The Bush Administration's War Against Our Health
The Bush Administration’s War Against Our Health
by Nicholas Skala (Health Policy Research Associate), Physicians for a National Health Program
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The Bush Administration’s War Against Our Health
by Nicholas Skala (Health Policy Research Associate), Physicians for a National Health Program
CEPR Releases Report on Prescription Drug Research Economist Dean Baker examines alternatives to the drug patent system
CONTACT: Patrick McElwee, 202-387-5084
In a new report entitled, “Financing Drug Research: What Are the Issues?” Center for Economic and Policy Research (CEPR) Co-Director Dean Baker contributes to a growing public debate on alternatives to the current patent system as a mechanism to fund pharmaceutical research. Given the increasing burden on families and the economy of U.S. prescription drug prices, whose growth has been fueled in large part by government-granted monopolies to patent holders, several alternative mechanisms for funding bio-medical research have been proposed. Dr. Baker examines and rates four such proposals, and in the process articulates criteria by which any proposed mechanism should be evaluated.
Without some form of intervention in the market, such as granting and enforcing exclusive patent rights, economists agree that there would not be enough money to support pharmaceutical innovation.
However, Dr. Baker points out that, while the patent system is one method of intervention capable of generating funds for research and development, it also creates large economic distortions and inefficiency. Patent protection pushes drug prices far above the cost of production, often by 400 percent or more. Other distortions of the patent system include: unnecessary marketing expenses; a tendency to research duplicative, rather than breakthrough, drugs; neglect of fundamental bio-medical research unlikely to produce patentable products in the near future; and a perverse incentive for researchers to keep their research private, even preventing the public from becoming aware of potentially harmful side effects.
The four alternatives Dr. Baker examines include a proposal to require employers to contribute funds to drug researchers, a proposal to compensate patent holders based on the quality and extent of use of their drug, a proposal under which the government would purchase most drug patents and place them in the public domain, and a legislative proposal to establish a group of publicly supported pharmaceutical research centers, which would develop patents for public use.
Dr. Baker evaluates each of these alternatives, as well as the current patent system, based on ability to finance research, effect on the price of drugs, potential for political interference in research priorities, impact on international coordination, and incentives for excessive marketing, copycat research, and keeping research findings secret. Dr. Baker concludes that all proposed alternatives “hold clear advantages over the patent system,” in part because each would allow drugs to be sold in a competitive market unhindered by government-granted monopoly rights.
See the report: http://www.cepr.net/publications/patents_what_are_the_issues.htm
Or in PDF: http://www.cepr.net/publications/patents_what_are_the_issues_9-20.pdf
The Center for Economic and Policy Research is an independent, non-partisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people’s lives.
Letter to the Editor
The Washington Post
September 30, 2004
Last year I led researchers at the London School of Economics in testing whether the practice of reimporting prescription drugs in Europe saved consumers billions in drug costs…
Reimporting prescription medicines has flourished in the European Union because national health policies in some member countries, such as Greece, Italy and Portugal, have led to declines in the local prices of patent-protected prescription medicines — as much as 70 percent in some northern E.U. member states. Those countries include two of the five largest pharmaceutical markets in the world, Germany and Britain. This is similar to the pricing imbalance between the United States and Canada.
We looked at 19 top-selling drugs in six Northern European “destination countries” of imports — Denmark, Germany, the Netherlands, Norway, Sweden and Britain. The 19 drugs — which treat heart, gastrointestinal and mental health ailments — account for almost a quarter of all prescription drug sales in Europe.
Our study found combined sales of reimported versions of these drugs saved health care payers in Northern Europe a minuscule 0.3 percent to 3.6 percent of their annual drug budgets, or slightly more than $100 million. Moreover, these savings were not passed on to consumers, and drug prices in Northern and Southern Europe did not become more similar.
The biggest gains from selling imported drugs — more than $650 million, or 46 percent of the sales of all products studied — went straight to the repackagers.
Panos Kanavos
London
http://www.washingtonpost.com/wp-dyn/articles/A60984-2004Sep29.html
And…
Prescription-Drug Prices
By Richard G. Frank, Ph.D.
The New England Journal of Medicine
September 30, 2004
A key feature of the pharmaceutical industry is that drugs can be manufactured at a variable cost of pennies per pill, but drug companies incur high fixed research-and-development costs to bring new drugs to market. If manufacturers were paid prices that reflected their variable costs, as other industries are, the average cost of a drug would not be covered, and the companies would lose money. The implication is that with lower prices, drug-company profits will diminish and research-and-development efforts may be reduced, resulting in a diminished flow of new drugs. There is therefore a constant tension between drug policies that control today’s prices and those that promote tomorrow’s innovative products.
Prices for brand-name prescription drugs are 35 to 55 percent lower in other industrialized countries than in the United States. The central reason for these price differentials is that Canada and most European countries (13 of the 15 countries in Western Europe) directly regulate the prices of prescription drugs. High U.S. prices are said to be necessary to cover the costs of research and development for new and better drugs…
http://content.nejm.org/cgi/content/full/351/14/1375
And…
Financing Drug Research: What Are the Issues?
Center for Policy and Economic Research
By Dean Baker
September 21, 2004
The immediate cause of high drug prices is government granted patent monopolies, which allow drug companies to charge prices that are often 400 percent, or more, above competitive market prices.
Patent monopolies are one possible mechanism for financing prescription drug research. Rapidly increasing drug costs, and the economic distortions they imply, have led researchers to consider alternative mechanisms for financing drug research. This paper outlines some of the key issues in evaluating patents and other mechanisms for financing prescription drug research.
As economic theory predicts, government granted patent monopolies lead not only to deadweight efficiency losses due to the gap between the patent protected price and the competitive market price, but also to a variety of other distortions. Among these distortions are:
1) excessive marketing expenses, as firms seek to pursue the monopoly profits associated with patent protection - data from the industry suggests that marketing costs are currently comparable to the amount of money spent on research;
2) wasted research spending into duplicative drugs - industry data indicates that roughly two thirds of research spending goes to developing duplicative drugs rather than drugs that represent qualitative breakthroughs over existing drugs;
3) the neglect of research that is not likely to lead to patentable drugs;
4) concealing research findings in ways that impede the progress of research, and prevent the medical profession and the public from becoming aware of evidence that some drugs may not be effective, or could even be harmful.
This paper examines four alternatives to the patent system… All four of these proposals finance prescription drugs in ways that allow most drugs to be sold in a competitive market, without patent monopolies. These proposals also would eliminate many of the economic distortions created by the patent system.
These proposals, along with other plausible alternatives to the patent system, deserve serious consideration. Current projections for drug spending imply that patent supported prescription drug research will lead to ever larger distortions through time. For this reason, it is important to consciously select the best system for financing prescription drug research, not to just accept the patent system due to inertia.
http://www.cepr.net/publications/patents_what_are_the_issues.htm
Comment:
As I’ve said before, “We don’t need to reimport drugs from Canada; we need to import Canadian drug prices.”
The greatest contributor to perverse drug pricing in the United States is patent monopolies. Dean Baker explains the reasons that the pharmaceutical industry is providing sometimes questionable quality at unacceptably high prices. He then discusses alternatives to the patent monopolies that would significantly improve pricing and quality while still enabling most drugs to be sold in a competitive market.
Baker provides us with a starting point on the path towards attaining greater value in prescription drugs through more rational financing of drug research. Let’s start down that path… ASAP!
Business Wire
September 29, 2004
Golden Rule Customers Exceed $110 Million Saved in Health Savings Accounts; HSA Sales Reflect Growing Popularity of Lower-Cost Health Insurance
Golden Rule Insurance Company today announced that its customers have exceeded more than $110 million saved in tax-advantaged Health Savings Accounts (HSAs).
“On average, we find Golden Rule’s customers saving 45-55 percent on annual insurance premiums alone,” Andy Grim, Golden Rule vice president of marketing, said. “Our customers are getting the coverage they need without paying for coverage they don’t.”
Comment:
Step back and look at the broad picture. Imagine everyone having a health savings account (HSA) and a low cost, high deductible insurance plan. Now let’s fund our entire health care system, currently at $1.8 trillion, with the HSAs and high deductible plans. Keep in mind that 80% of health care costs are used by the 20% of individuals with serious acute and chronic disorders.
Current contributions for HSAs are capped at $2600 for individuals and $5150 for families. For illustrative purposes only, let’s assume that each individual has $2000 in an HSA. That means that the 294 million U.S. citizens would have $588 billion in HSAs. For the 20% with significant needs, their $117 billion would be rapidly depleted, having been spent of health care. The healthy 80% might use an average of $300 per person in incidental health care costs, depleting their accounts of $70 billion. The “beauty” of HSAs is that the $401 billion remaining in the HSAs of the 80% who are healthy will be converted into retirement pensions. That’s a great deal for the majority of individuals who remain healthy. But that removes about $400 billion from the $1.8 trillion that we are already spending.
HSAs will have funded $187 billion of the $1.8 trillion, leaving costs of $1.61 trillion for the catastrophic care of the 20% of individuals with greater needs. But after the HSA funds are removed from the equation, there is only $1.21 trillion left to pay for care that currently costs $1.61 trillion.
Where will the $400 billion shortfall come from? Not from most of those with greater needs since current health plans already fail to provide adequate financial security, and this would add an average additional burden of $6800 per person. The only practical solution would be to increase the premiums for the high deductible coverage to a level that would fund the full balance of the $1.8 trillion that we are spending.
There are two significant consequences of this. First, the low cost, high deductible plans would no longer be low cost. Second, there is a perversity of the fundamental principle of health insurance, in which funds of the healthy normally help to pay for care for the sick, in that, with HSAs, the funds of the sick help to pay for the retirement accounts of the healthy.
And that’s sick health policy!
Families USA
September 2004
In 2004, there were 14.3 million Americans whose health care costs totaled more than one-quarter of their earnings-up from 11.6 million in 2000, an increase of approximately 22.9 percent.
Among insured people, the number with health care costs in excess of one-quarter of their earnings rose from 8.4 million to 10.7 million between 2000 and 2004.
The result of (the) combination of higher premium costs and thinner coverage is that insured workers with serious illnesses, those with chronic conditions or disabilities, or those who experience a one-time medical crisis often find themselves in real financial trouble. In 2004, having health insurance does not necessarily guarantee protection against high medical bills. A growing number of insured workers are facing catastrophic health care costs.
http://www.familiesusa.org/site/DocServer?docID=4601&JServSessionIdr005=sf27qmna31.app26a
And…
Rising Health Costs, Medical Debt and Chronic Conditions
By Ha T. Tu
Center for Studying Health System Change
September 2004
Between 2001 and 2003, the proportion of people with high out-of-pocket costs relative to income increased overall. The increase occurred almost completely within the privately insured group, and the increase was most pronounced for low-income people. The proportion of low-income, privately insured, chronically ill people with out-of-pocket costs exceeding 5 percent of family income increased from 28 percent in 2001 to 42 percent in 2003-an increase of 50 percent. This change likely reflects the impact of increased patient cost sharing for insured people, as well as the fact that health care costs increased at a much faster pace than incomes. By 2003, low-income, chronically ill people covered by private insurance had become as likely as their low-income, uninsured counterparts to spend at least 5 percent of income on health care.
http://www.hschange.org/CONTENT/706/
Comment:
Currently the rhetoric on health care reform centers around two
approaches. Some recommend that patients be “empowered” to pay more for
their own care. Only the “let them eat cake” ideologues can be serious about
this approach since all objective studies confirm that the negative impact
on the health of nation would be catastrophic.
Those who are serious about trying to address the unmet health care needs of
the nation are supporting expansion of our current fragmented system of
funding care, especially providing incentives to expand private health care
coverage. But these two reports add to the plethora of studies confirming
that private plans no longer protect individuals against catastrophic
financial losses, nor do they ensure adequate access to essential care.
We will attain our goals of comprehensive coverage for everyone only when we
address the real problems facing us. We must eliminate the $300 billion
waste in administrative excesses. We must provide incentives for a strong
primary care base which has been shown to improve quality while decreasing
costs. We must budget capital improvements to prevent the excess high-tech
capacity which results in much higher costs but with unimproved or even
detrimental outcomes. We’ll never be able to make these essential changes
until we establish a universal risk pool from which funds can be allocated
on a rational basis.
We don’t need more of the flawed coverage provided by private plans. We need
single-payer national health insurance. Nothing less will work.
(Please share this message with others. Thanks.)
Don McCanne
By Milt Freudenheim
The New York Times
September 25, 2004
The Bush administration has broken new ground in its “faith-based” initiative, this time by offering federal employees a Catholic health plan that specifically excludes payment for contraceptives, abortion, sterilization and artificial insemination.
The new plan, announced last week, combines two White House priorities. It is part of a $1 billion project seeking to involve religious organizations in all types of federal social programs. At the same time, the plan is a new form of coverage - a health savings account combined with high-deductible coverage - that is being promoted as a centerpiece of President Bush’s health care policy.
…the new OSF health savings account plan will not cover contraceptives. But because the money in the savings account itself is controlled by the enrolled member, the member could use the account to pay for an abortion or for contraceptives, according to federal officials.
Kay Coles James, the director of the Office of Personnel Management (which manages the Federal Employee Health Benefits Plan, the nation’s largest purchaser of health insurance), said last week that the new additions to federal employees’ health benefits would “empower” workers to control their medical spending.
But some critics expressed concern that this trend in health care might grow into a wider phenomenon. Is this “explicit denial” the first step in “denying federal employees a normal benefit that has been traditional for 30 years?” asked Philip R. Lee, a professor of social medicine at the University of California, San Francisco and a former assistant secretary for health in the Clinton administration. “Is this simply the opening wedge?”
http://www.nytimes.com/2004/09/25/business/25care.html
Comment:
Today’s comments will not address the controversial issue of health plan coverage of reproductive services, other than to dismiss that issue with a restatement of our belief that we need a universal system that covers all beneficial services. Setting aside the issue of faith-based coverage, there is another extremely crucial health policy issue in this new FEHBP plan.
Much has already been said about the inadequacies of health savings accounts(HSAs) for those with major acute or chronic disorders. For these individuals, the HSAs would be rapidly depleted, and then the individual would be dependent on the high deductible plan that complements the HSA. We’ve already seen that these plans are not indemnity plans that cover all additional expenses, but they are managed care PPO plans with significant out-of-pocket expenses, restricted provider choices, and severe financial penalties for using non-contracted providers. But what is alarming is that the supporters of this version of consumer-directed health care (CDHC) call for increasing options in coverage. Why pay for services that you will not use? Parenthetically, this was Gov. Schwarzenegger’s message this week when he vetoed the bill requiring California health plans to include maternity benefits.
The FEHBP program has required plans to provide a minimum level of benefits. This new plan breaks ground by shifting the coverage for reproductive services from the high deductible plan to the individual’s own HSA. Very soon we can anticipate that patient-consumers will be further empowered by being offered a greater variety of high deductible plans with even lower premiums made possible by excluding benefits which they know or at least they hope that they will never need.
This is part of the agenda to break up all risk pools, whether public or private, and shift the responsibility of funding health care delivery in the United States. Instead of funding care in an equitable manner from a common pool based on solidarity shared with our fellow man, health care will become ever more the responsibility of the individual. The 20% of individuals who use 80% of all health care will find that the exclusions that made their premiums affordable will make their access to health care unaffordable.
Are we really a society that believes that we should cut the anchor ropes for those unfortunate enough to have significant medical needs and simply allow them to drift off into the seas of ill health, poverty, despair, and even death?
Do Bush and Kerry Offer a Cure?
by Milton Fisk
A PERMANENT CRISIS has plagued American health care since 1981. It began with Ronald Reagan, whose tax cuts led to cuts in Medicaid as well as more stringent eligibility rules. The crisis has continued, even through the boom years presided over by Bill Clinton, to the present.
The current presidential campaign offers an opportunity to discuss the crisis and to agitate for resolving it. Yet the major political parties, the AFL-CIO, and other organizations like the AARP show little interest in opening a debate on whether still more incremental change—like computerizing health records or expanding
eligibility for the Children’s Health Insurance Program—will serve to end the crisis.
Dennis Kucinich, even after getting little support in the preference primaries for the Democratic Party presidential candidate, is trying to spark such a debate. Kucinich has emphasized the need for health care reform that would end the role of commercial insurers.
Al Sharpton and Carol Moseley Braun, who both dropped out of the race for Democratic presidential candidate, and now Ralph Nader, an independent candidate for president, have also contributed to the revival of the single-payer idea.
If in addition to these efforts, the few state AFL-CIOs and unions like AFSCME, UAW and UNITE that support basic change in the health industry were to become active on the issue, then indeed a debate on the crisis might ensue that goes beyond talk of incremental change.
Instead, we are being treated in the campaign to a celebration of “choice,” with each candidate claiming his tinkering with the industry would give people the most choice.
President Bush advocates personal Health Savings Accounts, pointing out that they give their owners the choice of whether they want to spend their HSA on health care or keep it to gather tax-free interest. Senator John Kerry wants to give any citizen the same choice a congressperson has, under the Federal Employees Health Benefit (FEHB) Program, among various plans from different
insurers, assuming he or she can pay for one of those plans.
The real issue posed by the crisis is not choice between one insurer and another or between one doctor and another. The issue, rather, is having affordable insurance. The choices the presidential candidates celebrate are the choices of individuals about their individual well-being. All these “choices” are
irrelevant to the individuals who can’t afford insurance.
The choice to have affordable insurance in our society, though, is not one that individuals make on their own nor is it merely about their individual well-being. It is a choice that we as a society must make together about the good of our society. This would be a choice worth celebrating—if only we had it.
Why the Disaster?
The health care crisis has two sides. One is the upward spiral of premium rates charged by commercial health insurers; the other is the increase of the uninsured, within only two decades, by some 15 million up to 44 million.
Moreover, in response to higher premiums for comprehensive plans, people have bought cheaper health plans with higher deductibles and co-payments and fewer covered conditions. Thus, even those who have insurance are often underinsured.
The roots of the crisis are in dispute. Some blame it on the high cost of malpractice insurance; some say it comes from the success of disgruntled consumers in ending various cost-saving features of managed care; some explain it as due to the expensive new technology that patients ask for; and still others say insurers are catching up on the profits they failed to make in the mid-1990s.
These accounts either fail to explain the depth of the crisis or explain only its short-term aspects. Working people—those employed as well as the frequently unemployed —are most affected by the crisis. Employers are shifting the costs
of health insurance to employees. The working poor can only hope they might qualify for the under-funded Medicaid program.
Those eligible for Medicare are under-insured since illness could leave them with devastating co-payments; and even when George W.Bush’s drug program finally kicks in many of them will still pay large amounts for medicines. A change is needed that would eliminate all these vulnerabilities.
Fear of Going Public
In view of the inflationary tendencies unleashed by commercial insurance, it is remarkable that the main presidential contenders still rely on commercial insurance to reduce health care costs. In his campaign for the presidency, John Kerry’s grand gesture concerning health care has been to promise to make a program universally available that is now available to the Congress and
nine million federal employees, the Federal Employees Health Benefits Program.
FEHB’s advantage is the large pool over which it spreads risk and hence keeps premiums lower than they might be for smaller pools. For those who are not federal employees, Kerry would set up a separate pool, which could attract significantly higher numbers.
Individuals as well as large and small employers could join the plan. If you or your employer were in the plan, there would be a variety of commercial insurers among whom you could choose. In an urban setting, you might have the option of choosing between an HMO, which charges a capitation fee but sends you no bills for services; a PPO, which gives discounts for services coming from a specific list of providers; and a non-PPO.
A federal employee in Indianapolis, for example, can now enroll in the M*Plan, a local HMO, for $336 a month to cover his or her family; or among other options, the family can enroll in one of several national Blue Cross/BlueShield fee-for-service plans for $245 a month. There would be a great deal more out-of-pocket expenditure with the cheaper plan.
What about people who can’t afford to join the proposed FEHB-style program? Outside this program, Senator Kerry would have the federal government pay for the cost of 20 million children enrolled in Medicaid in exchange for the states’ insuring both children in the Children’s Health Insurance Program, which would be expanded up to 300% of poverty, and working parents of children in Medicaid or CHIP up to 200% of poverty.
These expansions would put the United States nearer to universal insurance coverage. The Kerry plan does not require that they take place through public insurance, however, even though public funds would foot the bill.
A Tangled Web
Kerry wants employers who now provide money for their employees’ health insurance to continue to do so. To keep the cost of doing so from rising rapidly, he proposes that the government reimburse employee benefit plans by 75% of the expenses of catastrophic illnesses costing more than $50,000.
This would reduce insurance claims for catastrophic illnesses, thereby lowering premiums. The condition Kerry puts on this reimbursement is that employers use the resultant savings in insurance costs to reduce premiums paid by employees.
This reimbursement plan locks employee benefit plans in place without asking whether they might be part of the problem. Even with reimbursement of catastrophic expenses, the costs of employee health benefits will continue to rise due to the non-competitive nature of insurers.
Where employees are insured under employer self-insured plans, the costs of health benefits will also rise since the costs allowed by commercial insurers will act as the norm. As costs of health benefits rise, employees will have to battle with employers over threatened cuts in health benefits, as occurred recently with grocery workers in California.
The struggle for affordable health care, though, should be one that engages us all for the purpose of reaching a society-wide commitment, rather than one that pits a few workers at a time against powerful employers in relatively isolated struggles.
The main weakness in the Kerry plan is, though, the assumption that keeping commercial insurers in it will create the competition to control the rise of premiums. To stick with this assumption, he has to create a patchwork of measures in order to give the impression he is solving the problem.
The FEHB-style program does spread the risk. But the advantage of spreading risk diminishes quickly as the pool gets larger. In controlling insurance costs, spreading risk will only take us so far: It is easy to cancel out the savings from spreading risk by raising the unit charges made by providers.
This brings us right back to the non-competitive nature of insurers stemming from their need for an added boost to their profits from higher premiums. Even with millions of people in an FEHB-style program, the participating insurers will seek to make profits from increasing premiums. It is less painful for them to raise premiums when they can point to the increasing charges providers are making.
Kerry’s bold gesture doesn’t, then, touch the root problem that with profit-making insurers, premiums will continue to rise leaving a large number of uninsured. He, or those who wrote his proposal, surely know this, but they fear the consequences of advocating public insurance as the alternative.
Lag Effect and Hostile Intermediary
Shouldn’t, though, having individual choices keep both medical costs and insurance rates down? According to advocates of competition, with only one insurer trying to get my business, that insurer has no incentive to put pressure on health care providers to keep their charges for my services down.
The providers will get what they charge since the insurer has only to raise the premium rate. My insurance is important to me, so I’ll follow along paying higher premiums until I can no longer afford them.
Following this logic, we should have at least a second insurer who will also want my business. This insurer will try to take business away from the first one by charging a lower premium. This will force the first insurer to lower premiums as well.
These competing insurers will tell health providers that they have to lower their charges in order to get fully reimbursed. As a result, medical costs will go down and more people will be able to afford health insurance.
This is a fairy tale, of course, since selling insurance is different from selling most other things. Say you build a house and the suppliers of materials are charging more than previously. When you sell the house, you will include the additional cost in the price precisely so you can pay the bills from the suppliers.
Raising the price, however, gives you no additional money to play around with since suppliers won’t wait to be paid.
The case of insurance is different because of a “lag effect.” When I pay a higher premium to my health insurer due to health providers’ raising the prices of their services, these providers, unlike the suppliers of building materials, don’t expect to get the additional amount immediately: It may be weeks, months, or if I’m lucky, years before I have to go to a health provider.
When I pay my premium, that commits my insurer to cover my risk of incurring future expenses instead of my previously incurred expenses. The lag effect opens up the possibility that the insurer will become a hostile intermediary, working against my interests as an insured party.
The insurer can profit from investing—usually in stocks, bonds or real estate—a premium payment prior to the time a claim is made to pay for a covered service. This of itself doesn’t harm the insured.
Yet from this fact it follows that the amount by which the premium rises to cover increased provider charges can also be invested to make a profit. Insurers derive from this the perverse incentive to allow providers’ charges to rise; for once those charges rise insurers have an excuse to raise premiums, thereby providing them additional funds to invest.
Wouldn’t competition over premiums among insurers be strong enough to overwhelm this perverse incentive and hence keep insurers from acquiescing in higher and higher medical costs? It would indeed; but the health insurance industry cannot afford such competition.It relies for an important part of its profit on taking advantage of the lag effect to invest the higher premiums that increased medical charges seem to legitimate.
There is a reason why the profits derived from this acquiescence in rising provider charges are important. The lag effect in health insurance is shorter than it is in life insurance and liability insurance. One goes to the doctor more frequently than one has automobile accidents and one only dies once. In health insurance, then, a great deal of liquidity is called for, leaving less money for investment. Thus profits in those other areas of insurance tend to be higher.
How then do health insurers compensate for this drawback? They must do something to attract investors to buy their stocks. In competing for investors with insurers in other areas, health insurers need to make extra profits from raising premiums as provider charges rise.
A Shell Game
From time to time, frustration with rising premiums reaches such intensity that health insurers are led to take measures. The most obvious measure at their disposal is the subordination of providers to the insurance function.
An attempt of this kind took place in the 1980s and 1990s, with the corporatization of the health care industry. If successful, this would have freed insurers to compete on premiums or capitation fees. With providers under control, they would accept less remuneration so that stabilizing insurance rates would not lower insurers’ profits.
Providers, though, turned out not to be so easy to control. The result was a return to a truce among insurers based on accepting rising premiums as their way of life.
There is an important spillover from this non-competitive way of life among health insurers. If they can increase premiums when providers charge more without a competitive challenge, then they might be able to increase them even faster than providers are increasing their charges. All will profit, thereby discouraging any competitor to break ranks.
These gratuitous increases in premiums have actually become a cyclical feature in the history of health insurers. Premiums rose dramatically in the late 1980s leading to profits that were 44% higher than only several years earlier. Health insurance profits came down in 1990 as investments by the industry in real estate and stock lost value.
A decade later, starting in 2000, premiums were again increasing faster than payments to providers and insurers were showing large gains in profits. Apologists said that the insurers were merely catching up for their low profits of the mid-1990s. No competitor challenged the gentlemen’s agreement to have catch-up.
Meanwhile medical equipment, laboratory tests, consultations, and hospital rooms are priced high in the light of the knowledge that the demand for them coming through insurance will not be significantly lowered. The message, then, is that we commit ourselves to a continuing inflation in health care costs so long as commercial insurance plays a major role.
Just Say No to Insurance?
For its part the Bush right wing, despite its defense of the commercial health insurers, feels instinctively that there is something socialistic about insurance, which involves not pure self-reliance, but reliance on others to help us cover our risk of incurring expenses through illness.
Relying on others makes us profligate, according to these ideologues. When we undergo a medical procedure and are covered by insurance, we may never know how expensive it is. We don’t really care: we’re covered! George W. Bush philosophizes that with insurance “there is no demand for better prices.”
This is what I have been arguing here. Bush, however, sees the other-reliant individual as the culprit, whereas I’m pointing the finger at the commercial insurer. To make the individual self-reliant, Bush wants him or her to swear off insurance, at least partially. One can do this by setting up a tax-deferred
Health Savings Account (HSA) of $5,000 to cover many of the ordinary expenses needed to keep a family healthy.
One will think a second time about sending Johnny to the doctor with his earache. One may even scowl at the doctor when she recommends a panel of blood tests for Susie that will cost $1,000. If Johnny gets well at home and Susie doesn’t get the tests, then one’s HSA stays in tact and continues producing tax-free interest. With demand for health care reduced by self-rationing of this kind, the theory predicts that our doctors and laboratories will start charging less.
The Bush campaign knows that HSAs by themselves are not enough. People want to rely on others to pay for catastrophic health expenses. Thus along with HSAs, Bush says there will have to be insurance for major illnesses. This would be a high-deductible insurance with an accompanying HSA at hand to pay the greater part of the deductible.
Premiums for such a major medical plan would cost 30% to 50% less than those for a traditional low deductible plan. Insurance would then have been made more affordable.
HSAs plus major medical insurance make sense if one is healthy. If instead, one needs considerable health care, it may be cheaper to join a traditional plan in order to avoid using one’s HSA up every year to pay the high deductible of the major medical insurance. But HSAs will have a serious impact on the affordability of traditional plans, by taking the healthy who choose the HSA-plus-major-medical route out of traditional plans. Even if only a quarter of all those insured opt for HSAs, the premiums of traditional low-deductible insurance would go up by an estimated 50-60%.
There will be a greater concentration of the not so healthy left in the traditional plans. At the same time, those who opt for HSAs, while they may be healthier, will have an incentive to keep their savings accounts rather than spend them on physical checkups; they may also delay getting treatment for a condition until it calls for expensive treatment.
Their short-term thrift merely makes it more likely that they will incur expenses for which their major medical insurance will be needed. The tendency over time will be to make that insurance less affordable.
Bush’s proposal to promote HSAs parallels several of his other programs. First, it serves the same individualism that is appealed to in regard to Individual Retirement Accounts, with which he hopes to privatize Social Security. Like the retirement accounts, HSAs roll back cooperation in favor of self-reliance.
Second, they would promote individual choice between saving money and getting health care, in the way that the recent Bush reform of Medicare promotes choice between HMOs and fee for service. Third, HSAs entail a mini-tax cut, with the savings being tax-deferred until 65 when one would cash in the account as one became eligible for Medicare, with the interest on the savings being tax-free.
The Real Choice
Government—federal, state and local—already contributes half the money that is expended on health care in the United States. Its contribution is slightly more than that of employers for their employees’ health benefits.
Would it be possible to use what government already spends together with what employers already spend on employees’ health care as an adequate financial base for a more reasonable system? Specifically, could that sum support universal comprehensive coverage and at the same time rein in the inflation in charges coming from providers?
By most estimates, it could. There is, though, an important condition. That sum would be sufficient provided a major part of it does not go to commercial insurers as intermediaries, whose interest in profits from rising premiums overrides the interest the public has in controlling the charges made by providers.
Yet as far as the goal of controlling costs goes, neither Kerry nor Bush see anything problematic in using private insurers as intermediaries between either government or employer funds and providers.
Time to Decide
We are at a critical juncture. To save what we have in the way of public insurance, it has to be expanded to cover everyone. If the public insurance system is left as an isolated part of the overall insurance system, it will be underfunded, blamed for failure, and ultimately destroyed.
Medicare is in the crosshairs of the Bush sharpshooters. They want to use, not just part, but all of the funds it is based on to buy private insurance. This would be one of the largest privatizations in history. It would add, on a continuing basis, huge sums to the capital that circulates in the private financial system.
It is critical, then, that there should be a counter-offensive that would expand rather than privatize public insurance. The expanded system would be a Medicare For All. Defensive efforts will not suffice to protect Medicare.
Consider the sorry history of one such effort. In order to defend Medicare from rising costs, Medicare began during the Clinton period to pay private managed care companies to care for the elderly. That failed with the big insurers involved in managed care dumping millions of the elderly.
Now in the Bush period the Congress, still wanting to defend Medicare from rising costs, is having Medicare pay the same big insurers for managed care 7% more to enroll an elderly person than the per capita spending for traditional Medicare. In a twist of irony, this increase was used, shortly after its passage, to show that Medicare will be bankrupt by 2019.
We need, then, a public insurer whose mission would be to pay fairly for services coming from those professionals and institutions whose work is to provide health care, or to provide assistance or guidance in controlling behavior and environments which tend to create needs for health care. The likelihood that the services will be compensated fairly is increased when democratic
procedures are used.
Is, though, the idea of national health insurance realistic? This is the question people ask, often implying that they see a need for a public insurer as a way of putting an end to the seemingly permanent crisis. To respond, one must begin by recognizing the obstacles. In order of rising importance they are: distortions,
bribery, and inertia.
We can answer the distortions that the press distributes from places like the rightwing Fraser Institute in Vancouver about long waiting lists for MRIs in Canada. They are nowhere near as long as the lists of uninsured in the United States.
As to bribery, we can ask candidates for the Congress how much they have received from health sector corporations, and whether they plan to receive any more before the crisis of unaffordable insurance is really resolved.
The prods to reducing citizens’ inertia are multiplying: Employers are cutting health benefits, Medicaid is being cut back, Medicare funds are being squandered in subsidies to HMOs, and health corporations are regularly found guilty of fraudulent practices. Increasing numbers of people are no longer willing to accept the patchwork reforms offered by presidential candidates.
Politicians are fond of saying that everyone should have a health plan as good as the one that Congress has. John Kerry, for instance, says that “all Americans should have access to the same affordable coverage policies that Members of
Congress get today,” and he proposes that any individual or business should be able to buy into it. This plan, which is available to Congress and all other employees of the Federal Government, is the Federal Employees Health Benefit Plan (FEHBP).
By John A. Nyman
Health Affairs
September/October 2004
Excerpts:
Insurers call the change in behavior that occurs when a person becomes insured “moral hazard.” Moral hazard occurs, for example, when an insured person spends an extra day in the hospital or purchases some procedure that he or she would not otherwise have purchased. Insurers originally viewed moral hazard unfavorably because it often meant that they paid out more in benefits than expected when setting premiums - hence the negative term.
Economists also viewed moral hazard negatively because, under the conventional theory, the additional health care spending generated by insurance represents a welfare loss to society. When people become insured, insurance pays for their care. In economists’ view, insurance is reducing the price of care to zero. When the price is reduced in this way, consumers purchase more health care than they would have purchased at the normal market prices-this is the moral hazard. But because consumers purchase care when the price drops to zero that they would not have purchased at the market price, economists interpret this behavior as revealing that the value of this care to consumers is less than the market price. The additional care, however, is still costly to produce. The difference between the high cost of the resources devoted to producing this care (reflected in the high market price) and its low apparent value to insured consumers (reflected in the low insurance price) represents an inefficiency. Thus, health care spending increases with insurance, but the value of this care is less than its cost, generating an inefficiency that economists call the “moral-hazard welfare loss.”
Conventional insurance theory also provided the policy solution: Impose coinsurance payments and deductibles to increase the price of medical care to insured consumers and reduce these inefficient expenditures. In the 1970s many insurers adopted copayments to reduce health care spending. In the 1980s and 1990s economists also promoted utilization review and capitated payments to providers as further ways to reduce moral hazard. The managed health care system we have now is largely a product of this theory.
A fundamental ambiguity exists, however, in the welfare implications of moral hazard, which economists have, perhaps, always suspected but could never voice because they did not have the appropriate theory to explain it. That is, conventional theory makes sense for health care such as cosmetic surgery or drugs to improve sexual functioning or designer-style prescription sunglasses, but not for serious treatments such as coronary bypass operations or organ transplants. Clearly, insured people would purchase more of all these procedures than would uninsured people, so they would all be considered moral hazard to insurers.
Mark Pauly, one of the architects of the conventional insurance theory, recognized this ambiguity as early as 1983. He pointed out that his original theory of moral-hazard welfare loss was intended to apply only to “routine physician’s visits, prescriptions, dental care, and the like” and that “the relevant theory, empirical evidence and policy analysis for moral hazard in the case of serious illness has not been developed. This is one of the most serious omissions in the current literature.” This distinction, however, has been lost on most health economists. For example, health economics textbook writers continue to present moral hazard as being unambiguously welfare decreasing, and health policy analysts continue to use the conventional theory in developing their recommendations for optimal cost-sharing rates, managed care programs, and other policies designed to curb U.S. health care costs.
If insurers actually transferred income to an ill person in one lump-sum payment, the welfare implications of moral hazard would be unambiguous.
Health insurance policies, however, generally pay off by paying for the ill person’s care. The welfare ambiguity arises because of this payoff mechanism. …we cannot tell whether this additional moral-hazard spending represents a welfare loss or a welfare gain.
…there is some unknown portion of patients who would respond to insurance paying for their care in exactly the same way that they would respond to insurance paying them a cashier’s check for the same amount. For these patients, moral hazard is efficient and represents a welfare gain.
Implications For Policy
Cost sharing often not appropriate: Because some of the moral hazard that was considered a welfare loss under the conventional theory must now be reclassified as a welfare gain, health insurance under the new theory is generally much more valuable to consumers than economists have thought it was. Many of the more serious procedures - organ transplants; trauma care; many cancer treatments;and, indeed, a large portion of the costly, life-saving medical care that people could only afford to purchase with insurance - would now be tallied in a welfare gain column instead of a welfare loss column when determining the value of insurance. Because such a large portion of moral hazard spending represents a welfare gain, the recategorization of losses as gains dramatically changes the welfare calculations.
The new theory suggests that cost-sharing policies have been directed at problems that largely do not exist. Furthermore, it suggests instead that coinsurance is too blunt a policy instrument and that it should be refined to focus only on the inefficient moral hazard. Moral hazard that generates welfare gains should be left alone or even encouraged. That is, for those with serious illnesses, whose care might also be associated with a great deal of pain and suffering anyway, it makes little sense to apply copayments.
Subsidizing insurance premiums is beneficial: The new theory suggests that health insurance generally makes the consumer better off. Therefore, the subsidies that encourage consumers to purchase insurance voluntarily, or a national health insurance program for the entire U.S. population, would improve society’s welfare.
High prices are harmful: …under conventional theory, high health care prices are not bad. Indeed, a few economists have even argued that high prices should be encouraged because they reduce moral hazard. …according to conventional theory, any reduction of moral hazard is a welfare gain. Under the new theory, the high prices that providers charge because they have market power would again be considered harmful. With the new theory… economists would be able to revert to the standard analysis that monopoly pricing causes an undesirable reduction in use, even for the insured.
More than anything else, the new theory suggests that health insurance provides an economywide redistribution of income from those who remain healthy to those who become ill. Those who become ill use this income either to cover the costs of health care that they would otherwise purchase, or to purchase more care, often care that they would not be able to afford without insurance. Those who remain healthy simply pay into the system, but they do so voluntarily because everyone has a chance of becoming ill. Because people value the additional income they receive from insurance when they become ill more than they value the income they lose when they pay a premium and remain healthy, and because everyone has in theory an equal chance of becoming ill, this national redistribution of income from the healthy to the ill is efficient and increases the welfare of society. Thus, the new theory identifies efficiency as a new justification for adopting some form of national health insurance.
http://content.healthaffairs.org/cgi/content/abstract/23/5/194
Comment: Although steeped in the rhetoric of health policy economists, the concepts presented are fundamental to the health care reform movement. It is imperative that we have a solid grasp of the issues.
The decades old Rand studies are still frequently cited to show that cost sharing through deductibles, copayments and coinsurance is effective in reducing health care costs. Cost sharing has been widely adopted in response to concerns about rising health care costs. Some features of managed care were designed to further reduce utilization of health care services. Largely ignored has been the well documented fact that this reduction included a reduction in the utilization of truly beneficial services. Avoiding the “moral hazard” has proven to be too blunt of a cost containment tool, even though it is still widely supported.
Today, the consumer-directed health care (CDHC) movement expands on that concept. The supporters of CDHC and health savings accounts (HSAs) contend that the moral hazard is eliminated because individuals will not spend funds on care that they perceive to have a value less than its cost. A major flaw in this concept is that individuals with major acute or chronic problems would rapidly deplete their funds. CDHC supporters state that catastrophic coverage would then provide an umbrella to cover the losses. But these plans are high deductible, managed care PPO plans which provide protection that is about as effective as a sieve. Coverage under these plans has already proven to be inadequate to protect against significant financial loss or even bankruptcy. Again, this tool is too blunt because it prevents the delivery of welfare-increasing health care.
There are other mechanisms to reduce ineffective, welfare-reducing care that are much more precisely targeted. Pricing can be improved through negotiation with providers which takes into consideration legitimate costs and fair profits. Excess capacity which results in higher spending without a commensurate improvement in outcomes can be controlled through planning and budgeting of capital improvements. Physicians who inappropriately upcode or who provide an excessive frequency or intensity of services can be identified as outliers and provided with education opportunities or subjected to punitive measures if refractory to the educational process.
Global budgeting can slow the expansion of health care services down to levels closer to inflation and growth of the GDP. The $1.8 trillion that we are spending should be sufficient to ensure that there is adequate capacity in our system to meet our needs for beneficial services.
John Nyman has provided us with an invaluable contribution to the health policy literature. As he says, “There is a new argument for national health insurance: efficiency.”
Robin McKie, science editor
The Observer - Sunday September 19, 2004
http://observer.guardian.co.uk/international/story/
0,6903,1307825,00.html
Bloated, blue-collar Americans - gorged on diets of fries and burgers, but denied their share of US riches - are bringing the nation’s steady rise in life expectancy to a grinding halt.
Twenty years ago, the US, the richest nation on the planet, led the world’s longevity league. Today, American women rank only 19th, while males can manage only 28th place, alongside men from Brunei.
These startling figures are blamed by researchers on two key factors: obesity, and inequality of health care. A man born in a poor area of Washington can have a life expectancy that is 40 years less than a woman in a prosperous neighbourhood only a few blocks away, for example.
‘A look at the Americans’ health reveals astonishing inequalities in our society,’ state Professor Lawrence Jacobs of Minnesota University and Professor James Morone, of Brown University, Rhode Island, in the journal American Prospect .
Their paper is one of a recent swathe of studies that have uncovered a shocking truth: America, once the home of the world’s best-fed, longest-lived people, is now a divided nation made up of a rich elite and a large underclass of poor, ill-fed, often obese, men and women who are dying early.
In another newly published paper, statisticians at Boston College reveal that in France, Japan and Switzerland, men and women aged 65 now live several years longer than they do in the US. Indeed, America only just scrapes above Mexico and most East European nations.
This decline is astonishing given America’s wealth. Not only is it Earth’s richest nation, it devotes more gross domestic product - 13 per cent - to health care than any other developed nation. Switzerland comes next with 10 per cent; Britain spends 7 per cent. As the Boston group - Alicia Munnell, Robert Hatch and James Lee - point out: ‘The richer a country is, the more resources it can dedicate to education, medical and other goods and services associated with great longevity.’ The result in every other developed country has been an unbroken rise in life expectancy since 1960.
But this formula no longer applies to America, where life expectancy’s rise has slowed but not yet stopped, because resources are now so unevenly distributed. When the Boston College group compared men and women in America’s top 10 per cent wage bracket with those in the bottom ten per cent, they found the former group earned 17 times more than the latter. In Japan, Switzerland and Norway, this ratio is only five-to-one.
Jacobs and Morone state: ‘Check-ups, screenings and vaccinations save lives, improve well-being, and are shockingly uneven [in America]. Well-insured people get assigned hospital beds; the uninsured get patched up and sent back to the streets.’ For poor Americans, health service provision is little better than that in third world nations. ‘People die younger in Harlem than in Bangladesh,’ report Jacobs and Morone.
Consumption of alcohol, tobacco and food can also have a huge impact on life expectancy. The first two factors are not involved with America’s longevity crisis. Smoking and drinking are modest compared with Europe. Food consumption is a different matter, however, for the US has experienced an explosion in obesity rates in the past 20 years. As a result, 34 per cent of all women in the US are obese compared with 4 per cent in Japan. For men, the figures are 28 and 2 per cent respectively.
‘US obesity rates jumped in the 1980s and 1990s, and the vast majority of the population affected by obesity had not yet reached age 65 by 2000,’ state the Boston group. ‘As the large baby boom cohort begins to turn 65 in coming years, a stronger connection between obesity rates and life expectancy may emerge.’
In other words, as the nation’s middle-aged fatties reach retirement age, more and more will start to die out. Life expectancy in the US could then actually go into decline.
The Inquirer
Sep. 17, 2004
Waiting list for health care surges in Pa.
By Marian Uhlman
The waiting list for adults trying to get cheap government health coverage in Pennsylvania has jumped by a third since February, and in July topped 100,000 people for the first time, setting a record for the two-year-old program.
Experts see the surge as indicating a further decline of health insurance paid by businesses, which have been gradually cutting back benefits and raising costs for workers for several years.
The Pennsylvania Insurance Department launched the adultBasic insurance program two years ago in response to the growing ranks of uninsured adults.
The program dwindled to 37,000 people in August - the lowest number since November 2002 - because of budget uncertainties earlier this year.
The enrollees make too much money for the government’s medical assistance
program, but their income is too modest to pay for private insurance.
About 97,000 people are… on the waiting list, according to the state Insurance Department. The wait has been about 16 months. About 10,000 more people apply each month.
AdultBasic “is a Band-Aid,” said Kate Sorensen, health organizer for the Philadelphia Unemployment Project. “There has to be a more concerted effort
to deal with health care.”
http://www.philly.com/mld/philly/living/health/9684191.htm
Comment: Innumerable incremental measures, such as Pennsylvania’s adultBasic, have not been effective in even stabilizing the level of insurance coverage as the numbers of uninsured continue to increase. Other nations may struggle with queues for non-urgent services, but none of them condone queues for any health care coverage whatsoever. Our queues are criminally negligent, or at least they should be illegal.
As if the failure to adequately address the problem of increasing numbers of
uninsured were not enough, a Zogby poll last week revealed that 56% of Americans are now “personally affected” by health care costs. The 84% who do
have insurance now believe that health care costs are the number health care
concern. Middle America has been impacted.
Cost is an issue. Most current proposals for reform do not really address costs, in spite of the rhetoric, but rather only infuse more funds into our flawed system. The only approach currently under serious consideration that would work to reduce costs is to expand consumer-directed models of reform. The tragedy of this approach is that these models work by making essential health care services unaffordable, especially for those who have the greatest needs. That is the most inhumane policy approach that can be devised to contain costs.
There is tremendous waste in our system that is recoverable, but only if we adopt structural reforms that will improve our resource allocation. Prices in the United States are much higher than in other nations, pharmaceuticals being only one obvious example. Prices can be negotiated to ensure that only legitimate costs and fair profits are funded.
The well documented administrative excesses due to our fragmented system of
funding care are enormous and could be recovered by changing to a single
payer.
The tremendous technological excesses that are not beneficial, and sometimes
even detrimental, could be reduced by two measures. A strong primary care
base has been demonstrated to provide higher quality at lower cost. Providing incentives to strengthen the primary care base while reducing excessive rewards for high tech care would improve resource utilization. Excess capacity has also been demonstrated to increase the frequency and intensity of services without a commensurate benefit in health care outcomes. Planning and budgeting of capital improvements would reduce waste while ensuring adequate capacity to prevent excessive queues.
This is not rocket science. Through our tax system we’re already paying enough to fund the finest health care system in the world. But by international standards our health care delivery system is characterized by mediocrity, and affordable access to care is the worst of all industrialized nations. We are providing our government with the health care funds needed, but we are not demanding accountability for the use of those funds. We should hang our heads in shame.
Don McCanne
(Please share this message with others.)
By Randi F. Marshall
Rising health care costs and shrinking coverage have prompted a significant majority of Americans to support government regulation - or even universal health care, according to a survey released yesterday.
Two-thirds of those surveyed said they supported a health care “guarantee,” similar to the Canadian or British systems, according to the survey, which was issued by Results for America, a division of the Civil Society Institute, a think tank based in Newtown, Mass.
Additionally, 78 percent of Americans advocate government regulation of health care, similar to utilities such as gas and water, the survey found.
“What this survey shows is a nation in the grips of a health care crisis,” said Civil Society Institute president Pam Solo. “Americans are now prepared to embrace some tough ideas.”
That’s certainly true for Plainview resident Jeffrey Rosen. As a vice president for a retail company, Rosen, who is married and has two children, watched his employer’s health care costs rise 18 percent in the past year. As a result, Rosen is seeing fewer benefits, higher deductibles and a co-payment that has gone from $10 to $25 in the past five years.
“It just gets harder and harder and harder,” Rosen said. “But it doesn’t matter what it costs; I have to spend it.”
He said he expects the United States to head toward a socialized medicine system within 10 to 15 years.
“You have no choice,” he said. “You can’t deprive people of medical coverage.”
The Civil Society Institute says it is a nonprofit, independent organization that attempts to focus on social issues such as health care, education and the environment. Solo is a social activist and grassroots advocate who has focused on issues such as national health care, stem cell research and global warming.
The institute’s survey of 1,020 adults showed that while 85 percent of respondents have health insurance, the majority of them either have seen their coverage cut or their costs rise. That represents about 100 million Americans, according to the institute.
The survey’s results, particularly on the rising cost of health care, have been echoed by other experts and research groups. The Kaiser Family Foundation just announced its findings that health care premiums rose by double digits for the fourth year in a row in 2004.
“Health insurance is becoming increasingly unaffordable in our country, especially for small employers,” said Kaiser president Drew Altman at a Washington, D.C., news conference last week. “We unfortunately should expect the ranks of the uninsured to continue to pick up.”
Nearly 20 percent said they skip or reduce dosages of their medications because they cannot afford their prescription drugs.
That translates into more than 20 million Americans, said Wayne Russum, senior researcher with Opinion Research Corp., which conducted and analyzed the survey.
As a result, more and more Americans are turning to Canada and other countries to buy their medications. More than a third are either purchasing or would consider purchasing their prescription drugs from Canada or elsewhere, the survey found. Russum said 6 percent - or as many as 10 million Americans - have bought their medications abroad. Among them are Rosen’s parents, who live in Florida and order their prescription drugs via mail-order, at a third of what it would cost here, Rosen said.
Solo said the American public was ahead of Washington politicians in their concern for health care costs.
She said, “The longer our leaders fail to take steps … the more millions of Americans will be squeezed out of our health care system and left out in the cold.”
For Immediate Release:
September 14, 2004
Contacts:
Dr. Jerry Earll
Phone:(202) 895-0122
Email: jearll@thewashingtonhome.org
Nick Skala
(312) 782-6006
1.6 Million More Americans Uninsured, Millions More “Underinsured”
Statement of Dr. Jerry Earll on the Uninsured
Washington, DC. – The recent report by the U.S. Census Bureau on the uninsured brought sad news. The number of uninsured Americans climbed dramatically to 45.0 million (15.6 percent of the population) in 2003, an increase of 1.4 million. The increase would have been much greater if Medicaid enrollment had not been expanded to an additional 2.4 million Americans. Children make up 8.4 million of the uninsured, a number that has not budged despite the expansion of the Children’s Health Insurance Program. In the state of Texas, a shocking one-fourth of the population has no health care insurance.
Businesses are dropping health coverage as a benefit for their workers in response to continually escalating costs, up 60 percent since 2001. A fall in the percentage of Americans with employer-sponsored insurance (from 65 percent in 2001 to 60.4 percent this year) accounted for most of the increase in uninsured. Health insurance premiums are now so high that they often exceed a family’s mortgage payments. Family coverage averages almost $10,000 a year.
In our nation’s capital, the uninsured scramble for health care since the closure of the public hospital, DC General. It is not only the indigent. Middle class Americans make up a growing share of the uninsured, and tens of millions more are “underinsured.” We regularly see patients who refuse to go to the emergency room for needed evaluation because of the cost. 18,000 Americans die every year because of lack of health care, and one million middle class families go bankrupt for medical bills. Death and bankruptcy – that is real terror for any family!
David Broder’s recent description of the American health care system in a “downward death spiral” remains accurate. Americans are being offered tea cups to bail out the Titanic. Proposals for “consumer directed health care,” “health savings accounts” and “taking ownership” will neither help the uninsured nor control rising costs: They are cruel hoaxes when you do not own anything. Americans already pay the highest out-of-pocket costs in the world, so shifting more costs onto “consumers” will simply add to the heavy financial burden faced by the ill. Our nation is already spending more than enough money to pay for health care for all, but nearly one-third of every dollar is squandered on private insurance paperwork and overhead.
It is time for all physicians to become active in health policy and the movement for single payer national health insurance. Single payer could save enough on administrative costs to cover all the uninsured and upgrade benefits for everyone, including prescription medications. It is our duty as physicians to promote an effective remedy to the crisis and wise stewardship of health resources. Please join me in this effort.
#####
Dr. Jerry Earll is a Professor in the Department of Medicine at Georgetown University and the Director of the Washington Home and Hospice in Washington, DC. He served as a Colonel in the US Medical Corps (1958-1979).
Physicians for a National Health Program was founded in 1987 and has over 12,000 physician members in every specialty and state. For information or additional contacts, please call Nick Skala at (312) 782-6006.
America is wonderful - a mixture of Disney World and Lake Woebegone. You remember Garrison Keilor’s home where all the men are good looking and all the children are above average. In a recent poll review in Provider (Sep. 2004) - a majority of baby boomers believe they are not going to need ongoing health care during their retirement years . Fact: Only 1/3 will drop dead during their first heart attack. Even Bill Clinton got caught needing health care.
Only 14 % of adults between the ages of 50 and 65 believe they will ever need day to day assistance or long term care (nursing home). Fact: Forty three percent will wind up in a nursing home - even when you go to assisted living there is probably a 50 % chance you will graduate to a nursing home - often correlated with when you run out of funds.
Sixty two percent plan to use medicare to pay for long term care services. Fact: - medicare does not pay for nursing home care other than brief rehabilitation programs. Forty per cent expect to use health insurance for their extended care - described as a total misconception of those resources - even if you were lucky enough to have insurance.
Not convinced about Lake Woebegone yet, try this! Twenty percent of the U.S. population believes they are in the top 1 % of income tax brackets. No wonder it does not bother many people when it is mentioned that nearly 50 % of the tax cut went to the upper 1%.
The poll described at the beginning of this note was done by computer on line - suggesting that the group might be above average in education and resources and are much less likely to be in the 45 million who have no health care and the 83 million who have inadequate health care or were without insurance for considerable time during the last two years.
The nation watched survival and reality shows during the conventions, just as big media predicted. This decade will decide how your children and grand children will live - even if they will live. Isn’t 18,000 deaths from lack of health care enough reality? Enough survival? These dramas are playing out every day in our non affluent homes, on the streets and in the emergency rooms. If physicians do not help the public to understand this and even remain uninformed themselves, who will help? Please remember that we pay for universal health care and do not get it! Get it?? Jerry Earll M.D.
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The Albuquerque Tribune
September 13, 2004
Women: Health care is in crisis
By J. D. Bullington
The National Association of Women Business Owners (NAWBO) has become increasingly outspoken on health care policy…
The NAWBO position doesn’t address whether a government-run, single-payer health care system should be studied. However, several prominent NAWBO members, including past presidents, say it’s time for universal, government-run health care to be put on the table as an option for consideration.
Samantha Lapin, former NAWBO president and CEO of POD Inc., an Albuquerque computer services company, says: “I’m the last person that would have ever considered looking at universal health care, single-payer, socialized medicine - call it what you want. But the more I learn about the health care system, and the more I hear the health care industry say costs will keep rising, and there is no end in sight, then I think we’ve gotten to the position where we have to keep all of our options open and every proposal on the table.”
Another former NAWBO president, Karen Urbieliewicz, principal of her own accounting firm, largely agrees with Lapin’s assessment of the health care industry and the growing financial burden on small businesses.
“The rising costs of the medical system are out of control,” she said. “I’ve shopped for alternatives like catastrophic coverage and health savings accounts, but these products are priced higher than regular health insurance coverage. We need to look at and reevaluate the entire health care system.”
Another active NAWBO member is Edna Lopez, CEO and president of COMPA Industries, a staff augmentation and program management company with 168 employees. Lopez is also president of the Hispanic Women’s Council.
“A single-payer system used to be unattractive and ridiculous to us. But we’re in a desperate situation, where health premium increases are hurting our businesses. We’re at a point now where we have to look at all other options.”
Lapin, who was named New Mexico’s 2004 Small Business Person of the Year by
the U.S. Small Business Administration, sums up the frustration many women
in business feel toward health care: “Maybe a single-payer system isn’t viable, but we don’t know, because we haven’t discussed it.”
“Is there an alternative? What is the alternative? I can’t find it. Can you?”
http://www.abqtrib.com/archives/business04/091304_business_jdcol.shtml
Comment: It is time to put all options on the table. But that is what is feared the most by the vested interests that are diverting our health care dollars into their own coffers. These vested interests can’t find an alternative to single payer that makes any sense if the goal is to provide everyone with affordable access to comprehensive care.
Go ahead and put all options on the table and then study them. I’ve done that. And, as Ms. Lapin says, I can’t find the alternative either.
Don McCanne
Teamsters President Calls for National Health Insurance
Speech to Detroit Economic Club Focuses on Taxes, Health Care, Trade, Pensions
Press Release, Teamsters web site September 13, 2004
(Detroit, MI) - International Brotherhood of Teamsters General President Jim Hoffa today outlined a four-point plan to restore the American economy in a speech to the Detroit Economic Club.
“It is based upon my experience in reaching out and talking to American workers that I come today to speak about the crisis our nation faces,” Hoffa stated. “It’s a multi-faced economic crisis that is hurting millions of Americans. It is a crisis that is destroying the unity that our nation needs in this time of global terrorism. It’s a tax policy crisis. It’s a health care crisis. It’s a trade crisis. It’s a crisis of retirement security. And, it’s a crisis of wages and jobs.”
Hoffa outlined policy solutions in each crisis area culminating with a call for the American business community to join with organized labor to change the tax system, create a national healthcare plan, revamp our trade policy and support government intervention to protect pensions and retirement security.
“It’s time to create a nationwide business-labor coalition to solve the healthcare crisis once and for all,” Hoffa said. “We need a national healthcare system and we need it now. We can’t afford to wait any longer.”
Hoffa continued on trade, “We are destroying the markets that are necessary to sustain demand. And the biggest market, we are destroying is right here in the United States where the middle class has less and less disposable income. Our trade crisis demands that labor and business forge a solution that puts the American economy first.”
“There’s too much at stake to ignore these issues. We have a responsibility as leaders to keep America strong and safe for future generations,” Hoffa concluded. “Together, we must put America back to work and secure our economic future. I call on you to join me in restoring the American Dream.”
The International Brotherhood of Teamsters represents more than 1.4 million hardworking men and women throughout North America.
The Albuquerque Tribune
September 13, 2004
By J. D. Bullington
The National Association of Women Business Owners (NAWBO) has become increasingly outspoken on health care policy…
The NAWBO position doesn’t address whether a government-run, single-payer health care system should be studied. However, several prominent NAWBO members, including past presidents, say it’s time for universal, government-run health care to be put on the table as an option for consideration.
Samantha Lapin, former NAWBO president and CEO of POD Inc., an Albuquerque computer services company, says: “I’m the last person that would have ever considered looking at universal health care, single-payer, socialized medicine - call it what you want. But the more I learn about the health care system, and the more I hear the health care industry say costs will keep rising, and there is no end in sight, then I think we’ve gotten to the position where we have to keep all of our options open and every proposal on the table.”
Another former NAWBO president, Karen Urbieliewicz, principal of her own accounting firm, largely agrees with Lapin’s assessment of the health care industry and the growing financial burden on small businesses.
“The rising costs of the medical system are out of control,” she said. “I’ve shopped for alternatives like catastrophic coverage and health savings accounts, but these products are priced higher than regular health insurance coverage. We need to look at and reevaluate the entire health care system.”
Another active NAWBO member is Edna Lopez, CEO and president of COMPA Industries, a staff augmentation and program management company with 168 employees. Lopez is also president of the Hispanic Women’s Council.
“A single-payer system used to be unattractive and ridiculous to us. But we’re in a desperate situation, where health premium increases are hurting our businesses. We’re at a point now where we have to look at all other options.”
Lapin, who was named New Mexico’s 2004 Small Business Person of the Year by the U.S. Small Business Administration, sums up the frustration many women in business feel toward health care: “Maybe a single-payer system isn’t viable, but we don’t know, because we haven’t discussed it.”
“Is there an alternative? What is the alternative? I can’t find it. Can you?”
Comment: It is time to put all options on the table. But that is what is feared the most by the vested interests that are diverting our health care dollars into their own coffers. These vested interests can’t find an alternative to single payer that makes any sense if the goal is to provide everyone with affordable access to comprehensive care.
Go ahead and put all options on the table and then study them. I’ve done that. And, as Ms. Lapin says, I can’t find the alternative either.
Health Affairs
September 9, 2004
Health Benefits In 2004: Four Years Of Double-Digit Premium Increases Take Their Toll On Coverage Five million fewer jobs provided health insurance in 2004 than in 2001, this new analysis finds.
By Jon Gabel, Gary Claxton, Isadora Gil, Jeremy Pickreign, Heidi Whitmore,Erin Holve, Benjamin Finder, Samantha Hawkins, and Diane Rowland
Health insurance premium increases:
Premiums increased 11.2 percent from spring 2003 to 2004, making 2004 the fourth consecutive year of double-digit premium increases. Premium increases outpaced the economy-wide rate of inflation and increase in workers’ hourly earnings by almost nine percentage points. During the past four years,the cost of health insurance has increased 59 percent.
Cost of coverage:
The average monthly cost of single coverage rose to $308 ($3,695 annually) for single coverage and to $829 ($9,950 annually) for family coverage in 2004.
Employee cost sharing:
Contributions for family coverage rose from $201 in 2003 to $222 in 2004, an increase of 10 percent.
Interest in new plan arrangements:
There has been considerable interest in “consumer-driven health plans” over the past few years. A common approach pairs a plan with a relatively high deductible (such as $1,000) with a savings account option.
Availability of coverage:
The offer rate among small employers continues to drift downward, with just 63 percent of small firms offering coverage in 2004, compared with 65 percent in 2003 and 68 percent in 2000 and 2001. The offer rate among large employers remains high at 99 percent.
Employers’ attitudes and views about the future:
Although it appears that relatively few employers are engaged in explicit practices that could discourage the take-up of family coverage, more than 40 percent of all firms, including more than 72 percent of large firms, reported that they are very or somewhat likely to increase the percentage of the premium that employees must contribute for family coverage.
Outlook for the future:
More employers are familiar with and offer consumer-driven health plans In 2004 than in 2003. A growing number of workers are employed in firms with the option to enroll in such a plan. Increased interest in high-deductible plans suggests that this trend will continue.
…monthly contributions for health insurance, deductibles, and copayments have risen in absolute dollars over the past four years. Most importantly, after four years of double-digit premium increases, the cost of health coverage has risen to levels that have further eroded the already tattered employer-based system.
http://content.healthaffairs.org/cgi/content/full/hlthaff.23.5.200/DC1
Comment: How much more erosion of the tattered employer-based system are we going to accept before we decide that must enact structural changes that could ensure that everyone would have affordable access to comprehensive health care?
Friday, September 10, 2004 (SF Chronicle)
Health care’s reality
by David Lazarus
The original article can be found on SFGate.com here:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/09/10/BUGU58MFDG1.DTL
denial \di-nI-l\noun: a psychological defense mechanism in which confrontation with a personal problem or with reality is avoided by denying the existence of the problem or reality..
Is the U.S. health care system working? Here are the facts:
— The number of Americans lacking health insurance rose last year to a record 45 million from 43.6 million in 2002, according to the latest census figures.
— About 5 million fewer jobs now provide health insurance than just three years ago, according to a newly released Kaiser Family Foundation survey.
— For jobs that do provide coverage, insurance premiums climbed 11.2 percent this year, or five times faster than both inflation and average U.S. workers’ salaries.
— Since 2001, premiums for family coverage have soared by almost 60 percent, compared with a 9.7 percent increase in consumer prices and a 12.3 percent gain in wages.
— More than half of companies with at least 200 workers say it’s very likely they will raise employee contributions to health coverage in the near future.
Yet despite such clear evidence of a health care system in crisis, neither President Bush nor Democratic challenger John Kerry has called for meaningful change in how Americans receive medical treatment.
Instead, both candidates favor keeping the current system intact while using taxpayer funds to expand the reach of the insurance industry.
“To expand a system that’s not working is absolute insanity,” said Don McCanne, a Southern California doctor and former president of Physicians for a National Health Program, a 12,000-strong organization advocating medical coverage for all Americans.
The real solution, McCanne and other health care activists believe, is creation of a so-called single-payer system in the United States.
Under such a system, similar to Canada’s state-backed insurance network, any American would be able to receive treatment from any doctor at any hospital nationwide.
It’s not so far-fetched. Federal and state taxes, along with tax subsidies for businesses, already account for about 60 percent of the nearly $1.8 trillion expected to be spent this year on health care in the United States, primarily through Medicare and Medicaid.
For the remaining 40 percent of health care spending, Physicians for a National Health Program advocates replacing private-sector insurance plans with a government-run program that would allocate funds to medical facilities.
A payroll tax of about 7 percent would replace all other employer expenses for medical costs, and an income tax of about 2 percent would replace employees’ current insurance premiums, co-pays, deductibles and other out-of- pocket expenses.
Such a system not only would work — as has been demonstrated in countries that already have single-payer plans — it would be far cheaper to administer than the existing health care system.
Harvard Medical School researchers determined earlier this year that about a quarter of all health care spending in the United States is now squandered on bureaucratic overhead, such as clerical staff at doctors’ offices to process a vast array of insurance forms.
Under a standardized single-payer system, the researchers estimated, annual administrative costs would be slashed by more than $280 billion. This represents enough money to insure all Americans now lacking coverage and to allow millions of underinsured people to improve their quality of care.
Refinements would be necessary to ensure cost controls and quality. A 2001 study, for example, found that Canadians requiring elective surgery wait an average 16 weeks before reaching an operating table. That would have to be improved upon.
But we’ll never know unless we try.
“It won’t be easy,” observed Kevin Grumbach, chairman of UCSF Medical School’s Department of Family and Community Medicine and a longtime backer of universal health care.
“You’re up against formidable special interests,” he said. “The insurance industry, the pharmaceutical industry — everybody making outrageous profits at the expense of delivering rational care to people.”
It should be noted that Canada didn’t rush into a single-payer plan. It experimented with the system on a province-by-province basis, beginning with Saskatchewan in 1946, before implementing it nationwide 25 years later.
State Sen. Sheila Kuehl, D-Santa Monica, believes California is the ideal proving ground to demonstrate that a single-payer system can work in this country as well.
She’s introduced legislation, SB921, which would insure every Californian under a single-payer plan and save the state about $14 billion in annual administrative costs. The bill was approved by the Assembly Health Committee in June by a vote of 12-5.
However, even if signed into law — which no one expects any time soon — SB921 still would require passage of federal legislation allowing state health authorities to serve as a conduit for Medicare funds.
“That’s going to be difficult under this president and this Congress,” Kuehl acknowledged. “The interests of business take precedence at the moment.”
She thinks this will change. First, though, political leaders will have to stop being in denial about the dysfunctional state of the current health care system.
“We’re often in denial about things we don’t know how to solve,” Kuehl said. “But I’m hopeful. Single-payer is so much more efficient and so much more effective. People will see that.”
When they finally accept reality, that is.
David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.” Send tips or feedback to
dlazarus@sfchronicle.com.
Copyright 2004 SF Chronicle
Jewish Journal of Greater Los Angeles, September 2004
Israel Has Rx for U.S. Health Careby
Mordechai Shani
Israel and the United States each have successes and failures in their respective health care systems, but the younger of the modern nations, rooted in its tradition of helping the needy, has much to teach its American ally. When it comes to some of the most important issues facing the American health care system today - universal health care, administrative costs and establishing a national health basket of services - America can look to Israel.
Until 1995, health insurance in Israel was voluntary, although 99 percent of the Jewish population and 97 percent of the Arab population were covered by four HMOs, the first of which was established at the end of 1911. This was a system wherein the insured members paid the HMO, and the employer made a compulsory payment to the National Insurance Institute.
Today in Israel, everyone is covered by health insurance. In 1994, the Israeli parliament passed a groundbreaking health insurance bill that made every Israeli resident automatically insured, no matter their age, financial status or religion. In the United States today, more than 43 million people, including 12 million children, are uninsured.
Israel’s universal health care is characterized by its “national health care basket,” which defines the range of services to which every resident is equally entitled. Residents can petition a labor court if they believe an HMO has ignored their rights to a medical service.
Universal access to Israel’s national health care basket means that there is no underinsurance in Israel, which happens when there are gaps in coverage. In the United States, more than 100 million citizens are underinsured, including 40 million with Medicare, 50 million with Medicaid and at least 10 million who are employed in large companies that have self-insurance.
The main health care delivery system for all Israelis is through primary and secondary clinics. These clinics, which are present throughout the country, provide easy and efficient access to care.
The clinics that belong to the HMOs enable quick access to primary medical care and also easy referral to specialists without waiting lists. There is continuity of care, while there is now a tremendous effort to computerize all the medical data.
Ninety-five percent of general care hospitals in Israel are public. There is no wait for diagnostic examinations such as MRI and CT or for procedures such as open-heart surgery. Payment for hospitalization is the responsibility of the HMO, and there is no deductible or co-insurance payment required of the patient.
There is a $3 co-payment for each prescription on the approved drug list covering acute and chronic diseases.
High unemployment and the Israeli economic recession make it difficult for about 10 percent of the population to pay even this, even though there is a $50 biannual co-payment cap.
Caring for the elderly is a core social policy and an integral part of health care in Israel. While in the United States geriatric care is handled by Medicare, in Israel it is part of the health basket and is the responsibility of the HMOs.
Only hospitalization in nursing homes is the responsibility of the Ministry of Health for those who cannot afford to pay for private insurance or from their own means. Geriatric care, being an integral part of health care in Israel, is of high quality.
I do hope that one of the Israeli government’s priorities in an improved economic situation will be to reflect the nation’s social values by exempting the poorest 5-10 percent of the population from drug co-payments.
Israel’s health indicators for longevity and infant mortality are better than those of the United States. This aspect is not unique to Israel, but many Western countries are better in the various indicators of health than the United States. Yet while Israel spends 8.8 percent of its Gross National Product on caring for the elderly, the United States spends 15 percent of its GNP.
In international comparisons of health care systems, Israel ranks among the top 20 in the world. But, even with its favorable standing, Israel faces many challenges, such as the financial limitations of introducing new technologies and prescription drugs to the health basket and the high taxes Israelis pay. Also of concern are high out-of-pocket expenses for cost sharing and for health care services that are covered only by complementary insurance.
Israel’s health care system, while based on the core value of access for all, is still evolving. The establishment of a “health parliament,” a private initiative endorsed by the government, enabled input from ordinary Israelis to help set priorities for the future, including the challenges of limited resources and the growing gap between rich and poor.
Obviously, Israel and the United States differ vastly in size, making full comparisons limited. But with the exception of four large states, Israel is similar in size to most U.S. states. The American health system can be improved only if states take responsibility for health care, or, in the case of the four largest states, if there is regional responsibility within the state.
In 2003, the United States spent at least 30 percent of its national health expenditures on administration, while Israel spent less than 10 percent. The United States could have saved at least $280 billion of the $400 billion spent in administrative expenditures in 2003 to cover the uninsured and to close the gap of the underinsured, strengthening the democratic principles it holds dear.
Professor Mordechai Shani is the director general of Sheba Medical Center at Tel Hashomer, Israel’s largest hospital. He served twice as director general of the Ministry of Health, including 1994, when the Insurance Bill and the Patients Bill of Rights were passed by the Knesset.
Friday, September 10, 2004 (SF Chronicle)
Health care’s reality
by David Lazarus
The original article can be found on SFGate.com here:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/09/10/BUGU58MFDG1.DTL
denial noun: a psychological defense mechanism in which confrontation with a personal problem or with reality is avoided by denying the existence of the problem or reality..
Is the U.S. health care system working? Here are the facts:
— The number of Americans lacking health insurance rose last year to a record 45 million from 43.6 million in 2002, according to the latest census figures.
— About 5 million fewer jobs now provide health insurance than just three years ago, according to a newly released Kaiser Family Foundation survey.
— For jobs that do provide coverage, insurance premiums climbed 11.2 percent this year, or five times faster than both inflation and average U.S. workers’ salaries.
— Since 2001, premiums for family coverage have soared by almost 60 percent, compared with a 9.7 percent increase in consumer prices and a 12.3 percent gain in wages.
— More than half of companies with at least 200 workers say it’s very likely they will raise employee contributions to health coverage in the near future.
Yet despite such clear evidence of a health care system in crisis, neither President Bush nor Democratic challenger John Kerry has called for meaningful change in how Americans receive medical treatment.
Instead, both candidates favor keeping the current system intact while using taxpayer funds to expand the reach of the insurance industry.
“To expand a system that’s not working is absolute insanity,” said Don McCanne, a Southern California doctor and former president of Physicians for a National Health Program, a 12,000-strong organization advocating medical coverage for all Americans.
The real solution, McCanne and other health care activists believe, is creation of a so-called single-payer system in the United States.
Under such a system, similar to Canada’s state-backed insurance network, any American would be able to receive treatment from any doctor at any hospital nationwide.
It’s not so far-fetched. Federal and state taxes, along with tax subsidies for businesses, already account for about 60 percent of the nearly $1.8 trillion expected to be spent this year on health care in the United States, primarily through Medicare and Medicaid.
For the remaining 40 percent of health care spending, Physicians for a National Health Program advocates replacing private-sector insurance plans with a government-run program that would allocate funds to medical facilities.
A payroll tax of about 7 percent would replace all other employer expenses for medical costs, and an income tax of about 2 percent would replace employees’ current insurance premiums, co-pays, deductibles and other out-of- pocket expenses.
Such a system not only would work — as has been demonstrated in countries that already have single-payer plans — it would be far cheaper to administer than the existing health care system.
Harvard Medical School researchers determined earlier this year that about a quarter of all health care spending in the United States is now squandered on bureaucratic overhead, such as clerical staff at doctors’ offices to process a vast array of insurance forms.
Under a standardized single-payer system, the researchers estimated, annual administrative costs would be slashed by more than $280 billion. This represents enough money to insure all Americans now lacking coverage and to allow millions of underinsured people to improve their quality of care.
Refinements would be necessary to ensure cost controls and quality. A 2001 study, for example, found that Canadians requiring elective surgery wait an average 16 weeks before reaching an operating table. That would have to be improved upon.
But we’ll never know unless we try.
“It won’t be easy,” observed Kevin Grumbach, chairman of UCSF Medical School’s Department of Family and Community Medicine and a longtime backer of universal health care.
“You’re up against formidable special interests,” he said. “The insurance industry, the pharmaceutical industry — everybody making outrageous profits at the expense of delivering rational care to people.”
It should be noted that Canada didn’t rush into a single-payer plan. It experimented with the system on a province-by-province basis, beginning with Saskatchewan in 1946, before implementing it nationwide 25 years later.
State Sen. Sheila Kuehl, D-Santa Monica, believes California is the ideal proving ground to demonstrate that a single-payer system can work in this country as well.
She’s introduced legislation, SB921, which would insure every Californian under a single-payer plan and save the state about $14 billion in annual administrative costs. The bill was approved by the Assembly Health Committee in June by a vote of 12-5.
However, even if signed into law — which no one expects any time soon — SB921 still would require passage of federal legislation allowing state health authorities to serve as a conduit for Medicare funds.
“That’s going to be difficult under this president and this Congress,” Kuehl acknowledged. “The interests of business take precedence at the moment.”
She thinks this will change. First, though, political leaders will have to stop being in denial about the dysfunctional state of the current health care system.
“We’re often in denial about things we don’t know how to solve,” Kuehl said. “But I’m hopeful. Single-payer is so much more efficient and so much more effective. People will see that.”
When they finally accept reality, that is.
David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.” Send tips or feedback to
dlazarus@sfchronicle.com.
Copyright 2004 SF Chronicle
September 10, 2004
Cost of Insuring Workers’ Health Increases 11.2%
By MILT FREUDENHEIM
http://www.nytimes.com/2004/09/10/business/10care.html (story has a good chart that doesn’t show up here)
The cost of providing health care to employees has risen 11.2 percent this year, according to the results of an authoritative national survey reported yesterday.
It was the fourth consecutive year of double-digit increases in health insurance premiums, which has resulted in a steady decline in the number of the nation’s workers and their families receiving employer health care coverage.
The annual survey of 3,000 companies, conducted between January and May by the Kaiser Family Foundation and Health Research and Educational trust, is considered a reliable indicator of health care costs paid by companies and their workers.
Perhaps the only good news in the report was its indication that the rate of increase slowed from the record 13.9 percent in 2003, turning down for the first time since 1996. But this year’s jump was still more than five times the national 2.2 percent increase in wages from the spring of 2003 to spring 2004, as reported by the Bureau of Labor Statistics.
Small businesses are being especially hard hit as the average family coverage in preferred provider networks, the most common type of health plan, has risen to $10,217, with employees paying $2,691 of the total. In response to the soaring costs, many small companies are simply no longer offering coverage of a worker’s spouse and children.
“Small employers just cannot afford to spend the bulk of $10,000 on a family health plan for a $30,000 employee,” said Kate Sullivan Hare, the executive director of health care policy for the United States Chamber of Commerce. That same family coverage “used to cost $4,500 about six years ago,” she noted.
The survey found that the share of companies of all sizes offering health benefits to their workers declined to 61 percent, down from 65 percent in 2001. As a result, an estimated five million fewer workers have access to employer health care coverage than the 127 million reported in 2001, said John Gabel, vice president of Health Research and Educational Trust.
With health care high on the list of voter concerns in election year polls, the Bush and Kerry campaigns quickly jumped into the fray.
Senator John Kerry blamed Bush administration policies. “It’s wrong to allow skyrocketing health care costs to choke off new jobs, eat up family incomes and leave millions uninsured,” Mr. Kerry, the Democratic presidential candidate, said yesterday during a campaign stop in Des Moines.
The Census Bureau said last month that the nation’s total number of uninsured people had risen by 1.4 million in 2003, to a record 45 million.
Reed Dickens, a spokesman for the Bush-Cheney campaign, said: “This administration has helped slow the rate of increase for the first time in seven years. The president’s approach to this is a consumer-driven approach, and John Kerry’s philosophy is to shift the decision-making power to the federal government and shift the financial burden to the taxpayer.”
But Ms. Sullivan Hare at the Chamber of Commerce said that “neither presidential candidate is really talking about government policies to control health care inflation.” She added that most employers feel frustrated by the problems but they do not see “any magic bullets to help bring down costs.”
Health premiums are rising faster than the underlying cost of doctor and hospital care, as consolidation in the insurance industry has given insurers greater clout. The monthly cost of two-person coverage for workers and their spouses increased 23 percent, to $836.78, this year at the John G. Shelley Company, a distributor of industrial products with 26 employees in Wellesley Hills, Mass. Monthly premiums for individuals rose 13 percent, to $418.39.
Full family coverage at Shelley is now $1,255.17, with the company offering to pay nearly half. Kara Connaughton, the financial controller at the Shelley company, said nobody signed up. “They all have their children covered under their spouse’s plan,” she said.
Frank Ciotola, an owner of Da Vinci Ristorante in northwest Columbus, Ohio, is another employer grappling with premium inflation.
“It’s the same story with everybody I talk to,” Mr. Ciotola said. “We got 31 percent increase last month to renew our insurance.” He said he erased the increase by changing to a health savings plan, with a $1,700 annual deductible, for the three owners and four full-time employees in the plan.
The Kaiser report said that a growing number of employers were familiar with the health savings approach, a centerpiece of President Bush’s health care program that combines pretax savings accounts and high deductibles. But the report said that only 3.5 percent of the employers in the survey had adopted the plans. The favorable tax feature took effect last January.
Megan Hauck, deputy policy director of the Bush campaign, said that a survey by Fortis Health, a company that sells the health savings plans, reported that about one-third of the early recruits were “previously uninsured.”
For years, employers have been paying about 84 percent of premium costs, with workers picking up the remaining 16 percent, the survey said. But in dollar terms, that now means the average employee’s share has risen by more than $1,000 since 2000, said Drew Altman, the chief executive of the Henry J. Kaiser Family Foundation.
The rising cost of health insurance is not only affecting the current working population.
The federal Centers for Medicare and Medicaid announced last week that Medicare premiums deducted from Social Security checks of elderly and disabled people would rise 17.4 percent next year to $78.20 a month. Meanwhile, Social Security payments are expected to rise by only 2 to 3 percent, according to the Medicare Rights Center, an advocacy group for Medicare beneficiaries.
Would Heritage Foundation support an equitable individual mandate?
Los Angeles Times
September 4, 2004
Editorial
‘Ownership’ Isn’t the Cure
Welcome to President Bush’s ideal of “added choice” in healthcare. Buzzwords like “flexibility” and “ownership” might sound empowering when read off a teleprompter, as they were frequently during this week’s Republican convention. When discussed behind the scenes by health insurers, however, they are read as code words for giving insurers more leeway to “cherry-pick” - offering bargain-rate coverage to those who need it the least (such as healthy children) while pricing care beyond the reach of many who need it the most.
Bush’s “ownership society” ideal for healthcare is embodied in the health savings account. These let a family of four put aside up to $5,150 in tax-free savings that can be used to purchase health insurance on the open market. That will be small comfort to low- and middle-income families because the premiums for such family policies ran more than $9,000 in the group market last year, and would be even pricier if purchased by an individual family.
Another danger is that many healthy and wealthy people will flee group plans
in favor of health savings accounts, leaving the older, more comprehensive
health insurers stuck with a growing proportion of poor and sick members.
Insurers that aren’t driven out of business would be forced to raise costs.
Not all “ownership society” healthcare ideas are bad. One of the most radical - requiring all U.S. residents, some with government help, to buy health insurance, much as drivers are required to buy auto insurance now - has gained converts not only from the predictable places like the conservative Heritage Foundation but from centrist think tanks like the New America Foundation. The proposal deserves to be at least discussed by both presidential candidates.
Most of the healthcare ownership ideas the president has proposed so far, however, are fundamentally unfair. It’s an issue both parties will have to
address more seriously before the country’s near-terminal healthcare system
goes flat-line.
http://www.latimes.com/news/printedition/opinion/la-ed-health4sep04,1,992590.story
Comment: The editors of the Los Angeles Times obviously recognize that
retaining personal ownership of the risk of financial loss due to adverse
medical events is flawed policy. Exposing the medically unfortunate to greater financial risk defeats the purpose of insurance.
On the other hand, the editors believe that the Heritage Foundation’s proposal to require everyone to purchase health insurance (individual mandate) is not a bad idea. Is it?
Many Americans would rather keep their employer sponsored health care coverage rather than accept the perceived risk, though unsubstantiated, of a
universal program that has a greater government role. Because of perceptions
of greater political feasibility, many continue to advocate for employment linked coverage. Actually conservative and liberal policy analysts agree that there are problems with such coverage. Particularly, lack of portability threatening continuity of care and continuation of coverage are of concern. Also, employer sponsored plans are inequitably funded through regressive tax policies. Administrative waste and lack of effective mechanisms to contain costs are also issues. So is individual coverage a better option?
Mandating individual coverage will not be effective if the premium costs encroach on the ability for individuals to meet other expenses. And if individual premiums are tax deductible, funding would be unfair because of this regressive policy. But if the tax system were used to fund individual coverage, then a properly designed tax could make the funding equitable, and automatically include everyone since there would be no option to not pay.
Individual plans are usually subject to underwriting standards and individuals can be required to pay excessive premiums or be denied coverage altogether. Insurers could be required to accept anyone regardless of risk and set the premium to reflect all costs in the community (community rating). Individual plans cost about 30% more than group plans with the same level of coverage since there are proportionately higher marketing, underwriting and other administrative costs in selling insurance one policy at a time rather than selling a single policy to a large group of individuals. Insurers could be required by regulation to greatly reduce costs that are not related to providing actual health care benefits.
Various public and private payers continually manipulate the system by shifting costs of their own beneficiaries to other payers. Regulations could be established which would require all insurers to pay the same rates for their beneficiaries (risk adjusted), thereby ending cost shifting.
In fact, once you have established a rigid regulatory environment that addresses the problems of cost shifting, adverse selection, inequitable funding, lack of portability, excessive financial barriers to care, and, above all, the lack of universal coverage, then that regulatory environment would have created a de facto single payer system using the private health plans.
There is still one more problem. Although the regulator can demand administrative standardization, thereby reducing the administrative burden on the providers, the insurers will continue to make every effort to expand and sell their primary product: administrative services. On the other hand, a publicly administered insurance program remains sensitive to taxpayers’ needs and makes efforts to streamline government administration. Observations of our Medicare and of the Canadian single payer system confirm this.
Do you believe that Heritage would support a rigid regulatory environment for private plans that would create a de facto single payer system? If so, then maybe that really isn’t such a bad idea in that it would be a good starting point to begin negotiations.
(Please keep in mind that PNHP does not “negotiate” sound health policy science. Our mission at PNHP is to rigidly advocate for health policy that is strictly in the best interests of patients.)
Dirigo Health: Don’t compound the illness
By Kent Price
WALDO COUNTY (Aug 29, 2004): Last week’s Citizen reported that as many as 3,500 of Maine’s hospital jobs may be at risk under cost-cutting ideas being considered by the Commission to Study Maine Hospitals, part of the Dirigo Health plan soon to be under way. Asked to comment on this prospect, Mark Biscone is not at a loss for words: “Devastating, outrageous and horrible,” are just a few.
Biscone, CEO of Waldo County General Hospital, is not crying wolf. The hospital has cut services, reduced positions, and is among the state’s most-efficient facilities. Yet, if the proposed reductions are approved, the hospital may have to trim an additional 40 to 50 positions, directly affecting patient care services.
Are across-the-board cuts appropriate for all Maine hospitals? Does one size fit all? Does community need diminish along with position cuts, or is the opposite more likely? The very fact that such a high degree of controversy exists suggests that, as the movie line has it, we have here a failure to communicate. State health policymakers need to collaborate closely with those most directly affected by their decisions.
Still, few would deny that a health care crisis exists and that Dirigo Health is a bold and positive bid to insure the uninsured, reduce costs for both individuals and small businesses and boost preventative programs. It is a Maine original — unique in the nation — and other states are looking at us closely. Dirigo means “I lead” and we are doing just that.
But if Dirigo is pioneering, it also may be only a step in the right direction. In what might be called consumer-owned medicine, national health insurance would take high-profit insurance companies out of the health-care equation while extending coverage to the tens of millions of Americans who lack it.
A year ago, in August 2003, nearly 8,000 physicians, including two former U.S. Surgeons General and hundreds of medical school deans and professors, proposed a plan for national health insurance. Writing in the Journal of the American Medical Association, they said a national single-payer plan not only is the best way to deal with our mounting health-care crisis, it is the only way.
National health insurance is not pie in the sky. Every other industrialized nation in the world takes care of its people in this way. Only in the U.S., and only because of an accident of history, are employers the primary providers of health insurance. It makes little sense, and the whole system now is breaking down under soaring costs and lack of coverage. Neither our health nor our wallets can afford it anymore.
It may well be years before the U.S. joins the rest of the world in guaranteeing basic health care to all our citizens. In the meantime, let’s be sure not to make a bad problem worse by cutting needed community services. After all, the Hippocratic oath taken by physicians provides that, “First, do no harm.”
Kent Price is a Democratic candidate for Maine House District 41, which includes Searsport, Frankfort, Stockton Springs, Prospect, Verona Island and Orland.
NHS plc
THE PRIVATISATION OF OUR HEALTH CARE
ALLYSON M POLLOCK
Whether or not the public has a ‘right to choose’, it seems likely that the basic right to free care that the creation of the NHS sought to enshrine will continue to suffer at the hands of a succession of politicians more interested in media presence than in the realities of public health policy. Now, more than ever, it is vital to understand what has happened to our health service, and to ask whether it is in the public interest for matters to continue in this way.
NHS plc tells the story of how the ideal of universal, comprehensive health care, equally available to all and disconnected from income and the ability to pay, has been progressively eroded, and how the clock is being turned back to pre-NHS days. Now even the shrinking core of free NHS hospital services is being handed over to private providers at the taxpayers’ expense. Allyson Pollock deconstructs slogans like ‘care in the community’, ‘diversity’ and ‘local ownership’, to present a clear and powerful analysis of the transition from a comprehensive and universal service to New Labour’s ‘mixed economy of health care’.
“This is a shocking story, brilliantly told, by one of the leading thinkers in the field of public health policy. Here you will learn how Labour politicians, with their cronies from the private sector, are turning this magnificent institution into one of the greatest pork barrels of all time. No one who cares about the health of the nation should ignore NHS plc.”Prof Raymond Tallis, author of Hippocratic Oaths. Medicine and its Discontents
Allyson M Pollock. NHS plc: the privatisation of our health care. London: Verso 2004
Hardback: £15
ISBN: 1 84467 011 2
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National Bureau of Economic Research
August 2004
How Much Might Universal Health Insurance Reduce Socioeconomic Disparities
in Health? A Comparison of the US and Canada
By Sandra L. Decker and Dahlia K. Remler
Abstract
A strong association between lower socioeconomic status (SES) and worse health— the SEShealth gradient- has been documented in many countries, but little work has compared the size of the gradient across countries. We compare the size of the income gradient in self-reported health in the US and Canada. We find that being below median income raises the likelihood that a middle aged person is in poor or fair health by about 15 percentage points in the U.S., compared to less than 8 percentage points in Canada. We also find that the 7 percentage point gradient difference between the two countries is reduced by about 4 percentage points after age 65, the age at which the virtually all U.S. citizens receive basic health insurance through Medicare. Income disparities in the probability that an individual lacks a usual source of care are also significantly larger in the US than in Canada before the age of 65, but about the same after 65. Our results are therefore consistent with the availability of universal health insurance in the U.S, or at least some other difference that occurs around the age of 65 in one country but not the other, narrowing SES differences in health between the US and Canada.
From the Conclusions and Discussion
While we cannot definitively say that universal health insurance causes all of the 4 percentage point gap shrinkage at age 65, our results, particularly our access results, are consistent with such a causal role. More work comparing adients and their variation with age across countries whose institutions differ can further help disentangle the causes of the gradient. Once the causes of the gradient are understood, policies can be more effectively targeted. In particular, we could learn just how much inequality reduction universal health insurance would buy us in the US. Although far from definitive, our present results suggest that it might buy us quite a bit.
http://papers.nber.org/papers/W10715 (copyright by the authors)
Comment: This important paper confirms the correlation between universal health insurance and lower socioeconomic disparities in health, even though
a causal relationship has not been irrefutably established. But what else might explain why, in the United States, at age 65 when Medicare coverage begins, there is a dramatic reduction in socioeconomic health disparities? Might it be because our fragmented system of funding care eliminates some of the infirm by age 65?
I’m betting on the fact that national health insurance does, in fact, actually reduce socioeconomic disparities in health. Regardless, because of the positive correlation we don’t need to wait for more studies. The cumulative body of health policy literature confirms that the benefits of universal health insurance vastly outweigh the negligible disadvantages. Failure to proceed with reform now would constitute an egregious ethical lapse on the part of our policymakers.
David Broder of the Washington Post has been observing and reporting on the
political process for a very long time. During a live, online discussion held on September 2, 2004, David Broder responded to my question as follows:
San Juan Capistrano, Calif.: Is there any hope at all that, after the election, the strong partisan divide can be tempered and we can move forward with addressing the real issues such as the tragedy of the uninsured?
David S. Broder: There is some hope, but as long as the parties remain almost even in strength, the temptation will continue to ask, about every issue, “Does it help us or them?” Leadership of the right sort can set a tone and make a difference, but it is the severe competitiveness of the current situation that inflames the animosity.
http://discuss.washingtonpost.com/wp-srv/zforum/04/broder090204.htm
The New York Times
September 2, 2004
Full Text of President Bush’s Remarks
“Many of our most fundamental systems - the tax code, health coverage, pension plans, worker training - were created for the world of yesterday, not tomorrow. We will transform these systems so that all citizens are equipped, prepared and thus truly free to make your own choices and pursue your own dreams.”
http://www.nytimes.com/2004/09/02/politics/campaign/03TEXT-BUSH.html
Comment: Apparently President Bush wants to sever the umbilical cord of solidarity. Is that the “leadership of the right sort” that we are seeking?
Prof. Kahn on cost estimates of HSAs
Response to yesterday’s message that included calculations of a hypothetical
example of how Health Savings Accounts (HSAs) might impact health care spending:
James G. Kahn, M.D., M.P.H., Professor of Health Policy & Epidemiology, Institute for Health Policy Studies at the University of California San Francisco:
I really like the approach to estimating the ridiculous cost of the health savings accounts . Really drives home how it’s actually a mechanism to force costs onto sick people who don’t have the money to afford it. A few from-the-hip technical comments:
— The scale of these effects may be much smaller — if people currently in public programs largely stay in public programs and thus are unaffected by this restructuring of private insurance markets, and their costs don’t need to be covered by the catastrophic plans.
— The low medical cost load on HSAs may be somewhat mitigated: If individuals in public programs constitute the sickest / most expensive individuals (certainly true for Medicare), then the skew that drives your analysis may be much less for the population that remains and would be affected by SAs.
These two points emphasize the importance to us of keeping people in public programs, where they’re not subject to the problems you so aptly describe, and are supported relatively efficiently via tax revenues (which remain ever so lightly progressive at least for Medicaid).
— Finally, arguably, money placed in HSAs and not used for medical care shouldn’t count in the health care spending total. It’ll be spent on a broad mix of consumption and savings (for the rich healthy people who get it). — The incentives to get care will drive down utilization and costs (for those who are poorest and sickest).
So, if I’m right on these points, HSAs may waste only billions or tens of billions, not hundreds of billions. They would represent, essentially, an odious transformation — from health from the poor and sick, into wealth for the rich and healthy. Stunningly cynical and extortionate. Compassionate conservatism indeed.
Don McCanne’s response:
Jim is absolutely correct on all of his points. In fact, as I composed the Quote of the Day message, I thought that we really need a full paper on this concept. But I wanted to keep the message relatively brief. Some of the conservatives have suggested that the poor would benefit by HSAs and perhaps we could get rid of Medicaid. And then the supporters of Medicare privatization have suggested that high deductible coverage (with HSAs) would be the preferred substitution for the government-run Medicare program. So I lumped everyone in together for the analysis to demonstrate how flawed the general concept is. Excluding groups such as those in Medicaid and in the traditional Medicare program changes the numbers, but it does not change the principle that this is clearly a flawed concept.
There are other issues that I didn’t cover. HSA advocates contend that health costs would be reduced because people would not want to spend their own money on “unnecessary” care. But I decided that this would be roughly offset by the increased use by those currently uninsured who would then gain access to care.
I didn’t mention the fact that the $5000 accounts may not be actual accounts
but might be only accounting entities. Perhaps $3000 would be the limit permitted to fund the accounts and then a $5000 deductible required to be sure that the patient remained sensitive to costs. For others there may be no account but rather only a $5000 deductible that must be met out-of-pocket. But whether it’s money in an HSA account or money that the patient is responsible for but was never spent because of lack of need, from a policy perspective it’s still $5000 that each person is responsible for up front until insurance becomes available. On the health care balance sheet, the $5000 per person would appear as a liability and it would be only partially offset with the unspent mount appearing as an asset.
Also, in making the point that, for the healthy, HSAs are savings accounts that can be used in retirement, I did not emphasize that these are retirement funds that are at risk in the event of unanticipated major medical expenses. It is terrible policy to require the 30% or so with major medical needs to pay for their health care out of what they thought would be their retirement funds.
The first lesson, as I see it, is that would should recognize the flawed policies of the HSA model. HSAs attempt to address two issues, paying for health care and funding retirement, and yet they threaten affordability for care for those with greater needs, and they increase uncertainty in retirement planning. The second and perhaps more crucial point that Jim emphasizes is that we must make every effort to protect Medicare and Medicaid until they can be replaced with an even better program that includes all of us.
Graham Walker’s animated message on single payer
Single payer advocates sometimes have difficulty understanding why there
isn’t a groundswell of support for the single payer model of reform since its superiority as a method of funding health care is so clear (to us). But actually the model is fairly complex and not well understood by the majority of citizens. A brief explanation tends to be dismissed with the meme by which we have been thoroughly indoctrinated that “the government can’t do anything right.”
Graham Walker is a medical student at Stanford University and a former staff member of Physicians for a National Health Program. To no surprise, he found
that it was difficult to deliver a simple message on single payer that would
stimulate an inquisitive mind to investigate the model further. He then went
to work on creating a message that would be directed to a broad spectrum of
relatively uninformed individuals. He was especially interested in creating rhetoric that would connect with young adults who have been saturated with
the message that Social Security and Medicare will not be there when you need it (essentially the same message that is being presented this week by President Bush when he discusses the “ownership society”). Graham uses the analogy of funding “Prom Night” as an example that might resonate with a younger audience.
Graham has created an animated explanation of single payer targeted to the
larger audience that does not have a sophisticated understanding of health policy. You should view this five minute animation since you will probably find it very useful in your advocacy work. It is particularly suited to distribution over the Internet through an e-mail link that Graham has provided.
For the animation:
http://www.grahamazon.com/sp/whatissinglepayer.php
For a written explanation of single payer (The animation can be accessed on
this page by clicking “”animated version” near the top.): http://www.grahamazon.com/sp/
If you don’t have five minutes now, retain this message so that you can
view the animation during a break. I suspect that you’ll agree that we should
share this with as many people as possible (but avoid spamming those who
wouldn’t be interested).
By Ron Cohen, special to Workday Minnesota - September 1, 2004
ST. PAUL - Employers will reduce or eliminate drug coverage for 3.8 million retirees when the new Medicare prescription drug benefit starts in 2006, according to one U.S. government estimate. This will happen despite the fact companies - and supposedly even unions which offer prescription drug coverage - are eligible for $71 billion in federal subsidies between 2006 to 2012. But payment requires they offer substantially the same inadequate drug benefits specified in the new Medicare law.
However, it is a mistake to blame the new law for the continuing sharp decline in retiree health coverage. Employers already are slashing retiree health benefits. Goaded by rapid increases in medical costs, employers also shift premium hikes to their current workforce, increase their co-payments and drop some benefits.
Between 1993 and 2001, firms with 500 or more workers reduced health coverage for early retirees from 46% to 29% and for Medicare eligible retirees from 40% to 23%, the Washington Post reported. The AFL-CIO stresses that employers with 200 or more workers who offer retiree health care fell from 66% in 1988 to 38% in 2003.
The extra pressure on private business came in 1990 when a law was changed to include immediate accounting of future health care costs in publicly held corporate balance sheets.
This year that accounting standard was extended to state and local governments who now will be required to estimate the full cost of health benefits promised to future retirees. This will generate intense pressure to reduce liabilities by scaling back or eliminating future retiree benefits or shifting costs to public employees, including teachers.
Handwriting On The Wall
Look at the cold hard facts. Larger established firms, both union and non-union, have so-called “legacy costs”, long established pensions and retiree health benefits. Estimates are that the price of every truck and car built by General Motors last year included $1,900 in pension and retiree health benefits, up from $1,300 the previous year. The newer auto transplant companies in the U.S. have no such comparable costs.
Major airlines, like Northwest, with long-standing pensions and health benefits are reeling under price wars with low-fare start up airlines without these costs. Steelworkers found how hollow claims are for pensions and retiree health benefits promised by firms that no longer exist or file for bankruptcy to shed a union contract.
The Foreign Competitive Advantage
Worse yet is the situation regarding competition from foreign firms! Canadian, Japanese and European companies have the competitive advantage of government-paid health and/or pension systems. Even China provides manufacturing workers with health care and lodging, a holdover from pure communism.
When the nation’s governors met this spring, they heard testimony that U.S. workers had average benefit costs amounting to $5.50 an hour—-before wage rates are even considered. How can American companies compete? Governors asked. Apparently, the corporate answer is to outsource white-collar jobs along with blue-collar work.
A recent article in the New York Times warns the Chinese have excess capacity in nine key manufacturing categories. Since President Bush took office in 2001, America has lost 2.6 million manufacturing jobs. The U.S. trade deficit runs a staggering $600 billion a year, Bush’s new record.
Against this background, it makes no economic sense for the United States to fragment health care among a hodgepodge of systems with separate administrative structures and regulations: Medicare, Medicaid, the Veterans Administration, the Defense Department, the Federal Employees Plan, Federal-State programs to cover children, a flock of state and local government employee plans and finally private insurance plans often top-heavy with administrative costs. Add to this 44 million persons without health insurance who seek treatment at expensive hospital emergency rooms often with costs left for hospitals and local governments to pay. What a tangled mess! Clearly we lack a rational, cost effective health care system.
The One-Payer Necessity
Health care in the richest nation on earth is broken. It is obvious the United States needs one-payer, national health insurance to level the playing field for all employers and employees!
Bush now offers $9 billion a year in new tax incentives for individuals who set up Health Savings Accounts. This is on top of his enacted tax cuts: 36 percent gone into the pockets of the richest one percent of Americans with average incomes of $1.2 million, according to the nonpartisan Congressional Budget Office.
Brace yourselves for what was by far the worst feature of the new Medicare law — a section that doesn’t apply to retirees 65 and older — the creation of tax-free Health Savings Accounts. You qualify for up to a $5,150 a year tax deduction if you’re covered by a catastrophic health plan with at least a $1,000 deductible for an individual, $2,000 for a family. The larger the deductible, the lower the employer’s cost.
Brothers and sisters, this is not the proverbial camel’s nose under the tent. This is the whole animal in your tent chewing its cud. It’s the ultimate conservative fantasy, the richer you are, the bigger the tax break. And naturally employers would love to shuck ever-costlier comprehensive health benefits in favor of cheap catastrophic plans that appeal to the wealthy and the healthy. Non-union employers will flock to this option leaving unionized employers exposed to devastating cost competition!
According to Business Week, May 24, 2004, “Conservatives would require workers to pay taxes on some of the value of employer-provided insurance but give them tax breaks for buying insurance on their own. That’s a far more controversial step than Bush is likely to propose in a tight re-election campaign.” Be warned this is what the President means when he talks about giving workers and their families “ownership” of health care in America: you’re on your own. Also never forget, if re-elected, Bush is on record to compel future retirees to “own” their Social Security Accounts and play the yo-yo stock market.
As President Bush proclaimed on a recent campaign stop, “I need four more years to complete the work.”
This is the reason to vote Nov. 2 for John Kerry, the AFL-CIO’s endorsed candidate for president. It’s up to each of us to mobilize current and retired union members, family and friends to block a second term for Bush and his risky privatization schemes.
This commentary is reprinted from “Gopher Retiree”, the newsletter of the Minnesota State Retiree Council, AFL-CIO. Last month, the Minnesota AFL-CIO convention adopted a resolution sponsored by the Retirees Council, “supporting a not-for-profit, single-payer, national health care plan for all Americans.”