Sunday, August 9, 2009

America's consolidation of healthcare by outlawing options

A perspective from Massachusetts, where we're already on the operating table

Massachusetts stepped into unknown territory on April 12, 2006, when then Governor Mitt Romney signed into law the Commonwealth Health Connector. It’s a mandate requiring people and businesses to purchase health insurance or face monetary penalties for not doing so.

Now, the U.S. Congress and White House are pushing a bill (H.R. 3200) that copies many of the essential concepts from the Massachusetts plan. Acknowledged to be an intermediate step on the way to adopting a single-payer system, H.R. 3200 is intent on foisting Massachusetts’ failing experiment upon the rest of the nation.

Here’s what the Connector says about its own CommCare plan (from http://www.mahealthconnector.org/):

COMMONWEALTH CARE PROGRAM COST

The Commonwealth Care program is funded by both the state and federal governments.

For FY08, the original budget was $472 million while final spending came to $628 million. Additional funding was required because Commonwealth Care had enrolled considerably more residents than anticipated in FY08 (which suggests that the number of uninsured at the outset was closer to the federal estimate of over 650,000 than to the state’s original estimate of fewer than 400,000). The cost per covered life is actually just below budget.

For FY09, which began July 1, 2008, the budget is $869 million. Current projections indicate the cost will actually be about $800 million. When the legislative conferees who crafted the healthcare reform legislation in 2006 looked at future spending, they estimated it would cost $725 million in FY09. Again, the difference is due to the number of eligible enrollees in Commonwealth Care. Government payments toward premiums for the program increased by an average of 9.4% for the fiscal year that began July 1, 2008.

For FY10, which began July 1, 2009, the budget is $723 million. In addition, the governor has requested an additional $70 million to restore subsidized coverage to approximately 30,000 aliens with special status (legal immigrants), whose funding was eliminated since this population does not qualify for matching federal funds. [As a side note, the governor’s request to fund $70 million for legal aliens was trimmed to $40 million, putting the fiscal year 2010 budget for CommCare at $763 million.]

Without reducing benefits or increasing cost-sharing for members, base enrollee contributions remain flat in FY10. Most of those in higher-priced plans are seeing a decrease. Since the inception of the program in 2006, the average annual rate of increase in premiums per covered person has been held under 4.7 percent.

Let’s examine a few of these self-admitted facts:

1) The fiscal year 2008 expenditures for the CommCare exceeded its budget by $156 million, a full one-third higher than expected. Or should I say “budgeted” rather than “expected” because the two can be very different from each other.

2) The legislature voted for this plan in 2006 using data that underestimated the number of uninsured people in this state by at least 60% in spite of having the more accurate figure available at the time.

3) The fiscal year 2009 budget was 38% higher than fiscal year 2008’s actual spending.

4) CommCare boasts of holding the annual rate of increase on premiums to less than 5%, but at what cost to the state? (By the state, I mean you and me, as taxpayers.)

For the $2.2 billion the state spent and expects to spend for the first three years on CommCare, the Connector reports that 430,000 new people are insured compared with the number of insured at the outset of the program. At 97.4% of the population insured, we’re now in the range of diminishing returns. That is, most of the remaining people are exempted from purchasing insurance for religious reasons (which doesn’t, by the way, keep them from accessing free healthcare via an emergency room) or are in an interesting No Man’s Land of making too much money to qualify for a subsidized plan but proving, by the Connector’s own formula, that they make too little to be fined for not having a plan.

For those people: “Too bad. Hope you don’t get sick. Have a nice day.”

Assuming that the uninsured ranks will stabilize, how much are we going to spend on the 430,000 newly insured people in Massachusetts? According to the Connector, those 430,000 break down as follows:

149,000 are now insured by employer-subsidized plans and, therefore, should consume little or no state resources.

41,000 have individual policies for which they are paying the premiums. Again, little or no cost to the state.

76,000 are now enrolled with MassHealth, which has its own budget separate from CommCare’s. MassHealth estimates its caseload in fiscal year 2010 will be about 1.2 million cases at a cost of nearly $9 billion (9,000 million dollars).

164,000 are enrolled in CommCare and are paying subsidized or no premiums. CommCare is budgeted to spend about $763 million in the current fiscal year (July 1, 2009 to June 30, 2010), or about $5,000 per person.

On top of all this, we learn from a Boston Herald article that the employee roster at the Connector has ballooned to four times its original size in the last 18 months, with 17 of the agency’s staff of 89 earning more than $100,000 per year. The Connector’s executive director, Jon Kingsdale, commands a $239,000 salary and the agency’s total budget for fiscal year 2010 is $33 million, a full 9% higher than the 2009 budget. Good times must be rolling on Beacon Hill.

With close to $10 billion, or 37%, of our $27 billion FY10 state budget going to healthcare (compared with 34% of our FY07 budget), we’re now apparently satisfied with the results of the Massachusetts Experiment and are ready to spring it on the nation as a whole. And, just as Massachusetts failed to deal with the single largest contributor to increasing health care costs—the cost of litigation which inflates malpractice premiums and is passed on to patients in the form of higher fees, hospital costs, and unnecessary defensive medical procedures—H.R. 3200 also does nothing to reform this fundamental cost driver.

Another significant contributor to the cost of health insurance in Massachusetts is the minimum coverage standard, referred to in the Health Connector law as “creditable coverage.” Just about any plan was okay during the first year the Connector was in effect, but starting January 1, 2009, the rules changed and will change again as of January 1, 2010. Next year, creditable coverage means a qualifying plan must include all of the following:

1) Preventive and primary care

2) Emergency services

3) Hospitalization

4) Ambulatory patient services (i.e., all outpatient services regardless of the setting)

5) Prescription drugs

6) Mental health and substance abuse services

7) Diagnostic imaging and screening procedures, including x-rays

8) Maternity and newborn care

9) Radiation therapy and chemotherapy

10) Medical care deductibles not exceeding $2,000 annually for an individual and $4,000 for a family

11) Prescription drug deductibles not exceeding $250 for an individual and $500 for a family

12) No annual maximum capping the dollar amount or utilization of core services

In short, our health insurance plans must come with all of the bells and whistles to qualify for creditable coverage. For a 25-year-old single male or 60-year-old woman, is maternity and newborn care really necessary? How can this state expect everyone to be able to afford a gold-plated insurance plan?

As you can see, our ability to control health insurance premiums by selecting a policy we can afford has been eliminated. Fewer choices, more government control. And the federal proposal does exactly the same thing, sure to crank up costs while you hear our president promise the opposite.

Remember, however, that the America’s Affordable Health Choices Act of 2009 is simply an intermediate step on the road to a single-payer system. Based on the Massachusetts incubator, there is no doubt that the national version of our state's failing experiment will similarly fail. And that, my unsuspecting friends, is the point.

When we “discover” that costs are still going through the roof, the only “logical” alternative will be to move to a single-payer plan. After all, we obviously won’t be able to go back to the old system. You’ll be deemed an idiot if you propose that. And the on-switch will be an easy one to flip. Just eliminate the private coverage provision of H.R. 3200 and, voilĂ , instant single-payer system.

That bill should be named America’s Consolidation of Healthcare by Outlawing Options (ACHOO).

Copyright 2009 Randy Hunt

4 comments:

  1. http://www.youtube.com/watch?v=ZmKgiIXTymQ

    Above link are my thoughts on the current health care debate.

    Jeff Perry

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  2. Excellent reporting and analysis. Job well done. Thanks.

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  3. Nice overall summary Randy, not many flaws in your logic at all. But I would like to point out a few things that your argument seems to presuppose as being true.

    1. A single payer system is inherently bad. At no point to you give reasons why this true, you simply treat the term as if it were toxic. Now a single payer system is certainly not all fun in the sun, but it is interesting that the vast majority of industrialized countries with such a system have better health outcomes when you look at broad population health statistics and achieve such outcomes at much lower costs when you look at national healthcare expenditures in relation to their GDPs.

    2. You treat healthcare coverage as a privilege for those who can afford it not a universal right. I personally don't buy into the slippery slope argument that a lot of conservatives use to counter this point, but feel free to make it. Education is universal through grade 12, why shouldn't access to decent health care be as well?

    3. You imply that a program like Commonwealth Care implemented at the national level would produce the exact same results as it did at the state level. This is what I believe to be the biggest fallacy in your logic, as well as thousands of critics of the health reform effort. State mechanisms for funding are very different than that at the national level. In fact a good portion of the state healthcare budget is payed for through federal funds. If the national government were to implement a similar system it would have much more far-reaching effects. In the case of MA, we implemented a statewide policy in a marketplace that really is a national one. The state government is trying to control costs in a market thats is frankly largely outside the scope of their regulatory control. This would not be the case with a national program. This is the same reason I believe the Cape Care movement is both comical and a bit scary. They're trying to implement a policy (that at least in my opinion is an interesting one) on a very very local level within a much bigger national market. The result will undoubtedly be disastrous as it won't be able to control costs like it bills it will be able to, because so much will be outside its control.

    4. I will say that I'm in 100% agreement with you on the malpractice/tort reform. That's something that needs to be addressed very sourly and nothing has really happened on that front.

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  4. Hi Randy. Good analysis of the Commonwealth Care Plan. I do have to take exception to the comparison that a national health plan will be the same. There are 4 plans on the table including one in the Senate that is discussing “Cooperatives”. It is premature to conclude a national health care package will mirror Massachusetts.
    There is a clear understanding that our “for-profit” corporate insurance system is in collapse. Global business is losing competiveness, small business is being strangled, 16% of our population is uninsured, and premiums are rising on those with company provided plans detracting from payroll at an alarming rate. We spend double per capita on health care costs than the rest of the industrialized nations and direct 16% of GDP to the sector (France 4%, Germany/Japan 5%.)
    These nations have a longer life expectancy, better recovery rates, and significantly lower costs.
    Little Sandwich town employees health care cost has increased by 17.6% per year for the last ten years. Our system is bankrupting our town and our nation.
    Quick facts: (of the 45 or so “wealthy” nations)
    1) Every nation rations care. All others have a basic floor of care people have access to that assures no one dies or goes bankrupt because they get sick. Americans are at the mercy of insurance monopolies.
    2) All others have not-for profit health insurance companies. Americans pay for multimillion dollar insurance executive salaries, corporate jets, and 20% higher admin. Costs. Money that should go to care.
    3) All others pay doctors for outcomes rather than procedures.
    4) All others have a “loser pays” tort system to alleviate egregious and frivolous lawsuits.
    President Obama has outlined the guideline to comprehensive health insurance reform:
    • Reduce long-term growth of health care costs for businesses and government
    • Protect families from bankruptcy or debt because of health care costs
    • Guarantee choice of doctors and health plans
    • Invest in prevention and wellness
    • Improve patient safety and quality of care
    • Assure affordable, quality health coverage for all Americans
    • Maintain coverage when you change or lose your job
    • End barriers to coverage for people with pre-existing medical conditions
    HR3200 (I call the “Pelosi Bill”) being touted as the end game will not, by any stretch, be the final.
    There are 4 major types of health care systems in the world today & U.S. has aspects of each:
    1) “William Beveridge” model =England’s NHS. (Spain, Italy, New Zealand). Closest to our term “socialized medicine” = Government owns hospitals, buys the pills and pays the bills.
    a) U.S. =If you are a veteran or Native American this is you.
    2) “Bismarck” Model – France, Germany and most continental Europe plus Japan. Private Doctors, hospitals, insurance (many choices- of non-profit); Note: France rated #1 by World Health Organization. a) U.S. -If you are an employed person sharing your health insurance premium with your employer-this is you. The major difference is cost. Corporate monopoly in U.S. vs. reasonable non-profit in these nations.
    3) Canada- blend of both types: private Doctors and hospitals and Government pays the bills. Does have long lines for non acute care. a) U.S. - If you are a senior and buy Medicare from the Gov’t and go to private doctors –this is you without the waiting.
    4) “Out-of-Pocket” system = the remainder of the 150 or so nations. No money no care. a) U.S.- if you are one of the 45 million uninsured this is you. (Hospitals are primarily for acute care only…)
    Whatever the outcome of the health care debate –we desperately need major reform. We have ignored this problem (and others) far too long. Whatever one’s opinion is of President Obama may be, you have to give him credit for finally addressing issues that “We The People” have ignored far too long. Personally I think he’s got guts.



    Shawn

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