The Health Care Debate

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Medicare Drug Premiums Heading Up

The word is out, for 2009 Medicare drug benefit premiums are going up, in some cases way up.  At the same time, co-payments and deductibles are increasing.  Of course, we all know that is due to the high prices charged by the drug companies.  Not exactly, just like other health benefits the cost of a given program is based largely on the use of those benefits by the participants.

 

Even the premiums for the AARP sponsored plan are increasing by 18%.  Others are increasing much more.  Prescription drugs are expensive, they are also misused by over prescribing and under utilization, and yes I said under utilization.  A substantial percentage of prescribed drugs are never taken, but that’s another story.  Drug advertising doesn’t help because it does in fact; increase the use of certain drugs unnecessarily.

 

So what’s the solution?  Well, many people think the answer is for the federal government to negotiate drug prices directly with the manufactures.  Keep in mind that one of the reasons why drug prices are high in the US is because other countries regulate the price of drugs so in effect the US is subsidizing the rest of the world to some extent.  But so what, the drug companies make too much money, so we will cut their profit for Medicare in the US.

 

Let’s see, Medicare already caps what it will pay for other medical services like hospitals and doctors and guess what happens?  Costs get shifted to the non Medicare population.  Could the same happen with prescription drugs?  Do ya think?  Or, if we squeeze too hard against drug companies, will we limit the research into new and better drugs?

 

Nothing is a simple at it appears, at least as it may appear to politicians.

 

Perhaps we should regulate all health care, perhaps US physicians should earn between $50,000 and $100,000 a year just like they do in France, should we ask them?

What you see may not be what you get!

 

Read the following and then tell me what it says.

"John McCain Will Reform The Tax Code To Offer More Choices Beyond Employer-Based Health Insurance Coverage. While still having the option of employer-based coverage, every family will receive a direct refundable tax credit - effectively cash - of $2,500 for individuals and $5,000 for families to offset the cost of insurance. Families will be able to choose the insurance provider that suits them best and the money would be sent directly to the insurance provider. Those obtaining innovative insurance that costs less than the credit can deposit the remainder in expanded Health Savings Accounts."

Time is up.

Here is a good example of politico speak. Take this literally and each American will receive a tax credit. That sounds good except they left one part of this plan off the McCain-Palin website. That little detail is that the tax code with regard to employer sponsored health benefits will be set on its ear and anyone who has employer based coverage will be hit by more taxes, in some cases a lot more and that affects over 100 million Americans.

So what’s the rest of the story, well by eliminating the tax free status of employer contributions toward health care the average family will have additional taxable income of between $8,000 and $12,000 per year depending on your benefits plan and where you live. So here is the deal, say you have imputed income of $10,000 and you are in the 20% tax bracket. In year one you pay $2,000 in additional taxes on the $10,000, but you get a credit of $5,000 and in year two the $10,000 goes to $10,900 because of increasing health care costs and you pay $2,180 in taxes and get a $5,000 credit and in year three, you get the idea.

But wait, won't the tax credit also increase in the future, good luck.

Whether you like the plan or not (and if you have no employer coverage it is better than nothing), is not the point. The point is here is another example of a politician trying to obfuscate the facts.

And what the heck is “innovative insurance?” I will tell you, it is high deductible, catastrophic type coverage which means you pay now or pay later. Again, something you may like, but geez, say the words will you guys.

Not to worry, like just about everything being promised by both campaigns, the chance of this actually going into effect is as good as Obama affecting "change."
 

Make Your Decision Based on the Facts

 

Right, good luck with that.

In one recent issue of the Wall Street Journal there is an article reporting on the health care plans of Obama and McCain. The story relates the results of a study by the nonpartisan Tax Policy Center. Its conclusion is that Obama’s plan will add about 34 million people to those covered by health insurance and will cost $1.6 trillion over 10 years (yikes, that even more than AIG’s assets). The McCain Plan will cost $1.3 trillion over the same period and would, in their view, add far fewer people to the insured roles, only about 5 million temporarily.

In the same issue of the paper, there is an opinion piece by a Harvard professor who is an advisor to the Obama campaign. He says that the Obama plan will save money, lower premiums by $2,500 for the typical family (that is nearly 25% by the way), plus employer costs will fall by $140 billion (because of more people being covered).

How will these savings be achieved? Well, better information about the best health care providers will be available, Medicare and Medicaid payments will be based on outcomes thus rewarding the better doctors and hospitals (except that has nothing to do with the vast majority of what Americans pay for health insurance), pooling, that is allowing small groups to pool their risk. Not a bad idea really, but one that may lower some premiums and does nothing to affect underlying costs and finally, there is preventive services, screenings, lifestyle information, etc. Most large employers have been pushing this one for years and investing heavily in the process with little to show for it. In fact, there are studies that show this can actually increase costs in the short run and there is no evidence showing that even over the long run there is a cost benefit.

None of the above ideas are new of course and yet for nearly fifty years Congress has failed to do anything other than to create programs that simply add to costs. However, I have to say, the view presented is consistent with a 50,000-foot view on how to solve every problem.

So, ya pays your money and you takes your choice…just base your decision on the facts please. Where did they put those by the way?

 

 

Is an Out of Pocket Cost for Health Care of $10,000 a year Affordable?

 

Every politician has uttered the words that he or she is for "affordable" health care. The politicians of Massachusetts think they have it, well sort of.   The problem is, like beauty, affordability is in the eye of the beholder.

emptypocketsSo what is affordable health care? The cost of health care for an individual is the combination of the premium they pay and their out of pocket costs. Generally, the higher the premium the lower out of pocket costs in the form of deductibles and co pays and services covered. Conversely the cheaper the coverage the more out of pocket costs there are likely to be.  For some people a high deductible health plan is affordable. Here is what the U.S. Office of Personnel Management thinks is affordable.

 

The HDHP features higher annual deductibles (a minimum of $1,100 for Self and $2,200 for Self and Family coverage) than other traditional health plans. The maximum amount out-of-pocket limits for HDHPs participating in the Federal Employees Health Benefits (FEHB) Program in 2008 are $5,600 for Self and $11,200 for Self and Family enrollment based on IRS rules.

 

So at least the federal government has defined affordable…but have you heard a politician illustrate his or her idea for health care with a monthly premium of $412.54, a $3,000 deductible for the family – meaning that the cost for a family in a year BEFORE any benefit is paid is $7,950.48 if the family is enrolled in a plan in Massachusetts?

 

 

       2008 High Deductible Health Plans with Health Savings Accounts/Health Reimbursement Arrangements

Plan (Carrier codes)

Service Area

Monthly Premium

HSA/HRA Savings1

In-NetworkDeductible1

In-NetworkCatastrophic Limit1

In-Network/Out-of-NetworkDoctor's/Primary Care VisitYou Pay

In-Network PreventiveServices Before DeductibleYou Pay

Advantage Health (6Y)

Indiana

$83.31/$187.16

$800/$1600

$1,550/$3100

$4,050/$8,100

20%/No Benefit

20%

Aetna (22)

38 States and DC

$67.00/$146.72

$750/$1,500

$1,500/$3,000

$4,000/$8,000

10%/30%

Nothing

Altius (9K)

Idaho, Utah

$99.71/$206.57

$550/$1,100

$1,100/$2,200

$5,000/$10,000

$20/No Benefit

Nothing

Aultcare (3A)

Ohio

$91.29/$182.91

$1,000/$2,000

$2,000/$4,000

$4,000/$8,000

20%/40%

Nothing

Bluegrass Family Health Plan (KV)

Kentucky, Indiana

$95.33/$173.32

$1,100/$2,000

$2,200/$4,000

$4,000/$8,000

10%/30%

Nothing

CDPHP (SX)

Upstate New York

$69.11/$178.30

$750/$1,500

$1,500/$3,000

$5,100/$10,200

10%/30%

Nothing

Coventry-- Deware (LK)

Delaware, New Jersey

$78.83/$190.99

$500/$1,000

$1,500/$3,000

$4,000/$8,000

$15/30%

$15/$25

Coventry-- Maryland (GZ)

Maryland

$66.08/$159.75

$500/$1,000

$1,500/$3,000

$4,000/$8,000

$15/30%

$15/$25

Coventry--Iowa (SV)

Iowa

$99.88/$321.36

$500/$1,000

$1,100/$2,200

$5,000/$10,000

$20/No Benefit

$20/$30

Coventry--Kansas (9H)

Kansas, Missouri

$89.35/$230.54

$500/$1,000

$1,200/$2,400

$5,000/$10,000

$20/No Benefit

$20/$35

Coventry--GHP (MM)

lIlinois, Missouri

$154.83/$292.81

$500/$1,000

$1,250/$2,500

$5,000/$10,000

$15/30%

$15/$25

Fallon Community (DV)

Massachusetts

$149.03/$412.54

$750/$1,500

$1,500/$3,000

$3,000/$6,000

$20/No Benefit

Nothing




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

But what is affordable, 10% of income, 5%, more, less? Until we define affordable the phrase is meaningless as part of the health care debate. Let's see, we spend $100 a month for cable, perhaps $20 a week on smoking or $4.00 a day on coffee, etc. What can we afford on our health? In 1961, many health plans had a deductible of $100 per person (I know because I set those plans up for employers). Just applying general inflation, that $100 deductible should be $692 today...so is a $700 annual deductible "affordable?"  For many people the answer is yes, for others perhaps not so much. 

 

I viewed a documentary on television recently and a couple who was paying $200 a month for health care concluded that since they were not using it, they could not really afford the premium.  You guessed it, shortly after they cancelled the coverage her husband crashed his motorcycle (gee, he could afford a motorcycle) and incurred tens of thousands of dollars in medical bills. The family is now $30,000 in debt and, of course, it is all the fault of the system.  It would appear that on an individual basis “affordable” is truly a mystery.  $200 a month is not affordable, just the same as in Massachusetts, an employer has the choice between paying for health care at several thousand dollars a year versus an annual fine of $250, ah, the ultimate conundrum.

Solve the mystery of affordable in the minds of Americans and you will go a long way toward solving the health care problem. However, the real problem is that most Americans think health care should be free and politicians do not have the guts to tell them the truth.  Expanded coverage without true affordability for both individuals and their employer or even taxpayers (I resist the term government because that implies that nobody is paying the cost) over the long term is going backwards, not improving the health care system in America.

 

 

Guess Where?

 

State officials, struggling to keep down the cost of the subsidized insurance program at the heart of healthcare law changes, abruptly pulled back from new contracts with insurers this week, according to three sources close to the bidding process.

 

In December, before bidding began, authority staff predicted that state costs per member could rise as much as 14 percent without any changes in coverage or co-payments, an increase officials said was unsustainable. Initial bids from some insurers came in even higher, sources said, followed by second bids that were more moderate, but apparently still too high for the state.

 

timebombGovernor XXXXX, in his proposed budget for next year, included $869 million for the subsidized program, called Commonwealth Care, up from $618 million this year. The program currently serves more than 170,000 low-income people and is expected to grow to 225,000 by June 2009

 

In addition, the board has been considering raising premiums and co-payments to help reduce the state's costs.

 

Over the last few weeks, as the state negotiated new contracts with four insurers who have managed the program since it began in October 2006, lobbying intensified against the proposed premium increases.

 

The authority's staff had proposed that the premiums and co-payments be adjusted depending on the insurers' final bids. About 75 percent of members currently pay no premium, while the rest pay $35 and up a month. The state has proposed increases of $5, $10, or $15 a month, along with similar increases in co-payments. Higher bids could mean higher premiums and co-payments to offset the state cost.

 

Three sources close to the bidding process, who asked for anonymity because of the confidentiality of the negotiations, said some of the four insurers' initial bids came in even higher than 14 percent increases and were rejected by the state. After a second round of bids, the state and insurers reached preliminary agreement on new contracts with at least a 10 percent increase for some of the plans, the sources said.

 

Celia Wcislo, assistant division director of Local 1199 of the Service Employees International Union, said the state needs to look broadly for ways to pay for growing costs.

 

"If the bids are high, extreme co-pay and premium increases for low-income families are not a morally or fiscally sound solution," she said. "Massachusetts healthcare reform, which has been successful so far, was built on a foundation of shared responsibility."

 

Excerpts from the Boston Globe ©

Bay State pulls back on health contracts

Officials struggle with rising costs of subsidized plan Officials struggle with rising costs of subsidized plan

By Alice Dembner

Globe Staff / February 29, 2008

 

It is Massachusetts!   Surprised?

 

Wave a magic wand and costs will come under control, just look for other ways to pay for growing costs, health care reform was built on a foundation of shared responsibility…reform you say. What was reformed that controls costs? Mandating coverage, and allowing people to pay premiums based on their age, has nothing to do with health care costs.  The problem now in good old Massachusetts, where I sit at the moment, is that they don’t know the difference between premiums and costs and perhaps have not made the connection that the cost of health care drives premiums…

 up, up, up.  What's 10 - 14% among friends, I'm sure they can beat those insurance companies down to oh, 8-10%

 

Have you read the paper Mr. Obama, Mrs. Clinton?  It doesn’t happen just because you pass a law that says it does.

 

Pick Your Problems – Can you say 20% of GDP?

 

I am all for an uplifting message and solving problems, but to create the impression that a problem will be solved when it is not even understood seems rather naïve.  Take health care, is the problem the lack of universal health care or cost.  Both democratic candidates seem to think the problem is universal care and propose plans that will cost somewhere – no one really knows – in the vicinity of $100 billion a year.  For those of us who find it difficult to comprehend such amounts think of it as a tenth of a trillion a year, hmmm not sure that helps.

 

A new report from the government and reported in the February 26 Wall Street Journal © says health care costs could double by 2017 to more than $3 trillion. Even more startling than the dollars is the fact that Medicare will equal 20.7% of national health care spending.  Need more bad news? By 2017, that’s only nine years from now by the way, total health care spending in the US is expected to reach 20% of the gross domestic product.  I remember a few years back talking with a CEO who was convinced that could never happen, that was back when the spending was about 14% of GDP, to day it is 16.3%.  Much of the increase will be the obligation of the federal government via Medicare – that illusive entity funded by who?  Think 1.45% of your total pay and enjoy the 1.45% while you can.

 

doctorcopayToday enrollment in Medicare HMOs is about 16% of the total Medicare enrollment and that is expected to grow to over 27% by 2017.  That coverage is growing because it offers near zero out of pocket costs for the beneficiaries who are willing to use a limited group of health care providers so it is a good deal, but it costs the Federal government more than basic Medicare.  Is that a good or bad thing?  Ask the people enrolled in Medicare HMOs if they want their premiums or out of pocket costs to rise or their coverage to no longer be available if Medicare dramatically reduces the payment to these plans.  Some politicians see that as a way to save money for Medicare, ok, but those savings are coming from somewhere and it is not all from the big bad insurance companies.  People not enrolled in Medicare C typically either have high out of pocket costs or pay for supplemental coverage that can cost more than $200 per month, add the Medicare premium on top of that and you are talking a third of the average Social Security check.

 

So if you are going to solve a problem, better pick the right one.  The largest single financial problem facing the federal government (that’s you and me by the way) is Medicare, period.  It would seem that solving that problem should not include an additional $100 billion more in federal spending on another problem. 

 

Note to the Candidates: You do not save money by promoting preventive care and wellness, etc. In fact, studies have shown that preventive care sounds great and logical but it actually increases costs and wellness, well wellness may help us live better and longer but the financial benefits take years to have any impact and in the end, the real end, it may not matter at all.  

 

February 26, 2008

 

 

 

 

California Dreaming

The state of California finally figured out what I and others have been saying for years.  The problem with health care in American is not the uninsured, but the cost and if we don’t solve the cost issue, we will never solve the coverage problem or in the process of trying we will bankrupt the Country.  Other states have figured this out and some like Massachusetts will shortly see the light as well. 

 

beachball

 

You can’t simply mandate the problem away; you can’t have age based premiums without someone paying the additional cost for older and sicker people.  You can’t wave a magic wand and subsidize low income people while the cost of care still rises at two or three times the rate of inflation.  You can’t mandate that people earning over $50,000 pick up an additional cost of $500 a month without consequences.

 

If a politician says they have the solution to health care in American and that solution does not include as the foundation dealing with underlying costs first, then they either don’t know what they are talking about or they are lying to you.

 

And what does controlling health care costs really mean?  Well, it means a number of things, including not receiving all the health care we think we need or which simply makes money for health care providers, it means lower payments to physicians, it means lower malpractice awards and fewer lawsuits.  It means changing the way we pay for drug research and medications and even how we pay for physician education…and so much more.

 

You get the idea, it means making hard decisions and it means rethinking health care and the way it is delivered.  And most of all it means hearing the truth from our politicians, yeah right!

 

Do you want to hear the truth or do you want the short version and the magic wand?

 

 

Another Point of View from A Reader

"What I'd like to see in all of these reform proposals is more on individual responsibility. If we believe the data that tell us that over 60% of health care costs are attributable to life-style issues, when are we going start taking harder stances in this area? This is a sticky wicket, but if we don't find some way to address this (and consumerism will help to a degree) then all the medical magic and public/private sector cooperation isn't going to have much of an impact. We're taking baby steps in this area (i.e., if you smoke, you pay more for your coverage), but I think that perhaps the biggest hurdle is the obesity problem and all it's comorbidities. It may not be politically correct to make this observation, but have you walked through a shopping mall lately? It's downright scary how many people are in the obesity zone! "

 

The November 16, 2007 Wall Street Journal, page 1 includes an article “How U.S. Health System Can Fail Even the Insured” that relates the problems a women with a somewhat rare genetic disease had in working the system, getting the right care, approval from her insurer, losing coverage and all the rest. 

 

Here’s my letter to the editor:

 

“As an employee benefits professional for over forty-six years (and still going), I can relate to the issues in “How U.S. Health System Can Fail Even the Insured” November 16, 2007.  I recall hundreds of such stories in my career involving screw-up, stupidity or simply incompetence by physicians, their office staffs, hospitals, insurers and patients, so what’s the point?

 

If you take an unusual set of circumstances with people in the mix, stand back and enjoy the show.

 

No system is designed to seamlessly take care of the outliers or exceptions, and certainly there can be no implication that Medicare or other government bureaucratic system would do any better in such situations.  One point was made in the story that does deserve more scrutiny and as usual gets to the crux of the health care problem, why did the doctor’s office visit cost $650?

 

There is another point that should not be overlooked.  If this were to happen to an employee in my company (and similar things have), they would be able to seek help from our patient advocacy service, from our benefits staff and from our internal appeal process, not to mention we can make a call to the plan administrator to get it fixed.  That all goes away if the employer is no longer the source of health care.  What I can’t fix is the mess in provider administrative systems, in large measure caused by government regulation.”

A Ten Point Plan From Aetna

Ok, this company may be a very large health insurer and health benefits company and sure, they have a stake in the outcome of all this, but I think this view has merit, what do you think?

As I told an Aetna representative, we still need to come to a common acceptance of what "affordable" means.

To Your Health!

Aetna’s Proposal for Health Care System Transformation

 

Introduction 

 

Our health care system remains the world’s pioneer in research and medical technology, leading treatment breakthroughs that benefit Americans and people across the globe.  The presence of first-rate physicians, hospitals, drugs and treatments are due, in large measure, to the competition inherent in our market-based system. While an impressive 85 percent of people in America – nearly 250 million people – have some form of health insurance, there are also critical problems relating to access, affordability and quality that must be addressed. 

 

The problem of the uninsured has reached crisis proportions.  About 45 million people in America – one in six individuals – lack health insurance, and research consistently shows the uninsured obtain less care, use fewer preventive services, and fail to adhere to recommended treatments.  Additionally, tens of billions of dollars are spent each year treating those without health insurance, which places enormous strains on federal and state budgets, hampers the economy, and results in higher premiums for employers and those with insurance. 

 

The cost of health care services continues to grow at a rate faster than both general inflation and wages, making health insurance increasingly difficult for individuals to purchase and for employers to offer in the workplace. 

 

And there are well-documented problems with quality of care.  Both over-utilization and under-utilization of services, combined with preventable medical errors and unacceptable variation in treatment outcomes have created what the Institute of Medicine has long described as a chasm “between the health care we have and the care we could have.”

 

Aetna’s Commitment to Thought Leadership and Advancing the Public Good

 

As one of the oldest and largest insurers in America, we believe Aetna has both an opportunity and an obligation to be part of the solution.  Our commitment to advancing the public good is engrained in the company’s 154-year heritage and is reflected in Aetna’s core values of integrity, quality service and value, excellence and accountability, and employee engagement.  We fundamentally believe that being a leader in health care means not only meeting business expectations, but also exercising ethical business principles and social responsibility in everything we do.  We also believe that our considerable intellectual resources and experience can and should be leveraged to build a stronger and more effective health care system.  This stance is embodied by Aetna’s leadership on a variety of public policy issues, including racial and ethnic disparities, genetic testing, consumer engagement, price transparency, mental health parity and health and benefits literacy.  Our commitment to being a thought leader means that we must be willing to challenge the status quo; that we set high expectations and support the development of fresh, yet pragmatic, policy approaches offered by our industry and others (e.g., Aetna endorses the “Vision for Reform” put forward by America’s Health Insurance Plans); and that we serve as a resource to policymakers and others striving to improve our health care system.

 

Aetna’s contributions to the intensifying policy debate about comprehensive health care reform are grounded by five core beliefs.  First, every American should have affordable access to health care that produces quality outcomes, facilitates prevention, wellness and care coordination.  Second, transforming the U.S. health care system, including its financing, is a shared responsibility that requires public and private sector leadership and collaboration.  Third, achieving universal coverage is only possible when there is universal participation.  Fourth, comprehensive health care reform should be built upon the strengths and successes associated with the competitive marketplace.  And fifth, consumers must be empowered with the information, technological tools and product options necessary to make prudent health care decisions.

 

Aetna’s Ten-Point Plan for Health Care System Transformation

 

Transforming the U.S. health care system is a monumental challenge, but it is a challenge that must be addressed to ensure the future health and well being of the nation and our fellow citizens.  Described below is a ten-point plan to transform the U.S. health care system.  This plan addresses the following key themes:  Achieving universal coverage; increasing the affordability of health insurance and health care; strengthening consumer choice and flexibility; and improving health care quality and patient safety.

 

 

(1)  Leverage the strengths of the current health care system to advance the goal of achieving universal coverage

 

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