Health Insurance News

A Market ‘Fundamentally Changed’: How Health Proposals Could Affect Americans Who Buy Their Own Insurance
By Julie Appleby, KHN Staff Writer

This story is a collaboration between Kaiser Health News and 

Who will benefit - and who won’t - if Congress overhauls America’s health-care system?

So far, there are two main proposals being debated on Capitol Hill: one authored by the Senate Health, Education, Labor and Pensions Committee and a similar one being put together by House Democrats. Still to act: the Senate Finance Committee, whose approach could differ significantly.

Whatever the details, it’s likely that any overhaul would target the individual insurance market, where 17 million people buy their own policies because they don’t get coverage through their jobs, are unemployed or are early retirees.

That type of coverage can be expensive and hard to get, especially for people who are older or have preexisting conditions. New rules being debated on Capitol Hill would mean consumers couldn’t be rejected because they have health problems, take prescription drugs or are disabled. Insurance marketplaces, called exchanges, would offer a range of policies, possibly including a public or government-run option. Government subsidies would help millions of people buy insurance. And nearly all Americans would be required to have insurance or face a penalty for opting not to do so.

“This will fundamentally change the insurance industry everywhere in the U.S.,” says Mila Kofman, superintendant of insurance in Maine.

Still, the proposals, which come with an estimated trillion-dollar price tag over 10 years, wouldn’t solve all the problems faced by the millions of people who buy their own coverage. Some could still face big out-of-pocket expenses. Others would earn too much to qualify for a subsidy. Premiums would probably continue to rise.

Following are examples of some problems faced by families across the country - and what the current proposals might mean to them.

UNINSURED

Jose Guevara and Flora Ana Granado, Mount Rainier, Md.

In a good year, bricklayer Guevara and his wife, who cleans offices, earn about $30,000. Their three children, ages 18, 15 and 3, are covered by Medicaid, the state-federal program for the poor. But when Jose and Flora applied for themselves several years ago, they were rejected because they were not legal permanent residents. (Both were born outside the United States.)

In 2005, they became legal but have not re-applied for Medicaid. Their combined income is still low enough to keep their children on Medicaid but is slightly more than Maryland’s cutoff for eligibility for parents, about $29,900 for a family of five. (In many states, the cutoff is lower.)

When Jose, 49, or Flora, 40, need to see a doctor, they rely on La Clinica del Pueblo, a community health clinic in the District, which charges patients on a sliding scale. Jose and Flora pay $20 for an office visit. They don’t have coverage for hospitalization. Jose says he’s not optimistic that proposals in Congress would do much to help families like his. “What I’m hearing is, the only benefit is for the people who are already earning a lot,” he says. Lawmakers, he says, should “help the people who need it the most, the poor people.”

What proposed reforms might do

The couple would probably be helped by a health-care overhaul. They would have to purchase insurance coverage, but because of their low income they would get a subsidy or might become eligible for Medicaid, which would be expanded significantly under the House and Senate health committee’s proposals.

If Medicaid is not an option, the couple would probably be eligible to buy insurance on the proposed exchanges with a subsidy from the government. Advocates of these exchanges, or marketplaces, say they would foster competition and restrain insurers’ prices; opponents say poorly designed exchanges could drive up costs or encourage employers to drop coverage.

SHARP PREMIUM INCREASES

Christine Duncan and Gerald Duncan, Denver　

In July, the Duncans, who run a small drafting firm, dropped health insurance coverage for themselves and their 20-year-old son after their insurer raised premiums to $766 a month from $706. The increase came amid a severe downturn in the couple’s business, which has been hit hard by the recession.

“We had nothing coming in during July,” says Christine, 53, who says the couple earned about $50,000 last year but will make much less this year.

In the 15 years they have been buying their own insurance, the Duncans have seen their premiums rise by 300 percent, she says. The July increase left them with a stark choice: Paying the mortgage or paying for insurance.

“We’re praying we don’t need any medical care,” she says.

What proposed reforms might do

If the Duncans earned what they did last year, which was about 275 percent of the federal poverty level for a family of three, they would qualify for a government subsidy to help them buy insurance. Under the House proposal, for example, they would pay a premium of no more than 9 percent of their income, or $375 a month.

Under that proposal, the Duncans would still face deductibles and co-payments, which could add substantially to their financial burden.

Their situation raises an important question: Would a health-care overhaul restrain fast-rising premiums?

Proponents say yes, claiming that reform would increase competition among insurers and slow health-care costs. Detractors aren’t so sure, saying some people might end up paying more than they do now. An amendment to the House plan would bar insurers from raising premiums by more than 150 percent of the rate of medical inflation each year, but it isn’t clear whether that provision will survive.

HIGH OUT-OF-POCKET COSTS

David Sherry and Debbie Sherry, Green Bay, Wis.

Four years ago, David Sherry, now 59, took early retirement after working for the city of Green Bay for 34 years. He and his 57-year-old wife, whose job doesn’t offer insurance, decided to stay on the city’s health plan for retirees. They pay a premium of $1,025 a month.

Before the plan fully covers their medical care, they each must shell out $2,600 a year in deductibles and co-payments for hospital and doctor bills. All told, their premiums, deductibles and drug costs will total at least $18,400 this year. That’s about 28 percent of their $65,000 in income from Debbie’s office job, David’s pension and his part-time job at a car dealership.

The Sherrys had trouble paying their $5,200 in deductibles and co-payments last year, so they started a payment plan under which they paid $300 a month. But some providers threatened to report them to a collection agency, so they sold one of their remaining financial assets - some stock - to pay off the bill.

Late last year, David received a diagnosis of bladder cancer, and his wife is scheduled to have surgery on her parathyroid gland this month. Because of those health problems, the couple expects to confront the full deductible again this year.

“What are we going to sell off next year to pay our $5,000?” David asks. “The only way I’ll get a little reprieve is if I live until 65 and go on Medicare. Then my premium won’t be as much. Maybe I should have stayed working until I died.”

What proposed reforms might do

It isn’t clear whether the Sherrys would be helped by the legislation being debated in Congress. The House proposal requires insurers to limit a family’s out-of-pocket payments to $10,000 annually. That’s about twice what the Sherrys are paying now. Insurers, of course, could offer policies with lower limits, but premiums would be higher.

Given their income, the Sherrys would not qualify for a government subsidy to help them purchase coverage. They could be helped, however, by a proposal to ban insurers from rejecting people with preexisting medical conditions. That would allow them to shop around for a better deal. (If they tried now, their applications would probably be rejected because of their health problems.)

Finding a lower-cost policy could still prove difficult and might depend on whether the proposed insurance exchanges create enough competition to restrain prices.

PREMIUMS ROSE WITH AGE

Robert Tollis, Hartford, Conn.

Soon after turning 50 in January, Tollis got an unwelcome surprise: His health insurance premium jumped to $575 from $367 a month. Thinking it was a mistake, Tollis called his insurer and was told he had just entered a new, more expensive age bracket.

To lower his monthly bill, Tollis asked whether he could switch from his current plan, which has a deductible of $1,500 a year, to one with a higher deductible. He was told he would have to apply for a new policy. When he did, he was rejected because he’s HIV-positive. The bottom line: He can’t buy a cheaper policy from the insurer he has been with for 10 years, and he’d probably be rejected by any other insurer. For now, he has kept his current coverage.

This summer, Connecticut insurance officials approved a rate increase that will allow his insurer to raise his rates by a further 16 percent in January. Tollis says that increase makes it unlikely that he’ll be able to continue buying insurance.

“I haven’t been uninsured for 30 years,” he says. “I can’t believe after 30 years of paying into the system they’re going to force me to become uninsured.”

What proposed reforms might do

People such as Tollis might not see such large increases in premiums if a health-care overhaul goes through. Currently, insurers often ratchet up premiums for people when they turn 45 or 50, policy experts say. Some states have limits on how big that increase can be, but most don’t.

Under the House proposal, insurers could charge older customers no more than double what they charge younger ones. Insurers object, saying the result would be higher premiums for younger people; they want to be able to charge older people up to five times as much. The bar on rejecting applicants with preexisting medical conditions would also mean Tollis could shop around for more economical coverage.

OUT-OF-NETWORK FEES

Sara Ellen Minor and Blaine Minor, Dalton, Ga.

The Minors’ two children have serious illnesses: Their 15-year-old daughter has Crohn’s disease, a chronic inflammatory problem of the intestines, while their 12-year-old son has celiac disease, a digestive disorder. The parents felt the children needed treatment from pediatric specialists outside their insurance plan, which has a relatively small network.

Their policy includes a special annual deductible for non-network doctors and hospitals that totals $5,000 for each family member, or a maximum of $15,000. After that, their insurance begins to cover part of the cost.

The family, whose income is between $100,000 and $120,000 a year, has a policy with a premium of $1,100 a month. Besides out-of-network deductibles, the policy has in-network deductibles that total $2,500 per person, or a maximum of $7,500, before coverage begins. Sara, 46, estimates that out-of-network costs and in-network deductibles come to $6,000 to $7,000 a year.

“This is where my savings and my children’s college money is going each month,” she says. “These costs are crippling our family; I can only imagine what other families must be experiencing.”

What proposed reforms might do

Exchanges set up to allow the self-employed to purchase coverage could result in more insurance options for families such as the Minors. The proposals before Congress require insurers to provide “adequate” networks of doctors and hospitals. In addition, the ban on insurers’ rejecting applicants with preexisting medical problems could allow them to qualify for a different plan. But there is nothing in the proposals that would specifically cap out-of-network charges. The family earns too much to qualify for subsidies.

PREEXISTING CONDITION

Bill Inslee and Rosemary Sack Inslee, Coatesville, Pa. 　

After buying their own health insurance for more than a decade, antiques dealers Bill Inslee, 60, and his wife, Rosemary, 56, recently canceled it, making a risky bet that they’ll be able to stay healthy and avoid big medical costs. With their business declining, they say they couldn’t justify paying $12,000 a year in premiums and another $5,000 in deductibles. Plus, Bill wasn’t covered for any potential prostate problems because of several biopsies he had starting two decades ago - even though the results were negative.

“All in all, I didn’t see the distinct benefit” of the insurance, he says. “I’m going to try to live four more years and get on Medicare.” His wife won’t be covered until she turns 65, so Bill says they may consider trying to find a policy that would cover just her.

What proposed reforms might do

Overhaul proposals would bar insurers from excluding preexisting conditions from coverage, so Bill could get full coverage, including for any problems involving his prostate. The proposals also bar insurers from rejecting people with health conditions who apply for individual coverage, so the Inslees could shop around for another carrier, if they chose.

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Potent HIV-Blocking Proteins Raise Hopes for Vaccine
By Rob Waters - Bloomberg

Sept. 3 (Bloomberg) — A new blood screening technique has turned up antibodies with the ability to neutralize many strains of the AIDS virus, a discovery that might help create a long- sought vaccine against the deadly disease.

The finding, published today in the journal Science, is the result of an global effort by AIDS researchers using new methods developed by two companies, Monogram Biosciences, a unit of Laboratory Corp. of America Holdings, and closely held Theraclone Sciences of Seattle. Scientists searched the blood of HIV-infected people who were symptom-free for three years.

The quest to develop an AIDS vaccine has consumed the energy of scientists and the cash of drug companies and funding agencies for 25 years, since the discovery of HIV, or human immunodeficiency virus. So far those efforts have failed. In 2007 Merck & Co. ended work on a vaccine after it appeared to boost people’s chances of becoming infected by HIV. Now the global alliance formed to hunt for antibodies able to block many strains of the AIDS virus has achieved its first success.

“We said if we want broadly neutralizing antibodies, we should look for people, infected individuals, who are making them,” said Dennis Burton, a scientist at the Scripps Research Institute, in La Jolla, California, who is at the center of the new undertaking. “The key thing about the antibodies we’ve found is that they’re more potent than previous ones and that’s great for a vaccine.”

Protocol G

The achievement was spearheaded by the International AIDS Vaccine Initiative, a New York-based nonprofit group that is coordinating and funding vaccine-development efforts. In 2006 the group kicked off an effort dubbed Protocol G, aimed at searching for antibodies that can neutralize the strains of HIV that circulate in the developing world, where the majority of new infections are taking place.

Working with doctors and clinics in Thailand, Australia, the U.S., the U.K. and especially Africa, where two-thirds of the world’s infected people live, the group collected blood samples from 1,800 people who had been infected with HIV for at least three years without developing symptoms.

Such people are the most likely to make antibodies, infection-fighting proteins, in their bloodstreams that can bar HIV from entering their blood cells and work against many or most of the HIV strains circulating in the world. At the end of a complex screening process, the effort pointed to two antibodies that came from one person in Africa.

A Variable Virus

“HIV is very variable, that’s the big problem with it,” Burton said in a telephone interview yesterday. “If you want to make a vaccine that works, it has to protect against not just one but most of the strains that are out there.”

After collecting blood from the 1,800 people, the samples were shipped to the South San Francisco research labs of Monogram Biosciences. Monogram had developed a technique for embedding in a virus an enzyme that would glow if it entered a cell. Using robotic technology, they mixed the virus carrying the enzyme with the blood cells from the 1,800 people and watched what happened.

“When you see the light you know your virus has successfully entered and infected the target cell,” said Christos Petropoulos, Monogram’s chief scientific officer, in a telephone interview yesterday. No light meant that the patient’s antibodies had kept the virus from getting in the cell.

Laboratory Corp. rose 22 cents, or less than a percent, to $69.09 at 4:04 p.m. in New York Stock Exchange composite trading. The shares of the Burlington, North Carolina-based company have declined 7 percent in 12 months. The stock traded today as low as $68.28 before Bloomberg News reported the results, and rose afterward.

Theraclone Sciences

Monogram’s process allowed the scientists to find the blood samples that most successfully avoided infection. Next they needed to isolate the antibodies themselves, and for this they turned to Theraclone Sciences, which had developed another critical technology.

The Theraclone team isolated some 30,000 antibody-making cells from blood samples of an African donor that ranked high in ability to prevent infection and cloned them to make multiple copies of each antibody. The individual antibodies were then tested again using Monogram’s system to find those that blocked the greatest number of HIV strains.

The two antibodies from the African donor each blocked about three-quarters of the 162 HIV strains they were tested against, scientists said.

The antibodies themselves can’t simply be put in a vaccine to immunize people against HIV, said Wayne Koff, senior vice president of research and development at the Vaccine Initiative in New York. While such an effort could have a short-term benefit, a successful vaccine will teach people’s immune systems to produce their own powerful antibodies.

Spikes on Virus

The researchers also were able to look at the sites where the antibodies bound to proteins on a spike on the surface of the HIV virus. Koff and his colleagues think this spike may represent a vulnerable part of the virus and tracing how these and other potent antibodies attach to it may help them to better map its structure and design a vaccine, he said.

“We’re like sculptors trying to make a key that fits a lock and we’re starting with a lump of clay,” Koff said in a telephone interview yesterday. “These antibodies have given us information on the general shape of the key and as we learn more about the binding site, we’ll have a pretty close approximation of what the key actually looks like.”

The Protocol G effort will continue to hunt for additional HIV neutralizing antibodies and to decipher the structure of a virus that has so far outwitted many attempts to defeat it. While a vaccine is still years away, Burton said scientists are making progress by learning from the very people who appear to be dodging the AIDS bullet.

To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net.

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A Medical Mystery: Why Health Care Is So Expensive
by Chana Joffe-Walt - NPR

For all the attempts to lower the cost of health care in the United States, it remains expensive. Overall medical spending accounts for more than 17 percent of America’s entire economy.

As lawmakers look for ways to trim costs and extend insurance coverage to more people, one of their greatest challenges has been pulling apart the many layers of expense.

Their work is as intricate as that of cardiologist Dr. Paul Teirstein. On a recent day he stands in an operating room at Scripps Health in San Diego, looking down at a patient under light anesthesia. The patient lies half-conscious, with tubes coming out of her chest and beeping monitors keeping track of her vital signs. At least a dozen professionals shuffle around the room.

Teirstein holds up a single small piece of metal — it costs $2,000, and it’s destined for one of her arteries. He turns the overhead lights on to better show the stent. “They’re very small,” he says, “and very flexible.”

Teirstein turns his attention to a screen showing the patient’s arteries. They look like narrow, winding tree roots. Teirstein has to put this stent somewhere in there. He assesses the size of the problem and calls for a 23-millimeter stent. Someone repeats the order, then hands it to him. Teirstein threads it around a bend and up the clogged artery.

He looks back at the screen. “Too big, I think,” he says aloud. “What do you guys think? A little bit too long? Want to try an 18?”

Teirstein pulls the stent back down out of the patient’s artery and tosses it aside. He calls for an 18-millimeter stent and starts over.

“It’s one of the advantages of having a lot of different stents in your cabinet,” he says, noting that he can try several sizes to find the best fit.

The Cost Of Precision

And what happens to the stent that didn’t look right? It goes back to the company, which throws it away.

Teirstein’s hospital has a special deal with the stent manufacturer — the hospital doesn’t have to pay for stents it doesn’t use. But from an economic perspective, trashing stents raises the price of all stents, because the manufacturer has to factor in that cost.

In this single operating room, doctors might go through a dozen stents in a day. The rolling metal shelves are stacked with boxes of stents, with what amounts to piles of money.

Teirstein is casual not just with stents but with all his tools. When a tiny wire that looks like it belongs in a piano annoys him during the procedure, he gets rid of it. The wire costs $50.

Then a catheter doesn’t sit right in an artery. He calls for another. “You really need a lot of tools to do this procedure,” Teirstein says. “They’re all kind of expensive. This catheter is probably about $60.” It’s just a piece of plastic, but it’s an FDA-approved piece of plastic that has to bend in the right away and perform its role exactly.

It feels bizarre to stand here not as the patient and not as the doctor but as a sort of accountant. Teirstein goes through five of these $60 plastic tubes in an hour, and three of the $2,000 stents.

You might ask whether the stent needs to cost $2,000. Part of the answer is simply that it’s critical to life. It’s got to live inside a human being, next to the heart. It needs to be precise, and precision is expensive. Getting a new stent approved by the FDA costs millions of dollars. The $2,000 price lets the manufacturer recoup some of that expense.

The Cost Of Being New

There’s another simple answer to why the stents cost so much. Doctors like Teirstein handle new technology, so new that the market hasn’t figured out yet what it should cost.

Harvard economist Ken Rogoff says that some materials you see in hospitals, like bandages, have been around long enough to become ordinary and cheap. “But the kind of fine scalpels used in heart surgery are really pretty new, and there are lots of different varieties,” he says. “The market is still sorting itself out.”

Over time, most products become mass-produced, familiar, and less expensive. Think of Band-Aids, TVs and calculators — they’re all ordinary, and they’re all generally affordable.

We don’t get to know scalpels and stents the way we know calculators. We don’t really understand just how perfect they need to be. And we tend to accept that marginally better medical technologies are worth the cost.

Because we’ll pay for the new, better stent, manufacturers are constantly trying to make a new, better stent. Americans have been incredible innovators in medical technology. We benefit from that. The world benefits from that. We also pay for it. A lot.

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Minnesota Experiment Puts Patient Health First
by David Welna - NPR

This is the second of a two-part report about the search for a more cost-effective health care delivery system.

In the health care debate, many agree that the payment system for doctors and hospitals doesn’t work. They’re paid for each procedure they perform, giving them a perverse incentive to perform more.

Yet that system — known as “fee for service” — is what prevails nationwide, and it is a major driver in rising health care costs. The health care bills before Congress may do little to change that. But on the state level, Minnesota may have found its own way to move doctors off of the fee-for-service treadmill.

An Unlikely Partnership

Watching health care costs soar has David Tilford increasingly worried. As president and CEO of Medica, Minnesota’s second-biggest health insurer, Tilford fears medical-expense inflation is too much of a burden on employers, who are Medica’s main customers.

“Some employers, especially on the smaller end, are dropping coverage altogether, because it’s simply become unaffordable,” Tilford says. “So we had an obligation to do something. We couldn’t simply sit idly by, while our customers were struggling.”
So about a year and a half ago, Tilford met for drinks with Mark Eustis. Up until then, the two men were adversaries — Tilford’s firm, Medica, was paying ever-higher bills on claims from Fairview Health Services, the not-for-profit that Eustis heads. Fairview has seven hospitals and 49 clinics. Eustis says he was tired of trying to defend a broken system and wanted to do something different.

The challenge, Eustis says, is that “if you do something different in today’s reimbursement world, you’ll generate less funds, because we’re in a fee-for-service world that actually pays you to do more. If you really manage utilization appropriately, if you try to reduce costs, be more efficient, more effective, you get paid less.”

So Eustis and Tilford struck a deal. The insurance company agreed to provide an undisclosed amount of money to help Fairview — Minnesota’s second-largest health care provider — move from fee-for-service billing to a system based on fixed payments. Tilford says it was by no means a gift to Fairview.
“I was very clear that we would make investments, and that those investments should produce changes in the way care was delivered,” Tilford says.
Eustis, for his part, says Medica took a carrot-and-stick approach with Fairview: “If we don’t perform, we’re going to get less. If you perform at a higher level, you’ll be able to get additional payment.”
The idea, says Eustis, was to keep patients well — by spending more on them when they’re healthy, with the aim of reducing costly illness.
“It may sound simple, but getting physicians and practitioners to think about that, versus just thinking about people when they’re sick and generating production units, is a huge, huge change,” Eustis says.

Experimenting In ‘The Sandbox’

Fairview’s clinic in Eagan, just south of Minneapolis, resembles most big health clinics. But this facility, with its 10 physicians and 12,000 patients, is known as “the sandbox” — it’s where Fairview began a number of new approaches in patient care this spring.

One of its patients is a 43-year-old father of three who, for fear of losing his job, asks that only his first name, John, be used in this report. Dr. Jamie Gaul sits down with him in the exam room and gives him a physical. John says he ran out of Lipitor, a cholesterol-lowering medication, but that’s not the only reason he has come to the doctor’s office.

John also complains of constant chest pains, which he links to stress he has been feeling due to layoffs at his workplace. Later, Gaul says he has adopted a new approach for identifying such a patient’s concerns. He calls it “motivational interviewing” — essentially, letting the patient do most of the talking during an exam.

“I think if we can catch ourselves, so we don’t jump in with our own agenda too quickly, I think it really does help, and I think that overall, the care ultimately is more effective,” he says.

Were Gaul being paid by the number of patients he sees, as most doctors are, it might not have been worthwhile for him to sit and listen at length to his patient. But Gaul and all the other doctors at the Eagan clinic are now on salaries and feel more at liberty to consult with each other about patients.

“It’s kind of interesting that Washington is reforming health care, when they’re not the ones in the room with the patient, and that’s really what this project is about: letting the people in the room with the patient reform health care,” says nurse practitioner Val Overton, who helped oversee the redesign of care at the Eagan clinic.

Being Responsible For Patient Health

One new goal for Lynn Fiscus, the Eagan clinic’s medical director, is to get more patients to do cancer screenings.

“Under the old model, it didn’t matter whether I did a good job counseling them or talking to them about colon cancer risk. We were all reimbursed the same, just for that face-to-face visit,” Fiscus says. “Under this new model, we’re accountable for how many of our patients are up to date on their colonoscopies, how many have had their mammograms. It’s really a different way of looking at it.”

It’s still too soon to know whether the more collaborative, wellness-oriented approach is more cost-effective at Fairview’s Eagan clinic.

The clinic’s goal this year is to cut costs by 20 percent, while increasing the number of patients by 50 percent. Physician Dave Yehl says he has no idea whether he gets a bonus if that happens.

“This is a faith-based initiative,” he says with a laugh. “We’re kind of taking it on faith that our higher-ups will kind of kick in that incentive once we’ve established that we have good ways of making quality care.”

And if they do, the Medica-Fairview venture could be a model for revamping fee-for-service health care.

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Double-Digit Medical Expense Trend to Continue
By Philip Moeller - U.S. News and World report

As Congress gets ready to reconvene next week and take up healthcare reform, the reality of seemingly uncontrollable medical costs will be playing out once again. Despite near-zero inflation and recessionary conditions, health insurers in 2010 face another year of double-digit increases in the charges they pay for hospital services, physicians, drugs, and other healthcare costs. Premiums will rise and some health plans will raise co-pays for doctors visits, eliminate coverage of some expensive drugs and consider other ways to save money. Imagine if the auto industry decided to make its case for government support by jacking up the price of the vehicles that consumers already can’t afford.

“2010 medical plan cost trends will be more than four times greater than the annual increase in average hourly earnings,” the Segal Co. said in its authoritative annual review of cost trends at most of the nation’s major health and drug-plan providers. For the year ended last July, it noted, wages rose by 2.5 percent.

The biggest percentage impact of the changes may be felt by the estimated 11 million older Americans with Medicare Advantage policies, according to Edward A. Kaplan, the senior vice president at Segal who oversees the cost survey. Medicare Advantage policies offer more benefits than regular Medicare. In addition to the basic premium for Medicare, consumers pay an extra premium to the private insurers who administer the Medicare Advantage plans. However, the Centers for Medicare & Medicaid Services (CMS) historically has paid the insurers extra money to offer the policies and the products have featured an attractive combination of affordable premiums and enhanced services. Now, that is changing. CMS decided earlier this year to raise the amount it pays to the Medicare Advantage plans by only 1 percent in 2010, Kaplan said. With the plans facing cost increases of nearly 10 percent, they either must reduce coverages, cut profit margins, or raise premiums.

[See Low CPI Creates Medicare Winners and Losers.]

CMS payment rates vary by location but Kaplan said it would not be unusual to have an MA plan where the insurer is receiving $1,000 a month from CMS and charging retirees premiums of $100 a month. Even if the plan had a solid profit margin, raising its expenses by nearly 10 percent would force it to seek additional revenues, he said. Say, for example, the plan sought $60 in additional monthly revenues per insured person. Because CMS will only pay it $1,010 a month (an increase of 1 percent), the other $50 would come from retiree premiums. In this example, retiree premiums would rise 50 percent to $150 a month from $100. Social Security already has forecast no cost-of-living increases for benefits in 2010 and 2011, so retirees will be especially pressed to pay higher healthcare expenses.

Medicare Advantage insurers are looking for other ways to absorb the expected cost increases, Kaplan said, but he already is beginning to see “dramatic rate increases” of 20 to 35 percent. “These Medicare Advantage plans were a big bargain, and now that’s going to go away.”

Ironically, the dominant source of healthcare cost pressure is the federal government, Kaplan said. Charges for Medicare and Medicaid provide hospitals with half of all their revenues, he explained, and dominate fee structures for other segments of the industry. To keep costs down, CMS has been underpaying for these services, he maintained. So hospitals, doctors, and drug companies have been trying to compensate by raising the fees they charge to insurance plans. Historically, Kaplan said, the plans have felt forced to pay these charges in order to maintain insurance programs that are attractive to employers and consumers.

“Hospitals have had market power,” he said, and health plans have not wanted to drop expensive hospitals from their network. But that’s changing, he feels. “Plans will have to disrupt member choices, cut out some hospitals and other services,” he said. “I think we’re at that time right now.”

[See How to use New Medicare Hospital Tools.]

Other health insurers are also facing the same cost pressures, but consumers will not be expected to shoulder such big premium increases on their own. Employers, who pay most of the tab for healthcare coverage, will have some tough decisions to make. Expect to see health plans with more wellness incentives, preventive screenings, and reduced or even eliminated coverage for some brand-name types of drugs. Office co-payments may be lowered for visits with primary-care physicians but increased for appointments with specialists.

Here are the top-level expense trends faced by different types of insurance plans, according to the Segal survey:

Fee for service, indemnity plans: up 13.3 percent, or 12.5 percent including prescription drug coverage.
High deductible health plans: up 11.9 percent (11.3 percent including prescription drugs).
Open access PPO (preferred provider organization) and PSO (point of service) plans: 10.8 percent (10.5 percent including prescription drugs).
HMOs (health maintenance organizations): 10.2 percent (10 percent including prescription drugs).
Medicare Advanatge fee for service plans: 9.8 percent (9.5 percent including prescription drugs).
Medicare Advantage HMOs: 7.7 percent (8.2 percent including prescription drugs).
These expense trends generally are an improvement on last year, Segal notes. Prescription drug expenses, for example, are forecast to rise 9.1 percent, their second consecutive sub-10 percent year. Increased use of generic drugs plus a lack of new mass-market biotech drugs is helping drive claim trends downward, the company said. Still, it said, “inflation rates on brand name medications are projected to exceed those on generic medications by over 100 percent.” For specialty biotech drugs, the annual trend rate for claims increases is expected to be 17.8 percent, down slightly from 18.1 percent in 2009.

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Wellpoint CEO Braly argues for health care reform
Kevin Rader/Eyewitness News

Indianapolis - One of them most powerful women in the nation is calling for health care reform. Wellpoint CEO Angela Braly says she supports guaranteed coverage for everyone - as long as everyone gets and stays covered.

Braly addressed the Economic Club at the Convention Center Tuesday. As Forbes Magazine’s eighth most powerful woman in the world, Braly is going to attract attention.

“People are very passionate about health care,” she said.

Outside the Convention Center a handful of demonstrators debated that personal issue.

“If we don’t do a public option, if we don’t do something now, there are 48 million without insurance that will not be helped. My father is one of them,” said one of the protesters.

Inside, the CEO of the nation’s largest health insurer said she was concerned about several shifts, first of all in the debate.

“It has gone from a debate about health care reform to health insurance reform,” she said.

According to Braly, the difference between the Medicaid or Medicare payouts and actual costs are shifted to the private plans, costing you $1,500 a year. Add that to the $1,000 a year shifted to the private plans to cover the uninsured and it costs you a total $2,500 a year.

“Sounds a lot like the Fannie Mae for health care and I think we all know how that experiment is going,” Braly said.

But she also argued for change.

“The high and rising cost of health care in America is just not sustainable,” Braly said. She said the current system, including Medicare, which is administered by the federal government, was inefficient and promotes quantity over quality. She also said it posed “a real threat to the social and fiscal obligations of the government and to the health and prosperity of the American people.”

“We believe insurance companies have a role to play. We can and are making a difference,” Braly said. She said Wellpoint’s strategy was moving beyond processing claims and managing risk, noting employee incentives when customers get healthy.

Braly said private insurers need to work with the government to provide health care for an aging baby boomer population.

Braly said it was important to “refocus the debate on health care reform.” She said she would support a plan requiring everyone to buy health insurance while at the same time guaranteeing everyone, including those with pre-existing conditions, would get coverage and would not be excluded.
She said such a plan “must address underlying health care costs so that coverage is affordable.”

Braly talked about promoting health care consumerism to make people “better shoppers” for health care, and a field where insurers were “free to offer a range of choices. Let’s not put everyone in a one size fits all plan.”

Braly says the what worries her most about the plan currently under consideration is the “public option.”

On the outside, a few Hoosiers had a very different perspective.

“They spent $1.2 million last month on lobbying, Wellpoint did. We don’t have that kind of a budget so we have to be out there every day sending that message,” said Allison Luthe, Health Care for America Now.

Health Care for America Now says private health insurance companies are getting bigger while Indiana residents are forced to pay higher premiums for decreasing coverage.

“If you completely eliminated insurance company industry profits which is clearly the aim of some, you would pay for two days of health care in America and in the process you would eliminate the market mechanism to control costs and improve quality of health care being delivered,” Braly argued.

The key, Braly told the Economic Club, is to fix what is broken without breaking what still works.

“It won’t be easy and it should not be quick,” Braly said.

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AARP raises its voice in health care debate
By Mimi Hall, USA TODAY

WASHINGTON — AARP, which has lost tens of thousands of members over its support for efforts to revamp the health care system, is preparing a post-Labor Day blitz to try to cast itself as a politically impartial advocate on health care issues.
“To be clear: AARP has not endorsed any comprehensive health care reform bill — but we are fighting for a solution that improves health care for our members,” the group’s CEO, Barry Rand, and president, Jennie Chin Hansen, wrote to members on Tuesday.

The effort gears up next week, when members of Congress — some of them surprised by voter anger expressed at town-hall-style meetings last month — return to the nation’s capital to resume the debate over how to lower health care costs and provide insurance coverage for the millions who go without.

Since July 1, many of the 60,000 AARP members who have quit over concerns about health care legislation said they were worried it could lead to cuts in Medicare. Although AARP has not endorsed any specific plan, its general support for a system change left many members with the impression it backs the Democrats’ bill.

The resignations surprised leaders of the 40-million-member lobbying group, even though it signed up 400,000 new members during the same period.

“The last thing I want is for members to feel we’re not representing them,” says Lori Parham, AARP’s Florida director.

AARP’s new national campaign will include:

• A post-Labor Day direct-mail blast — 8 million letters will be sent — addressing concerns about health care and Medicare.

• Release of the September AARP Bulletin with a cover story debunking health care myths.

• Town hall forums and tele-town halls to address concerns about the changes the White House and Congress are considering.

• National TV and Web ads. A multimillion-dollar ad campaign, which started in mid-August, will continue through Sept. 14, and plans are underway for a second set of ads to run this fall.

AARP hopes to retain members such as Ted Campbell, head of the Republican Club at the Greenspring retirement community in Springfield, Va. A retired engineer, Campbell says many of his friends dropped their AARP memberships and he may quit, too.

AARP “most definitely should be neutral” in the health care debate, says Campbell, 80. “I can see that they’re going Democratic, very much so. They talk about bipartisanship, but you don’t see it.”

Campbell’s big worry: “rationing of treatments. It sounds to me like, based on age, they’re going to determine whether you get treatment or not. I don’t think that’s the way to control health care costs.”

In a letter to the AARP leadership last week, Republican National Committee Chairman Michael Steele urged the group to reject “the Democrats’ government-run health care experiment and the consequences it would have on seniors.”

Rand and Hansen said they will work with both parties and urged their members to reject the “misinformation and fear-mongering in the debate.”

Edward Coyle of the Alliance for Retired Americans says seniors groups “have not done as good a job as we might have talking to seniors about the real issues. …We were taken aback earlier in the summer” when town hall meetings became shouting matches.

AARP’s legislative director, David Certner, says the concerns seniors are raising now about rationing and cuts to their benefits are far different from those seniors have voiced for the past several years — concerns that prompted AARP to endorse plans for health care system changes.

Those concerns, he says, were about the high cost of health care, the difficulty getting insurance for those between 50 and 64 years old who don’t yet qualify for Medicare and the high cost of prescription drugs.

“There’s clearly been an effort to scare people,” says Certner, referring to incorrect warnings issued by some Republicans, including former Alaska governor Sarah Palin, of “death panels” that would cut off care for the elderly. “We’ve been spending a lot of time trying to dispel the myths. I think it has derailed the debate.”

Jim Kessler of Third Way, a Washington think tank that backs a public option, says AARP must be “pro-reform without being partisan.” Seniors are confused, he says, they “need to see (AARP) as an honest broker in this debate, … where they will get the most accurate information.”

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Poll: Two-Thirds Confused by Health Reform
CBS News Survey Finds Most Americans Scratching Heads Over Proposed Changes to Health Insurance System

(CBS)  Most Americans find the health care reforms being discussed in Congress confusing and say President Obama has not clearly explained his plans to overhaul the system, according to a CBS News poll released Tuesday.

Two in three Americans call the health care reforms being debated by lawmakers confusing; only 31 percent said they have a clear understanding of the proposed changes. Sixty-seven percent of those questioned said the reform ideas were confusing.

This evaluation cuts across party lines, with majorities of both Republicans (69 percent) and Democrats (58 percent) saying the current proposals are confusing.

Most Americans (60 percent) say the President has not clearly explained his health care reform plans. While slightly more than half of Democrats think Mr. Obama has clearly explained his plans, majorities of Republicans and independent voters say he has not.

Government vs. Private Industry

Americans also have increasing doubts as to how well the government can compete with private insurers. Just under half of those questioned said the government would do a worse job providing medical coverage - only 36 percent said it would do better, marking a change since earlier this summer.

There has also been a significant drop in the percentage that says government would be better than insurers at keeping costs down; from 59 percent in June to 47 percent now. Still, more said the government rather than private insurers would do a better job containing costs.

Town Halls

Most Americans have heard or read something about the protestors who attended recent town hall meetings on health care reform. Among those who have heard about them, almost half (49 percent) said the protestors do not reflect the views of most Americans, but 41 percent said they do.

A majority of Republicans (66 percent) said the protestors reflect the opinions of Americans as a whole, while a slightly larger proportion of Democratic participants did not (73 percent). Among those aged 65 and over, 45 percent said the protestors’ views were in line with those of most Americans - the highest of any age group.

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Dem split on the public option casts doubt on reform of healthcare
By Mike Soraghan and A.B. Stoddard - The Hill

Democratic aides and lawmakers are questioning how their party can pass a health reform bill next month with centrists and liberals at odds over a core aspect of the legislation.

Speaker Nancy Pelosi’s (D-Calif.) has pledged to include a government-run insurance option in the House bill that will be voted on next month. This reassures liberals but will make it difficult or impossible to get the votes needed to pass it if the public option is included.

Bruised by a tough vote on climate change legislation in June, burned by fiery town hall meetings in August, and worried about the midterm elections to be held in November 2010, Democratic centrists and vulnerable lawmakers in the party are signaling that they are not happy with Pelosi’s plan.

“I don’t see how we get to 218,” said a senior Democratic aide. “The Blue Dogs are ‘Hell nos.’ The people who voted yes [on energy] want to vote ‘no’ twice.”

Still, even skeptics note that Pelosi has almost never lost a vote in the House since becoming speaker. They figure she will try to tough it out vote by vote until she gets the 218-vote majority she needs, much as she did on the climate change vote.

One Blue Dog said Pelosi’s pledge to include a public option favors her liberal base in the Democratic Caucus.

“They’re playing to people who can’t get beat by Republicans,” said the lawmaker, who plans to vote against the bill if it remains in its current form.

He suggests Democratic leaders dramatically scale back their ambitions and work with Republicans to pass a bill. The House could easily pass legislation if the bill contained costs and forced insurance companies not to deny coverage to people based on their pre-existing health conditions.

“There’s not a critical mass of public support around here for a major overhaul,” he said. “We ought to do incremental reforms and make Republicans vote for it.”

Other Blue Dogs say overhaul legislation can be done if it is brought back to the center of the political spectrum.

“I think it’s pretty clear this bill needs more work,” said another Blue Dog. “If it’s not done right it will be something the American people won’t accept. That is a message the leadership needs to heed. We’re not going to be jammed.”

The centrists’ concerns were reflected earlier this month when House Majority Leader Steny Hoyer (D-Md.), leadership’s liaison to the Blue Dogs, suggested a public option might need to be dropped to pass a bill.

“I’m for a public option, but I’m also for passing a bill,” Hoyer said.

This comment contradicted Pelosi’s statement a day earlier that she could not get a bill through the House without a public option.

Her defenders note, however, that she successfully steered it through three committees. They say pessimism is premature, if not misguided.

“It’s a favorite Washington game to announce the score before the game is finished,” said a senior aide close to negotiations on the bill. “There is no appetite in this Congress for failing to pass health insurance reform.”

The public option is just one sticking point for Democratic members. Many, especially freshmen from conservative districts, do not like the income surtax on high earners that Pelosi wants to impose in order to pay for the bill. Centrists think the bill is too burdensome to small business, and that its $1 trillion price tag is too high.

“I think we should squeeze the savings out of the current system … without…a surtax – I think that’s a misguided policy,” said Rep. Jason Altmire (D-Pa.), a Blue Dog who voted against the bill in committee.

Others worry that Pelosi is trying to force centrists to vote for provisions that are unpopular in their districts and may never become law. They want to see a bill from the Senate Finance Committee, which is unlikely to include a public option, before they vote.

The House bill is still being modified. The three committees that approve versions of the bill are melding their drafts, and the bill could change substantially. The final version for the floor vote will be in the hands of the Rules Committee, and ultimately of Pelosi.

There is strong support among House Democrats for a government-run health insurance plan that would compete with private insurers. House leaders have also distributed polling data to the Caucus showing strong voter support for it.

But with Republican opposition expected to be nearly universal, Pelosi will need centrists if she is to win a simple majority.

If Republicans all vote against the bill, the Speaker can afford only 38 defections. There is no clear count, but there are signs of trouble.

There are 52 Blue Dogs, more than enough to block a bill. Some of the most conservative, including Reps. John Tanner (D-Tenn.), Charlie Melancon (D-La.), John Barrow (D-Ga.) and Jim Matheson (D-Utah), voted against the bill in committee.

Reps. Dan Boren (D-Okla.) and Parker Griffith (D-Ala.), among others, have told town hall audiences that they will oppose a public option. Griffith even said he wouldn’t vote for Pelosi again as speaker.

But Blue Dogs aren’t unanimous. At the less conservative end, Reps. Mike Thompson (D-Calif.) and Jane Harman (D-Calif.) have voiced their support. Several others like Rep. Joe Baca (D-Calif.) and Rep. Loretta Sanchez (D-Calif.) have signed statements that they support a public option.

In the middle, Blue Dog Reps. John Salazar (D-Colo.) and Michael Arcuri (D-N.Y.) have told hometown media outlets that they support a public option.

But dissatisfaction extends beyond Blue Dogs. Rep. Rick Boucher (Va.), a conservative Democrat but not a Blue Dog, says he doesn’t like the public option. Rep. John Adler (D-N.J.) told an audience, “The bill that’s coming through the House, with or without the public option, isn’t good for America.”

The Democrats’ most vulnerable new members from conservative districts are also concerned. Rep. Betsy Markey (D-Colo.), elected in 2008 in a heavily Republican district, supports a public option. But she told voters during recess that she opposes the bill “in its current form” because of the surtax and overall cost.

That leaves Pelosi caught in an increasingly bitter feud between her liberal and centrist factions. On the liberal side, 60 members of the Congressional Progressive Caucus signed a letter saying they would oppose a Blue Dog deal that they believe would weaken the public option. When the administration indicated this month that the public option was not essential to health reform, Rep. Anthony Wiener (D-N.Y.) said dropping it could cost the bill 100 votes.

Even with the public option, there are “no” votes on the left. Rep. Eric Massa (D-N.Y.), who supports a single-payer system, has told voters he opposes it because the public option is too weak, it will increase the budget deficit, and it “shifts too much power to the pharmaceutical industry,” according to a spokesman.

Liberal frustration with Blue Dogs is growing. In a conference call Thursday, liberal Rep. Pete Stark (D-Calif.) said Blue Dogs are “brain dead,” and “just looking to raise money from insurance companies.”

Rep. Lynn Woolsey (D-Calif.) co-chairwoman of the Progressive Caucus, said liberals face political consequences, too.

“Most of my constituents want single-payer,” Woolsey said. “If we can’t even pass a public option, they could vote me out of office. We’d have primaries. What do they think happens to progressives?”

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