Briefing on single payer national health insurance, April 1, 2009, Washington, D.C.
Mr Chairman, Members of the Committee,
On April 1, 2009, a Congressional forum organized by the Leadership Conference for Guaranteed Healthcare and chaired by Congressman Eric Massa [NY-29], critically examined insurance mechanisms in the private sector. The expert panel included doctor, nurse, patient, researcher, labor, and economic perspectives.
The Leadership Conference for Guaranteed Health Care is a coalition of more than 20 million doctors, nurses and other health care providers; labor unions; nonprofit agencies; reform advocates and faith-based organizations who support guaranteed comprehensive, high quality, and affordable health care coverage for everyone. The coalition specifically advocates for a publicly funded and privately delivered national health care system structured around a single-payer financing mechanism.
Legitimate health care debate must include discussion of a single-payer financing mechanism for national health insurance. It is the only approach that introduces effective cost-containment provisions, such as bulk purchasing and global budgeting and would greatly simplify administration, allowing the U.S. to slash spending on overhead by $400 billion annually. Such economies would allow for expanding health coverage to everyone — with no co-pays or deductibles — with no overall increase in health care spending, an especially important consideration at a time of economic distress.
We are deeply concerned that they Ways and Means Committee has not heard testimony from a single payer expert in an official congressional hearing. We urge the Committee to review the testimony below, and include a single payer advocate on all future hearing panels.
What follows is the written testimony of the April 1 forum panelists, followed by a two-page summary of the event.
Louis Balizet, MD, Oncologist, Pueblo, Colorado (http://www.youtube.com/watch?v=mrvqSft8j7U)
I am a Medical Oncologist who has practiced in Pueblo, Colorado since 1976. As do my two partners and the majority of America’s physicians, I favor single-payer universal health care. I would like to share with you the stories of some patients I have cared for recently that illustrates why I believe the current system is broken and unfixable.
1. Mrs. A is an 80-year old woman with breast cancer. She takes Arimidex, a helpful but very expensive ($12/pill) medicine, in hopes of preventing a recurrence of her disease (what we oncologists call adjuvant therapy). When I saw her several weeks ago she confided in me that when she reached the “doughnut hole” in her Medicare Part D coverage last year, she took her pills only every other day, instead of daily, as prescribed. Arimidex taken daily is an effective deterrent to breast cancer; Arimidex taken every other day is of uncertain value.
2. Mrs. B is a 51-year old woman who was discovered to have advanced metastatic colon cancer last year. Her treatment consisted of three chemotherapy drugs, one of which is given by a 48-hour infusion. This is usually accomplished in the outpatient setting, using a battery-powered portable infusion pump. Mrs. B was indigent and uninsured, as are many people in Pueblo. The only way she could get her treatment was to be admitted to the hospital where she stayed for 2 days every 2 weeks. After 4 months she finally got Medicaid, which paid for treatment in our office. Not only was treatment in the hospital much more expensive (to all of us, in the final analysis), but it took precious time from her life that she could have much better spent with her family.
3. Mr. X was a 49 year old married schoolteacher who was faced with pressing household expenses when it came time to sign up for continuation of his health insurance. He elected to forego health insurance to save his portion of the premium. He gambled that he would not get sick and require expensive health care. He lost. He developed rectal bleeding, but put off seeking care, hoping it was just hemorrhoids. When he had bled enough to be unable to go to work, he was taken to the emergency room; subsequent evaluation revealed a very advanced cancer of the colon. He spent a total of three of the next twelve months in the hospital. After chemotherapy and several surgeries, his cancer disappeared, and he worked for several more years. Inevitably, however (because we cannot cure very advanced colon cancer), his cancer returned, and he recently passed away. There is a relationship between insurance status and outcome from cancer (and, incidentally, from heart disease as well). Mr. X serves as an unfortunate illustration of this connection. Had he been insured, it is very likely that he would be alive today. In addition, the enormous, largely uncompensated, hospital expenses could have been reduced immensely.
4. Mr. Y is a 60-year old man who developed lymphoma during a period when he was between jobs and uninsured. He responded initially to chemotherapy (given, out of necessity, in the hospital) but then relapsed. A bone marrow transplantation can be lifesaving in this situation; he now has insurance, but with a six-month exclusion on pre-existing conditions. We are hoping that stop-gap chemotherapy can keep his lymphoma in check until his six-month waiting period is over; however, I am doubtful this will happen. As long as we insist on a health care system based on private health insurance, we will have to accept the consequences of intermittent and patchy coverage. The consequences to Mr. Y may prove fatal.
5. Mrs. Z is a 75 year old woman who developed an aggressive breast cancer that had spread to her lymph nodes — serious, but potentially curable by the successive application of surgery, chemotherapy, radiation therapy, and hormonal therapy (Arimidex). She made it through the first three treatments, but was stymied when she came to the fourth, since she could not afford the $300/month co-pay required by her prescription drug plan. Help came from a mail-order Canadian pharmacy working in cooperation with a local pharmacy service; she was able to get the medicine for one-third of that amount. Without this “back door” supply, she would have been unable to complete a crucial part of her treatment.
How do I envision life changing for me and my patients under single payer universal health care?
1. Approved oral drugs would be available for all. Our office staff would no longer spend hours begging (usually unsuccessfully) for free drugs from pharmaceutical companies. The volume purchasing power of a single payer system would reduce drug prices. Mrs. A would be able to take her Arimidex as prescribed, instead of scrimping and jeopardizing effectiveness. Mrs. Z would no longer have to rely on a Canadian pharmacy.
2. Intravenous chemotherapy that could be given through the office would be available to all. Mrs. B could get her therapy using a portable infusion pump at less cost to the system, and without paying the personal penalty of intermittent hospitalization.
3. Health coverage would not be optional. Mr. X would not be faced with the agonizing choice of health insurance premiums versus solvency. The financial disincentives to obtaining life-saving screening procedures like mammography and colonoscopy would disappear. Participation in these measures would increase, and mortality from breast and colon cancer would decline even further.
4. Health coverage would be freed from its connection to employment; loosing one’s job would no longer entail the risk of loosing one’s life. Mr. Y could get timely evaluation for a bone marrow transplant without giving his cancer a head start.
5. Marginally effective but outrageously expensive cancer treatments would not be available. Effective central planning, feasible only under single payer, would require the establishment of an American equivalent of Britain’s National Institute for Health and Clinical Excellence (NICE), charged with evaluating the value, not just the effectiveness, of new drugs, procedures and devices. If a drug offers not cure but only a few weeks to a cancer patient’s life expectancy, and is prohibitively costly, society will not be harmed by its exclusion.
6. Our office operation would be more efficient and less costly. Our billing clerks tell me that, if all patients had Medicare, their work would be reduced by at least half. My 2 partners and I have 25 employees, of whom I count at least 4 who would be unnecessary under a single payer system.
My experience and that of my patients are not unique. A recent report by the Kaiser Family Foundation and the American Cancer Society confirm that the present system is hazardous to cancer patients nationwide, for reasons not limited to those depicted above. Medical Oncology thrives on new drugs; they are one reason it is such an attractive specialty. Even more important to me than new drug development, however, is the prospect of being able to apply what we now have to all Americans without the deterrence of unemployment, poverty, or age. Medical Oncology as a specialty is young enough, and I am old enough, that I was able to get in on the ground floor of what was to become an exciting, vibrant medical discipline. I fervently hope that, before I retire, I can experience the joy of seeing all my patients benefit fully from the successes of the past four decades, not just the wealthy and the lucky.
Marilyn Cawthon, ICU RN, Pennsylvania Association of Staff Nurses and Allied Professionals
My name is Marilyn Cawthon. I have been privileged to be a registered nurse for over 36 years. I have spent most of my career in critical care. I have always felt that my first duty as a nurse was to advocate for my patients’ needs. I have come to realize that this is not just a responsibility during their hospital stay, but a commitment to advocate for all patients, every day. This is why I am here today.
My dad died at 45 from heart disease. It is part of the reason I went into nursing. In August of 2000, I told my doctor I was experiencing shortness of breath with exercise and he scheduled me for a stress test. It was positive. I needed to have a cardiac catheterization to check the valves and arteries in my heart.
A lot of thoughts went through my mind when I first heard this. I was scared. I didn’t want to die. I wanted to be there to see my 13 and 15 year olds grow up. I wanted to be there for my daughter and the birth of my first grandchild. I put my affairs in order and scheduled the catheterization for January 2001.
As the time neared for the procedure, I knew I wanted more time with my family. I had been working 12 hour days, 5 days a week. I decided to become a contract nurse and work 40 hours a week. I was going to COBRA my benefits, but I was also looking into outside health plans. A few weeks before the catheterization, I spoke with Independence Blue Cross about their individual family plans. Under this plan, I would save $100 a month. I explained to Blue Cross that I had a procedure scheduled in a few weeks. I said I did not want any questions about coverage. I was told there would be no problem, the procedure would be covered as there would be no gap in coverage. I asked for it in writing. No problem, said Blue Cross.
On the day before the procedure, I received a form letter from Independence Blue Cross: “the requested service has been approved.” On January 3rd, 2001, I had a cardiac catheterization. A blockage was found, ballooned open and a stent placed. I was back to work in 3 days and very grateful. I know this prevented a heart attack. Three weeks later, I received a form letter from the hospital where I was treated stating that Blue Cross denied benefits due to a pre-existing condition. I immediately called Blue Cross and was assured this was a mistake and that they were “in the process of making payment,” “not to worry.” Nine months later I received an official denial of services letter from Blue Cross “due to a pre-existing condition.”
I immediately called Blue Cross and sent a certified letter to appeal the decision. This was the beginning of many calls and certified letters. On the phone I was always told that a mistake had been made and would be looked into, to call back in a week and it would be corrected. I was always given the same line whenever I called and my certified letters were ignored. I was stuck with a $24,471 hospital bill that had already been turned over to a collection agency and my credit was ruined. I paid 2 to 3 times in interest for car and student loans. The fall out from this continued and the stress was something you can’t put a price tag on.
On November 20th, 2004 there was an article in the Philadelphia Inquirer about G. Fred Di Bona, president and CEO of Independence Blue Cross. It was about his fight with cancer. I wrote him that day and hoped that he would win his battle. I also told him what his company had done to me. I received a letter back saying he’d look into it. He died not long after.
In January 2005, I received a letter from Independence Blue Cross: “A decision has been made to have the claim reprocessed for payment. This is a one time exemption.”I was relieved and grateful that the hospital and professionals who had helped me were reimbursed. But, the chain of events this insurance debacle caused in my life could not be compensated. I don’t want anyone else to go through this.
During this experience, I looked up national healthcare reform on the internet and found an explanation of single-payer healthcare. A single-payer system would offer the most comprehensive healthcare. It would save money. I’ve been a registered Republican all my life. I don’t see this problem in terms of politics but in terms of what kind of healthcare system would help others avoid the struggle I endured. Under single-payer, I would have been able to go to my own private doctor and hospital. And, my life and finances would not have been turned upside down by a private insurance company.
As a registered nurse, I see people every day who delayed care because they were uninsured or underinsured, only to seek help when it’s catastrophic or too late. I see insurance companies dictating decisions over doctors on what medications a patient can take, what procedures they can or cannot have, and how long they can stay in the hospital. I’m old enough to remember when the patient was the bottom line, not profits.
As a healthcare professional, I deal with people. People at their most vulnerable. People who are sick, dying, or in pain. Their most basic thoughts aren’t about the trillions going to banks on Wall Street or about wars in Iraq or Afghanistan. They want to be taken care of now. They deserve to be given the best care available. They can get this care now if we passed House Bill 676. Give all Americans a chance at healthcare!
Leonard Rodberg, PhD, Professor and Chair of Urban Studies Queens College, http://www.youtube.com/watch?v=oM9v0EWZ51M, http://www.youtube.com/watch?v=X_NGLM_hZvQ
Annette Ramirez de Arellano, DrPH, Public Citizen Health Research Group
Dr. Atul Gawande has described American health care as “an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and 15 percent of the passengers thrown over the rails to keep it afloat.” And those thrown overboard are not a cross-section of the population as a whole; rather, they are more likely to be minorities and poor. Thus, in 2007 approximately one-third of Latinos, one-fifth of African-Americans, and one-sixth of Asians in the US were uninsured, compared to one-tenth of non-Hispanic whites. Moreover, the disparities are likely to become sharper with the economic downturn, which is already having a strong negative effect on blacks and Hispanics in the labor market. And insurance does matter, as a recent Institute of Medicine report stresses when it points out that “despite the availability of some safety net services, there is a chasm between the health care needs of people without health insurance and access to effective health care services. This gap results in needless illness, suffering, and even death.”
To compound the situation, the cost of keeping the health care ship afloat represents a rising percentage of the gross domestic product, with no end in sight. There is general consensus that health care is uneven in access and quality, leaves too many people out, and costs too much. There is less agreement on what should be done to fix it. In my brief remarks this afternoon, I would like to address why incremental approaches are short-sighted and ineffectual, and why a single payer is the only viable solution to controlling costs.
There are serious issues with focusing on just parts of the problem and calling it “incremental reform”. That is what we have done up to now. Indeed, “Health for some” appears to have been the prevailing slogan for much health care planning in the US. Medicare and Medicaid were designed to cover the elderly and the poor, which were the populations most identifiably in need. And we are still discussing the possibility of mandating care for just certain groups, leaving the rest behind. “Health for some” seems to have political currency even when we have run out of specific identifiable groups to cover. But sifting and sorting the population further will only pit one group against the other, undermine equality, and exacerbate the disparities in access and quality that are already prevalent and unacceptable. For several reasons, we should avoid any approach that is short of universal.
First, it does not make practical sense. The fact is that lack of coverage for all affects everyone in the United States, including those with health insurance. Lack of access cannot be seen solely as a problem of the poor, or of children, or of selected minorities. In many ways, everyone pays for the gaps in service and the neglect of specific groups. In communities with high uninsurance rates, even the insured are likely to have difficulty obtaining needed health services. Health providers of every type gravitate to well-insured areas, which in turn attract new technologies and promote additional services. Moreover, the uninsured who need care end up generating expenditures that are covered by others. This “implicitly subsidized care” (defined as the difference between the amount a privately insured person would be expected to pay for the same care and the uninsured person’s actual payment) is estimated at $536 per person for the full-year uninsured, and care provided by other private and private sources adds another $567. As a result, the care that is not paid for out of pocket comes to $1103 per person. Three-fourths of this is covered by the government, through different pathways. And some of these services may come too late. Such services also tend to cost more, which limits the cost-effectiveness of the expenditure. This is suggested by a study of Medicare decedents published last month, which showed that black and Latinos have substantially higher costs than whites in the last 6 months of life.
Secondly, incrementalism militates against a broad-based sense of community and shared responsibility among members of society. Our current system is highly stratified; one’s place in the hierarchy largely determines not only access to care but also the quality of care received. The top tier includes those with comprehensive private insurance or Medicare. The second tier is made up of those who rely on means-tested safety-net programs such as Medicaid and SCHIP. Those in the second tier often face complicated hurdles to gain access care. Moreover, because the scope of services and the availability of providers may vary widely from state to state, there is a kind of geographical determinism at work here: what one gets depends on where one lives. And there is no stability in coverage, as states make constant adjustments to balance needs against revenues, modifying eligibility requirements and changing the services covered over time. The final tier is composed of the uninsured, most of whom are poor and who often forgo necessary care. This hierarchy leads to de facto health segregation that undermines the “United” part of the United States. And because minorities are disproportionately represented in the lower two tiers, this widens the racial and ethnic health disparities that have been repeatedly documented.
Third, the incremental approach lacks political appeal. “Health for some” is hardly a ringing motto under which to mobilize support, and it certainly does not represent the change that most Americans want. Access to health should be a right, and health care a social good which should be available to all. We’re all stakeholders in this and need to come together to ensure that the currently “patched together ship” is redesigned or replaced. Universal coverage would provide a standard set of benefits to all, thereby eliminating the discriminatory stratification that exists now. It would also lead to a more equitable distribution of health resources, as providers would not have the current incentive to confine their practices to areas where there are covered patients. And a single-payer system would streamline administrative costs for providers, cut back on the bureaucracy, and ensure that a higher proportion of our health expenditures is spent on health services rather than paperwork. At present, the multiplicity of payers means that between 12 and 20% of premiums are devoted to marketing and advertising, profits, and the complicated processes insurers use to protect themselves against higher risks. And the labor costs of hospitals and practitioners rise when they have to deal with multiple billing forms, fees, reporting requirements, and when they have to seek authorization for given procedures. A single payer system would be better able to leverage its purchasing power, obtaining better prices. In addition, a single payer would be better placed to monitor health care at the national level, providing the public sector with important intelligence on patient needs and demands, consumption patterns for different types of services, provider behaviors, and rising costs and their distribution. Having a single payer does not preclude health care being provided and organized in a variety of ways. But it makes explicit the trade-offs that are often obscured by the different funding streams that support our patched-up services.
Returning to the metaphor of the ship, we need more than replacing a few rotting timbers. This is the time for bold solutions and significant steps towards universal coverage and single-payer health care. Here, it is appropriate to recall the words of David Lloyd George, who said “Don’t be afraid to take a big step if one is indicated. You can’t cross a chasm in two small jumps.” Thank you very much.
Cindy Young, Senior Health Policy Advisor California School Employees Association
I have worked at California School Employees Association since 1988. I started a career in health policy as the Research Director for HERE Local 2 in San Francisco in the early eighties. I’ve had almost thirty years working with employee healthcare benefits at the bargaining table and have seen first hand that our employer based health insurance system is failing for three reasons, there is uncontrolled inflation in health care costs, premiums and health care are increasingly unaffordable for employers and employees, and the levels of insurance coverage are decreasing for everyone.
Healthcare benefits are a mandatory subject of bargaining under the National Labor Relations Act. When I first started bargaining healthcare benefits in 1984, it was common for employers to provide health insurance, which provided full family coverage for workers. Generally, workers had a $1.00 co-payment for physician visits and prescription drug benefits. In the hotel and restaurant business, a worker had to work a minimum three — three hour shifts, and received health coverage for the entire family.
But by the early nineties insurance premiums were rising far faster than the Consumer Price Index. Unable to afford healthcare costs, employers began demanding that it cap its premium payment for health insurance. This meant workers had to pay more toward the cost of the insurance premium - a phenomenon known as cost shifting.. Single employees rebelled because they did not want to have to pay for the composite rate for families. Families could not afford their share of the premium because it increased substantially.
Today private health insurance costs continue to rise, they are increasing by 6.7 percent a year while out-of-pocket payments grow by 6.1 percent, more than double the rise in the cost-of —living. The insurance industry passes these increases onto employers who shift then shift the costs to employees. The costs of health insurance premiums alone have far outstripped overall inflation and the growth in workers’ earnings for most of the last 20 years making healthcare progressively more unaffordable for a growing number of Americans.
To best illustrate the effect of the healthcare cost escalation, and the resulting cost-shifting, we need look no further than one of the largest school districts in the U.S.; the Los Angeles Unified School District (LAUSD). Last month the unions in LAUSD just completed bargaining for health insurance benefits. The average cost to insure a family in 2009 is $12,000 per year. The Los Angeles Unified School District is spending $930 million for insurance benefits (health, dental and vision). When I first started working with the LAUSD in 1992, it spent $330 million on health, dental and vision. In 17 years, insurance premium have almost tripled. Because healthcare is so expensive, this District can’t insure 9,000 employees that cook for our children, drive them to school on buses, and provide instructional assistance to students.
For the first time in history, the LAUSD had to “cap it contributions” for health insurance, and has agreed to pay only 3.54% of what is projected to be an 8% increase in health insurance premiums. That means in 2010, workers will be required to pick up far more. Nationally, workers pay about 25% of premiums; federal employees pay 28%. And because the same cost will be shifted onto workers at the highest and lowest end of the pay scale. The impact of that on a worker who makes $40,000 a year, will end up paying more proportional to their take home savings than a school district management employee who makes close to $100,000 (or more) per year
Today eighty five percent of the CSEA collective bargaining agreements have an employer cap for health insurance. Costs they can’t afford. CSEA represents thousands of part-time employees who are paying hundreds of dollars a month for health insurance. We are now beginning to identify workers who are actually writing a check to the school district at the end of the month because their share of the insurance premium is more than their paycheck.
I think my last point is critical: Keeping the insurance you have is not going to help my membership. We are paying more and getting less coverage. In 1984, at HERE, Local 2, if you worked three — three hour shifts, and you would receive full family coverage. Today 100,000 classified school employees in the State of California do not qualify for employer paid coverage because they work part-time.
I represent workers who earn, on average, approximately $30,000 per year. Because the cost of health insurance, California’s school districts now pay approximately 16% of its budget on employee benefits (medical, dental and vision). The CSEA Research Department is identify more collective bargaining agreement that have $20 co-payment for physician visits, and $30 co-payment for prescription drug benefits. For lower wage income earners, the monthly contributions that workers have to make equates to a regressive tax on working families. That is low income workers are paying a greater portion of their income toward insurance costs, while higher paid workers and executive are paying less of their income toward the cost of insurance. .
The U.S. Healthcare System penalizes companies like GM or employers like LAUSD who want to provide decent benefits to its workers. By American standards, these employers have an old workforce: its average worker is much older than the average worker at a company like Google. That has an immediate effect: health-care costs are a linear function of age. The average cost to insure a worker between the ages of thirty-five and forty is $5,400, and for someone between the ages of sixty and sixty-four it is $6,400.
This goes a long way toward explaining why LAUSD has an enormous GASB 45 (employers having to account for post retirement medical benefits) liability. The insurance system discourages employers from hiring or retaining older workers. If they do, they are penalized by having to pay more expensive insurance premium. Yet another example of the fatal flaws in employer based insurance.
If the U.S. moved to a single payer national health insurance system, employees would benefit by knowing that everyone would pay proportional to their income, benefits would not be lost if workers were to be laid-off, people could move to jobs they enjoy instead of staying in jobs they hate because they provide benefits. The employer and the union could stop spending hours at the bargaining table talking about insurance benefits with an end result of a zero sum gain. We could finally get control of the cost, which would free up billions of tax payer dollars that could go back into teaching our children. Thank you.
David L Rabin MD, MPH, Professor of Community Medicine, Georgetown University Medical Center, http://www.youtube.com/watch?v=qrbqXZadUjg (starting at 2:50 min), http://www.youtube.com/watch?v=-LSaAN02dPo
I am pleased to discuss the Medicare Advantage program. It is medical care costs, as President Obama said, that are the greatest barrier to extending coverage to everyone. One experience, from which we can learn about cost containment as we consider health care reform, is the history of private plans in Medicare.
Single payer Medicare began because private insurers withdrew from insuring the elderly, who could not afford insurance at a cost profitable for the insurer. When Medicare began, non profit HMOs,like Kaiser, were permitted. But 6 years later, in 1972, with the first Medicare Amendments, for-profit private plans—HMOs—were permitted—the reason—to save money. To make that reason explicit, in 1982, the Tax Equity and Fiscal Responsibility Act began paying HMOs at 95 % of the average per capita cost for a Medicare beneficiary and additional benefits. But studies showed that HMO enrollees were healthier than average Medicare beneficiaries; therefore, Medicare was paying more for these HMO enrollees than for similar beneficiaries in traditional Medicare. Despite these findings, the 1997 Balanced Budget Act created Medicare+Choice, expanding availability of private plans other than HMOs by (1) including private provider organizations (PPO) and private fee-for-service plans (PFFS)and (2) increasing payments in areas with low fee-for-service costs—mostly rural areas. In 2000, payments were increased to encourage inclusion of low-cost beneficiaries in urban areas. Nevertheless these additional payments proved insufficient for private plans. Many private plans withdrew from participation, some abruptly, leaving enrollees without supplemental Medigap insurance; other plans reduced benefits. Private plan enrollment dipped from 6.9 million beneficiaries in 1999 to 5.3 million by 2003.
The 2003 Medicare Modernization Act, renamed Medicare private plans Medicare Advantage, legislated additional plan types (regional private provider organizations and Special Needs Plans). Plan payments were increased. Private plans incorporate supplementary Medigap benefits and 66% incorporate Part D drug plans into a single plan and premium. By March 2009 10.9 Medicare beneficiaries, had enrolled in private plans, 83% in plans with individual enrollment. Aggressive marketing by some private Medicare Advantage plans was documented with violation of Medicare advertising guidelines. Supporters of private plans speak of choice and the average beneficiary has 44 plans to chose from, but every private plan limits choice of providers compared with traditional Medicare. Restricted provider choice is associated with lower costs — HMO’s cost least and PPO’s most, on average. But for most beneficiaries the choice they want is choice of providers, not plans. Nearly all institutional care providers and well over 90% of physicians accept Medicare, many more then within an HMO or network plan. Premium cost seems to be the most important attraction for enrollees — 54% selected plans with no premium. Enhanced Part D benefits with gap coverage are also attractive to enrollees. These features imply lower out of pocket costs though there may be a trade off with quality as initial quality evaluation of Medicare Advantage plans, have not been reassuring. However cost sharing for benefits can be as much as $3559 for those chronically ill. The most critical issue however for Congress is program costs
The private plans are being paid an average of 14% more than the cost of care for a traditional Medicare beneficiary. Among Medicare Advantage plans, the PFFS plans, which have grown the most rapidly; cost 17% more than for traditional Medicare beneficiaries. PFFS plans neither manage care nor develop provider networks though are now required to by 2010. They assume providers will accept their reimbursement levels. Some reimbursement levels are less than Medicare’s some e.g. for physicians, may be more. However, if providers do not accept the private fee-for-service plans, patients are uninsured at the point of service. Some plans have provided extra benefits unavailable to traditional Medicare beneficiaries. But other PFFS plans do not provide benefits as required by the rebates Medicare gives them—thereby increasing profits, not services. OMB’s Peter Orzag estimates that Medicare Advantage supplementary benefits costs Medicare $1.30 for every $1.00 of coverage with no evidence of improved quality.
Medicare Advantage pays more to private plans, sometimes providing additional benefits, even though plan enrollees are healthier - physically and mentally - than traditional Medicare beneficiaries. The 5% of Medicare beneficiaries in poor health account for 43% of Medicare costs, so very small differences in the proportion of enrollees in poor health, has large implications for total MA costs. Paying for healthier people adds to the profitability of private plans, but exacerbates the financial viability of traditional Medicare, now increasingly serving those most in need. Since Medicare receives general tax revenues, all tax payers, as well as all Medicare beneficiaries pay for the MA subsidy, decreasing the fiscal viability of their own program. The congressional focus on MA has diverted attention from program cost containment, sustainability and improving benefits for those most in need, to subsidizing care for those least in need.
A quarter century of experience with Medicare private plans shows that private plans using public monies are a shameless giveaway—with no clear social benefit—to private insurers. For the nation, Medicare Advantage is Medicare Disadvantage! We must learn from this experience as we discuss health reform for the non elderly. The overwhelming national interest in health care reform for the non elderly is to contain health care costs. One proposal is to introduce a public single payer Medicare like plan to compete with private plans. Experience with Medicare private plans shows they have not contained costs as well as the public plan. They cost more even while undermining the public plan by adverse selection of enrollees. Over time they manipulate the legislature, the market, and providers to increase their profitability at the expense of the public good. Continuation of private plans assures continued high administrative costs for insurers averaging 25% and for providers dealing with numerous private plans, another 10%. Health expenditures can best be contained by establishing a single payer public plan for all, which would save $400 billion annually in administration, decrease provider expenses by simplifying reimbursement, assure continuity of coverage, provide universal access and initiate essential system reforms that contain costs. A combination of private and a competing public plan is a mirage, assuring continuing health care inflation and exploitation of the public good to serve private interests.