Cain Not Able

Herman Cain’s ascendant Presidential campaign brings into focus the limited health policy thinking that has dominated the campaign so far. 

Here are our current major health policy challenges:

• Reversing the trend toward lower investments in the public health and prevention activities that have accounted for half of our increased longevity in the last century;
•  Assuring fair coverage of the chronic conditions, including mental illness, cardiovascular disease, and cancers, that affect 60% of our population;
• Giving even the uninsured 16% of our population access to high quality, comprehensive, integrated primary, specialty, and hospital care; and
• Figuring out how best to pay for all this.

Despite the urgency of these challenges, the current health policy debate can be condensed into a four word sound bite – “Repeal Obamacare Individual Mandate.”

Here are the specifics of what the candidates have been talking about the past couple of weeks.

Mitt Romney and Newt Gingrich are fighting over whether Romney got the idea for the “individual mandate” from Gingrich or the Heritage Foundation.  (Both, it seems, from their exchange in the last debate.)

Ron Paul wants to abolish our health care system in its entirety and replace it in part with free care “as a charitable benefit provided by doctors” for all poor people.

Rick Perry’s first national health policy headline came when he advocated eliminating the Medicaid program that pays for long-term nursing and home care for elders and people with disabilities.  His last came this past weekend when he questioned Hawaii’s vital statistics record-keeping – at least where Barack Obama’s birth certificate is concerned.

And Herman Cain, the self-proclaimed a “problem solver,” solved his business’s financial problems in part by helping to pay for health insurance for only 17% of his employees.

As Cain’s sketchy health care plan shows, his plans for what he would do for the other 83% are few and far between.   

First, he wants to sell insurance across state lines.  The Affordable Care Act already will permit this, but there’s a catch.  The only policies that could be sold across state lines must meet minimum coverage standards. 

He opposes this.  So when he favors selling insurance across state lines, he doesn’t care if it actually covers anything for which you might need insurance, such as cancer, heart disease, mental illness, comprehensive primary care, drugs, or even most hospital stays. 

Second, even though it would violate his 9% flat tax proposal, he wants to allow individuals who buy insurance to be able to deduct it from their income tax.    

Why?  So that businesses could eliminate group health insurance from their employee benefits package – as Cain himself did – and let employees pay for the more expensive individual plans on their own.

Third, he wants to expand the use of health savings accounts, into which individuals and families would have to deposit their own money to cover the thousands of dollars of deductibles in the stripped down insurance policies that would flood the market if his “across state lines” plan passed.

They might get a tax deduction for this – if he violated his 9% flat tax policy again – but that’s just another way of shifting even more of the cost of health care to individuals and the federal government. 

Citizen Cain refers to these proposals as “patient-centered” reforms.  But patient-centeredness involves most everything that is absent from “Cainsian” health economics. 

It is about promoting health and well-being and improving access to affordable, quality care, not making insurance companies more profitable.

At least Cain offers a plan on his web site, unlike family-first candidate Rick Santorum.  And in a nod to Michele Bachmann, Cain did acknowledge in a recent debate – without mentioning her – that he lifted much of his health plan from legislation co-sponsored by Bachmann (HR3400) in 2009.

Herman Cain talks a good game about the “sacred patient-doctor relationship,” but his slapped-together health plan is little more than a slap in the face to people with serious health and wellness needs.  There’s nothing in it about wellness, prevention, or chronic disease management.  There’s nothing about access and quality. 

It’s all about stringing together a few of the worst proposals for individuals, families, and taxpaying citizens, and dressing them up as an alternative to the Affordable Care Act. 

Even raising Cain to new poll heights won’t make him able to sell this.   

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.

Does The PCIP Enrollment Problem Signal the End of Private Insurance?

There are 4 million or more Americans who can’t get regular insurance because of a pre-existing condition.  You might be one of them.  Now there’s a policy that costs less than $300 per month and covers all of your medical needs, including your pre-existing condition. 

Will you buy it?  Apparently not.

And that may signal the beginning of the end of private insurance in America.

I first wrote about the diminished role of private insurance in a column last month entitled America’s Health Insurance Myth.  Privately-financed private health insurance today pays only 17% of America’s health care bill.

Two recent developments suggest that this share will become even smaller in the future.

The first was last week’s death of the CLASS Act.  As a result, long term care will continue to be an out-of-pocket and government expense only for nearly everyone.

The second was the report of first-year enrollment numbers for the new Pre-existing Condition Insurance Plan (PCIP).  PCIP was created as part of the Affordable Care Act.  It offers low-cost health insurance for adults who have – or have had – conditions like mental illness, cancer, diabetes, and heart disease.  (Children are now covered on their parents’ policies.)

PCIP is comprehensive.  It covers hospitals, doctors, and drugs. 

There is no means test to qualify.  Provided that you have been uninsured for at least six months, all you need to apply is a note from a physician attesting to your chronic condition.

PCIP is inexpensive.  In Florida, the monthly PCIP premium for a forty-year old is only $211 for the standard option.  There are deductibles and co-pays, but annual out-of-pocket costs are capped at $5,950.  This may seem like a lot, but it is less than 20% of the 2009 average charge of $30,655 for a single hospital stay.

The federal government operates Florida’s plan and those of 22 other states.  Connecticut, on the other hand, is one of 27 states that choose to run their own programs.  In Connecticut, PCIP insurance costs $381 per month, but out-of-pocket costs are capped at $4,250 per year.  So its overall costs are similar to Florida’s.

Of an estimated 4 million people eligible for PCIP and 375,000 expected to sign up in the first year, only 30,395 bought policies.  Just 1,454 people enrolled in Florida, and only 62 enrolled in Connecticut.

Why so few?

The answer is obvious in states like Massachusetts, which has only one PCIP enrollee, and Vermont, which has none.  They have near universal coverage, so they don’t need PCIP.

What about states without universal coverage?  Pennsylvania had the highest first-year enrollment.  It had 3,762 people insured through PCIP.  If every state were like Pennsylvania, then PCIP would have around 100,000 enrollees today, still far below the expected number.

There are three explanations for why people aren’t enrolling in PCIP that speak to how little faith we have in insurance.

The first is that they believe that when there’s a crisis, hospitals and doctors will treat them whether or not they are insured.  Health care providers rarely turn their backs on people in need.

But someone still has to pay the bill.  And it usually gets paid through hidden charges in everyone else’s insurance premiums. 

The second is that people don’t think they can afford even $211 per month for health insurance, or up to $5,950 in medical bills in a year. 

But when the costs of common chronic diseases routinely run into six figures, the alternative can be bankrupting.

The third is that we don’t trust insurance.  Insurance companies take our money, fight with us about covering our bills, and make huge profits. 

But PCIP isn’t like that.  Unlike other insurance, it is designed to pay out far more money than it takes in.  PCIPs paid out four times in benefits what they charged in premiums during the first few months of the program, and Congress set aside $5 billion – of which only a fraction was spent – for this.

Here’s the bottom line.  If $211 a month is too much to pay for insurance we are sure we will use, then health insurance is dying in America.  Many of us say we will rely on our own resources, but also expect a government safety net to be there when our resources fall short.

If we roll the dice and don’t buy PCIP when we can, then we may lose more than we think.  There are political leaders who are already celebrating the demise of the CLASS Act.  Many also would happily repeal both PCIP and the Affordable Care Act, and replace them with… well, nothing.

For more information about federal and state PCIP, visit https://www.pcip.gov/.  If you have questions about this column or wish to receive an email notifying you when new Our Health Policy Matters columns are published, contact gionfriddopaul@gmail.com.

Supreme Court Ruling Against Individual Mandate Could Result in Care Denial to Poor

Opponents of the Affordable Care Act (ACA) are now looking to the Supreme Court to overturn the 2010 law before time runs out on them.

After ACA became law eighteen months ago, they were optimistic that they could beat back several of its key provisions.  These included the minimum medical loss ratios, the expansion of Medicaid, the health insurance exchanges, and the individual mandate.

A brief review of the current status of each shows why the individual mandate is the last one standing.  But as the arguments for and against it have crystallized in the Courts, they show how the Supreme Court could open a Pandora’s Box best left closed.

 Minimum loss ratios

ACA mandates that all private insurance plans will have to pay at least 80 to 85 cents in benefits for every premium dollar collected, or rebate the difference to policy holders beginning in 2012.  Opponents argued that many existing plans would be forced out of the market because of high administrative costs.

However, the federal government has approved several short-term waivers from the requirement, deflating opposition.  Also the Center for Medicare and Medicaid Services has told Florida that it must meet the 85% minimum loss ratio in its public Medicaid program, too.  Once private insurance rebates start to flow to consumers in 2012, the remaining opposition will likely melt away.

Medicaid Expansion

Beginning in 2014, everyone below 133% of poverty will be eligible for Medicaid.  The 26-state lawsuit against the ACA – the one most likely to be taken up by the Supreme Court this term – argued that the Medicaid expansion imposed an unconstitutional financial burden on the states.

But the Courts have already ruled against the states on this one, and so the Medicaid expansions will go forward in two years unless Congress changes the law.

Health Insurance Exchanges

Beginning in 2014 states will have to have exchanges through which consumers will purchase health insurance.  Only plans offering the minimum benefits mandated by ACA can be offered on the exchanges.  Some state regulators argued that they did not have the authority to enforce the “minimum benefit provisions” mandated by ACA.  Florida decided to establish its own exchange that will not meet the ACA requirements.

However, a dozen other states are already moving forward with their approved exchanges, undercutting “lack of state authority” argument and putting Florida out on a limb.   

The Individual Mandate

Beginning in 2014, a system of subsidies and penalties will go into effect to encourage people to purchase health insurance.  Those making up to 400% of poverty will receive subsidies for health insurance, but all those above 133% of poverty who refuse to purchase insurance will have to pay a federal income tax penalty.

The crux of the legal argument against the individual mandate is that it is unconstitutional for the Federal government to impose a tax penalty on an individual for refusing to purchase a consumer product.  However, opponents have conceded that it would be Constitutional to impose such a mandate at the time of service.

Judge Stanley Marcus, one of the judges who heard the appeal that may now go before the Supreme Court, made this clear in his dissent.

He wrote that “the plaintiffs and, indeed, the majority have conceded, as they must, that Congress has the commerce power to impose precisely the same mandate compelling the same class of uninsured individuals to obtain the same kind of insurance, or otherwise pay a penalty, as a necessary condition to receiving health care services, at the time the uninsured seek these services.”

So what the Supreme Court is being asked to decide is not “if” the individual mandate is constitutional, but “when.”

Some legal experts don’t think that there is much of a distinction in this. 

But if the Supreme Court feels differently, and ultimately decides that it is Constitutional to impose the tax at the time of service, but not in advance, then this may well open up a Pandora’s Box that we would all rather stay tightly closed and locked.

Even a narrow ruling against the “pre-tax” could have a far-reaching unintended consequence for indigent, uninsured people.  These people include many of the over 50 million uninsured people today and the 22 million who will still be uninsured after ACA implementation.  A Supreme Court ruling that holds that people could be forced to pay at the time of service could also be construed as permitting providers to deny care to those who cannot afford it.

Opponents hope that a Supreme Court ruling against “pre-taxing” will result in a political unraveling of the law. It could well happen, but not in the way they intended.

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

Florida's Shame is Connecticut's Gain

The next time Florida’s Governor tells you that the only way to create private sector jobs is to cut public sector health spending, don’t believe him. 

According to news reports, the Governor’s Office is already warning state health agencies to expect more budget cuts in 2012.  He wants the dollars to implement his 7-7-7 plan to create 700,000 jobs in 7 years.

source: US DOL data, 2011

How’s the plan working out for Florida so far? Dismally, by two different measures.  The first is the 2011 state unemployment claims data.  The second is the story of why Florida just lost another 7,500 jobs in health research.

The 2011 unemployment data show that Florida’s Governor has been more effective at killing jobs than creating them.  The week before Governor Scott took office, 14,139 Floridians lost their jobs and filed new unemployment claims.  In 36 of the 37 weeks since then, the number has been higher than that.  Another 15,713 Floridians filed new unemployment claims during the most recent September week for which data are available. 

To add insult to injury, there was a press conference a thousand miles away in Connecticut last week that explained why Florida’s job creation performance has been so dismal this year. 

 Jackson Laboratory, a Maine-based company, announced that it will build a new, $1.1 billion research lab on University of Connecticut Health Center property in Farmington, Connecticut.  The lab will produce over 661 new research jobs, support 842 construction jobs,  and create an estimated 6,200 spinoff and indirect jobs.

Jackson carries out cutting edge research in the genetics of Alzheimer’s disease, cancer, and diabetes prevention.  Landing the company was a huge victory for Connecticut.  A source close to Connecticut’s Governor reportedly proclaimed that it “will make Connecticut a world leader in the science of genomics.” 

This was all supposed to happen in Florida, as a part of that highly-touted 7-7-7 plan.   But in June, Jackson announced that it had “withdrawn” its request for $100 million from Florida to locate in Sarasota.  In its June release, its Executive Vice President was gracious, but clear, about why it went elsewhere.   “We respect that the state had to make difficult priority decisions in order to balance the budget this year,” he said.  But the lack of dollars “and the uncertainty of future funding made such a venture too speculative to undertake responsibly.”

In a story last week, the Hartford Courant, Connecticut’s newspaper of record, offered up a slightly different, and blunter, quotation from a company official.  It reported that a “Jackson source said ‘politicians in Florida took a dramatic, hard turn to the right, and funding dried up.’"  

One local Florida health leader recently said that “we used to just show ‘em a palm tree” to get people to relocate to Florida from the north.  Apparently, Florida can no longer sell itself to actual job creators on good looks alone.

As a result, the University of Connecticut – instead of the University of South Florida – will reap the benefits of a billion dollars of private investment in one of the most rapidly growing areas of health care.  In return for a $192 million loan and $99 million in support of research, Connecticut, instead of Florida, will get over 7,500 new jobs.

CT News Junkie, an online publication, rubbed it in with a headline article on September 30^thentitled “Florida’s Loss is Connecticut’s Gain.”  In the accompanying photo, Jackson Laboratory CEO Edison Liu is shown holding up a UCONN tee shirt as UConn’s President speaks, flanked by the Speaker of the Connecticut House and the Chairman of her Board of Trustees.

This was supposed to be Florida’s photo op.  But opportunity knocked, and no one answered. 

Florida has only its “hard turn to the right” to blame for the clouds over its horizon.  That’s why over 7,500 jobs will begin to fly north this winter.

Florida should be a leader in health research and treatment, especially research and treatment in diseases affecting an aging population.  But Florida can’t lead when its elected officials are running backwards. 

Florida’s Governor and Legislature have been slashing from health and mental health programs – including public health, Medicaid, and – as it turns out – even economic development spending.  And now the Governor, who should be ashamed by what happened with Jackson, wants to slash some more.   

The next time you visit Farmington, Connecticut, take a good look at where over 7,500 would-be Floridians will be buying their homes, paying their taxes, and spending their money for years to come.  You won’t see a single palm tree.

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, email gionfriddopaul@gmail.com.

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.

 

If you have questions about this column, or wish to receive email notices when future Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.

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.

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

A Different Kind of Individual Health Mandate

According to a recent report in Health Affairs, health spending in the United States is projected to rise by 5.8% per year over the next decade.

source: CT OPM

Rising health care costs are a problem that must be brought under control.  One approach is to do what Florida's doing.  It is forcing state employees into a single HMO, removing all competition from the market while praying that the HMO won't be motivated by making a profit. 

Another is to look at what the State of Connecticut is doing.

It is betting over $100 million that its employees and retirees will respond to a different kind of “individual mandate” from the one under fire in the Affordable Care Act.  Connecticut has decided to give financial incentives to employees and retirees to manage their health.  It will also penalize financially those who do not. 

State workers overwhelmingly voted to accept the new deal earlier this month.  If the plan works, then it may signal a new path for every state hoping to cut its future health care spending.

Connecticut was motivated to undertake this challenge by its mind-boggling budget deficit.  The deficit in the coming two years was projected to be 50% higher than the entire annual state budget was just a little more than 30 years ago.

To avoid thousands of layoffs, it entered into negotiations with its unions to change salary and benefit packages.

At the bargaining table, negotiators decided not just to employ the old, failed cost-containment strategies of reducing benefits to workers and squeezing payments to providers.  They took a different approach by promoting the participation of employees and retirees in disease management and health maintenance programs. 

They created a new “Health Enhancement Program” for all Connecticut state employees and all future retirees. Those who choose to participate in the “voluntary” program will benefit financially.  Those who do not will pay higher insurance rates as a penalty.

Participants in the Health Enhancement Program will receive some excellent chronic disease management services, including free health care and drugs.  They will not have to pay any co-pays for office visits related to diabetes, asthma, heart disease, hyperlipidemia, or hypertension, as long as they adhere to the schedule of visits recommended by their health care provider.

Participants in the program will also pay reduced co-pays for drugs needed to treat these conditions.  The co-pays will be as low as zero for all diabetes prescriptions and for generic drugs used to treat the other conditions.

In return, participants will have to agree to focus on staying healthy.  They must get regular physicals, eye exams, and dental cleanings.  If they and their dependents do all these things, they will receive a cash award of $100 per year for their efforts.    

On the other side, those who choose not to participate will pay more for health insurance and health care.  They will pay an additional $100 per month for their insurance.  They will pay higher drug co-pays.  They will also pay a new $350 deductible per individual, with a $1,400 family cap, for health care services not covered by co-payments.

Connecticut is betting heavily that its employees, retirees, and their dependents will want to manage their health – and, most importantly, that it will pay off in reduced costs to the state.

In June, the Office of Policy and Management estimated that the Health Enhancement Program will save the state over $100 million annually in health care costs.  OPM believes that 50% of those eligible will choose to participate, and that this will result in a 10% reduction in health insurance claims – even though some participants will be required to visit health and dental health professionals far more often than they do now.

The penalty provisions save the state another $18 million, which the non-participants will pay out-of-pocket in higher premiums and deductibles.

There may be two big holes in the Connecticut plan that will reduce the savings to the state.  While mental health and chronic pain services are still included in health plans just as before, the Health Enhancement Program does not include them among the conditions managed in the program.

Both affect a large number of people, lead to many expensive and preventable health care encounters, and often co-occur in a patient with the covered chronic conditions.  If a patient’s unmanaged mental illness leads to a failure to comply with a diabetes disease management program, both the patient and the state will lose.

Still, the Connecticut plan goes beyond what most other states have attempted, and is well worth a try. Changing the trajectory of increasing health care costs isn’t easy.  It will be interesting to see if Connecticut’s health “mandate” proves more popular and effective than the alternatives.    

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

BCBSFL Wrong To Cut Mental Health Providers

A recent story in Health News Florida broke the news that Blue Cross and Blue Shield of Florida (BCBSFL) has notified all of its participating mental health providers that their contracts are being terminated as of November.

Those who wish to continue to see BCBSFL patients will have to sign a contract with a new provider partially owned by Blue Cross and Blue Shield.  Their payments will be cut between 25% and 55%.

BCBSFL’s notice caused a justifiable uproar – one that may extend beyond the boundaries of the state. 

Mental health advocates see the action as a violation of the federal Mental Health Parity Act, because only mental health providers have been singled out.

Florida residents are also concerned.  BCBSFL has four million members, and insures over 7 million people in the state.  They all may lose access to providers as a result of this action. 

But up to 80 million on Blue Cross Blue Shield plans outside of Florida will also be affected.  Blue Cross Blue Shield plans around the country use one another’s provider networks.  Florida’s providers who are dropped by BCBSFL are also automatically dropped from every out-of-state Blue Cross Blue Shield plan, too.

There is a nagging sense that what is behind the BCBSFL decision is a desire to deny coverage for mental illness by denying the people it insures access to mental health providers.

Providers are already forced to accept low BCBSFL rates when they treat patients.   I have a recent statement indicating that a Florida provider gets $51.97 from Blue Cross and Blue Shield for an hour of counseling.

This may seem like a lot of money, but it is not.  At that rate, a provider would have to treat seven patients per day, five days per week, fifty weeks per year, to gross $91,000 per year.  But office expenses, the cost of help, taxes, and insurance would all have to come from this, leaving the provider with a salary of perhaps $50,000.

And BCBSFL thinks this is too generous?

In the interest of accuracy, I should point out that the provider in question is an out-of-network provider who nevertheless handles the BCBSFL paperwork and accepts the payment on behalf of the patient – relieving the patient of this headache.  Also, the $51.97 payment wasn’t even made by BCBSFL, but by an out-of-state plan.  I contacted the out-of-state plan, and its representative confirmed that it paid the rate set by BCBSFL.

If this is the BCBSFL standard, then we pay plumbers, electricians, carpenters, and auto mechanics more than BCBSFL pays mental health professionals.

Is our mental health care really worth less than our clogged kitchen sinks, our burned-out fluorescent lights, our broken porch railings, and our regular oil changes?  BCBSFL seems to think so.

BCBSFL could make the argument that it pays only a portion of the mental health provider’s bill, and the patient co-pay makes up the difference.  Fair enough.  So I added in the co-pay and the provider’s reimbursement went up to $64.

This is still less than we pay carpenters, plumbers, electricians, and auto mechanics.

The cost of mental illness in America is staggering, but it is not because of high counseling rates paid to psychologists.  Using current research, Mental Health America has argued that the economic costs of mental illness are now in the vicinity of $200 billion per year.  In addition, mental illnesses cost over $57 billion a year to treat, making mental illness the third most costly chronic condition.

But, according to a recent article in the New England Journal of Medicine, private insurance pays for only 27% of our nation’s mental health costs (versus 37% of all health costs), leaving almost three-quarters of the mental health bill for federal, state, and local governments. 

Not bad for a country which continues to believe that it’s not paying for mostly single-payer, government-sponsored, national health insurance.

Poor coverage for mental illness is one of the reasons that states have had to mandate mental health benefits.  It is also a reason why Congress passed the Mental Health Parity Act and put consumer protections into the Affordable Care Act. 

But in a state like Florida, where both the Governor and the Insurance Commissioner have repeatedly opposed the interests of consumers, BCBSFL may not be held accountable.  This is unfair and wrong. 

It is also the best argument I can think of for why we need a government that is willing to stand up to private insurers on behalf of its citizens.

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