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Wednesday, April 12, 2006

SB840: Bringing the Failures of Canada to the Golden State Part III

In my two previos posts about SB840, I discussed the financial repurcussions (part I) as well as the social consequences (part II). This week I am going to take a slight turn, and discuss two alternative plans that I consider more apt, and less troublesome than SB840.

Since my last post in regards to this subject, Massachusetts was able to pass a bill that will require every citizen to be covered. Unlike SB840, which is a single-payer system (aka "government funded"), the Massachusetts system will not criminalize private-insurance, will still-require citizens to seek their own coverage, but will accomplish the goal of insuring every citizen of the state with heavy subsidies, federal funding, and insurance mandates for those financially able to buy insurance. Even though the government is not the ultimate source of funding, citizens and businesses are still required to pay into a government fund, and "everybody pays something. No more entire free rides...Everybody pays what they can afford.> Thus, it still requires funding based on excessive taxation of top and middle, to fund the bottom.

The Massachusetts plan is not as destructive as SB840, but will still have strong economic repurcussions for the state. Furthermore, it will encourage private insurance companies to provide "barebones policies" to the uninsured as a way to meet mandates. Because the bill will require small businesses to provide health insurance for their employees, it will have a strong impact on these small businesses, and will surely force many out of business.

Another option that has been presented is health savings accounts, HSAs. These were most recently proposed by President Bush, created in a medicare bill signed December 8, 2003. While I was initially skeptical and concerned about the proposal, the more I read about them, the more confidence I have in their success. The concept relies on the fact that many people do not utilize the full amount of money they pay for insurance. By matching a health savings account, which could be co-funded by an employer, with a catastrophic insurance policy, patients have more freedom in terms of choice of care (location, extent, etc...). Because care requires payment, there is a prevention of the overuse that plagues single-payer plans. However, HSAs are certainly not for everyone, only those both willing to be proactive in their own health care, and those willing to risk the benefits of the plan against potential for expensive treatment.

As is often the case, the complete solution will be neither of these, nor will it be in the form of SB840 or anything similar. The best solution will likely be an amalgam of private, personal, and governmental coverage, suited to each individual. Any plan that presumes to treat every person identically, or that claims to be able to provide full coverage in every instance is naive.

7 Comments:

Anonymous Bubb Rubb said...

God forbid someone should have health care and not have to spend anywhere from 15-40% of their income on health cost. The President likes to say that democracy is gods gift to mankind, but democracy is useless if you are too sick or broke to enjoy it.

Furthermore, HSAs are a waste of time. Not many employers if any actually match what an employee puts in and it does nothing to control the outragious cost of health-care. HSAs are a band-aid on a dam.

It funny that those who have the most health coverage, or who never ever get sick are the first to cry-out against health care for others. If we can spend billions and billions of our tax dollars on a BS war then we can find the money to give people healthcare.

10:55 AM  
Anonymous lil sis said...

What i find naive is to support heath savings accounts which intentionally force shift medical costs on to individuals. Overutlization is not a "problem" in healthcare, you WANT peope to use the remedies available to them. Why would you want to design a scheme to intentionally increase costs for people to use their own healthcare? The group that benefits in that scheme are the insurance companies and HMO's- who are conflicted with financial interests.

Anything short of single payer healthcare are schemes that are intended to support corporate bottom lines and not those in need of healthcare.

11:18 AM  
Blogger The Gentle Cricket said...

"Why would you want to design a scheme to intentionally increase costs for people to use their own healthcare?"

I don't, and that is, in large part, why I am opposed to SB840. Not only will costs skyrocket, but coverage quality will decline.

6:50 PM  
Anonymous Anonymous said...

Your comments are curious in their infatuation with private health insurance as a solution to making health care more available and less costly than it is today. Of every $ of premium you pay a private health insurance company only 65 cents on average pays for health care. The rest pays for marketing, legal, executive, and gatekeeper salaries obstructing access to service. Medicare on the other hand has spend over 95% of its funding on health activities except in the past 10 years when Congressional Legislation has channeled funds from Medicare to private insurance companies only to see those companies take the funds and fail to provide cost effective coverage, with Medicare Part D being the latest escapade.

Insurance premiums are based on acturarial risk assessment of the insured population, but few health insurance companies have a population base large enough to determine a reasoned acturarial risk factor so they load their risk factors in their own favor.

How can they do this you ask? Well, according to the conservative spin competition will cause the uncompetitive carriers to leave the business and lower prices for the insured. It hasn't happened in the last 120 years and it won't happen in the future what with the legislation regulating the industry having been written for their monied interests.

Look at the insurance ratings services, Best & Weiss for example, and you will find over 1,550 health insurance companies rated and in business nationwide as of 2000.

Jennifer Klein, a researcher at Princeton University, has published extensive details on the industry's influence on the regulations that keep them in business. Her book title can be found through a web search.

5:08 PM  
Blogger Dr.Don said...

Third in a series of rebuttals to your columns on SB 840 from a Co-Director of the San Fernando Valley Chapter of Health Care for All- California.


We currently have a ‘government funded’ (more accurately it’s publicly funded) system for the fire department, police, standing army, etc., and most of us agree that that is good public policy. Some services should be publicly funded so that they are fair and comprehensive.

In poll after poll, American’s favor a publicly funded health insurance system 2 to 1 even if it means more taxes. In a recent poll in California, sixty percent of respondents favored a publicly funded health insurance system.

In your general approach you seem to embrace the notion of social Darwinism: “…it still requires funding based on excessive taxation of top and middle, to fund the bottom.” What would you prefer? That the people on the bottom—the ones barely surviving in poverty—just be discarded?

Like many conservatives, the assumption you make is that they are freeloaders. That they wouldn’t be ‘at the bottom’ if they just worked harder. That’s true for some of them, of course, and they should be singled out and removed from the dole and required to be more productive (another government service).

There are millions of people, however, who did not choose to be ‘at the bottom.’ They are sick, aging, mentally ill, disabled, uneducated, unintelligent, abandoned, forgotten. If what you are suggesting is that they should just be ignored and discarded—then we don’t anything more to talk about. It’s apparently your opinion that they are just a burden and deserve their fate.

Many people think, however, that human life is more precious than that. When we see an aging woman dumped in skid row, wandering and confused in a hospital gown, we see our mother or sister. We feel that those less fortunate—through no fault of their own—deserve some consideration.

With regard to taxation, in a democratic society there are services that we require from government for the good of all: protection from predators, safety, an infrastructure that supports commerce, defense against enemies, etc. The fairest way to fund these necessary services is a progressive tax so that those at the bottom can still function and those at the middle and top are not financially crippled. If you see this as unfair, then I would like to hear a more equitable way to pay for the services that we find necessary.

With regard to SB 840, the taxation will not be excessive. The taxes will amount to less than we are paying now in private insurance premiums for inadequate or incomplete coverage. What’s more—while the details have not been finalized as yet—the suggestion is that there be floors and ceilings to protect both the poor and the rich from paying too much.

RE: The Massachusetts law: It will rely heavily on government subsidies. This means—you guessed it—higher taxes to pay for it. SB 840 will actually save money by expanding the risk pool.

Furthermore, the Mass. law provides no mechanism to control runaway healthcare costs. The ‘barebones policies’ that it subsidizes won’t provide complete protection for those who become seriously ill, and once again we will be subsidizing them with our tax dollars.

SB 840 has checks and balances built into it that would control costs—such as collective bargaining, drastically reduced administrative costs, and contracting for reduced prices on prescription drugs and durable medical equipment based on a large population base.

RE: HSAs. The flawed assumption with HSAs is that anyone can predict when and how sick he or she will become. It treats health care as a commodity, like buying a car or furniture. But healthcare is not something you shop for or even choose. When you are hit by a truck, you need healthcare now, even though you didn’t need it yesterday. Same thing with a stroke or heart attack or the onset of MS or cancer or a hundred other diseases. There is no way to predict these things, much less acquire adequate information to let you ‘shop’ for healthcare services when you’re lying on an emergency room gurney.

The function of the general practitioner under SB840, in addition to providing primary care, is to serve as a gatekeeper to the system and a coordinator of care. The GP decides what treatment—if any—is appropriate for your condition. What’s more, preventive care will drastically reduce the demand for much more expensive emergency room services. This is a vast improvement over our current system where clerks at a computer second guess doctors and dictate what procedures or prescriptions can be dispensed under various private plans.

Ultimately, the only economic model that will solve the healthcare crisis is single-payer, as every other industrialized nation in the world has discovered. Any market-driven system will eventually implode because healthy people opt out to save money, and the risk pool becomes smaller with sicker people. This cycle will continue as long as the profit motive is central to health insurance. Eventually it will collapse—as we are witnessing now.

The only way to treat everyone as fairly as possible is to expand the risk pool as widely as possible, minimize administrative costs, let the medical professionals decide on appropriate care, and compensate them adequately for their services.

To think that any other system will succeed is naïve.

12:28 PM  
Blogger Dr.Don said...

Following is a rebuttal to Part 1 of your column on SB840.

I am a Co-Director of the San Fernando Chapter of Healthcare for All-California.

While employment, economics, and taxation are legitimate concerns, they are not the only ones in the healthcare equation. There are also the issues of pain, suffering, bankruptcies from medical bills (half of all bankruptcies are because of medical bills), and unnecessary deaths from lack of access to adequate healthcare for some seven million Californians without health insurance, and many millions more who are inadequately insured.

The system proposed by SB840 would actually be far less ‘socialized’ than the fire department, the police department, public works that provide roads and traffic safety, or the U.S. armed forces—all of which are completely government run enterprises that we cannot do without.

SB 840 proposes publicly financed health insurance. The providers of health services—hospitals, doctors, labs, pharmacies, etc., would continue to be private enterprises as they are now. The only difference is that they would be paid for their services by a single state agency with a single, negotiated payment schedule, rather than the roughly 10,000 different health insurance plans currently offered by private insurance firms in the state.

Secondly, SB 840 proposes a system that incorporates best from the health insurance systems of every industrialized nation in the world, all of which are some form of single-payer, and most provide better health outcomes than our system at half the cost.

Furthermore, it’s a fallacy that the Canadian system is in shambles. In many polls, over 90% of Canadians like their healthcare system. Those who need urgent care get it immediately. There are delays in other types of care because the government in Canada doesn’t finance the system adequately. They spend less than $2000 per person on healthcare. The U.S. spends more than $6000 per person. We have enough money to provide quality care for everyone.

SB840 proposes a single payer system like those that provide far better health outcomes in every other industrialized nation in the world at less than half the cost of our inadequate system. We have the opportunity to take the best of all of these systems and avoid the worst.

The proposed system would eliminate private health insurance policies because they have proven to be inadequate to the task of providing adequate health coverage to all people. Private insurance companies would still be free to offer policies for those services not covered by the state insurance plan. They will also be eligible to provide administrative services under contract with the government. For example, Blue Cross administers the Medicare system in the U.S. at 2% of the overall budget, meaning that 98% of premiums go to healthcare.

The cost to families that currently purchase health insurance would be less than they are paying now for private health insurance. As it is currently proposed, the tax would be flat, meaning everyone pays the same percentage of wages and income as everyone else. Also, the proposed system would eliminate co-pays, deductibles, and exclusions. Businesses would also pay less for health insurance than they pay now for far less coverage on their employees.

To protect taxpayers, there would be a cap at the high end so that the wealthy would pay a smaller percentage when that cap is reached. There is also a "floor" at the lower end.

It’s also important to note that the financial aspects of the bill have yet to be determined. The bill to do that was introduced in February, 2006, and must work its way through both legislatures where specifics will be added.

Furthermore, healthy people are paying a ‘disproportionate’ amount for the coverage they receive now under private insurance plans. That’s how insurance works: the risk is shared by all of those who pay into the plan. The problem we are facing now is that too many healthy, young people are opting out of the private system, causing prices of premiums for the rest of us to climb precipitously. The only way to control these escalating prices is to include everyone in the system—to share the risk among a larger group so that each of us pays less.


As mentioned, for most families and businesses, the proposed tax will be less than they are paying now for inadequate coverage. For example, does your policy cover medical, dental, prescriptions, eye care, mental health care, ambulance services, diagnostics, hospice care, home health care, preventive care, rehabilitative care, and much more without you having to pay deductibles? The proposed system does.

Are there exclusions or caps in your policy? None in SB 840.

Are pre-existing conditions covered? There are no pre-existing conditions in the proposed plan.

Can you choose any doctor you wish, or must you select one that’s agreed to the negotiated fee structure of your plan? SB 840 will allow anyone to choose any doctor, lab, dentist, hospital, or other healthcare provider.

And what cost containment structures are in place now? Not only are there currently ‘seeds for increasing’ current healthcare premiums, that increase is inevitable and growing at an alarming rate and has been for many years. In the new system, there will be constant oversight of expenditures and policies. Those that prove wasteful or redundant, will be eliminated. Best practices will be made available to every healthcare provider to improve treatment outcomes. The new system will introduce cost controls that currently do not exist in the healthcare system because it is so fragmented.

RE: Business competitiveness: Any business that currently provides health insurance for their employees would pay less than they are paying now. Those that do not, and therefore have an unfair competitive advantage over other business in their markets, will have to step up and level the playing field. This would actually be good for businesses in California as it would increase healthy competition. Furthermore, it would make California businesses more competitive with businesses overseas who have universal healthcare already. Even GM publicly supports the healthcare system in Canada because it lowers the prices of the cars they manufacture there.

For the same reasons, companies would have an incentive to remain in California, especially if they are already providing health insurance for their employees. And everyone would be free to choose any healthcare provider he or she pleases.

The proposed system would be cheaper than the ragtag, inadequate, unfair coverages we must choose from now. An independent Lewin report shows that the coverage goals are indeed realistic—and we will save money in the process.

As far as the crisis goes—we are in the throes of one right now. Radical changes must be made.

12:31 PM  
Blogger Dr.Don said...

Following is a rebuttal to Part II

RE: Over-use - Fire departments or police are not over-used even though they are ‘free.’ People don’t go see doctors because they enjoy it. They go because they need medical care—they are sick or hurting, or want to prevent illness.

People with complete coverage under private plans currently can’t be accused of ‘over-using’ the system. It’s not true at the VA. It’s not true at Kaiser. These organizations control the access to expensive procedures by requiring that everyone visit a primary care doctor first. This general practitioner becomes the gate-keeper to the system. The proposed system requires the same—all referrals to specialists, indeed, all access to medical treatments of any kind must begin with the GP, who also has the responsibility of coordinating care—something that does not occur in the current system.

Initially, there will be a shortage of general practitioners. This is because GPs are typically underpaid by private insurance firms in the current system. (One reason you only get five minutes with your doctor now.) Financial incentives, and the elimination of overhead now devoted to paperwork, will rectify this situation in the new system.

In the proposed system, all medical service providers will be able to choose what kind of compensation they prefer—capitation, or fee for services. Patients will be free to choose whatever health care provider they prefer. Those that provide quality service with better outcomes will have more business. The only thing that will change is the insurance system which has proven itself to be inadequate and unfair when it is run for profit as it is now.

Compensation for services under SB 840 will be collectively negotiated with the state, by representatives from the medical profession (GPs, specialists, nurses, technicians, administrators), accountants, attorneys, and citizens. If the rates are low enough to cause a shortage of specialists, they will be adjusted upwards.

One other thing about high salaries: If a specialist has gone to school for years, endured years of residency, etc. to earn a substantial income, what have the executives who walk away with seven, eight, and nine figure incomes from health insurance firms done to earn that kind of money? In a recent merger between two private healthcare firms, one executive walked away with $216 million. How is that good for anyone’s healthcare when we have 7 million people in this state alone that don’t have insurance?

We currently have woefully inadequate care that is far from the best quality in the world. The Institute of Medicine recently reported “a quality chasm” in healthcare provided by the current system—a wide gulf between the care that patients should receive and the care that is actually delivered.

SB 840 proposes a system that has built-in mechanisms that provide incentives and facilitate quality care.

Doctors are being squeezed at every turn by the current system. Compensations are being negotiated down, and collecting the compensations are becoming increasingly difficult. A third of a doctor’s overhead is spent just dealing with insurance companies—often two or three employees in a typical doctor’s office do only that.

There would be nothing close to the ‘stress of dealing with reimbursements from and limitations by the state’ as there is now in trying to deal with literally 10,000 different insurance plans, each with its own rules about pre-approvals, deductions, co-pays, exclusions, compensation schedules, pre-existing conditions, and appeals procedures. Under SB 840 there would be one set of rules, one compensation schedule, one place to send the bills, and one source of funds.

Once again, it won’t be ‘state health care.’ It will be healthcare provided by the same doctors, hospitals, labs, and pharmacies that are providing healthcare now. The only thing that will change is the insurance system, which is currently so broken that it is literally killing people.

We have an egregiously tiered system now. We over-treat the rich and neglect the poor, and the middle-class is left underinsured—if they can afford insurance at all—with policies rife with deductibles, co-pays, exclusions, pre-existing conditions, and restrictions on what care is covered and who can provide it.

Under SB 840, anyone can seek care anywhere they choose—which is certainly not true now. You have to seek treatment where your insurance policy covers you. Or if you don’t have insurance, you have to seek treatment where you can get it and pay cash at higher rates—or go bankrupt.

SB840 - Lower costs, free choice of doctors who have incentives to provide quality care, with the ability to vote on that quality with your feet. Every kind of necessary care would be covered—from womb to tomb. No loss of coverage when you change jobs, go to or finish school, leave the state and return, get older, get sick, have an accident, or get pregnant. No more exclusions, pre-existing conditions, deductibles, pre-approvals, or mountains of paperwork.

SB 840 will provide comprehensive, universal health insurance to every California resident, and save money in the process. No other solution to the current health care crisis can say the same. And hanging on to a system that costs more, covers less, excludes a fifth of the population, and kills people—while making record profits every year—is not acceptable.

12:43 PM  

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