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Commonwealth Expects 1 Million New Uninsured
Reuters Health reports on a new Commonwealth Fund study that anticipates 1 million newly uninsured as a result of the economic downturn and the 9/11 lay-offs. Reuters says, “the spike in uninsured Americans is likely to put a strain on low-income healthcare programs like Medicaid . . .”
Reuters adds that the Senate is debating a Democratic proposal to have the federal government pay up to 75 percent of the cost of COBRA for 12 months and spend $1 billion so states can add to the Medicaid rolls those who don’t qualify for COBRA.
Commonwealth Wants Medicaid for Unemployed
The Commonwealth study says 37 percent of unemployed people are uninsured, and a “rise in unemployment could increase enrollment in Medicaid by as much as 3.3 million people.” It also says the individual market is “unaffordable or inaccessible for most unemployed people.”
Yet, while it is all in favor of subsidizing unaffordable COBRA coverage and expanded Medicaid, Commonwealth doesn’t seem to think subsidizing individual coverage is a good idea. Can’t help but wonder what the ultimate goal is here: individuals with good insurance coverage, or individuals with government insurance coverage.
NCPA Says Many Uninsured By Choice
NCPA’s Devon Herrick notes, in a Brief Analysis recently published, that many of the uninsured are “Uninsured by Choice.”
Herrick points out, “From 1993 to 2000 the number of uninsured people in households with annual incomes above $75,000 increased by 63 percent, and the number in households with annual incomes from $50,000 to $75,000 increased by 48.2 percent. By contrast, the number of uninsured people in households with incomes under $25,000 fell by 25 percent.”
He notes the disproportionate number of young people without insurance, who may simply feel insurance is not a good value for the money.
WTO Willing to Sacrifice Drug Patents
The World Trade Organization seems to have found its own answer to the question, “Why don’t they like us?”
Because we enforce our intellectual property rights.
The Washington Post reports the WTO is trying to win some Third World friends by sacrificing the patent rights of pharmaceutical drug makers. A spokesman for a Ralph Nader organization is quoted as saying, “Is the WTO turning into the General Assembly of the United Nations?”
Apparently, some countries like Brazil and South Africa threatened to derail any trade agreements unless the WTO coughed up the drug patents. So the WTO sacrificed the interests of drug makers and drug research (and the people who benefit from such research) in a blatantly political deal.
If the WTO will sacrifice patent rights to avoid the criticism of demonstrators, what will it sacrifice the next time it meets a dozen people with picket signs?
NCPA Says Drug Patents Critical for Innovation
Of course, our own Secretary of Health and Human Services, Tommy Thompson, and Senator Charles Schumer (D-New York) didn’t help matters at the WTO when they threatened to override the Bayer patent on Cipro. The obvious argument at the WTO: if the U.S. can do it when they have an emergency, why can’t we?
Frank Lichtenberg wrote a Brief Analysis for NCPA explaining why: that protection of intellectual property drives innovation. There are a number of specifics in the paper, including one that says, “65 percent of pharmaceutical inventions would not have been introduced if patent protection could not have been obtained.”
AEI: Full Story on Cipro Issue
The American Enterprise Institute’s (AEI) Jack Calfee provides an even more detailed discussion of exactly what happened with the Cipro flap, including the cost and availability of other antibiotics, Canada’s patent violation, and the details behind Secretary Thompson’s peculiar position.
Study: Mammograms Useless in Preventing Breast Cancer Deaths
A new report says there is no credible evidence that “mammograms reduce the risk of dying of breast cancer in women of any age,” according to The Washington Post.
The very well-respected Danish Cochrane Collaboration authored the report. They reviewed each of seven large mammography trials, involving half a million women. They concluded five of the trials were either of poor quality or so flawed as to be discounted altogether. The two remaining studies were found to be “of medium quality” . . . and those two found no reduction in breast cancer deaths.
The Post article quotes Maryann Napoli of the Center for Medical Consumers in New York as saying, “mammography causes more harm than good . . . we have been sold a bill of goods.”
And that conclusion is based solely on the clinical results, without consideration of costs. If the cost of mammography were added to the equation, the conclusion would have to be it is a gigantic rip-off. And yet, virtually every state mandates that insurance companies pay for periodic mammography screening. Someone is making a fortune off the procedure.
Source: Scandlen’s Health Policy Comments, National Center for Policy Analysis, 10/22/01
Humana Makes Consumer-Driven Transformation
Jennifer Gordon has a major story on the transformation of Humana in Business First of Louisville.
She notes Humana is no stranger to reincarnation, starting as a nursing home company, and going to a hospital corporation, then to a managed care insurer. Now, it is “taking the lead in reshaping its current industry (by) . . . developing products suited to the preferences of the American public: consumer choice and business done via the Internet.”
Gordon reports Humana’s all-Internet product is called Emphesys and will do all business online, from enrollment to claims processing.
The other new product is less Web-dependent. Called Choices, it enables workers to pick any of six health plans—ranging from an MSA program with monthly premiums as low as $10, to a “rich PPO with premiums of about $80/month for an individual plan.”
She quotes president and CEO Michael McAllister as saying, “Individual consumers are going to have a lot more financial involvement in the cost of things as they move through health care,” and “employer-financed, consumer-centric health benefits products (are) . . . the next thing after managed care as we know it today.”
Entitlement Mentality in Dayton
David Miller, CFO of Dayton’s Children’s Medical Center, points out that people tend to make irrational decisions in health care, partly because they have come to expect insurance to pay for everything. He cites “the new field of behavioral finance” to explain such behavior. “[I]n (consumers’) view,” he writes, “a $50 medical service seems more costly than a $50 entertainment purchase.”
He chides a colleague who decided to pay $2,000 more for a PPO because the HMO alternative didn’t include his favorite doctor. “[B]y choosing the cheaper plan he could pay the doctor each time, tip him, and still have a lot of money left over.”
NY Times Doesn’t Like Consumer-Driven Health
The New York Times made quite a splash with its hatchet job on consumer-driven health care. The front-page article by health and business writer Milt Freudenheim was headlined, “A New Health Plan May Raise Expenses for Sickest Workers.”
To make the point, Freudenheim uses a very remote scenario and implies it is typical. He supposes a family of three is required to pay a premium of $1,150 for a policy with a $5,000 deductible, with an employer-funded “allowance” of $3,000. Prescription drugs in this hypothetical case are not covered and are do not apply to meeting the deductible.
This poor family not only incurs medical expenses of $5,000, but it also suffers from asthma, high cholesterol, and mental illness severe enough to take Prozac, incurring another $2,484 in expenses, without the insurance plan paying a penny in benefits.
Freudenheim’s comparison plan includes a family deductible of only $900, coinsurance of only 10 percent, and very generous prescription drug benefits, all of which costs the family a mere $300 more in annual premium.
Of course these are fantasy numbers, but the article uses them as if they are real-life scenarios. It implies this is just one example of the horrendous cost-shifting that employers are using to hoodwink their employees.
The article goes on to quote Uwe Reinhardt and Deborah Chollet as tsk-tsk-ing over employer and insurer greed. Reinhardt is quoted as saying, “The insurance industry has decided that if you are sick, you ought to eat the costs. It’s a very dubious social policy.”
But Dallas Morning News Does
Fortunately, The New York Times is not the only publication reporting on the consumer-driven movement.
The Dallas Morning News ran an article by Patricia Rivera headlined, “New Option for Health Insurance: ‘Consumer Driven’ Policies Shift Cost Decisions to Employees.”
Rivera reports on a meeting of the DFW Business Group on Health that attracted over 200 people to hear about defined contribution. She quotes a local PWC consultant as saying the movement is in its infancy, “but it’s gathering steam very quickly.” She also quotes a benefits manager from Texas Instruments as saying, “Our company wants to empower our employees to make their own health care decisions.”
The article also notes the American Medical Association is supportive of the movement, while the American Hospital Association is critical. Lumenos’ Doug Kronenberg is quoted as supporting the cost-containing effects: “When (employees) actually see that the amount in their account is disappearing, they’re not afraid to ask why.”
Source: DMN charges a fee for archived articles. The publication date was November 30, 2001.
So Does National Underwriter
National Underwriter is also reporting on the new movement. Barry Higgins writes, “MSAs Touted as an Answer to Rising Health Care Costs.”
The article quotes an insurance broker and representatives of Aetna and Lumenos. Dr. Michael Parkinson, CMO of Lumenos, discusses both cost-containment and restoring the patient/physician relationship. He says by changing control of the dollars from a third party to the consumer, “it’s much more likely that they’ll ask the hard questions of the system.”
He adds, “By aligning the financial incentives with consumer-friendly clinical information, the future for a true partnership between patients and their doctors will only be enhanced.”
Memphis Commercial Appeal on D-C
The Memphis Commercial Appeal also weighs in on the new direction with an article by Associated Press writer Theresa Agovino. The article cites a Medtronics employee who is delighted with his new health plan because of less expense and more freedom. The article notes that established companies like Aetna, UnitedHealthcare, and Wellpoint are testing the concept, but it adds “smaller firms are the driving force behind the concept.”
This time, the note of skepticism is sounded by Ed Kaplan of the Segal Company, who says “Employees are risk averse. They don’t want to risk not going to the doctor, so I’m not sure how popular the plans will be.”
San Diego Union Tribune Also on D-C
The San Diego Union Tribune also notes the trend in an article by Tony Fong headlined, “Know What Health Care Really Costs?” Fong reports that “after years of hand-wringing over consumer behavior, health plans and employers are taking aggressive steps to make patients aware of the cost of their health care.”
Fong cites the Pacific Business Group on Health, which has recently agreed to make the Definity Health product available to all its members. He calls managed care “the standard all-you-can-eat-for-a-$10-co-payment” plan.
Of course, Fong quotes the academic skeptics, too, including UCLA’s Richard Brown, who says, “I don’t really see any good to this,” and Princeton’s Uwe Reinhardt, who seems to have changed his mind from the NY Times article. Reinhardt, according to the article, “compares American health-care consumers to teenagers with a parent’s credit card: They want to charge whatever they want but want someone else to pay the bill.”
Market Catching up to MSAs
No publication is following the consumer-driven health care trend as well as Employee Benefit News. The December 1, 2001 issue contains four—count ’em, four!—relevant stories.
The first is by Karen Lee who writes, “Market Seen as Catching Up with MSA Concept.” She quotes Proweh Health System’s Michael O’Malley as saying, “MSAs are the building blocks of the future of health care.” She notes the problems with the HIPAA-enabled MSAs, but says to “look for a run on MSAs” if the MSA expansion contemplated in patients’ bill of rights legislation becomes law.
Meanwhile, Lee says large employers are doing their best to replicate the MSA concept through firms like Proweh, Lumenos, Definity, Vivius, and more recently Aetna and Humana.
Source: I couldn’t find this one on- line, but the publication date was December 1, 2001.
Employers Getting Mixed Signals
Karen Lee has another EBN article that looks at employee response to the new conditions.
She cites the recent EBRI survey that says 80 percent of employees “are confident that their employers have picked the best available health plan,” and “37 percent insist they would not be able to find the best insurance on their own.” But she also notes, “34 percent of respondents claim to want to choose their own health insurance, with employers paying the same amount currently spent and employees making up the difference for a more expensive plan.”
The article quotes me, Mark White of Watson Wyatt, and Paul Fronstin of EBRI for varying views.
Quality Means Consumer Choice
Craig Gunsauley has another article in the same issue of EBN. “More sophisticated (employers) are trying to partner with employees and help them take responsibility for their coverage,” he writes.
The article discusses disease prevention and management and employer efforts to affect quality of care, but it also quotes AHA’s Jon Gabel as saying, “Most employers think quality is leaving the doctor alone and allowing employees to go to any doctor they want.”
The article goes on to emphasize employer efforts to increase patient education and quotes even General Motors’ Bruce Bradley as acknowledging that, “more and more consumer-driven decision making is a factor in health care coverage.”
Regulatory Issues in Defined Contribution
And Jill Elswick also covers the issue with an EBN article headlined, “Tax Risks Cloud DC Health Plans.”
Elswick discusses the IRS’s position (or lack thereof) on defined contribution, and Congressional interest in clarifying the issue. She also quotes PWC legal advisor Joe Walshe as saying, “I think (the IRS) is looking for some guidance as to which way they should go. I think they’re a little skittish about what to do.”
But Definity’s Tony Miller says, “Each new deal inked leads to even more business as employer confidence in the new funding strategy increases.”
Greg Scandlen is senior fellow in health policy at the National Center of Policy Analysis in Dallas, Texas and assistant editor of Health Care News. To sign up for his free weekly e-newsletter, Scandlen’s Health Policy Comments, log on to http://www.ncpa.org/sub/. Email Scandlen at [email protected].
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For past issues of Scandlen’s Health Policy Comments go to http://www.ncpa.org/sub/shpc