Wednesday, March 31, 2010

qotd: Cerberus Capital provides another Massachusetts lesson for U.S.

The Boston Globe
March 30, 2010
Seeking lower-cost care
By Steven Syre and Robert Gavin

The New York private equity firm that last week struck a deal to buy Caritas Christi Health Care could build the chain of six Catholic community hospitals into a competitive lower-cost provider of medical services in Massachusetts, touting it as a profitable national business model in the age of health care reform, analysts say.

Caritas, which also includes a physicians network, could become a new cost-conscious option for more patients under such a system.

Cerberus Capital Management plans to invest $830 million to acquire Caritas Christi and turn the charity into a for-profit venture. The investment, which includes money to reduce debt and invest in renovations and upgrades, would appear to be a steep price for the Caritas business as it exists today.

But the hospitals could emerge as an attractive lower-cost alternative to Boston's big teaching hospitals as health care reform moves forward soon in Massachusetts and later across the country. And, as reforms aimed at controlling costs take effect, an increasing number of health insurance policies may well offer patients a choice: Go to a famous teaching hospital and pay more or go elsewhere and spend less.

If the ambitious plan works, it could eventually mean a sizable payoff for Cerberus and its investors, said Howard Anderson, senior lecturer at MIT's Sloan School of Management. With a successful health care business, Cerberus could cash out by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.

Comment:  Massachusetts has been held up as a model on which our new federal health financing program is based. The purchase of Caritas Christi Health Care by Cerberus Capital Management may give us a hint as to what efforts under such a reform model might be made to slow the growth in health care costs.

Cerberus Capital Management plans to convert Caritas Christi into "an attractive lower-cost alternative" to Boston's expensive teaching hospitals. 

Their concept of lowering costs is right out of the book on the promised rewards of free markets. They are going to take a chain of low-cost charity hospitals and convert it into a for-profit venture. Then they are going to reap a "sizable payoff" by cashing out, either by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.

The model of reform that has just been enacted expands the lucrative health care marketplace for opportunists such as these venture capitalists. These entities will be crawling out of the woodwork to try to glom on to a share of the massive infusion of tax dollars to be redistributed by the private insurance companies. Should we really have expected anything else?

It's not too late to regroup and do it right.

Tuesday, March 30, 2010

qotd: Houston retirees face 50 percent premium increase

Houston Chronicle
March 29, 2010
Parker increases insurance premiums of city retirees
By Bradley Olson

Working to close a looming $100 million budget shortfall projected for next year, Mayor Annise Parker has sharply increased the monthly insurance premiums that thousands of retired city of Houston employees must pay, prompting outrage from retirees.

Beginning May 1, more than 4,000 retirees under 65 will face a nearly 50 percent increase in their insurance premiums, a budget fix the mayor imposed without consulting City Council.

Parker said the city decided to restructure the benefit payments because retirees under 65 have far higher use of insurance claims than active employees or retirees over 65, whose insurance is subsidized by Medicare.

"People are being priced out of benefits. I'm hoping City Council will take another look at this thing," said (Bill Elkin, executive director of the Houston Police Retired Officers Association)

Comment:  So paraphrasing Mayor Annise Parker of Houston, the greater health care needs of the retirees made it important to restructure their premiums to make them even more unaffordable. 

Now think about how the new health reform legislation would address this problem. It looks like these retirees under 65 would have to keep the insurance they have, without the choice of other options, and pay 50 percent higher premiums.

What if everyone were covered by an improved Medicare program? There would not be an issue here.

The point is that we have not reformed our health care financing system; we've only tweaked it. We have to keep working to be sure that people understand what didn't happen this time around.

Monday, March 29, 2010

qotd: Who is Donald Berwick?
March 28, 2010
Obama to nominate Berwick to head CMS
By the Associated Press

An administration official says President Barack Obama will nominate healthcare scholar Donald Berwick to be CMS administrator.

Berwick, a pediatrician and noted health policy expert, is president and CEO of the not-for-profit Institute for Healthcare Improvement in Cambridge, Mass.

Berwick is also a professor of pediatrics and healthcare policy at the Harvard Medical School and a professor of health policy and management at the Harvard School of Public Health.

An elected member of the Institute of Medicine of the National Academy of Sciences, Berwick served as a member of the IOM's Committee on Quality of Health Care in America, which launched the slowly building revolution in healthcare quality improvement. The committee published in November 1999 To Err is Human: Building a Safer Health System, which gave the healthcare industry one of its most totemic phrases: "At least 44,000, and perhaps as many as 98,000 Americans, die in hospitals each year as the result of medical errors."


Quote of the Day
November 18, 2005
Donald Berwick speaks up

'A Deficiency Of Will And Ambition': A Conversation With Donald Berwick
By Robert Galvin
Health Affairs
January 12, 2005

Donald Berwick is president and chief executive officer of the Institute for Healthcare Improvement (IHI) in Boston, Massachusetts. Bob Galvin is director, Global Health Care, at the General Electric Company in Fairfield, Connecticut.


Galvin: I'm interested in your thoughts on the impact of the Leapfrog Group, an effort organized by the purchasers of health care, both private-sector employers and public purchasers. The Leapfrog agenda has focused on... benefit incentives that engage consumers and patients in the quality and cost of care...

Berwick: The one part of the (Leapfrog) plan that I am absolutely against at the moment is the shifting of burden to individual patients. I do not believe that making the individual American patient more "cost-sensitive" has any rationale in science, ethics, or evidence. It will fail, and it will fail miserably. It will result in a shifting of care away from the people who need it the most. It is a displacement of responsibility for changing the system. You know, if CalPERS or Xerox or GE can't change care through using its purchasing power, then I absolutely promise you that Mrs. Jones can't. The idea that she will now be more sensitive because she pays an extra ten bucks out of pocket is, to me, nearly stupid. So I really disagree with that element of the agenda.

Internationally, when one looks at high-performing systems around the world - and ours is nowhere near the highest-performing one - it is almost a routine characteristic of the best systems that they have first-dollar coverage, and there is no attempt to make patients pay more when they're sick, which is a stupid thing to do.


Galvin: The conceptual basis of this is - as unsettling as it may be to "dangle money" to increase motivation-grounded in personality and motivation theory. In private industry, we would simply call it understanding what makes people tick. People respond to incentives. So part of the pay-for-performance movement is based on this idea that clinicians are really no different than other people and that they'll respond to incentives.

Berwick: At the individual level, I don't trust incentives at all. I do not think it's true that the way to get better doctoring and better nursing is to put money on the table in front of doctors and nurses. I think that's a fundamental misunderstanding of human motivation. I think people respond to joy and work and love and achievement and learning and appreciation and gratitude-and a sense of a job well done. I think that it feels good to be a good doctor and better to be a better doctor. When we begin to attach dollar amounts to throughputs and to individual pay, we are playing with fire. The first and most important effect of that may be to begin to dissociate people from their work. That's really where we've come to, and we've done it by pay-for-performance in terms of throughput measurements and manipulating payment schemes.


Galvin: Let me move to another issue, and that is the explosion that's about to play out in biomedical innovation. If you talk to patients... they are also interested in innovations that can cure them or their loved ones. They speak about it with pride and passion...

Berwick: I do think this: We have a learning disability in this country with respect to the difference between technologies that really do help and technologies that are only adding money to the margins of the companies that make them, without essentially paying their way in value. One of the drivers of low value in health care today is the continuous entrance of new technologies, devices, and drugs that add no value to care. If we had strong national policy, it would allow us to know the difference, and I would more fully support what I think you're correctly proposing, which is an innovations value. We need to help the public know the difference. There's a big agenda here, possibly for government, to help create a public awareness that more is not necessarily better. Frequently it's worse. So we can be smart about what we buy and what we choose not to buy.


Galvin: Many of us on the purchaser side see radically improving the efficiency of the system as a way to free up capital to cover the uninsured and to fund innovation. How do you think efficiency fits into the quality agenda?

Berwick: Let's define efficiency as making sure that every dollar you spend gets a dollar of value back, so that efficiency is the opposite of waste. Right from the start, it has been one of the great illusions in the reign of quality that quality and cost go in opposite directions. There remains very little evidence of that. There may be some innovations that raise cost while raising quality, but many, many improvements reduce costs.

What puzzles me is how to access efficiency as a social agenda in health care. There are couple of problems. The first is that a lot of people make a lot of money on inefficiency - on production of things that have no value. So the minute you try to become truly efficient, you're going to run into stakeholders who are going to tell you that you're harming care, and the knee-jerk reactions of doctors and others will be to reinforce that idea. And they include you. I mean, GE pays out of one pocket and then makes money on products and services that do not add real value.


Galvin: There's a threshold issue with most purchasers when you talk about getting a patient financially engaged. That is that no one ends up paying more because they're sick. The only option would be to pay less. Let me give you an example: Many employer-sponsored benefit plans across the country have hospital copays as part of their cost sharing. This means that there is a fee of a hundred or several hundred dollars when one is admitted to a hospital. In these benefit designs, while most people have pretty free choice of what hospital they go to, going to the one that objective data demonstrate is of superior quality and efficiency would result in a waiver of the copay.

Berwick: Well, I can be an empiricist about it. Go ahead and try it. I shudder to think about what may happen, because in the end, that sick patient arriving at that hospital is in the absolutely weakest position at that particular point to decide, "Aha, I'm going to save a hundred dollars and go elsewhere." That person is more likely to be poor, more likely to be black, more likely to be a low-wage earner. I think it's regressive social policy, and I predict that it won't work. It's a displacement of responsibility from the stewards who actually have the job of crafting systems to meet the needs of the people who come to them for help. I think it's a bad, bad policy, and I don't see it playing out productively in other countries, either.

Full interview:


Kaiser Health News
November 12, 2009
Checking in with Donald Berwick, President and CEO, Institute for Healthcare Improvement

An interview of Donald Berwick (video 8:39)


The Century Foundation
March 26, 2010
Health Beat by Maggie Mahar
Video Segments of Dr. Donald Berwick from the Documentary "Money Driven Medicine"

Nine video clips (total 9:38)

Comment:  Soon everyone will know what Donald Berwick is - a Harvard professor and head of the Institute for Healthcare Improvement, about to become the administrator of CMS (Centers for Medicare and Medicaid Services), assuming that he survives the acrimonious vetting process in our highly politicized Congress.

More importantly than what, today's message tries to show who he is by repeating a prior Quote of the Day extracted from an interview of him published in Health Affairs five years ago. Also included are links to more recent video interviews of him (total less than 20 minutes).

Friday, March 26, 2010

qotd: India's outsourcers outsource to U.S.

The Christian Science Monitor
March 25, 2010
US healthcare reform is boon for India outsourcing companies
By Taylor Barnes

President Obama signed into existence not just a historic healthcare reform law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases.

The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives here in India, it's heaven-sent.

The addition of 32 million insured Americans is "very significant" for Indian outsourcers, says Ananda Mukerji, chief executive officer of Firstsource Solutions in Mumbai. Companies like his will see "increased opportunities" as US health insurers and hospitals scramble to reorganize to comply with the new law.

This extra work will include processing new enrollments, organizing bigger member databases, processing more claims, providing more support services, and managing more revenue, he says.

The US healthcare reform offers a "natural extension" of the back-office outsourcing that Indian companies already specialize in, says Tu Packard, a senior economist with Moody's

But some services in the US healthcare industry cannot be outsourced beyond America's borders due to regulations. That's one reason major Indian outsourcing firms have set up shop in the United States. In a twist, America's outsourcers are now outsourcing back to America.

Comment:  President Obama and Congress rejected the administratively efficient model of single payer, and have now enacted into law the most expensive and most administratively complex model of reform. In the ultimate of ironies, India is now outsourcing to the United States the profusion of health care administrative services outsourced to them. It reminds you of why Willie Sutton robbed banks.

Thursday, March 25, 2010

qotd: Middle and high income levels experience largest increases in financial burden

Health Affairs
March 25, 2010
The Growing Financial Burden Of Health Care: National And State Trends, 2001–2006
By Peter J. Cunningham

The financial burden of health care — the ratio of total out-of-pocket spending for health care services and premiums to total family income — continues to increase nationally.

Although attention has been focused on rising health care costs, the fact that real median household income remained largely unchanged between 2000 and 2007 — hovering at about $50,000 — was an equally important contributor to increasing financial burden.

Among the total nonelderly U.S. population during 2004–6, 15.7 percent were insured people with high out-of-pocket expenses, and 14.2 percent were uninsured for the entire year. Thus, almost 30 percent of the U.S. population either had high financial burden or were uninsured.

Among those with employment-sponsored private insurance, the percentage with high financial burden increased from 15.1 percent in 2004 to 18.4 percent in 2006 — an increase that was very similar to that seen in the 2001–4 period.

Nationally, middle- and higher-income people with private insurance experienced the largest increases in financial burden.

Between 2001 and 2006, high burdens among the privately insured increased 17 percent for those below poverty, 56 percent among middle-income people, and 98 percent among higher-income people. An additional eleven million people with private insurance had high burdens in 2006 than in 2001; of these, 39 percent were high-income and 48 percent were middle-income.

(In the legislation just signed into law by President Obama) there are no subsidies for families with incomes greater than 400 percent of poverty, a group that has been experiencing the greatest percentage increase in high financial burden in recent years.

Thus, subsidizing private coverage and expanding public coverage for lower- and moderate-income families alone is not sufficient to stem the increase in high financial burden or to reduce the variation in financial burden across states. To stem the increase in financial burden among families at higher income levels — and to sustain proposed subsidies to lower-income people — it will be essential to combine cost containment efforts in health care along with achieving real gains in family income.

Comment:  Those individuals with good incomes and who have employer-sponsored health plans should not be complacent, but should be very concerned for the following reasons:

* The largest increases in the financial burden of health care have been occurring amongst middle- and higher-income people

* Among those with employer-sponsored private insurance, 18.4 percent face a high financial burden (spending over 10 percent of income on health care)

* In the reform legislation just passed, there are no subsidies for families with incomes greater than 400 percent of poverty ($88,000 for a family of four)

* Subsidizing private coverage and expanding public coverage for lower- and moderate-income families alone (the reforms in the legislation) are not sufficient to stem the increases in high financial burden

The insurance reform legislation is now law, but the measures "are not sufficient to stem the increases in high financial burden." There is no law against passing a new law. Do we live with the increasing financial burdens of this law, or do we eliminate the financial burdens by enacting an improved Medicare for all?

Wednesday, March 24, 2010

qotd: Reconciliation Act includes wealth transfer

The Library of Congress
Health Care and Education Reconciliation Act of 2010


(a) Investment Income-
(1) IN GENERAL- Subtitle A of the Internal Revenue Code of 1986 is amended by inserting after chapter 2 the following new chapter:

Sec. 1411. Imposition of tax.

(a) In General- Except as provided in subsection (e)--
(1) APPLICATION TO INDIVIDUALS- In the case of an individual, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax equal to 3.8 percent of the lesser of--
(A) net investment income for such taxable year, or
(B) the excess (if any) of--
(i) the modified adjusted gross income for such taxable year, over
(ii) the threshold amount.
(2) APPLICATION TO ESTATES AND TRUSTS- In the case of an estate or trust, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax of 3.8 percent of the lesser of--
(A) the undistributed net investment income for such taxable year, or
(B) the excess (if any) of--
(i) the adjusted gross income (as defined in section 67(e)) for such taxable year, over
(ii) the dollar amount at which the highest tax bracket in section 1(e) begins for such taxable year.
(b) Threshold Amount- For purposes of this chapter, the term `threshold amount' means--
(1) in the case of a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $250,000,
(2) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1/2 of the dollar amount determined under paragraph (1), and
(3) in any other case, $200,000.



(a) In General- Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:
(o) Clarification of Economic Substance Doctrine-
(1) APPLICATION OF DOCTRINE- In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if--
(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer's economic position, and
(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.


The New Republic
July 16, 2008
Is Single-Payer Health Care The Best Option?
By Don McCanne

Because of our very high costs, we must accept the fact that the insurance function is no longer simply a transfer from the many who are healthy to the fewer with health care needs, but it now must also include a partial transfer from the wealthy to middle- and lower-income individuals with needs. There is no alternative to this wealth transfer.

Comment:  The traditional role of health insurance has been to transfer funds from the many who are healthy to the few who are sick. But now health care costs in the United States are so high that if we expect everyone to have the health care that they need, a transfer of funds from the wealthy down would be absolutely mandatory if we are to be able to finance that care.

The easiest way to accomplish that transfer would be to establish a single national risk pool that covered everyone, and fund that pool through progressive taxes. Unfortunately, Congress and the President selected a much more complex financing scheme for their health reform program. Nevertheless, there was no way that they could escape the necessity of including a wealth transfer mechanism. So what did they do?

The most obvious transfers are contained in the bill signed yesterday that is now law. Individuals purchasing their health plans from the state exchanges will receive federal subsidies in an amount inversely related to their incomes. Individuals with very low incomes will be enrolled in Medicaid and will not have to contribute any premium. Since the taxes collected to support these programs are progressive, the wealth transfer is automatic.

The Reconciliation Act that is still under consideration in the Senate provides additional measures that acknowledge the need for a wealth transfer, including the unearned income Medicare contribution, and the codification of the economic substance doctrine.

Our current tax policies extract both income taxes and payroll taxes from hard-earned wages, but passive unearned income such as interest, dividends and capital gains may receive favorable treatment for income taxes, and totally escape payroll taxes. It seems unfair to tax individuals who are contributing to society by their personal work effort at a higher level than wealthy individuals who contribute little more than conversation at the nineteenth hole of the golf course. The common argument that those funds shouldn't be taxed so that they can be invested in the economy holds little water when you consider that increased productivity comes from the workforce and not from passive investors.

In recognition of this imperative of wealth transfer, the Reconciliation Act includes a Medicare tax of 3.8 percent on passive income over $200,000 for individuals or $250,000 for couples. Although that is a relatively modest tax for wealthy individuals, it is a giant step forward in solidifying the principle of wealth transfer.

The codification of the economic substance doctrine is simply locking into law the principle that wealthy individuals can no longer establish sham transactions that have the sole function of reducing income tax liability. Although this is not a wealth transfer in the same sense as the Medicare tax on passive income, it does ensure that the rightful transfer can no longer be avoided by these devious transactions, subject to an extra 40 percent penalty if attempted.

Although the decision of Congress and the President to continue to use private health insurers to finance health care was a terrible decision that we will continue to attempt to upend by pushing for a single payer system, nevertheless we can celebrate some of the beneficial features of the legislation such as the expansion of community health centers and the reinforcement of primary care.

One of the most important beneficial features of all is the firm establishment of the principle that the transfer will not come only from the healthy but must also come from the wealthy. That is a policy bridge that we will have already crossed on our march to an improved Medicare for all.

Tuesday, March 23, 2010

qotd: Ernestine: Blind? Read the fine print!

California OneCare
Campaign for SB 810 - Single Payer Universal Health Care

Lily Tomlin as Ernestine

30 second video:

Comment: We have been saturated with commentary since the passage and signing of the trillion dollar Private Insurance Industry Stimulus legislation. Lily Tomlin provides us with a much needed break as she reminds us, in her own incomparable style, of the industry that Congress and the President have so richly rewarded.

Monday, March 22, 2010

qotd: PNHP's response: A False Promise of Reform

Physicians for a National Health Program
News release
March 22, 2010

A False Promise of Reform

The following statement was released today by leaders of Physicians for a National Health Program, Their signatures appear below.

As much as we would like to join the celebration of the House's passage of the health bill last night, in good conscience we cannot. We take no comfort in seeing aspirin dispensed for the treatment of cancer.

Instead of eliminating the root of the problem - the profit-driven, private health insurance industry - this costly new legislation will enrich and further entrench these firms. The bill would require millions of Americans to buy private insurers' defective products, and turn over to them vast amounts of public money.

The hype surrounding the new health bill is belied by the facts:

* About 23 million people will remain uninsured nine years out. That figure translates into an estimated 23,000 unnecessary deaths annually and an incalculable toll of suffering.

* Millions of middle-income people will be pressured to buy commercial health insurance policies costing up to 9.5 percent of their income but covering an average of only 70 percent of their medical expenses, potentially leaving them vulnerable to financial ruin if they become seriously ill. Many will find such policies too expensive to afford or, if they do buy them, too expensive to use because of the high co-pays and deductibles.

* Insurance firms will be handed at least $447 billion in taxpayer money to subsidize the purchase of their shoddy products. This money will enhance their financial and political power, and with it their ability to block future reform.

* The bill will drain about $40 billion from Medicare payments to safety-net hospitals, threatening the care of the tens of millions who will remain uninsured.

* People with employer-based coverage will be locked into their plan's limited network of providers, face ever-rising costs and erosion of their health benefits. Many, even most, will eventually face steep taxes on their benefits as the cost of insurance grows.

* Health care costs will continue to skyrocket, as the experience with the Massachusetts plan (after which this bill is patterned) amply demonstrates.

* The much-vaunted insurance regulations - e.g. ending denials on the basis of pre-existing conditions - are riddled with loopholes, thanks to the central role that insurers played in crafting the legislation. Older people can be charged up to three times more than their younger counterparts, and large companies with a predominantly female workforce can be charged higher gender-based rates at least until 2017.

* Women's reproductive rights will be further eroded, thanks to the burdensome segregation of insurance funds for abortion and for all other medical services.

It didn't have to be like this. Whatever salutary measures are contained in this bill, e.g. additional funding for community health centers, could have been enacted on a stand-alone basis.

Similarly, the expansion of Medicaid - a woefully underfunded program that provides substandard care for the poor - could have been done separately, along with an increase in federal appropriations to upgrade its quality.

But instead the Congress and the Obama administration have saddled Americans with an expensive package of onerous individual mandates, new taxes on workers' health plans, countless sweetheart deals with the insurers and Big Pharma, and a perpetuation of the fragmented, dysfunctional, and unsustainable system that is taking such a heavy toll on our health and economy today.

This bill's passage reflects political considerations, not sound health policy. As physicians, we cannot accept this inversion of priorities. We seek evidence-based remedies that will truly help our patients, not placebos.

A genuine remedy is in plain sight. Sooner rather than later, our nation will have to adopt a single-payer national health insurance program, an improved Medicare for all. Only a single-payer plan can assure truly universal, comprehensive and affordable care to all.

By replacing the private insurers with a streamlined system of public financing, our nation could save $400 billion annually in unnecessary, wasteful administrative costs. That's enough to cover all the uninsured and to upgrade everyone else's coverage without having to increase overall U.S. health spending by one penny.

Moreover, only a single-payer system offers effective tools for cost control like bulk purchasing, negotiated fees, global hospital budgeting and capital planning.

Polls show nearly two-thirds of the public supports such an approach, and a recent survey shows 59 percent of U.S. physicians support government action to establish national health insurance. All that is required to achieve it is the political will.

The major provisions of the present bill do not go into effect until 2014. Although we will be counseled to "wait and see" how this reform plays out, we cannot wait, nor can our patients. The stakes are too high.

We pledge to continue our work for the only equitable, financially responsible and humane remedy for our health care mess: single-payer national health insurance, an expanded and improved Medicare for All.

Oliver Fein, M.D.

Garrett Adams, M.D.

Claudia Fegan, M.D.
Past President
Margaret Flowers, M.D.
Congressional Fellow

David Himmelstein, M.D.

Steffie Woolhandler, M.D.
Quentin Young, M.D.
National Coordinator

Don McCanne, M.D.
Senior Health Policy Fellow

qotd: Private insurer nightmare

Los Angeles Times
March 22, 2010
Effects of health overhaul will take time to become clear
By Duke Helfand

(The industry's Washington lobbying arm, America's Health Insurance Plans) ran ads in national newspapers last week criticizing the overhaul for failing to adequately contain costs. Without bolder action, it warned in its "Open Letter to the American People," the country could face a healthcare cost "crisis similar to the financial crisis that has rocked our economy."

"Virtually everyone believes that we have a huge number of issues that remain to be addressed," said Jay Gellert, chief executive of Woodland Hills-based Health Net Inc. "If anyone thinks that just by passing this we're going to solve the problems, they are seriously mistaken."

Comment:  I had a nightmare last night. I dreamed that we reformed the financing of health care in America, but that we left the private insurance industry in charge. Oh, wait... Oh, no!

Friday, March 19, 2010

qotd: Arizona shuts down CHIP, slashes Medicaid

The Arizona Republic
March 18, 2010
Governor signs Ariz. budget-balancing bills
by Casey Newton

Gov. Jan Brewer signed the fiscal 2011 budget on Thursday, enacting $1.1 billion in spending cuts and program eliminations.

The budget, passed last week by the Republican-led Legislature on largely party-line votes, drew criticism from opponents for what they called a disproportionate impact on the poor.

"I'm not sure how cutting three-quarters of a billion dollars from public education and kicking 300,000 people off of health care puts our state on the back on the road to recovery," said Rep. Kyrsten Sinema, D-Phoenix. "In fact, it dismantles what we have been working for years to build in Arizona — a vibrant, healthy state where people want to live and work."

One aspect of the budget expected to be challenged is a cut of $385 million to the state's Medicaid program, the Arizona Health Care Cost Containment System.

The budget bills also eliminate KidsCare, which provided health care to 38,599 children of low-income parents.

Hours after she signed the budget, Brewer appeared at a news conference to urge opposition to federal health-care reform. Asked by reporters what the hundreds of thousands of Arizonans set to lose coverage this year should do, Brewer said they should use community health clinics and emergency rooms.

Comment:  Programs benefiting low income individuals and families, such as Medicaid and CHIP, are politically vulnerable to the whims of conservatives wielding budget cleavers. Gov. Jan Brewer of Arizona has just provided us with a prime example of that.  Yet popular programs benefiting everyone, such as Medicare, are relatively impenetrable to the weapons of the conservatives.

The reform proposal likely to be enacted by Congress is heavily dependent on the expansion of Medicaid. Since it is a federal/state program, it requires the support of the government on both levels. In spite of the proposed increases in federal support, Gov. Brewer continues to urge opposition to the reform proposal. Low income families will remain vulnerable in her state as long as she and her Republican colleagues remain in charge.

Suppose Congress had included single payer in their deliberations and eventually decided that the benefits were too great to pass up ,and so enacted an improved Medicare program that covered everyone. Gov. Brewer and her ilk on the state level would be powerless to stop it. It would be so popular that conservatives who managed to take over the federal government would never be able to shut the program down.

Whether or not the current bill passes, we need to make every effort to replace our expensive, fragmented, often cruel, and relatively ineffectual system of health care financing with one that works for all of us - a single payer national health program - an improved Medicare for everyone.

Or failing that, as Gov. Brewer says, we could all just go to the emergency room when we can't get into the clinic.

Thursday, March 18, 2010

qotd: Keep your insurance? Ask locked-out employees in Boron

The Nation
March 29, 2010
Labor War in the Mojave
By Mike Davis

The biggest hole in California, with the exception of the current state budget, is Rio Tinto's huge open-pit mine at the town of Boron, near Edwards Air Force Base, eighty miles northeast of Los Angeles.

The Boron pit, which replaced an underground mine, produces almost half the world's supply of refined borates.

Once upon a time, there were several thousand mining communities in North America; perhaps fewer than a hundred still exist. Boron (unincorporated, population 2,000) is one of the survivors.

In last year's contract negotiations, Rio Tinto (the British-Australian multinational acquired its Boron facility, U.S. Borax, in 1968 and renamed it Rio Tinto Borax) stunned members of the International Longshore and Warehouse Union, ILWU, Local 30 (Boron), by demanding abolition of the contractually enshrined seniority system and the surrender of any worker voice in the labor process.

The company wants a contract that would allow it to capriciously promote or demote; to outsource union jobs; to convert full-time to part-time positions with little or no benefits; to reorganize shift schedules without warning; to eliminate existing work rules; to cut holidays, sick leave and pension payments; to impose involuntary overtime; and to heavily penalize the union if workers file grievances against the company with the National Labor Relations Board.

"The company's proposal," union negotiators emphasize, "would destroy our union, lower our living standards, and give Borax total control over our jobs." On January 30, Local 30 members unanimously rejected the concessions demanded by Rio Tinto.

The company deadline expired the next morning, when Terri Judd set off for work as usual with her lunchbox and thermos. At the locked front gate she and other day-shift workers encountered a phalanx of nervous Kern County sheriff's deputies in full riot gear. Inside the plant, an elite "strike security team" hired by Rio Tinto had taken control of operations.

"Being locked out," says Terri, "is different from going on strike. Initially there's disbelief that the company is actually serious about booting you out the door. Hey, my granddad worked in this mine. But then you see that caravan of scabs coming to take your jobs, and the betrayal cuts like a knife in your heart."

Comment:  Empathetic souls will find the full version of this article to be very tough reading. When the 560 wage earners unanimously rejected the demands of Rio Tinto to give up much of their job security, the company terminated all of them in a job lockout. The impact on their small community of Boron is devastating.

Even though this story is not about health care, there is a very important health policy lesson here.

These people lost company support of their health benefits program at termination. With loss of their paychecks, many of these individuals are struggling to pay their rent and to buy food. Extension of health coverage through COBRA, even with subsidies, is of no benefit if they don't have the funds to pay for it.

And President Obama's promise of being able to keep the insurance you have if you want to? He left off the part that says you can keep it until your COBRA runs out, and at that only if you can pay your share (and all of the other reasons why hardly anyone still has the insurance they had twenty years ago, even if they wanted to keep it).

The policy lesson is that a health care financing system should be designed to cover absolutely everyone automatically throughout life. Individuals unfortunate enough to lose their jobs shouldn't be further penalized by losing their health care as well.

Wednesday, March 17, 2010

qotd: Sen. Snowe's policy advisor : Single payer in a decade

The New York Times
March 15, 2010
The Health Care Letdown
By William F. Pewen

Should they succeed in blocking reform, Republicans should take no consolation. When Congress next attempts reform, in a decade or more, health costs and the number of uninsured and underinsured will have escalated — and the likely outcome will be the single-payer system that Republicans most abhor.

(William F. Pewen is a former senior health policy adviser for Senator Olympia Snowe, Republican of Maine.)

Comment:  William Pewen expresses the view of the majority of well informed moderates and conservatives: The likely eventual outcome of further deterioration in health care financing will be a single payer system, like it or not.

Although they may be opposed to single payer based on ideology, they understand simple math. A decade from now a family with an income of $100,000 will not be able to pay an insurance premium of $25,000 plus a $25,000 deductible plus a coinsurance of 30% of the balance of the medical expenses.

The private insurance industry never has been and never will be capable of reining in health care costs. Health care costs are now so high that the reliance on pure market forces can never be effective in ensuring that everyone receives the health care that they should have. Only the government has the capability of slowing spending and improving the allocation of our health care resources so that everyone is taken care of.

A decade from now costs will be so high that almost every informed individual will recognize that we can no longer afford the additional waste inherent in our fragmented, dysfunctional financing system. In all reality, only a single payer system will work. Opposition will be limited to the "I got mine" folk who do not accept the enlightened, civilized view that we are all in this together.

We likely are now about to begin an experiment to see if a combination of greater government regulation of private insurers along with a system of government subsidies can provide everyone with the health care that they need without busting the budgets of families, businesses and the government. It is an unfortunate delay since the results are in before the experiment has even begun. Tens of millions will be left out of the system, and by selecting the most expensive model of reform, budget busting will only compound.

So as William Pewen states, if the bill before Congress is blocked, the likely outcome a decade from now will be a single payer system. But health policy science tells us that, if this bill passes, the likely outcome a decade from now will be a single payer system.

We really don't have to wait another decade. People already understand that health care costs are too high. What they need to understand is that they cannot rely on being able to keep the insurance they have if it becomes unaffordable for themselves or their employers, and they cannot rely on being able to purchase it though an exchange if the premiums are too high and the subsidies are too low. They also need to understand that, even if they have insurance, the relatively low actuarial value of basic coverage will leave them exposed to financial hardship should they develop significant health care needs, so the insurance they have won't work as it should.

Regardless of the results of the vote on the reform bill, we need to intensify our efforts to inform the public. Health care justice in America is ultimately their decision.

Tuesday, March 16, 2010

qotd: Massachusetts hospital spending out of control

Boston University School of Public Health
Health Reform Program
March 16, 2010

Massachusetts Hospital Spending Reached 55.4% Per Person Above the U.S. Average in 2007

Most of Excess is Unjustified, and State's Health Reform Law Is Negligible Factor

Report by Alan Sager and Deborah Socolar

This report documents and investigates the excess in Massachusetts hospital costs per person above the average for the United States. It examines the recent rise in this excess after a prolonged earlier decline, analyzes the many causes of the excess, assesses their reasonableness, and offers recommendations for addressing the state's resurgent hospital cost crisis.

Comment:  It is difficult to reduce this complex 211 page report on the very high level of spending by Massachusetts' hospitals into a few paragraphs, but the title and subtitle alone deliver the dominant messages. For those who would like more insight without reading the full report, there is an excellent 30 page summary at the beginning the report.

For those following the health care reform process, one observation stands out. The Massachusetts health reform - a hybrid model of reform not unlike the proposal before Congress - was not a significant cause of the excesses in hospital costs. More importantly from the perspective of those of us concerned about reform, it played no role in slowing cost increases.

All nations struggle with rising health care costs, but all except the United States have been able to maintain a lower trajectory in those increases. Financing systems do make a difference, and they must enable strong government oversight to be effective. Fragmented hybrid systems such as that in Massachusetts, and, more importantly, that in the proposed federal legislation, are not particularly effective. The authors do not discuss this other than to state that in the United States, "Nationally, neither competitive forces of a market nor regulatory actions by government have succeeded in reining in health care costs generally or hospital costs specifically."

Sager and Socolar do reemphasize an important point that they have made many times about controlling costs: "it is fundamentally about liberating, enabling, and persuading physicians to spend money more carefully on behalf of their patients." That sure seems like it would be much easier in a single, publicly administered system devoid of the third party money manipulators.

Monday, March 15, 2010

qotd: Do premiums correlate with actuarial values?

California HealthCare Foundation
October 2008
Actuarial Value: A Method for Comparing Health Plan Benefits
By Roland McDevitt, Ph.D., Director of Health Research, Watson Wyatt

Actuarial value is a summary measure of likely payments by a plan. It
measures the percentage of medical expenses paid by a health plan for a
standard population, ranging from 0.00 for a plan that pays nothing to
1.00 for a plan that pays all medical expenses.

Actuarial value only measures benefit payments. To fully assess whether
a plan is a good purchase, consumers would want to know both the premium
and the actuarial value. They may also want to consider other aspects of
the plan, such as whether specific benefits like maternity are covered,
whether the plan offers a broad choice of providers, and whether the
plan has a good record of administrative performance.

Individual market plans in Los Angeles County, 2006
32 plans listed at <>
Actuarial value and premium for a 32-year-old

0.86 - $194
0.83 - $289
0.83 - $242
0.82 - $204
0.70 - $257
0.69 - $198
0.67 - $56
0.67 - $448
0.64 - $186
0.63 - $110
0.62 - $62
0.62 - $403
0.59 - $244
0.58 - $222
0.57 - $81
0.56 - $50
0.56 - $69
0.49 - $193
0.49 - $283
0.47 - $244
0.46 - $83
0.46 - $111
0.46 - $278
0.46 - $87
0.45 - $77
0.44 - $298
0.44 - $72
0.44 - $166
0.41 - $93
0.41 - $60
0.39 - $149
0.34 - $75

If the policy goal is to provide a single number that consumers can use
to compare the relative value of different benefit packages, actuarial
value presents a more robust measure than any single cost-sharing provision.


House of Representatives
March --, 2010
H.R. ____
To provide for reconciliation...

Table of premium percentage limits and actuarial value percentages based
on income tier

Family income of 350% through 400% of federal poverty level (FPL)
Final premium percentage - 11%
Actuarial value percentage - 70%

Reference premium amount - average premium for the 3 basic plans in the
area for the plan year with the lowest premium levels

Comment: An important finding in this Watson Wyatt report is that the
premium paid for a private insurance plan has a very poor correlation
with the percentage of medical expenses that are paid by that plan on
average, as represented by the actuarial value. In this list from 2006,
a plan that paid 86% of the medical expenses had a premium of $194,
whereas another plan that paid 44% of expenses had a premium of $298.

Another important observation is that most of these plans in the
individual market have a comparatively low actuarial value. Almost half
of them don't even pay one-half of the medical expenses on average.
Think of the burden on the typical family of a year's worth of premiums
plus one-half of all medical expenses.

Although following the numbers reminds you of a shell game, it is
instructive to look at the reconciliation bill released by the House
Budget Committee last night (link above). With a family income of 350%
to 400% of the federal poverty level, the family would be required to
purchase a plan with an actuarial value of 70%, and they would be
required to pay up to 11% of their income for the premium. Thus the
family would be responsible for 11% of their income plus, on average,
30% of the medical expenses covered by the plan, plus all other costs
not covered by the plan.

That family also would be limited to providers selected by the private
insurer. In addition, that 11% of income cap on premiums applies only to
the average of the three cheapest plans with a 70% actuarial value.
Seeing the poor correlation with actuarial value, the family may feel
compelled to purchase a much more expensive plan with the same 70%
actuarial value if the cheapest plans do not include their personal
health care professionals with whom they have an established relationship.

Furthermore, most would prefer to have a plan that has benefits closer
to typical employer-sponsored plans which until now have had an
actuarial value of about 80%, and sometimes more. The family would be
responsible for the full additional costs of any such plan if they
should upgrade. (Upgrade really isn't the best choice of terms since all
trends today actually constitute a downgrade from the traditional standard.)

The bottom line is that a family at 400% FPL is being priced out of
health care, and a major factor contributing to this is that we are
relying on an incompetent private insurance industry that can't even
price its products properly. And Congress is... yes... cramming that
down our throats!

Friday, March 12, 2010

qotd: Grayson's "Public Option Act" or "Medicare You Can Buy Into Act"

Congressman Alan Grayson
March 9, 2010
Press Release
Grayson Introduces Public Option Act

Congressman Alan Grayson, D-Fla., today introduced a bill (H.R. 4789)
which would give the option to buy into Medicare to every citizen of the
United States. The "Public Option Act," also known as the "Medicare You
Can Buy Into Act," would open up the Medicare network to anyone who can
pay for it.

Congressman Grayson said, "Obviously, America wants and needs more
competition in health coverage, and a public option offers that. But
it's just as important that we offer people not just another choice, but
another kind of choice. A lot of people don't want to be at the mercy
of greedy insurance companies that will make money by denying them the
care that they need to stay healthy, or to stay alive. We deserve to
have a real alternative."

The bill would require the Secretary of Health and Human Services to
establish enrollment periods, coverage guidelines, and premiums for the
program. Because premiums would be equal to cost, the program would pay
for itself.

"The government spent billions of dollars creating a Medicare network of
providers that is only open to one-eighth of the population. That's
like saying, 'Only people 65 and over can use federal highways.' It is
a waste of a very valuable resource and it is not fair. This idea is
simple, it makes sense, and it deserves an up-or-down vote," Congressman
Grayson said.

H.R. 4789 - "Public Option Act" or "Medicare You Can Buy Into Act": Click Bill Number. Enter H.R. 4789. Click
Search. From there you can access the text of the legislation (very
short bill), cosponsors, and other information.

Video of Grayson's introduction of H.R. 4789 to House (5 minutes):

Article XVIII, Sec. 1818

Article XVIII, Sec. 1818A

Medicare premiums for 2010

Comment: Throughout the reform process members of Congress have been
fighting over whether or not the reform legislation should include the
option of purchasing a government-sponsored plan through the proposed
insurance exchanges - the so-called "public option." Since Congressman
Alan Grayson introduced the "Public Option Act" or "Medicare You Can Buy
Into Act" three days ago, a wave of enthusiastic support has been
generated based on the perception that this is the perfect solution.
Today's comment briefly discusses this legislation, and it will sound
really great at first blush, but do not draw any firm conclusions until
you read through to the end.

Okay. What does this bill do? It simply allows any legal resident of the
United States under age 65 to buy into Medicare. The program will be
paid for by the premiums to be collected from the individuals purchasing
the coverage. Six age brackets are established for purposes of pooling
funds. This reduces the financial burden on younger, healthier
individuals by requiring older individuals to pay the higher premiums
that would be required to fully fund their less healthy risk pool.

Many are not aware of this, but Medicare already has a buy-in program.
Under Title XVIII, Sec. 1818, individuals over 65 who have fewer than 40
quarters of Medicare-covered employment who would otherwise not be
eligible for Medicare can still participate by paying a full premium for
Part A coverage (hospital) or a reduced premium if they have 30 to 39
quarters of Medicare-covered employment. Likewise, under Sec. 1818A,
disabled individuals whose entitlement ends due to having earnings that
exceed the qualification level can also purchase Medicare Part A.
Grayson's bill adds a new Sec. 1818B to Title XVIII to expand the buy-in
option to anyone under 65.

For 2010, the premium under Sec. 1818 and Sec. 1818A to buy into
Medicare Part A is $461 per month. The premium for Part B (supplemental
medical) is the same as for qualified retirees - $110.50 and up, based
on income (ignoring the hold harmless exception). Thus the buy-in is
about $571 per month, or more for those with higher incomes.

Although Medicare beneficiaries have a high rate of chronic disease plus
the costs of end-of-life care, the risk pool is diluted with a very
large number of healthy seniors, thus the premiums are not as high as
one might think. On the other hand, it is likely that the risk pools for
the older but still under 65 age groups in the Grayson proposal would be
subject to adverse selection. Since the premiums must pay all costs,
they may be higher, perhaps much higher, than the diluted post 65 risk
pool. Grayson has not included any risk adjustment mechanism to
compensate for this.

At any rate, the Grayson proposal seems to be the true public option,
run by the government, that progressives have been fighting for. So what
could be wrong with it?

The greatest concern of all is that it still does not fix our
outrageously expensive, administratively wasteful, highly inequitable,
fragmented method of financing health care. It merely provides another
expensive option in our very sick system of paying for health care.
Providing yet one more option that people can't afford really hasn't
moved the process.

Although Medicare is a very popular program, it is highly flawed. It has
an oppressive central bureaucracy. It fails to use more efficient
financing systems such as global budgeting for hospitals and negotiation
to obtain greater value in health care purchasing. There are serious
questions about whether Medicare funds are being distributed equitably
and in a manner to promote greater efficiency. Its benefit package is
relatively poor, covering only about half of health care costs for our
seniors. Most Medicare beneficiaries feel that they essentially are
forced either to purchase Medigap plans, which provide the worst value
of all private health plans, or to enroll in Medicare Advantage plans,
which waste too many tax and premium dollars. It would be both much less
expensive for all of us and better for Medicare beneficiaries if the
extra benefits of these private plans were rolled into the traditional
Medicare program. Part D should be stripped of its private market
administrative and profit excesses and also be rolled into the
traditional program. Medicare also has failed to introduce beneficial
innovative programs such as the British NICE system, which would improve
both quality and value in our health care.

When we advocate for an improved Medicare for all, we really aren't
advocating for Medicare with a few tweaks. We are advocating for
replacing Medicare with a single payer national health program that
covers everyone, which we can still call Medicare, just as the Canadians
do. Adding another buy-in program to the two buy-in programs that
already exist in our highly dysfunctional system will do virtually
nothing to fix these flaws we now have. It does nothing to slow the
growth in our national health expenditures, and the high premiums for a
package of mediocre benefits will do little to reduce the numbers of

For those who say that a Medicare buy-in is an incremental step towards
health care utopia, explain precisely how that is going to work. Explain
each problem that it solves. Explain how it is going to morph into a
universal or near universal system in which each individual is paying
the full actuarial value of the coverage. It won't happen.

Playing with a Medicare buy-in is an unnecessary diversion at a time
that we need to get serious about reform. We need to fix Medicare and
expand it to cover everyone. Nothing less will do.