A special message from Senator Mark Leno on SB 810, the California Universal Health Care Act:

September 3, 2010

Dear Friends,

By now most of you have heard the disappointing news that our bill, SB 810, the California Universal Health Care Act, was held on the Assembly Floor on the last night of session, effectively killing the measure until next year. Over my strong objections, Assembly leadership decided to hold the bill. Although we are greatly disappointed, we are determined to come back even stronger next year.

I want to thank and recognize the work of the California School Employees Association and California Nurses Association who worked hard to lobby members all year. I also want to recognize Health Care for All, California Physicians for a National Health Plan, Single Payer Now, California Alliance for Retired Americans, California Health Professional Student Alliance, League of Women Voters and the other dozen organizational members of our statewide alliance. Most importantly, I thank the thousands of advocates who made phone calls, requested meetings, attended rallies, and sent letters, faxes and emails, making it clear to legislators that the single payer health care movement is vibrant, strong and growing larger every day.

Our movement has always acknowledged that it is founded on a long-term vision and strategy. This setback does not change our work, it only emboldens it. For decades we have found the courage to speak out for single payer, even when others around us told us that now is not the right time. We have learned that fear and hesitation can only be overcome by courage and commitment – something with which our movement is rich. That is how we have come so far, and that is why we will win.

Without question, I commit to reintroducing this bill again next year, and to work ever harder with you to achieve the only real solution to our health care crisis – Medicare for All.

I encourage you to begin our work today to ensure the passage of this bill next session. Now is the time to educate your current representatives, and those who are seeking office, about the need for single payer universal health care and to ask for their support. More importantly, now is the time for you to educate your co-workers, neighbors, friends, and family members about why their elected officials should take a strong stance in support of Medicare for All.

We’ve always said that the closer we come, the harder our work will become. So often, it’s “two steps forward, one step back.” Let this temporary detour enliven us to work even harder to see single payer become a reality in California. With term limits, it is clear that each new class of representatives needs to be educated and reminded of how important this issue is to our state. Next year will bring a new governor and a new legislature – and consequently, new opportunities and challenges. To win, we must come closer together as allies, fight smarter, and work even harder.

As the author of SB 810, I believe deeply in you, this cause and this movement. Until every Californian has health care and no family faces medical bankruptcy, we will not be deterred. Until our state budget and entire economy are no longer being swallowed by health care costs, we will not cease. Until we have “Medicare for All,” we will not stop fighting. We’re the fastest growing grassroots movement in America, and we will win universal health care. Let’s dig deep, redouble our efforts and get back to work.

Sincerely,

Senator Mark Leno

http://senweb03.senate.ca.gov/focus/outreach/sd03/sd03-ealert-20100902.asp

On Health Care, the Devil’s in the Details

By Uwe E. Reinhardt
The New York Times
September 3, 2010

The recently passed Affordable Care Act requires heath insurance issuers to use at least some minimum fraction of revenue from the premiums it receives on medical services. While the idea might sound straightforward, this fraction, known as the “medical-loss ratio,” is open to all sorts of creative arithmetic, and you can bet that interest groups from every corner are trying to get the math to add up in their favor.

Under the new law,  health insurers are supposed to spend at least 85 percent of premiums collected from large groups of insured on something defined as “medical benefits and activities that improve health care quality.” For small groups and individually sold policies, the standard is lower, at 80 percent.

Put yourself in the shoes of the health care providers.

They would like to put as many of an insurer’s outlays – other than provider payments – as can be justified into the denominators as “selling or administrative expense.” That would put pressure on insurers to increase payments to providers or to spend less on administration to meet the ratio requirement. Therefore, providers typically plead for a very narrow definition of an insurer’s outlays for “health care quality improvement” that, by statute, are to go into the numerator.

Health insurers, on the other hand, would like to pack as many of their outlays as possible into the numerator of the ratio.

In a letter to the commissioners, the president of America’s Health Insurance Plans, which represents about 1,300 member companies that provide insurance for more than 200 million Americans, pleads for inclusion in “activities to improve health care quality” such items as fraud prevention and detection, utilization review, costs associated with administrative simplification and health-information technology expenses, and the cost of implementing the new International Classification of Diseases, or ICD-10, codes.

Finally, there are the commissions that insurers pay to brokers, who currently play an important role in the small-group and individual market for health insurers.

The commissions usually range between 4 and 8 percent of the premium, depending on the state, but sometimes are 20 percent of the premium in the first year of a policy before dropping to the normal range.

How these commissions are incorporated into the ratio can have a significant impact on the economics of insurance brokers, whose future role in health care is of great concern to the commissioners.

http://economix.blogs.nytimes.com/2010/09/03/on-health-care-the-devils-in-the-details/

My response, also posted at the link here:

10.  Don McCanne, San Juan Capistrano, CA
September 3rd, 2010

Focusing on narrow issues such as whether the administrative cost of brokers’ fees somehow represents patient care or quality improvement as opposed to being an administrative expense distracts us from the much more important overriding issue of the profound administrative waste throughout our health care system that is related to the dysfunctional, fragmented manner in which we allocate health care spending.

The first consideration is the administrative cost of the private insurers. Should we really be allocating 15 to 20 percent of the insurance premiums to the private insurers for them to use for their own intrinsic purposes – funds that never make it to paying for health care? When you consider the very high health care expenditures in our nation, 15 to 20 percent is a huge allocation for non-medical purposes.

Another very important diversion of health care dollars is the cost of the administrative burden placed on hospitals and physicians merely to deal with our fragmented system of a multitude of public and private plans – especially in claims processing, including not only the protracted process of managing disputed claims, but also other administrative diversions such as negotiating and managing insurance company contracts.

This administrative burden on the providers has been estimated to consume about 12 percent of premium dollars. Thus the combined administrative costs merely for the insurance function will be about 27 to 32 percent of the insurance premium – a very high percentage of our very high priced system. That does not include all of the other essential administrative functions that hospitals and physicians face. What a waste!

It is unfortunate that consideration of a single publicly-financed and publicly-administered financing system was excluded before the reform negotiations began. Such a financing system – a single payer or an improved Medicare for all – would have dramatically reduced this profound administrative waste.

Even more important, a single financing system would have created our own public monopsony (single buyer of health care) in which we could ensure that we would be receiving maximum value in our health care purchasing – avoiding excessively high prices while ensuring that enough funds are available to maintain adequate capacity in the system. That is the cost control that we really need. And, oh yes… everyone is included!

Wasn’t that the goal of reform? Cover everyone and control costs?

By Charles R. Mathews, M.D.

This pulmonologist was plying his profession in upstate New York some 44 years ago when his receptionist announced, “The White House is calling!” I assumed it was a hoax, since my only direct contact with that eminent residence had been limited to passing through as a tourist.

But my receptionist persisted and connected me to the caller, who inquired whether I’d be available for a “presidential meeting on Medicare’s implementation” to take place in Washington on June 15, 1966.

The invitation, which was shortly confirmed by telegram, was not to be declined. I was more than a bit surprised, since I’d been actively supporting the American Medical Association’s campaign to stave off the inroads of government into our medical domains, decrying and demonizing Medicare as “socialized medicine.”

But President Lyndon B. Johnson, the consummate politician, was able to draw me and many others into the orbit of his Great Society programs by dint of his overwhelming electoral triumph in 1964. His formidable political capital helped win passage of civil rights and anti-poverty legislation, aid to education, and, of most consequence to us physicians and our patients, Medicare and Medicaid.

About 200 of us from all 50 states attended the meeting. We were whisked into the East Room, where, because of its small size, we barely had room to breathe. (Take it from a lung doctor.) Minutes later, the president took the podium and delivered a moving half-hour address.

“For the first time in the history of America,” Johnson said, “every senior citizen will be able to receive hospital care – not as a ward of the state, not as a charity case, but as an insured patient.”

The changes had been breathtaking. Medicare had been enacted into law just one year before, on July 30, 1965, and here we were, assessing its progress. But certainly more remained to be done.

For example, the president noted that some 20 percent of the nation’s hospitals were not in compliance with the Civil Rights Act. Over 90 percent of hospitals in the South were still segregated.

“We believe the answer to that problem is a simple one,” LBJ said, noting that hospitals had been put on notice that their Medicare reimbursement payments would be contingent on their compliance with the Civil Rights Act’s ban on any discrimination based on race, color or national origin.

While the desegregation process was sometimes slow, “whites only” hospital wards were ultimately consigned to the dustbin of history, and Medicare had played an honorable part in their abolition.

Forty-five years have passed since Medicare became the law of the land. It’s hard to overstate the beneficial effect it’s had on the health and financial security of our nation’s seniors and their families. It remains absolutely essential for persons over 65 and for those with severe disabilities or end-stage renal disease.

But it faces new challenges. The basic Medicare program worked well for many years as an efficient, not-for-profit system with a standard benefit package for all enrollees. However, beginning with the passage of the Balanced Budget Act of 1997, the private, for-profit health insurance companies began to more aggressively bore their way into the program with the aim of siphoning off public and beneficiary dollars.

They’ve succeeded in doing so through their Medicare Advantage plans (which offer some additional benefits but which don’t improve overall quality, even as they rack up much higher overhead expenses than traditional Medicare) and through a prescription drug program that boosts insurance and drug company profits.

Partially as a consequence, health costs continue to skyrocket.

It is clear to me that President Johnson’s original vision of providing universal access to health care through an equitable, publicly financed plan is one that we must turn to again. It’s the only approach that is sustainable and just.

We need an improved Medicare for all. Research shows the $400 billion in savings we’d reap from eliminating all the excess paperwork and bureaucracy associated with the private insurance industry, plus the cost-control tools we’d acquire have like bulk purchasing of medications, would be enough to assure high quality, affordable and comprehensive care for everyone over the long haul.

It remains to be seen how long the health care oligarchs, particularly the private insurers and Big Pharma, can forestall this badly needed solution. They managed to do so this round of reform. But its day must come.

Charles R. Mathews is a Tallahassee, Fla., physician and a member of Physicians for a National Health Program (www.pnhp.org).

Employer Health Benefits

The Kaiser Family Foundation and Health Research and Educational Trust
September 2, 2010

The average annual premiums for employer-sponsored health insurance in 2010 are $5,049 for single coverage and $13,770 for family coverage.

Twenty percent of covered workers are in plans with an annual total premium for family coverage of at least $16,524 (120% of the average premium).

Covered workers on average contribute 19% of the total premium for single coverage (up from 17% in 2009) and 30% for family coverage (up from 27% in 2009).

Fifty-one percent of workers with family coverage pay more than 25% of the total premium.

Among workers with a deductible, the average general annual deductible for single coverage is $675 for workers in PPOs, $601 for workers in HMOs, $1,048 for workers in POS plans, and $1,903 for workers in HDHP/SOs.

For the last two years we have asked employers about changes that they made to their health benefits in response to the poor economy. Among large firms (200 or more workers), 38% reported reducing the scope of benefits or increasing cost sharing, up from 22% in 2009, while 36% reported increasing their workers’ premium share, up from 22% in 2009.

Tracking whether and how worker out-of-pocket costs continue to grow will be an important focus for the survey over the next few years. The slow economic recovery and continuing high unemployment suggests that this trend of increasing out-of-pocket costs will persist, as workers have little clout to demand better benefits or lower costs in the current labor environment.

http://ehbs.kff.org/pdf/2010/8086.pdf

Full report (226 pages):
http://ehbs.kff.org/pdf/2010/8085.pdf

By design, the Patient Protection and Affordable Care Act (PPACA) will have the least impact on employer-sponsored health plans. Congress did not want to disturb these plans that seemed to be working reasonably well, in that they covered more of us than all other programs, and were already generously funded with employer contributions. This annual report on employer health benefits is even more relevant this year since Congress, through PPACA, has deemed that we will be living with these plans for decades to come.

The report brings us terrible news. Premiums continue to rise at intolerable rates, and more of the premium costs are being shifted to the employees. Employers also are requiring greater cost sharing on the part of their employees, especially in the form of higher deductibles. Employees are paying more for less protection.

With the poor economy employees need greater relief, yet employers are seeking relief for themselves by placing an even greater financial burden on their own employees.

This is a one-way trend. Employers will continue to seek ways to reduce the costs of their health benefit programs, and an ever increasing amount of the burden will be borne by the employees. Should we really be leaving these decisions in the hands of the employers?

Drew Altman, president and CEO of the Kaiser Family Foundation, said, “The new law helps a lot of people in a lot of ways… but in general it left employer-based coverage alone. That is what the politics of health care dictated and what the American people asked for.” (Kaiser Health News, Sep 2)

If Americans really prefer their employer-sponsored plans, then why are they so relieved when they get to go on Medicare? How much more burden will Americans have to bear before they change the politics and start demanding Medicare for all?

By Don McCanne
September 1, 2010

Speaker John Perez of the California State Assembly, on the very last day of the legislative session, pulled SB 810, the single payer bill, from the Assembly floor.

This highly unusual move of pulling a bill that had cleared all legislative hurdles except for the final Assembly floor vote was to protect Democrats from having to cast a health care reform vote in a difficult political environment three months before the next election.

Democrats feared a backlash from those who are opposed to the recently enacted federal health care legislation should they vote for the bill, and they feared offending their progressive base should they vote against the bill. Since a veto by Gov. Schwarzenegger was a given, it was decided that it would be safer to avoid the political risks by simply pulling the bill.

But did they really avoid that risk? Are the single payer advocates expendable? Don’t think so.

Fortunately, Senator Mark Leno is not to be deterred. He has vowed to reintroduce the bill in the next legislative session which begins in January.

The Democrats are worried about their political base, but maybe that’s not the framing we should be looking at. Perhaps the single payer advocates should be reassessing their own base instead.

Not all Democrats have been supportive of single payer, and several Republicans who are not part of the prevailing lock-step bloc do understand the benefits of the single payer model. The Patient Protection and Affordable Care Act is proof that we can’t rely on the Democrats to do the right thing. Most importantly, everyone understands the benefits of Medicare as a social insurance program (even if there is a fringe reactionary element that would emasculate it).

The Tea Party is proving that passionate voices can be heard. Maybe we can learn from them, though our message should contain more than simple platitudes. Our message needs to convey the principled substance of health care justice, and it needs to be loud, clear and highly infectious.

Health Insurer Cash Shifts to Favor Republicans Before Election

By Drew Armstrong
Bloomberg
August 26, 2010

Health insurers led by WellPoint Inc. are backing Republicans with campaign donations by an 8-to-1 margin, favoring the party that’s promised to repeal President Barack Obama’s health-care overhaul if it wins back Congress.

WellPoint, Humana, Aetna, Cigna and UnitedHealth Group Inc. have also been considering a $20 million-plus campaign fund to reward friends and punish enemies in Congress. That fund would target vulnerable Democrats who have spoken out against the industry, and would support candidates who are likely to argue for the industry’s positions during future debate on the health overhaul.

http://www.bloomberg.com/news/2010-08-26/health-insurer-cash-shifts-to-favor-republicans-before-november-elections.html

With private insurers supporting Republicans by an 8-to-1 margin, there is no question but that the insurers are supporting their own financial interests, regardless of the negative impact on people who need health care.

The Republicans remain opposed to all forms of social insurance that would make health care accessible and affordable for everyone (not that the Democrats did much better this time around). Instead Republicans support measures such as high-deductible health plans, health savings accounts, elimination of mandated benefits such as mental health and maternity care, and promoting interstate sale of less regulated, Spartan plans.

Insurers prefer these plans because they are the most profitable. Many individuals in the large healthy sector of our population tend to prefer these plans because the premiums are lower. Unfortunately for the sick, these plans shift a burdensome amount of the health care costs to the patients in need, not to mention the fact that the insurers have been relatively successful in avoiding these higher-cost individuals in the first place.

Republicans support these proposals because of their ideological stance, believing that each person should be responsible for their own welfare, making exceptions only for those who are the most destitute, not of their own making. They oppose the social solidarity of “collectivist” approaches such as universal insurance programs, whether public or private.

A distinction should be made between the current, lock-step, obstructionist, party-of-NO Republicans, and the nearly extinct species of progressive Republican – many of whom have become independent. It is this obstructionist Republican bloc that serves so well the interests of the private insurers.

It’s sad that the Democrats got into bed with these people. The Democrats ended up supporting the right-wing private insurance model of Mitt Romney and the Heritage Foundation to appease the Republicans and the private insurers. That resulted in the enactment of a terribly flawed program that will not adequately control costs, and will leave tens of millions uninsured and many more underinsured.

The insurers now want to send us more of these reactionary politicians. Aren’t there enough of us who care about the health of all of our people to step up and counter this? Or is it merely all words (for the pollsters), and no action (on behalf of those with health care needs)?

Where are our activists?

By Kip Sullivan

The campaign to create a “public option” ended in failure last March when Congress passed the Patient Protection and Affordable Care Act with no “option” in it.

This failure occurred even though the “option” campaign happily allowed their proposal to be transformed from one that would have taken 130 million customers away from the insurance industry and given the insurance industry no subsidies, to one that took zero to 10 million customers away and gave hundreds of billions of dollars to the insurance industry. Even after “option” advocates had degraded the “option” to a sad little token of a program, Congress refused to incorporate it into PPACA.

There are several useful lessons to be learned from the failure of the “option” campaign. However, you won’t find them in an August 17 article in The American Prospect entitled “Health Reform 2.0” by Jacob Hacker, the most visible scholar in the “option” campaign.

Rather than give us his assessment of what went wrong, Hacker celebrates PPACA and issues recommendations for improving it that are so vague they amount to platitudes. Here are examples:

• “reformers will need to call plainly for a greater government role;”

• “Insurers and providers will be doing everything they can to shape what states do. Reformers… will need to push back;”

• “[reformers should] build on the existing law to fill in its gaps;”

• “progressives [should] rehabilitate American government;” and, of course,

• “reformers should revive the public option.”

Any questions?

The following two sentences are the only ones in Hacker’s article that resemble analysis:

[T]he public-option debate was a case study in why cost control is so hard: Conservative Democrats first effectively stripped out the tools of cost control that would have allowed the public option to compete aggressively with private insurers. Then they complained that the public option wouldn’t control costs!

So why were “conservative Democrats” successful in stripping the “option” of its alleged cost-containment tools? Hacker doesn’t say. We may infer from Hacker’s silence that he would prefer his readers not question the decisions the “option” campaign made.

But the decision by Hacker and the leadership of Health Care for America Now (HCAN, the coalition that led the “option” campaign) to abandon single-payer legislation in favor of the “option” on “political feasibility” grounds ought to be questioned. Over the last five years, Hacker has repeatedly argued that single-payer legislation is not “feasible” because the American public is “stubbornly attached” to the current system. By the same logic, he also argued that “option” legislation could pass because it leaves the current multiple-payer system intact.

Here is a particularly condescending example of Hacker’s argument taken from an article he published in 2007 the New England Journal of Medicine in which Hacker criticizes Michael Moore for supporting a single-payer system:

Moore wants to do away with it all. His “prescription for change,” available on the Sicko Web site, calls for giving every U.S. resident “free, universal health care for life” [and] abolishing “all health insurance companies….” Moore clearly does not think much of the health plans being offered by Democratic presidential candidates Barack Obama and John Edwards. The Sicko site directs us to a new vehicle for “netroots” organizing sponsored by Physicians for a National Health Program … which warns, “Beware of Phony Universal Coverage: Many political candidates say they support ‘universal health care,’ but usually this just means making more Americans insurance company customers. Real universal coverage means evicting insurance companies and establishing a national health program instead.” It is an appealing vision, in many ways…. But it is also unrealistic. Sadly most Americans … can be frightened into believing that changing [the current] entrenched and inadequate system means paying more for less.

(“Healing our Sicko health care system,” New England Journal of Medicine 2007;357:733-735, 734.)

Having criticized Moore for being “unrealistic,” Hacker went on to urge his readers to abandon single-payer and support the version of the “option” he was promoting back then, a version he called the “Health Care for America Plan.”

We all know what happened over the next two years. Single payer was taken “off the table” because it was “unrealistic” and an utterly innocuous version of the “option” was placed on the table. But, alas, even this “option” turned out to be “unrealistic,” and so it was also removed from the table. What remained on the table was the centerpiece of what became PPACA – a mammoth insurance industry bailout. The PNHP warning that Hacker scoffed at in 2007 turned out to be 100 percent accurate.

As PNHP had warned, the legislation Obama supported (and that Hacker now celebrates) turned out to be a scheme to turn even more Americans into “insurance company customers.” Under PPACA, the insurance industry will get 20 million to 25 million new customers (16 million directly, and a few more million through the expansion of privatized state Medicaid programs), and the premiums of most of these customers will be subsidized by the taxpayer.

The net result of Hacker’s strategy: A “reform” bill with no “option” and no cost control which will leave half the uninsured uninsured a decade from now and which enriches the insurance industry.

This outcome begs for analysis. The “option” campaign was one of the most well-funded campaigns for a left-of-center proposal in American history (HCAN alone spent at least $51 million over the past two years). Moreover, the campaign took place at one of the more propitious moments for health reform in American history. And yet it failed completely. (This assessment assumes that Hacker and HCAN weren’t all along promoting an insurance industry bailout under the guise of promoting an “option.” I have questioned this assumption in a previous comment on this blog.)

But Hacker offers no analysis other than to blame “conservative Democrats” for whacking his “option.” If it had been a single-payer bill that conservative Democrats successfully opposed in 2009 and early 2010, we know exactly what Hacker would be saying: He would be saying single-payer advocates are “unrealistic” people who don’t understand Americans as well as he does. He would be saying, “Of course conservative Democrats killed the single-payer bill. They represent mainstream Americans who are stubbornly attached to the current system.”

But, of course, it wasn’t single-payer that got killed last year, it was Hacker’s “option” – the completely gutted version – that got killed.

The lesson that Hacker and all of us who care about universal coverage should draw from the “option” debacle is that the “option” never was the Northwest Passage to universal health insurance in America. It will turn out to be more like the Donner Pass – a path that seemed from afar to lead over a mountain range of obstacles, but which turned out to be a trap.

It is imperative that the American universal coverage movement arrive at an accurate interpretation of the history of PPACA, including the “option” campaign’s criticism of single-payer and its support for an insurance industry bailout. The interpretation I hope we all arrive at some day is that the “option” campaign squandered a golden opportunity to achieve real reform or to at least set the stage for the achievement of real reform in the near future.

The year 2009 was one of those rare windows of opportunity for fundamental reform of our health care system. Two-thirds of Americans supported a single-payer system. The nation’s large and seasoned single-payer movement was chomping at the bit to fight for single-payer legislation.

But the “option” campaign squandered it all for an insurance industry bailout. Hacker’s timid and inaccurate analysis of what was possible played a key role in this tragedy.

Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program (www.pnhp.org).

Groups Press Congress To End Patients’ Wait For Medicare

By Jessica Marcy
Kaiser Health News
August 27, 2010

Under federal rules, most people with disabilities who are younger than 65 aren’t eligible for Medicare until more than two years after they qualify for Social Security disability income. A coalition of more than 65 organizations led by the Medicare Rights Center has been pushing Congress to do away with the waiting period. But the effort has stalled because of the high cost to the federal government – an estimated $113 billion over 10 years, according to the Congressional Budget Office. That takes into account a $32 billion reduction in federal spending on Medicaid, the state-federal program for the poor and the disabled. Many people with disabilities go on Medicaid while they wait to become eligible for Medicare.

When Medicare expanded in 1972 to cover the disabled, Congress created the waiting period to help control costs and ensure that only people with severe, ongoing disabilities received coverage. About 17 percent of Medicare’s total 47 million beneficiaries – just over 8 million people in 2010 – receive disability benefits, according to the Kaiser Family Foundation.

Still, the patient groups are pushing to end the Medicare waiting period because many people may still need government help. Currently, nearly 39 percent of patients are uninsured for at least some of the time during the Medicare two-year waiting period while 26 percent have no insurance for the entire time.

Discarding the Medicare waiting period “is always going to be an issue in Congress,” said Edmund Haislmaier, senior health policy research fellow at the Heritage Foundation. “Some of it is money, some of it is politics, too. For members of Congress, irrespective of party or where they stand on the issue, it’s kind of all-or-nothing because if they did it for some diseases, then they’re immediately going to be inundated with ‘Why didn’t you do it for us?’”

Joseph Antos, health care policy scholar at the American Enterprise Institute, said that a total elimination of the waiting period was not going to happen. “Across the board eliminating the two years just doesn’t seem practical,” he said. “This really is a money issue.”

http://www.kaiserhealthnews.org/Stories/2010/August/27/huntington-waiting-period.aspx

When Congress expanded Medicare to cover individuals under 65 with long-term disabilities, they specified a two year waiting period to be certain that only those with truly permanent disabilities would be admitted to the program. Obviously this creates a hardship for precisely those for whom the eligibility was established. Will the Patient Protection and Affordable Care Act (PPACA) adequately address this injustice?

PPACA did not include any adjustments in the two year waiting period. Consequently different groups representing specific chronic disorders are lobbying for exceptions to the two year wait. Even if some of these groups achieve legislative success, it will not help the others who must wait the two years.

Since many lose their insurance and their income during that two year wait, some may become eligible for the expanded Medicaid program. Yesterday’s message explained how Medicaid may leave those with chronic disorders underinsured with impaired outcomes, so this is certainly not a satisfactory solution. Besides, many with inadequate incomes may still fall above the threshold for Medicaid eligibility.

For those who lose their insurance during the two year wait, the individual mandate would require that they purchase private plans. Even with premium subsidies, these plans may still not be affordable. Besides, their low actuarial values will not provide adequate protection for these individuals with high health care costs, even with out-of-pocket spending subsidies.

PPACA included the CLASS Act (Community Living Assistance Services and Supports Act) designed to provide long-term care insurance. Though you might think that this provides an out, there are significant problems with CLASS. The program is voluntary and the individual must pay premiums for five years before benefits are available. That alone will exclude those with modest incomes who might consider the premiums to be unaffordable, especially for a program they can’t use for five years and may never need. Furthermore, the benefits are anticipated to be quite meager and likely will provide only a modest daily cash benefit. The CLASS Act will not fulfill the insurance need for the two year gap.

The comments from the representatives of the Heritage Foundation and the American Enterprise Institute describe the real hurdles: politics and money. It’s not that we can’t find the money, but the anti-government politics of today is driven by the philosophy that the government has been drained dry so that no funds are available. That is ridiculous. Our national health expenditures are already adequate, but the funds are inequitably and inefficiently distributed. We need more government involvement, not less, in providing stewardship over our health care funds.

The two year waiting period is yet one more example of the profound injustices inherent in our fragmented, dysfunctional health care financing system – a unsound and iniquitous system perpetuated by Congress through the enactment of PPACA. All of this evil nonsense would go away if they instead would enact a single payer, improved Medicare for all.

Underinsurance among Children in the United States

By Michael D. Kogan, Ph.D., Paul W. Newacheck, Dr.P.H., Stephen J. Blumberg, Ph.D., Reem M. Ghandour, Dr.P.H., Gopal K. Singh, Ph.D., Bonnie B. Strickland, Ph.D., and Peter C. van Dyck, M.D., M.P.H.
The New England Journal of Medicine
August 25, 2010

ABSTRACT

Background

Recent interest in policy regarding children’s health insurance has focused on expanding coverage. Less attention has been devoted to the question of whether insurance sufficiently meets children’s needs.

Methods

We estimated underinsurance among U.S. children on the basis of data from the 2007 National Survey of Children’s Health (sample size, 91,642 children) regarding parents’ or guardians’ judgments of whether their children’s insurance covered needed services and providers and reasonably covered costs. Data on adequacy were combined with data on continuity of insurance coverage to classify children as never insured during the past year, sometimes insured during the past year, continuously insured but inadequately covered (i.e., underinsured), and continuously insured and adequately covered. We examined the association between this classification and five overall indicators of health care access and quality: delayed or forgone care, difficulty obtaining needed care from a specialist, no preventive care, no developmental screening at a preventive visit, and care not meeting the criteria of a medical home.

Results

We estimated that in 2007, 11 million children were without health insurance for all or part of the year, and 22.7% of children with continuous insurance coverage — 14.1 million children — were underinsured. Older children, Hispanic children, children in fair or poor health, and children with special health care needs were more likely to be underinsured. As compared with children who were continuously and adequately insured, uninsured and underinsured children were more likely to have problems with health care access and quality.

Conclusions

The number of underinsured children exceeded the number of children without insurance for all or part of the year studied. Access to health care and the quality of health care are suboptimal for uninsured and underinsured children. (Funded by the Health Resources and Services Administration.)

From the Discussion

We found that inadequate coverage of charges was far and away the most common source of underinsurance. We also found that children enrolled in private plans were more than three times as likely as their counterparts in public plans to have inadequate coverage of charges. This dramatic difference is probably the result of federal rules that permit only very limited cost sharing under Medicaid and modest cost sharing under the Children’s Health Insurance Program.

http://healthpolicyandreform.nejm.org/?p=12176&query=TOC

And…

Treating Underinsurance

By James M. Perrin, M.D.
Editorial, The New England Journal of Medicine
August 25, 2010

Health care reform, through the Patient Protection and Affordable Care Act of 2010, may improve access to needed health care services for people with chronic health conditions, including children. Key private insurance reforms, including the removal of provisions imposing lifetime limits or unreasonable limits on annual benefit, the removal of discriminatory premium rates, guaranteed availability of coverage, and dependent coverage for young people up the age of 26 years, may go a long way toward improving coverage for Americans and lowering out-of-pocket costs.

However, the growth in child and adolescent disability, combined with the problem of underinsurance and its effects on the quality of care and access to care, also highlights gaps that will remain in public insurance coverage even after the institution of safeguards affecting private coverage. The basic Medicaid program, unlike Medicare, includes long-term care benefits, such as care at home or in nursing homes and specialized therapies, and it serves as a vital source of financing for nursing home care (about 41% of current total nursing home support). The assumption that most children are healthy, however, has led policymakers to limit long-term care and coverage of a number of other benefits for chronic conditions in other programs for children. SCHIP provided a less generous benefit package — and excluded coverage of services for many chronic conditions (e.g., respiratory therapy, speech and language services, and home-based services) on the basis of the belief that the SCHIP population would not need such benefits. Research conducted since the enactment of SCHIP has indicated that substantial numbers of enrolled children have chronic conditions and could benefit from these services.

The Affordable Care Act calls for a major expansion in Medicaid, especially to provide insurance for a large number of currently uninsured and ineligible adults — that is, those under 65 years of age who have incomes below 133% of the federal poverty line (an estimated 12 million to 17 million people). Here, too, the benefit package will resemble the SCHIP (now CHIP) benefit, with an emphasis on coverage of care for acute conditions and less generous coverage of long-term care. Yet the members of the low-income adult population who will become eligible under this Medicaid expansion include substantial numbers of people with chronic conditions, especially mental health conditions. Here, too, for cases in which long-term care is needed, the Medicaid expansion may leave many newly insured people underinsured. For those instances in which the major epidemics of chronic conditions among adolescents have already begun to affect the young adult population, it is unlikely that many of these young people, even with their new Medicaid coverage, will receive the coverage they need for long-term care.

http://healthpolicyandreform.nejm.org/?p=12178&query=TOC

Being underinsured often results in the same or similar adverse outcomes as not being insured at all. This study demonstrates that the problem of underinsurance amongst children is even more widespread than being uninsured. Does the Patient Protection and Affordable Care Act (PPACA) adequately address this shameful injustice?

PPACA does expand coverage for children through the individual mandate to purchase private insurance, though this study demonstrates that private insurance plans were three times as likely as public insurance plans to have inadequate coverage of charges. Thus PPACA, while reducing the numbers who are uninsured, actually increases the incidence of underinsurance. Most will still be insured through private employer-sponsored plans. For those purchasing their plans through the exchanges, the subsidies will provide some relief but still will not be not adequate to eliminate underinsurance.

PPACA also expands Medicaid, though primarily for adults. Although Medicaid and CHIP cover out-of-pocket expenses better than do the private plans, the editorial by James Perrin explains how lower-income individuals in these programs may still be underinsured. This is particularly true of those with chronic conditions who may need long-term care.

An appropriately designed single payer system eliminates the problem of underinsurance by eliminating significant cost sharing for all appropriate health care services. The efficiencies and policies of the single payer model create enough savings to pay these costs equitably without increasing our national health expenditures.

As long as we remain content with merely tweaking PPACA, we will continue to live in a society that tolerates exposing individuals and families to the hardships created by underinsurance or by having no insurance at all. Certainly we must be a better nation than that.

States Should Structure Insurance Exchanges to Minimize Adverse Selection

By Sarah Lueck
Center on Budget and Policy Priorities
August 17, 2010

The health reform law (the Affordable Care Act) relies primarily on states to establish health insurance exchanges — marketplaces that provide affordable, good-quality coverage options to individuals and small businesses. But it gives states substantial flexibility in how they structure the exchanges.

Adverse selection — the separation of healthier and less-healthy people into different insurance arrangements — will occur if a disproportionate number of people who are in poorer health and have high health expenses enroll in coverage through the insurance exchanges, while healthier, lower-cost people disproportionately enroll in plans offered through the individual and small-business markets outside the exchanges. If that occurs, the cost of exchange coverage will be higher than the cost of plans offered in outside markets. That would drive up costs not only for consumers and small firms purchasing coverage through the exchanges, but also for the federal government, which must provide premium subsidies to enable low- and moderate-income people to afford coverage in the exchanges.

Higher premiums would depress participation in the exchanges by individuals and small businesses, particularly by those people and firms that can obtain better deals in outside markets. That, in turn, could raise premiums even higher in the exchanges and could ultimately result in their failure over time.

Risk Adjustment and Risk Pooling Will Reduce But Not Prevent Adverse Selection

The law also requires use of a risk-adjustment system, in which plans with sicker-than-average overall enrollments receive payments to compensate them for their resulting higher costs. The payments would come from plans that enroll healthier-than-average people that do not cost as much to cover.

As CBO has warned, the inability of current risk-adjustment systems to fully adjust for differences in health care costs between low- and high-cost groups means that, among plans in the same risk-adjustment system, “premiums for enrollees in plans that attract higher-cost beneficiaries [could] rise substantially over time.”

Another potentially helpful provision of the Affordable Care Act requires a “single risk pool,” meaning that each insurer operating inside and outside of an exchange will be required to treat all of its enrollees as a single group when setting premiums.

These pooling requirements, however, have significant limitations — for example, the risk-pooling requirement would apply only to insurers that choose to sell products both inside and outside an exchange. And as noted below, even in cases when insurers do sell products in both markets, it is likely to be difficult to enforce the requirement and ensure that risk is actually being pooled. In addition, the requirement that insurers offering identical plans in both markets charge the same premium in both places is weakened by the fact that the Affordable Care Act does not require insurers participating in both markets to offer the same plans inside and outside the exchange.

Some Elements of the Affordable Care Act Leave Exchanges at Risk for Adverse Selection

Under the Affordable Care Act, the existing individual and small-group markets can continue to operate outside the exchanges. Many of the law’s requirements relating to individual and small-group insurance plans will apply regardless of whether the plans are offered inside or outside the exchanges. For example, all new plans offered — whether through the exchanges or through outside markets — will have to provide a package of “essential benefits” and a minimum level of coverage (as measured by actuarial value). In addition, the law’s new “rating rules,” including those that prevent insurers from charging different prices based on a person’s health status, will apply to new individual-market and small-group plans regardless of whether the plans are offered inside or outside the exchanges.

But various other Affordable Care Act requirements apply only to health plans offered through an exchange, such as requirements related to the adequacy of provider networks, reporting on health care quality, grievance procedures, marketing practices, and benefit design. In addition, the law allows the Secretary of the U.S. Department of Health and Human Services to set additional standards for plans offered through the exchange, which plans sold outside an exchange are not required by federal law to meet.

This leaves substantial opportunity for adverse selection because insurers in these external markets will effectively be competing for enrollees against the exchange plans, but will not have to comply with standards that are as strict. Insurers operating outside the exchanges could seek to take advantage of these looser rules to attract healthier people and businesses, while leaving sicker people to enroll in coverage through the exchanges. As a result, the differences in rules would likely create an unlevel playing field and thereby increase the likelihood of adverse selection against the exchanges unless states institute protective measures.

In addition, under the Affordable Care Act, states have the option of setting up two separate exchanges — one for individuals and another for small businesses. States that do so may find that the exchanges lack the necessary volume to attract a sufficient number of insurers, ensure a large enough pool of enrollees that is well-balanced between the healthy and the sick, and achieve the economies of scale that can keep an exchange’s administrative costs low.

(This paper focuses on the risk of adverse selection between a health insurance exchange and outside health insurance markets. Another type of adverse selection could occur among plans within an exchange; this will be the subject of a future analysis.)

http://www.cbpp.org/cms/index.cfm?fa=view&id=3267

Any health care financing system that divides health care funds into separate risk pools inevitably experiences adverse selection. In fact, private insurers do all that they can to see that their own risk pools contain low-cost healthier individuals while shifting higher-cost individuals into other public or private risk pools. As this article indicates, numerous regulations can be introduced that may reduce the magnitude of these differences, but they can never be eliminated.

When Medicare was financed using a single risk pool, adverse selection did not exist. Once private insurers were allowed to offer options to the traditional Medicare program (Medicare + Choice and then Medicare Advantage), multiple risk pools were established providing an opening for private insurers to game the system – and game it they did. They skirted the rules to selectively market the healthier sector of the Medicare population. They further pushed up their overpayments by upcoding the diagnoses – creating the deception that their enrollees were sicker than they actually were so that they wouldn’t be subject to risk adjustment (adjusting payments to reflect the health status of those in the pool).

Who suffers? Individuals, employers, taxpayers, health care providers. Who benefits? The private insurers.

Adverse selection was not simply an inconvenient policy problem that the legislators had to fiddle with merely because they rejected the concept of a single universal risk pool that eliminates the problem of adverse selection. Far worse, it was a deliberate policy decision supported by the leadership of the private insurance industry who held the hands of the legislators as they led them down the primrose path to the everlasting bonfire that they call reform.

The Center on Budget and Policy Priorities (CBPP) report lists a few policy tweaks that are an attempt to patch some of the loopholes, but there are two major problems with their recommendations.

First, since the insurance exchanges are established on a state by state basis, each and every state must have its own enlightened and caring leadership that would oversee the intensive oversight efforts that will be required to reduce (but not eliminate) these injustices. That will never happen in most states.

The greater problem with the CBPP analysis and recommendations is that they completely excluded any consideration of the solution that really would work – a single universal risk pool through a single payer national health program, such as an improved Medicare for all.

Bill Moyers on John Geyman’s “HIJACKED”

“You think the battle for real health care reform is over? John Geyman says ‘Not on your life!’ And, by the way, your life is what’s at stake. This former Republican country doctor and long-time respected scholar, editor, and advocate for reform that puts the patient, not the industry, first, has issued an informed, convincing, and passionate account of why the battle has just begun, and how we, the people, can win.”

Bill Moyers, author of “Moyers on Democracy”

HIGHJACKED – The Road to Single Payer in the Aftermath of Stolen Health Care Reform
by John Geyman

Everyone needs to read this book. Order your copy now. (I’m ordering ten copies – to share with others.):

To order:
http://www.commoncouragepress.com/index.cfm?action=book&bookid=402

Dems retreat on health care cost pitch

By Ben Smith
Politico
August 19, 2010

Key White House allies are dramatically shifting their attempts to defend health care legislation, abandoning claims that it will reduce costs and the deficit and instead stressing a promise to “improve it.”

The messaging shift was circulated this afternoon on a conference call and PowerPoint presentation organized by FamiliesUSA.

The Herndon Alliance, which presented the research, is a low-profile group that  coordinated liberal messaging in favor of the public option in health care.

http://www.politico.com/news/stories/0810/41271.html

And…

Implementing Health Reform: A Communications Perspective

By Lake Research Partners, Greenberg Quinlan Rosner Research, and The Herndon Alliance
August 19, 2010

Challenging Environment (Slide 4):

Straightforward “policy” defenses fail to be moving voters’ opinions about the law.

Public is disappointed, anxious, and depressed by current direction of country – not trusting.

Voters are concerned about rising health care costs and believe costs will continue to rise.

Women in particular are concerned that health law will mean less provider availability – scarcity an issue.

Many don’t believe health reform will help the economy.

Strategic Recommendations: The “Do Nots” (Slide 24):

Don’t assume public knows the  health reform law passed or if they know it passed understand how it will affect them

Don’t list benefits outside of any personal context

Don’t barrage voters with a long list of benefits

Don’t use complex language or insider jargon

Don’t use heated political rhetoric or congratulatory language

Don’t say the law will reduce costs and deficit

PowerPoint presentation
http://www.politico.com/static/PPM153_pp.html

And…

Herndon Alliance Statement on Politico Story

Herndon Alliance

Our research reaffirms that the more the public hears about the specific reforms in the law, the more they like it. The strategy of informing and educating the public about the law continues to be the right strategy.  The Politico story (Aug 19, 2010)  is wrong when it says groups supporting affordable health care for the American people are dramatically changing their strategy.  There is no reason to do so — our research reaffirms that the more the public hears about the specific reforms in the law, the more they like it.  And our research finds that there is a need to cut the political flak and give real information to the public.  Americans are tired of the partisan spin that many opponents continue to throw at the health reform law. Hard-working people are thinking about the economy and just want to know how the law will help them and their families. That is what the President and the administration have been doing — it is the approach we support.

http://herndonalliance.org/

The conclusions and recommendations presented during the Families USA conference call were based on polls and focus groups conducted by Herndon’s research partners. In spite of Herndon’s positive spin, the research confirms that the Obama administration and the Democrats in Congress face a very “challenging environment” as they attempt to sell the benefits of the Patient Protection and Affordable Care Act.

Their recommendations for communicating the benefits of reform might best be characterized as “keep it simple, stupid,” relying heavily on personal anecdotes. Don’t confuse the public with the actual policies that are now law, and certainly don’t claim that the law will reduce costs or the deficit.

Many will remember that these are the same partners that pushed the message of choosing your own health plan, while actively suppressing any references to single payer or Medicare for all. They seemed to have the view that the message was of prime importance and policy be damned. Obviously they haven’t changed.

This next time, let’s first define optimal policy (single payer) and then develop a message that fits. As Herndon states, we “need to cut the political flak and give real information to the public.”

Trade group sues over new Calif. insurance rules

By Shaya Tayefe Mohajer
San Francisco Chronicle
August 19, 2010

A new regulation that makes it harder for health insurance companies to drop individual policyholders in California is being challenged in court by an industry trade group.

The California Department of Insurance’s new regulations, which took effect Wednesday, require insurers to investigate the medical histories of those seeking individual policies before accepting any premiums.

The Association of California Life and Health Insurance Companies sued to stop the rules on Monday, accusing the state of acting “in excess of its jurisdiction and authority” by creating regulation that conflicts with the state’s insurance code.

Insurance Commissioner Steve Poizner on Thursday called the lawsuit “shortsighted and morally wrong.”

“Sometimes I think representatives in this industry have their heads permanently stuck in the sand. Illegal rescissions are a repugnant industry practice,” said Poizner.

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/08/19/financial/f132925D03.DTL

One of the most egregious offenses of the health insurance industry has been to retroactively revoke an insurance policy after the insured individual files a medical claim, a process known as rescission. Public outrage over this injustice helped to drive the process that brought us the Patient Protection and Affordable Care Act (PPACA).

Apparently the insurance industry has learned nothing. Their trade organization in California has the gall to infuriate all of us by suing to protect their right to do their underwriting after a claim is filed rather than before the policy is issued, whacking the patients when they are down.

Since PPACA will make rescissions more difficult, you would think that the industry would be quiet and accept the inevitable. No. Instead they reveal that they are not simply an amoral industry but rather a truly immoral one by insisting on their right to retroactively deny payment of medical bills run up by the hapless patient, merely to save the costs of timely underwriting.

This is not the industry that should be managing our health care financing. We need our own public financing entity – a single payer national health program.

Large Employers’ 2011 Health Plan Design Changes

By Karen Marlo, Dannel Dan, and Craig Lykens
National Business Group on Health
August 2010

The National Business Group on Health conducted its annual plan design survey with members in the spring/summer of 2010.

Changes as a Result of Health Care Legislation

While there was uncertainty about the regulations determining grandfathered plan status, the majority of employers (53%) were still planning to make changes to their plan designs.

Medical Plan Costs

Employers estimated an average increase in health care costs of 7.0% for 2010, with reported estimates ranging from a 2.7% decrease to a 14.0% increase. For 2011, employers are estimating a slightly larger increase, an average trend of 8.9%.

In 2011, 63% of employers will be increasing the employee percentage contribution to premium costs, and 46% will increase out-of-pocket maximums, while 44% will increase in-network deductibles.

Consumer-Directed Health Care

Of the respondents, 61% will offer a CDHP in 2011. Of those offering a CDHP, 20% indicated that they will or have moved to a full replacement plan (i.e., no other option), up from 10% in 2010. The most common type of CDHP employers will offer in 2011 is a high-deductible health plan (HDHP) with a health savings account (HSA) (64%).

Pharmacy Benefits

To manage pharmacy benefits, the techniques employers are most likely to use are prior authorization (73%), followed by step therapy (63%), three-tier design (63%), and mandatory mail order for maintenance medications (47%).

Retiree Health

Very few employers offer retiree health benefits for new hires, with 18% offering coverage to pre-65 retirees and 11% offering post-65 supplemental coverage to new hires.

The top strategies being used to control retiree health care costs are caps on company contributions (46%), increasing employee contributions (37%), and eliminating coverage for future retirees (33%).

http://www.businessgrouphealth.org/pdfs/Plan%20Design%20Survey%20Report%20Public.pdf

The National Business Group on Health represents primarily Fortune 500 companies and large public-sector employers with self-insured health benefit programs. Because of their market power and their ability to eliminate the risk pooling function of private insurer intermediaries, you would think that these large employers would be immune from the high health care costs inflicted on the rest of us by our dysfunctional system of financing health care, but you would be wrong.

This report shows that escalating health care costs continue to plague our nation’s largest employers, so much so they they are turning to some of the same ill-advised cost containment measures used throughout our system. Amongst the most perverse is that they are shifting ever more costs to those individuals who most need to be protected by the benefit programs – their employees and family members who have health care needs. It is bad enough to have health problems, but it is even worse to be financially penalized for having them.

Why is it that these large employers, with their tremendous purchasing power and ability to bypass the extortion of risk-bearing private insurers, have been unable to control their health care costs? The reason is quite simple. Our fragmented, dysfunctional, multi-payer system permeates the entire health care delivery system, and these employers are unable to function in an isolated delivery system that has not been damaged by the financing perversities.

Let’s look at some of the excess costs that they face. First, U.S. health care prices are the highest in the world. Even with their purchasing clout, the employers are not able to slow the unrelenting escalation in health care prices; they still have to pay prices close to those negotiated by the private insurance industry. In fact, most of them use private insurers for administrative functions such as claims processing, so they’re playing the same ball game.

Second, and most importantly, the health care delivery system has built into it very high administrative costs due to the necessity of interacting with a multitude of payers, each with different contract requirements. There is no way that large employers can avoid paying these excess costs because they are fixed costs built into the delivery system.

It is true that large employers escape some of the costs of private insurance, such as the expense of marketing health plans, or the necessity of paying profits to investor-owned insurance companies. However they are exposed not only to the massive indirect administrative costs imposed on the health care delivery system, they also have their own excessive administrative costs.

The U.S. model of health care financing depends on provider networks, and these large employers must either establish their own networks, or, much more likely, rent these networks from the private insurers. It defies logic that they should pay extra to take choice away from patients, but they do. (Keep in mind that Medicare controls prices without the need of establishing restrictive provider networks.)

They also must either establish their own claims processing system, or again more likely, use private insurers or claims processing managers which profit from the services they are selling to the employers.

With the increase in consumer-directed health care plans employers have increased administrative responsibility for managing the various cost sharing provisions, ranging from tallying services before the deductible is met to management of payments from health savings accounts.

It is easy to see why being self-insured has not protected these large businesses. Their direct insurance-type administrative costs may be comparatively low, but the costly burden of our dysfunctional financing infrastructure has been placed upon the entire health care delivery system, and they must pay for that. (Yes, I repeat myself, but this is the crucial take-home message.)

Although some might want to give the private insurers a pass because the employers are not dependent on them for risk pooling, that would be a mistake. The private insurers and their political supporters are very much to blame because they have perpetuated this dysfunctional financing system that the large employers have been unable to penetrate. The politicians perhaps bear the greatest blame because they have supported the private insurance industry at a great cost to the rest of us.

What the United States lacks that all other industrialized nations have is a monopsony (single purchaser) to purchase health care. Even in those nations with multiple payers, government oversight pulls them together as a de facto single purchasing entity. In the private sector, a monopsony can be as evil as a monopoly, but a public monopsony is different because it purchases health care for the benefit of the nation’s patients.

Our nation’s largest employers, with all of their purchasing power, still lack the strength of a monopsony. They are making a tragic mistake in trying to solve their problems by passing more of the health care burden onto their workers.

If the leadership of the business community had just a little bit more vision, they would realize that it is time to establish a monopsony that would not only control their costs, but would work for all of us. The ideal monopsony for this nation, of course, would be an improved Medicare that covers everyone.

By Donald W. Light

The New York Times’ recent upbeat editorial about the radical reform of Britain’s National Health Service (“Health Care Reform, British Style,” Aug. 4) has its facts wrong and biases showing. As anyone familiar with the NHS knows, it has not been “bristling at any suggestion of change” but rather has been absorbing large waves of change since 1990.

The new government’s reforms will eliminate layers of public bureaucracy piled on by the last two Labour governments, but only to install a new variation of commissioning that will require more private bureaucracy in the form of hired management companies. These companies will charge several times more for doing the same kind of paperwork and administration that the civil servants who are being laid off currently do.

Or perhaps the private management companies will hire back the laid-off men and women who, after all, know how things work, only now the workers will have no job security. There is plenty of precedent for this kind of scenario.

English primary care doctors have long had power over treatment decisions and referrals. To say the reforms will give them more power is misleading, especially since the reforms will now make those doctors responsible for contracting all hospital and specialty services. Everyone agrees this is a time-consuming, complex job for which doctors have no training or experience. If anything, the reforms will add a great bureaucratic burden on GPs so they have less time to provide personalized care to their patients.

The editorial suggests there is cause for worry that introducing for-profit management companies and American features will lead to patients’ interests being shortchanged. Then why endorse such a path? Indeed, overall administrative costs are likely to go up, and 500 little GP contracting groups will not have the clout to save money by reducing the waste built into the hospital-centered structure of specialty services.

In the zero-sum game of a fixed budget with more of it going to management contracts, services to less-affluent patients will have to be cut. Clinical and class inequalities are likely to increase. When, in the name of austerity, the NHS is called upon to save 20 percent of its budget, the new reforms will transfer more money to managed care corporations and leave less for patient care. In these ways, the NHS will become more American.

Donald W. Light
Princeton, N.J.

Donald W. Light is Lokey Visiting Professor at Stanford University and professor of comparative health care systems, University of Medicine and Dentistry of New Jersey. He is the editor of the just-published book titled “The Risk of Prescription Drugs” from Columbia University Press.

By Lynn M. Petrovich for CommonSense2.com

For the Love of Universal Health Care

Some time ago I received a letter from my employer regarding its health insurance policy which said there would be some changes to it. First of all, that’s never good. Second, I wasn’t sure what the letter meant. I was confused. I thought it meant whatever I had been doing, I couldn’t do anymore, but I wasn’t sure. You see, I hadn’t been doing anything prior to receiving the letter, and I didn’t know if I should still not be doing anything or if I should start doing something. Actually, doing nothing is what I do best…well, when it comes to this health care thing, that is. If I don’t need to use it, then that is when it works best for me and my family.

I mean, trying to understand the mechanics of our current health care structure requires an advanced degree in doublespeak. There’s a contract but somehow it’s always subject to unilateral alteration, especially if profits start dropping, then these insurance companies look for ways to re-assess the relationship (According to MS magazine until the year 2014, domestic violence, pregnancy, and cesarean sections are pre-existing conditions which could render a claim denied).

And there are times, I admit, I have to hand it to our for-profit health insurance for their ingenuity. The aforementioned letter forewarned of a 12 page pamphlet entitled “Important Notice of Changes to Policy”. Among the 40 or so “revisions” (which all increased insured’s out of pocket costs) was a real gem: The Company would no longer reimburse policyholders for prosthetic devices not prescribed by a physician and for which there was no loss of limb.

I wonder how long that had been going on before someone became the wiser.

So you can see why I’m rather claim-shy; I avoid doctors and hospitals like the plague. That is, until one night several months ago when the ultimate crisis happened: A family member became ill, and we had to go to our local emergency room. A total of 37 hours, including one night, was spent in the hospital. Then we got the bill. It totaled $16,808.

After the deductible, our insurance company paid $2,739. That’s it. Which begs the question: Which was the cost of the hospital’s services, $16,808 or $2,739?

I’ve spent months trying to get an answer to this question. Everyone at the hospital from accounting, to billing, the doctors and nurses, employees, former employees, collection agents, even the hospital’s Executive Director have been unable to articulate the tabulation of this invoice. I’m told “it’s complicated, very, very complicated” and “no one knows exactly how the bills are computed because it’s complicated.” There’s the chauvinistic approach: “Mrs. Petrovich, you don’t need to know because it has nothing to do with you.” And the demeaning: “It’s something you wouldn’t understand.” Of course then there’s the ever lovin’: “It’s just something we do, an adjusting entry, and no one really knows how it’s done because [you got it] it’s complicated.”

Without the knowledge of exactly how hospital bills are calculated, how can we ascertain if medical costs are indeed increasing? I mean if they’re just throwing darts at a board, we have no control or foundation for determining medical cost trends.

And quite frankly, how difficult can it be? I mean pardon the analogy, but it’s not brain surgery. It’s cost accounting 101.

Reviewing the hospital’s detail of services rendered, among the charges were $8,786 for the room (one night), and another $2,609 for the emergency room (2 hours – ouch!), and $368 for one X-ray (was it printed on gold?).

Here’s an interesting tidbit: If you can afford health insurance, the hospital will accept $2,739 as payment in full; if you can’t afford health insurance, you’ll owe more, like $16,808.

That’s not complicated, that’s sick.

So in an effort to thwart my frustration with regard to how much the hospital’s services cost to the hospital and why they would negotiate with our for-profit health insurance conglomerates to accept a sum that is sixteen percent of what they billed, I decided to dive into their financial statements because, like most hospitals in America, it’s a non-profit 501(c)(3) institution. IRS Form 990s are public information.

There are strict guidelines for operating a non profit, 501(c)(3), which is understandable because non profit entities pay no income, property, or sales taxes. Contributions are tax deductible. Also, an important component is that earnings (not referred to as profits, but as “surplus”) may not benefit any individual or stakeholder and must be retained by the organization and used to further their cause, which must advance the welfare of the public.

The latest IRS Form 990 available, 2008, was very interesting. The hospital, whose mission statement is to provide “medically necessary health care services to all individuals regardless of race, color, national origin, religion, or ability to pay” had a loss of almost $10 million on revenues of $266 million (of course we don’t know which set of books were used to tabulate the revenue, the one showing $16,808 or the one booking $2,739). Despite this loss, they doled out bonuses to their (already) highly compensated employees. Since this hospital is part of a system of hospitals and that conglomerate paid its Executive Director in excess of $3 million (including half a million as bonus), I reviewed at least a dozen hospital’s financials in the Tri-State area (Among nine hospitals, compensation to highly salaried personnel totaled over $55 million).

This particular hospital wrote off almost $12 million as uncollectible. (In fact one of their collection agencies told me they typically see over 1,000 accounts per year which they deem as uncollectible.). This hospital had a cumulative net fund balance (what’s left over after subtracting what’s owed) of negative $48 million.

Here’s something worthy of note: Stuck to the hospital room’s pegboard was a flyer which said they were on a “cost-cutting” mission and had partnered with doctors in a “profit-sharing” measure (not sure how a non profit has profit sharing). This mission included several critical modifications to their policies – like not changing patients’ bed linens daily unless they were soiled. Hey, aren’t hospital infections one of the largest problems of staying in the hospital? Just thinking out loud here but maybe they could cut out bloated paychecks, bonuses, “incentive” compensation programs (apparently a quarter to half a million dollars salary isn’t enough enticement), severance packages, world class travel and hotel rooms; or advertising and 12 page glossy color brochures with pictures of happy people catching butterflies which I receive ad nauseam (and are nothing more than teasers to people who can’t afford healthcare).

Some of the other hospitals had investment losses in the millions on derivatives which have become totally worthless. I’d cut that shit out completely. I mean it seems to me for every dollar lost on derivatives, they’ve got to make that up by charging more from people who can’t afford to pay you in the first place.

And for goodness sake, change the bed sheets already!

Oh the interesting information I found when digging into Form 990s, that is, those hospitals that didn’t close their doors. Here are some more highlights:

A NJ regional trauma hospital (6 CEOs with compensation in excess of $4.4 million) had unrealized losses on investments of almost $60 million. It wrote off almost $50 million as uncollectible.

For some reason hospitals spend large sums on office supplies totaling in the hundreds of millions – comprising over 20% of overhead (I’m talking about for each hospital). That’s a lot of white out!

A central Jersey hospital gave its former CEO severance pay of $732,809; current CEO pay was half a million.

Here’s a good one: One hospital paid two non-medical (i.e. administrative) employees a combined total of $460,000 and yet felt the need to add another $3,000 so they could get their taxes done.

According to a 2/22/10 article in the New York Post, St. Vincent’s Hospital (which closed this year due to insurmountable debt of almost $1 billion) paid NFL Giant’s quarterback Eli Manning at least $600,000 in addition to “first class airfare, lodging, ground transportation and meals for his family” for media events. Mr. Manning is already independently wealthy with a 6 year deal worth almost $100 million and another $5 million a year in endorsements. An astute St. Vincent’s board member noted “Manning’s pact was a ‘bad deal at a bad time’ that could lead to ‘bad publicity” (thousands laid off).

Harlem’s North General Hospital couldn’t hold on either. An official announcement this past April stated: ”Like many health care providers, North General has to find ways to cope with dramatic changes to health care, state funding, the economy and our local area.” North General closed its doors July 2nd (thousands laid off)

In the last decade, Los Angeles County saw 14 hospitals, with emergency rooms, close down due to financial constraints (tens of thousands laid off).

It seems the expense side of hospital ledgers is amok with waste and what we in NJ recognize as “The Blob”, and there’s obviously a tremendous disconnect between what is invoiced by the hospital and what is paid.

According to a report by the Institute for Health & Socio-Economic Policy (IHSP) dated 12/13/2005 (you can find this report at www.calnurse.org), “The Third Annual IHSP Hospital 200: The Nation’s Most – and Least – Expensive Hospitals Fiscal Year 2003/2004″ [”The Report”]:

“When pressed, the hospital industry habitually states that gross hospital charges are irrelevant since actual payments from Medicare and other payers are reimbursed via fixed rates. The question left unasked and unanswered is, if reimbursement rates are absolutely fixed, then why are not hospital gross chares – the ‘list prices’ – fixed and indexed to the same rate?”

“The Report”, p. 5

Exactly. What this Report found in its study of 238 hospitals across America was a shell game referred to as “The Health Care War Economy”:

“High hospital charges have provided ideological cover for health plans to raise once again premium rates by double digits – and to dramatically increase their profits – thus increasing health care costs for large and small employers and federal, state and local government agencies. This has prompted a number of businesses to scale back on the quality of the plan available for their employees and has been a significant contributor to the growing ranks of the uninsured whose only recourse to care is the hospital emergency room – the most expensive form of care. Hospitals then cost shift that economic burden to other payers by raising charges in so far as possible, particularly drug, medical supply and operating room charges, contributing to a self-perpetuating and self-defeating Health Care War Economy of more expensive care, less care, higher premium rates, and more uninsured.

This brings us full circle and is exactly what one should expect as the necessary outcome of the ongoing but unwinnable battle within the Health Care War Economy struggles among pharmaceutical corporations, insurers and hospitals as they do their best to exploit each other in a market care-blind to the nation’s health needs.”

The Report, pgs 14 – 15

This Report details in Table 9, pages 34 through 38, the average total billings-to-cost-ratio of the top 100 Hospitals by State. Some of the most egregious offenders, at one thousand seventy five percent above cost, are Tenet Healthcare (for-profit corporation that owns or leases at least 50 hospitals, $9 billion in 2009 sales), and Temple University in Pennsylvania (nonprofit 501(c)(3), CEO compensation for 2007 was $1.1 million) at nine hundred ninety percent above cost.

The Report reviewed lawsuits filed on behalf of patients who claimed they were unfairly treated:

Scott Ferguson, a retired artist without health insurance, was billed $66,900 for treatment of a heart condition at St. Anthony Central Hospital in Denver last December [2004]. If he had had insurance, his attorneys claim the tab would have been about $10,000.

The Report, p. 94

This, our standard industry-wide “health care” practice, indicates health care costs are not necessarily increasing (unless CEOs wants bigger bonuses, severance packages, and maybe a pony), but instead are artificially inflated and in an effort to maximize revenues from those least able to pay for it.

So what do hospitals do when the uninsured or those with limited insurance can’t pay? They aggressively pursue patients – for the inflated billings – by contracting with collection agencies that use any tactic available to secure payment. Many patients end up with ruined credit ratings, garnished wages, high-interest rate credit card debt, or bankrupt.

According to an online news agency, over 62% of bankruptcies filed last year were due to high medical bills, three-quarters of those people had medical insurance: “Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country” said Steffie Woolhander, M.D., of the Harvard Medical School (CNN.com 6/5/09).

So going back to the criteria for establishing and running a non profit 501(c)(3) entity, how does forcing people into poverty or insolvency by insisting on payment for a puffed up hospital bill advance the welfare of the public?

Under our current system, hospitals’ sources of revenue are multiple and costly to obtain. A great deal of overhead must be expended in the (timely) claim filing process in order to secure funds among various entities, to name a few:

(1) Medicare

(2) Medicaid

(3) TRICARE (military reimbursement to civilian hospitals);

(4) Matching State Medicaid

(5) SCHIP (States’ Children’s Hospital Insurance Plans)

(6) Charity Care,

(7) For-profit private insurance companies which all have their own processing procedures, paperwork, and deadlines

(8) Collection agencies

(9) Attorneys who have filed legal claims against patients.

The Patient Protection and Affordable Care Act, signed into law by President Obama in March, does nothing to stop this abusive health care practice; in fact it enables the dysfunction by forcing more people into it.

So what, as a nation, can we do?

The best solution is Universal Single Payer Health Care which considers health care a basic human right, “un-complicates” the system, and removes the profit motive.

(1) Universal – because everyone would be covered regardless of race, age, sex, employment or ability to pay. It would be publicly financed, privately delivered.

(2) Single Payer – because funding would originate from a single source, a small, fixed payroll tax as a percentage of wages which would be much smaller than what the majority of Americans now pay in insurance premiums (full disclaimer: LeBron James and Paris Hilton would pay more);

(3) Health Care – that is, actual accounting-determined-cost-controlled health care for individuals and not for the exploitation of hospitals, private profit-driven insurance conglomerates, and the pharmaceutical industries.

Under Universal Single Payer Health Care, hospitals would be paid a single sum, an amount that is equal to their annual operating costs. That’s it.

On the expense side, there would be no need for

(1) Billing

(2) Filing of claim forms

(3) Writing off uncollectible accounts,

(4) Collection costs

(5) Colorful glossy brochures

(6) Advertising

(7) Lobbying expenses

Of course there would have to be oversight to knock down those million-dollar compensation packages (think employment!).

The cost savings just from uncollectible accounts would be enough to open more hospitals (a review of 10 hospital’s financials showed they collectively wrote off over $212 million – think employment!).

Even better the States would not have to fund charity care, SCHIP, TRICARE, match Federal Medicaid dollars, and any other low-income specific health programs. Conservatively speaking the collective savings would be at least $60 billion.

So under Universal Single Payer Health Care, we are able to save billions of dollars, open new hospitals, increase employment, and streamline costs and funding.

Now that’s a change I wouldn’t mind receiving a letter about!

Originally posted on CommonSense2.com

Commissioners OK health rate plan

By Sarah Kliff
Politico
August 17, 2010

The National Association of Insurance Commissioners approved Tuesday morning (by a unanimous vote) a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.

While insurance commissioners moved forward unanimously, familiar fault lines emerged between consumer advocates and industry over the document and how it categorizes medical spending.

“In general, we are very pleased,” said NAIC consumer advocate Timothy Jost, a professor of health policy at Washington & Lee University. “The process has been very open and participatory. We feel like our concerns have been listened to.”

“The NAIC is conducting a transparent and thorough process as it develops the [medical loss ratio] MLR definition, but the current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care and fight fraud,” AHIP president Karen Ignagni said in a statement.

http://www.politico.com/news/stories/0810/41179.html

NAIC approved reporting form (blank):
http://www.naic.org/documents/index_health_reform_mlr_blanks_proposal.pdf

Letter from AHIP’s Karen Ignagni:
http://www.politico.com/static/PPM153_ahip_081510.html

The National Association of Insurance Commissioners (NAIC) has finally come to agreement on the reporting form that likely will be used to determine whether or not the private insurers are in compliance with the required medical loss ratios (MLRs). The agreement is being reported as a victory for health care consumers and a defeat for the private insurance industry, but this ignores the crucial overriding issue.

The debate was over how much of their administrative costs the private insurers would be able to pass off as quality improvements that could be classified as medical expenses. Such reclassifications would allow the insurers to spend more for other non-medical purposes such as marketing and profits. Much of their attempted overreach – some described in Karen Ignagni’s letter – was rejected.

This is not a victory for the health care consumer. We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purposes. Congress and the President rejected a model of reform – an improved Medicare for all – that would have eliminated much of this waste plus the waste of the excess administrative burden that the insurers place on physicians and hospitals. The insurers get to include the latter as medical costs, further padding their margins, but administrative waste doesn’t benefit anyone’s health.

With all of the attention being given to the details of implementing the Patient Protection and Affordable Care Act (PPACA), too many have forgotten about the fact that the financing model in PPACA is irreparably flawed and can never bring us affordable health care for everyone. Instead of frittering away our efforts in the peripheral skirmishes, we need to pull together and win this war.

The economic crisis and medical care usage

By Annamaria Lusardi, Daniel J. Schneider, Peter Tufano
National Bureau of Economic Research
Working Paper 15843
March, 2010

We use a unique, nationally representative cross-national dataset to document the reduction in individuals’ usage of routine non-emergency medical care in the midst of the economic crisis. A substantially larger fraction of Americans have reduced medical care than have individuals in Great Britain, Canada, France, and Germany, all countries with universal health care systems. At the national level, reductions in medical care are related to the degree to which individuals must pay for it, and within countries are strongly associated with exogenous shocks to wealth and employment.

http://www.nber.org/papers/w15843

This five-nation study of the impact of the financial crisis on usage of routine medical care demonstrates that both a decline in employment and a decline in wealth are strongly associated with reductions in medical care. But once again, the United States is an outlier.

U.S. citizens pay the highest out-of-pocket amounts for health care, and therefore were two to five times more likely than Europeans to reduce their use of health care. In difficult economic times, higher cost sharing has a greater negative impact on health care access.

The Patient Protection and Affordable Care Act (PPACA) will intensify this problem because most of the subsidized private plans will have low actuarial values, requiring larger deductibles, higher coinsurance (percentage of costs paid by the patient), and higher copayments (dollar amount paid by the patient).

The health care financing system should be designed to allow individuals to have the health care that they need without exposing them to financial hardship, and that protection certainly should extend into times of economic crises.

Now that PPACA has established underinsurance as the norm, we can anticipate greater reductions in necessary care, especially during difficult economic times. Or instead we could ensure that people receive the care that they need by replacing our financing system with a single payer national health program. As voters, it’s our choice.

Big and beleaguered: WellPoint’s bad image

By Emily Berry
American Medical News
August 16, 2010

Thus far, WellPoint and insurance trade group America’s Health Insurance Plans have responded to criticism about rate increases with variations on the same theme: Medical costs, driven by physicians and hospitals, are rising so dramatically that insurers cannot avoid raising rates.

The argument doesn’t appear to work if WellPoint and AHIP are trying to elicit sympathy or understanding from the public or policymakers.

As it went on the defensive using studies demonstrating higher medical costs, WellPoint reduced payment for physicians in most of its markets by double-digit percentages for certain procedures, and the cuts were across all specialties, said Susanne Madden, CEO of the consulting firm Verden Group in Nyack, N.Y.

“They’ve done a spectacular job destroying customer loyalty and physician loyalty at the same time, and they’re not making any friends in government,” she said. “They don’t seem to have a grasp on the fact that if they do not have physicians as allies in some way, shape or form, they’re going to have a hard time.”

If it cannot raise rates, WellPoint — and other national insurers — will have to cut costs, experts said. This is where physicians might be affected. WellPoint is likely to cut costs by further reducing payments for hospitals and physicians and restricting networks, experts said.

http://www.ama-assn.org/amednews/2010/08/16/bisa0816.htm

WellPoint’s phenomenal business success has been largely due to its ability to offer competitive premiums by limiting what it has had to pay out in health care benefits. Will WellPoint’s business model continue to be viable?

It has targeted its marketing to the healthy workforce and their young, healthy families, and to the portion of the individual market that can pass underwriting standards. Under the Patient Protection and Affordable Care Act (PPACA) WellPoint will no longer be able to exclude individuals with greater health care needs, neither by favorable selection nor by retroactive rescissions. Without other innovative cost controls, premium increases will be inevitable.

Under PPACA, WellPoint will also be required to provide a standard package of benefits, preventing them from reducing health care spending by cutting benefits. They will also be required to provide plans with tiered actuarial values, prohibiting them from requiring ever greater out-of-pocket cost sharing by the patient. Thus premiums will have to reflect the actual increases in health care costs.

It would be possible for WellPoint to slash reimbursement rates for physicians and hospitals, but that would be a terrible business decision wince it would risk a massive exodus from their provider networks.

It is likely that WellPoint and other insurers will establish more restrictive networks with providers who are willing to accept payment reductions in exchange for greater volume, but that loss of choice would certainly further alienate their plan subscribers, also threatening their market.

The plans may search for other innovations, including some of those in PPACA, but at this time there is little prospect that cost savings could be achieved without creating greater animosity amongst patients and providers.

To comply with PPACA, WellPoint will have to increase premiums and market primarily plans with low actuarial values of 60 or 70 percent, leaving excessive out-of-pocket costs for those with health care needs. The subsidies in PPACA are too small to prevent financial hardship, and there is little political will to expand the federal budget by increasing the subsidies.

The situation can only grow worse with time. The WellPoint model will inevitably end up in the trash heap of failed policies as it is replaced with a single payer national health program – a program that would meet the needs of patients and their health care professionals.