Physicians for a National Health Program Comments: pnhpnyc@igc.org WHO NEEDS INSURANCE COMPANIES ANYWAY? or “Get the insurance companies out of my health care” Leonard Rodberg, PhD Physicians for a National Health Program New York Metro Chapter Comments: pnhpnyc@igc.org

BEFORE HEALTH INSURANCE BEGAN… Health care 1% or less of GNP Out-of-pocket payment for physician care Charity and public hospital care

BEGINNINGS OF PRIVATE EMPLOYMENT-BASED HEALTH INSURANCE 1936 - 1965 Blue Cross is formed in 1936; Blue Shield in 1946 WW II: health benefits linked to employment IRS rules employer contributions tax deductible Commercial life insurance companies begin selling health insurance to employers

LIMITED GOVERNMENT HEALTH INSURANCE 1965 - 1990 Rising cost of medical care due in part to innovations in medical technology and drugs Medicare for those over 65 years Medicaid for the poor U.S. remains the only industrialized nation without universal access to health care

DOMINANCE OF FOR-PROFIT HEALTH INSURANCE 1990 – present Experience-rated premiums (where the sick pay more) dominate the market Expansion of for-profit managed care companies Managed care restricts access and maintains profits Non-profit Blue Cross plans convert to for-profit companies

EXPANSION OF UNIVERSAL HEALTH INSURANCE 1883 - Germany 1911 – Switzerland 1935 – United States* 1938 -- New Zealand 1945 – Belgium 1945 -- France 1946 – United Kingdom 1947 – Sweden 1948 – United States* 1961 – Greece 1961 – Japan 1966 – Canada 1973 – Denmark 1974 – Australia 1978 – Italy 1979 – Portugal 1986 – Spain 1994 – United States* 1996 – South Africa 2002 – Taiwan * Proposed by the President. Strong public support for the principle. Failed in Congress. None of these countries rely on private, for-profit insurance companies.

Our Public System Covers Fewer, and Private Insurance Dominates United States Source: F. Colombo and N. Tapay, Private Health Insurance in OECD Countries, OECD 2004

How Does the U.S. Compare with Other Countries? We provide the same medical care We use the same medical technology But… We have large numbers of uninsured We spend much more We remain the only major country that builds its health care system around private for-profit insurance companies.

Hospital Inpatient Days Per Capita

Physician Visits Per Capita

Bone Marrow Transplants

MRI Units/Population

CT Scanners per million population 2002

US Life Expectancy is Less than Many Other Countries United States Source: OECD 2005

…and its Infant Mortality is Higher

The US spends more, but our system doesn’t work well, and we aren’t happy with it.

Rising Number of uninsured Number of Uninsured Americans (Millions) 45 Rising Number of uninsured 40 35 30 25 20 1980 1985 1990 1995 2000 Source: U.S. Census Bureau

Playing Doctor? (cartoon)

U.S. Health Costs are 70% Greater than the Median of Other Countries United States

Our Public Sector Alone Spends More than Other Countries: Americans Pay for National Health Insurance but Don’t Receive It OECD and “Paying for National Health Insurance—And Not Getting It” Health Affairs: July / August 2002  

THE COST OF CARE CREATES HEALTH PROBLEMS AS WELL AS FINANCIAL PROBLEMS In nearly 3 in 10 (29%) households, someone skips a medical treatment, cuts pills, or does not fill a prescription because of cost Nearly 1 out of 4 (23%) Americans have problems paying medical bills More than 1 in 5 (21%) Americans had an overdue medical bill at the time of a 2004 survey 1 million people experience medical bankruptcy each year Health Care Costs Survey, USA Today/Kaiser Family Foundation/Harvard School of Public Health, August 2005; D. Himmelstein et al, Health Affairs, 2005 Many people still believe that people without health insurance get the care they need. Its just not true.

HIGH COST OF HEALTH INSURANCE PREMIUMS National Average for Employer-provided Insurance Single Coverage $4,024 per year Family Coverage $10,880 per year Note: Annual income at minimum wage = $10,300 Annual income of average Wal-Mart worker = $17,114 Source: Kaiser Family Foundation/HRET Survey, 2005

CONNECTING THE DOTS: So why do we spend so much and have so many uninsured? It’s the insurance companies! Only the U.S. relies on private for-profit insurance companies, the most inefficient, ineffective, inequitable way to pay for health care.

THE MAJORITY OF AMERICANS HAVE PRIVATE INSURANCE … Total Population Private health insurance - Employer-provided - Individual Public health insurance Medicare Medicaid Uninsured Million % 288 100.0% 174 60.5 % 160 55.6% 14 4.9% 72 25.0% 41 14.2% 31 10.8% 42 14.6% Source: National Center for Health Statistics, 2003

…BUT IT PAYS MUCH LESS THAN HALF THE COST 2004 Personal Health Expenditures Private Funds Private health insurance - Self-funded plans - Insurance company plans Out-of-pockets payments Other private funds Public Funds* Medicare Medicaid Other public expenditures $ Billion % $ 1,753 100% $ 965 54% $ 658 37% $340 19% $318 18% $ 236 13% $ 70 4% $ 789 46% $ 309 18% $ 293 17% $ 187 11% * Does not include tax subsidy for private insurance. See Woolhandler & Himmelstein, HealthAffairs 2002 Source: Centers for Medicare and Medicaid Services, 2006

A PUZZLE: If private insurance pays for such a small portion of the total, how can it be responsible for the high cost of our system?

THE ANSWER: Reliance on private insurance companies accounts for 20% or more of total health care spending due to: Insurance company profits, marketing, and overhead costs, and Wasteful billing and administrative burdens imposed on the entire system.

CEO’S COMPENSATION 2004 Note: Total Pay=Salary+Stock Options Source: Modern Healthcare, Aug. 1, 2005; NYTimes, Apr. 3, 2005

Private Insurers’ High Overhead International Journal of Health Services 2005; 35(1): 64-90

Hospital Billing & Administration United States & Canada

Physicians' Billing & Office Expenses United States & Canada

Billing and Insurance Costs Account For More Than 20% of All Health Care Costs BIR = Billing- and insurance-related costs; profit and marketing costs not included Source: James G. Kahn et al, The Cost of Health Insurance Administration in California: Estimates for Insurers, Physicians, and Hospitals, Health Affairs, 2005

Half of Middle- and Lower-Income Adults Experience Serious Problems Paying Medical Bills or Insurance Premiums Percent Percent 50 50 48 48 38 38 33 35 21 23 Medical bills Health insurance Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.

Worries About Affordability and Access to High-Quality Care Spreading to Middle-Income Families Percent worried they will not be able to pay medical bills in event of serious illness Percent worried they will not get high-quality care when needed 66 52 53 50 50 48 47 47 38 34 Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.

Insurance Complexity: Two of Five Adults Report Having to Spend Time on Paperwork or Disputes Related to Medical Bills and Health Insurance in the Past Two Years Percent 46 39 39 38 33 Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2006.

The US Health Care System! – Uwe Reinhardt

PROBLEMS CREATED BY PRIVATE HEALTH INSURANCE #1 High cost Excessive administrative costs System complexity And, as a direct consequence of high cost, Large numbers of uninsured and under-insured who cannot afford adequate coverage

And Health Insurance Costs Keep Rising

Health insurance premiums have risen faster than health care costs Wall Street Journal, July 31, 2006

US Health Costs Rise Faster than Other Countries’ Costs Source: Health United States 2005, Natl. Center for Health Statistics

Health Insurance is a Rising Share of Employment Benefits

Firms Shift Health Insurance Costs to Workers

A Declining Number of Firms Are Offering Insurance…

And Small Businesses Especially Can’t Afford to Offer Insurance

PROBLEMS CREATED BY PRIVATE HEALTH INSURANCE #2 Failure to control costs Continuing double-digit annual cost increases Costs cannot be controlled in a for-profit multi-payer system that resists coordination, budgeting, and planning.

CLAIMS BY HEALTH INSURANCE COMPANY SUPPORTERS Private health insurance gives consumers: Greater choice Efficiency through competition

Most Employers Offer Only One Plan

Many With Insurance Lack Choice 42% Are Offered Only 1 Plan

Employers Control their Choice: Reasons for Changing Health Plans Reason for Changing Health Plans   About 17% of privately insured Americans change plans each year, often disrupting the continuity of care. Those switching insurance are twice as likely as others to change their usual source of care. Only 9% switched plans to get better care. Three-quarters were forced to switch because they changed jobs or because their employer changed plan offerings. An additional 17% switched in search of a cheaper plan. Thus, choice remains a prerogative of employers, not patients, assuring that quality plays little role in driving plan selection. According to data from another survey, among those forced to change plans in the past 5 years, 50% were offered only a single option for new coverage. *Changed job, or employer changed plan offerings Source: Health Affairs 2000; 19(3):158

Some Choices Don’t Really Matter!

The Choice that People Really Want: Choice of doctor Choice of treatment and location of treatment NOT Choice of health plan Today’s managed care plans limit the patient’s choice of doctor, treatment, and location. The only choice they offer is: How much freedom from our limits are you willing to pay for?

The Health Insurance Industry is Highly Concentrated Source: Modern Healthcare, Aug. 1, 2005; PacifiCare was bought by UnitedHealth in December 2005

…And the Concentration is Growing Between 1995 and 2005, there were more than 400 mergers involving health insurers and managed care organizations. In 95% of metropolitan areas, a single insurer had 30% or more of the market In 56% of the areas, a single insurer had 50% or more of the market. Source: Competition in Health Insurance: A Comprehensive Study of US Markets, American Medical Association, 2005.

THE TRUTH ABOUT HEALTH INSURANCE COMPANY CLAIMS They fail to provide real choice or competition Many employees have no choice of plan Many employers change plans People want choice of provider, not plan Competition is declining through mergers

OTHER PROBLEMS CREATED BY PRIVATE HEALTH INSURANCE Financing by income-independent (and often unaffordable) premiums is highly regressive Millions have inadequate coverage and high out-of-pocket expenses One million households each year face health- related bankruptcy The “hassle factor: Filing of claims by consumers is confusing, costly, stressful Claims are often denied or delayed

STILL MORE PROBLEMS CREATED BY PRIVATE HEALTH INSURANCE Insurers avoid covering those who are sick (underwriting or risk selection) Insurance companies interfere in physician decision-making Trust in the doctor-patient relationship erodes Money is spent on treatment, not prevention Health care is treated as a commodity to be purchased rather than a service to be provided

THE ULTIMATE PROBLEM “Physicians have a professional and ethical obligation to their patients; health insurers’ primary legal obligation is to their shareholders.” Competition in Health Insurance: A Comprehensive Study of US Markets, American Medical Association, 2005 (Note: Perhaps now the AMA will reconsider its support for private for-profit insurance over publicly-provided insurance plans.)

This Familiar Headline is Wrong! It is not the employer-based system that is collapsing -- it is the unaffordable and inefficient private insurance system. U.S. employers should contribute their fair share, but not through private insurance. Many countries use employer-supported non-profit industry-based sickness funds – and they achieve universal coverage with lower cost.

SOME PROPOSALS BASED ON PRIVATE INSURANCE Employer mandate to provide insurance Individual mandate to purchase insurance Tax credits for the purchase of insurance Health savings accounts and high-deductible insurance (“Consumer-directed health care”) ALL OF THESE WILL FAIL They are more of the same: They all rely on private health insurance

WHAT’S WRONG WITH THE ME/MA/VT PLANS What is really wrong with these plans is not their details. The problem with them is: They continue to rely on private insurance. Covering the uninsured with private insurance will increase the cost of health care. Costs will continue to rise as long as there are multiple private payers with no coordination, no budgeting, and no planning.

SO WHO NEEDS INSURANCE COMPANIES ANYWAY? The U.S. today runs a very successful program that Pays for comprehensive health services Covers more than forty million people Gives patients free choice of doctors and hospitals Is funded by a public agency, not by private insurance companies It’s called Medicare. Some of you may know that Medicare uses so-called “fiscal intermediaries”, often insurance companies, to process claims it receives. These organizations are acting simply as bill processors; they assume no risk and are simply paid a fee for providing this service. Under a true single payer system, where Medicare was the only payer, there would be no need for these intermediaries; physicians and other providers could simply submit a single monthly bill to CMS (which runs Medicare), as is done in Canada, and hospitals could be placed on annual global budgets.

THE EVIDENCE FROM MEDICARE Since 1997, the US has conducted a head-to-head comparison between private insurance (“Medicare Choice+”, now called “Medicare Advantage”) and “public” Medicare. The result: Private insurance companies require a subsidy of at least 15% just to stay in the business. Fewer than 1 in 6 Medicare-eligibles choose the private insurance option.

Medicare Coverage is Better than Private

SO HERE’S OUR SOLUTION: Expand Medicare to cover everyone Improve the coverage it offers Eliminate private insurance Expanded and Improved Medicare for All Conyers Bill - HR 676 -- The “single payer” solution --

HOW WOULD “MEDICARE FOR ALL” WORK? Everyone would receive a Medicare card assuring payment for all needed care Complete free choice of doctor and hospital Doctors and hospitals remain independent, negotiate fees and budgets with Medicare Progressive taxes go to Medicare Trust Fund Public agency processes and pays bills

SOME IMPLICATIONS OF MEDICARE FOR ALL The same coverage for everyone: No means testing; coverage would not depend on income, employment or age Medicaid would no be longer needed Hundreds of billions of dollars in administrative costs would be saved Costs would be controlled through capital planning and quality reviews conducted through the single insurer The Medicare-for-All "single payer“ program -- that is, the government, rather than 1500 private insurers – would reimburse doctors, hospitals, laboratories, MRI's, etc. These providers would remain largely private, as they are now. Today we have what could be called a "multi-payer” system, with a central role for private for-profit insurers. Germany and France have "multi payer" systems using sickness funds or "mutuelles" based on employment and rooted in their national labor history, which act as insurers. But this kind of multi-payer system is very different from the multi-payer system we have in the U.S. These European sickness funds are non-profit and are highly regulated by the government in a way that would be inconceivable in this country. They are so regulated that this is actually very much like a single-payer system. The historical basis for such sickness funds in this country is very limited. Moreover, as the international comparison shows, even a non-profit multi-payer system is more expensive than a single payer system. However we do it, though, we need to eliminate for-profit, private insurers and stop letting them play a major role in our American health care.

How Would It Be Paid For? One Example:

Covering Everyone and Saving Money through Medicare for All Additional costs Covering the uninsured and poorly-insured +7.2% Elimination of cost-sharing and co-pays +5.1% Savings Bulk purchasing of drugs & equipment -2.8% Reduced hospital administrative costs -1.9% Reduced physician office costs - 3.6% Reduced insurance administrative costs -5.3% Primary care emphasis & reduce fraud -2.2% Net Savings -4.3% Source: Health Care for All Californians Plan, Lewin Group, 2005

WHY IS SUCH A NATIONAL HEALTH PROGRAM POSSIBLE TODAY? Private insurance is not addressing the fundamental problems of cost, choice, access and quality. Everyone is affected: the uninsured, the underinsured, and everyone else who is insecurely insured. Employers who provide insurance want to be relieved of the burden of rising costs and unfair competition from employers who don't offer insurance. Small businesses want to offer insurance to their employees but can’t afford it. Every other industrialized country has done it.

“Would you prefer the current system or Universal Health Insurance…like Medicare…run by Government…financed by Taxpayers” Don’t know Current Universal Health Insurance Source: Washington Post/ABC News Poll, 10/20/03

PHYSICIANS FOR A NATIONAL HEALTH PROGRAM (PNHP) says: Who needs insurance companies anyway? Limited reforms that keep private insurance in place have been tried and failed. If we get rid of the insurance companies, we can have a Medicare for All system that is: - Simpler - Less costly - Better for our health - Equitable, and - Covers everyone Let’s do it!

RESOURCES Physicians for a National Health Program (PNHP) www.pnhp.org PNHP New York Metro Chapter www.pnhpnyc.org. Rekindling Reform www.rekindlingreform.org HealthCare-NOW www.healthcare-NOW.org Citizens Health Care Working Group (US govt) www.citizenshealthcare.gov