Solving the Health Care Crisis in Minnesota Minnesota Universal Health Care Action Network Prepared and Researched by: Joel M. Albers health economics researcher, clinical pharmacist Website: www.uhcan-mn.org, www.drugindustrywatch.bravepages.com Email: joelalbers@uhcan-mn Tel: 612-384-0973 MN-UHCAN Joel Albers

Outline Documentation of the health care crisis Analysis of power structure of the industry What’s causing the health care crisis ? Compare universal publicly-funded single-payer model to private HMO, multi-payer, job-based market approach. What polls, studies show about various health care reform models ability to cover all without increasing costs. Solving the Crisis by Building a Movement MN-UHCAN Joel Albers

Essence and Summary of Health Reform Debate Health care system that is market-based in which health care is a commodity, distributed according to ability to pay ? Health care system that is social insurance distributed according to need? MN-UHCAN Joel Albers

Documentation of the health care crisis MN-UHCAN Joel Albers

Is There Really a Health Care Crisis in MN and U.S. ? “The American Health system is in need of fundamental change. It is failing both clinicians, and patients, and their frustration levels have never been higher”, U.S. Institute of Medicine, 2001 Report Biggest frustration is with administrative tasks: billing, claims processing, inventory, insurance problems. Also: “The system is collapsing around us”: conservative Senate Democrat John Breaux of Louisiana in 2002. “The system is imploding”, Marcia Angell, former editor in chief, New England Journal of Medicine MN-UHCAN Joel Albers

WHO: Health System Rating US Ranks 37th in the World This is a crisis for the wealthiest country in the world. who.int/whr/2000/en/report.htm MN-UHCAN Joel Albers

Uninsured in Minnesota Point in time: 5.4% (266,000), at time of survey Uninsured at some point in year:8.1% Uninsured at some point in 2 yrs:20% or 941,000** Source: * MN Health Dept ‘01 Health Access Survey;** Robert Wood Johnson Foundation. Survey did not ask about mental health coverage. Minnesota’s population = 5 million 2004 Could include these: Uninsured all year:3.1% Uninsured part of year:4.7% Survey was “point in time” at time of survey, most commonly used measure of uninsurance. First 5 above were “basic HI coverage. MN Dept Hlth 2001 survey did not ask about mental health coverage. Only other was supplemental coverage for those on Medicare. No other type was asked.Thus, lack of measures on underinsured. “We estimate that about 2/3 s of MN’s uninsured are eligible for coverage thru an employer or public ins program. 1/5 of uninsured are eligible for coverage thru an employer but not enrolled. When asked why, over half responded main reason for not enrolling in employer coverage is cost. Of uninsured w/ family incomes low enough to qualify for public programs,> 3/4s would enroll if knew they were eligible. Note administrative and continuity of care problems with being uninsured even briefly. MN-UHCAN Joel Albers

Underinsured in MN 16% lack prescription drug insurance 50% of seniors lack prescription drug coverage 34% lack dental coverage Large unmeasured % lack mental health coverage Private insurance and Medicare generally do not cover long term care (neither nursing home nor home health care) Source: * MN Health Dept ‘01 Health Access Survey Yet these are all considered medically necessary services. Other countries cover these, including long term care. In fact, only a handful of Americans have private coverage for nursing home and home health care. For the rest, only virtual bankruptcy brings entitlement to public coverage under Medicaid. MN-UHCAN Joel Albers

2001 Minnesota Uninsured Rates by Race/Ethnicity Source: MN Health Dept 2001 Health Access Survey 17.3% 16.1% 15.6% 6.6% Afr Am US born 13%, Afr born 24.8% Hisp/Latino: Mexican 19.6%,other Hisp/Latin 12.6%. US born 8.5%,foreign born 36.6% Asian Am & Pacific Islander: Hmong 9%, Vietnamese, Camb, Thai,Laos 6.9% Asian Indian; 5.5% Pacific Islander: Hawaii,Guam,Samoaor other Pac Islands:15.1% Other Asian: Chinese,Korean,Filipino & Japanese:3.8% US born 6.0% Foreign born 6.9% 4.5% MN-UHCAN Joel Albers

International Comparison: Canada’s Single-Payer v. U. S International Comparison: Canada’s Single-Payer v. U.S. Multi-Payer System Life expectancy 2 years longer Infant deaths 25% lower Universal comprehensive coverage More MD visits, hospital care; less bureaucracy Quality of care equivalent to insured Americans’ Free choice of doctor/hospital Health spending half U.S. level MN-UHCAN Joel Albers

8 MN Labor Union Strikes Provoked by Health Care Costs 2000 - 2004 2004 Transit Union ATU 1005 2003 AFSCME 3800 U of MN 2002 Teachers in Red Wing 2002 Teachers in International Falls 2001 Nurses Fairview Hospital 2001 MN Association of Professional Employees 2000 HERE, Hotel and Restaurant Employees 2000 Teamsters Minneapolis Pepsi workers Minnesota Labor Union Strikes 2000 - 2004 2000 June, the Hotel and Restaurant Employees (HERE) went on strike concerning four major issues including family health insurance. They stated, “most of us rely on state-subsidized health insurance for our families because our employers refuse to provide this benefit. It should not be the responsibility of the taxpayers of this state to shoulder the burden”. 2000 July : Minneapolis Pepsi workers walked out. Again health care was a crucial contract issue. The Pepsi bottling workers, members of the Teamsters union state that Coke pays all of the health insurance premiums for its workers, including those with family coverage. Pepsi workers pay an average of about $160 permonth for family coverage, and they would have to pay even more under the company’s proposal if health premiums rose. 2001, January: 300 AFSCME clerical and technical workers, St Paul city employees, organized a January 12, 2001 rally of hundreds to hear mothers – St Paul employees – tell of dependence on medical assistance for health care for their children or in some cases without health insurance entirely, because low-paid employees cannot afford the city’s family health insurance plan. The city of St. Paul has cut retirement benefits for low-paid city workers after backing out of tentative agreements on union contracts. The city has also repeatedly tried to cut health benefit protections in union contracts. The rally was called because both unions had to accept “ with great apprehension and reluctance”, increases in the employees’ medical costs effective January 1, 2001. For the first time, $15 copays for routine office visits, and a doubling of out-of-pocket costs for prescription drugs (as much as $800 annually were imposed. 2001 June: Fairview hospital nurses went on strike. Fairview’s health care proposal was inadequate because it did not reduce premiums. Nurses could elect to enroll in Fairview’s corporate health plan, which had lower premiums, yet higher copays ande more copays for doctor visits and prescription drugs. Nurses saw that as a trade-off not an improvement. Nurses on the picket line said premiums for family coverage cost $250 to over $300 monthly, depending on which health plan they choose. *New contract upped Fairview’s share of premiums from the current 65- 68% of family coverage to 75% in ‘02.Upped pay 19.5%/3 yrs. For the nurses it was a matter of working conditions: MNA says: “Patient care is being compromised in our hospitals because not enough nurses are on staff” . RNs seek say in patient flow, workload, staff levels; pay, benefits Hospitals refused to negotiate these issues in a meaningful way 2001, October: 20,000 MN Association of Professional Employees (MAPE) and AFSCME Council 6 went on strike because their wage increases were being negated by health insurance cost increases. MAPA nearly went on strike again in the fall of 2003, yet reached an agreement that increased maximum out of pocket payments for health care and prescription drugs from $2200 in 2003 to $3300 in 2005. Family premiums will rise from $59/month in 2003 to $107.58/month in 2005. This is in addition to a two year wage freeze. For the many AFCSME members paid less than $30,000 per year, such an expense would be financially devastating. This “compromise” staved off an attempt by the governor to freeze the employer contribution to health care costs to 2003 levels. That would have meant the full 20 percent annual increase in health care costs or $190,000,000 would be thrust on the backs of the workers. It is simply wrong for the governor to think it is good politics to accuse us of Cadillac health care. He knows this is not true. MAPE and AFSCME have preserved affordable health care benefits by taking smaller wage increases over the past 30 years of collective bargaining. The governor continues to lead all of us in the wrong direction when he insists that working families pay more and more for basic health care. The governor is shortsighted by not finding ways to work with state employees and their unions to take on the medical care industry, and to help solve the health care crisis that is facing us all. Due to cost shifting, state employees now pay 15 percent of total health care expenditures. In large firms the employee’s contribution to the premium (individual’s) was 13% in 1988 and 22% in 1996. In 2004, it’s about 33%. For small firms the employee’s share is much higher than that. 2002 March: On March 31, 2002, retiree health care ended for 85,000 LTV Steel retirees, including several thousand in Minnesota. LTV’s retirees had been promised lifetime health insurance at their time of retirement. At the USWA Convention the following summerattended by 2500 union members under the banner, “Fightiong to Win”, the convention adopted a resolution calling “For a single Payer Healthcare, Publicly-Funded, Not-for-Profit Health Plan.” 2002 Spring: Soaring health care costs was the major issue in both teacher strikes in International Falls and Red wing where health care costs increased a whopping 50 percent over the last three years. 2003 May Service Employees Int’l Union 900 members walked out of United Hospital and Children’s Hospital. SEIU says Hospital charges workers 2 x as much as CEOs for health insurance. United Worker’s family $479/mo, CEO $153/mo. Other hospitals too,strike approval all 90% 2003 October: AFCSME 3800, representing 1800 clerical workers goes on strike over out of control health care increases for workers. (Teamsters local 320 at the U of MN also took a strike vote but chose not to strike. AFSCME 3937 also chose not to strike) Four of the seven plans for family coverage premiums annual increase ranged between $951.60 to a high of $1,916.20. This plus doubling of office visit copays for all plans, on top of a tw0-year wage freeze proposal. 2004 March: Amagalmated Transit Union local 1005. MN-UHCAN Joel Albers

MN 2003 Legislature Cut $200 Million From Public Assistance Programs 38,000 people will lose public health insurance by 2007 Severe restrictions for people still on MNCare,GAMC Source: MN Dept of Human Services MNCare:Increased premiums, $5,000 limit on outpatient care. Most people with chronic conditions easily go over $5,000/yr. New copays for brand $3, and generic $1 Rx drugs in MA. Cuts in diabetic supplies for MNCare. Dental care limits to $500/yr. Nonemergency emergency copay of $3. Pawlenty has recently (March, 2004) proposed to cut $40 million more from health care including nursing home and ? Note that the MCHA program, 33,000 people who were denied private insurance due to “preexisting conditions” MN-UHCAN Joel Albers

Effects of Budget Cuts on only Remaining Public Hospital: Hennepin Cty Medical Center Overcrowded emergency rooms Understaffing,higher workloads, longer shifts Lower quality health care $30 million in federal government cuts $7.8 million in other cuts Less revenue from public assistance patients, more uncompensated care Serious $ problems, 190 “nonclinical” staff fired. Source: www.savehcmc.org Save HCMC Coalition 612-338-3331 MN-UHCAN Joel Albers

Power structure of the industry MN-UHCAN Joel Albers

Power Structure of MN Health Care Industry: Medical-Industrial-Government-Academic Complex Health Professional Associations: MMA, MPubHA, MN pharmacists Assoc. Corporate: HMOs, drug, medical device, biotech corporations:attorneys,lobbyists Big Business, MN Business Partnership, Chamber of Commerce Trade Assocs: MN Council of Health Plans (HMO), MNBio (biotech) Think tanks: Interstudy (HMO),MedicalAlley (Tech) Foundations: HealthPartners Research Foundation Government agencies:Legislature, MN Dept of Health Commissions: Pawlenty-Durenberger Academia: U of MN The industry and all of its its outposts are advocating the market-based,private, for-profit approach. HMOs, hospital chains also have Government Affairs and Public Policy Committees to advise their Boards of Directors. The real power though comes not from the Boards of Directors, but from the CEOs, CFOs and COOs within the Executive Committees of these corporations (see AGs investigations of Medica, HealthPartners). If you thought the Enrons were heinous. This also includes commissions such as MN Health Care Commission of 1993, and the MN Citizens Forum on Health Care Costs 2004( the Pawlenty-Durenberger Commission. Health professional assocaitions are beholden to HMOs, Drug companies with Business, Financial conflicts of interest. Corporatization, privatization of U of MN. Armies of attorneys, phalanxes of lobbyists. Control over democracy itself. Publicly-traded, limited-liability,for-profit MN-UHCAN Joel Albers

How MN HMO & Drug Corporate Money Controls MN Legislature,2000 House Health & Human Services Policy Cmte $28,187 Senate Health & Family Security Cmte $24,943 House & Senate Legislative Caucuses* $194,221 MN DFL Party $4,500 Republican Party of MN $178,880 Source: MN for Fair and Clean Elections, *Caucuses are the legislative leaders’ PACs Control over democracy. Is it any surprised that the Senate legislative caucus is fully supporting Linda Berglin’s incremental bill to enroll small employers into MNCare?

What’s causing the health care crisis ? MN-UHCAN Joel Albers

MN Statewide Health Care Cost Trends; Current Law 60.8 37.2 Billions $ 20.4 This curve is the reason health care debate has reopened across the country. Total health care spending in Minnesota (MN) under current law is estimated at $20.4 billion in 1998, rising sharply to $31.6 billion in 2003, $37.2 billion by 2005 (9.2 % average annual increase) and tripling to $61 billion by 2012 (7.3% average annual increase ’05-‘12). Per capita health care costs in 2005 are projected at $ 7,157. Compare this curve with wages, GDP, and inflation rate -- all are flat in MN and US. MDH has a slide of this. Year Sources: Center for Medicare and Medicaid Services www.hcfa.gov ; “Health spending projections for 2001-2012,Health Affairs, 2/3/03 MN-UHCAN Joel Albers

Double-Digit Health Care Cost Increases in Every Sector of MN Total Statewide State government Seniors Business Labor Unions Households MN-UHCAN Joel Albers

Market-based System Since 1994 Results in Oligopoly 4 Private HMOs Control MN Health Care Market 2002 Blue Cross-Blue Shield, 2 million members Medica, 1 million members HealthPartners,660,000 members Preferred One, 600,000 members These 4 insure 9 of every 10 Minnesotans, Own or investors in most of MN’s major hospitals & clinics Source: HMO companies Evidence market-based system has failed -- oligopoly. All 4 characteristics of a competitive market are violated. Lot of buyers and sellers, standardization of product, price disclosure, no barriers to entry in the market. These 4 insure 9 of every 10 Minnesotans, own or are investors in most of the state’s major hospitals and clinics and wield market power unheard of elsewhere in the US. Medica insures about 45% of its 1 million members;remainder are self-insured plans sponsored by employers. All use Medica’s MD and hospital network. Contracts w/ 15,000 MDs. HP has 202,000 (of 660,000) in self-insured plans. Contracts w/ 11,000 MDs.Owns 1 hospital,1 hospital partner, and owns 25 clinics. 2/3’s of Preferred One is owned by Fairview. Roger feldman HC economist U MN:rates MN as one of least competitive insurance mkts in US. His studies indicate MN premiums would be betw 7-11% lower w/ more competition. Allan Baumgarten indy analyst: MNs premiums rising faster than any of the 7 mkts he studies all more competitive. Denver has 8 HMOs and none own a hospital. Highest combined mkt share of 4 lgest HMOs is 61%. Mn’s hlth insurers also own hospitals, clinics, and MD specialty grps, ripe for conflict of interest (HMO insurer might try for higher fees from hosps/clinics it owns, & lower fees from its competitors. Lg hosp systems that own HMOs can do same. 1993 MinnesotaCare bill allowed insurers to buy hospitals,MDs. Most states didn’t relax antitrust regulations. In MN both horizontal and vertical integration. By 1996 most traditional for-profit plans left MN. The AG split Allina into Medica (HMO) and Allina (hospital/clinic system). Allina has shown some interest in single-payer : MN-UHCAN Joel Albers

Twin Cities Hospital Market Share,1996 & 2001 Measured as Percent of Inpatient Admissions Children’s 5%,5.6% Other non-affiliated 3%,3.9% Methodist 6% Allina 27%, 29.2% HealthPartners,(was Regions) 7%,7.6% N.Memorial 7%,7.8% Hennepin Cty 8%,6.3% Evidence market-based system has failed. A highly concentrated hospital market too. Hardly a competitive market. Hospital Consolidation In addition to the consolidation among health plans, observers often note that the Twin Cities hospital market is highly consolidated. As with MN HMOs, much of this consolidation occurred during a series of mergers in the 1990s. The largest hospital merger was between LifeSpan and HealthOne, forming the HealthSpan Hospital System. The second merger occurred in 1997 between the U of MN and the Fairview Hospital System. Vertical Integration In addition to the mergers among hospitals or among health plans, mergers between different types of entities, such as between a hospital system and a health plan, have also occurred in MN’s market. The two most prominent examples are the merger between the HealthSpan Hospital System and Medica HMO in 1994, forming Allina Health System, and between HealthPartners HMO and St. Paul Ramsey (now Regions Hospital). Source: MN Dept of Health, Consolidation in MN’s Health Care Market, Issue Brief 98-04. The attorney general finally split Allina into Medica HMO, and Allina Hospital system in 2001. Also, Fairview owns two-thirds of PreferredOne, a health plan (PPO) with more than 600,000 members. Fairview owns 7 hospitals, and 63 clinics. HealthPartners owns 1 hospital is in a partnership with another and owns 25 clinics. Allina, due to pressure from Attorney General Hatch in 2001, was split into Medica HMO and Allina Health System (Hospitals). Allina owns 11 hospitals, manages or is affiliated with 6 others, and owns 48 clinics. BCBS is a partner in a Fargo, ND hospital, and a partner in Willmar, Mankato, and Fargo clinics. Fairview University 26%, 20.9% HealthEast12.0%, 12.1% Source: MN Dept of Health, Consolidation in MN’s Health Care Market, Issue Brief 98-04, MN Managed Care Review 2002, Part 1 MN-UHCAN Joel Albers

What is causing health care costs to spiral out of control? Medical-industrial-government-academic-complex strategy: blame consumer demand & overutilization Drink too much alcohol Smoke too much Overweight Don’t feel cost of care Aging population Malpractice costs MN-UHCAN Joel Albers

Myth: The US Health System Costs so Much Because Americans Drink and Smoke so Much MN-UHCAN Joel Albers

Myth: US Health Care Costs so Much Because Americans are so Fat www.iuns.org/features/obesity and Obesity Res 2001;9:2306 MN-UHCAN Joel Albers

Myth: US Health Care Costs so Much Because Americans Don’t Feel the Cost of Care % of total health spending: WHO: 2000 MN-UHCAN Joel Albers

Myth: US Health Care Costs so Much Because Americans don’t personally pay for Health Care MN-UHCAN Joel Albers

Myth: US Health Care Costs so Much Because Americans are Really Old! Note HealthPartners Foundation study, and MDH study in MN. Both contradict the notion that the aging population even upt o 2030 is driving HC costs. MN-UHCAN Joel Albers

Per Capita Spending and % Elderly % of Population over 65 Health Aff 2002;21:170 MN-UHCAN Joel Albers

Myth: Malpractice costs are why US Health care costs so much % of total US Health Spending Premiums MD and Hosp .07% Defensive medicine .12% Comp Ther 1998;24:455-9 MN-UHCAN Joel Albers

What is REALLY causing health care costs to spiral out of control? In reality, the CAUSE comes from the supply side HMO premium prices, administrative costs Drug,medical device, biotechnology company prices MN-UHCAN Joel Albers

It’s the Prices and Administrative costs Health Care Costs = Price X Volume + adm costs Note Uwe Reinhardt’s August 2003 article in Health Affairs, “It’s the Prices Stupid”: Why the US is so different from other countries; higher health spending but lower use of health services adds up to much higher prices in the US. Every other country contains costs through price controls and admin efficiency through single-payer. US attempts to contain costs by decreasing volume of services, which ironically increases admin costs to do so. MN-UHCAN Joel Albers

Excess Administrative Costs (% of Revenues) in U. S Excess Administrative Costs (% of Revenues) in U.S. Compared to Canada,1999 These data are the most detailed and comprehensive analysis of administrative costs undertaken to date. The costs these percentages represent are in U.S. dollars. Figures on insurance overhead relied on the insurance industry’s own reports of their costs. US total HC spending $1.6 trillion, could save $200 billion. The total is a conservative estimate due to the exclusion of administrative cost percentages of health businesses for which reliable administrative cost data were unavailable -- for instance, drug companies,retail pharmacies, medical equipment and supplies, public health, construction, research, and “other”, a heterogeneous category that includes ambulance companies. These excluded accounted for $261.1 billion, 21.6% of U.S. health care expenditures, and $21.0 billion, 27.6% of Canadian health care expenditures. ‘Insurer’, in the bar graph, refers to both private and public insurers as a percent of TOTAL HEALTH CARE EXPENDITURES in each country. Taken as a percentage of total private insurance premiums ($401.2 billion), plus Medicare and Medicaid 1999 program expenditures (estimated $387 billion), the U.S. public and private overhead was $72.0 billion/ $401.2 billion + $387 billion = 9.1%. Private insurers administrative costs are considerably greater than the average of private and public as depicted in the graph: U. S. (11.7%), Canada (13.2%). Administrative costs of Canada’s provincial insurance plans was 1.3% ($311 million/$23.5 billion spent for physicians and hospital services. Employer = Employers’ costs to manage health benefits. Percent administrative costs were not reported in the Woolhandler et. al. 2003 study. This was estimated as follows: Total employers’ costs to manage health benefits from 1999 at $15.9 billion as reported by Woolhandler et al. 2003 (includes $12.2 internal adm costs, and $3.7 billion on health care benefits consultants). This was divided by total private employer health care spending from 1999 calculated as follows:( In 1998 private U.S. employers paid $216.5 billion for health care (Himmelstein et. al. Health Affairs 1999;18 (2):176. National Health Expenditure inflation rate from 1998 to 1999 was 5.6%. Adjusting for inflation from 1998 to 1999 that total becomes $228.6 billion). Thus $15.9 billion/ $228.6 billion = 7.0 %. Spending per capita for employers’ costs to manage health benefits was reported as U.S. ($57) v. Canada ($8), the U.S. greater by a factor of 7. Thus, Canada’s employer administrative costs as percentage of spending is 1%. Source: Woolhandler S., Campbell T., Himmelstein D. Costs of Health Care Administration in the U.S. and Canada. New England Journal of Medicine 2003;349:768-75 MN-UHCAN Joel Albers

International Comparisons Every other industrialized nation has a healthcare system that assures medical care for all All spend less than we do; most spend less than half Most have lower death rates, more accountability, and higher satisfaction MN-UHCAN Joel Albers

U.S. Public Spending Per Capita for Health is Greater than Total Spending in Other Nations Note: Public includes benefit costs for govt. employees & tax subsidy for private insurance Source: NEJM 1999; 340:109; Health Aff 2000; 19(3):150 MN-UHCAN Joel Albers

How are profits made in Health care ? HMOs,other insurers are fiscal intermediaries (middlemen) do it by denying care, underutilization Drug, device, biotech companies do it by overpromotion, overutilization Thus, the system suffers from both overutilization, AND underutilization of health care services Take home message: The dirty little secret is that HMOs, other health insurers profit by denying care. Technical term for this is loss ratios. The amount paid out for care/ total revenues. The more paid out the higher the loss ratio. This is what determines stock price in publicly-traded health insurers. MN-UHCAN Joel Albers

What is single-payer compared to current HMO multi-payer enterprise ? MN-UHCAN Joel Albers

Single-payer is: publicly financed and administered, yet privately practiced, social insurance system Public financing; public taxes replace private premiums Public Admin: the single-payer- a citizen board- replaces multi-payers Social insurance: All in,None out; healthy subsidize sick, disperse financial risk over entire population.No bankruptcy Socialized medicine: ONLY if gov’t EMPLOYS practitioners and OWNS hospitals, nursing homes etc It’s not government run or socialized medicine MN-UHCAN Joel Albers

Health Care is a Public Good: like roads, fire protection, parks something we all need but cannot afford to pay for ourselves MN-UHCAN Joel Albers

Basic principles of a single-payer system Universal – it covers everyone Comprehensive – covers all needed health care services Cost Containment – sets fee schedules for practitioners, budgets for hospitals, controls prices; ends insurance co. waste. Choice of Practitioners – patients choose practitioners  Fairly Financed – funds health care by consolidating existing public programs, & a tax that replaces premiums & copays. Publicly Accountable – a board of citizens sets fee schedules for providers, budgets for hospitals, and ensures quality of care. Comprehensive = including long term care, prescription drugs, mental health, and dental care.

Models for Single-payer Health Care ? U. S. Medicare 41 million elderly and disabled Internationally: Canada, Sweden, Norway, Denmark MN-UHCAN Joel Albers

Myths About Single-payer perpetuated by Medical-Industrial- Government- Academic Complex We can’t afford it It’s socialized medicine It’s not politically feasibility It will stifle innovation We would have to ration care Will increase taxes It would be government run MN-UHCAN Joel Albers

Difference Between Single-payer and Multipayer-HMO system Analogy Fences (Macromanagement) Reins (micromanagement) The two systems are analogous to fences and reins. SP puts fence around the system by controlling overall prices, squeezing out xs admin costs, unnecessary duplication, and profit, while intervening little in the patient-practitioner relationship. HMOs use reins to try and tame each bronco ( a third party utilization reviewer often approves or denies care). Hands on supervision of practitioners. HMO “managed care” is like trying to tame each bronco by hands on supervision of each practioner and patient through utilization review, prior authorization, precertification in hospital. Single-payer puts a fence around the whole system, by controlling prices, and by uniform benefits, standardized billing, global budgets, and leaves the patient-practitioner relationship autonomous. MN-UHCAN Joel Albers

How the HMO System Works in MN Micromanagement system to control costs by restrict or deny services Managed care: hands-on supervision of practitioners Transferred financial risk to physicians (capitation bonuses) Utilization review, Heavier workloads Sometimes limiting choice of physician. Managed competition theory: competition among HMOs controls costs. Reality is oligopoly of HMOs formed, not “managed competition” MN-UHCAN Joel Albers

What the polls, studies, and cost analyses show about various health care reform models. MN-UHCAN Joel Albers

20% 80% 20% 20% 80% 80% opinions regarding health care services Which of these do you think is more important? Providing health care coverage for all Americans, even if it means raising taxes Holding down taxes, even if it means some Americans do not have health care coverage. ABCNEWS Poll Comparison: The response was very similar in the national poll with 17% favoring holding down taxes and 80% favoring providing health care for all Americans. (Base=795) 20% 20% Eight out of ten Minnesotans are willing to pay higher taxes in order to ensure that all Americans have health care coverage. 20% 80% 80% 80% MN-UHCAN Joel Albers

Washington Post/ABC Poll Oct 2003 62% of the U.S. supports a national health care system that covers everyone 32% favor the current system 6% don’t know Most think Canada’s (single-payer) system is better MN-UHCAN Joel Albers

“What is the best health care system for the most people?” 56% of Medical Students & Faculty Favor Single Payer, Majority of Med School Deans Concur “What is the best health care system for the most people?” Lot of practitioners support for SP in MN. NASW, Psychologists, MN Nursing Association. MMA almost voted for SP pilot project in 1994; lost by 4 votes. Independent pharmacists in MN, 2 debates between HMO and SP, both times majority in favor of SP. Source: NEJM 1999; 340:928 MN-UHCAN Joel Albers

9 State Studies Conclude Single-Payer Financing Saves $ While Covering All Massachusetts Medical Society, 2 studies, 1998 California, funded by State legislature, 2002* Oregon, Health Care for All, 2001 Vermont State publicly funded study, 2001 * Maryland, privately funded* Maine Rhode Island 2002 Missouri 2003 *Evaluations carried out by The Lewin Group, Inc www.healthcareoptions.ca.gov = California; , www.hcao.org = Oregon MN-UHCAN Joel Albers

7 National Studies Conclude Single-Payer Financing Saves $, Covers All U.S. Economic Policy Institute (private) 1998 4 studies by Congressional Budget Office, ‘91-’93 U.S. General Accounting Office, 1991 Physicians for a National Health Program,PNHP,’91 MN-UHCAN Joel Albers

Projected Universal Single-payer Health Plan Savings for MN 2005 (in millions) Total Health Care Expenditures (current law) $ 37,194 Additional health care utilization from extending coverage to under and uninsured, & eliminating cost sharing +$ 3,905 (10.5% of total costs) Minus excess administrative costs now incurred by insurers, employers, hospitals, practitioners,nursing homes, home health care -$ 6,309 (17% of total costs) Savings from prescription drug discounts a/ - $ 982 (2.6% of total costs) Total Health Care Expenditures, Single-payer $ 33,808 Total Savings under Single-payer AFTER covering all $ 3,386 (9.1% of total costs) Further savings would accrue if retail pharmacy, drug companies, other administrative, and savings from minimizing fraud were calculated. a/ It is anticipated that the Program will secure discounts approximating that of Medicaid (15.1% of Avg Manufacturers’ Price (AMP) or “best price”) or Veterans Affairs (Federal Supply Schedule,the Minimum or Federal Ceiling Price (FCP) of 24% of AMP,). The actual FSS average discount price of AMP has been estimated at 40% by Merrill Lynch based on VA prices; 42% by the CBO, www.cbo.gov/showdoc.cfm?index=655&sequence=4 ; and 52% by the GAO, Drug Prices; Effects of Opening the FSS for Pharmaceuticals are Uncertain. Minnesota Medical Assistance rebates in 2000 were 18.5%. $5,307 x .185 = $982 million. Source: National Pharmaceutical Council, Pharmaceutical Benefits under State Medical Assistance Programs, Reston, Virginia 2001, section on Minnesota-1. Thus, this estimate was at the conservative end of the discount range. Continued from previous slide- d/ 15% estimated increase for nursing home use. According to the study by Charlene Harrington and Christine Cassel, et al. “ A National Long-term Care Program for the United States,” JAMA 266;21:3025, (December 4, 1991) an increase of 20% for nursing home care with universal long-term care is suggested. Since Minnesota has a history of controlling inpatient nursing home care by providing more community-based care, that estimated increase was adjusted to 15%. (Their source is the Pepper Commission, and Rivlin and Weiner, “Caring for the Disabled Elderly: Who Will Pay?” Washington,DC: Brookings Institution, 1988. The 1988 study also anticipated a 55% increase in home health care use. Both references are cited in Universal Comprehensive Coverage; see note b.) e/ Subtotal is $4,036, minus excess administrative costs for uninsured, RX drugs, nursing home, and home health care --the areas that were not already calculated at a marginal rate. Thus total costs for each of these categories was multiplied by 7.8% and subtracted from $4,036. C and d collectively refer to increased HC utilization for underinsured. Source: Joel Albers MN-UHCAN Joel Albers

State-by-State Estimates of Single-payer Savings MN Ranks 3rd in U. S State-by-State Estimates of Single-payer Savings MN Ranks 3rd in U.S. Administrative Savings Available Per Uninsured Resident 2003 Projected Health Expend. Current System Millions $ Admin. Expenses in Potential Admin. Savings in Uninsured Residents in 2001 1000s Admin. Savings Available per Uninsured Resident $ D.C. 6,226 1,816 1,244 70 17,771 Mass. 43,603 12,090 8,556 520 16,453 MN 28,862 7,885 5,793 392 14,777 R.I. 6,353 1,672 1,174 80 14,677 WI 28,598 7,727 5,527 409 13,513 Harvard/Public Citizen Report by Himmelstein D.U., Woolhandler S, Wolfe S. , “Administrative Waste in the U.S. Health Care System in 2003: The Cost to the Nation, the States, and the District of Columbia, “ With State-Specific Estimates of Potential Savings. August 27, 2003. MN-UHCAN Joel Albers

Cumulative savings from 2005 - 2012 = $ 56.2 billion Future Savings, Minnesota Total Health Care Spending: current system v. single-payer Cost growth under current trend of 7.3% per year 60.8 56.7 52.9 49.3 45.9 42.8 49.3 39.9 37.2 46.7 44.3 billions 42.0 39.8 37.7 35.7 33.8 Single-payer: limit cost growth to 5.5% per year Health expenditures in the U.S. are currently rising three times faster as the U.S. Gross National Product; in Canada they are rising at a rate only slightly greater than growth in the Gross National Product. The 5.5% growth limit is only 0.5% less than 6.0% annual limit on health spending growth stipulated under the 1993 MinnesotaCare law. It stated, “ the Commissioner of Health is responsible for developing and enforcing annual limits on the increase in total public and private health care spending in Minnesota. The growth limits are designed to reduce the rate of growth in health spending by at least ten percent each year for the next five years. Growth limits will be enforced through aggregate limits on ISNs, CISNs, and through RAPO.” Year Cumulative savings from 2005 - 2012 = $ 56.2 billion Source: Joel Albers MN-UHCAN Joel Albers

Projected Health Expenditures 2005: Transition to, Implementation of Single-payer, (in millions) Single-payer expenditures in 2005 $ 33,808 Admin. costs 1st yr of plan operation:(6% of program costs)a/ +$ 2,029 Health Care Operating Budget b/ $ 35,837 Additional 1% of Operating budget for displaced worker training c/ $ 358 Construction Account, 1.15% of Op budget d/ $ 389 Reserve Account e/ $ 290 Total Health Plan Budget $ 36,874 a/ Includes initial capital costs of setting up a uniform billing system, an encounter data system, and a quality assurance system, and is equal to 6% of program costs. After the third year of operation, administrative costs will be capped at 5% of single-payer program revenues. The figure used here for total administration costs in the 1st year of operation is 6% of personal health care expenditures. Not all administrative functions will require new funding; current resources devoted to the MN Universal Health Care Program and other government health programs will be subsumed in the Program operations. Indeed, the over $2 billion in administration costs projected for the first year of Health Plan implementation may be a high estimate. Minnesota already has an infrastructure for quality review, a billing system, policy analysis, technology assessment, surveillance and utilization review (partly to detect consumer, provider, and to some extent health plan fraud), as part of the current system. This infrastructure includes the MN Dept of Health’s Health Policy and Systems Compliance, and Health Technology Advisory Committee; and the MN Dept of Human Services Health Care Operations Division, and Performance Management and Quality Improvement. After the first three years of the Plan’s operation, the administrative costs may not exceed 5% of Plan revenues collected in the preceding year. After the initial one-time start-up capital costs, the ongoing annual costs of the Program are projected to be lower than the case if the Program did not take effect. b/ Annual costs will decrease in later years, as one-time start-up costs occur primarily in the first 3 years. c/ This fund will address needs of workers in billing and insurance functions. d/ This fund provides for construction costs that were previously funded by private sources; this estimate is based on CMS National Health Accounts calculation of 1.15% of health care costs. e/ The Program requires the development of a Reserve Account. Source: Joel Albers MN-UHCAN Joel Albers

Estimated Financing of Single-payer Health Plan,2005 (in millions) Government programs such as Medicare, Medicaid,and State employees, 44% of base personal health care expenditures $ 16,365 Payroll tax at 9.5% of $108.9 billion $ 10,563 Income tax at 5.1% of $179.9 billion Personal Income $10,794 Transfer of workers compensation medical payments $ 470 Transfer of medical portion of automobile insurance $ 573 Total projected revenue $ 36,929 The government share of personal health care expenditures is projected at 41%, according to CMS. 150,000 state employees account for another 3.0% of total statewide health care expenditures, or $950 million/$37,194 million. The Program implementation calls for integration of federal programs, such as Medicare and Medicaid, into the single statewide Program pursuant to negotiations with the federal government. Other programs and services to be included in negotiations for transfer to the State plan are: Indian Health Service; state and local hospitals; CHAMPUS/Tricare; and federal block grants. The source for the Minnesota personal income projections and payroll projections is the Minnesota Bureau of Economic Affairs, http://www.bea.doc.gov/bea/regional/reis/drill.cfm . Accessed 11/06/03 Source of baseline figures regarding workers compensation: Minnesota Department of Labor and Industry, Research and Statistics Unit. 2002 data inflated to 2005 using the CPI. Source of baseline figures on revenue from the medical portion of automobile insurance: MN Dept. of Commerce, Property and Casualty Unit. 2002 data. The employer would pay 6.5%, and the employee 3.0% of the 9.5% payroll tax. Thus, employers now pay the same or less than the 6.5% of payroll they currently pay in health care premiums. Employers also save another $52 million in costs to administer their health benefits. Although the income tax of 5.1% is added to the current income tax, it is offset by elimination of private insurer premiums and all or most out-of-pocket costs. Source: Joel Albers MN-UHCAN Joel Albers

Building a Movement Organizing Model Goals Objectives Strategies Tactics Timeline The issue v. the organizing. Principles: start at grassroots, do analysis, build relationships, trust, capacity. MN-UHCAN Joel Albers

Organizing Model: affinity group-spokescouncil-consensus is one model Networking & Coordinating (v. Centralized Single-issue Coalition) : organizations horizontally linked, diverse, inclusive Organizational Structure: decentralized, non-bureaucratic, non-hierarchical, organizations send reps to spokescouncil mtg Decisionmaking process: All decisions democratic by consensus, participatory, every voice heard equally. Develop Work Plan to proactively set mission, goals, objectives, strategy, narrowed down to specific Tactics and Timeline at work, hood, school, organizations. Organize in your own niche. MN-UHCAN Joel Albers

Infrastructure: working groups Actions: strikes, rallies,marches, street theater, creative, continuity Outreach: flyering, tabling, endorsements, resolutions, petitions Education: forums,conferences, speaker’s bureau, HC resource center Legislation: bills, lobbying, hearings Media: independent, mainstream, incite sustained, accurate debate Research: cost analysis, analysis of policy proposals, surveys Communications: website,e listserve, phone tree Share stories, powerpoint. Financial working group. MN-UHCAN Joel Albers

Implement Universal Single-payer Goal and Objectives Goal: Implement Universal Single-payer Objectives: Political: State Legislation Single-payer Economic: Organizing huge purchasing groups until reach one state pool. Economic: HMOs are big, but local. They are fiscal intermediaries.Economic includes self-insuring, direct contracting, building grassroots purchasing pools with standardized benefits, begin to approximate single-payer. Large groups admin costs 5-10% v. small business admin costs of 35%. MN-UHCAN Joel Albers

Strategy and Tactics Strategy Create fair democratic debate in MN, demarginalize us Build grassroots base and capacity of organizations into Network: labor, practitioners, seniors, community Tactics Guerrilla health care: change debate spin w/ few resources Protest any publicly unaccountable institution. corp or gov Striking labor unions can mobilize groups. HMOs are powerful, but still a local oligopoly, not like the Aetnas (20 million enrollees), Prudentials, Cignas. MN-UHCAN Joel Albers

Of All Of The Forms Of Inequality, Injustice in Health Care is The Most Shocking and Inhumane -- Martin Luther King jr. MN-UHCAN Joel Albers