Fightin’ The Blues

On a cold and rainy December 2, while the Senate in Washington was slogging along debating health reform, a remnant troupe of public-option supporting Organizing for America stalwarts stood outside the corporate headquarters of WellPoint, Inc. in the center of downtown Indianapolis.  Minutes before their demonstration started, three single payer activists slipped in and out of the WellPoint office dropping off a shareholder resolution for next May’s annual meeting.

WellPoint, also known as Anthem or Blue Cross, is the perverted spawn of what was once a charitable venture known as Blue Cross/Blue Shield of Indiana.  From the 40’s up into the 90’s Blue Cross of Indiana was like all the other Blues around the country, non-profit with a charitable mission.  Its board of directors included physicians, hospital administrators, labor and community leaders, and it existed to serve the needs of patients.  But the healthcare market had become increasingly cutthroat, and in the aftermath of the Clinton Health Plan’s crash and burn, there was a huge consolidation in the industry.  Doctors went from solo or small group practices into larger and larger groups.  Hospitals that had been independent since their founding merged and national chains of for-profit hospitals grew powerful and predatory.

The most significant consolidation of all happened in the insurance industry, yet it is the least understood and appreciated.  Health insurance was once predominately state or regional non-profit Blue Cross plans or other regional non-profits, and a few national for-profits.  Now there are nine major national health insurers dominating the country.  They are for-profit, beholden not to their customers but to their shareholders.  Like most consolidated industries, they don’t compete head to head in most markets, but rather divide up the markets and crush smaller local competitors.  Did I mention that the insurance industry is exempt from federal anti-trust laws? The American Medical Association’s 2007 report “Competition in health insurance: A comprehensive study of U.S. markets,” found that in the majority of areas studied, a single health insurer dominated the market.  So much for competition.

The field these behemoths compete on is in Washington, DC. They can buy and sell Senators and dominate regulatory agencies.  More on that later after we come back to the story in Indiana.

In the early 90’s the Hoosier Blue Cross leadership decided that the future looked bleak for non-profit health insurance.  They began a series of maneuvers to radically restructure the company.  They took off the gloves.  Goodbye to a charitable mission.  Goodbye to being tax-exempt.  Hello Wall Street.

Blue Cross became Anthem turning a non-profit into a mutual company.  This set the stage for demutualization and a public stock offering (IPO).  In 2001 Anthem announced its intention to convert from a mutual insurance company to a stock corporation and filed its demutualization proposal with the Indiana Department of Insurance.  By this time Anthem had already completed a frenzy of mergers and acquisitions of Blues in Colorado, Connecticut, Kentucky, Maine, New Hampshire, Nevada, and Ohio. None of policyholders in those states had any say in this matter. Just days after the Indiana Department of Insurance commissioner approved Anthem’s demutualization proposal, Anthem announced that its IPO had yielded $1.7 billion.

Now came the mother of all mergers.  Blue Cross of California had been following a similar path beginning with their demutualization in 1993 and subsequent acquisition of Blues in Missouri, Georgia, Virginia, and Wisconsin, as well as acquiring the health divisions of Massachusetts Mutual, and John Hancock, among others. They changed the corporate name to WellPoint. In 2004 Anthem and WellPoint merged, becoming the largest health insurer in the US with 34 million lives covered.

The $20.8 billion merger created a cornucopia of compensation for executives of both parent companies.   Not only did Anthem’s Indiana CEO Larry Glasscock receive a $42.5 million dollar bonus on top of his base salary of $3.7 million, other top Hoosier executives pocketed $4 to $16 million dollars each.  The CEO of WellPoint in California, Leonard Schaeffer, retired on a package valued at $337 million.  I am not making this up.

At the close of 2009, hope is gone that we will see universal health coverage come out of this Congress.  Single payer advocates like myself never really believed it might come this time around, but couldn’t help but get our hopes up.  It remains to be seen whether any bill that passes will end up being an incremental step in the right direction, but it won’t be a slippery slope.

Our Hoosier “Democratic” Senator Evan Bayh has distinguished himself as a hindrance to any reform bill that is not in the best interests of the hometown insurance company.  Although he and his wife Susan proclaim no conflict of interest, she sits on the WellPoint board.  Her compensation for serving on that board, as reported to the Securities and Exchange Commission, is $330,000 a year, more than twice Evan’s salary of $160,000 as a senator.

Progressives disagree about how to proceed from here.  I spoke with T R Reid a few weeks ago in Boston.  He is the author of the PBS Frontline Sick Around the World and a new book,  The Healing of America. He makes a strong case for getting to universal care while keeping the private insurance industry, although he makes it clear that no nation has achieved universal care using for-profit companies.

Can universal health care be accomplished within our system of for-profit insurance companies?  I’ve always favored the single payer approach, which seems more feasible to me than taming the insurance behemoths.  Reid thinks we’ve got to consider the taming approach, so some of us decided to put that idea to the test, in the form of a shareholder resolution.

We delivered the resolution on that dark and rainy day.  Now we await word about whether the SEC will require WellPoint to include it in the proxy for the annual meeting.  It is a long shot, to be sure.  But if Congress won’t take on the insurance industry, then someone has to.  Here is our resolution, couched in the language our legal advisors recommended and adhering to all SEC requirements:


Whereas, the United States allows too many people to suffer and die due to lack of adequate health insurance and this is threatening the economic stability of the country; and

Whereas, no country has achieved universal healthcare through for-profit health insurance; and

Whereas, in written statements WellPoint supports “the best healthcare value for our customers” and promises  “to advocate for responsible healthcare reform”; and

Whereas, WellPoint has actively opposed President Obama’s healthcare reform efforts; and

Whereas, WellPoint was a nonprofit insurance company before it demutualized, raised capital through stock offerings, merged with, acquired, and demutualized other nonprofit Blue Cross/Blue Shield companies; therefore be it

Resolved, that the shareholders of WellPoint urge the board of directors to launch a feasibility study for returning to nonprofit status.  This study, conducted at reasonable cost, with results made available to the stockholders, omitting any proprietary information, should be completed within nine months of the 2010 shareholder meeting.

Supporting Statement:

Investors are concerned about the effects of runaway health costs on the economy, and the crisis of over 46 million uninsured.  Recent studies show 45,000 people a year die because they lack health insurance (American Journal of Public Health 9/17/09).   Tens of millions more are underinsured, able to afford coverage only through policies with huge deductibles and out of pocket expenses.  The impact of high deductible policies is seen in recent bankruptcy data showing 62% of personal bankruptcies caused by illness and medical bills, but 78% of those declaring bankruptcy for medical reasons had insurance when they became ill (American Journal of Medicine 8/09).  WellPoint has been a leader in marketing high deductible policies, specifically under the Tonik label.

From 1999 to 2008 American health insurance premiums increased 119% while workers earnings and overall inflation rose 30% (Bureau of Labor Statistics).  Businesses cannot continue to afford covering their employees. The Hewitt Associates study “The Road Ahead: 2009” found 1 in 5 employers are planning to drop health benefits in the next 3 to 5 years.  This system is unsustainable.

Studies show 31% of US healthcare spending is attributed to overhead.  In comparison, Medicare runs 3.1% overhead.  Most other developed nations spend less than 10% on overhead (New England Journal of Medicine 8/21/03).  Nations with universal systems spend about half what we spend on a per capita basis and have better health outcomes (Organization for Economic Cooperation and Development).

WellPoint reported its third quarter 2009 medical loss ratio at 81.1%.  Medical loss ratio is the percentage of premiums that actually pays for care, and thus corresponds to 18.9% of premiums for overhead and profit.  Although this is good for WellPoint’s profitability and share price, it supports the argument that for-profit health insurance is a major reason for the discrepancy in overhead expenses between the US and other countries.

WellPoint’s reputation has suffered as a consequence of the negative publicity surrounding its efforts to oppose healthcare reform.  This resolution could change that.”

I’ll keep you posted on our progress.

Dr Rob


Is the House bill better than nothing (continued)


More comments from worthy commentators – Jonathan Cohn, a highly respected single payer advocate and writer, in The New Republic writes about why we should support the bill and urge its passage in the Senate, and Dennis Kucinich discusses why he voted against the House Bill.  For commentary from HCHP’s own Dr Aaron Carroll, check out his blog

The House Bill Is “Worse Than Nothing”? Really?

  • Jonathan Cohn November 9, 2009 | 1:47 pm
    Marcia Angell, M.D., is one of the nation’s most well-respected experts on health care issues. And with good reason. A board-certified pathologist who also trained in internal medicine, she’s a former editor of the New England Journal of Medicine and senior lecturer at Harvard Medical School. Her writing credits include The Truth About Drug Companies and an award-winning article at TNR on the same subject. (She co-wrote that with Arnold Relman, a distinguished physician, writer, and intellectual in his own right.)

Angell is a well-known advocate for single-payer health care: If it were up to her, she’d simply expand Medicare to cover everybody. This is not, of course, the kind of health care reform we’re going to get this year. Instead, we will–if we are lucky–get something that looks like the bill that passed the House of Representatives on Saturday night.

Angell is not impressed, as she explains today at the Huffington Post:

Is the House bill better than nothing? I don’t think so. It simply throws more money into a dysfunctional and unsustainable system, with only a few improvements at the edges, and it augments the central role of the investor-owned insurance industry. The danger is that as costs continue to rise and coverage becomes less comprehensive, people will conclude that we’ve tried health reform and it didn’t work. But the real problem will be that we didn’t really try it. I would rather see us do nothing now, and have a better chance of trying again later and then doing it right.

I’m a longtime single-payer supporter myself. If Angell could get her way, I’d be thrilled. But Angell can’t get her way.

Blame the composition of the U.S. Senate, where North Dakota has the same representation as California. Blame the power of special interests like the drug industry, which virtually own large swaths of Congress. Blame public opinion, which remains stubbornly skeptical of big government even as it cherishes programs like Medicare. Or blame somebody else. The numbers in Congress simply don’t provide enough support for anything remotely approaching single-payer. Just look at how hard it is to pass a scaled-back public insurance option.

To Angell–and to others on the left, as my colleague John Judis notes today–this is reason for ditching the whole effort. But what, really, would that accomplish? The immediate impact would be to undermine Obama and his allies in Congress, creating the (accurate) impression they are incapable of passing major legislation. The Democratic Party would lose seats at the midterms and then, quite possibly, suffer even bigger setbacks two years hence. That’s not exactly a recipe for progressive revival.

Perhaps Angell and those who agree with her that this would be a constructive failure–that eventually growing frustration with our health care system will help us elect even more progressives and pass more ambitious reforms. Well, maybe. But that’s an awfully big chance to take. Progressives said the same thing when the Clinton health care plan failed and, before that, when efforts to pass universal coverage under President Richard Nixon collapsed. If anything, the conversation about health care reform has drifted the opposite direction over that span of time. You could plausibly claim that the reforms on the table today are more or less what moderate Republicans were proposing under Clinton, just as the Clinton reforms were not that far removed from what Nixon himself wanted in the early 70s.

And what would happen in the meantime? According to the Congressional Budget Office, the House bill would mean about 36 milion people get health insurance, reducing the number of uninsured by around two-thirds. People who had pre-existing medication conditions would, finally, have the ability to get insurance just like the employees of large companies do. The insurance would not always be as generous as it should be, but the government would prohibit lifetime caps, place some limits on out-of-pocket spending, and establish a basic benefits package that makes sure all policies cover a broad range of services.

The studies–which, I know, Angell has seen–suggests tens of thousands of people* die or go bankrupt every year because they can’t afford to pay their medical bills. Countless more suffer. The House bill wouldn’t stop such hardship altogether. But it would reduce it significantly–arguably, by as much as any single piece of domestic legislation since the Great Society. Surely that qualifies as something more than “a few improvements around the edges.”

The House bill would do many other things, too, familiar to the readers of this space–from the creation of a public plan to the creation of pilot programs that would begin to change the way we deliver medical care. And while it wouldn’t do nearly enough to make health care less expensive–the drug industry, among others, remains a source of untapped savings–the House bill certainly wouldn’t cause the cost of medicine to go up even more quickly. If anything, it’ll cause the cost to go up a bit more slowly.

As I’ve argued repeatedly, the House bill is not close to perfect. Neither is its Senate counterpart. But we don’t pass perfect laws in the U.S. We pass imperfect ones and then do our very best to improve them over time.

It happened that way with Social Security and Medicare. It can happen that way with comprehensive health care reform, too. But only if we do something, rather than nothing.

*Note: I originally wrote “millions” of people die or go bankrupt every year. That’s rather overstated. It would be more accurate to say “tens of thousands,” as I’ve now rewritten, although one could plausibly argue it’s more like “hundreds of thousands” depending on your definition of “medical-related bankruptcy.” In any event, thanks to reader “adsprung” for correcting my error–and for reminding me that I should read over my blog entries a little more carefully before hitting “publish.”


Congressman Kucinich addresses vote on H.R. 3962

Congressman Dennis Kucinich after voting against H.R. 3962 addresses why he voted NO, stating:

“We have been led to believe that we must make our health care choices only within the current structure of a predatory, for-profit insurance system which makes money not providing health care. We cannot fault the insurance companies for being what they are. But we can fault legislation in which the government incentivizes the perpetuation, indeed the strengthening, of the for-profit health insurance industry, the very source of the problem. When health insurance companies deny care or raise premiums, co-pays and deductibles they are simply trying to make a profit. That is our system.”

“Clearly, the insurance companies are the problem, not the solution. They are driving up the cost of health care. Because their massive bureaucracy avoids paying bills so effectively, they force hospitals and doctors to hire their own bureaucracy to fight the insurance companies to avoid getting stuck with an unfair share of the bills. The result is that since 1970, the number of physicians has increased by less than 200% while the number of administrators has increased by 3000%. It is no wonder that 31 cents of every health care dollar goes to administrative costs, not toward providing care. Even those with insurance are at risk. The single biggest cause of bankruptcies in the U.S. is health insurance policies that do not cover you when you get sick.”

“But instead of working toward the elimination of for-profit insurance, H.R. 3962 would put the government in the role of accelerating the privatization of health care. In H.R. 3962, the government is requiring at least 21 million Americans to buy private health insurance from the very industry that causes costs to be so high, which will result in at least $70 billion in new annual revenue, much of which is coming from taxpayers. This inevitably will lead to even more costs, more subsidies, and higher profits for insurance companies – a bailout under a blue cross.”

“By incurring only a new requirement to cover pre-existing conditions, a weakened public option, and a few other important but limited concessions, the health insurance companies are getting quite a deal. The Center for American Progress’ blog, Think Progress, states, ‘since the President signaled that he is backing away from the public option, health insurance stocks have been on the rise.’ Similarly, healthcare stocks rallied when Senator Max Baucus introduced a bill without a public option. Bloomberg reports that Curtis Lane, a prominent health industry investor, predicted a few weeks ago that ‘money will start flowing in again’ to health insurance stocks after passage of the legislation. last month reported that pharmacy benefit managers share prices are hitting all-time highs, with the only industry worry that the Administration would reverse its decision not to negotiate Medicare Part D drug prices, leaving in place a Bush Administration policy.”

“During the debate, when the interests of insurance companies would have been effectively challenged, that challenge was turned back. The ‘robust public option’ which would have offered a modicum of competition to a monopolistic industry was whittled down from an initial potential enrollment of 129 million Americans to 6 million. An amendment which would have protected the rights of states to pursue single-payer health care was stripped from the bill at the request of the Administration. Looking ahead, we cringe at the prospect of even greater favors for insurance companies.”

“Recent rises in unemployment indicate a widening separation between the finance economy and the real economy. The finance economy considers the health of Wall Street, rising corporate profits, and banks’ hoarding of cash, much of it from taxpayers, as sign of an economic recovery. However in the real economy – in which most Americans live – the recession is not over. Rising unemployment, business failures, bankruptcies and foreclosures are still hammering Main Street.”

“This health care bill continues the redistribution of wealth to Wall Street at the expense of America’s manufacturing and service economies which suffer from costs other countries do not have to bear, especially the cost of health care. America continues to stand out among all industrialized nations for its privatized health care system. As a result, we are less competitive in steel, automotive, aerospace and shipping while other countries subsidize their exports in these areas through socializing the cost of health care.”

“Notwithstanding the fate of H.R. 3962, America will someday come to recognize the broad social and economic benefits of a not-for-profit, single-payer health care system, which is good for the American people and good for America’s businesses, with of course the notable exceptions being insurance and pharmaceuticals.”

Is the House Health Care Bill Better than Nothing?

What to make of the health care bill passed late in the night on 11/7?

Below are two (long) commentaries by writers I greatly respect.  Marcia Angell is the iconic former editor of the New England Journal of Medicine and a stalwart single payer advocate.  Maggie Mahar is a thoughtful non-single-payer healthcare writer, the author of Money Driven Medicine, and someone I admire although don’t always agree with.  It’s worth the time to read both of these as we figure out where we should go from here.

– Rob

Is the House Health Care Bill Better than Nothing?

By Marcia Angell, M.D.Physician, Author, Senior Lecturer, Harvard Medical School  November 8, 2009 08:02 PM

Conservative rhetoric notwithstanding, the House bill is not a “government takeover.” I wish it were. Instead, it enshrines and subsidizes the “takeover” by the investor-owned insurance industry that occurred after the failure of the Clinton reform effort in 1994. To be sure, the bill has a few good provisions (expansion of Medicaid, for example), but they are marginal. It also provides for some regulation of the industry (no denial of coverage because of pre-existing conditions, for example), but since it doesn’t regulate premiums, the industry can respond to any regulation that threatens its profits by simply raising its rates. The bill also does very little to curb the perverse incentives that lead doctors to over-treat the well-insured. And quite apart from its content, the bill is so complicated and convoluted that it would take a staggering apparatus to administer it and try to enforce its regulations.

What does the insurance industry get out of it? Tens of millions of new customers, courtesy of the mandate and taxpayer subsidies. And not just any kind of customer, but the youngest, healthiest customers — those least likely to use their insurance. The bill permits insurers to charge twice as much for older people as for younger ones. So older under-65’s will be more likely to go without insurance, even if they have to pay fines. That’s OK with the industry, since these would be among their sickest customers. (Shouldn’t age be considered a pre-existing condition?)

Insurers also won’t have to cover those younger people most likely to get sick, because they will tend to use the public option (which is not an “option” at all, but a program projected to cover only 6 million uninsured Americans). So instead of the public option providing competition for the insurance industry, as originally envisioned, it’s been turned into a dumping ground for a small number of people whom private insurers would rather not have to cover anyway.

If a similar bill emerges from the Senate and the reconciliation process, and is ultimately passed, what will happen?

First, health costs will continue to skyrocket, even faster than they are now, as taxpayer dollars are pumped into the private sector. The response of payers — government and employers — will be to shrink benefits and increase deductibles and co-payments. Yes, more people will have insurance, but it will cover less and less, and be more expensive to use.

But, you say, the Congressional Budget Office has said the House bill will be a little better than budget-neutral over ten years. That may be, although the assumptions are arguable. Note, though, that the CBO is not concerned with total health costs, only with costs to the government. And it is particularly concerned with Medicare, the biggest contributor to federal deficits. The House bill would take money out of Medicare, and divert it to the private sector and, to some extent, to Medicaid. The remaining costs of the legislation would be paid for by taxes on the wealthy. But although the bill might pay for itself, it does nothing to solve the problem of runaway inflation in the system as a whole. It’s a shell game in which money is moved from one part of our fragmented system to another.

Here is my program for real reform:

Recommendation #1: Drop the Medicare eligibility age from 65 to 55. This should be an expansion of traditional Medicare, not a new program. Gradually, over several years, drop the age decade by decade, until everyone is covered by Medicare. Costs: Obviously, this would increase Medicare costs, but it would help decrease costs to the health system as a whole, because Medicare is so much more efficient (overhead of about 3% vs. 20% for private insurance). And it’s a better program, because it ensures that everyone has access to a uniform package of benefits.

Recommendation #2: Increase Medicare fees for primary care doctors and reduce them for procedure-oriented specialists. Specialists such as cardiologists and gastroenterologists are now excessively rewarded for doing tests and procedures, many of which, in the opinion of experts, are not medically indicated. Not surprisingly, we have too many specialists, and they perform too many tests and procedures. Costs: This would greatly reduce costs to Medicare, and the reform would almost certainly be adopted throughout the wider health system.

Recommendation #3: Medicare should monitor doctors’ practice patterns for evidence of excess, and gradually reduce fees of doctors who habitually order significantly more tests and procedures than the average for the specialty. Costs: Again, this would greatly reduce costs, and probably be widely adopted.

Recommendation #4: Provide generous subsidies to medical students entering primary care, with higher subsidies for those who practice in underserved areas of the country for at least two years. Costs: This initial, rather modest investment in ending our shortage of primary care doctors would have long-term benefits, in terms of both costs and quality of care.

Recommendation #5: Repeal the provision of the Medicare drug benefit that prohibits Medicare from negotiating with drug companies for lower prices. (The House bill calls for this.) That prohibition has been a bonanza for the pharmaceutical industry. For negotiations to be meaningful, there must be a list (formulary) of drugs deemed cost-effective. This is how the Veterans Affairs System obtains some of the lowest drug prices of any insurer in the country. Costs: If Medicare paid the same prices as the Veterans Affairs System, its expenditures on brand-name drugs would be a small fraction of what they are now.

Is the House bill better than nothing? I don’t think so. It simply throws more money into a dysfunctional and unsustainable system, with only a few improvements at the edges, and it augments the central role of the investor-owned insurance industry. The danger is that as costs continue to rise and coverage becomes less comprehensive, people will conclude that we’ve tried health reform and it didn’t work. But the real problem will be that we didn’t really try it. I would rather see us do nothing now, and have a better chance of trying again later and then doing it right.


Why Congress’ Health Care Bills Are Better Than You Think

By Maggie Mahar, Health Beat. Posted November 6, 2009.

Many progressives are expressing deep disappointment with the health reform legislation now moving through Congress.

Some suggest that some legislators made deals with lobbyists and let them write the bills. Others complain that both the subsidies and the penalties are too low. Still others don’t like the fact that states can “opt out” of the public insurance option and decide not to offer “Medicare E” — Medicare for everybody.

Finally, many ask: “Why can’t everyone sign on for the public plan in 2013? Why do we have to wait until 2013? Why can’t they roll out universal coverage next year?”

Normally, I would be among the first to critique the bills. By temperament and training, I’m both a skeptic and a critic.

But in this case, I think it is important to recognize that we cannot expect this first piece of health reform legislation to be anything but wildly imperfect. In fact, I’m impressed by the progress Washington has made in just 10 months.

I’ve been watching the struggle for health care reform since the early 1970s, and compared to what has happened over the past 39 years, this is mind-boggling.

I also believe that those who favor overhauling our health care system should send a strong signal to legislators: We support you for having come this far. We realize that you have three years to strengthen, change and refine the plan before rolling it out in 2013.

What Has Been Accomplished So Far: Affordability

What is astounding is that this Congress has made as much progress as it has. We may have a new administration in the White House, but we do not have a brand-new group on the Hill.

The majority of our legislators are moderates; many are conservatives. Nevertheless, a sufficient number have found the will to stand up and back changes that would make health care affordable for millions of poor, working-class and middle-class Americans.

For example, under the House bill, a family of three making $32,000 a year would pay $1,360 in annual premiums for good, comprehensive coverage; under the Senate Finance Committee bill, that family would be asked to lay out $2,013. Today, without reform, if that family tried to buy insurance, it would find that the average plan costs $13,500. For this household, the current legislation makes all the difference.

Too often, the press suggests that such a family would be expected to pay $10,000 out of pocket to cover co-pays and deductibles. That just isn’t true.

Even if the entire family were in an auto accident and racked up $200,000 in medical bills, at their income level, the House bill caps out-of-pocket expenses at $2,000 a year. Under the Senate Finance bill, the family would have to pay $4,000.

Moreover, under both bills, there are no co-pays for primary care. Even private insurers cannot put a $25 barrier between a family and preventive care.

Moving up the income ladder, a median-income household earning roughly $55,000 would pay premiums of $4,300 to $6,500 — depending on whether the Senate Finance bill or the more generous House bill sets the terms.

Without legislation, they too would face a $13,500 price tag — and that is if they could get a group rate. If they are buying insurance on their own, coverage could easily cost $16,000.

For self-employed workers, early retirees and those who work for (or own) a small business, the legislation offers major savings.They will be able to buy coverage on the Insurance Exchange, where they would suddenly become part of a group — which makes their premiums much lower.

Whether rich or poor, this is great news for anyone who works for himself, retired early (voluntarily or involuntarily) or is part of a small firm.

Granted, the legislation now on the table still doesn’t make insurance affordable for many Americans at the upper edges of the middle class — or the upper class. They don’t qualify for subsidies. But, as I discuss below, the legislation does point the way to lowering their premiums.

Before reform becomes a reality in 2013, I am convinced that this will happen, in part because it must. We can no longer ignore the waste, inefficiency and pure fraud in our health care system. There is absolutely no reason why we should pay so much more for health care than any other nation in the developed world.

And at least the current legislation protects these more affluent households from medical bankruptcy. No matter how much a family earns, they cannot be asked to pay more than $10,000, out of pocket, in a given year. For households that have savings and property to protect, this means that they don’t have to worry about being wiped out by a medical disaster.

Even if you and your family are in that car accident that leads to $200,000 in doctors’ and hospitals bills, you will owe only $10,000. In that situation, doctors and hospitals will let you pay off your bills over time, because they know you can. You won’t be forced into bankruptcy court. This represents an enormous step forward.

In addition, under reform, private insurers will not be able to put a cap on how much they will pay out to you and your family, over the course of a year or over a lifetime. If tragedy strikes and a child needs six or seven years of cancer treatments, your insurance will not “run out.”

For some families, this one provision will mean the difference between being able to care for their child and financial ruin (coupled with the suspicion that, if they had just had more coverage, they might have been able to save their child).

Moreover, in the very first year of reform, the public plan will offer less expensive, higher-quality coverage to uninsured Americans, the employees and owners of small firms, and those who now buy their own insurance in the private sector.

Congressional Budget Office Director Douglas Elmendorf has been spreading misinformation about the government plan, asserting that only 20 percent of those who are eligible for the Exchange will choose it. His offers no evidence for this claim — just a string of “probablies.”

He then argues that despite the fact that its administrative costs will be far lower than those of private insurers, the public plan will cost more than comprehensive private insurance. This theory is based on the unfounded assumption that only one-fifth of Exchange shoppers will pick the government option, coupled with speculation that those running the public plan will make no effort to control costs and utilization.

For peculiar reasons that I don’t fully understand, progressives have been listening to Elmendorf’s numbers. They seem to forget his past: He was mentored by Martin Feldstein, known as the dean of conservative economists. Elmendorf first made his mark in Washington by helping to quash the Clintons’ hopes for health care reform.

Coverage Denial Is Forbidden

Finally, under the House and Senate reform bills, insurers will no longer be able to deny coverage, or charge a customer more, because of a pre-existing condition.

If you’ve begun to take that idea for granted, keep in mind that the Republican’s recent 11th-hour proposal for reform “gives the insurance industry more leeway” as the Wall Street Journal put it yesterday. (Media Matters points out that this WSJ story disappeared from the paper’s Web site sometime last night.) Under the Republican proposal, insurers would be able to take pre-existing conditions into consideration.

House Speaker Nancy Pelosi’s health care reform fact sheet offers two outrageous examples of just how easy it is for insurers to deny coverage today:

Peggy Robertson: The Colorado mother of two was denied health coverage because she had a C-section in 2006. The insurance company told her if she got “sterilized” she would be eligible for coverage.

Christina Turner: After being sexually assaulted in Florida, Turner followed her doctor’s orders and took a month’s worth of anti-AIDS medication as a precautionary measure. She never developed an HIV infection. Months later, when shopping for new health insurance coverage, Turner was repeatedly denied coverage because of the precautionary anti-HIV treatment she received after being raped.

Today, in most states, this could happen to anyone. (I am fortunate to live in New York, where we have community rating, so I don’t have to worry about pre-existing conditions. My employer provides excellent insurance, with no annual or lifetime caps, so the current reform legislation would probably have no immediate effect on my life.) We all should recognize that the bills on the table would change the lives of millions of Americans, giving them the security they don’t have today.

Progressives cannot let this opportunity slip through our fingers because we are so busy critiquing the legislation — and arguing with each other. The Wall Street Journal Online reports that Senate Majority Leader Harry Reid has begun to warn that the Senate may not be able to complete the legislation by the end of this year.

Given all of the criticism he has faced, Reid could be losing heart. After all, conservatives continue to argue that legislators like Reid will be punished at the polls. Congressmen who have been pushing for reform need our encouragement. Progressives should continue to make it clear that the majority of Americans want reform — and a public option — even if the legislation is far from perfect.

Next year, the 2010 election campaigns will be in full swing. Fearful of losing, some members of Congress will begin to back away from change, so it is critical that broad reform legislation is passed this year.

Over the next three years, it can be amended as the crucial details are fleshed out. Anyone who thought that Congress would be able to overhaul a $2.6 trillion industry with just one bill was, I submit, terribly naïve.

What Remains To Be Done In the Next Three Years

There is so much to be done to lay the groundwork for a reformed system — this is one reason reform cannot be implemented until 2013:

Congress must figure out how to regulate the private insurance industry. This will require enormous cunning.

Reformers will have to find a way to stiffen the penalties for those who choose not to buy insurance, without alienating young, healthy voters. This is a job for a charismatic president.

Legislators must map out how the Insurance Exchange will work.

They also will need to come up with a formula that will adjust for risk if one plan winds up with a larger share of poor and sick customers. (Some fear that this will happen to the public plan, so this, too, is a crucial detail.)

Finally, and perhaps most importantly, Medicare needs time to begin eliminating waste in the system — saving billions of health care dollars while simultaneously lifting the quality of care. In fact, while all eyes are focused on the legislation, Medicare already has begun putting its own house in order.

What the Current Proposed Public Plan Offers

What many reformers don’t seem to understand is that when the public plan begins to negotiate fees with providers in 2013, Medicare fees for some very expensive services will be significantly lower than they are today, while reimbursements to primary care doctors will be substantially higher.

Medicare already has announced plans to cut fees for CT scans and MRIs by as much as one-third and has proposed trimming fees to cardiologists by 6 percent next year. Meanwhile, it would hike fees for primary care physicians by 4 percent.

Congress has 60 days to respond, or the changes take effect Jan. 1. Over the next three years, we can expect more changes in the fee schedule. And private insurers will follow Medicare’s lead. As their representatives explained to the Medicare Payment Advisory Commission (MedPAC), they just want Medicare’s actions to provide political cover for their own.

In other words, the public plan will be negotiating fees with providers in a very different, less expensive and more rational context.

This is another reason why public-plan premiums will be significantly lower than the CBO’s Elmendorf suggests.

Over the next three years, Medicare will be realigning financial incentives to reward preventive care and management of chronic diseases, while reducing payments for overly aggressive tests and treatments that have no proven benefit — and penalizing hospitals that don’t pay enough attention to medical errors. In the process, Medicare will be conserving health care dollars while protecting patients from needless risks.

As President Barack Obama has promised, Medicare cuts can make health care safer and more affordable for everyone — including the upper middle class. Because most private insurers will mime Medicare’s efforts to reduce overpayment, the cost of care will come down for everyone.

The public health insurance plan will incorporate Medicare’s reforms, and it will have clout. Seven percent of Americans now buy their own insurance in the private sector market. Most are neither poor nor sick. (If they were, they wouldn’t be able to purchase insurance.) More than half earn over $55,000. They will be able to go into the Exchange and sign up for the public plan.

Other middle-class self-employed Americans who cannot afford to buy individual insurance will join them in the Exchange, where they will automatically become part of a group. In addition, a large share of relatively young Americans (age 25-34) are uninsured. Most are relatively healthy. No one knows how many will choose the public plan, but since it will have much lower administrative costs than private-sector plans, it will be less expensive. This should make it attractive to younger Americans.

Finally, even if the Senate’s opt-out provision for states remains in the final health care reform bill, states will not opt out. It would be too difficult for politicians to try to explain to voters why they cannot have access to a government plan that will be able to offer comprehensive insurance for less than what they pay for private insurance.

The Enemy of the Good

If there ever was a time to avoid the traps of perfectionism, it’s now. As the old saying goes, don’t let the perfect be the enemy of the good.

And there’s a lot that’s good in the bills coming out of the House and Senate. No, they’re not perfect, but they offer a path to even better reform in the future while improving the lives and health care outcomes for millions of Americans. And that is all to the good.

Time to Play the Single Payer Card

Rob Stone MD  March 30,2009

“First they ignore you, then they ridicule you, then they fight you, then you win.”  – Ghandi

A health care reform bill out of Congress by the end of the summer?  An end to our national nightmare within five months?  The health insurance industry is banking on an Obama-Kennedy-Baucus bailout – “universal” health care, with taxpayer subsidies for those who can’t afford the unaffordable premiums.

Right now the insurance gang is controlling the debate, with big headlines about how they will give up a few of their most egregious behaviors and accept a modicum more government oversight as long as we mandate that everyone become their customer.  And, most importantly, don’t let the Socialists have their way and allow a Medicare-like “public option.”  They cry that it would be unfair competition to ask the for-profit insurance companies to go up against a government run plan. 

If they think the government can do so much better than they can, why don’t we listen to them?  Let’s go ahead and put everyone in a government plan!

The strategy from the industry and their Republican allies is obvious – appear to offer a series of compromises, but draw the line to prevent any government plan.  Wrap it all up in a big package and proclaim that we’ve got a uniquely American solution to our problem: a huge system of taxpayer subsidies to the insurance industry, with no mechanism to control costs, because there are too many big money interests who don’t want to see real cost control.  They are happy to expand access to insurance because it makes good business sense to create more customers.

The strategy of Obama, the Democrats, many labor leaders, and “progressive” groups like Healthcare For America Now is equally clear.  Let’s offer a compromise plan with many complex features, all of which need to be clarified and debated, and hope that we can get the whole thing through Congress intact, including the public option.  This is a strategy for failure.  The public option will be the part that gets compromised out.

Many prominent progressives like Paul Krugman and Jacob Hacker have argued that the public option is the key to the whole reform process.  The public option will constrain the rapacious insurance companies.  The public option will be popular and efficient.  The public option will be, at its best, a slippery slope to a single payer plan.  Never mind that critics have pointed out that if the public plan is enacted, the insurance companies will find ways to game the system again.  Never mind that the Right has recognized the slippery slope argument, and that is why they are so adamantly against it.

This calls for an obvious change in the Democrats’ strategy.  Up to now they have tried hard to keep the voices for single payer out of the debate. They have reassured the Republicans that single payer isn’t even “on the table.”  If they want to have a chance to get the public option through Congress, it‘s time for a new strategy.  Time to play the single payer card. 

Purely from a strategic perspective, the President should put single payer back on the table and start explaining to the people all the advantages of Medicare for All.  Then, when the going gets tough in the trenches of Congress, they can compromise and  settle for the public option, and a muscular enough public option that it could serve as a model (a slippery slope) for an eventual single payer system. 

Of course, maybe once the single payer cat is out of the bag, the weight of logic and public support will just push the insurance gang right out of the way.