer health insurance market. But these are our own public programs. We have handed them over to the private insurers along with a massive excess infusion of our own taxpayer funds. This constitutes a flagrant betrayal of trust by our legislators (which is a definition of treason). Every legislator that participated in this massive fraud should be voted out of office in the next election.

* The insurance industry remains concerned about doing business in an uncertain political environment, including concerns about the unstable Medicare line of business. No problem. By establishing our own national health insurance program, we can provide the insurers with the certainty of knowing that they will no longer have to manage our universal risk pool.