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ABX1 1: Universal health insurance without health care

by Claudia Chaufan
The “Health Care Security and Cost Reduction Act”, known as ABX1 1 and described by New York Times reporter Kevin Sack as a “bipartisan blueprint” conceived by Republican governor Arnold Schwarzenegger and Democratic Assembly speaker Fabian Nunez to bring “near-universal coverage to the country’s most populous state”, with neither provide health care security nor reduce costs of medical care. This article explains why.
Virtually everybody agrees that the American health care system is broken: costs are rising well in excess of the rate of inflation [1], insured and uninsured alike are often an illness away from bankruptcy [2], and too many go without medical care altogether - and roughly 18,000 die each year for this reason [3]. With over 20% of its population uninsured and growing, California exemplifies well the sorrowful state of health care in the country [4]. As a result, it has become fashionable, for politicians and corporate executives alike, including CEOs of health insurance companies, to call for universal coverage. As Jonathan Cohn noted recently in the New York Times Magazine, universal coverage is today the “one thing Big Business and the Left have in common” [5]. And Cohn must be right, because, at least in California, traditionally opposed interest groups are about to tie the knot in Assembly Bill X1 1 (ABX1 1), the “Health Care Security and Cost Reduction Act”. According to New York Times reporter Kevin Sack, this act is a “bipartisan blueprint” drawn up by Republican governor Arnold Schwarzenegger and Democratic Assembly speaker Fabian Nunez to bring “near-universal coverage to the country’s most populous state” [6]. So, should we not be raising our glasses in celebration? Not really.

However wonderful it would be for this well-meaning legislation to provide health security and reduce costs, there is little if any reason to believe it will do either.

For one, it cannot keep at least half of its promise, controlling costs of medical care, because not only does it not remove the private insurers that created the current nightmare, it actually gives them a central role in the new system. And let us remember that the extraordinary administrative costs to private insurers – up to 34 cents out of each dollar [7] – are for them no great burden, because they are easily offset, as such costs allow insurers to never pay more in medical care than they collect in premiums. Indeed, such is the purpose of the sophisticated system of co-pays, cost-sharing, deductibles, exclusion clauses, and eligibility criteria, whose goal is not to control the cost of medical care in order to provide more and better of it to more people, but to control the costs of running their profit-maximizing business, while leaving enough spare change to shower high level executives with generous salaries and compensation packages.

What is worse, ABX1 1 creates new eligibility categories -- the poor, the not-so-poor, the non-poor, and several levels within each category -- and imposes “fines” for misbehavior (e.g. failing to purchase health insurance) that will have to be enforced, all of which will increase administrative waste. And in its attempt to regulate industry, whether or not it succeeds, the legislation creates yet another layer of expensive bureaucracy that will divest resources from actual medical care.
Last, ABX1 1 will not control costs because it prevents Californians from using a major cost-containment mechanism: the purchasing power of large pools, which allows single payer systems like the Veteran’s Administration or Canadian Medicare to negotiate for best prices of medical goods and services through global budgets, fee schedules and drug formularies.

This failure to control costs will prevent ABX1 1 from meeting the other half of its promise: providing health care security to Californians. It cannot provide “health care security” because it does not guarantee a comprehensive package of medical services at prices that are affordable for prospective patients. Rather, it merely mandates individuals to buy a policy in the market, whether or not the policies they can afford truly meet their medical needs. And we should note that subsidies, likely to increase as more individuals become impoverished by rising medical costs and become “eligible” for them, are not gratis: they are borne collectively by all taxpayers.

If we are to go by the experience of other states, the prospects of ABX1 1, at least for those who would like to have the health care security and cost control of medical care that the legislation promises, are grim: a similar, individual mandate in Massachusetts is already running $147 million over the $472 million budgeted for fiscal year 2007, collections of fines from employers who fail to provide coverage are 80% below the original projections, and barely 7% of the uninsured who are not poor enough to receive subsidies have enrolled in any plan at all. Yet we should refrain from throwing the first stone: the cheapest plan that meets the mandate’s requirement for a couple in their fifties costs $8,200 per year, with $2,000 deductible per person, so “choosing” to not enroll in any plan, even at risk of being fined, is not unreasonable [8]. Nor is it unreasonable to request, as many have done, a “compassionate exemption”, which by April of 2006 was already being granted to approximately 20% of those who failed to comply with the mandate (about 60,000 individuals) [9].

All of the above gives us reason to believe that an individual mandate, such as the one proposed by ABX1 1, will no more protect individuals from financial ruin due to medical expenses than bare bones drivers’ insurance protects anybody from the the costs of a car accident. We do not count on those policies to get our cars back in shape, but we need them to meet the requirements of the law and protect ourselves against the claims of others. So for now, no reason to raise our glasses.
And yet, some Californians are surely celebraing: among them are high level executives and shareholders in the private health insurance sector, which, if ABX1 1 becomes law, will count on a captive pool of clients for years to come. Indeed, Blue Shield California and colleagues must be following closely the smashing success of the Massachusetts plan. They must be particularly excited about the surplus of $1 million a day that Blue Cross Massachusetts is collecting. Or about the $16.4 million retirement bonus recently awarded its chairman, even as he continues to draw a $3 million dollar salary [8].

Which is why we do not need to think too hard to understand why this marriage of Republicans and Democrats must already be celebrated in so many places. We can only speculate, however, why health care reporters insist on calling ABX1 1 and similarly ill-conceived legislation “near-universal” or “universal” health coverage. Or why they are dismissing single payer, the only viable option for controlling costs and securing health care [10], as having “limited political support” [11], as editors in the New York Times recently did, despite evidence to the contrary among the public [12] and even among physicians [13].

But maybe we are missing something. .?

Claudia Chaufan received her medical degree from the University in Buenos Aires and her PhD from the University of California at Santa Cruz, where she currently teaches sociology of health and medicine and health policy. She is the Vice President of California Physicians Alliance, the Californa Chapter of Physicians for a National Health Program, and an active member of the national group.

References
1. Anderson, G.F., et al., It's The Price, Stupid: Why The United States Is So Different From Other Countries. Health Affairs, 2003. 22(3): p. 89-105.
2. Woolhandler, S. and D.U. Himmelstein, Paying for health insurance-and not getting it. Health Affairs, 2002. 21(4): p. 88-98.
3. Institute of Medicine, Hidden Costs, Value Lost: Uninsurance in America. 2003, National Academies Press: Washington D.C.
4. California Health Care Foundation, Snapshot: California's Uninsured. 2004, California Health Care Foundation: Oakland. p. 1-18.
5. Cohn, J., What’s the One Thing Big Business and the Left Have in Common?, in The New York Times Magazine. 2007.
6. Sack, K., States' Widening of Health Care Hits Roadblocks, in The New York Times. 2007: New York. p. 1, 16.
7. Kahn, J.G., et al., The Cost Of Health Insurance Administration In California: Estimates For Insurers, Physicians, And Hospitals. Health Affairs, 2005. 24(6): p. 1629-1639.
8. Woolhandler, S. and D.U. Himmelstein, An Open Letter to the Nation from Massachusetts Physicians: Early Outcomes from Massachusetts' Health Care Plan. 2008, http://www.pnhp.org.
9. Center for Studying Health Systems' Change, Massachusetts Health Reform: Employers, Lower-Wage Workers, and Universal Coverage (Issues Brief). 2007, Center for Studying Health Systems' Change: Washington D.C. p. Report No113 p. 1-6.
10. Sheils, J.F. and R.A. Haught, The Health Care for All Californians Act: A Cost and Economic Impacts Analysis: Executive Summary. 2005, The Lewin Group. p. 1-10.
11. Editorial, The High Cost of Health Care, in The New York Times. 2007: New York. p. 9.
12. Kuhnhenn, J. and T. Tompson, Pocketbook worries outweigh voters' concerns over war in Iraq, in http://news.yahoo.com/page/election-2008-political-pulse-voter-worries. 2007, Associated Press.
13. Trapp, D., Internist society sees single-payer as option. 2007 December 24/31, Amednews.com.
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Comments (Hide Comments)
by Repost By Richard Phelps


Dear Friends,


Below is an essay by Senator Sheila Kuehl that provides a critique of the Governor and Assembly Speaker's healthcare reform legislation, ABX 1 1. We urge you to read her essay and then please immediately contact the members of the Senate Health Committee and voice your strong opposition to ABX 1 1.

Members, Senate Health Committee

Senator Sheila Kuehl (Chair)
Senator Samuel Aanestad (Vice Chair)
Senator Elaine Alquist
Senator Gilbert Cedillo
Senator Dave Cox
Senator Abel Maldonado
Senator Gloria Negrete McLeod
Senator Mark Ridley-Thomas
Senator Darrell Steinberg
Senator Mark Wyland
Senator Leland Yee

Senator Kuehl's Essay

This is my seventh and last essay for 2007. As I write, the Assembly has just passed Speaker Fabian Nunez' healthcare bill and it's on its way to the Senate and a hearing in the Senate Heath Committee in January. A number of people have called and emailed asking for my take on the bill and this essay will give some analysis.


Visit my website at http://www.sen.ca.gov/kuehl to read my previous essays. For those of you who received this essay by forwarding, it is written by California State Senator Sheila Kuehl. If you wish to subscribe to receive these essays on a continuing basis, (no charge), please send an e-mail to Sheila.Kuehl [at] sen.ca.gov, titled "subscribe". If you receive it directly and wish you didn't…..send an e-mail to the same address, but title it "unsubscribe".


"Giant Leap" for Health Coverage? Or for premiums...
The press has described the bill in breathless prose as a "giant leap" for health coverage. Unfortunately, this is not quite the case, depending on who you are and how and where you work. Each of the sections below will explain some of the provisions of the bill actually harmful to regular, working-class and middle-class families. And it provides less help than advertised for poor families, as well.


Coverage for everyone?
The press characterizes the bill as "providing" or "extending" coverage to all but a few Californians.
This is a mischaracterization, nothing is "provided". Instead, all Californians would be required to buy insurance with no caps on premiums, no regulation of the cost of insurance or medical expense, no maximum deductibles, and no floor on how little coverage you can buy and satisfy the legal requirement. If you do not buy insurance within 62 days after the requirement kicks in, the Franchise Tax Board is authorized to collect premiums determined by the Managed Risk Medical Insurance Board by garnishment of wages or mortgage liens.


Your employer would be required to spend from 1% to 6.5% of payroll (depending on the size of the payroll) to buy insurance policies for employees. Employees would be required to take the insurance and to pay whatever supplemental premiums, co-pays and out of pocket costs are not paid by the employer. There are no caps on what the employee would pay, only for the employer. There is a vague term about "hardship" letting people out of the mandate, but no definition is offered and, as in Massachusetts, if you are excused from the mandatory purchase of insurance, you simply have no insurance!


If your employer does not wish to spend 1% to 6.5% of payroll on your insurance, he or she must pay the same amount into a state fund, and employees of those employers will be required to buy their insurance through the state fund, again with no cap on premiums and no floor on coverage.


Is there at least minimum coverage required in the bill?
No. For the State Fund, for those employers who choose to pay into it, the Managed Risk Medical Insurance Board will set the minimum coverage (what you get for your premiums, what conditions, services, treatments, are covered by your insurance), which will not appear in statute. For those who buy insurance on the open, private market, and those whose employers pay total or partial premiums for insurance chosen by the employer, as well as for self-employed folks, there is no minimum coverage in the bill. One woman reported to me that she had a bare-bones, catastrophic policy and, upon being rushed to the hospital, received the bill for the ambulance ride that got her there, placed on her chest, as she was carried into the hospital.


How is the bill to be financed?
There is no funding in the bill. Instead, there is the promise of an initiative, no language available yet, to tax cigarettes at an additional $1, $1.50 or $2 a pack, tax hospitals in order to draw down federal money which would then go back, to a great extent, to the public hospitals, and require employers to pay a portion of their employees premiums, as indicated above. There is also a hope that the federal government will provide more money for children's insurance. Instead, of course, the federal government is cutting children's insurance such that the California Legislature will meet in emergency session in January to disenroll children from Healthy Families.

Everything else would be paid for by premiums, co-pays and deductibles.


In addition, if the Director of Finance finds that the state cannot afford all the promises made in the bill, the bill goes away. Or does it? There needs to be clarification that, if the initiative fails, we're not still stuck with an individual mandate to buy insurance.


But how do poor people fare.....today's uninsured?
Better, but still a hardship. Healthy Families coverage for children would allow those whose families who earn up to $40,500 for one adult and one child to be covered (children only) by state or federal money. (federal cuts mean we already have to kick kids off this program, see above). Since the bill allows all children, even those with undocumented parents, to be covered, but the feds won't pay for those children, there will be increased state costs in Healthy Families. (see budget discussion below)


Families whose income is at or less than $43,000 for a family of three would be "subsidized" for their premiums only. This means they would be required to pay an unspecified amount for premiums and receive an unspecified amount from the state budget to help. There is no subsidy for co-pays, deductibles or out of pocket (uninsured) expenses associated with their policies, which could be sizeable if they bought a minimal policy.


Families who earn between $43,000 and $68,680 for a family of three would be allowed to pay full boat for their uncapped premiums and then deduct any part of the premium that exceeds 5.5% of their income as a tax credit, refunded dollar for dollar by state money. (again, see budget discussion, below). There is no tax credit for their required co-pays, deductibles or out of pocket (uninsured) expenses, which could be big if they purchased a minimal policy.


But insurance companies would be required to take everyone

That is correct. However, they are allowed to offer minimal coverage set by the Managed Risk Medical Insurance Board (minimum coverage that may be offered is not specified in the bill) and there is no control over their premiums or deductibles.
In addition, they are allowed to adjust their premiums, not by medical condition, but by age and other demographic factors.
The companies are required to spend 85% of premiums on care, but they maintain they do that now, and count marketing, information technology and other kinds of administrative overhead as "care". The bill would allow this characterization to continue.


Unions seem to like the bill, don't they?
Well, some of them. SEIU, who has organized and hopes to organize healthcare workers is positively salivating over the bill, to the extent that their national leader, Andy Stern, is engineering moving out the current state leader, who has questioned the bill, in favor of a new leader who will go along with it. AFSCME has also come on board with the bill, thinking that public employees will benefit. (However, with all the hits the bill brings on the state budget, this may be short sighted). About half of the unions in the California Labor Federation are with it, and half are against it but not taking a firm position. The California Nurses, the California School Employees and the Teamsters, among others, are strongly in opposition.


Many other troubling sections in the bill.

(1) rescission
While we are struggling to keep insurance companies from rescinding policies of beneficiaries who do nothing wrong except try to use their insurance, the bill takes a step backward by applying the "no retroactive rescission" language only to HMO's and not to all insurers.

Troubling (2), no choice of doctors or hospitals
Your insurance company tells you who is in their provider network. Employers are not required to give a range of choices. The state fund would give a range of choices, as soon as they are determined by the Managed Risk Medical Insurance Board.

Troubling (3), more unsupervised healthcare workers Nurse Practitioners and Physician's Assistants would be allowed, by the bill, to give written instructions (not personal supervision) to medical assistants in retail clinics, such as those proposed for Wal Mart, and the assistants would be allowed to give medication. Currently they can do so in specific clinic settings. The bill removes this requirement.


So, what's next?
There may be a hearing on the bill in Senate Health on January 16th, but only if the requested analysis of the impact of the State Budget by the Legislative Analyst's Office is complete. Thus, the hearing may be postponed until January 23rd.

-end-

Please contact the members of the Senate Health Committee and voice your strong opposition to ABX 1 1.

Members, Senate Health Committee

Senator Sheila Kuehl (Chair)
Senator Samuel Aanestad (Vice Chair)
Senator Elaine Alquist
Senator Gilbert Cedillo
Senator Dave Cox
Senator Abel Maldonado
Senator Gloria Negrete McLeod
Senator Mark Ridley-Thomas
Senator Darrell Steinberg
Senator Mark Wyland
Senator Leland Yee


The bill may be read online at http://www.leginfo.ca.gov. Press the button for Bill Information and type in ABX1 1 and click on what comes up. The author is Speaker Nunez.

Raise $0.03 for OneCareNow Universal Health Care campaign each time you search the web




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by Repost by Richard Phelps
France is healthcare leader, US comes dead last: study
Tue Jan 8, 4:45 PM ET



France is tops, and the United States dead last, in
providing timely and effective healthcare to its
citizens, according to a survey Tuesday of preventable
deaths in 19 industrialized countries.

The study by the Commonwealth Fund and published in
the January/February issue of the journal Health
Affairs measured developed countries' effectiveness at
providing timely and effective healthcare.

The study, entitled "Measuring the Health of Nations:
Updating an Earlier Analysis," was written by
researchers from the London School of Hygiene and
Tropical Medicine. It looked at death rates in
subjects younger than 75 that could have been
prevented by timely and effective medical care.

The researchers found that while most countries
surveyed saw preventable deaths decline by an average
of 16 percent, the United States saw only a four
percent dip.

The non-profit Commonwealth Fund, which financed the
study, expressed alarm at the findings.

"It is startling to see the US falling even farther
behind on this crucial indicator of health system
performance," said Commonwealth Fund Senior Vice
President Cathy Schoen, who noted that "other
countries are reducing these preventable deaths more
rapidly, yet spending far less."

The 19 countries, in order of best to worst, were:
France, Japan, Australia, Austria, Canada, Denmark,
Finland, Germany, Greece, Ireland, Italy, Netherlands,
New Zealand, Norway, Portugal, Spain, Sweden, the
United Kingdom and the United States.

Some countries showed dramatic improvement in the
periods studied -- 1997 and 1998 and again between
2002 and 2003 -- outpacing the United States, which
showed only slight improvement.

While the United States ranked 15th of 19 between
1997-98, by 2002-03 it had fallen to last place.

"It is notable that all countries have improved
substantially except the US," said Ellen Nolte, lead
author of the study.

Had the United States performed as well as any of the
top three industrialized countries, there would have
been 101,000 fewer deaths per year, the researchers
said.




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