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Well it’s a heady time to be a health care policy wonk. Not four weeks ago I was telling you all about how health care was going to be the big political issue in 2008 or may be 2010 … and all of a sudden it’s the biggest news of 2006 with almost daily stories about Medicare "Part D" and something called Health Savings Accounts. Both are concoctions of the pay-to-play Bush Administration and both will have a serious impact on politics and the health care system.
So, as ever, for the Spot-on crowd, a bit of a history lesson is in order. Back in the dark days of late 2003, now-disgraced former Majority Leader Rep. Tom DeLay got a quite extraordinary bill past the House of Representatives. The vote was held open for 5 days and included payola, whippings and public beheadings on the floor to get the necessary votes— OK not quite but pretty close.
This was the bill that finally provided Medicare recipients - that’s those of us over 65, and the disabled - with coverage for their prescription drugs. It's was something that had been wanting for decades but was still contentious. Why? The estimate for the cost of the program was way higher than the few fiscal conservatives in the Republican party wanted. And that was before it was revealed that the actual estimated cost was nearly double what Congress was told, and that the head of Medicare - former for-profit hospital lobbyist Tom Scully who was out the door immediately after the Bill’s passage to return to K street - had threatened the agency’s chief actuary with firing if he told Congress the truth.
What was really going on here? Well American drug companies have forever been able to charge much higher prices for their drugs here than elsewhere in the world because they didn’t face a monopsony (e.g. the government). So as long as there has been talk of a prescription drug benefit for Medicare, Pharmaceutical companies have been terrified that the Federal government would fix prices the same way it does for the other services it buys for Medicare. That would inevitably lead to lower profit margins.
So, as the pressure grew for Medicare drug coverage over the years, Big Pharma didn’t quite know what to do. But then they hit on a old trick. The shipped a a boatload of money into key Congressional districts in the 2002 election, When Congress convened, Big Pharma got a big win: A bill that would guarantee drug coverage for at least poorer seniors (after a fashion) but in a way that they could handle. That's why Medicare Part D (the prescription program) is administered by private sector intermediaries called Participating Drug Plans and the government is expressly banned from directly negotiating prices.
But that's not all that was in the bill, which was a kind of eternal Christmas for Big Pharma and other parts of the health care system. Also included were support for a program pioneened by a small Indianapolis insurance company called Golden Rule. Golden Rule allowed the establishment of tax-free savings accounts similar to IRAs and in the 2003 legislation, these programs were massively extended so that any American can have a Health Savings Account.
Continue reading "Medicare and HSAs: Ready for Their Close-Ups" »
Everybody's a critic but some critics - particularly those with real-world experience - shouldn't be ignored. My last pair of columns discussing the uninsured and San Francisco Supervisor Tom Ammiano’s proposal to get city employers to cover their employees health care costs caused a moderate amount of fuss. One San Francisco restaurateur told me in a series of emails that the new law would put essentially him out of business. I think he’s actually wrong, but he does point out why, politically, pay-or-play is so tough, and also why it’s bad public policy. So let's talk about the Incanto problem, and then we’ll hint at some solutions.
What’s the Incanto problem? Incanto is a fine restaurant in San Francisco’s Noe valley neighborhood. By San Francisco standards it’s not particularly expensive, but it’s not cheap eats. Furthermore, restaurants like this are one of the main reasons why San Francisco is such a great place to live, and we don't all sell up and move to (insert name of podunk town here) instead. Incanto's owner Mark Pastore took issue with my remark that pay-or-play wouldn’t be that disastrous because many of the businesses that would be forced to pay for their employees health insurance couldn’t move, and would stick their prices up instead. Here’s Mark’s experience:
There are limits (in economics the concept is known as price elasticity) to increasing revenues by raising prices. In my own restaurant, which is considered one of the better restaurants in the Bay Area, our prices increased slightly in 2005 (3-4%), however our total revenues declined slightly versus the prior year.
In other words the consumer wouldn’t deal with the price increase, costs went up and profits went down. Now the marginal dollar that was no longer being spent at Incanto got spent somewhere, presumably not on dining out, or, if so, at a cheaper restaurant. Now, that may not matter to economists or health care consultants too much, it matters like heck to Mark and his fellow owners. So even though I can cite evidence that these forced wage increases on a city or national level don’t impact unemployment overall, they may cause an adjustment in employment. This will necessarily be exacerbated in the San Francisco proposal where employers with fewer than 20 employees won’t have to pay into the insurance fund, and therefore will have a big cost advantage over those that do. So you can expect an enormous amount of opposition to this from people directly affected, who will make their feelings very well known, whereas it’s hard to identify businesses that will gain (even if some do).
The ordinance may avoid his Gavness’ veto — don’t forget that Newsom ran a group of restaurants but is also responsible for the city budget — much of which goes on the spending on the uninsured at SF General hospital. If it does, you can expect that lots of restaurants that were 40 tables and 25 employees suddenly lose 20% of both. Lots of other small businesses will get smaller and split into two, delivering a mini-boom for creative lawyers and accountants.
Continue reading "Busboys On The Street" »
So far the proposal by gay comedian turned San Francisco Supervisor, Tom Ammiano, to force San Francisco employers with more than 20 employees to pay for their employees’ insurance is getting the kind of response that you’d expect. The headlines read that Merchants blast plan to require health care, and why wouldn’t they?
It is, of course, not going to work. The ordinace might not get vetoed by his Gavness, but it'll end up in court, and even if it does pass, the one comparable example, Hawaii, which has had mandatory employer-funded health insurance for three decades, still has lots of uninsured people -- even if it's tough to move most local businesses over the state line! But this issue is a microcosm for the crisis in American health insurance, and it gives an excuse for a little more explanation about the various attempts like Ammiano's to get to fewer uninsured by attacking the problem in the workplace.
More than 80% of the uninsured are in families with either a full-time or part-time worker. That's why getting employers to cover their workers is such an attractive way of getting at the uninsured. (By the way, this type of policy approach is called, in health care policy wonk vernacular, "pay-or-play"). Ammiano's actual proposal is a little vague but he has been explicit about this being an attempt to reduce the amount that San Francisco spends on uninsured people at its General Hospital by up to $20 million a year.
As it's now written - and Ammiano has signaled that he's willing to negotiate - the proposal calls for a payment of $345 a month per employee working more than 80 hours a month to be put into a fund to be used for care. The $345 number is designed to stop employers buying a “lite” insurance product which leaves employees under-insured.
Now, business groups in the city will have no trouble finding a restaurant that’s bound to go under, sending a platoon of bus-boys onto the bread line. But Chamber of Commerce rhetoric aside, there are some sensible objections to a city-wide pay-or-play policy. The first is geographic: Half those employed in city businesses don’t live in San Francisco and many of those who live in the city work outside it. On top of that, many of the employees who do not get insurance at their businesses get it elsewhere as part of the employment package of a family member.
But the first objection is why a local solution for health care uninsurance can’t work. Try as it might - and it tries hard - San Francisco city government can't force businesses outside the city to provide insurance for their employees who live in it.
So why are we having this debate in San Francisco? Well a couple of years back the Democrats in the California state assembly got a state-wide pay-or-play bill onto Gray Davis’ desk moments before the voters tossed him out. He signed it. But the state's business interests put the law on the ballot, Proposition 72, the next year, and you can guess what happened. Just as we’re about to see in San Francisco, Californianis saw a plethora of articles saying that workers would be put on the street as poor employers couldn’t afford to keep them on with the huge added burden of health care added to wage costs.
Continue reading "A Tale of the (Insurance) City" »
For our next adventure in the American health care system we are going to look at a heated debate in San Francisco, one that nicely sums up the problems with the health care systems but fails to answer - really - the tough questions.
City Supervisor Tom Ammiano is demanding that that city businesses with 20 or more employees begin providing insurance for anyone who works more than 18.5 hours a week. It's a political stake in the ground that Ammiano - who led the fight to have employers give spousal benefits to same-sex domestic partners - seems to intend as his political legacy.
But there are some practical politics at work here, too. To be sure there's lots in the mix (Ammiano has enjoyed lots of support from the city's unions, for instance), but it won’t have escaped the attention of the city's more moderate politicians that one of San Francisco's major liabilities is its general hospital. Like many cities, San Francisco is a health care provider. And SF General is located close to the poorer end of town. As we'll see, that means - like urban hospitals across the country - it doesn’t enjoy the same clientele as say Sutter's Cal Pacific hospital over in tony Pacific Heights. So getting employers to insure their employee isn't just a feel-good idea that plays well politically; it's a bottom-line issue as well. As we'll see, If more low-wage earners showed up at SF General with health insurance their care would cost the city (and its taxpayers) much less.
But Ammiano's proposal is a band-aid, not a solution. And while it's political appeal - saving the city money - may well get his proposal adopted by even by business-minded moderates on the Board of Supervisiors, it's not getting at some of the real problems with the health care system.
It's not just uninsurance that's the problem. Large numbers of Americans are significantly under-insured too. The under-insured tend to have either limited coverage for the first several thousand dollars of care, or have certain conditions excluded from their insurance, or in a small number of cases they have a policy but it doesn't cover real catastrophes. Many university policies that cover students are like this--they often top out at less than a few hundred thousand dollars, which may not be enough if something goes badly wrong.
To remedy the number or uninsured and to make sure that they're not just replaced by the highly under-insured, Ammiano's proposal requires employers to spend as much as the city does - $345 monthly each - on insurance for employees. Not surprising, that element of the program is what has employers really up in arms and is the least likely to be written into law.
I explained last column why the presence of the uninsured allows the health care system to go on raising its prices willy-nilly, and how that hurts the rest of us. But today I'll touch more on who gets directly hurt by uninsurance and how that relates to what's being discussed here in San Francisco.
How many uninsured people are there? The number has actually been remarkably stable in the US over recent years. Employers have been dropping benefits coverage rapidly, Medicaid - that's you the taxpayer - has made a valiant effort to pick up the slack by expanding coverage, especially for children. Don't forget that we have a universal single payer system for the elderly called Medicare, so there are no uninsured older than 65. (That's one reason we don't have a universal insurance care system for the rest of us, but that's a subject for another day).
What's important is that the uninsured are not a stable bunch. Roughly 8% of Americans are hard-core uninsured, and have been that way for 2 years or more. The 45 million (or 16% number you hear often) is a snapshot. That's the number of uninsured right now. But there are a hell of a lot more people cycling through that number; the best estimates are that over a two year period, some 80-90 million people will be without insurance for a brief - a few months - period. So effectively some 30% of American adults have experienced being uninsured.
Who are they? We have seen them and they're us.
Kaiser Family Foundation has done a fantastic job quantifying the uninsured for years. 81% of them are working or are in a family that has at least someone working part-time. They are more likely to be poor and/or ethnic minorities, but there's a sizable contingent from households who earn significantly more than poverty level incomes. Seven percent of those in households earning three times the Federal poverty level or more are uninsured — even if those of you paying mortgages in San Francisco may not realize that $60,000 a year is not a poverty level income!
More importantly, what’s the impact of uninsurance? Not surprisingly the uninsured get less access to care and have less money spent on their care than the rest of us (about 50% of the average). And they are far more likely to skip recommended or necessary care, not be able to pay their medical bills, or not fill a needed prescription. And as you can imagine, given that prevention is better and cheaper than cure in virtually every sphere of life, this does come back to haunt them. The Institute of Medicine estimated that 18,000 deaths a year can be attributed to uninsurance. So skipping your medical insurance because you don’t remember being unhealthy is not such a great idea.
But there's is another, less obvious, group that suffers from uninsurance. It's health care providers. And as with everything else, in health care the distribution of hurt is not even. Providers who are geographically located in areas where there are more likely to be more poor and minorities - say, the Southern reaches of San Francisco near the Latino-heavy Mission and Excelsior neighborhood - are more likely to have the uninsured showing up on their doorsteps seeking help. So much so that there's actually a Federal designation for hospitals like SF General which enjoy what the industry euphemistically terms a "poor payer-mix". The designation is called "disproportionate share hospital" (known as DiSH) and like most Federal designations it comes with dollars attached, in this case via the Medicaid program. And most of these dollars go to the big inner-city hospitals and rural hospitals that you'd expect they'd end up at.
But of course there are not enough dollars to make up the difference. If you look at the profit margins of hospitals that receive DiSH money compared to those that cleverly chose to locate in affluent suburbs near patients with good insurance, you'd see that the safety-net hospitals barely scrape by while the rest make 3% margins in a bad year and 6-10% in a good one. (Don’t worry, those numbers get buried deep enough in the non-profit hospital accounting world so that no one notices). And hospitals in the suburbs - or nice neighborhoods like Pacific Heights - are on the mother of all building booms right now, so that they are ready for the time when the baby boomers hit Medicare in 2010. Yes, unless you don’t intend paying taxes in the future, you’ll be paying for that too.
There's way more to this. But in summary Ammiano's proposal is a doomed local attempt to fix something that just escaped reform at the state level last year and the national one in 1994. But that story will have to wait till next week. For now realize that uninsurance does actually matter in more ways than you’d might think. And ponder the realization that the type of person likely to be uninsured (young, poor, a minority) is also the type of person not likely to vote.
Editor's note:This entry was written by Matthew Holt but, for technical reasons, posted by Spot-on editor Chris Nolan.
