Health care's perfect storm
San Franciso Chronicle Editorial
Thursday, December 21, 2006

HERE'S WHAT California taxpayers have to look forward to next year, when the state begins fully accounting for retiree health benefits: picket lines. Lawsuits. Private-sector worker revolts. Desperate budgeting. And plenty of potholes.

Although only 15 percent of California's workers are public-sector employees, every last one of us will be affected by the numbers that will come out of the state's largest agencies. This year, state and local governments spent at least $4.5 billion for retiree health care costs -- and saved little or nothing for future years. The California Legislative Analyst's Office estimates that between 35 percent and 45 percent of the state's active workforce will retire within the next 10 years. If government agencies continue their spending formulas, they'll be paying out $31.5 billion per year by 2019.

Sadly, that's not a typo. And if we keep our tax rates, it's not the kind of number the state budget can handle -- at least, not if the public is expecting parks and schools as well. If our state and local governments are going to pay for the health-care benefits that they've promised their workers, these agencies will be forced to make some very difficult and unpopular decisions. The only question is, what's the least bad option?

"The chickens are coming home to roost very quickly in California," said Steven B. Frates, senior fellow at the Rose Institute of State and Local Government at Claremont McKenna College. "And it's not just a matter of choosing between changing the benefit structure, raising revenues or cutting other expenditures. It's probably going to require a combination of all those things."

Even stemming the worst of the damage will require a tremendous amount of sacrifice. The legislative analyst's office estimates that the state alone has an unfunded liability of $40 billion to $70 billion. Simply paying for the costs of current retirees and putting away enough money to pay for the ones who are already vested in the system would require the state to throw $6 billion at the problem annually. The likelihood of this happening? Let's just say that the private sector started fully accounting for its retiree health benefits under similar standards in 1992. Within years, the rate of employers offering retiree benefits dropped by half.

"There's definitely fear, particularly among public-employee unions and their supporters, that governments around the country are going to react the same way the private sector did," said Jason Dickerson, a budget analyst in the state legislative analyst's office. "In the next few years, it's likely that there will be significant court decisions, as different government agencies try to scale back their offers and public-employee groups around the country say no."

Already, the huge costs of retiree health-care costs have started writing this story: In Orange County, officials looking to save $1.4 billion in unfunded liabilities proposed a requirement to have retirees to purchase their own health insurance, and retirees immediately threatened to sue. In Fresno, a group of school retirees is locked in a court battle with the school district over a free health-care benefit that was supposed to last their lifetime. A lifetime, alas, is looking more expensive now than it was when the school district originally made the promise in 1977.

If the workers do fight the tide, though, they're not likely to get much sympathy. Private-sector employees, who have faced the erosion of their retiree benefits for years, have lately been looking at public-sector workers with anger and envy. Those feelings are only likely to get worse if the costs of providing health care for public workers starts to tax important state services -- such as infrastructure, safety and the public schools -- that the state's struggling private-sector workers are depending on for their own futures.

In light of these developments, one thing is clear: The need for a health-care system that is accessible, and affordable, to all is more important than ever. With the exception of a few uninspired, out-of-touch proposals that encourage patient "choice," as though health care was something we could buy from a mall, the Bush administration hasn't been willing to touch health care. Perhaps the coming storm of 2007 will bring about a change of heart.

National Health Care? We're Halfway There
By DANIEL GROSS
New York Times
December 3, 2006

WHEN Democrats assume control of Congress next month, they may be dusting off some long-dormant proposals on how to deal with the growing disconnect between health insurance and employment. From 2000 to 2005, the proportion
of workers aged 18 to 64 with employment-based health benefits fell to 70.6 percent from 74.5 percent, according to the Employee Benefits Research Institute. A record 46.6 million Americans lacked health insurance last year; of them, more than 82 percent lived in households headed by someone holding a job.

Any efforts to expand government's role in providing insurance will likely be opposed by the Bush administration, which says it opposes excessive direct government involvement in an industry that constitutes about 14 percent of the gross domestic product. Michael O. Leavitt, the secretary of health and human services, recently dismissed a proposal to have the government negotiate drug prices for the Medicare benefit, arguing that "it’s a surrogate for a much larger issue, which is really government-run health care."

While the administration may oppose government-run health care in principle, the government's role in the vast health industry has been expanding. By various measures, the United States is about halfway toward a system in which the government and taxpayers fully fund health care. And trends are pushing the government to become more involved each year.

Out of a total population of about 300 million, 35.6 million elderly Americans were on Medicare in 2005. Of the working-age population, which reached 257.8 million in 2005, some 45.5 million were covered by Medicare, Medicaid or military health programs, according to the benefits institute. An additional 18.2 million workers had health insurance through jobs in the public sector, which includes state, federal and local governments, public schools and state universities, according to Paul Fronstin, director of the institute's health research and education program. Millions of those workers' dependents are covered as well. Even if those dependents are not included in the tally, taxpayers paid the bill for almost two-fifths of all Americans with insurance in 2005.

But that's not the full extent of government and taxpayer involvement. Employer-provided health insurance premiums are a form of compensation, yet are not subject to federal payroll or income taxes and are exempt from many state and local taxes. Economists consider these exemptions a form of subsidy. Thomas M. Selden, economist at the federal Agency for Healthcare Research and Quality, estimates that the tax subsidy for employment-related coverage at $208.6 billion in 2006, or 35.4 percent of the amount spent on premiums.

"The tax subsidy is one of the largest public expenditures on health care," Mr. Selden said. In fiscal 2006, by comparison, spending on Medicare was $378.7 billion and federal spending on Medicaid was $180.6 billion.

Viewed strictly in terms of dollars and cents, the government already accounts for more than half of the nation’s health care spending. Mining data from the National Health Expenditures Accounts, Mr. Selden found that public expenditures on health care Medicare, Medicaid, military health care and federal employee benefits accounted for $888 billion of the $1.96 trillion spent on health care in 2004. Adding in the aforementioned subsidies, and premiums paid for public-sector employees, the total comes to $1.2 trillion, or 61 percent.

Uwe E. Reinhardt, the James Madison professor of political economy at Princeton, suggests adding 5 percent for the federal mandate that hospitals provide free health care to the uninsured. "So government accounts for about two-thirds of health care spending," Mr. Reinhardt said.

The government spends money as if there were a national health insurance program. In 2004, government spending on health care equaled 9.6 percent of the gross domestic product, compared with 6.9 percent in Canada, which has a
single-payer universal health care program, said David Himmelstein, associate professor of medicine at Harvard Medical School. And yet some significant components of federal support are not efficient methods of providing health insurance to the people who most need it. Higher-income workers are likely to have higher rates of coverage, higher premiums and higher taxes, all of which means that the tax break for compensation disproportionately helps the well-off.

"We’re paying for national health insurance, but we’re not getting it," Dr. Himmelstein added.

Taxpayers also don’t get as much bang for their bucks because the government guarantees coverage for the elderly and the poor, groups that account for a disproportionately large amount of expenditures.

"A rough rule holds that private insurance covers two-thirds of the population and pays for only one-third of all health care," Mr. Reinhardt said.

The raw figures may be worrisome, but the trends behind the data are clearly troubling. Despite five consecutive years of economic growth, the private sector has continued to reduce its role in providing insurance. As the population ages, the ranks of Medicare recipients grow. And if the price of health insurance keeps rising at a much faster rate than the average earnings of lower-income people, more and more of the working poor will be priced out of the market.

So even as politicians rail against the pernicious effects of government-run health care, taxpayers, one way or another, are likely to be footing more of the nation’s huge and mounting medical bills.

Daniel Gross writes the Moneybox column for Slate.com.

Major surgery is the only cure
David Lazarus
San Francisco Chronicle
October 1, 2006

Our health care system is a shambles. Here's yet more proof:

-- Insurance premiums paid by employers and workers have nearly doubled since 2000, according to a new report from Menlo Park's Kaiser Family Foundation. The 7.7 percent increase this year is more than twice the rate of inflation.

-- San Pablo's Doctors Medical Center says it expects to file for bankruptcy protection this week after losing about $1 million a month for the past two years. The obstetrics department is scheduled to close today and the hospital's 11 emergency-room physicians have given notice that they'll quit by the end of the month.

-- Gov. Arnold Schwarzenegger has vetoed state legislation that would have established universal health coverage for all Californians. He offered no alternative plan to help the state's roughly 7 million uninsured.

"We're watching the health care system collapse around us," said James Kahn, a professor of health policy at UCSF.

The Kaiser report issued last week serves as a frightening reminder for all families that health insurance in the United States is an increasingly costly and, for many, unobtainable goal.

Premiums have increased 87 percent during the past six years, the report shows. Family health coverage now costs an average $11,480 annually, with employers paying the bulk of that amount and workers paying an average $2,973. That's about $1,354 more than the typical worker had to pay in 2000.

This year's 7.7 percent hike in premiums is the slowest growth rate in six years but it's still more than double the annual increase in wages (3.8 percent) and the overall cost of living (3.5 percent).

"The bottom line here is that health care costs are increasing dramatically faster than wages, and that's why people are feeling pain," said Drew Altman, president of the Kaiser Family Foundation. "We're seeing a slow unraveling of the employment-based health insurance system."

Nationwide, about 47 million Americans lack health coverage -- a number that's steadily rising as more companies abandon health programs for workers. (About 61 percent of businesses now offer coverage to at least some employees, according to Kaiser. That's down from 69 percent in 2000.)

"Health insurance is becoming increasingly unaffordable for businesses and working people," Altman said.

The financial woes plaguing Doctors Medical Center in the East Bay illustrate how dysfunctional the U.S. health care system has become.

The hospital, which serves some of the more economically challenged communities of Contra Costa County, was run by Tenet Healthcare until 2004. It lost $24 million that year alone.

The facility was taken over by the West Contra County Healthcare District, which cut the deficit to $15 million in 2005 but now foresees even more red ink due to lower-than-expected patient volume, technology upgrades and other factors.

Perhaps the biggest problem faced by the hospital is the fact that about a third of ER patients have no insurance and can't pay their bills. About 10 percent of all patients arriving at the facility lack health coverage.

To help turn things around, the hospital's board last week approved a contract for up to $84 million to treat at least eight San Quentin inmates every day for the next few years.

"The prison contract offsets some of the losses we're seeing in other areas," said Gisela Hernandez, a hospital spokeswoman. "But it's not the entire solution."

For this reason, she said a bankruptcy filing is all but certain this week. And even then, the future of Doctors Medical Center remains uncertain. "Without an immediate infusion of cash, it's going to be tough," Hernandez said.

ER doctors gave notice last week because they say they haven't been paid for six months.

Hernandez said universal coverage would go a long way toward keeping hospitals like Doctors afloat. "If everyone had health insurance," she observed, "we wouldn't have any uninsured people in the emergency room."

However, it looks like that won't be happening anytime soon. The governor recently vetoed legislation -- SB840 -- that would have used taxpayer funds to establish a universal health insurance system for all Californians.

Independent analysts say such a system would be cheaper than existing insurance payments for most businesses and workers. But Schwarzenegger, bowing to pressure from the insurance industry, said the system envisioned by the bill would be tantamount to socialism.

"Socialized medicine is not the solution to our state's health care problems," he said in a statement, adding that the proposed system would be "a serious and expensive mistake."

UCSF's Kahn countered that the governor has it wrong.

"SB840 is not about socialized medicine," he said. "You would still have public and private health care providers. What this is really about is simplifying the finances of health care."

According to researchers at Harvard Medical School, about a third of all health care spending nationwide is squandered on bureaucratic overhead -- the result of a vast array of insurance forms and procedures.

"All the evidence suggests that the current system doesn't work," Kahn said.

And gradually, business leaders are reaching the same conclusion.

"The (health care) system is out of control, it's unstable, it's basically bankrupt, it gets worse each year and all we do is tinker around the edges when what we need are major fixes," Craig Barrett, chairman of chipmaker Intel Corp., said in a speech last week.

He didn't call specifically for universal coverage, but he said that employers should demand that hospitals use standardized record systems to keep costs under control.

"The current health care system is economically unsustainable and negatively impacting our nation's ability to compete globally," Barrett said. "It's time for a systemic transformation, and U.S. employers must lead."

Unless, that is, our politicians can find the courage to do so.

Luring Customers from Medicare
Milt Freudenheim
New York Times
September 22, 2006

For years, private insurers have offered alternatives to the federal Medicare program that are meant to give patients lower-cost options than the government coverage provides. More than 7 million people now subscribe to such plans, out of a total Medicare population of 42.5 million.

But suddenly a type of private insurance plan is gaining ground that looks very similar to the basic coverage long available to anyone with a federally issued Medicare card.

And the government is paying the private insurance industry a subsidy of 11 percent per patient, on average, to provide it.

Since the government substantially increased the subsidies two years ago for these most basic private industry plans — known as private fee-for-service — enrollment in the plans has grown tenfold to 820,000. About 18,000 people signed up in August alone, Medicare said yesterday in its latest update. And some analysts expect enrollments to double or even triple by 2009.

The $7 billion that Medicare will pay private industry this year to provide this fee-for-service coverage is at least $770 million higher than the government would spend covering those patients itself, based on the 11 percent calculation.

Critics see the trend as further evidence that the government is paying private industry to take Medicare off its hands.

It is a “back-door way of trying to privatize Medicare,” said Dr. Jack Lewin, the chief executive of the California Medical Association, a physicians’ group. But the Bush administration’s Medicare chief, Dr. Mark B. McClellan <http://topics.nytimes.com/top/reference/timestopics/people/m/mark_b_mcclellan/index.html?inline=nyt-per> , insisted yesterday that the trend “is definitely not a ‘push to privatization,’ ’’ but simply a way to give people with Medicare more choices. “The original Medicare program is and remains an option for those who prefer it,’’ said Dr. McClellan, who plans to step down next month.

Private insurers can offer more choices and cost breaks to patients, he said, while providing overall better health care that will end up saving the government money.

The 11 percent calculation comes from the Medicare Payment Advisory Commission, an independent federal research body that advises Congress. And some insurance executives say the figure is an exaggeration. But there is little dispute that federal subsidies are encouraging the insurance industry to recruit members for the plans.

And while the current industry coverage can be a good deal for some patients, critics worry that Medicare patients reliant on private insurers could be left stranded if the federal money is eventually cut.

“We are very concerned that Congress is going to pull back on the funding,’’ Dr. Lewin said, “and we will be left with a private system that offers fewer benefits and is going to be influenced by Wall Street.’’

Critics say the growing transfer of the nation’s $342 billion Medicare program to private industry has already been playing out through other means, like the new Medicare Part D drug program and various Medicare-linked managed care plans and H.M.O’s offered by private insurers.

Providing Medicare coverage in all its guises has become a $60 billion-a-year business and one of the few profitable growth areas for insurers. Medicare enrollees look especially attractive to insurers, as the industry’s other main clientele — corporate America — struggles to meet the growing cost of providing health benefits to working people.

The fee-for-service plans, the focus of the current controversy, are in many ways similar to the government’s own Medicare. Under the industry version, patients have the right to choose their own doctors and hospitals — as they have long been able to do with their federally issued Medicare cards.

And as with the federal program, enrollees in the private fee-for-service plans typically pay a monthly $88.50 premium to the government.

Under the industry plans, moreover, the hospitals and doctors receive the same rates as when they are paid through the basic federal Medicare program.

Experts say that because the administrative costs of providing the private policies are minimal, they represent easy income for the insurance companies, with profit margins of 4 percent or so.

But many see the private fee-for-service Medicare plans as mainly a feeder program in which insurance companies hope to gradually convert members into even more complex, more profitable private Medicare offerings that the government also subsidizes.

The more lucrative plans, like Medicare health maintenance organizations or doctor-network managed care programs, which have been available longer, can yield profits in the 10 percent range, analysts say.

The more basic private fee-for-service plans, around for less than a decade, were authorized through an amendment to the 1997 balanced budget act as a way to ensure that elderly people could obtain adequate health insurance. Now the plans are envisioned as primarily for rural Americans who typically have few medical choices.

The insurance industry largely ignored the fee-for-service plans until the insurers’ subsidies were increased by $14 billion over 10 years by the 2003 Medicare overhaul legislation. Insurance lobbyists had argued that expanding private Medicare programs would eventually lower the government’s costs.

But insurers “are not really being asked to do anything for additional subsidies,’’ said Marilyn Moon, a longtime Medicare researcher who served as a public trustee of the program — a watchdog role — during the Clinton years. She is now at the American Institutes for Research, a nonpartisan research center in Washington.

Insurers, though, say they provide benefits that basic Medicare does not cover.

The leader by far in private Medicare fee-for-service, with more than half the total members, is Humana <http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&amp;symb=HUM> . UnitedHealth and WellPoint <http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&amp;symb=WLP>  are also big players.

John M. Bertko, a Humana vice president, says benefits included having nurses stay in touch with discharged hospital patients with chronic diseases to make sure they were following doctors’ orders.

Other selling points for the private insurance plans include predictable out-of-pocket co-payments — typically $5 to $20 for doctor visits. That compares with the uncertainties patients face under traditional federal Medicare, in which they are responsible for 20 percent of whatever the doctor charges.

Martin Smith and his wife, Donna, of Bristol, Ind., chose a fee-for-service plan from UnitedHealth’s Secure Horizons Medicare unit earlier this year.

The monthly premiums of $12.50 each for Mr. Smith, 68, and Mrs. Smith, 70, are in addition to their government Medicare premiums of $88.50 each. But the Smiths say the private plan is paying off.

Mrs. Smith recently had heart bypass surgery. And though the bill has not yet arrived, she knows that the hospital deductible for her Secure Horizons plan is $600, compared with the $952 she would be responsible for under traditional Medicare.

And instead of 20 percent of the approved doctors’ fees in traditional Medicare, the Smiths pay only $10 to a primary care doctor and $20 for specialists. Secure Horizons pays the rest out of its subsidies from Medicare — which are $692.29 a month, on average, for each fee-for-service member in that part of the country.

The Smiths chose to sign up for Medicare Part D drug coverage from a separate insurer, Humana.

Like the Smiths, more than half of the private fee-for-service enrollees so far have also chosen drug coverage, and many are choosing a plan that combines both.

One is Cathy Watts, 58, of Decatur, Ill., a former nurse who says she had to retire four years ago because of Parkinson’s disease and partial paralysis. Last January she signed up for a fee-for-service offering from Humana that included Part D drug coverage.

Other than the government’s $88.50 Medicare premium that is deducted from her monthly Social Security check, Ms. Watts pays no premium to Humana.

She says the drug coverage was the main lure for her because her drug bill last year was $6,000.

“I will probably pay $3,600 this year’’ for drugs, she said. “So that will be better.’’ And she can still see the doctors of her choice.

While insurers do run a risk of losing money on a patient if he or she has unexpectedly large health costs, the companies can consult county-by-county Medicare cost data and decide where to offer coverage and which high-cost areas to avoid.

In southern Illinois, where Mrs. Watts lives, the average monthly rate the government is paying an insurer to provide Medicare fee-for-service is $692.29 — the same as in Mr. Martin’s town in Indiana.

Under Medicare’s complicated rules, though, the amount actually paid to a company for a patient can vary. Around the nation, depending on local medical costs and the health profile of Medicare-eligible residents, the monthly federal subsidy to the insurance company can range from $400 to $2,500, said Dr. Scott Latimer, a Humana executive based in Tampa, Fla.

Enrollments in the fee-for-service plans are still primarily, though not exclusively, concentrated in rural and small cities. Before the Medicare subsidies were increased in 2003, insurers had little incentive to focus on such places. With few doctors and sometimes only one or two hospitals in such areas, insurers typically have little bargaining power. And the health care providers have often balked at accepting the lower fees and second-guessing often associated with managed care insurance networks. But when enough patients in a local area have been enrolled in the private fee-for-service plans, the companies say local health care providers may have little choice but to join the insurers’ Medicare networks.

Rick Jelinek, the chief executive of UnitedHealth’s Secure Horizons Medicare business, acknowledged that the company’s strategy was “in the longer term, to build networks around our programs.”

With such networks in place, he said, the company could help manage patients’ health — and the insurer’s costs — through techniques like having nurses provide telephone health counseling aimed at helping keep patients with heart disease <http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/heartdisease/index.html?inline=nyt-classifier> and diabetes <http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/diabetes/index.html?inline=nyt-classifier> avoid hospitalization.

Dan Mendelson, a former Clinton administration health official who is now the president of Avalere Health, a Washington research and consulting firm that advises insurance companies, said the private fee-for-service trend “should save money for Medicare by improving patient care.”

But Ms. Moon, the Medicare researcher, said she was “unconvinced by the logic that says, ‘If we are overpaying the health plans now, they will save us money later.’ ”

Insurance Horror Stories
Paul Krugman
New York times
September 22, 2006

“When Steve and Leslie Shaeffer’s daughter, Selah, was diagnosed at age 4 with a potentially fatal tumor in her jaw, they figured their health insurance would cover the bulk of her treatment costs.” But “shortly after Selah’s medical bills hit $20,000, Blue Cross stopped covering them and eventually canceled her coverage retroactively.”

So begins a recent report in The Los Angeles Times titled “Sick but Insured? Think Again,” which offers a series of similar horror stories, and suggests that these stories represent a growing trend: more and more health insurers are finding ways to yank your insurance when you get sick.

This trend helps explain something that has been puzzling me: why is the health insurance industry growing rapidly, even as it covers fewer Americans?

Between 2000 and 2005, the number of Americans with private health insurance coverage fell by 1 percent. But over the same period, employment at health insurance companies rose a remarkable 32 percent. What are all those extra employees doing?

Now we know at least part of the answer: they’re working harder than ever at identifying people who really need medical care, and ensuring that they don’t get it. In the past, they mainly concentrated on screening out applicants likely to get sick. Now, it seems, they’re also devoting a lot of effort to finding pretexts for revoking insurance after they’ve already granted it. They typically do this by claiming that they weren’t notified about some pre-existing condition, even if the insured wasn’t aware of that condition when he or she bought the policy.

Welcome to the ugly world of American health care economics.

Health care is poised to become America’s largest industry. Employment in manufacturing, which once dominated the economy, has fallen 18 percent since 2000, to 14.2 million. Meanwhile, employment in the private health services industry has risen 16 percent, to 12.6 million. Another 1.3 million people are employed at government hospitals. So we’re quickly approaching the point at which more Americans will be employed delivering health care than are employed producing manufactured goods.

Yet even as health care becomes the core of the American economy, our system of paying for health care remains sick, and is getting sicker.

Because everyone faces some risk of incurring huge medical costs, only the superrich can afford to be without health insurance. Yet private insurers try to refuse coverage to those most likely to need it, and deny payment whenever they can get away with it.

The point isn’t that they’re evil or greedy (although you do wonder how the people who cut off the Schaeffers can look themselves in the mirror). The fact is that cruelty and injustice are the inevitable result of the current rules of the game. Blue Shield of California is a nonprofit insurance provider, yet as a spokesman put it, if his organization doesn’t follow the for-profit practice of selectively covering only the healthiest people, “we will end up with all the high-risk people.”

Now, before you panic about the state of your own coverage, you should know that the horror stories in The Los Angeles Times article all involve individual insurance; if your coverage comes via your employer, you’re reasonably secure against sudden cancellation.

But employment-based insurance is in rapid decline, as employers balk at the cost and more and more companies adopt Wal-Mart-style minimal-benefit policies. That’s why many people are turning to individual insurance — only to find out, in some cases, that they didn’t get what they thought they paid for.

And here’s the thing: it’s all unnecessary.

Every other wealthy nation manages to provide almost all its citizens with guaranteed health insurance, while spending less on health care than we do. And there’s no mystery why: we’re paying the price for pointless, destructive reliance on private insurers. Medicare, which is a universal health insurance program for older Americans, spends less than 2 cents of every dollar on administrative costs, leaving 98 cents to pay for medical care. By contrast, private insurance companies spend only around 80 cents of each dollar in premiums on medical care; much of the remaining 20 cents is spent denying insurance to those who need it.

If we had a universal system — Medicare for everyone — there would be no more horror stories like those reported by The Los Angeles Times. And we’d almost certainly spend less on health care than we do now.

No Rx in Massachusetts
Trudy Lieberman
The Nation
September 18, 2006

Senator Ted Kennedy, Governor Mitt Romney, the medical establishment of Massachusetts and the state's consumer advocacy groups could hardly resist congratulating themselves on passing a new health insurance law this past spring--a so-called individual mandate requiring the uninsured to buy coverage from private carriers under penalty of paying higher income taxes if they don't. The media called the law a model for states to replicate and praised such diverse groups for coming together to solve a seemingly intractable problem. A headline in the New York Times proclaimed, A Health Fix That Is Not A Fantasy.

A close look, however, reveals that the new law may well be a fantasy and a triumph for special interest politics after all. "It's absolutely worthless," says Dr. Marcia Angell, former editor in chief of The New England Journal of Medicine and author of The Truth About the Drug Companies. "There is no magic in Massachusetts."

The law is yet another patchwork attempt to dodge the main obstacle to reform--a fundamental lack of agreement about equity in healthcare. Americans still don't share equity as a universal value, so every endeavor to cover more people results in a complicated, contorted and underfinanced scheme. Massachusetts's latest move is no exception. It pushes the country further away from national health insurance--with its essential ingredients of universal access, low administrative costs and limits on what medical providers can charge. Instead the law embodies much of the right's approach to health reform, which continues to make the world safe for big insurance, big hospitals, and Big Pharma while palming off on the working poor the task of covering themselves. Indeed, a document distributed by Romney's staff says the organizing principles of the new law are "a culture of insurance" and "personal responsibility"--exactly the opposite of what's needed if the United States is ever to join the rest of the world in providing medical coverage for all its people.

The law, on a speedy track for implementation next March, leaves the current dysfunctional system intact, tinkering around the edges with insurance market reform. In Massachusetts that means, among other things, no new coverage mandates for two years, merging the individual and small-group markets to enlarge the risk pool and encouraging more policies with health savings accounts--not what people need for really good coverage. The core of American health insurance--the principle of letting private carriers select those they will insure--is firmly in place. Advocacy groups signed on believing that more people would be covered, that the state would make sure insurance was affordable and that compromise would move the debate forward.

Hospitals and employers emerged in fine shape too. Hospitals will receive about $500 million in higher Medicaid payments and a new revenue stream--in effect, they will be freed from the burden of offering charity care to the poor, who will now have insurance to pay their bills. Employers escaped without swallowing an employer mandate; that is, a requirement to cover all their workers. Those with eleven or more employees who fail to offer insurance will be assessed $295 per worker per year--a pittance compared with what they would have had to pay for real insurance, estimated by Hewitt Associates, a benefits consulting firm, to be about $9,000 per worker in 2006. For employers, the puny assessment was a far better deal than a real mandate, which had been headed for a ballot initiative this fall.

Rather than force employers who have deeper pockets to pay for coverage, the law requires the state's 550,000 uninsured to come up with the money. Recognizing that Massachusetts has the costliest medical care in the country--spending $9,200 per person, compared with the national average of $7,250--the legislature created an elaborate mechanism of subsidies to help the poorest folks, an arrangement the governor's press materials call a "glide-path to self sufficiency." For individuals with incomes at the poverty level, about $10,000 ($20,000 for a family of four), the state subsidy will cover all the cost; for single people with incomes between $10,000 and $30,000, it will cover some of the cost, more for those at the low end. Those with incomes greater than $30,000 will be on their own and subject to tax penalties if they don't spring for a policy.

t will be up to a new, $25 million quasi-state agency, the Commonwealth Health Insurance Connector, a concept born at the Heritage Foundation, to certify whether new policies--likely with very high deductibles, high cost sharing and less comprehensive benefits--will be affordable and who can afford them. Determining affordability will be a difficult, politically charged job in a climate where there are more doctors per person than the national average and the state's hospitals spend 44 percent more on care than the national average. "The affordability standard is the most fragile part of the legislation. We don't know to whom it will apply," admits Nancy Turnbull, president of the Blue Cross Blue Shield of Massachusetts Foundation. (Blue Cross Blue Shield of Massachusetts and Partners HealthCare, a big hospital system, paid for a report by the Urban Institute, a Washington, DC, think tank, which became the road map for the new law.)

Imagine the shock to a worker at a Rockport clam shack when he realizes that his taxes are going up because he can't afford the state's "affordable" policy. The law does provide for appeal rights and a waiver of the penalty if people can prove that buying a policy is a financial burden. (Imagine the new bureaucracy and costs that will entail.)

Money for the estimated $725 million in subsidies needed by the third year comes mostly from federal funds available through the state's Medicaid waiver. These waivers, available to all states, allow them to expand coverage by leveraging Medicaid dollars. Besides the federal dollars, Massachusetts expects to cover the subsidies with money redirected from the state's uncompensated care fund, which pays hospitals for serving the uninsured; $125 million in new funds from general revenues; and the new assessment on employers. That may not be enough. A House-Senate conference committee report projects a deficit of $162 million by the third year. Even John McDonough, executive director of Health Care For All, a strong supporter of the new law, worries about future funding. "At some point the program will require additional infusions of money to meet its promise," he says.

Where that money will come from is unclear. Relying on Medicaid is dicey; the state's Medicaid waiver expires in two years. The employer assessment may not stick. Romney vetoed the provision once, but the legislature overturned the veto. And there's virtually nothing in the law that will stem the rising cost of care, the greatest threat to the program. A new report by health policy researchers at Boston University shows that the state's healthcare costs will exceed $62 billion this year, one-third above the national average. "Without cost control, they are bringing the uninsured into the same mess that the rest of us are in," says Dr. Mark Chassin, executive vice president at Mount Sinai Medical Center in New York.

Instead of strong cost controls, which would have kept the hospitals and insurance companies from agreeing to the bill, the law bets on market competition to bring down the price of medical care and thus the cost of insurance. It sets up a plan for collecting price information and data about quality of services so patients can become wise shoppers, and it contemplates that the new affordable policies with their higher deductibles and co-insurance will make people think twice about using medical services--approaches that don't touch the use of unproven technology, a major culprit in healthcare inflation. The law also envisions electronic medical records and computerized physician order systems in hospitals to address the cost problem. These may make healthcare safer, but the payoff on the cost side is a long way off, if it comes at all.

Massachusetts led the way in healthcare reform once before, by passing a reasonable employer mandate in 1988 during the Dukakis Administration. The plan, which would have required employers to pay nearly $2,000 per worker each year for coverage, went nowhere in the state but later became a model for Clinton's pay-or-play plan. The state's individual mandate may suffer the same fate. If it becomes a national model, American healthcare, already on life support, will take a turn for the worse.

Get business behind health-care reform
Visalia Times-Delta Editorial
September 14, 2006


Business leaders and health-care executives will meet Friday at the Visalia Chamber of Commerce to discuss and emphasize a growing problem in our communities — the lack of health-care professionals, especially specialist physicians.

They are right: Recruiting specialist doctors to the Central Valley is a hard sell. Attracting certain kinds of sophisticated specialists is virtually impossible. The business and health-care leaders are calling it a "state of emergency," and that is no exaggeration, because without adequate health care, some health problems could cost lives.

As long as they recognize the emergency, the business leaders should also acknowledge: Our entire health-care system needs to be overhauled.

Many factors contribute to the doctor shortage: lack of sophisticated medical installations here, the low reimbursement rates of public health insurance, the lack of other specialists and the simple fact that this area is not as appealing to highly paid professionals as other areas of California. Highly skilled doctors like being among other highly skilled doctors in urban areas with greater medical, cultural and economic advantages.

Local businesses are not doing themselves any favors, however, if they do not endorse and embrace full-fledged health-care reform such as that represented by SB 840, the universal health-care plan that has been passed by the Legislature but which Gov. Arnold Schwarzenegger intends to veto.

One of the most significant obstacles to the attraction of specialists is this area's low reimbursement rate for Medicare and Medi-Cal patients. Despite many appeals to the U.S. Congress and the state Legislature, this inequity continues to persist. It only stands to reason that doctors do not want to practice in places where they know they will be underpaid.

In the San Joaquin Valley, in many cases doctors are not paid for their services at all: An alarming proportion of patients have neither public nor private insurance. They seek treatment in hospital emergency rooms and sometimes are referred to other doctors for treatment. Often, the hospital and doctors are left eating the unpaid bill.

Who would come to the Valley to work under those conditions?

Even when doctors are paid for treating indigent patients, they are reimbursed at a rate of 30 cents or 40 cents on the dollar for their expenses. The amount a doctor gets reimbursed for seeing a public insurance patient in many cases doesn't cover the cost of the doctor's office expenses.

What doctor, who has spent at least 12 years in expensive education and is burdened with hundreds of thousands of dollars in debt to pay for training, would come to an area to practice under those circumstances?

The business community is right to sound the alarm over this deplorable condition: Lack of health care affects productivity, the attraction of other people, the quality of life and the bottom line.

The cost of health insurance hurts business and cuts into profits. It can lead to layoffs and bankruptcy. Worse, it contributes to the deteriorating overall health of the population, which is translated into higher costs for public health for us all.

State business ought to consider supporting a system in which all doctors are fully reimbursed, health-care costs are reduced and treatment is guaranteed for all. That is what is being proposed by SB 840.

Business leaders would do better to urge Schwarzenegger to sign SB 840 and begin the reform that our health-care system demands. Until doctors know they will be paid as much for treating a patient in Los Angeles as they will for treating a patient in Visalia, because both have identical health-insurance coverage, don't expect that this area will do any better in attracting medical providers at all, let alone specialists.

Universal Health Insurance and the Race for Governor of California
CommonDreams.org
Tom Gallagher
September 13, 2006

You generally figure a thirteen point poll deficit will set a campaign looking to scare up a little excitement out on the hustings. So when California Senator Sheila Kuehl delivered Democratic gubernatorial candidate Phil Angelides' trailing campaign a hot issue, in the form of universal health insurance bill that has everything but a governor willing to sign it into law, a lot of people might have thought he'd grab at it. But so far he's acted like it's too hot an issue for him.

The "single payer" health insurance bill Senator Kuehl, D-Santa Monica, introduced just a few years ago has moved with surprising speed, arriving on the governor's desk this year – far sooner than most expected. Not surprisingly though, Governor Arnold Schwarzenegger plans to veto it. But maybe the biggest surprise lies in the fact that thus far his challenger, who is currently the state's treasurer, hasn't said that Governor Angelides would sign it either.

Although Kuehl's Senate Bill 840 (the California Health Insurance Reliability Act) will save "the state almost a billion dollars," in the view of Assembly Speaker Fabian Nunez, and is "responsible ... achievable and ... what we need to do to fix the health care system in California" in the words of Senate President pro Tem Don Perata, it hasn't gotten this far because a few people in Sacramento think it's good public policy. And certainly its success doesn't come from having big money behind it. What it does have is grassroots support in legislative districts – the bill claims the backing of hundreds of organizations around the state.

This was not lost on the legislature's Democrats, all but one of whom – out of both branches – voted for the bill. Kuehl believes a veto would "hang the albatross of bad health care around the governor's neck.." Angelides, though, seems none too eager to tie the knot. So far he says only that he will work "hand in hand" with Kuehl "to move toward universal coverage."

We've grown so accustomed to Democratic candidates running cautious campaigns as of late – even when they're behind – that there's a tendency to just look away as Angelides shrugs off the big issue and hope that maybe he can light a fire under his potential base on something else, even if there are no obvious alternatives. After all, he's already considered out there on tax issues in that he's willing to say that there are wealthy Californians who actually ought to pay more in taxes – which qualifies as brash talk these days. And for sure we know that single payer's opponents will always call it a tax increase, even if it would save Californians bundles.

Why then has the Democratic legislature so eagerly embraced the bill, we might ask. The answer is that there's nothing rash about SB 840. While it commits the state to the "single payer" approach, the specific, crucial details of funding it are to be developed in a public process. The "single payer" would be a trust fund consolidating all existing public health programs – currently accounting for nearly half of California's total health care spending – and replacing premiums, co-pays and deductibles currently paid to insurance companies with a premium paid into the trust fund.

The savings potential of breaking the log jam of paper work created by all of the fine print generated by all of the competing players in the private health insurance industry is stupendous – to the point where a streamlined claims and reimbursement system could provide comprehensive medical, dental, vision, hospitalization and prescription drug coverage to every California resident for what we are already spending, and with individuals choosing their own doctors as they do now. And if all this seems too good to believe, the bill does not require you take it on blind faith. SB840 is no plunge into the unknown; it establishes a panel of experts to sort through the facts and arguments and propose a specific system to the legislature by 2009 – which the legislature would then pass, fail, or amend, and send on to the governor – or not.

So the Kuehl bill is a seriously thought out plan. Its signing would set the nation's largest state on a course that avoids the dead end of the Clinton plan which was based on the folly of leaving the core of the problem – the private health insurance industry – intact while adding on a new layer of government bureaucracy. California would take a giant step toward dealing with out-of-control health care costs nationwide.

Up to this point, the primary impact of the recently ended California legislative session upon the gubernatorial race has been to provide Schwarzenegger the opportunity to garner kudos for all of the Democratic bills that he is signing. But he won't sign this one. Right now, Angelides is giving this landmark piece of health care legislation the elephant-I-don't-see-in-the-room treatment. But if he hopes to see the elephant's party leave the governor's office any time soon, he may need to set himself more earnestly to reminding people why they need a Governor Angelides.

Tom Gallagher is president of the Bernal Heights Democratic Club in San Francisco. He can be reached at: TGTGTGTGTG@aol.com

Our View: State-funded Health Care
Merced Sun Star Editorial
September 12, 2006

Careful, Gov. Arnold Schwarzenegger. Your ghost writer seems to have just made you an opponent of Medicare.

The opinion piece in question detailed your reasons for vetoing Senate Bill 840. The measure would have revolutionized the state's health care system. Private insurers would have gone out of business. The state would have started paying directly for the health care of millions of Californians.

"I cannot support a government-run health care system," you wrote (or, more accurately, someone wrote for you).

Hmm. So what exactly is Medicare? Or, more important, what are Republicans and Democrats really fighting about when it comes to providing affordable health care to more Californians, and how can anyone find the elusive political compromise?

SB840 sought to create one payer of health care -- the state -- for residents of California. That would be the so-called "single-payer" solution. The very term "single payer" creates political divides. And along those divides, the very real role of government in health care gets misunderstood.

"Socialized medicine is not the solution to our state's health care problems," wrote Schwarzenegger. Actually, Medicare is a form of socialized medicine.

Medicare is essentially a single-payer form of health care. One payer -- the federal government -- provides the bulk of funds to hospitals and doctors for the care of millions of senior citizens.

Yes, those over the age of 65 pay part of the cost. Some can join HMOs as an alternative. But the federal government "runs" Medicare. And it also "runs" Medicaid (known as Medi-Cal in California), the single-payer program that underwrites care to the poor.

The political mainstream isn't clamoring to get rid of those established forms of socialized U.S. medicine. So why do hard philosophical viewpoints suddenly emerge when the same solution is discussed for working Americans and their children?

Our problem with SB840 was how the Democrats dangled it as veto bait from the get-go. No quest for common ground ever appeared evident, either by Democrats or Schwarzenegger. It was all about Democrats embracing government as the solution and Republicans denouncing it.

We need real progress in lowering health care costs and getting more Californians insured. There was too much theater surrounding SB840.

Single-payer Insurance Is a Cure for California's Ailing Health System
Spyros Andreopoulos
San Francisco Chronicle
Thursday, September 7, 2006

California lawmakers feel certain that the time is now ripe for progressive legislation to ensure universal citizen access to health insurance and to contain rising costs in the health industry. They have passed Senate Bill 840, an unfunded yet important piece of legislation sponsored by state Sen. Sheila Kuehl, D-Santa Monica, that establishes the principles of a plan for covering every Californian with comprehensive health insurance.

The plan would consolidate all health insurance under a state-administered program -- hence the name single-payer. The program would be funded by drawing in public health-care spending and replacing all premiums, co-pays and deductibles now paid to private insurance companies with premiums paid to the state system. Medical care will be privately delivered.

Annual health-care expenditures in California from all sources now exceed $184 billion, with 19 percent consumed by administrative costs. By slashing these costs and utilizing the state's purchasing power to buy prescription drugs and medical equipment at reasonable prices, studies conducted by the Lewin Group, a health-care management consulting firm, project the system would provide high-quality care and result in savings of nearly $8 billion in the first year alone, and $345 billion between 2006 and 2015.

The proposed law will initially establish a commission made up of health economists and health-finance experts to develop a detailed funding proposal within two years. The law will not take effect until the Legislature considers the funding details. Implementation would require separate legislation.

The time between passage of the law and its execution should be viewed as an opportunity for opening a serious dialogue that would help Republicans and Democrats toss aside some of their preconceptions of what is involved in moving toward universal access. If this plan, or any plan, is to blossom, political will and moral imagination will be needed on all sides.

But the plan is vulnerable to conservative counterattacks, including cheap shots from the health-care industry, which has been predicting a calamity if universal health care is adopted. What the critics do not talk about is that in the proposed system, decisions about all matters will be publicly debated, that individuals will be able to choose doctors and hospitals, that medical care providers will be paid fairly and equitably and fees will be negotiated with the system's appointed governing board, and that barriers of class, language and education will be minimized. Gov. Arnold Schwarzenegger has said that he opposes the bill, but he has offered no alternatives to reform our struggling health-care system.

I would hope the governor is nimble enough to sense a shift in the political climate about health care and sign the bill into law. Our health system is unraveling and the status quo is not acceptable. Polls of business executives rank the rising costs of health insurance and health care highest on the list of problems confronting business today, sapping corporate balance sheets faster than energy costs and forcing companies to cut employee benefits. Many troubled companies in California need single-payer health insurance because their biggest foreign competitors have some form of national health insurance -- plans that cover all of their citizens at costs far below what Americans and the companies they work for are now forced to pay.

It isn't that we don't have enough money to enact a single-payer system, the equivalent of a Medicare plan for the entire state. Individuals and companies in the state are already spending billions for our dysfunctional system. In a global economy, companies operating in a country with universal coverage enjoy a significant competitive advantage over those that are not. Ford and Daimler-Chrysler's Canadian units, for example, have found that Canada's single-payer health insurance system covering their workers significantly reduces total labor costs by at least $1,700 per car, according to Ford CEO William Clay Ford.

Many California CEOs acknowledge that the solution must involve government. The proposed law is but a start, and it is a good start for Californians and a good start for business. The governor could seize the moment and make California the leader in health-care reform in the nation, and spur the feds and Congress to do the same.

State-mandated health insurance is not incompatible with conservative ideology. In an article published in the July 2006 issue of the Hastings Center Report, and titled "A Conservative Case for Universal Access Health Care," authors Paul Menzel and Donald L. Light wondered why conservatives in the United States consider universal health care an anathema and why conservatives in other countries accept it? They accept it because it is based on values conservatives share, they point out. These are the values of being able to take care of oneself and others, preventing irresponsible freeloaders and alleviating inefficiency and waste that limit entrepreneurial activity. Access to medical services, regardless of income, is as necessary to individual freedom, opportunity and self-responsibility as is access to fire and police services.

In our current voluntary system, employers that do not offer health coverage for their employees, and individuals who do not insure themselves, irresponsibly free-ride on the unintended largesse of others, according to the Hastings article. When roughly 40 percent of all employers do not participate in this system, when only 51 percent of American workers receive insurance through their employers, and when 47 million Americans (including, by the latest count, nearly 7 million Californians) have no insurance at all, the practical compromise of conservative values is hardly insignificant.

Universal access, whether in Canada, Australia, Germany or France, is provided in many forms. Some countries use government insurance paid through taxes. Some even use private insurance framed by strict rules requiring everyone to be insured and to contribute in equitable ways. Our own system is designed to maximize sales and profit, not cost-effective health care, and this explains why spending bloats while the numbers of uninsured grow.

By vetoing a bill that makes a moral case for universal access and principles that conservatives share, Schwarzenegger would be making a big political mistake. A year ago, Fortune magazine predicted that the concerns of American corporations about health insurance driven by fierce global competition are becoming so intense that it is Republicans who will carry the ball for universal coverage.

Something akin to this prediction has already come to fruition in Massachusetts, where lawmakers passed legislation predicted to extend coverage to 95 percent of the state's residents currently without health insurance. While not strictly mandating that everyone be insured, both individuals and businesses will pay financial penalties for failing to obtain insurance. The law also provides state subsidies to make insurance to the uninsured affordable. Republican Gov. Mitt Romney pushed the idea to deal with why so many people lack insurance -- those who cannot afford it, and those who imagine they don't need it -- and stick the rest of us with the bill when they end up in emergency rooms.

We now have an opportunity to have health insurance covering everybody in California at a reasonable cost. Californians should urge Gov. Schwarzenegger to sign SB840 into law.

Spyros Andreopoulos is director emeritus of the Office of Communication and Public Affairs at Stanford University Medical Center. This article represents his personal views.

Health Care Issue Won't Go Away
San Francisco Chronicle Lead Editorial
September 7, 2006

WHEN Democrats put a universal health-care plan on Gov. Arnold Schwarzenegger's desk, they knew with drop-dead certainty it faced a veto.

Cynical? Yes. An end to the issue? No.

Health coverage, especially for the state's nearly 7 million uninsured, can't be dismissed by the GOP or used as a vote-grabbing issue by the Democrats. Polls, focus groups and town hall meetings should remind both parties that costly, haphazard health care is an enduring worry.

This year, the chances for change were all wrong. The bill, SB840 by state Sen. Sheila Kuehl, a Santa Monica Democrat, was approved at the 11th hour, after the governor had stretched as far left as he could go with a minimum wage increase and landmark greenhouse-gas controls.

Kuehl, who has long favored expanded health coverage, was pushing a plan to replace private insurers with a single, Sacramento-run system. In theory, at least, current insurance payments would be replaced with taxes on business and consumers. The savings to cover the uninsured would come from less paperwork and bureaucracy, backers argue.

Kuehl's bill kicked the telltale financials to a 21-member commission to work on for up to three years. It was hardly a master plan, but it also pushed the true costs far down the road. No matter: Schwarzenegger has made it clear he's against the idea of government-run health insurance. With three months left before his re-election campaign, there was no way he could hand Democrats a trophy win and disappoint his base of small-government Republicans.

If this sounds as if it's a recipe for gridlock, it shouldn't be. The problems of inadequate coverage for the insured, high costs for business and emergency-roomtreatment for everyone else aren't going away. Waiting for Washington to take action -- the weary fallback position for do-nothing politicos -- isn't good enough.

Put politics aside and look at the issue from another angle. Extended health coverage is not an insoluble problem. It takes work, experimentation and partial steps.

In Massachusetts, a Republican governor and Democratic Legislature struck a deal to offer a range of programs that amount to universal coverage, but short of a state-run, single-payer system. San Francisco is launching a smaller package that offers coverage through existing city clinics and hospitals to the working uninsured.

With a topic as complex as health care, both the Massachusetts and San Francisco plans need seasoning and monitoring. But each represents a negotiated solution that overcame the flame-thrower slogans and posturing that keeps getting in the way of solutions.

Regardless of who wins the governor's race, health care should be on the top of Sacramento's agenda next year.

 

Health Policy Malpractice
Paul Krugman
New York Times
September 4, 2006

Let me tell you about two government-financed health care programs. One, the Veterans Health Administration, is a stunning success —but the administration and Republicans in Congress refuse to build on that success, because it doesn’t fit their conservative agenda. The other, Medicare Advantage, is a clear failure, but it’s expanding rapidly thanks to large subsidies the administration rammed through Congress in 2003.

I’ve written about the V.A. before; it was the subject of a recent informative article in Time. Some still think of the V.A. as a decrepit institution, which it was in the Reagan and Bush I years. But thanks to reforms begun under Bill Clinton, it’s now providing remarkably high-quality health care at remarkably low cost. The key to the V.A.’s success is its long-term relationship with its clients: veterans, once in the V.A. system, normally stay in it for life. This means that the V.A. can easily keep track of a patient’s medical history, allowing it to make much better use of information technology than other health care providers. Unlike all but a few doctors in the private sector, V.A. doctors have instant access to patients’ medical records via a systemwide network, which reduces both costs and medical errors. The long-term relationship with patients also lets the V.A. save money by investing heavily in preventive medicine, an area in which the private sector —which makes money by treating the sick, not by keeping people healthy—has shown little interest.

The result is a system that achieves higher customer satisfaction than the private sector, higher quality of care by a number of measures and lower mortality rates—at much lower cost per patient. Not surprisingly, hundreds of thousands of veterans have switched from private physicians to the V.A. The commander of the American Legion has proposed letting elderly vets spend their Medicare benefits at V.A. facilities, which would lead to better medical care and large government savings.

Instead, the Bush administration has restricted access to the V.A. system, limiting it to poor vets or those with service-related injuries. And as for allowing elderly vets to get better, cheaper health care: “Conservatives,” writes Time, “fear such an arrangement would be a Trojan horse, setting up an even larger national health-care program and taking more business from the private sector.”

Think about that: they won’t let vets on Medicare buy into the V.A. system, not because they believe this policy initiative would fail, but because they’re afraid it would succeed.

Meanwhile, the Bush administration is pursuing a failed idea from the 1990’s: channeling Medicare recipients into private H.M.O.’s. The theory was that H.M.O.’s, by bringing private-sector efficiency and the magic of the marketplace to health care, would be able to do what the V.A. has achieved in practice: provide better care at lower cost.

But the theory was wrong. Years of experience show that H.M.O.’s actually have substantially higher costs per patient than conventional Medicare, because they add an expensive extra layer of bureaucracy and also spend heavily on marketing. H.M.O.’s for Medicare recipients prospered for a while by selectively covering relatively healthy older Americans, but when the government began paying less for those likely to have low medical costs, many H.M.O.’s dropped out of the Medicare market.

In 2003, however, the Bush administration pushed through the Medicare Advantage program, which offers heavy subsidies to H.M.O.’s. According to the independent Medicare Payment Advisory Commission, Medicare Advantage plans cost the government 11 percent more per person than traditional Medicare. Oh, and mortality rates in these plans are 40 percent higher than those of elderly veterans covered by the V.A. But thanks to the subsidy, membership in Medicare Advantage plans is surging.

On one side, then, the administration and its allies in Congress oppose expanding the best health care system in America, even though that expansion would save taxpayer dollars, because they’re afraid that allowing a successful government program to expand would undermine their antigovernment crusade and displease powerful business lobbies.

On the other side, ideology and fealty to interest groups make them willing to waste billions subsidizing private H.M.O.’s. Remember that contrast the next time you hear some conservative going on about excessive spending on entitlements, and declaring that we need to cut back on Medicare and Medicaid benefits.

Health care problems won't end with veto
BUSINESSES SHOULD OFFER ALTERNATIVES
Mercury News Editorial
Sep. 05, 2006 

Lost amid the furor over the California universal health care debate is the fact that health care issues are fundamentally the responsibility of the federal government.States -- even those as big as New York, Texas and California -- are limited in what they can do because they can only work around the margins of the
federal system.

President Bush has the ability to get at the crux of the issue. But he continues to ignore the problem of the uninsured, whose numbers have ballooned from 38.7 million to an unacceptable 46.6 million during his presidency. Bush's irresponsible inaction is forcing states to experiment to see what they can do to alleviate the problem.

But Gov. Arnold Schwarzenegger, unlike some governors around the nation, has yet to really engage on the issue, other than to tell Californians that he'll let them know his plans in January if voters re-elect him.

Enter state Sen. Sheila Kuehl, D-Los Angeles. The longtime advocate of a state-run, single-payer system last week saw years of intensive work come to fruition when the Legislature passed her universal health care bill, SB 840. But Kuehl -- and every Democrat who voted for the bill – knows Schwarzenegger will veto the legislation. And he should.

Kuehl's bill was passed for show. Democrats in the Legislature appropriately want to force the governor out of hiding on health care issues before the November election. It's telling that the Legislature did not pass the funding mechanism to accompany the universal health care legislation, which in effect would replace private health care plans with a statewide program that would cover all Californians and put an elected state ``czar'' in charge of managing California's entire medical system.

The Legislature knows that California isn't prepared for the sort of earthquake a single-payer approach would produce, especially since the Bush administration -- which vigorously opposes any movement toward government-run health care -- would stand ready to do everything it could to make sure the state's experiment fails. Insurance companies, which would essentially be put out of business in California, would also fight the universal health care legislation with all of their considerable resources, tying up the effort in court at every opportunity.

But the main reason Schwarzenegger should veto the bill -- despite some obvious benefits -- is it's not in the best interests of California taxpayers or businesses. The risk of the state's inability to provide high-quality health care for all and the uncertainty over the true costs of the program are too high.

The state would be better off amending its public-private partnership into a system that provides suitable tax incentives for businesses to play a role in helping guarantee coverage for all. Massachusetts, Maine and Michigan are all experimenting with bringing businesses and government together to cover the uninsured.

California now has nearly 7 million residents without health care insurance. The state cannot allow the rapid deterioration of the current system to continue. Unless California employers want to be subjected to legislative mandates or a government-run, single-payer system, they should be proactive in taking the lead in finding a solution to the state's health care crisis. And Schwarzenegger should be helping to lead the way. A good start would be telling voters his plans to work with business and labor to create the new working partnership necessary to reduce the number of uninsured.

Health care's squabble
David Lazarus
San Francisco Chronicle
September 3, 2006

Critics of the universal health care bill heading to Gov. Arnold Schwarzenegger's desk this week say the legislation would create a cumbersome state bureaucracy that won't adequately address the needs of California's roughly 7 million uninsured.

Don't listen to them. Opposition to the bill -- SB840, authored by state Sen. Sheila Kuehl, D-Santa Monica -- is all about the money, not least the devastating impact of a state-run health program on the politically powerful insurance industry. That said, the legislation is woefully lacking in specifics about how universal health coverage for Californians would be funded, and for that reason, more than any other, is likely to be vetoed by the governor after the holiday weekend.
"It's a glaring omission," said Alan Garber, director of the Center for Health Policy at Stanford University. "The toughest questions have been avoided in this bill."

That was deliberate. After years of fighting a largely uphill battle in the Legislature for universal coverage, Kuehl sought broader backing for her latest bill by leaving the matter of funding for another day and focusing instead on the policy framework for a statewide health plan. SB840 was approved by the state Senate along party lines in a 24-12 vote Thursday. The Assembly gave its blessing in a 43-30 vote Monday.

To some extent, SB840 was passed by the Democrat-controlled Legislature as an election-year ploy. Schwarzenegger will veto the bill, the thinking goes, and then Democratic politicians get to beat him up for leaving millions of Californians without health coverage.

In fact, lawmakers on both sides of the political fence need to take responsibility for a problem that grows in scope with each passing year. The Census Bureau reported last week that the number of uninsured nationwide rose in 2005 to 46.6 million, a 3 percent increase. SB840 at least attempts to address this shameful situation at the state level. And if universal coverage were to succeed in California, it's a sure bet that other states would be quick to follow suit. The bill would create a 21-member commission that would hammer out the details of a single-payer insurance system, essentially making the state, not private insurers, responsible for people's health coverage. That means any Californian could see any doctor at any hospital and would be covered for all medical, dental, hospitalization and drug costs.

Assemblyman Greg Aghazarian, R-Stockton, was quoted widely in the press last week as saying a single-payer system would basically saddle California with another Department of Motor Vehicles. "Do we really want another DMV making decisions for so many hard-working Californians?" he asked.

Kuehl found the DMV comparison laughable. "We already have 30,000 insurance plans in California," she told me. "We already have a bureaucracy." What her bill does, Kuehl said, is consolidate health insurance under a single roof and make it available to everyone. "This is historic," she said.

One reason for that is the complexity of pulling it off. SB840 would require acts of Congress to incorporate billions in federal dollars that now flow into the Medicare and Medi-Cal systems. "No state has done a single-payer system," said John Sheils, vice president of the Lewin Group, a health care consulting firm. "It's hard getting  Congress to cooperate." If that obstacle can be surmounted, though, Sheils said the federal cash would only get California about halfway toward an estimated $167 billion annual cost for universal coverage. The rest would come from new taxes paid by employers and workers – possibly a 7.5 percent payroll tax for businesses and a 3.5 percent tax on employees' income.

This isn't as daunting as it sounds, though, because the taxes would replace all premiums, co-pays and deductibles currently paid to private insurers. Sheils said most companies and workers would end up paying less annually under a single-payer system than they do now.

Additional savings would be found by slashing the amount of bureaucratic overhead currently necessitated by having thousands of competing health plans, each with their own paperwork and administrative needs. Researchers at Harvard Medical School say about a third of the roughly $2 trillion in annual health care spending nationwide is squandered on processing a bewildering array of insurance forms. "We spend a lot of money for hospitals and insurers to talk to each other," Sheils said.

The Lewin Group estimated in an analysis last year that a single-payer system as envisioned by SB840 would save California nearly $8 billion in the first year alone.
So what's not to like? Well, if you're an insurance company or an insurance salesman, the bill represents nothing less than an end to your livelihood. As such, the insurance industry has been fighting -- and lobbying -- aggressively to protect its turf.

"This is a bill that basically says, 'You're not part of the future,' " said Chris Ohman, head of the California Association of Health Plans, an industry group. "We're all frustrated by the rising cost of health care. But health plans in California are doing a pretty good job."

Pretty good, perhaps, but with 7 million uninsured, clearly not good enough. Rather, they contribute to a system that's proven itself unable to meet society's evolving health care needs. That's why Kuehl is correct that the state Legislature has taken a historic step in seeking universal coverage for all Californians.

Schwarzenegger, who has said in the past he doesn't think the government should be running a health care system, has yet to offer any better ideas for extending coverage to all residents. Vetoing SB840, for whatever reason, would represent a failure of leadership at a time when our health care system has abandoned millions of people. This bill may not have all the answers, but it represents a practical step forward in addressing an intolerable situation. "This isn't about politics," Kuehl said. "This is a serious attempt to reform health care in California."

We should give it a try.

Health Care Reaches Tipping Point
Companies Can No Longer Afford Insurance; Only Government Can
Ron Gettelfinger;
Detroit News Online
September 03, 2006

This Labor Day, you can find a solution to one of the most difficult problems facing American workers and employers by reading a single magazine article: "The Risk Pool," by Malcolm Gladwell, in the Aug. 28 issue of the New Yorker magazine.

Examining the roots of our health care and pension dilemma, Gladwell reports that when General Motors and the United Auto Workers were negotiating in 1950, corporate Chief Executive Charles Wilson favored a company-by-company approach to worker benefits. But Walter Reuther and the UAW wanted a universal system that would include all workers and all employers:

"The labor movement believed that the safest and most efficient way to provide insurance against ill health or old age was to spread the costs and risks of benefits over the biggest and most diverse group possible.

"(I)n most countries, the government, or large groups of companies, provides pensions and health insurance. The United States, by contrast, has over the past 50 years followed the lead of Charlie Wilson and made individual companies responsible for the care of their retirees. It is this fact, as much as any other, that explains the current crisis. In 1950, Charlie Wilson was wrong and Walter Reuther was right."

Starbucks sets example

The health care and pension problems Gladwell writes about in the auto and steel industries are present throughout our economy. Starbucks, for example, is a retail firm, operating in a competitive environment that is worlds away from manufacturing. But Starbucks now spends more money on health care than it does on coffee -- not unlike GM, which has for some time paid more money for health care than it does for steel.

Starbucks, like GM before it, is finding out the hard way that America's benefit crisis cannot be solved by any one company or any one industry. As Wilbur Ross, an investor in the steel and auto parts industries, explains to Gladwell:

"Every country against which we compete has universal health care. That means we probably face a 15 percent cost disadvantage versus foreigners for no other reason than historical accident. The randomness of our system is just not going to work."

Unfortunately, the reaction of many corporate executives and public officials is to make our current system more random, not less. Employers who seek to avoid the cost structures that have caused difficulty for major industrial firms have transferred responsibility for health care and retirement to individual employees, through 401(k) plans, health savings accounts and other mechanisms.

Don't burden households

But if pension and health benefits can't be adequately maintained by individual companies -- whether they are young retail giants like Starbucks or venerable manufacturing firms like GM -- then it makes no sense to transfer these obligations to individual households.
We need to go in the opposite direction, like all of our industrial trading partners, and develop well- funded public programs which cover every man, woman and child in America.

If we don't, a writer who is not yet born will be writing 50 years from now about millions and millions of workers who once labored for firms with no pension or medical plans and now cannot afford to take care of themselves properly in their retirement years.

"The Risk Pool" is important not because of what it says about the past, but because it sets the right framework for discussing America's future. Malcolm Gladwell is author of the "The Tipping Point," a book that argues that small events can have a large effect on complex systems. This Labor Day, let's hope th

Single-Payer Health Care is Way To Go.
Drs. David Iverson and Elinor Christiansen.
Rocky Mountain News.
9/4/2006.

The new uninsured statistics released Tuesday by the U.S. Census Bureau provide a sobering reminder of the failures of the U.S. health-care system. Here in Colorado the number of uninsured has risen to 788,000: nearly 1 of every 5 residents lacks coverage. Even for those lucky enough to be insured, ever-skimpier private policies helped push an estimated 14,000 Colorado families into medical bankruptcy in 2001. As physicians who face our state's health-care crisis day in and day out, we support a single-payer "Medicare for All" system for Colorado and for the nation.

Misinformation abounds about countries with government-financed systems, which is why we were troubled to see Deroy Murdock's column of Aug. 26, "Health-care horror," featuring misleading, unsourced data pushed by an extremist think-tank. Despite the best efforts of such groups, real science - reviewed by scientists and published in academic journals - does exist. Its conclusion is clear: Even though they spend far less, countries with public health systems provide better quality health care, offer vastly better access, and ration care less than the United States.

Some of the most authoritative studies are worth reciting here:

• Americans are less healthy than the British. We have higher rates of cancer, lung disease and stroke. Americans have a 50 percent higher rate of heart disease and double the prevalence of diabetes. (The New England Journal of Medicine, May 3, 2006)

• Americans are less healthy than Canadians, with higher rates of nearly every chronic disease. This is in large part because Canadians have far superior access to health care: They were 33 percent more likely to have a regular doctor and 27 percent less likely to have an unmet health need. Americans were seven times more likely to report going without care due to cost. (American Journal of Public Health, July 2006)

• American care quality compares poorly against other countries. Of 21 international quality indicators studied by a team of distinguished researchers, the U.S. was superior on only two. Despite spending twice as much on health care, the U.S. performed at or below average on the rest. (Health Affairs, May/June 2004)

How can the U.S. spend so much more and get so much less? Anyone who has ever had to deal with the nightmarish paperwork of giant insurance companies already knows the answer: it's our reliance on private insurers.

Insurance companies' natural market behavior is to compete to cover healthy, profitable patients and shun those who are really sick. To do this, they erect a giant, expensive bureaucracy whose only purpose is to fight claims, issue denials and screen out the sick. They consume care dollars, but their main output is unnecessary paperwork headaches. It affects everybody: doctors and hospitals must maintain costly staffs just to deal with insurance hassles, and businesses are saddled with the burden of administering their own health benefits. In total, this administrative waste consumes nearly one-third of our health spending.

Research has shown that streamlining payment though a single public payer could save the U.S. more than $350 billion per year. Such a system could have saved Colorado $3.8 billion in 2003. That's more than $5,500 per uninsured resident, enough to provide high-quality coverage to everyone. Everybody would be covered for all medically necessary services, including doctor, hospital, long-term, mental health, dental and vision care. All prescription drugs would also be covered. Costs are effectively controlled (as they are in other countries) by bulk purchasing of services.

Single-payer systems are often called "socialized medicine," but don't be fooled. In a "socialized" system (like the U.S. Veterans Affairs or Defense Department systems) the government employs the doctors and owns the hospitals.

In a single-payer system they stay private.

Much hysteria has been printed about alleged "rationing" of care in other nations. The truth is that the U.S. rations care more harshly than any other country. According to the Institute of Medicine's most conservative data, 18,000 Americans die every year due to a lack of insurance. Millions more go without needed care because of cost. Now that's rationing!

Single-payer offers the only solution for our state and for our nation. Let's get there - it's time.

 

Health Care: It's What Ails Us
Doug Pibel and Sarah van Gelder
Yes Magazine
Friday, August 18, 2006

For Joel Segal, it was the day he was kicked out of George Washington Hospital, still on an IV after knee surgery, without insurance, and with $100,000 in medical debt. For Kiki Peppard, it was having to postpone needed surgery until she could find a job with insurance &ndash it took her two years. People all over the United States are waking up to the fact that our system of providing health care is a disaster.

An estimated 50 million Americans lack medical insurance, and a similar and rapidly growing number are underinsured. The uninsured are excluded from services, charged more for services, and die when medical care could save them—an estimated 18,000 die each year because they lack medical coverage.

But it’s not only the uninsured who suffer. Of the more than 1.5 million bankruptcies filed in the U.S. each year, about half are a result of medical bills; of those, three-quarters of filers had health insurance.

Businesses are suffering too. Insurance premiums increased 73 percent between 2000 and 2005, and per capita costs are expected to keep rising. The National Coalition on Health Care (NCHC) estimates that, without reform, national health care spending will double over the next 10 years. The NCHC is not some fringe advocacy group—its co-chairs are Congressmen Robert D. Ray (R-IA) and Paul G. Rogers (D-FL), and it counts General Electric and Verizon among its members.

Employers who want to offer employee health care benefits can’t compete with low-road employers who offer none. Nor can they compete with companies located in countries that offer national health insurance.

The shocking facts about health care in the United States are well known. There’s little argument that the system is broken. What’s not well known is that the dialogue about fixing the health care system is just as broken.

Among politicians and pundits, a universal, publicly funded system is off the table. But Americans in increasing numbers know what their leaders seem not to — that the United States is the only industrialized nation where such stories as Joel’s and Kiki’s can happen.

And most Americans know why: the United States leaves the health of its citizens at the mercy of an expensive, patchwork system where some get great care while others get none at all.

The overwhelming majority — 75 percent, according to an October 2005 Harris Poll — want what people in other wealthy countries have: the peace of mind of universal health insurance.

A wild experiment?

Which makes the discussion all the stranger. The public debate around universal health care proceeds as if it were a wild, untested experiment &ndash if the United States would be doing something never done before.

Yet universal health care is in place throughout the industrialized world. In most cases, doctors and hospitals operate as private businesses. But government pays the bills, which reduces paperwork costs to a fraction of the American level. It also cuts out expensive insurance corporations and HMO's, with their multimillion-dollar CEO compensation packages, and billions in profit. Small wonder “single payer” systems can cover their entire populations at half the per capita cost. In the United States, people without insurance may live with debilitating disease or pain, with conditions that prevent them from getting jobs or decent pay, putting many on a permanent poverty track. They have more difficulty managing chronic conditions — only two in five have a regular doctor &mdash leading to poorer health and greater cost.

The uninsured are far more likely to wait to seek treatment for acute problems until they become severe.

Even those who have insurance may not find out until it’s too late that exclusions, deductibles, co-payments, and annual limits leave them bankrupt when a family member gets seriously ill.

In 2005, more than a quarter of insured Americans didn't fill prescriptions, skipped recommended treatment, or didn’t see a doctor when sick, according to the Commonwealth Fund’s 2005 Biennial Health Insurance Survey.

People stay in jobs they hate — for the insurance. Small business owners are unable to offer insurance coverage for employees or themselves. Large businesses avoid setting up shops in the United States — Toyota just chose to build a plant in Canada to escape the skyrocketing costs of U.S. health care.

All of this adds up to a less healthy society, more families suffering the double whammy of financial and health crises, and more people forced to go on disability.

But the public dialogue proceeds as if little can be done beyond a bit of tinkering around the edges. More involvement by government would create an unwieldy bureaucracy, they say, and surely bankrupt us all. The evidence points to the opposite conclusion.

The United States spends by far the most on health care per person — more than twice as much as Europe, Canada, and Japan which all have some version of national health insurance. Yet we are near the bottom in nearly every measure of our health.

The World Health Organization (WHO) ranks the U.S. health care system 37th of 190 countries, well below most of Europe, and trailing Chile and Costa Rica. The United States does even worse in the WHO rankings of performance on level of health &mdash a stunning 72nd. Life expectancy in the U.S. is shorter than in 27 other countries; the U.S. ties with Hungary, Malta, Poland, and Slovakia for infant mortality — ahead of only Latvia among industrialized nations.

The cost of corporate bureaucracy

Where is the money going? An estimated 15 cents of each private U.S. health care dollar goes simply to shuffling the paperwork. The administrative costs for our patched-together system of HMO's, insurance companies, pharmaceutical manufacturers, hospitals, and government programs are nearly double those for single-payer Canada. It’s not because Americans are inherently less efficient than Canadians — our publicly funded Medicare system spends under five cents per budget dollar on administrative overhead. And the Veterans Administration, which functions like Britain’s socialized medical system, spends less per patient but consistently outranks private providers in patient satisfaction and quality of care.

But in the private sector, profits and excessive CEO pay are added to the paperwork and bureaucracy. The U.S. pharmaceutical industry averages a 17 percent profit margin, against three percent for all other businesses. In the health care industry, million-dollar CEO pay packages are the rule, with some executives pulling down more than $30 million a year in salary and amassing billion-dollar stock option packages.

Do those costs really make the difference?

Studies conducted by the General Accounting Office, the Congressional Budget Office, and various states have concluded that a universal, single-payer health care system would cover everyone &ndash including the millions currently without insurance &mdash and still save billions.

Enormous amounts of money are changing hands in the health-industrial complex, but little is going to the front line providers — nurses, nurse practitioners, and home health care workers who put in long shifts for low pay. Many even find they must fight to get access to the very health facilities they serve.

Doctors complain of burnout as patient loads increase. They spend less time with each patient as they spend more time doing insurance company mandated paperwork and arguing with insurance company bureaucrats over treatments and coverage.

Americans know what they want

In polls, surveys, town meetings, and letters, large majorities of Americans say they have had it with a system that is clearly broken and they are demanding universal health care. Many businesses &mdash despite a distaste for government involvement &mdash are coming to the same view. Doctors, nurses, not-for-profit hospitals, and clinics are joining the call, many specifically saying we need a single-payer system like the system in Canada. And while we hear complaints about Canada’s system, a study of 10 years of Canadian opinion polling showed that Canadians are more satisfied with their health care than Americans. Holly Dressel’s article shows why.

Although you’d never know it from the American media, the number of Canadians who would trade their system for a U.S.-style health care system is just eight percent.

Again, the public dialogue proceeds from a perplexing place. Dissatisfied Canadians or Britons are much talked about. But there’s little mention of the satisfaction level of Americans. The Commonwealth Fund’s survey, for instance, shows that, in 2005, 42 percent of Americans doubted whether they could get quality health care. At a series of town hall meetings in Maine, facilitators asked participants to discuss dozens of complex health care policies but excluded single-payer as an option. (See Tish Tanski’s article. Only after repeated demands by participants was the approach that cuts out the corporate middle-men allowed on the list.

The same story played out across the country at town meetings convened by the congressionally mandated Citizens’ Health Care Working Group. In Los Angeles, New York, and Hartford, participants simply refused to consider the questions they were given about tradeoffs between cost, quality, and accessibility. They insisted that there’s already enough money being spent to pay for publicly funded universal health care.

But it’s not only about the money. Comments from participants in the town meetings, from Fargo to Memphis, from Los Angeles to Providence, revealed an understanding that this is about a deeper question. It is an issue of the sort of society we want to be &ndash one in which we all are left to sink or swim on our own or one in which we recognize that the whole society benefits when we each can get access to the help we need.

Likewise, when we asked readers of the YES! email newsletter what would make you healthier, nearly all answered in terms of “we.” Any one of us could get sick or be injured. Any one could lose a job and with it insurance. Our best security, they said, is coverage for all.

What form might this take?

As elections near and the issue of health care tops opinion polls as the most pressing domestic issue, various proposals for universal health care are circulating. The bipartisan NCHC looked at four options: employer mandates, extending existing federal programs like Medicaid to all those uninsured, creating a new federal program for the uninsured, and single-payer national health insurance. All the options saved billions of dollars compared to the current system, but single payer was by far the winner, saving more than $100 billion a year.

Meanwhile, the Citizens’ Health Care Working Group, which held those town meetings around the country, has issued interim recommendations. They state the values participants expressed: All Americans should have affordable health care, and assuring that they do is a shared social responsibility. Sadly, that bold statement is followed by inconclusive recommendations: more study, no preference for public funding, and a strong commitment to get everybody covered by 2012—but with no means to do it. The commission will make final recommendations to the president and Congress, and is accepting public comment through the end of August.

What is the obstacle?

With all the support and all the good reasons to adopt universal health care, why don’t we have it yet? Why do politicians refuse to talk about the solution people want?

It could be the fact that the health care industry, the top spender on Capitol Hill, spent $183.3 million on lobbying just in the second half of 2005, according to PoliticalMoneyLine. com. And in the 2003–2004 election cycle, they spent $123.7 million on election campaigns, according to the Center for Responsive Politics.

Politicians dread the propaganda barrage and political fallout that surrounded the failed Clinton health care plan. But in the years since, health care costs have outpaced growth in wages and inflation by huge margins, Americans have joined the ranks of the uninsured at the rate of 2 million each year, and businesses are taking a major competitiveness hit as they struggle to pay rising premiums.

Health Care for All is holding town hall meetings throughout the United States (they’ve held 93 so far), and people are pressing their representatives to take action. Over 150 unions have called for action on universal health care, and polls show overwhelming majorities of Americans feel the same way.

Some political leaders are pressing for universal health care. Remember Joel, who was kicked out of the hospital with $100,000 in medical debt? He started giving speeches about the catastrophe of our health care system, and eventually got hired by Rep. John Conyers (D-MI) to head his universal single payer health care effort. Conyers’ "Medicare for All" bill now has 72 co-sponsors. Rep. Jim McDermott’s (D-WA) Health Security Act has 62.

Around the United States, state and local campaigns for universal health care are making progress. (See Rev. Linda Walling’s update on www).

One of these days, the lobbyists and their clients in government may have to get out of the way and let Americans join the rest of the developed world in the security, efficiency, and quality that comes with health care for all.

 

So That's Why It's So Expensive: Blame insurance, not just tech, for spiraling health costs, says an MIT economist
Howard Gleckman
Business Week
August 14, 2006

Economists have long believed that technology is the main reason that health-care costs are rising so rapidly. The endless stream of innovation, from new drugs to delicate tools for microsurgery, the theory goes, largely explains why medical spending has exploded from 5% of the U.S. economy in 1960 to 16.5% today. According to some studies, as much as 65% of that growth could be laid at the feet of tech.

Now a young economics professor at the Massachusetts Institute of Technology is challenging the conventional wisdom. After studying data going back to the 1960s, Amy N. Finkelstein has concluded that the real culprit for the rapidly rising cost of health care is the massive expansion of medical insurance over the past 40 years. Sure, new technologies play a role, but doctors, hospitals, and consumers adopt them so freely largely because insurance foots the bill. "Where does that technological change come from?" asks Finkelstein, 32, who lives in Cambridge, Mass., with her economist husband, Ben Olken. "I am trying to get inside that black box."

If Finkelstein is right, her work could change the way policymakers and the companies that pay for most medical care think about costs. For example, if individuals have to pay more for their care through high-deductible health plans, they may cut spending. Her theory could also spur the drive for evidence-based medicine, the effort of some reformers to encourage the use of only those treatments that have been proven to work (BW -- May 29).

Already, Finkelstein's analysis is shaking up views across the political spectrum. "This is pathbreaking work," says Joseph R. Antos, a health economist at the conservative American Enterprise Institute. Adds the more liberal MIT economist Jonathan Gruber: "This really changes the whole landscape in the way we think about health economics."

Why is insurance so important? One obvious reason, Finkelstein believes, is that consumers opt for more care if someone else pays for it. But the more significant effect may be that insurance guarantees a steady source of revenue for hospitals and other health providers. Such ready cash encourages them to build new cardiac-care centers and stock up on the latest high-tech equipment, knowing it will be paid for. "If you produce expensive new things for medical care, people will buy them," says Paul Ginsburg, president of the Center for the Study of Health System Change in Washington. He has found results similar to Finkelstein's by looking at medical spending patterns