CLASS Warfare

Is the CLASS Act already dead and buried, a full year before it comes to life?

A couple of months ago, I wrote a column about the ill-advised, bi-partisan Congressional effort by the Senate “Gang of Six” to deep-six the CLASS Act. 

The CLASS Act is the new national privately-financed long term care insurance program authorized by Congress in 2010.  Without going into all the details again, it is intended to make long term care insurance care available to the working middle class.  This would take pressure off of the Medicaid program, resulting in billions of dollars of savings to taxpayers.

The CLASS Act won’t even take effect until October, 2012, and the Administration hasn’t even announced exactly how it would be structured.  But the Department of Health and Human Services may be closing down the CLASS office.  This past weekend’s news report from the Hill and other media outlets noted that it has let its actuary go and asked the Senate not to appropriate $120 million needed for the CLASS Act’s implementation.

That’s not “life support,” as one writer who is sympathetic to the Act suggested.  It’s a death rattle.

A program designed to cost the government next to nothing, provide benefits that people need, and save taxpayers significant dollars should be popular with elected officials.  However, that’s not the case here. 

According to the Hill, Senator Kent Conrad, a Democrat, has called the CLASS Act “a Ponzi scheme of the first order.”  Representative Phil Gingrey, a Republican, agrees with him.  Last March, according to Howard Gleckman in his Caring for Our Parents blog, Rep. Gingrey called the CLASS Act “a Bernie Madoff Ponzi scheme run by the Secretary of Health and Human Services.” 

On CNN almost two years ago – before the CLASS Act was even enacted – Senator Lindsey Graham called anyone who would vote for it a “co-conspirator to one of the biggest Ponzi schemes in the history of Washington.”  And Senator John Thune also characterized it in a 2009 Timearticle as “a classic definition of a Ponzi scheme.”

Aside from the hyperbolic tic that appears to compel all these members of Congress to refer to the CLASS Act in precisely the same way, and in the most demeaning manner possible, you get the bi-partisan picture.  They oppose it.

Their problem seems to be that it would collect premiums from a lot of people to pay for the care needs of a few.  What they call a “Ponzi scheme” is often referred to as “insurance.”

Other opponents have literally thrown the kitchen sink at the CLASS Act.  Heritage Foundation writers have made the simultaneous and contradictory arguments that too few and too many people will enroll, premiums will be too low and too high, benefits will be too small and too great, and the Trust Fund it establishes will be so big the Congress will raid it and so small that it will have to be subsidized.

The real problem seems to be that as it is currently designed, the program’s primary beneficiaries will be working members of our disappearing middle class. 

This is because most well-to-do aging Americans, like members of Congress, have personal wealth sufficient to help finance their long term care.  Long-term care insurance isn’t a necessity for people who have over $1 million in assets, because they can usually generate enough income from these assets to pay for their own long term care needs.

Or they can protect these assets by transferring them to their children, and qualify for Medicaid just like any other indigent person.    

Transferring assets to qualify for Medicaid is a common occurrence, but no one seems to know exactly how common.  In one analysis in New York, 7% of Medicaid applicants were denied because of a recent transfer of assets.  The percentage transferring assets successfully was likely much, much higher.

Maybe limiting the CLASS program to working people, or setting a $50 per day benefit level, or locking in an age-related premium aren’t the best approaches to setting up the program.  Perhaps its Trust Fund will prove too tempting for politicians who to raid for other purposes. 

But we need long term care insurance or our long term care system will collapse one day.  And the current private plans are far too scarce, and too few people are enrolled in them. 

So, instead of doing something about this, Congress will kill the one program it has passed that promised to make a difference – and, at the same time, help the middle class afford long term care.

That’s what CLASS warfare is all about. 

If you have questions about this column or would like to receive an email notifying you when new Our Health Policy Matters columns are published, please send an email to gionfriddopaul@gmail.com.

Uninsured Numbers a Compelling Case Against States' Rights

“States’ rights” is as popular a rallying cry as ever as we enter the early stages of the 2012 election campaign. 

To advocates of states’ rights, they are code words for state innovation and initiative, unhampered by the demands of a federal government.   In their minds, we are a United States of America. 

To skeptics, we are a United States of America, and states’ rights are the code words of political leaders who want to run their states as fiefdoms and answer to no higher authority. 

The new 2010 uninsured numbers released by the U.S. Census Bureau last week make a compelling case against the states’ rights position.

In the South, where the drum roll for states’ rights beats most loudly, 19% of all people were uninsured 2010 for the entire year.  This was more than in the West, where 18% were uninsured, the Midwest, where 13% were uninsured, and the Northeast, where only 12% were uninsured.

Place clearly matters where health insurance is concerned, and innovation and initiative in providing coverage for health care take a back seat in the Mecca of states’ rights.

Geography is an important factor in determining insurance status, but it isn’t the only one.  Others include:

·         Race and ethnicity – 31% of Hispanics were uninsured for the entire year, as were 21% of blacks;

·         Immigrant status – 34% of all foreign-born U.S. residents were uninsured, including 45% of those who are not citizens and 20% of those who are;

·         Income – 27% of people in households with less than $25,000 per year were uninsured.

But as bad as these numbers look, what’s behind them in the more detailed tables that accompanied the Census Bureau release is worth examining. 

It isn’t race, immigrant status, or income driving the health insurance numbers.  It’s geography.

Consider this fact.  The news headlines reported that 16.3% of the population of the United States as a whole was uninsured.  But when you remove people over the age of 65 – who are almost universally insured through the federal Medicare program – the percentage rises to 18.4%.

But in the two biggest southern states of Florida and Texas – where the new leaders of the states’ rights movement sit in Governor’s chairs – the numbers are far worse. 

In Florida, 24.6% of all people under the age of 65 were uninsured in 2010 for the entire year.

In Texas, 26.9% of all people under the age of 65 were uninsured in 2010 for the entire year.

Florida has earned its states’ rights badge through Governor Rick Scott’s attack on the Affordable Care Act.  His administration has refused to implement its consumer protections.  He has famously refused to accept public funding for many needed services because the funds were associated with the Act.  And he has turned down dollars to set up a health insurance exchange that would make more privately-funded insurance available in the state, too. 

Texas has earned its badge through Governor Rick Perry’s attack on Medicaid.  He has advocated repealing the Medicaid program in its entirety, making Medicaid a block grant so that Texas can do whatever it wants with it.  He once suggested seceding from the union if he didn’t get his way.

The one thing that neither Rick Perry nor Rick Scott can do is blame the federal government for the failures of their states to insure their populations properly.  Nor can they blame racial, ethnic, immigration, and income factors.

Mississippi, South Carolina, Maryland, and Georgia all have higher percentages of African Americans than Texas and Florida, but lower percentages of uninsured people.  New Mexico has a higher percentage of Hispanics than Texas, but a lower uninsured percentage.  And California has more undocumented immigrants than Texas and Florida combined, but a lower uninsured percentage, too.

Florida and Texas are also by no means the poorest states in the union. 

Florida and Texas have reached the bottom of the uninsured barrel through their own policy actions and despite their considerable assets.

When their governors talk about states’ rights in the area of healthcare, they seem to be arguing that every state should aspire to their level of failure.

Meanwhile, the one thing everyone seems to agree on is that more people in Texas and Florida will become insured when the Affordable Care Act is implemented by the federal government in a little over two years.

This has been characterized in recent Presidential debates as a federal takeover of health insurance.  But does anyone seriously believe that we would ever have needed an Affordable Care Act – or that it would have passed – if every state, including Texas and Florida, had taken care of its own problem like Massachusetts did?  

In Massachusetts, only 6% of the population was uninsured in 2010.

If you have questions about this column, or would like to receive an email notifying you when new Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

America's Health Insurance Myth

The recent heavy-handed action by Blue Cross and Blue Shield of Florida (BCBSFL) to terminate and amend all of its contracts with mental health providers brings to light a well-kept national health care financing secret.

It is an American myth that we rely on private insurance companies to finance our healthcare delivery system. 

America’s privately-financed private health insurance companies pay so small a share of the nation’s healthcare bill today that they could vanish tomorrow and we would barely notice anything but the cheering.

Insurance companies have been marginalizing themselves by years of short-sighted actions against both providers and patients. They are well on the way to becoming little more than bundles of administrative costs and profits. And it may already be too late for them to do anything about it. 

According to the Centers for Medicare and Medicaid Services (CMS), our total U.S. health care expenditures in 2009 were just under $2.5 trillion.   Privately-financed private insurance pays a stunningly small percentage of that – far, far less than most people believe and far less than the sky-high health insurance premiums they often charge would suggest.

Like it or not, it is the government that pays most of the bill. 

Medicare and Medicaid pay over one-third.  According to the Office of Management and Budget, Medicare paid $517 billion in 2009-2010 – 21% of the total.  CMS calculated that the combined federal and state Medicaid share was $374 billion in 2009, which accounts for 15%.

Other direct governmental health care expenditures account for another 20%, or $510 billion.   These include mental health and substance abuse spending, workers compensation, Indian Health Services, vocational rehabilitation, maternal and child health, CHIP, Department of Defense, Veterans Affairs, and other federal, state, and local expenditures.

As a result, the government’s direct share of health care expenditures comes to approximately 56% of the nation’s total healthcare bill.

But there’s more.  Government workers account for around one-sixth of our national labor force.  Their private health insurance is paid for by governments.   The Federal Employee Health Benefits Program costs $40 billion.  And according to a source at the Manhattan Institute, state and local benefit programs cost an additional $132 billion in 2008. Government-fundedprivate insurance therefore accounts for another7% of total health care spending.

But we’re not finished yet.

The government also subsidizes private insurance through tax deductions for premiums.  The Kaiser Family Foundation estimatedthat the value of this tax expenditure was around $200 billion in 2007.

When you add that in, too, it brings the government’s share to around 71% of the total.

According to CMS, private insurance paid $801 billion, or 32%, of our total health care bill in 2009.  But when you remove the $372 billion of government contributions to this share, the privately-funded private insurance share of health care costs goes down to $429 billion, or to around 17% of the nation’s health care bill.

CMS reported that in 2009 the remaining 12%, or almost $300 billion, was paid out-of-pocket for health care, through co-pays, deductibles, and other direct payments by or on behalf of individuals.  

But here’s the thing about the 17% paid by private insurance companies using private dollars.  It costs us all at least one-third of that to pay for their profits and administrative expenses. 

Private insurers regularly keep at least 15-20% of every public or private premium dollar they collect for profit and expenses.  This means that we have to pay insurance companies something like 6% on top of the 32% they pay toward health costs for their profits and administration.  If we didn’t have to cough up that 6% in fees, we could spend it all on healthcare.

 This means that the net value of the privately-funded private insurance share of the nation’s health bill is something like 11% of the total, just about what we already pay out-of-pocket.

It is maddening that private insurers pay out so little for the privilege of treating providers and patients so shabbily.  According to one Florida mental health provider, BCBSFL is also adding new paperwork requirements, random and aggressive auditing, other intrusive requirements, and even “legibility reviews” to the mental health treatment manual it will release to its new provider network in December.    

We need our government to be more aggressive by enforcing mental health parity laws and the consumer protections in the Affordable Care Act.  It must improve its regulation of an industry where the administrative bloat is already at least half as big as the benefit, and the benefit is no bigger than what we already pay in co-pays and deductibles. 

But the most telling anti-consumer position was staked out in an August 17, 2011 letter from the Deputy Insurance Commissioner of Florida to a representative of a coalition of mental health parity advocates: "I would note that the Office of Insurance Regulation has no jurisdiction with respect to enforcement of federal law."  Since Florida also denies the authority of the federal government to enforce insurance mandates, who's left to advocate for consumers? 

Where private insurance is concerned, it seems that we have laws with teeth, but regulators with no bite.  I wonder why.

 

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Why Research Matters

A few weeks ago, we were tantalized by the news that a new treatment for leukemia might be on the horizon. 

Three very sick patients were injected with a new drug.  It was made from – of all things – a modified version of the virus that causes AIDS.  After a year, two were disease-free and the third had a 70% reduction in disease tissue.  One researcher was quoted as saying that the results “exceeded our wildest expectations.”

But the rest of the story pointed out that the discovery almost didn’t happen.  There wasn’t enough research money for a full trial.  Neither the National Cancer Institute nor pharmaceutical companies had funding for the research.  A family foundation stepped up, but that’s why there were only enough funds for three patients to participate initially.

The National Institutes of Health (NIH) is the largest funder of biomedical research in the United States.  In requesting a budget of $32 billion for FY2012, it noted that research that it funded has reduced death rates from stroke by 70% and deaths from coronary heart disease by 60% since 1970.  It has also contributed to the amazing results that have been achieved over the last twenty years in HIV/AIDS management, and to a significant reduction in cancer deaths as well.

We spend $2.4 trillion on health care in America.  Shortly after NIH made this request for just over 1% of that, Congress cut its funding to $250 million below 2010 levels. 

On its cover, the AARP Magazine for September/October 2011 trumpets “Amazing Medical Discoveries That Will Change Your Life.”  These discoveries were the result of funded research.  They include artificial retinas, prostate cancer vaccines, and magnets for depression relief – all currently available.  AARP sees new breast cancer drugs and adult stem cells for coronary artery disease treatment in just a few years, and even more exotic treatments down the road.

These discoveries will all make a huge difference in how we live.

Research isn’t just the work of scientists in labs, and doesn’t just result in new drugs and treatments.  Sometimes, it results in safer medical procedures that not only preserve life, but also lower costs at the same time.

NIH says that research advances have saved trillions of dollars.

Here’s one story of money-saving research advances.  Jeffrey B. Cooper, a biomedical engineer at Massachusetts General Hospital, has made patient safety his life’s work.  Though he has labored in relative obscurity – I doubt that more than a thimble full of policy leaders outside of the Greater Boston area have ever heard of him – he played a key role in the development of modern anesthesia “standard of practice” guidelines, developed technology to manage the use of anesthesia in operating rooms, and facilitated the development of simulation training to ensure patient safety.

The bottom line results of his work suggest that there is more than one way to achieve tort reform.  As training and practice standards evolved and improved, there were fewer adverse patient reactions to anesthesia and fewer deaths.  This resulted in lower costs to insurers, which led to lower malpractice rates for physicians.

Research brings about medical advances, improved training, and better patient treatment.  But that’s not all.

The Framingham Heart Study was recently in the news because it released some new research linking poor health habits in middle age to brain shrinkage.  What makes this Study remarkable is that it has been ongoing since 1948. NIH is a partner, along with a number of other public and private institutions.  It is following its third generation of individuals now, and has participated in some of the most important advances in our understanding of cardiac disease risk factors.

We have another federal agency devoted to disease prevention, the CDC.  Its total budget of $11 billion is less than one half of one percent of our annual health care expenditures.

Most of us take for granted or devalue these agencies, and the many hundreds of researchers who have developed cures or treatments for disease, procedures and training that save patient lives, and strategies for preventing chronic conditions. 

The people who settled Jamestown did not yet know that blood circulated in the body, and those who prepared to declare our freedom from England still did not even know what oxygen was.

But our nation’s founders were scientists as well as public officials.  Modern health care is the result of their embrace of the miracle of modern science.

But in today’s United States, not everyone has equal access to advanced prevention and treatments.  Our health care safety net no longer catches everyone.

And we’re forgetting the value of research – that because of it we now live longer, healthier lives.

Research requires funding, and a willingness to embrace the legacy of our parents and grandparents.

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