Insurers profit on Medicare float

AP Exclusive: :

"Private health insurance plans catering to Medicare recipients are making millions by taking money the government sends in advance — but isn't immediately needed — and using it to make investments, federal investigators say in a report obtained by The Associated Press."

Read more...

It's Alive! GOPers Resurrect "Death Panels"

No sooner did the Republicans revive their crusade against Democratic health care reform than the law's biggest boogeyman made a comeback as well. With the Senate unlikely to take up the repeal bill that passed the House last week any time soon, the GOP has started going after individual parts of the legislation. Among the first targets is a little-known provision creating an independent Medicare panel whose purpose, Republican critics insist, is to ration care and could speed patients to an early death—in other words, the 2011 incarnation of Sarah Palin's "death panels."

Under federal health reform, the Medicare Independent Payment Advisory Board (IPAB) will be a new, White House-appointed commission with the authority to change what Medicare pays for and how it pays for it—all without direct congressional approval. Many of health reform's biggest supporters have celebrated IPAB, which starts in 2015, as central to the entire law's ability to rein in ballooning Medicare spending. "It's absolutely critical. It's the centerpiece of the bill—the major way that you begin to control costs," Sen. Jay Rockefeller (D-W.Va.) tells Mother Jones. But Republicans say the board embodies the most pernicious and outrageous faults of "Obamacare," delegating authority to unelected bureaucrats who could deny care to patients at their most critical moments

More at Mother Jones.

In Letter To Cantor, Schumer, Menendez Demand Answer To Key Repeal Question

From TPMDC:

"In a letter delivered to House Majority Leader Eric Cantor Sunday, Sens. Chuck Schumer (D-NY) and Robert Menendez (D-NJ) demand an answer to a question now at the center of the Republican party's top legislative priority: Will repealing the health care law force seniors to reimburse the government for the $250 check they received in 2010 to help them pay for prescription drugs?

'We are particularly concerned that repeal would reverse the course of making prescription drugs more affordable for seniors,' Schumer and Menendez write. 'The [repeal] legislation approved by the House could require seniors to repay the government.'

One of the major goals of the Affordable Care Act is to close the Medicare prescription drug coverage gap, better known to most as the 'donut hole.' The law will fill that hole over a decade, and in 2010, that meant many seniors received a $250 rebate check."

Death Panel Definition at Senior Community Center

Now This Is What a 'Death Panel' Looks Like:

"'It let's you make your own choice,' says Barbara Aplin, shouldering an oxygen tank on her way to the lunch line here at the senior Community Center in Green Bay, Wisconsin. She is speaking not of her meal options in 2011 but of so-called 'death panels,' the more colloquial name for the new Medicare rule now paying doctors to counsel this seventy-six-year-old ('and three-quarters!') and her fellow senior citizens about end-of-life care. If you listen to the new fear merchants from the right, the rule pushes seniors to opt out of medical treatment that might prolong their lives. But take an afternoon to listen to the actual grandmas, and you get a much different kind of scare. If her children don't listen to an end-of-life plan, Aplin says, 'I'll come back to haunt them.'"

What's getting Fox News's granny panties in a twist comes down to a new billing code — "voluntary" instead of "v66.7" — that the Obama administration added back in to Medicare regulation on New Year's Day after dropping it from the rather contentious Section 1233 of the health-care bill. But we couldn't find a single elderly American on Medicare who was against the provision.

"Death panels," now that they're going down in a slightly different way, don't strike those a bit closer to actual death as particularly deadly — and certainly not as anything new.

Here's something Fox News won't tell you: While the controversial billing code for an end-of-life conversation did not exist on Medicare forms until January 1, many doctors had the chat anyway — uncompensated. One primary-care physician told us that others found a way to bill "for the disease, and then add a v66.7 'encounter for palliative care.' And then I bill by time and code them usually a 99215, as it is usually forty-plus minutes."

With the new health-care regulation, she says she'll simply bill for "voluntary advance care planning." A different check box, as it were.

See also: Anatomy of the Right Wing's Death-Panel Meme

What Republicans want to repeal....

Way to go Debbie.....

From Think Progress:

WASSERMAN-SCHULTZ: The Republicans will take away a 50 percent cut in brand name drugs that seniors got…it will mean that children and in a few years everyone will be dropped or be denied coverage for the pre-existing condition that they might have. It will mean that young adults will no longer be able to stay on their parents’ insurance until they’re 26. …. What we’re going to do is put insurance companies and profit-driven decision making back in the driver’s seat, instead of decision making between doctors and their patients.
PRICE: That’s the kind of policy that was rejected on November 2nd.
WASSSERMAN-SCHULTZ: Really? Really? You think that people want insurance companies, Tom. You think that Americans want insurance companies to make decisions about whether or not they get coverage for a pre-existing condition? That is absolutely not what November 2nd was about.

New Weiner Study Shows 151 Members of House and Senate Get the "Public Option" Now

Weiner Calls on GOP Opponents of the Public Option to Give Up Their Medicare
 
From Representative Anthony Weiner:

A new study by Representative Anthony Weiner (D – Queens & Brooklyn), member of the Health Subcommittee and Co-Chair of the Caucus on the Middle Class, revealed that 151 members of the House and Senate currently receive government-funded; government-administered single-payer health care - Medicare.

On the list of recipients are 55 Republicans who have steadfastly opposed other Americans getting the public option, like the one they have chosen.

Weiner said, "Even in a town known for hypocrisy, this list of 55 Members of Congress deserve some sort of prize. They apparently think the public option is ok for them, but not anyone else."

The list of congressional recipients of Medicare who also oppose the public option is below:

Read more »

Are physicians fleeing Medicare?

In the debate on health care reform we hear that physicians are leaving the Medicare program because they cannot continue to accept the low fees paid by the government. Not true, according to this new GAO report. Physicians are more willing to serve Medicare beneficiaries and to accept Medicare fees as payments in full.

Read it all at PNHP's Official Blog

Democrats Spar Among Themselves Over PhRMA Deal - Prescriptions Blog

The first big fight over the Senate Finance Committee’s health care legislation erupted Tuesday night: a rollicking brawl over a deal that the Obama administration cut with the pharmaceutical industry to achieve $80 billion in savings on drug costs over 10 years, money that would help pay for the legislation.

Top House Democrats have hated the deal from the get-go. Senate Democrats are now bitterly divided. And Senate Republicans are eagerly jumping into the fray to needle the Democrats over their divisions.

The fight over the deal with PhRMA actually stems from the legislative battle over the Medicare prescription drug legislation that Republicans successfully pushed through Congress in 2003. As a result of that legislation, about 6 million elderly Americans who had been receiving drug benefits under Medicaid, the government insurance program for the poor, were instead shifted into the new Medicare drug program, resulting in the government paying far high prices for drugs.

Representative Henry Waxman, Democrat of California, and now the powerful chairman of the House Energy and Commerce Committee, has long complained about that switch. And the House health care legislation, of which Mr. Waxman is a main author, seeks to reverse the arrangement and to recoup the extra money that the government has been spending by restoring the old Medicaid drug discounts or “rebates” as they are known.

That would save the government at least $86 billion over 10 years, but would potentially cost the drug industry far more.

The White House has said that its deal with PhRMA would help narrow a gap in Medicare coverage of prescription drugs that is know as the doughnut hole, which forces people to pay some of their drug costs after a certain level. But there are also questions about the extent to which the drug industry also benefits, because the increased drug coverage for seniors means that the government will pay for more medication on their behalf, particularly brand-name drugs. In some cases, seniors now stop taking medication or switch to generics when they reach the doughnut hole.

Since the White House reached its deal with PhRMA in June there has been some disagreement between the industry and the administration over the precise terms of the arrangement. PhRMA has insisted that the White House agreed not to seek any additional concessions from drug manufacturers and to block Mr. Waxman’s plan in the House legislation. And the industry said that its support of the health overhaul was specifically aimed at Mr. Baucus’s proposal.

Mr. Baucus had previously announced that the first votes on amendments would not take place until Wednesday, so a final outcome of the fight was postponed.

Read it all at NYTimes.com

U.S. health insurers say they face gag order after being caught sending out anti-health care reform propaganda

U.S. health insurers whine about being "gagged" after being told not to violate marketing rules or improperly use protected Medicare mailing lists.

The Centers for Medicare & Medicaid Services (CMS), which oversees the Medicare program for the elderly and disabled as well as privately run Medicare alternatives, said on Monday it was investigating a letter Humana Inc (HUM.N) sent enrollees about efforts to overhaul the nation's healthcare system.

Humana's letter, sent in an envelope citing important plan information, told customers the Democrats' bills could hurt "millions of seniors and disabled individuals who could lose many of the important benefits and services that make Medicare Advantage health plans so valuable," according to CMS.

The agency also warned other insurers against sending potentially misleading health reform mailings to customers.

REad it all at Reuters

Linda Bird Johnson Robb: A Special Message on Health Insurance Reform

Linda Bird Johnson Robb, daughter of President Lyndon Baines Johnson, [LBJ} joins with with the Alliance for Retired Americans to reassure U.S. seniors that health reform is in their interest, and in the interest of a healthy sustainable Medicare program. Recalling the achievements of Presidents Roosevelt, Truman, Kennedy and Johnson -- "Social Security, Medicare, Medicaid and more" she says "Now it's time to complete the unfinished business of our generation."

Rate it up at YouTube

George S. McGovern: The Simple Health-Care Solution: Medicare for Everyone

By George S. McGovern
Sunday, September 13, 2009

For many years, a handful of American political leaders -- including the late senator Ted Kennedy and now President Obama -- have been trying to gain passage of comprehensive health care for all Americans. As far back as President Harry S. Truman, they have urged Congress to act on this national need. In a presentation before a joint session of Congress last week, Obama offered his view of the best way forward.

But what seems missing in the current battle is a single proposal that everyone can understand and that does not lend itself to demagoguery. If we want comprehensive health care for all our citizens, we can achieve it with a single sentence: Congress hereby extends Medicare to all Americans.

Those of us over 65 have been enjoying this program for years. I go to the doctor or hospital of my choice, and my taxes pay all the bills. It's wonderful. But I would have appreciated it even more if my wife and children and I had had such health-care coverage when we were younger. I want every American, from birth to death, to get the kind of health care I now receive. Removing the payments now going to the insurance corporations would considerably offset the tax increase necessary to cover all Americans.

I don't feel as though the government is meddling in my life when it pays my doctor and hospital fees. There are some things the government does that I don't like -- most notably getting us into needless wars that cost many times what health care for all Americans would cost. Investing in the health of our citizens will enhance the well-being and security of the nation.

We know that Medicare has worked well for half a century for those of us over 65. Why does it become "socialized medicine" when we extend it to younger Americans?

Taking such a shortsighted view would leave nearly 50 million Americans without health insurance and without the means to buy it. It would leave other Americans struggling to pay the rising cost of insurance premiums. These private insurance plans are frequently terminated if the holder contracts a serious long-term ailment. And some people lose their insurance if they lose their jobs or if the plant where they work moves to another location -- perhaps overseas.

We recently bailed out the finance houses and banks to the tune of $700 billion. A country that can afford such an outlay while paying for wars in Iraq and Afghanistan can afford to do what every other advanced democracy has done: underwrite quality health care for all its citizens.

If Medicare needs a few modifications in order to serve all Americans, we can make such adjustments now or later. But let's make sure Congress has an up or down vote on Medicare for all before it adjourns this year. Let's not waste time trying to reinvent the wheel. We all know what Medicare is. Do we want health care for all, or only for those over 65?

If the roll is called and it goes against those of us who favor national health care, so be it. If it is approved, the entire nation can applaud.

Many people familiar with politics in America will tell you that this idea can't pass Congress, in part because the insurance lobby is too powerful for lawmakers to resist.

As matters now stand, the insurance companies claim $450 billion a year of our health-care dollars. They will fight hard to hold on to this bonanza. This is a major reason Americans pay more for health care per capita than any other people in the world. The insurance executives didn't cry "socialism" when their buddies in banking and finance were bailed out. But to them it is socialism if the government underwrites the cost of health care.

Consider the campaign funds given to the chairman and ranking minority member of the Senate Finance Committee, which has jurisdiction over health-care legislation. Chairman Max Baucus of Montana, a Democrat, and his political action committee have received nearly $4 million from the health-care lobby since 2003. The ranking Republican, Charles Grassley of Iowa, has received more than $2 million. It's a mistake for one politician to judge the personal motives of another. But Sens. Baucus and Grassley are firm opponents of the single-payer system, as are other highly placed members of Congress who have been generously rewarded by the insurance lobby.

In the past, doctors and their national association opposed Medicare and efforts to extend such benefits. But in recent years, many doctors have changed their views.

In December 2007, the 124,000-member American College of Physicians endorsed for the first time a single-payer national health insurance program. And a March 2008 study by Indiana University -- the largest survey ever of doctors' opinions on financing health-care reform -- concluded that 59 percent of doctors support national health insurance.

To have the doctors with us favoring government health insurance is good news. As Obama said: "We did not come to fear the future. We came here to shape it."

George S. McGovern, a former senator from South Dakota, was the Democratic nominee for president in 1972.

Source: washingtonpost.com

McGovern was the first presidential candidate I actively campaigned for as a young adult. I am still proud of that. I reprinted the entire piece here because of that, because I agree with him and for educational reasons because everyone should read it.

Doctors want to call it quits because of the costs

Just learned something...

Waste of taxpayer money

It's also a waste of taxpayer money when a physician opts out. 'We are all paying out of our pockets to produce doctors,' said Mosley.

That's because medical residency programs are mostly funded by Medicare to the tune of $9 billion to train about 100,000 residents annually, according to the Medicare Payment Advisory Commission.

'It's Medicare that funds hospital costs to house residency programs, pay salaries of residents and sometimes pay faculties' salaries,' said Mosley.

Dr. Patricia Perry, 44, a dermatologist based in Burbank, Calif., operates a solo practice. She mostly performs medical procedures such as skin biopsies.

Perry said she's 'seeking to get out' of her profession because she's fed up with insurance reimbursement challenges while struggling to cover other costs associated with being a doctor.

'When you get to a point where you feel unappreciated and you're arguing with people about being paid, it takes away the passion for what you do,' Perry said."

Read it all at money.cnn.com

I admit that I was unaware that our government run Medicare program was also helping pay for so much to provide the nation with doctors. On top of making sure that all of our elderly citizens have access to basic medical care. Seems like a great return on our investment.

The rest of the article relates to other costs, like malpractice insurance premiums, that continue to rise while reimbursements from insurance companies are not increasing.

Individuals and businesses have seen insurance premiums skyrocket. But doctors are not getting increases in reimbursements for services. Where is the money going? Funneled into CEO salaries instead of providing care.

How To Slash Medicare Spending

It's tempting to assume Obama negotiated himself into a corner in which little actual reform was possible and is left with a modest expansion of the existing system and slowly-phased in reforms, all of which will still pass because it would be "obscene" to vote against it.

But suppose "fixing" the system was never the goal? Suppose you're Pete Peterson, and you've spent your career trying to slash America's "entitlement" programs, and you figured out a way to make drastic cuts in Medicare under the guise of "health care reform."

In that hypothetical, your major goal would be to extract hundreds of billions of dollars from the Medicare payment system, and then build in a politically shielded mechanism to extract hundreds of billions more if the initial cuts didn't sufficiently reduce Medicare's hit on the budget.

You'd have to package this carefully, because if you simply announced you wanted to slash Medicare by perhaps a trillion dollars or more over the next decade or so, you'd get slaughtered by AARP and earn the wrath of liberal Democrats and particularly seniors, the majority of whom tend to vote Democratic, or at least they used to.

So you'd talk about eliminating "waste, fraud and abuse" in the system. Few would believe there's much hope in that, so you'd add the idea of changing the provider payment incentives to get equal or better care by changing how providers practice medicine. You'd talk about "bending the cost curve" and warn folks that unless we did something dramatic, the Medicare deficits would overwhelm the federal budget and dominate the GDP.

Read it all at Firedog Lake

New Health Insurance Numbers: Uglier Than They Look

The Census Bureau released health insurance numbers for 2008 today. On the surface it appears that things haven't gotten much worse, and that for children they've gotten better. On the surface.

You really need to dig a little deeper than what's presented to get the whole picture and understand that, in addition to all the personal insurance horror stories out there, there is also the national horror story of how millions of people in our country, more than the entire population of Canada, lack health coverage.

If you look at the insurance rate changes by age group, you quickly see that the picture is not at all rosy. Children's insurance did indeed improve -- about 800,000 fewer uninsured children and a drop of 1.1 points in percentage uninsured from 2007 to 2008. Great! (And you can give grudging thanks to the terrible horrible no-good very bad gov'mint bureaucrat-ruled Medicaid and Children's Health Insurance Program). (But note -- 7.3 million children under 18 -- 8.1 million if you include the 18-year-olds, lack coverage and that's considered a major improvement!).

Elderly rates also improved marginally -- but they were very good to begin with (due to that other awful government-run scary socialist Obama-like Medicare program). 1.7% of the elderly were uninsured in 2008 as compared to 1.9% in 2007 (not a statistically significant difference).

For all other age groups, that is all groups within the category "non-elderly adults," things got worse. Over all, for people aged 18 through 64, the percentage uninsured went from 19.6 (pretty bad already) to 20.3%. And the number of uninsured non-elderly adults increased by 1.5 million. Just think, more than one out of every 5 people between the ages of 18 and 64 was uninsured in 2008.

Now isn't that interesting -- the two age groups with a "public option" (limited for children to the lower income children who are eligible for either Medicaid or the Children's Health Insurance Program) had stable or improved coverage, while the group reliant on employer & private coverage fared badly. Gee, do you think that could possibly mean that government-run programs might actually work?

So the improvement in children's coverage masks how bad things are for the non-elderly adults -- people like the woman I just talked to on the phone who said "I'm in that funny age group, no longer working at a salaried job with benefits and too young for Medicare. My insurance premiums have just doubled and I don't know if I can keep affording to pay for health insurance."

What we really have is a steadily worsening health coverage picture for the adult population. That picture is different for the young and old only because of much maligned public safety-net programs (and for children, this is a very limited safety net). From where I stand, a "robust public option" looks pretty damn good!

Read it all here.

On the status of health reform

by Andrew Coates MD

At the end of August the Republican Party took the position of “hands off Medicare.” While this would leave in place “Medicare Advantage” (which pays private insurance companies 12 to 17% more than it pays for the costs of care of traditional Medicare), and Medicare Part D (another huge giveaway to the drug and insurance industry), it was striking to see the Republican Party tie itself in knots after decades of calling for the abolition of Medicare.

Also in the name of "keeping the government out of health care" the Republican Party came out in defense of the Veterans Administration, a socialized health care system directly owned and operated by the federal government. In August the Congressional Budget Office released a study that underscored once again evidence of superior quality of care at the VA: better than Medicare, better than private practice and better than managed care.

If we were to engage a truly evidence-based debate over how to pay for health care using a “uniquely American” model, it would be a debate between single payer, the Medicare model, and socialized medicine, like the VA.

From "off the table" to "on the floor"

Single-payer national health insurance, after more than 20 years of accumulating evidence, now accumulates unprecedented popular support. Although polls have shown for decades that a majority, including physicians, favor national health insurance, the depth and passion of grassroots activism for the proposal is something new. For the first time this fall single payer may be voted on on the floor of the House of Representatives.

At the end of July, as the Energy & Commerce committee completed deliberations on HR 3200, Representative Anthony Weiner of New York, with 6 others, put forward an amendment to replace the text of HR 3200 with the text of HR 676. Committee Chair Waxman interrupted to say that House Speaker Nancy Pelosi offered to allow single payer to be voted on by the entire House of Representatives if the amendment were withdrawn from Committee. Weiner accepted.

Perhaps the prospect of defeating single payer on the floor of the House of Representatives seems, to the Democratic Party leadership, a way to at last get single payer off the table.

Single payer activists have welcomed this turn of events, for it was the direct fruit of grassroots mobilization. The proposals before Congress, with the exception of HR 676 and S 703, will simply not work. Whatever happens in Congress this fall, the system will grow more dysfunctional. And with expectations for fundamental reform now raised even higher, excellent prospects to build a movement for single-payer national health insurance will persist.

Read it all at PNHP's blog.

Dr. Coates practices medicine in Albany, NY, where he is assistant professor in the departments of medicine and psychiatry at Albany Medical College, secretary of the Capital District chapter of Physicians for a National Health Program and co-chair of Single Payer New York.

Rep. Anthony Weiner: Giving Single-Payer a Second Look

As President Obama prepares to address the nation about his vision for health care reform, we should not overlook the last, best truly transformative change to our health care system: Medicare. We have been staring so intently at the lessons of 1993 that we may have forgotten the universal rule of successful lawmaking: "keep it simple."

During the eleven town hall meetings I've held around my district, I've had some direct experience with the anxiety this debate has produced. Much of the fear comes from two groups: those who have Medicare and don't want it changed and those who have never had a government-run reimbursement system like Medicare and are worried about the impact it will have on their quality of care.

In both cases, a calm, reasoned and vigorous defense of the American single-payer plan is just what the doctor ordered.

The truth is that the United States already uses single-payer systems to cover over 47% of all medical bills through Medicare, Medicaid, the Veterans Administration, the Department of Defense and the Bureau of Indian Affairs.

Understanding that these single-payer health programs are already a major part of our overall health care system should help us visualize what an actual public plan would look like. These institutions also provide health care to millions of satisfied customers in every community who would heartily agree that the government can build and run programs that work quite well.

Medicare also provides us with a case study in the hypocrisy of our Republican friends who have built their party on a 44-year record of undermining this popular program. And now their Chairman sees no irony in ripping "government run" healthcare while publishing an op-ed opposing changes to Medicare.

If Medicare has been such a success, why not extend it? Why not have single-payer plans for 55 year olds? Why not have one for young citizens who just left their parents or college coverage?

So far, the answers we hear to these questions have simply not been very convincing.

At one town meeting the President responded that that he was worried about its "destructiveness."

Really? Americans would still go to the same doctor and the same neighborhood hospital. Sure, they would be able to delete the 1-800 number of their insurance company from their cell phones. And doctors would have to get rid of all those file cabinets full of paperwork while their assistants who spend time fighting with insurance companies would be able to actually speak to patients.

But everyone would adjust, I'm sure.

The real reason we haven't seen the Democratic Party embrace the obvious and simpler idea is that it boils down to pure beltway politics.

We've been reluctant to tackle the real inefficiency in the current system, namely, the very presence of the private insurance companies. Too many in Washington would rather stay friends with the insurance and drug companies when real reform probably can't be achieved in a way that makes these powerful institutions happy.

That's not to say we should vilify the industry. When they pocket up to 30% in profits and overhead (compared to 4% for Medicare) or when their executives take multimillion dollar salaries, insurance companies are doing what their shareholders want them to do.

But let's leave it to the Republicans to defend those actions. I, and most Democrats, should not join the chorus that sounds like we care more about insurance companies than taxpayers.

The same is true for Big Pharma. If Wal-Mart can pool its customers to be able to offer the $4 prescriptions, why shouldn't the federal government drive the same hard bargain on behalf of the tax payers so they too get the best prices under Medicare? I pose this exact question at every town hall meeting I attend and if my colleagues and the President did the same on Wednesday night, they would mix good policy with good politics. Instead we have watched a puzzling dance as policymakers have effectively limited the savings we would find in the enormous drug expenditures that are a fixture in our current system. Is it any wonder citizens are confused?

I have no delusions about the muscle needed to overcome resistance from the insurance and pharmaceutical industries. But I believe that for every American we may lose to a slash-and-burn TV ad funded by these businesses, we will gain five among those who are looking for a clear rationale for what we are trying to accomplish and an example for what it may look like.

We also achieve something else: realignment of the political universe. Democrats understand the role of government and are proud of our signature achievement: Medicare. The Republicans care most about big business.

I'll take that fight any day. And I'm hoping that the President will tell us on Wednesday that he is willing to do the same.

Source: Huffington Post

The "chicken and egg" problem: Can the "public option" succeed where Prudential failed?

By Kip Sullivan, JD - Source: PNHP's Official Blog

In a previous paper I described the transformation of the “public option” from an enormous program that would insure 130 million people to a tiny program in the Democrats’ health “reform” legislation that will insure somewhere between zero and 10 million people. I predicted that the “options” in the Democrats’ bills would be unable to succeed in all or most markets in the country. I characterized the main barrier facing the Democrats’ shrunken “options” as a “chicken and egg” problem: A person or group trying to create a new insurance company can’t tell prospective customers what the premium will be until they have determined how much they will pay providers; but the person or group can’t know how much it will pay providers until it knows how many people it will insure.

In this comment I elaborate on this chicken-egg barrier by presenting an illustration of the barrier at work – the departure of the Prudential Insurance Company from the Minnesota managed care health insurance market in 1994. Although Prudential was (and still is) a huge Fortune 500 company, it was unable to survive Minnesota’s highly concentrated group health insurance market and was forced to withdraw. If a company as large and as experienced as Prudential could not crack the Minnesota market, why should we hold out any hope for the little “options” proposed by the Democrats?

A recap of the transformation of the “public option”

Jacob Hacker laid out his vision of what is now called “the public option” in papers published in 2001 and 2007. Hacker spelled out five criteria he believed the “option” had to meet:

1. It had to be pre-populated with tens of millions of people;
2. Only “option” enrollees could get subsidies (people who chose to buy insurance from insurance companies could not get subsidies);
3. The “option” and its subsidies had to be available to all non-elderly Americans (not just the uninsured and employees of small employers);
4. The “option” had to be given authority to use Medicare’s provider reimbursement rates (which are typically 20 percent below the rates paid by insurance companies); and
5. The insurance industry had to offer the same minimum level of benefits the “option” had to offer.

Although I question some of the assumptions Hacker made in these papers, including his assumption that the “option” will inevitably enjoy Medicare’s low overhead costs, I have little doubt that an “option” which met Hacker’s five criteria would stand an excellent chance of surviving its start-up phase in most markets in the U.S. (I am ignoring here the question of whether an “option” as strong as Hacker’s original has a better chance of being enacted than a single-payer system does. Events of the last few months should disabuse the entire world of that myth.)

But when the Democrats drafted legislation early in 2009 that included provisions creating an “option,” they abandoned the first four of Hacker’s criteria and kept only the last one (the one requiring insurance companies and the “option” to cover the same benefits). Proponents of the “option,” including Hacker, did not raise a fuss about this. Not surprisingly, the “option” provisions of the bills introduced in July – one by the Senate Health, Education, Labor and Pensions (HELP) Committee and the other by the chairs of the three House committees with jurisdiction over health care reform – were basically unchanged from those in the draft versions. The Congressional Budget Office estimates the HELP Committee’s “option” will insure approximately zero people and the “option” in the House bill (HR 3200) will insure roughly 10 million people.

The advent of managed care augmented the chicken-egg problem

Prior to the advent of what came to be called “managed care,” an entrepreneur or group seeking to start a new insurance company only needed to focus on amassing a large number of customers as opposed to providers (clinics and hospitals). But with the advent of managed care in the 1980s, groups seeking to start a brand new insurance company also had to amass a supply (or “network”) of clinics and hospitals as well. Some insurers amassed this critical supply of providers by buying them out (or merging with them), but most did so by signing contracts with them.

This new provider-network requirement for market entry arose because the spread of managed care tactics meant that survival and success would go to the insurance company with the greatest ability to exert influence over providers. Insurance companies throughout the country sought to increase their influence over providers by limiting patient choice of provider so that they could steer their enrollees to fewer providers. Developing this power to steer more patients to some providers and away from others gave an insurance company two substantial advantages over an insurance company that did not do that. First, it gave the insurer the ability to force the providers they dealt with to give them discounts off their usual charges. Second, it enhanced the power of the insurer to force providers to play by the insurer’s “managed care” rules (for example, rules requiring providers to get permission from the insurer before hospitalizing a patient).

But creating a network of providers that is large enough to satisfy a widely dispersed customer base but still exclusive enough to give the insurer leverage over the in-network providers is a time-consuming and expensive process. This requirement gives an enormous advantage to the home team – the insurers that have been doing business for a long time in a given market – and, conversely, creates an enormous barrier to entrepreneurs seeking to create new insurance companies.

When the U.S. Department of Justice investigated a proposed merger between Aetna and Prudential in 1999, it concluded that “effective new entry for an HMO or HMO/POS [point-of-service] plan [that is, an insurance company that limits patient choice of provider] in Houston or Dallas typically takes two to three years and costs approximately $50 million.” Because insurance markets have become more concentrated in the decade since the DOJ published this report, the time and money required to break into today’s markets is even greater than that required a decade ago.

Insurance companies which failed to grasp this new rule of the managed care era – that success will depend not only upon the size of your customer base but also your ability to limit patient choice of provider – lost market share and many went out of business. The decision by Prudential Insurance Company to leave the highly concentrated Minnesota health insurance market in 1994 illustrates this trend.

Prudential’s departure from Minnesota’s group market

As of 1994, Minnesota’s four largest health insurance companies insured 80 percent of all Minnesotans who had health insurance of any sort. Blue Cross Blue Shield of Minnesota enrolled 1.33 million people, Medica enrolled 900,000, HealthPartners enrolled 650,000, and PreferredOne enrolled 450,000. Two of these insurers – Medica and HealthParters — were so powerful in the Twin Cities area they could extract discounts from Twin Cities hospitals that were approximately equal to Medicare’s (at that time, a discount of about one-third). They extracted these discounts not because they were as big as Medicare was (nationally Medicare insured 40 times more people than Medica did in 1994 and about 55 times as many as HealthPartners), but because they were big in the Twin Cities insurance market and, unlike Medicare, they made a point of limiting patient choice of provider. This meant they could exercise enormous leverage over the providers they did choose to deal with.

Even though Prudential was and still is a huge company nationally (it is a Fortune 500 company and is among the nation’s largest health insurance companies) and had been selling health insurance for decades, it did not react fast enough to the gradual spread of managed care tactics in Minnesota during the 1970s and 1980s. (Minnesota, along with California, led the nation down the managed care path.) By 1994 Prudential decided it couldn’t compete in the Minnesota market.

Prudential made its decision known on July 8, 1994. As the following excerpt from a Minneapolis Star Tribune article published the next day indicates, Prudential had established a toehold – it was well on its way to creating both a customer base and a provider network – but the toehold wasn’t enough.

… Prudential Insurance Co. said Friday that it will discontinue its Twin Cities managed care health plan due to intense competitive pressures. Eighty metro-area jobs will be eliminated….While Prudential … is now in 42 cities, only the Twin Cities market posed a particular problem and will be shut down….

Prudential Plus of Minnesota operates mainly in the Twin Cities and deals with 800 primary care physicians and 1,500 specialists. Nationwide, the managed care plan has 5 million members. Regardless, Prudential did not grow large enough or fast enough in the Twin Cities market to maintain a substantial lead, analysts said. The firm was easily overshadowed by heavyweights such as HealthPartners and Medica…. And these bruisers and others like them are merging or forming alliances that kept welterweights like Prudential Plus on the ropes. Gary Schultz, executive director of Prudential Plus of Minnesota, said, “Recent mergers, acquisitions and strategic alliances involving health care plans and providers … have combined to make it increasingly difficult to compete in this market place….

“Prudential only has 30,000 (members) in the Prudential Plus plan,” [Prudential marketing director Pat] McLaughlin said. “They are not the big player they needed to be and as a result may not have been able to negotiate the best deals with providers” (Dee DePass, “Prudential to discontinue managed care health plan,” Star Tribune, July 9, 1994, 1D).

An article in BNET reported an identical explanation for Prudential’s demise in Minnesota: “A Prudential spokesperson said the clout of its bigger competitors had made it difficult to recruit a critical mass of new employers and enrollees.”

Lessons for “option” advocates

This story illustrates three facts “option” advocates must address.

First, it clearly illustrates the “chicken and egg” problem facing the “option” program, or to be more precise, facing the corporations that will be hired by the Secretary of the Department of Health and Human Services to create the “option” program. (Both the HELP bill and HR 3200 authorize the Secretary to contract with corporations that the HELP bill calls “contracting administrators” for the purpose of creating the “options” throughout the U.S.) The contracting administrators are going to have to build up provider networks and a customer base from scratch, simultaneously, and market by market, even though they will suffer the disadvantage of entering the insurance business long after the insurance companies they are competing with began introducing themselves to customers and cobbling together their own provider networks.

Second, this story should put the entire country on notice that the “option” may never be able to deliver on the promise, made over and over by “option” advocates, that the “option” will offer complete freedom to choose one’s doctor and hospital. If the contracting administrators who create the “options” around the country refuse to create “options” that limit enrollees’ choice of provider, those “option” programs will have less power to drive provider rates down. That means, of course, those “option” programs will have to set their premiums higher than existing insurers that do limit patient choice of provider. That will in turn make attracting a critical customer base very difficult if not impossible.

The third fact the Prudential story illustrates is that the size of an insurer at the national level is not an important factor in decisions by clinics and hospitals about whether to sign contracts with an insurer and whether to give that insurer discounts. What matters to clinics and hospitals is size at the local level. Minneapolis hospitals, for example, could have cared less whether Prudential insured 20,000 people in Tulsa or half-a million in Florida. (Size at the national level does have some bearing on whether an insurer can extract discounts from drug and equipment manufacturers. But drugs and equipment amount to roughly 15 percent of medical costs for the non-elderly. It is clinic and hospital costs that make or break an insurance company.)

The “chicken and egg” problem is, of course, not limited to entrepreneurs trying to break into the Minnesota market. The conditions that create the “chicken and egg” problem – high concentration levels within the insurance industry and near-universal use of managed care tactics including limited choice of provider – exist throughout the country. As Senator Charles Schumer (D-NY) said in a press release about a May 2009 report from Health Care for America Now, the entire U.S. health insurance industry suffers from “extreme … consolidation.” According to the HCAN report, eleven states have more concentrated insurance markets than Minnesota does.

“Option” advocates should stop comparing the “option” to Medicare

To test your understanding of the “chicken and egg” problem, let me end with a pop quiz: Did Medicare face a “chicken and egg” problem when it started up?

The answer is: No, it did not. It did not because it didn’t have to create a “customer” base from scratch. Its base was created by the law (signed on July 30, 1965) that created Medicare.

Medicare is, by design, the sole insurer for people over age 64. That means that Medicare’s administrators had a precise idea of how many Americans they would be representing on July 1, 1966, the day Medicare commenced operations. Equally importantly, every clinic and hospital in America had a good idea of how many elderly patients they would be getting if they participated in Medicare and, conversely, how many they would lose (and how much money they would lose) if they refused to accept Medicare patients. And because the Medicare law gave the nation’s entire elderly population – the portion of the population with the greatest need for medical care – to Medicare, Medicare’s administrators had a good idea of how much leverage they had on day one over the nation’s providers. This allowed them (eventually) to make an offer to America’s providers that the providers could not refuse – accept Medicare’s below-average rates or lose a lot of money. The offer was not refused. Today, virtually all American clinics and hospitals accept Medicare enrollees even though there is no requirement in the Medicare statute that providers accept Medicare enrollees. In short, having pre-established enrollment, which in turn gave Medicare the ability to set its rates below those of the insurance industry, meant that Medicare did not face the “chicken and egg” problem.

More importantly, Medicare didn’t face a “chicken and egg” problem because it has always been the single insurer for the services covered under Medicare. Medicare has never had to compete with the insurance industry for “customers.” A pernicious consequence of the tendency of “option” advocates to describe the “option” as “just like Medicare” is that “public option” supporters and members of Congress have been lulled into thinking the “option” is bound to succeed just as Medicare did. The tendency of “option” advocates to ignore the daunting “chicken and egg” problem is one manifestation of the lazy thinking that has been induced by the constant comparison of the “option” to Medicare. ”Option” advocates should stop comparing the “option” to Medicare.

Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program. He is the author of The Health Care Mess: How We Got Into It and How We’ll Get Out of It (AuthorHouse, 2006).

Adventures in the Rabbit Hole

Josh Marshall gets it:

It also points back to the question (a frustratingly good one) of why the advocates of a public option and just reform in general have not simply explained this as allowing people to buy into Medicare at any age. Because, essentially, that's what it is. And I think I could pretty much guarantee you that if the question in the public mind was "Would you like the option of buying into Medicare before you turn 65?" the opposition would be vastly diminished.

This isn't just rhetoric. This is the most accurate and graspable explanation of what's being proposed. Indeed, the big secret not many people are discussing is that in the current iterations of the 'public option' in most of the bills in committee that 'option' isn't given as an option to many people. Most people aren't allowed to access it. And it's designed that way in order to put a crimp on any competition it might provide to private sector insurers.

But what we're stuck with is 'public option,' which a crew of bamboozlers have warped into some sort of Logan's Run government program in which your ten year old will need to make his case for his future contributions to society to ensure he can get his broken leg set rather than be euthanized and ground into Soylent Green to feed yet more illegal aliens on welfare.

Source: Talking Points Memo

Can We Afford Health Care Reform? We Can't Afford Not to Do It.

Put another way, if you are for fiscal discipline, you should be for health-care reform. If our government cannot produce some kind of reform, that will only reinforce the perception that our political system is incapable of resolving our largest, most difficult problem -- and that is what will make investors think twice about investing in America.

Read it all at washingtonpost.com

Employers Face 10.5 Percent Health Care Cost Increases

If corporate income taxes were raised 10.5%, all hell would break loose.

Aon Consulting surveyed more than 60 leading health care insurers, representing more than 100 million insured individuals, and found that health care costs are projected to increase by 10.4 percent for HMOs, 10.4 percent for POS plans, 10.7 percent for PPOs and 10.5 percent for CDH plans.

In addition, health care rate increases for retirees over the age of 65 are projected to be 6.6 percent for Medicare Supplement plans and 7.3 percent for Medicare Advantage plans.

The Medicare Advantage plans are overpaid deliberately to give the plans an unfair competitive advantage over the traditional Medicare program, with the intent of privatizing Medicare. Most of the extra payment is wasted in administration and profits, and what little benefit there is should be given to all Medicare beneficiaries, not just those enrolled in these plans.

The Medigap plans provide the worst value in the private insurance market. The insurers pay a much lower percentage of the premiums they collect for actual health care than they do in any of their other insurance product lines. Americans would be receiving a much greater value if the benefits of the Medigap plans were rolled into the traditional Medicare program, and these wasteful private supplemental plans were totally eliminated.

This Aon report should lead to two obvious conclusions: 1) get the private health plans out of our Medicare program, and 2) replace the private employer-sponsored plans with an improved Medicare program for all of us.

If you agree, let President Obama and the members of Congress hear your message loud and clear. Immediately.

Read it all at PNHP