Consumer Power Report #131

Published June 13, 2008

I’m keeping the Intro short this week, because it is a pretty long edition and I haven’t yet made sense of all the puzzling things going on out there. We are definitely going through a strange patch of political posturing and musical chairs. The song that keeps going through my head is Steven Stills, “Time to Change Partners.”

Greg Scandlen

The Attack Continues

A new article in Health Affairs by Cathy Shoen and colleagues at the Commonwealth Fund is another direct attack on HSAs and all forms of consumer empowerment. The article tries to raise the “problem” of underinsurance to the same level of hysteria used for people with no insurance at all. It “studies” the trend from 2003 to 2007 and finds deductibles are rising (horrors!). It says the numbers of underinsured rose 60 percent from 2003, and that 42 percent of the under-65 population has either no insurance or “inadequate” insurance. They go on to break all this down by income group, race, gender, and all the other things you would expect.

There is so much wrong with this “study” it is hard to know where to start. I know! Let’s start with one of their most blatant distortions. They say, “The United States already stands out internationally for high per-person out-of-pocket spending.” In fact, the United States has one of the lowest rates of out-of-pocket spending of all the OECD countries. According to OECD, Americans spend only 13 percent of total national spending out-of-pocket, while the OECD average is 20 percent. Even Canadians spend more out-of-pocket than we do, at 15 percent.

Next let’s consider their definition of “underinsured.” They include anyone who spends 10 percent or more of their annual income on medical expenses, 5 percent for those at 200 percent of poverty or lower, and anyone who has a deductible equal to 5 percent of their income. There is no rationale for this standard, other than “it is the level most commonly used in studies of financial stress and studies of the underinsured.” They do not take into account premium payments or taxes devoted to health care. It is somehow not stressful to pay large amounts of one’s income on insurance premiums or taxes, but just awful to reduce those payments and pay cash for health care instead.

It is curious as well that these authors confine their examination to the population under age 65, since their boss, Commonwealth Fund President Karen Davis, testified to Congress in 2001 that the average Medicare beneficiary pays 21.7 percent of income on out-of-pocket medical expenses and she expected that to rise to 29.9 percent by 2025. If “underinsurance” is a problem, the most egregious offender is the Medicare program.

But never mind all that. The sole purpose of this strange little exercise is to undermine the growing trend of consumers taking control of their own health care by taking control of the money they spend. Lower-income people obviously need additional assistance, but they will need that help whether they pay directly for services or indirectly for premiums.

SOURCE: OECD Chart of Out-Of-Pocket Spending; Health Affairs article

It’s All About Power

And it really is all about power and control. Jane Bryant Quinn had an article in the Washington Post in which she describes a new initiative by “the nation’s major employers” in which “the hope is to strengthen the employers’ hand.” They are frustrated because “even large companies don’t have much negotiating power when facing large health plans,” according to Mark Ugoretz of the ERISA Industry Committee (ERIC). So they want a national system of giant benefit administrators that would offer five standard health plans designed by the federal government. This sounds an awful lot like the “managed competition” approach Hillary Clinton tried to push 15 years ago.

So, we will have giant employer groups dealing with giant health plans that deal with giant hospital systems. Not much room here for individual consumers, is there? Or individual doctors, or small employers, eh?

Speaking of which, Ms. Quinn is dismissive of NFIB, which she says supports “adjective-based reform” — “universal, private, affordable, efficient, realistic, blah, blah, blah.” She adds NFIB is “not thinking outside the box” (now there’s a catchy expression) unlike ERIC and “its fresh approach.”

SOURCE: Washington Post article

Where’s NFIB?

So, where is NFIB these days? Many of us have been confused since NFIB joined the “Divided We Fail” Campaign along with the Service Employees International Union (SEIU), AARP, and the Business Roundtable. It seems like strange bedfellows for an organization that has always been firmly in the free market camp.

The Kaiser Daily Health Policy Report writes that AARP President Bill Novelli spoke at an NFIB conference in Washington and came out firmly in support of the bill NFIB is now supporting in lieu of its old Association Health Plan (AHP) bill. This new bill is sponsored by Senators Durbin (D-IL) and Snowe (R-ME), and is called the SHOP Bill (for Small Business Health Options Program), according to Sharon McLoone of the Washington Post.

The Kaiser story says this new bill would provide tax credits to small businesses and prohibit insurers from using health status ratings. The Post story adds that it will also somehow make prescription drugs more affordable and push wellness programs. AARP never supported AHPs in the past and it looks like NFIB has given up on waiving state mandates to get AARP’s support on this new bill.

It doesn’t appear that this new bill will do much of anything and NFIB’s position is puzzling. It has never figured out that prohibiting risk-based rating will only raise the cost of coverage for most small employers and drive them out of providing coverage at all. That doesn’t do any favors for the higher-cost groups.

SOURCE: Kaiser Daily Health Policy Report

Okay, I have reviewed the SHOP bill and NFIB’s support is even more puzzling. Here is what this bill would do:

1. Create a new position, The Administrator, within the Department of Health and Human Services. (Interesting that it is not in the Department of Labor). The Administrator is definitely the dude in the catbird seat. He (or she) will decide what insurers to contract with, collect all premiums, pay the insurers (with a risk adjustment mechanism), develop all information about the program, issue all regulations, and enter into agreements with “Navigators.”

2. A Navigator is what NFIB is hoping to become, but it doesn’t really do much. It distributes information developed by The Administrator — period. It doesn’t choose plans, or provide benefits, or enroll employers or employees, or define benefits, or collect premiums. It doesn’t even have an advisory role with The Administrator.

3. There is, however, a Small Business Health Board that advises The Administrator, made up of 13 individuals appointed by (of all people) the Comptroller General (this is the head of the GAO). It’s a pretty nice gig if you are looking for a part-time job. You won’t really have any responsibilities but you get paid very well for coming to meetings.

4. The health insurers that are allowed to participate are chosen by The Administrator by his whim, apparently. There are few standards beyond complying with the rules and no competitive bidding. The Administrator is allowed to choose only those insurers who employ his fraternity brothers.

5. Let’s get to the meat. This system does NOT override state mandates or state enrollment and rating requirements, providing they are at least as stringent as The Administrator’s, and insurers are still regulated by the states – UNLESS it is a “nationwide plan.”

6. The bill calls on the NAIC to recommend to Congress new rating requirements that would apply to all carriers in this program. Congress would have to enact new legislation to enforce these rules. But in the event that doesn’t happen, there is a fallback provision that requires community rating with adjustments only for age, geography, and industry, but any state (like New Jersey) with stricter rules may still apply those.

7. Now here is a biggie. The benefit structure of “Nationwide Plans” will be set by — (are you sitting down?) – the Institute of Medicine! No further comment needed.

I hope someone from NFIB will explain to me just what the heck they were smoking when they decided to support this. This does absolutely nothing NFIB has been pushing for the past 10 years. And it certainly will not help a single small employer.

SOURCE: Search for S. 2795 on the Thomas Web site

NFIB’s official position, “Small Business Principles for Healthcare Reform,” isn’t bad at all. It lists 10 principles, perhaps the most contentious is “Universal.” But what it means by universal is “All Americans should have access to quality care and protection against catastrophic costs. A government safety net should enable the neediest to obtain coverage.” Access to coverage is different than mandatory coverage. It goes on to call for “unbiased” tax laws between group and individual coverage, more “competition” between insurers and providers, “portability” of coverage, “transparency” of costs, quality and outcomes, and so on.


The Kaiser article also cites an article in the Washington Post reporting that NFIB is working with eHealth to expand a pilot program that has been tried in six states. The program allows employees to buy coverage from any of 175 insurers and encourages small employers to contribute to their workers’ health savings accounts. The article notes that, “eHealth Senior Vice President Sam Gibbs said the company noticed that over the last 15 months, small business owners were purchasing private coverage and were no longer purchasing group insurance plans.” Now, that is an initiative that could actually do some good.

SOURCE: Washington Post article

What’s Wrong With Newt Gingrich?

BusinessWeek reports that Newt Gingrich has come out in support of mandatory coverage for anyone making more than $75,000/year. The publication says, “Gingrich called it ‘fundamentally immoral’ for a person who can afford insurance to save money by going without, then show up at an emergency room and demand free care.”

Well, maybe so, but is there any evidence that little scenario has ever happened? Even once? Let alone that it is a public policy problem worthy of turning the entire health care system on its head?

Just imagine, if you will, the massive enforcement mechanism that would be required to ensure compliance with such a mandate. Imagine the cost involved in administering such a system. To what end? People are already legally responsible for paying the bills they incur. Hospitals already use collection agencies to recoup such money from people with the ability to pay.

The existence of such “self-pay” patients has helped identify many enormous problems in hospital billing practices that are being corrected. These patients are generally grossly over-charged for the services they receive. And hospital’s primitive accounting systems prevent them from even knowing what it costs to provide a particular patient with a particular service. Requiring everyone to get all their care through a third-party payer would continue the existing shell game of PPO discounts and bogus billing.

Furthermore, once we sacrifice the basic principle of freedom of choice, where do we stop? Why stop at $75K? Why not mandate everybody to behave however Newt Gingrich would like them to behave?

It would be sad enough if this were a one-time slip by a man I used to admire. But it isn’t. Mr. Gingrich is racking up a whole laundry list of irresponsible positions supported by inaccurate sound bites — “Paper Kills!” (in support of federally mandated electronic medical records); “Jumbo Jets Full of People Dying Due to Medical Errors!” (in support of — I’m not even sure); Now, “It’s Fundamentally Immoral to be Uninsured!” Pathetic.

SOURCE: BusinessWeek article

Roy Ramthun

CHCC member Roy Ramthun has just released an updated version of his incomparable (and free) guidebook on Health Savings Accounts. He has also issued a Spanish-language version and has some Web seminars scheduled for the near future. Roy has become the essential resource on all matters relating to HSAs. Be sure to check it out.

SOURCE: Roy Ramthun’s Web site