ProgressOhio

A Policy Response to Health Care for America Now

Posted by David Himmelstein, MD on Wednesday, Jul 9, 2008

Health Care for America Now (HCAN) is pushing a superficially attractive health reform model that has a long record of failure – akin to prescribing a placebo for a serious illness when effective treatment is available. They would offer Americans a new public insurance plan and a menu of private ones, with subsidies for coverage for low income families.

This approach reprises the format of Medicare’s ongoing privatization. Despite promises of strict regulation and a level playing field that would allow the public plan to flourish, private insurers would (as they have done in Medicare) predictably overwhelm regulatory efforts through crafty schemes to selectively recruit profitable, lower-cost patients, and avoid the expensively ill. Like the Medicare Advantage program, originally touted as a market-based strategy to improve Medicare’s efficiency, the HCAN plan would evolve into a multibillion dollar subsidy for private insurers whose massive financial power (amassed largely at government expense) would prove a political roadblock to terminating the failed experiment.

Unfortunately, proposals like HCAN’s that cede a central role to private insurers can only add coverage by adding costs. They promise savings from computerization and chronic disease care management. Yet the Congressional Budget Office has warned that there is little or no evidence for such savings.

The HCAN proposal forgoes most of the $350 billion annually in administrative savings possible under single payer national health insurance (NHI). Administrative waste is a natural byproduct of the private insurance firms that would retain a central role under HCAN’s plan. Private plans’ overhead is 12-fold higher than under NHI; the excess is squandered on marketing, underwriting, utilization reviewers and profits, and for the billions paid to executives. And the multiplicity of insurers envisioned in the plan precludes paying hospitals a global, lump sum budget; such budgets would save additional billions by obviating the need for most hospital billing and much of the internal accounting needed to attribute hospital costs to individual patients and payers.

HCAN’s proposal duplicates key elements of health reforms that have passed (and then failed) in multiple states: Massachusetts in 1988; Oregon in 1989; Tennessee, Minnesota and Vermont in 1992; Washington State in 1993; and Maine in 2003. In each case, rising costs scuttled the reform effort; none had a durable impact on the number of uninsured. The 2006 Massachusetts law, which incorporates many of the features of HCAN’s plan, is already threatened by rising costs, despite offering skimpy coverage and leaving many uninsured. And Massachusetts, with its low rate of uninsurance to begin with, and a large fund devoted to care of the uninsured, offered the optimal conditions for trying such a plan.

HCAN’s proposal tries to avoid a head-on collision with private insurers, but the result is a plan that cannot achieve universal coverage or make care affordable. For physicians, offering a placebo in place of effective treatment is a serious ethical violation. Hence, while we salute the good intentions of the members of the HCAN coalition, we must warn against their proposal.

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http://www.pnhp.org/blog/2008/07/09/a-policy-response-to-health-care-for-america-now/

 

United States House of Representatives
Committee on Oversight and Government Reform July 2008
Medicare Part D: Drug Pricing and Manufacturer Windfalls
By the Majority Staff

Conclusion

This analysis of confidential data on Medicare Part D and Medicaid drug prices shows that the private Medicare Part D insurers pay significantly higher prices for prescription drugs than does the Medicaid program. In the case of the six million dual eligible beneficiaries, the Medicare Part D insurers paid $3.7 billion more in 2006 and 2007 to purchase the top 100 drugs for dual eligible beneficiaries than they would have paid if they had access to the lower Medicaid drug prices. This increase in costs represents a windfall to drug manufacturers.

Eliminating the drug manufacturer windfall would realize substantial savings to federal taxpayers. Over the next ten years, taxpayers would save $86 billion if the Medicare Part D insurers paid Medicaid prices for drugs used by the dual eligible beneficiaries. If Medicare negotiated directly with drug manufacturers and obtained prices equivalent to the Medicaid prices for all Medicare beneficiaries, the potential savings to taxpayers increases to $156 billion.


Don McCanne's Comment: To understand the basis for the problems with the Medicare Part D drug benefit, you need only to recall that the program was designed by the Medicare privatizers in Congress, with the support of two of the largest lobby interests in the nation: the private insurers and the pharmaceutical firms.

There are a great many problems that have been created by the privatization measures in the Medicare Modernization Act, but here we will limit the discussion not to just the Part D program, but to only one aspect of Part D: the application of Part D to dual-eligibles.

Dual-eligible Medicare beneficiaries are those individuals who not only qualify for Medicare based on age or long-term disabilities, but they also qualify for Medicaid based on their very low incomes. Before Medicare Part D was enacted, they received their drugs through the state-administered Medicaid programs. This worked well for the taxpayers because of the ability of the government to negotiate much lower drug prices, and it worked well for the patients because they received their necessary medications usually without any out-of-pocket expense.

The privatizers were successful in shifting the state-run Medicaid drug benefit into the Part D program. Because the drug benefit for the dual-eligibles is still subsidized, the cost impact was not that great for the beneficiaries, though the administrative hassles, including the need to comply with various formularies offered by the different plans, proved to be more than just an inconvenience.

The taxpayers did not fare at all well with this shift into the Part D program. This study by the Majority Staff demonstrates that taxpayers paid $3,739,000,000 more to the drug manufacturers for the top 100 drugs than they would have under the Medicaid drug program which this replaced. The Republican Staff response glosses over this very real additional cost foisted onto taxpayers.

One thing great about America is that it is our choice... but we do have to make a greater effort to be certain that everyone is making an informed choice.

http://oversight.house.gov/documents/20080724101850.pdf