Multiple Insurers, Multiple Plans Create Expensive, Draining Hassle
By Benjamin Brewer – The Wall Street Journal – April 18, 2006
A recently approved Massachusetts plan designed to force all residents to get health insurance was a step in the right direction, but it doesn't go far enough.
Under the Massachusetts approach, there will still be a maze of plans provided by any number of insurers. That multiplicity is the problem. Multiple insurers and multiple plans create layers of unneeded expense and bureaucracy related to billing, collections and the entire assembly line of middlemen between the service rendered and the payment.
The solution that would really put health-care dollars, and providers, to their best use would be a single-payer system – namely, government-funded health coverage for all.
It took me a while to conclude that a single-payer health system was the best approach. My fear had been that government would screw up medicine to the detriment of my patients and my practice. If done poorly, the result might be worse than what I'm dealing with now.
But increasingly I've come to believe that if done right, health care in America could be dramatically better with true single-payer coverage; not just another layer – a part D on top of a part B on top of a part A, but a simplified, single payer that would cover all Americans, including those who could afford the best right now. Representatives and senators in Washington should have to use the same system my patients and I do were they to vote it in.
Doctors in private practice fear a loss of autonomy with a single-payer system. After being in the private practice of family medicine for 8 1/2 years, I see that autonomy is largely an illusion. Through Medicare and Medicaid, the government is already writing its own rules for 45% of the patients I see.
The rest are privately insured under 301 different insurance products (my staff and I counted). The companies set the fees and the contracts are largely non-negotiable by individual doctors.
The amount of time, staff costs and IT overhead associated with keeping track of all those plans eats up most of the money we make above Medicare rates. As it is now, I see patients and wait between 30 and 90 days to get paid. My practice requires two full-time staff members for billing. My two secretaries spend about half their time collecting insurance information. Plus, there's $9,000 in computer expenses yearly to handle the insurance information and billing follow up. I suspect I could go from four people in the paper chase to one with a single-payer system.
It would be simpler and better for the patient, and for me, if the patient could choose a doctor, bring their ID card with them, swipe it in a card reader at the time of service and have the doctor get paid on the spot with electronic funds transfer.
Instead, patients have to negotiate a maze of deductibles, provider networks, out-of-network costs, exclusions, policy riders, ER surcharges, etc. Wouldn't a card swipe be simpler? No preexisting conditions to worry about. No indecipherable hospital bills. One formulary to deal with and one set of administrative rules to learn instead of 300.
With a single-payer system, there are concerns about waiting times for procedures and not getting access to the "best doctors." These are real issues, but not unsolvable ones. We have these disparities now. Fact is, they are mostly a matter of geography, insurance status and personal wealth.
A single-payer system would increase access to care for the uninsured and the underinsured, including the working poor. It would lower total health costs, in part by replacing 50 different state Medicaid programs and umpteen insurers with one system. This approach has the potential to improve quality and lower costs by improving care for chronic illnesses such as diabetes, high blood pressure and heart disease.
Such a system of care would rely on evidenced-based interventions, that is, providing the right care at the right time to the right patients, according to generally accepted best practices, and it would reduce the disparities in access to and quality of care among ethnic groups. Better tracking of chronic diseases, outbreaks and identification of bioterrorism would also be benefits.
There are powerful forces that oppose a single-payer system – the health insurance industry for one. The insurance industry got its share of the Medicare drug benefit pie, as did the pharma industry. It would have been better and simpler for the government to design one plan with a standard drug fee schedule that everyone could understand, as the government does with care that doctors provide to Medicare patients. But that's not the way it happened.
Doctors have been supportive of the idea of universal access to care, but not necessarily a single-payer system. Some fear delays in obtaining necessary testing and surgeries. What I suspect they fear most is a loss of income and the fear of the unknown.
A single-payer system would admittedly lower fees for subspecialty care, such as radiology and cardiology. But if more doctors went into family medicine or obstetrics and fewer into subspecialties like plastic surgery, that shift might help correct the physician manpower imbalances that exist now. That wouldn't necessarily break my heart.
I suspect doctors would be more likely to support a single-payer system if national malpractice reform was part of the package – which it should be.
I used to think a single-payer system would keep my income down and inject bureaucracy into my medical decision-making. But with the efficiency it could bring, it would at worst be an economic wash; more likely, the trimmed costs would more than make up for any foregone revenue. As for autonomy, I'm already struggling to maintain it amid the interference of insurers.
On the whole, the efficiency – and equality – that a single-payer system would provide would more than compensate for its shortcomings.
THE DOCTOR'S OFFICE
The Doctor's Office is a first-hand online column about the issues, challenges and rewards facing physicians today. It's written by Benjamin Brewer, a doctor with a family practice in the rural village of Forrest, Ill. Send your comments and questions to Dr. Brewer at email@example.com
Dave Pavlick's full schedule and details on how you can help will be posted here soon. Please check back. In the meantime, please watch the video for more information.
May 1, 2006
New York Times
For lower-income working Americans, lack of health insurance is quickly becoming the new normal. That's the implication of survey results just released by the Commonwealth Fund, a nonpartisan organization that studies health care. The survey found that 41 percent of nonelderly American adults with incomes between $20,000 and $40,000 a year were without health insurance for all or part of 2005. That's up from 28 percent as recently as 2001.
Many of the uninsured reported spending their entire savings on health care and/or that they were having difficulty paying for basic necessities. And most uninsured adults reported cutting corners on medical care to save money — failing to fill prescriptions, skipping medications, going without preventive care.
Here's the other side of the same coin: health insurers' business is lagging, reports The Wall Street Journal, as "rising premiums and medical costs push more of their traditional-employer customers to shun or curtail company health benefits." And some investors are feeling the pain. Aetna's stock price fell sharply last week, on news that its "medical cost ratio" — a term I'll explain in a minute — rose from 77.9 to 79.4.
Taken together, these stories tell the tale of a health care system that's driving a growing number of Americans into financial ruin, and in many cases kills them through lack of basic care. (The Institute of Medicine, part of the National Academy of Sciences, estimates that lack of health insurance leads to 18,000 unnecessary American deaths — the equivalent of six 9/11's — each year.) Yet this system actually costs more to run than we would spend if we guaranteed health insurance to everyone.
How do we know this? The medical cost ratio is the percentage of insurance premiums paid out to doctors, hospitals and other health care providers. Investors are upset about Aetna's rising ratio, because it leaves less room for profit. But even after the rise in the cost ratio, Aetna spends less than 80 cents of each dollar in health insurance premiums on actually providing medical care. The other 20 cents go into profits, marketing and administrative expenses.
Other private insurers have similar ratios. And here's the thing: most of those 20 cents spent on things other than medical care are unnecessary. Older Americans are covered by Medicare, which doesn't spend large sums on marketing and doesn't devote a lot of resources to screening out people likely to have high medical bills. As a result, Medicare manages to spend about 98 percent of its funds on actual medical care.
What would happen if Medicare was expanded to cover everyone? You might think that the nation would spend more on health care, since this would mean covering 46 million Americans who are currently uninsured. But the uninsured already receive some medical care at public expense — for example, treatment in emergency rooms that would have been both cheaper and more effective if provided in doctors' offices.
And Medicare manages to spend much more of its funds on medicine, as opposed to other things, than private insurers. If you do the math, it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system.
And this calculation doesn't even take into account the costs our fragmented system imposes on doctors and hospitals. Benjamin Brewer, a doctor who writes an online column for The Wall Street Journal, recently commented on the excess expenses he incurs trying to deal with 301 different private insurance plans. According to Dr. Brewer, he currently employs two full-time staff members for billing, and his two secretaries spend half their time collecting insurance information. "I suspect," he wrote, "I could go from four people in the paper chase to one with a single-payer system."
Many pundits see red at the words "single-payer system." They think it means low-quality socialized medicine; they start telling horror stories — almost all of them false — about the problems of other countries' health care. Yet there's nothing foreign or exotic about the concept: Medicare is a single-payer system. It's not perfect, it could certainly be improved, but it works.
So here we are. Our current health care system is unraveling. Older Americans are already covered by a national health insurance system; extending that system to cover everyone would save money, reduce financial anxiety and save thousands of American lives every year. Why don't we just do it?
By Kip SullivanViews > May 4, 2006 > In These Times - Web Only
Odds are good that Romney will rue the day he took credit for this bill.
Legislators around the country are looking to the law recently passed in Massachusetts for answers on how to cope with the health care crisis in their states. Will Massachusetts really be the first state to achieve universal health insurance? Should Republican voters across the country see this legislation as evidence that Republican Governor Mitt Romney, who is likely to seek his party’s nomination for president, is an effective leader, or a “Republican In Name Only” who believes in too much government?
Proponents of the new law say it will result in near-universal coverage in the state by 2010, reducing the uninsured rate in Massachusetts to 1 percent from its 2004 rate of 11 percent. Beginning July 1, 2007, the law will require uninsured Massachusetts residents to either buy health insurance or face fines. Romney signed the bill on April 12.
The law has drawn an enormous amount of media coverage, much of it superficial. On April 12, the Associated Press reported, “The bill, intended to extend coverage to Massachusetts’ estimated 550,000 uninsured, is being touted as a national model, thrusting the state to the forefront of the national debate about how to provide near-universal health care coverage without creating a single government-controlled system. It’s also a political coup for Romney as he weighs a potential run for the Republican presidential nomination in 2008.”
Romney, who has repeatedly stated that the bill represents his thinking more than that of the Democratically controlled House and Senate, told the New York Times, “This is really a landmark for our state because this proves … that we can get health insurance for all our citizens without raising taxes and without a government takeover. The old single-payer canard is gone.”
However, Romney’s expectations of the law are going to be dashed, and his obituary for single-payer will prove to be premature. The fundamental flaw of the Massachusetts law is that it does little to reduce health care cost inflation. The bill attempts to improve coverage by funneling money through the bloated insurance industry. Insurance companies allocate roughly 20 percent of their revenue to cover their administrative costs (which include marketing, telling doctors how to practice medicine, providing dividends, and financing high management salaries). That is 10 times the overhead of Medicare, which allocates only 2 percent of its expenditures to overhead, and about 20 times that of Canada’s single-payer system, which allocates 1 percent. Moreover, a system of multiple insurers drives up the administrative costs of clinics and hospitals. This is especially true if all or most of the insurers practice managed care.
Nor is it likely that lowering the uninsured rate in Massachusetts will lower total health spending and premium inflation. Although the argument is often made that the cost of extending coverage to the uninsured will be more than offset by the reduction in medical costs due to improvements in the health of the formerly uninsured, there is little evidence for this claim. It is true that having health insurance is associated with better health. But it is also true that the insured use many more medical services than the uninsured do—some studies have estimated nearly twice as many.
The failure of the Massachusetts law to cut health care costs will be aggravated by its method of reducing the number of uninsured: It requires all Massachusetts residents to buy health insurance. Health insurance, in other words, will be treated like car insurance—you have to have it or you’ll be in violation of state law and subject to a fine.
This provision, known as an “individual mandate,” is supported primarily by Republicans. AFL-CIO president John Sweeney characterized it as a regressive measure that only Gingrich Republicans would support. “Forcing uninsured workers to purchase health care coverage or face higher taxes and fines is the cornerstone of Mr. Gingrich’s health care reform proposals,” Sweeney said. “It is unconscionable that Massachusetts has adopted this misguided individual mandate.”
To meet their obligations under the mandate, most employed Massachusetts residents will continue to buy health insurance from their employer. But because the law does little to reduce premium inflation, employer flight from the health insurance market will continue, forcing more and more employees to purchase insurance on their own. In Massachusetts today, it costs employers about $4,000 per year to insure an employee without dependents and $11,000 a year to insure an employee with dependents.
So, how will the state’s uninsured be able to afford such a big-ticket item? The law requires the state to pay the entire premium for those under the federal poverty level (about $10,000 in annual income for an individual), and to provide sliding scale subsidies for those between poverty level ($20,000 for a family of four) and 300 percent of poverty (about $29,000 for an individual). Unfortunately, it is impossible from reading the law to know what the minimum level of coverage will be, how much insurance companies will charge for it, and how much the subsidy will be for any given income level. The law merely tells us that a state board with the odd name “board of the connector” will determine what constitutes “minimum creditable coverage,” and that this board will determine how big the subsidies have to be to make the coverage “affordable” to residents. (The term “connector” in the board’s title reflects its central task of assembling individuals who don’t have insurance through work and small employers into a large pool so that they can purchase insurance at the lower rates large employers get.)
To get some sense of how the law is going to work, we must turn to statements by the lawmakers who wrote it. They claim they can reduce insurance premiums for individuals, for example, from $4,000 down to $2,400 a year. This seems extremely unlikely. The only way the Massachusetts insurance industry can reduce premiums even a little, never mind by 40 percent, will be by offering substantially reduced coverage. This will not endear residents to Governor Romney and his “model” legislation. If, on the other hand, coverage is not reduced and premiums therefore remain near current levels, subsidies will have to be raised, which means taxes will have to go up, which won’t endear Romney to Massachusetts residents or to voters, especially Republican voters, in other states.
What will probably infuriate residents most will be the enforcement of this bill. The bill requires employers, providers, and residents to make reports to the government about who has insurance, and it punishes the uninsured with fines enforceable by the Department of Revenue. Residents who don’t have insurance in 2007 will lose their personal income tax exemption (worth about $150). In succeeding years they will be fined half the price of the cheapest health insurance policy that the “connector” deems to be “creditable coverage”: about $1,200 if premiums indeed fall to the $2,400 range, and closer to $2,000 if premiums are in today’s $4,000 range. Penalties for families will apparently be even higher.
The spectacle of hundreds of thousands of Massachusetts residents having to buy insurance with awful coverage that they cannot afford, and many refusing to buy insurance and taking steps to avoid paying their fines (such as not filing income taxes) will come into focus in the latter half of 2007 and the first half of 2008—that is, in the year leading up to the 2008 Republican national convention. The media, in short, will have plenty of time to unearth horror stories about Romney’s “model” legislation. Odds are good that Romney will rue the day he took credit for this bill.
Kip Sullivan sits on the steering committee of the Minnesota Universal Health Care Coalition. He is the author of The Health Care Mess
, available at authorhouse.com
I am Patricia Moss and I am the proud president of AFSCME Ohio Council 8 representing 41,000 public employees in Ohio. Nationwide AFSCME represents more than 1.3 million working Americans.
Our members like most Ohioans find themselves in the midst of this fight for affordable, quality health care. As so many speakers will tell you today there are 1.3 million Ohioans without health care. Every 8th person you pass on the street in Ohio does not have health insurance. Count them the next time you go for a walk.
Many of you may think that union represented employees don’t need to be concerned about health care coverage. Well those days, if they ever existed, are gone. Across the nation, in states where we have the data, we see a growing number of union represented public employees on Medicaid—the government health care program for low income individuals who do not have health care.
Ohio unfortunately does not collect data on the number of public employees on Medicaid, so we don’t know the numbers. But we know they exist as public employers continue to reduce their health care benefits.
In Texas where we do have data, 15 of the 20 employers identified in the state's report of employers with employees whose children are on Medicaid, were public employers—mostly school districts.
In Massachusetts the City of Boston is number 6 on the list of employers with 50 employees or more who have employees using public health assistance.
How can it be that public employers, which have historically offered decent health care benefits, are now beginning to contribute to the nation's uninsured working population? Strapped for cash, many states are reducing their own employees' access to health benefits by relegating them to part-time or temporary status, or increasing their contributions to a point where they simply cannot afford health care.
After 5 years of double digit health care cost increases, no longer are public employers willing to allow employees to keep their health care in exchange for giving up wage increases. Every where we look, we see that the deal is off—a deal that cost our members year after year of wage increases.
And there is a growing number of public employees whose entire paycheck goes for their share of the health care premium. Some find that even after giving their entire paycheck to cover health care, they still owe their employer money for their health care.
We know that 46 million Americans have no health insurance. Another 16 million are in a new category of underinsured. That means these folks spend more than 10% of their income on health care costs.
With escalating health care costs and massive cost shifting to employees we are not only a nation of insured and uninsured, we are a nation of those who have insurance and can afford to use the benefit and those who are insured but cannot afford to use the benefit due to escalating deductibles, co-insurance and co-pays.
Indeed 21% of adults both insured and uninsured have medical debt they are paying off over time. For 44% of them the debt is in excess of $2,000. And no surprise the number one reason for bankruptcy in this country is due to medical expenses.
With every percentage increase in health care costs it is likely that 500,000 people are added to the uninsured as employers either stop offering health care or make it so costly that employees cannot afford to enroll in it.
We have an employer-sponsored health care system in this country. People generally get their health care through their employment. Yet nearly 40% of US employers do not offer health care coverage to their employees. Nearly 60% do not offer retiree health care benefits.
Of course if you are uninsured you are less likely get needed medical treatment or fill your prescriptions. Because of that the National Academy of Sciences estimates that lack of health insurance leads to 18,000 preventable deaths in the United States. That is equivalence of the losses suffered through 6 9/11’s each year.
This lack of health care coverage has serious impacts on our nation’s ability to compete in the global market place. Benefits cost in the United States equals 29% of payroll. While in Japan, Canada and the United Kingdom it is closer to 17%. And the reason for this increased benefit cost in the United States is due to the cost of employer sponsored health care.
Starbucks spends more on health care for their employees than they do on coffee. The auto industry spends more on health care than it does on steel for its cars.
Every car built in America has an additional $1200 in costs due to our inefficient health care system. That makes it very difficult for our auto industry to compete in the global market place. And is it any wonder that GM had its bond rating downgraded to junk bond status—because of its staggering health care costs for its employees and retirees.
So at the same time we are losing our manufacturing sector in the US due to this health care crisis, the number of citizens on Medicaid due to lack of health insurance is increasing. In Ohio the number of non-disabled adults on Medicaid increased by 31% in the last 6 years. These are people who either lost their job or lost health care because their employer stopped offering it or made it too expensive for the employee to afford. So we lose the tax base provided by the manufacturing sector that helps fund programs like Medicaid at the same time we are experiencing increased demand on such programs. This is a public policy disaster.
And while our manufacturing sector cannot compete globally, foreign manufacturers are not building plants in America either. In fact, when Toyota was deciding where in North America to place its next auto factory it by-passed numerous offers of tax subsidies in the United States and opted for Canada due in part to its national health care system. Canadian workers are $4 to $5 cheaper to employ in large part because of the taxpayer-funded health-care system in Canada.
So while we are in the midst of this health care crisis what does the Ohio Legislature offer us as solutions?
First for school employees the legislature wants to take our members’ right to negotiate health care benefits away. HB 66 once fully enacted will strip hundreds of thousands of school employees of their right to negotiate over health care benefits. These are the same people who have year after year sacrificed wage increases to keep affordable health care. This no solution to the health care crisis we face in Ohio. And if you want to help stop this plan please sign one of the post cards to the Speaker of the House and the President of the Senate circulating in the audience urging them to keep their hands off our health care and we will make sure they get delivered.
The second solution this legislature has offered us is to force every public employer to offer a high deductible health savings account. These accounts do nothing to help the 1.3 million Ohioans who do not have health care. HSAs do nothing to add needed improvements to the health care system.
HSAs will negatively impact employers’ traditional health care plans as healthier employees leave those plans for the HSAs. HSAs will also make lots of money for countless brokers who manage these accounts. And for those who can afford them, they will provide some tax relief. For those who can’t afford to put $1,000 to $2,000 a year in an HSA they will simply not select health care. And if their income is low enough they will end up on Medicaid.
So while HSAs will reduce the amount of tax dollars coming in, they will also increase the demand for Medicaid. This is not the kind of public policy that our lawmakers should be setting as we address this health care crisis.
We need real health care reform. We need to deliver a wake up call to this legislature that this health care crisis must be addressed. My union, AFSCME Ohio Council 8 will continue to link arms with organizations that are fighting for affordable, quality health care.
So many of our great social programs like Social Security, Medicare, unemployment insurance, the public school system and workers compensation came about because labor unions joined with others to advance these causes. We will win this fight because of our joint efforts and you can count on AFSCME to be at the front of this fight.
By JOANNE WOJCIK
While state lawmakers target private employers for not providing health care coverage, a similar issue may be brewing in many of their own backyards.
In addition to being taxed by having to provide public health assistance to a growing number of working poor, government budgets are also being squeezed by their own employees' escalating health care costs, forcing them to shift more of the expense onto those employees. Those employees, in some cases, then turn to public health programs.
For example, while Canton, Mass.-based Dunkin' Donuts Inc. may be No. 1 on the Massachusetts' Executive Office of Health and Human Services' list of employers with 50 or more employees using public health assistance, the city of Boston is not far behind, ranking sixth on the list.
In Texas, 15 of the 20 employers identified in the state's Health and Human Services Commission report of employers identified by individuals enrolling in the Children's Health Insurance Program, were public employers—mostly school districts.
How can it be that public employers, which once made up for paying low wages by offering comprehensive benefits, are now beginning to contribute to the nation's uninsured working population?
It's the same reason states are seeking reimbursement from private employers to help shore up their overtaxed Medicaid systems, observers say. Strapped for cash, many states are reducing their own employees' access to health benefits by relegating them to part-time or temporary status, or increasing their contributions to a point where they sometimes become unaffordable.
Ohio last July increased state employee health plan contributions to 15% of premiums from 10%, because "the state, like many other states, had significant concerns about the state budget," according to Nan Neff, benefits administrator, in Columbus. With the increase, the employee contribution for single coverage is now $47.30 a month and $128.91 for family coverage, she said.
While Ohio offers health benefits to part-time employees, their contributions are based on the number of hours worked, so those part-time employees who work fewer hours pay more for their health care, said Ms. Neff.
About 5,000 of the state's 60,000 workers are not eligible for coverage because they are either seasonal or temporary workers—a growing phenomenon in the public sector, experts say.
"Perma-temps—people without health insurance—are almost as big a problem in the public sector as the private sector," said David West, executive director of the Center for a Changing Workforce, a nonprofit research organization in Seattle that focuses on issues affecting low-wage and nonstandard workers. "In the last 10 years, the public sector strategy has been to reduce the number of employees eligible for insurance."
He said that the center's analysis of 2004 Medicaid enrollment found that as many as 10% of Washington state's 160,000 employees were receiving government health assistance.
"I'm sure every state and local government has people on Medicaid," Mr. West said.
Because many government budgets provide for a specific number of full-time positions, public entities often hire temporary, seasonal, part-time or other types of contract workers who usually are not eligible to participate inbenefit plans, according to Rick Johnson, senior vp and national public sector health practice leader for the Segal Co. in Washington.
Dennis DiMarzio, chief operating officer for the city of Boston, attributed that city's appearance on the Massachusetts list to part-timers, "school crossing guards and things like that."
Because, in his opinion, the city's benefit package is reasonably priced—$45.12 a month for individual coverage and $121.32 a month for family coverage, Mr. DiMarzio said that any eligible employee who isn't enrolled is "irresponsible."
"Even if you're making $30,000 a year—that's $600 a week—to not spend essentially $10 a week to get yourself coverage, outstanding coverage, to me is individual irresponsibility," he said.
He acknowledged, however, that it might be difficult to afford family coverage on that income.
According to the Massachusetts list, 1,110 city of Boston employees were receiving public health assistance. The city has 17,000 active employees and about 12,000 retired employees enrolled in its health plan, according to Mr. DiMarzio.
"I'm not surprised there are folks who can't make it on public salaries," because "there's always a tug of war between pay raises and benefits," said Segal's Mr. Johnson. "There's only so much tax money. They can't raise prices like private employers—that would be called raising taxes."
In general, public-sector employees "are probably over-benefited and underpaid and some of that reflects the thinking of our members. They really value their benefits," said Steve Kreisberg, head of collective bargaining at American Federation of State, County and Municipal Employees in Washington, which represents about half of the nation's public employees.
"So when we negotiate, the members say in a very clear voice, `Look, if I have to sacrifice wages, I will, but hold onto my health benefits'," he said. "But we're not increasing their standards of living as much as we should because health benefits are eating up an increasing share of their income."
For example, New York employees earn an average of just $28,000, which would make any kind of contribution difficult, according to Mr. Kreisberg.
"That's about rent if you're going to live in a lot of neighborhoods in New York City," he quipped.
While AFSCME doesn't track the number of public employees without health care coverage, it is looking into the uninsured program among a growing number of employees, such as home health and child care workers, who are not on public payrolls but whose wages are financed by government programs.
While AFSCME doesn't track the number of public employees without health care coverage, it is looking into the uninsured program among a growing number of employees, such as home health and child care workers, who are not on public payrolls but whose wages are financed by government programs.
These individuals are "paid with Medicaid money, but they have no health benefits," Mr. Kreisberg said. "There are also childcare workers who are getting subsidies from public programs. In the `80s there might have been a state agency created to employ them and provide benefits. But not today."
"The fact is, I don't know of a single government that is so rich and fat and happy that it can keep up with the increased cost in employee health care," said Darrell E. Wells, director of risk management for the city of Odessa, Texas, and chairman of the board of trustees of the Family Health Benefits Pool that provides coverage to city employees.
"Eventually, the pain level rises to the point where even government has to act," he said.
While the city of Odessa is still offering benefits to employees at almost no cost—individual coverage is free and employees with two or more dependents pay just $27.85 a month—other Texas communities aren't, Mr. Wells said.
As an example, he described the recent experience of a police officer who left Odessa to take a job as the police chief in another town.
"He called me on my cell phone after he was offered the job to say he had gotten his health insurance information and that something was terribly wrong," Mr. Wells recounted.
While the town offered to pay 100% of the cost of his individual coverage, he would be required to pay more than $370 a pay period for employee-plus-family coverage.
"It was almost $10,000 for the same thing he was getting for a little over $300 a year here," Mr. Wells said.
"He asked me, `They pay pretty good around here in this little town. But they've got garbage truck drivers and low-level people, how can they afford to spend $10,000 a year to insure their families?' I said, `That's the point. This city is sending a message. The message is, `We'll insure our employees. But we don't want your spouses and children'."
"The fact is, we're starting to see government reject the idea that we have to provide the best benefits in town," Mr. Wells said.
When Kip Wall, former chief executive officer of the Office of Benefits for the state of Louisiana, discovered that about 9% of the state's workers could not afford to participate in the government's health plan, he tried to create a low-cost plan that would have provided at least basic benefits.
"We have a material percentage of state employees making under $25,000 a year," said Mr. Wall, who now practices law in Baton Rouge.
Unfortunately, "we never could put together a plan of sufficient value to the employees to make it worth their while to invest in the product, and so it never did get off the ground," Mr. Wall said.
"There are still some public employer plans out there to die for…but comparable to what they were five years ago, not they're not common any more. The very rich plans are the exception," he said.
Today is the last day to sign up for Medicare Part D, the prescription drug benefit. It appears that mill ions of Americans, confused by the array of competing plans or simply unaware of the cutoff date, will miss the deadline. This will leave them without drug coverage for the rest of the year, and subject to financial penalties for the rest of their lives.
President Bush refuses to extend the sign-up period. "Deadlines," he said last week, "help people understand there's finality, and people need to get after it, you know?" His real objection to extending the deadline is probably that this would be an implicit admission that his administration botched the program's start-up. And Mr. Bush never, ever admits mistakes.
But Part D's bad start isn't just another illustration of the administration's trademark incompetence. It's also an object lesson in what happens when the government is run by people who aren't interested in the business of governing.
Before we get there, let's talk for a moment about the problems older Americans have encountered over the past few months.
Even Mr. Bush has acknowledged that signing up for the program is a confusing process. But, he says, "there is plenty of help for you." Yeah, right.
There's a number that people needing help with Part D can call. But when the program first went into effect, there were only 300 customer service representatives standing by. (Remember, there are 43 million Medicare recipients.)
There are now 7,500 representatives, making it easier to reach someone. But should you believe what you're told? Maybe not. A survey by the Government Accountability Office found that when Medicare recipients asked for help in determining which plan would cover their medications at the lowest cost, they were given the right answer only 41 percent of the time.
Clearly, nobody in the Bush administration took responsibility for making Part D's start-up work. But then you can say the same thing about the whole program.
After all, prescription drug coverage didn't have to be bafflingly complex. Drug coverage could simply have been added to traditional Medicare. If the government had done that, everyone currently covered by Medicare would automatically have been enrolled in the drug benefit.
Adding drug coverage as part of ordinary Medicare would also have saved a lot of money, both by eliminating the cost of employing private insurance companies as middlemen and by allowing the government to negotiate lower drug prices. This would have made it possible to offer a better benefit at much less cost to taxpayers.
But while a straightforward addition of drug coverage to Medicare would have been good policy, it would have been bad politics from the point of view of conservatives, who want to privatize traditional social insurance programs, not make them better.
Moreover, administration officials and their allies in Congress had both political and personal incentives not to do anything that might reduce the profits of insurance and drug companies. Both the insurance industry and, especially, the pharmaceutical industry are major campaign contributors. And soon after the drug bill was passed, the congressman and the administration official most responsible for drafting the legislation both left public service to become lobbyists.
So what we got was a drug program set up to serve the administration's friends and its political agenda, not the alleged beneficiaries. Instead of providing drug coverage directly, Part D is a complex system of subsidies to private insurance companies. The administration's insistence on running the program through these companies, which provide little if any additional value beyond what Medicare could easily have provided directly, is what makes the whole thing so complicated. And that complication, combined with an obvious lack of interest in making the system work, is what led to the disastrous start-up.
All of this is, alas, terribly familiar. As John DiIulio, the former head of Mr. Bush's faith-based initiative, told Esquire, "What you've got is everything — and I mean everything — being run by the political arm." Ideology and cronyism take complete precedence over the business of governing.
And that's why when it comes to actual policy as opposed to politics, the Bush administration has turned out to have the reverse Midas touch. Everything it gets its hands on, from the reconstruction of Iraq to the rescue of New Orleans, from the drug benefit to the reform of the C.I.A., turns to crud.
By Susanna Rodell
01:00 AM EDT on Thursday, July 6, 2006
WHENEVER the lament goes up about the awful health-care system in America, there's a predictable response: Yes, we have our problems, but this country still has the best health care in the world. To those who still think this is true, I'd like to introduce Billy Badger, of the Australian state of Tasmania.
Dr. Badger (a Ph.D., not a medical doctor) inhabits the office next to mine at the University of Tasmania. He is a professor of German. He is also the brand-new father of a baby girl.
Billy has no private health insurance. He and his wife, Christina, have relied entirely on the public system for prenatal care, for the birth, and for postnatal care of baby and mother. I asked him to describe the experience.
"We had no idea what to expect," he told me. Both parents were healthy and had never as adults set foot in a hospital. Upon finding out they were expecting a baby, they went to a doctor, who directed them to the maternity ward at the Royal Hobart Hospital.
At the Royal, Hobart's big public hospital, they were given the choice of three systems: 1) They could go to a birthing center, run entirely by midwives. 2) They could go to a doctor at the hospital. 3) Or they could stay in the hospital and use a system called KYM, which stands for Know Your Midwife: At prenatal visits they would meet all the hospital's midwives, so that whoever was on duty when the time came, it would be someone familiar. Christina and Billy chose the KYM system.
At first monthly, they visited the hospital's maternity unit and had checkups with midwives. As the pregnancy advanced, the intervals between visits were shorter, becoming weekly in the last month. They saw an obstetrician at their first visit and at the 20th and 36th weeks. If the midwives had seen any problems, the couple would have seen a doctor more often.
"We were never kept waiting at any of these appointments for more than five minutes," Billy said. "There were five or six midwives in all, and they were all pretty good. It was like a family; you had a community feeling."
On the day that Christina went into labor, she and Billy went to the hospital, at first to a PAC, or Pregnancy Assessment Center. This was a two-bed hospital room with a bathroom attached, where Christina was monitored until the staff judged her to be fully in labor. Then they went to the birthing suite.
The suite consisted of a large room with a double bed, a table and chairs, and its own adjoining bathroom. "It was comfortable," said Billy. "It was clean enough in a hospital sense, but also homey enough."
Here the midwives kept an eye on the couple but also tried to stay out of the way unless they were needed. The birth was straightforward.
Emergency equipment was available, just in case, and a doctor was also present, but a midwife eased the baby into the world as Billy stayed in bed with Christina.
"You didn't necessarily get the feeling you were being watched or intruded on," Billy said. "It was more like we were doing it, and they were there to help." For example, after the birth a midwife lifted the baby's legs and said, "Have a look and see what you've got" -- rather than telling them the child's sex.
"After that they left us pretty much alone," Billy said. "The baby was obviously all right, so they just left us for about an hour." Any time they needed help, it was nearby.
Billy, Christina, and the baby stayed together in the suite for five days, just getting to know each other and calling on the staff when they needed a little help with establishing breast-feeding and giving the baby her first bath.
"We could have stayed for up to two weeks if we had wanted," Billy recalled with wonderment. The food was good, too -- a special menu, since the couple are vegetarians.
When they decided to go home, the staff encouraged them to stay another night if they felt at all unsure. The staff also said that the new family could come back and stay a few more nights, if needed, up to the two-week limit.
When the family left, they took with them free diapers and baby wipes. Whatever was needed, said Billy, "if you didn't have it, you got it."
After the family was home, midwives visited every day for three days. A child-health-service nurse also visited, giving Christina and Billy phone numbers they could call at any time of day or night with any problem.
Christina made an appointment with a postnatal physical therapist, who spent 45 minutes with her, coaching her on exercises to get her body back in shape. In six weeks she will be able to go to postnatal-exercise classes with her baby.
How much, I asked Billy, did all this cost the couple?
Nothing, said Billy. Not the prenatal care, not the hospital, not the supplies, not the postnatal care, not the physical therapy. He and Christina have not spent a penny.
And there's more. In the next few weeks, the couple will receive a check from the government for $3,500, to help with the expenses of a new child.
How does Australia pay for all this? With a flat 1.5-percent levy on everyone's income, plus a 1-percent surcharge on people with higher incomes ($50,000 for an individual, $100,000 for a family). So if your taxable income is $45,000, you pay $675 a year.
Still think we in America have the world's best health-care system?
After Streak of Strong Profits,
Health Insurers May See Decline
Aetna, Others Face Dilemma:
Hold Back Price Increases
Or Watch Customers Walk?
Mr. Johnson Drops Coverage
By VANESSA FUHRMANS
July 31, 2006; Wall Street Journal, Page A1
Last year, the top seven U.S. health insurers earned a combined $10 billion -- nearly triple their profits of five years earlier. The windfall came as insurers raised their prices faster than underlying health costs.
Now the good times may be rolling to a halt. Health insurance has become so expensive that many smaller employers are dumping insurance altogether. If insurers don't do something, they may find their business shriveling. Yet if they restrain price increases, or appear to, they get hammered by Wall Street.
Aetna Inc. has found that out twice this year, after each of its quarterly earnings announcements showed medical costs were taking a bigger bite of premium revenue. The first time, in April, Aetna's shares fell 20%. Last week came another 17% plunge as investors expressed fear that the company is restraining premium increases too aggressively.
Aetna Chief Executive Ronald Williams denies that. "We have continued to exhibit strong pricing discipline," he says. "Sometimes that's more than what an employer can afford" but it's necessary to maintain Aetna's financial health, he adds.
Other insurance executives have also suggested they would rather miss their targets for membership than succumb to a price war. David Colby, WellPoint's chief financial officer, says that if the company's profit margin fell by just 0.2 percentage point, "We'd have to gain two million lives to make it up. It doesn't take much analysis to ask, 'From where?' "
Earlier this month UnitedHealth Group Inc. reported a 26% increase in second-quarter net income but said it expects to add only 850,000 new members this year instead of the one million to 1.2 million it originally forecast. WellPoint Inc., which had projected around one million new members, now expects about 700,000, with many coming from Medicaid and other public contracts.
With insurers trying to protect their profit margins, some consumers -- especially those who work for small or midsize businesses -- could be losers as employers trim health benefits or cancel them altogether. Insurers' resolve to price every account at a profitable level means a smaller company with several chronically ill employees or a few premature births can quickly be priced out of the market.
Robert Laszewski, a Washington-based health-care consultant and former insurance executive, says the insurers' strategy can work for only so long before their employer customer base dwindles dangerously. "Where is this industry in four, five years if it can't control health-care costs?" he asks. "It's on a long walk off of a short pier."
Stagnation "is a very real scenario," agrees Jon Rubin, chief financial officer of Cigna Corp.'s health-care business. Cigna, which reports second-quarter earnings Wednesday, saw its share price fall 15% after its first-quarter results.
Yet Mr. Rubin is optimistic about growth, simply because the U.S. has so many uninsured and underinsured people. "It has the appearance of a mature market because we have employers who can no longer afford coverage," he says. "But underneath you still have a growing employee population that needs coverage."
Others say the troubles of employer-based health insurance point to the need for a "single-payer" system in which the government would guarantee or mandate health care for everyone. However, the potential cost of such a system and opposition from those who favor a free-market approach make it an unlikely prospect anytime soon.
Big employers typically pay employees' health costs out of their own coffers and hire an insurer to administer the benefit -- negotiating with doctors over prices and handling the paperwork. At smaller employers, health insurance is truly insurance: The employer pays a premium at the beginning of the year, and the insurer takes on the risk of covering employees' medical bills.
The latter business offers a potential for big profits if covered employees rack up fewer medical costs than expected. That is precisely what was happening until recently. The "risk business" accounts for more than half of most of the big insurers' profits. A typical member in a risk plan currently yields six times the profit that a beneficiary in an employer-paid plan does, according to Goldman Sachs analyst Matthew Borsch. The only problem is that these small-business customers are the least able to absorb fast-rising medical costs and the most likely to be priced out of the insurance market.
Insurers have enjoyed their rising profits without the public vilification they suffered a decade ago. In the 1980s and early 1990s, many believed that insurers could play a leading role in containing costs by rounding up people in tightly controlled health-maintenance organizations. The HMOs cracked down on supposedly unnecessary care by limiting choices of doctors and procedures.
The so-called managed-care revolution collapsed amid a public outcry. HMOs were accused of denying lifesaving treatments. State legislatures rushed to pass bills forcing insurers to pay for various kinds of care. After costs briefly stalled in the mid-1990s, they surged again and forced many HMOs into the red amid a bruising price war.
Insurers found that, instead of playing the bad guy, it was easier to treat surging health costs as an inescapable force of nature -- and to make sure price increases stayed ahead of costs as much as possible. Today, operating margins, once 4% to 5% in a good year, average 8% at the country's biggest insurers.
Aetna's turnaround effort after heavy losses symbolized the strategy shift. Once the country's biggest insurer with 21 million members, it abandoned its growth strategy in 2000 and replaced its management. It sharply raised premiums, especially on unprofitable accounts, and lost eight million members in a few years. In 2002, premiums went up nearly 19%.
The industry's price rises outpaced the increase in health-care costs, especially after 2001 as the rise of cheap generic drugs and higher co-payments for employees curbed spending. Mr. Laszewski, the consultant, says employers tended to accept the increases because they didn't realize health-care inflation was decelerating. "Every year the insurer charges what the benefits manager thought was last year's trend," he says.
Randy Perkinson, chief executive of Advertising Props Inc. in Atlanta, felt the blow from the industry's tougher pricing. His 30-employee company makes packaging prototypes for advertising. For several years insurers told Mr. Perkinson he would have to pay double-digit increases in health-insurance premiums unless he introduced additional plans that spread more costs to employees. His medical costs were roughly half of the premiums he paid between 2002 and 2004, according to his insurance data. But last year, after an employee was severely injured in a highway accident, WellPoint's Blue Cross Blue Shield of Georgia boosted premiums by 30%. It had asked for a 41% increase but came down after Mr. Perkinson agreed to make employees pay even more of their bills out of pocket.
"I'm paying a lot more than I did three years ago and getting a lot less insurance for it," says Mr. Perkinson, who shopped around for a better deal but couldn't find one. "How can they come back to you year after year with 10%, 20%, 30%? The system is broken." The WellPoint unit says it had to increase AdProp's premiums so much to cover the big claims it incurred after the employee's accident.
Health-insurance executives say their business still has lower margins than drug makers and some hospitals. They say they have improved efficiency and used their profits to invest in innovations that keep the cost of health care from rising even faster than it has. Aetna points to its MedQuery system, which uses software to uncover gaps in care, unfilled prescriptions and medical errors. Customers in its risk business get the system for no extra charge.
Nonetheless, high health costs have forced many smaller employers to drop coverage. Today only 59% of employers with fewer than 200 workers provide health benefits, compared with 68% in 2000, according to the Kaiser Family Foundation, a policy-research group in Menlo Park, Calif. Last year, premiums at small firms rose more than 11% while the increase at larger firms averaged 8.9%, according to the foundation.
Two years ago David Johnson opened ImageFreeway Document Solutions LLC, a suburban Atlanta document imaging business. Soon he had to stave off a 22% increase in health premiums by raising employee deductibles -- the out-of-pocket cost before insurance kicks in -- to $1,000 per year from $250. Last fall, after Mr. Johnson and his partner reincorporated their business, Aetna re-evaluated his health plan from scratch because it was technically a new company. With a couple of his staff suffering from chronic ailments, the insurer told him it needed to roughly double his premium. No one else would offer a better price.
Mr. Johnson dropped coverage. "I can't open my doors with that financial burden," he says. Already three of his most experienced employees have left for a bigger company that could offer benefits, he says.
His receptionist, Nirvani Zurzolo, stayed and remains uninsured. She and her husband quickly bought their 10-year-old daughter an individual policy. But as a 47-year-old with previous episodes of high blood pressure, Ms. Zurzolo couldn't afford one for herself. She plans to skip her annual physical. "Bottom line, no health care for me now," she says.
Georgia law offers employers some protection from sharp rate increases. The state requires insurers to price premiums for small employers within 25% of a reference rate, which insurers file with regulators each month. But the reference rates have been surging by 12% to 18% a year since 2002, according to brokers.
George DuMouchel, a benefits consultant and insurance broker who advised Mr. Johnson, says in the late 1990s the market was more fragmented and insurers were eager to grab market share. "I'd take something into the marketplace and come back with 10, 11 bids," says Mr. DuMouchel.
WellPoint, which operates the for-profit Blue Cross Blue Shield of Georgia, has about 40% of the state's market, while UnitedHealth and Aetna hold another 25% between them. The 10 largest health insurers control about half of the U.S. market today, up from a quarter a decade ago. The industry has seen a handful of megamergers, such as UnitedHealth Group's purchase of PacifiCare Health Systems last year, and dozens of smaller ones.
Mr. Williams, the Aetna chief executive, says some regional competitors in a few markets are offering cut-rate deals for small employers. Aetna lost some customers with generally healthy workers, leaving it with a slightly more expensive pool of members.
"Some plans become very competitive and enter at price points that we don't believe are appropriate for us to sell at," he says. Because the competitors tend to pick off employers with healthy work forces, he says Aetna has lost some "very attractive business."
Mr. Williams cautions that this wasn't the only reason for Aetna's disappointing medical-cost results in the second quarter. He cites other factors including one-time spikes in medical costs on one big government account.
The challenge for Aetna and other insurers is keeping prices up without losing members. Aetna says it will fall 17% to 30% short of its original target of one million new members this year.
Jay Gellert, chief executive of insurer Health Net Inc., says the industry can still enjoy plenty of growth if it finds low-cost alternatives to attract uninsured customers. Over the longer term, Mr. Gellert and other executives believe the recent trend toward giving consumers more data on price and quality, with the goal of steering them to cost-effective care, will help bring health-care expenditures under control.
Says Mr. Rubin of Cigna: "We need to drive new solutions because, ultimately, the trends that are reflected in the premium simply are not sustainable. The only viable alternative is the advance of consumerism."
To cut its insurance costs, a US papermaker plans to let workers seek medical care abroad in 2007.
By Patrik Jonsson | Staff writer of The Christian Science Monitor
Carl Garrett, a paper-mill technician in Leicester, N.C., is scheduled to travel Sept. 2 to New Delhi, where he will undergo two operations. Though American individuals have gone abroad for cheaper operations, Mr. Garrett is a pioneer of sorts.
He is a test case for his company, Blue Ridge Paper Products, Inc., in North Carolina, which is set to provide a health benefit plan that allows its employees and their dependents to obtain medical care overseas beginning in 2007.
"It's brand-new and nobody's ever heard of going to India or even South Carolina for an operation, so it's all pretty foreign to people here," says Garrett. "It's a frontier."
Garrett's medical care alone may save the company $50,000. And instead of winding up $20,000 in debt to have the operations in the US, he may now get up to $10,000 back as a share of the savings. He'll also get to see the Taj Mahal as part of a two-day tour before the surgery.
His two operations could cost $100,000 in the US; they'll run about $20,000 in India.
With US health insurance costs soaring, cash-squeezed companies such as Blue Ridge and poor states such as West Virginia are considering affordable plans that may require their employees to travel to India, Thailand, or Indonesia.
Critics say that limited malpractice laws in foreign countries makes such travel risky as well as the prospect of spending 20 hours on an airplane after invasive surgery. Despite the concerns, "medical tourism" is morphing into "global healthcare."
"Global healthcare is coming and American healthcare, which is pricing itself out of reach, needs to know there are alternatives" in order to improve, says Alain Enthoven, senior fellow at the Center for Health Policy in Stanford, Calif.
The average American hospital bill was $6,280 in 2004, twice that of other Western countries, according to the National Coalition on Health Care (NCHC) in Washington.
The cost savings have prompted a few hundred Americans this year to fly to India, Jakarta, or Bangkok for serious medical conditions, receiving heart stints and hip replacements. But most of the some 150,000 "medical tourists" nationwide go for a tooth filling or plastic surgery and a week at a sunny beach resort where the dollar stretches like lycra.
More companies - especially those with smaller company-run plans - are investigating people's claims of good overseas hospital care. The International Standards Organization in Geneva accredits these hospitals and audits American hospitals, too.
Companies are also attracted to the relatively inexpensive price tag for care at foreign hospitals, which have been reported to be up to 80 percent less than in the US. In New Delhi, for example, the Apollo chain of hospitals gives resort-style convalescence care for $87 a night.
• Insurers Health Net of California already contracts with medical clinics on the Mexico side of the US border.
• A West Virginia state legislator introduced a bill this year that would encourage state workers to seek treatment overseas using incentives such as cash bonuses and family travel.
• United Group Programs in Florida, which administers self-insurance programs for small companies, has contracted with a Thailand hospital for its employer clients.
• Inquiries from self-insured employers are brisk at IndUShealth in Raleigh, N.C., which specializes in offshoring serious medical cases such as rotator cuff surgery and gall bladder removal to India.
"We're dealing mostly with companies that are self-funded and have essentially run out of options," says IndUShealth president Tom Keesling.
"It's an amazing trend, and it speaks to the tremendous frustration people feel with how to provide healthcare services in our current environment."
Blue Ridge Paper Products, which makes the DairyPak milk carton, pleaded unsuccessfully with providers for discounts for its 5,000 covered workers.
In the past five years, the company established its own clinic and pharmacy. Blue Ridge decided to try overseas healthcare after it heard that hospitals "rolled out the red carpet" to American patients based on news reports and personal accounts from a North Carolina medical traveler brought in by IndUShealth.
"We want to help our company but also help to drive healthcare reform," says Darrell Douglas, vice president of human resources. "We're very much homebodies ... and the idea of going abroad for fun, let alone healthcare, is foreign to some people. But we do have some adventuresome people, and [Mr. Garrett] is one."
For critics, Americans heading overseas for care shows the severity of the country's healthcare crisis - especially as employers' health insurance premiums have risen 73 percent while average employee contributions have risen 143 percent since 2000, according to the NCHC. Rising costs stem from poor management, inefficiences, waste, fraud, and lack of competition, critics say.
"We're seeing some employers who are seriously beginning to think about doing [global healthcare] and not giving employees an option," says Joel Miller, vice president of operations at the NCHC. "And that has implications for quality of care, and what recourse people have if something goes wrong overseas."
Hospital officials say only a sliver of business will be lost to overseas providers. Yet going overseas for expensive medical services, such as heart bypass surgery, cut into US hospitals profit centers - such as heart units - that are used to underwrite emergency rooms and indigent care.
"[Global healthcare] will limit the amount of money that's available for everybody else to have access to the system and starts to jeopardize access to healthcare for everybody in the community," says Don Dalton, a spokesman for the North Carolina Hospital Association.
Garrett, meanwhile, anticipates movie-star treatment in India. Doctors will operate on his gall bladder and left shoulder, he says, and he will have a 24-hour nurse working only for him while he's recovering. Garrett's experience could affect whether Blue Ridge will proceed with its plan to give its workers the option of going overseas for medical care, the company says.
"Everyone can see this thing could really become a big thing, so they're going to go out of their way to make sure everything is above and beyond the average in the United States," Garrett says.
From the August 16, 2006 edition - http://www.csmonitor.com/2006/0816/p03s03-usec.html