Posted on January 5, 2001

PNHP Comments on AAFP Reform


Lanny Copeland, MD
Chair, Task Force on Universal Coverage
American Academy of Family Physicians
2512 Westgate Blvd, #6
Albany, GA 31707

American Academy of Family Physicians
Attn: Health Care Coverage
11400 Tomahawk Creek Parkway
Leawood, Kansas 66211-2672

Dear Dr. Copeland,

Physicians for a National Health Program (PNHP) applauds the efforts of the AAFP Task Force on Universal Coverage in coming up with a draft proposal that is thoughtful, innovative, and bold.

We find the "guidelines" to be especially relevant and on target. In addition, we are extremely pleased that this proposal is truly for universal coverage, not for incremental steps or merely reducing the numbers of the uninsured.

The following comments on the Draft Proposal have been put together by family physicians in PNHP who have many years of caring for the uninsured and advocating for health care reform.� Some, like me, have worked with the uninsured in community and migrant health centers for over 20 years.� Other authors have worked in inner city hospitals and clinics or other parts of our tattered "safety net" for the sick poor.

While these comments come from a family physician perspective, they represent the views of our organization as a whole. PNHP has 9,000 members and includes physicians from every state and specialty, and a growing number of medical students determined to work for a system better for their future patients.
We hope that our comments will help improve the proposal. We have also e-mailed a copy of our comments to

We would be pleased to meet with you to discuss these comments or, more generally, strategies to promote real health care reform over the coming period. The struggle for universal health care is going to be a long and hard one and we share your belief that family physicians should play a leading role.


Bob LeBow, MD
Coordinator, PNHP Family Practice Working Group
Past President, PNHP
Medical Director, Terry Reilly Health Services
Boise, Idaho
Phone: (208) 466-7869

Comments on the American Academy of Family Physicians' (AAFP) Draft Health Care Coverage Proposal

Executive Summary:

* The AAFP Task Force deserves much credit for a proposal that is truly universal.
* PNHP agrees that the U.S. health care system is fundamentally flawed and has fragmented funding and delivery systems.
* The draft proposal's support for the concept of balancing individual needs and community resources is appropriate. The U.S. already spends over $4,000 per capita for health care, more than enough to provide care to all.
* The draft proposal's support for tax-based financing of health care is appropriate. However, PNHP would support expanding tax-based financing to cover all medically necessary care, including the draft proposal's "middle tier" of care. A separate "middle tier" of services would perpetuate disparities in access to care and fragmentation in the funding and delivery of care.
* PNHP agrees that "all people" in the U.S. should be covered, regardless of legal status.
* PNHP agrees that administrative costs should be minimized (see below).
* The draft proposal preserves a role for private insurance for a "middle tier" of benefits. In addition to perpetuating fragmentation, it sharply limits administrative savings (to less than 10% of the savings possible). It also perpetuates fraud and abuse as private insurers evade payment and attempt to shift costs to patients and government. PNHP suggests that the role of private insurance should be limited to "extra" services that are not medically necessary, such as private hospital rooms and cosmetic surgery. Sale of parallel private insurance that duplicates benefits for medically necessary care should be proscribed.
* Thus, PNHP suggests the proposal cover "all medically necessary" health care, not just "basic" and catastrophic coverage.
* PNHP feels that all federal programs should be comprehensively included in the plan, especially Medicare and the VA, in order to improve benefits for seniors and veterans, and to allow for more effective cost-containment mechanisms system-wide (e.g. globally budgeting hospitals - which also reduces overhead).
* PNHP agrees that no co-payments should be charged for primary and preventive services, but encourages AAFP to eliminate co-pays for all medically necessary care. Co-pays do not control costs, are expensive to administer, and reduce access to health care for the poor and the sick.
* Finally, PNHP believes that AAFP should ban or place a moratorium on investor-owned, for-profit health care providers. Investor-ownership pits physicians against patients; care for patients against shareholder profits (every dollar spent on clinical services is a "loss" to the profit-seeking entity).

On the Findings:

* We agree wholeheartedly with the "findings," especially as to the Task Force's conclusion that the insurance-based "philosophy" based on risk-avoidance is fundamentally flawed and must be changed, and that the degree of fragmentation of our current financing and delivery system is a significant barrier to addressing the problems. We also agree that system-wide change is needed, that the goal must be truly universal coverage, and that the "social good" concept is valid.

* As regards the four conceptual approaches, the "employer mandate" model as outlined resembles the solution recently proposed by Karen Davis, President of the Commonwealth Fund. We believe that this option would be very costly and perpetuate systems that are increasingly failing and expensive.

* The "individual mandate" approach again does little to reform our broken system. It leaves control over health care in the hands of the private insurance industry, and (given our experience with the uninsured) is totally unrealistic to reach those most in need.

* PNHP has always been a supporter of single-payer ("one risk pool") as the fair-est, most equitable and cost-effective way to finance universal coverage. We realize there are political challenges to this solution because of the opposition of the powerful HMO/insurance and pharmaceutical lobbies. However, we believe that by educating and mobilizing the public that these special interests can overcome. Also, these industries cynically use their vast resources (garnered from our health care premiums) to oppose any and all reforms, so pursuing a less comprehensive strategy does not confer any real advantage. Finally, with HMO premiums rising in the double digits, belying the myth of HMO "efficiency," the possibility of gaining business support for the most cost-effective reform ("one risk pool") is a distinct possibility.

* "Single Purchaser"- or vouchers- would do nothing to cure the ills of our present system. Cherry-picking andinsurance company control (based on the pricing of the product) would continue to prevail.

On the Guidelines:

Question: Are these the guidelines that we should follow in developing a plan for universal coverage?

Overall, with a few exceptions, yes. PNHP agrees that:

* (a) the current U.S. health system is fundamentally flawed, and that we as a society have a moral imperative to provide ethical care to individuals while providing responsible stewardship of community resources;
* (c) a uniform, outcome-based package of health services will be available to all, though we have a problem with the word "basic" (see below);
* (d) we will fund only evidence-based, high-quality, and cost-efficient health care services;
* (f) the system should balance the needs of the individual patient with the greater good of the community as a whole, and there need to be fiscal limitations;
* (g) sufficient funds for public health, research, and education are available to meet the nations' needs;
* (h) administrative costs should be minimized.

On (b) and (e) - and we will elaborate later - PNHP has a problem with the concept of "basic health services" as it applies in the draft proposal. We feel that the lack of coverage for the "in between" or "middle tier" services (specialist and hospital services not covered in the "catastrophic" part) are the weak point of this proposal. We will address this item below.

Program Elements and Fiscal Implications:

Question: What do you think of the overall approach and of the individual elements?

* PNHP strongly supports changing the source of funding from an employment-based system to a tax-based one. Current incentives in employment-based funding are based on costs rather than on the genuine health needs of employees. Small employers and the self-employed are also unduly penalized. A tax-based system would be simpler, more equitable, and easier to administer. Universal coverage would be much more difficult to attain without a tax-based system.

* Element I: "Basic health services": This is the part of the proposal with which PNHP has the greatest problem, especially given our members' extensive experience dealing with health care for the uninsured. Our comments are elaborated in several points below.

* PNHP agrees fully that there should be no co-payments or deductibles for "basic" services. We also advise that there be no co-payments for all medically necessary services, not just "basic" care. As the Rand study and other studies have shown (Rasell, "Cost Sharing in Health Insurance: A Re-examination," NEJM April 27, 1995) co-payments are true barriers to care - especially preventive care. We have seen patients delay or defer needed care, or not fill a prescription, because of co-payments and means-tested nominal fees (as low as $5 - $10). Patients often feel ashamed to come in when they can't pay a minimum charge - yet we would all agree that our poor, sick patients are the very ones we want to see most.

* The draft proposal defines "basic" as those "services...that most people need at some point in their lifetime": Would this also include the care our poor uninsured patients need, such as a cardiac catheterization, surgery to correct a prolapsed uterus or repair a torn knee ligament, neurological evaluation and treatment for a complex seizure disorder, cataract surgery, etc.? We're afraid our most vulnerable patients would continue to fall through the cracks.

* Those of us who have worked in the "safety net," e.g. in community and migrant health centers, feel that we're fairly well able to cover the primary (or "basic") health care needs of our patients, but when it comes to secondary care, which in the proposal seems to be defined as specialist care short of something catastrophic, we usually have to beg, borrow, and steal (so-to-speak) to get care for our patients. We don't see our patients as being able to go out on the market and purchase a plan or insurance to cover these "middle tier" needs, especially when they have multiple pre-existing conditions. Should we leave these patients (and their "in-between" needs) at the mercy of the for-profit insurance industry? We believe that this approach won't achieve the AAFP's goal of universal coverage. It will leave millions of patients underinsured, resulting in predictably delayed care, with larger expenses - and totally avoidable patient suffering -- in the long run. It will perpetuate multi-tiered care, where one patient will get a needed hip replacement, while the next patient, who is poor and without "middle tier" coverage, is sent home with a walker.

* PNHP believes that it makes more sense to cover all medically necessary care with a seamless, comprehensive benefit package. While the for-profit HMO/insurance and pharmaceutical industries will oppose this reform (as they do all reforms - witness the $30 million television advertising campaign the drug companies recently ran opposing a prescription drug benefit in Medicare), we believe physicians should place the interests of our patients first.

* As family physicians, we are trained to look at patients holistically. We don't see a patient's chronic mental illness as part of "catastrophic" coverage, their "pap" smear as "basic" and their congestive heart failure as "middle tier". We take care of the whole person during a visit. It's contrary to the philosophy of family medicine (and an administrative nightmare - see below) to create arbitrary categories.

* Should a plan cover all people as described above?: Absolutely. The plan should apply to all people in the U.S., including those who are undocumented. We have a commitment as physicians to care for every person when they need care. For public health reasons and to reduce the threat of treatable conditions becoming catastrophic it also makes sense to cover everyone.

* The draft proposal defines "basic" as services "most people" would need. What about the "basic" care people with rare conditions need to prevent complications? One of us has three patients with Fabry's disease, a fairly rare genetic disorder with severe consequences. Would they be excluded from new treatments (which could be expensive) as they become available? If they have a heart attack at age 40, their treatment would be covered under catastrophic coverage, but what about their "middle tier" medical care until then? There are hundreds of similar examples. We believe it would be simpler, and more ethical, to cover "all medically necessary services," and have an administrative body (with representatives from the NIH, the CDC, the public and the medical profession) define a seamless benefits package and meet periodically to evaluate new treatments and technology.

* Would the individual's financial participation - through co-payments, for example - discourage appropriate utilization of basic health services or simply discourage inappropriate utilization?: As we noted above, the medical literature and our experience show that such payments do discourage appropriate utilization and lead to delayed care. If we want appropriate access to primary care and (especially) prevention, co-payments are a mistake. We feel there should be less worry about inappropriate utilization. In primary care, those "inappropriate utilization" episodes are opportunities for prevention and improved continuity of care. Education with better patient information (a public health approach) is the path to take, not co-payments, to discourage inappropriate utilization.

* What process should be used to define basic benefits? We have already discussed the problems with both the definition and use of a "basic benefits" approach to health care reform. We gave some examples (above) which highlighted the vagueness and ambiguity of the "what most people need" criterion for basic benefits. The definition of "catastrophic" and "middle tier" care is just as problematic. Is all inpatient care considered catastrophic? How about a hernia repair as an outpatient? Colonoscopy for someone with positive stool hemoccults? An infertility work-up? Arthroscopy or an MRI ordered by an orthopedist for an injured knee? Would people who could not afford to buy private insurance (i.e. because of a low wage job or pre-existing conditions) for this "in-between" category be denied these kinds of procedures?

* It is more profitable for an insurer to cherry-pick patients in subtle ways than to provide care, even if rates are risk-adjusted. Also, insurers will exploit the arbitrary nature of the definition of "middle tier" to shift costs to patients and the government. This part of the draft proposal leaves the health system wide-open to continued fraud and abuse.

* PNHP feels we need to cover "all medically necessary" measures that are proven to be effective, not just "basic benefits" with a catastrophic caveat as this plan proposes. Otherwise, we will find ourselves in a quagmire of ambiguity, with little or no improvement from our current fragmented systems of health care financing and delivery. Moreover, the proposal could be interpreted as very self-serving for family practitioners, as it seems to indicate that the basic coverage would ensure payment for primary care practitioners, but (generally) not specialists. What if a gastroenterologist does EGD instead of a family practitioner? Would that be covered by the "basic" plan?

* As regards administrative savings, the savings projected by Lewin are tiny ($7.8 billion, less than ten percent of the $100 billion in administrative savings projected under single payer by the GAO and the CBO). These savings could be much greater, and the system much more effective and seamless, if everyone didn't have to re-enter the insurance market to buy their "in-between" or "middle-tier" insurance.

* Another part of the administrative waste in this proposal is that it maintains the Medicaid and CHIP programs to assure that this group has the "in-between" coverage. If the benefits package was seamless, these programs could be largely eliminated, increasing the administrative savings that could be used for clinical care. The sub-question of "Should physician payments be reduced to reflect lower administrative costs?": Yes, without a doubt, as long as the administrative office/etc. costs are truly diminished. It is doubtful that this would be the case if multiple systems of payment (many private insurance plans, basic plan, Medicaid, CHIP, Medicare, CHAMPUS) are retained.

Element 2: The Oversight Body:

What model of public/private oversight would be appropriate?: Oversight is critical at both the federal and state level. There should be representation from the public, public health, physicians, government agencies such as the CDC and the NIH, allied health professionals, and academic health centers. There should be substantial (perhaps half) representation that is non-medical, from the public. It could be modeled like a utility regulatory board, with decision-making authority, not just advisory status. And it should be empowered with setting and enforcing global budgets. PNHP is opposed to oversight by investor-owned interests, because that would be like "the wolf guarding the henhouse."

Element 3: Programs left in place:

Should some existing federal programs...remain as separate programs...or should these programs be eliminated? [And status of Medicaid] part of the universal coverage plan?

* PNHP believes that all federal programs should be folded into any proposal for universal coverage. The administrative savings could be increased if there were integration of the government health programs into the AAFP health plan, but probably only if the AAFP plan were expanded to cover "medically necessary and effective" treatment instead of "basic" and catastrophic services.

* There would be public resistance to integrating government programs into the AAFP proposal if the beneficiaries were offered worse benefits. Similarly, people in comprehensive private health plans might also object. As mentioned above, PNHP feels that the AAFP proposal should be upgraded to include a more comprehensive set of benefits, thus facilitating inclusion of people from federal programs as well as private plans. Also, allowing patients to choose and stay with their physicians is a major advantage of this proposal over existing health plans, but only if it includes choice and coverage of specialty care as well as primary care. Secure, comprehensive coverage that allows choice of physician would be attractive to the public and could be used to "sell" the program (for-profit HMOs would of course be opposed as they hope to expand their profits and share of the Medicaid/Medicare market).
* There have been many complaints from people about the current CHAMPUS and Indian Health Service programs. They seem to be insufficient and could probably be integrated into the AAFP plan without much complaint, and with added benefit to the people in these plans. The same could apply for the VA. To retain their usefulness for their beneficiaries, these programs could offer "extra" services not covered in the AAFP plan, such as social services, long-term care and rehabilitation, home visits by health teams, etc.

* The Medicaid program should be integrated into the AAFP plan, again with expanded benefits. Why duplicate bureaucracies, especially one like Medicaid with a separate bureaucracy in every state and beneficiaries who cycle in and out of the program, sometimes on a monthly basis? Continuity of care would be better with a seamless benefits package. Also, there wouldn't be the administrative nightmare of trying to determine which care is covered by Medicaid vs. the "basic" plan. Conversely, a Medicaid agency could be maintained to deal with "extra" benefits not covered under the AAFP plan, be it eyeglasses, durable medical equipment, transportation, etc., and these benefits could vary from state to state.

* PNHP believes Medicare should be included in any universal coverage plan. Medicare is in sore need of improved benefits. Shouldn't we be addressing the problems of Medicare if we're really interested in improving access for everyone? We see Medicare patients every day who postpone care, take medications every other day instead of every day, and cut corners because they can't afford the care we prescribe for them. Seniors spend close to 25% of their total income on health care despite Medicare. Can we ignore this? Can we really talk about "universal coverage and access" unless we deal with Medicare? Yes, it's a big political football, but the public supports Medicare, and it already has a funding mechanism. The AAFP plan is much superior to Medicare with regard to primary care, especially with respect to co-payments. But Medicare largely covers the "middle tier" care not in the current proposal. Integrating Medicare into "one risk pool" (such as a more comprehensive and seamless AAFP plan) or vice versa would also allow for more effective cost-containment (and administrative savings) system-wide.

* Consolidation of federal and state programs would allow increased administrative savings, much in excess of the Lewin estimate - savings that could be used to fund clinical health care. As a point of reference, the outgoing CEO of Aetna recently confirmed that administrative costs in the U.S. health system are about 25 percent of all health care costs (although we're tempted to think that if he admits to 25 percent, the truth is probably closer to 35 percent). We could cut that by half or more if we truly rationalized our payment system. Additional optional services could remain at the discretion of each state or program.

Element 4: Catastrophic Coverage:

Yes, in the absence of a truly comprehensive and seamless plan, there should be catastrophic coverage. One of the great inequities of our current system is the incredible financial burden a family must endure if they should be so unlucky to have a catastrophic health event. This burden currently applies in the U.S. not only to the uninsured, but to the underinsured as well. People in other countries shake their heads in disbelief that we tolerate such a situation.

* Should co-payments for catastrophic coverage be uniform or means-tested?
Neither. Co-payments and deductibles should be eliminated, especially in the case of chronic or catastrophic illness. Co-payments in these cases penalize the sick at the worst possible time in their lives. Not only are the patients too sick to work, but family members may also have to reduce their working hours to act as unpaid caregivers.

* Should catastrophic protection be provided in this way? PNHP feels strongly that there should be no out-of-pocket expenses for any necessary and effective medical care. Our experience with our low-income patients tells us that cost sharing is a burden. Even means-tested and capped out-of-pocket expenses are a major obstacle to access for families with little disposable income. Also, co-pays are administratively unwieldy and do not control health care costs.

Element 5: The "in-between" or "middle tier" services:

We gave examples in the section on "basic" coverage on how ambiguous and difficult the distinction of "middle tier" services would be. In addition, maintaining a separate tier covered by private insurers opens the door to fraud and abuse, as insurers "cherry pick" the healthy and cost shift expenditures for the sick onto patients and the government. Why perpetuate a system that is broken? Why keep a large portion of medical services under the old fragmented payment system with multiple tiers of care? The affluent will buy expensive plans; those who cannot afford them will scrape by with bare bones coverage, millions will continue to go without contrary to the goal of "universal coverage". What will insurers charge a person with angina to cover their "middle tier" of health care - and what lengths will they go to to deny coverage for any services they actually use. Finally, as we pointed out above, if we only endorse "basic" (primary) care as part of the plan, we family physicians could be perceived as self-serving

* [As an employer]... how likely would you be to offer...coverage [for non-covered] The link between employment and insurance is a historical accident that should not be maintained. This is a major flaw in the AAFP draft proposal, and should be remedied in the final version. Private employers pay for private insurance for less than half (43%) of Americans, and millions of Americans are uninsured because of the unfortunate link between insurance and employment. As family physicians, we know all too well the devastation caused by lack of insurance in our low-income patients - despite the fact that they are working two or three jobs.

* Those of us involved in purchasing insurance for our employees would try to price a plan, but it would be the same kind of game we play now, more or less at the mercy of the insurance companies, with ever more complex co-payments and deductibles. Once a plan is purchased, the insurer then denies paying for care, creating problems that are time consuming to resolve for us and our employees (and creates hassles for their physicians). With the basic and catastrophic parts in effect, why perpetuate the agony, increased complexity, and costly overhead of a "middle tier"?

* Besides sharply limiting administrative savings, maintaining a separate "middle tier" limits effective cost containment. As much as the guarantee of rising costs and a slice of the health care spending pie pleases insurers (and presumably this part of the proposal is intended to fend off their opposition) the HMO/insurers and drug companies will oppose the plan just as fiercely as they have other reforms.

* PNHP suggests that the AAFP have Lewin price out what it would cost to fund the "middle tier" through taxes as part of a unified system that would allow for improved continuity of care and fewer barriers to access. Administrative savings would be vastly increased, and cost-containment much more effective system-wide. The overall cost of a unified system should be much lower and help avoid fragmentation of care and administrative nightmares.

* Is it appropriate to leave to individuals whether to seek coverage for this tier of benefits? Should the plan incorporate individual accountability for patients' own health behaviors?

Part I: "Individual fiscal responsibility" is a concept that should have no place in the reform of health care. Health care is most ethically viewed as a social responsibility and a human right. The concept of the "irresponsible health care consumer" is a myth perpetuated by entrepreneurs and MBA's seeking to profit off the $1 trillion U.S. health care "market." As physicians, we need to debunk the myth of the patient as "greedy consumer" and the physician as "self-serving provider". Our relationship with our patients is not the same as the widget salesman to their customer - and we must not allow it to be reduced to that. A large measure of what needs to be accomplished in reform is to restore physicians' professionalism and eliminate the notion that a sick patient receiving care is somehow a "loss." Health care is a social "good." By putting forth a proposal for reform that is inclusive and comprehensive, and explicitly rejecting a corporate model of health care, the AAFP will be taking a large step in the right direction.

Part II: We affluent physicians often gripe about smokers, drinkers, drug-abusers, etc. Yet those of us with more experience realize that discriminating against people is a slippery slope. What about a physician (one of us) who bicycles in New York City or travels in malaria-infested rural West Africa? Or a person who does ice climbing or Class V rapids in a kayak? And how can we discriminate between a genetically-based mental illness and substance abuse? We should not include this type of "health behavior accountability," but provide the kind of educational, preventive, and rehabilitative services to help deal with these behaviors.

Element 6: The financing strategy

PNHP fully agrees with tax-based financing as the most equitable and efficient way to fund health care. The requirement that all employers participate will meet with resistance from some established business groups (e.g. the Chamber of Commerce), but others are likely to show renewed interest in health care reform. With HMO premiums rising 15-30% at many businesses this year, and the growing hassle and cost of managing employee health benefits, business can't afford to reject a proposal that will reduce their long-term costs out-of-hand.

The amount that employers and employees contribute could be changed over time. Gradually shifting more of the tax burden to income taxes (and having employers increase wages to account for their reduced contribution) would be one way to make the tax burden more progressive. PNHP supports either method.

One item that appears not to have been discussed in the proposal is the effect of the current tax-free benefit in present employer-paid health insurance. This benefit has been estimated to be a $100 billion subsidy from the government - i.e., money that would have been paid in taxes otherwise. The government could re-direct this money to pay for added services if this factor hasn't already been taken into account.

Element 7: State Administration:

What do you think of the fund distribution and the state administration provisions of this plan? PNHP feels that state-by-state (or maybe regional) administration makes sense as long as there are national guidelines to be followed and public oversight. We support negotiated fees (by the state or regional body) with the possibility of increased payments in areas where there is a shortage of physicians.