Last year's Medicare reform plan passed by Congress and vetoed by President Clinton would have allowed seniors to use a voucher equal to their per capita share of Medicare expenditures to purchase catastrophic insurance coverage and deposit funds in a Medical Savings Account (MSA) to pay routine medical expenses.
A report from the consulting firm Lewin/VHI concluded that MSAs would increase the cost of Medicare and benefit only healthier and wealthier seniors. The report was commissioned by a lobbying group, the National Committee to Preserve Social Security and Medicare, and it was widely cited by opponents of MSAs for Medicare reform. However, a recent analysis concludes that the Lewin study is flawed throughout.
The Lewin report claimed that only 3 percent of Medicare beneficiaries (1.1 million persons) would enroll in MSAs and that the MSA option would cost Medicare an additional $15.3 billion due to adverse selection. According to health policy expert Greg Scandlen, at every step in its calculations Lewin made assumptions to ensure a negative outcome. Among those unjustified assumptions identified by Scandlen:
The Lewin report also makes contradictory assumptions. It assumes that MSA enrollees would only gain $8.24 a month or $105 per year. But it also assumes the MSA deposit would be $2,470 -- $370 above its estimate of average spending for MSA enrollees in poor health and $1,740 above its estimate for spending for those in good health.
Finally, if MSAs only attract the healthiest 3 percent of the Medicare population, as Lewin contends, then the cost of premiums for catastrophic coverage would be much lower and the MSA deposit higher -- attracting even more people.
Scandlen concludes that the Lewin-VHI report is a blatant example of advocacy "research" that should not have been accepted uncritically.
Source: Greg Scandlen, "This is Research?! A Critical Review of the Lewin/VHI Study of MSAs and Medicare," Patient Power Report, Vol. 1, No. 4, May 22, 1996.
When the board of Trustees of the Medicare system issues its 1996 report today, the nation will learn how much further the federal health insurance system has lurched toward bankruptcy.
But even this modest stopgap measure was thwarted by Democrats who called the reductions in planned increases "brutal cuts," and alarmed senior citizens. When the GOP plan reached the White House last year -- as part of the Balanced Budget Act -- President Clinton vetoed it. The influential American Association of Retired Persons (AARP) suggested trimming provider payments (which experts say will drive even more doctors out of Medicare) and increasing enrollee payments -- which is what the Republicans proposed, although AARP didn't back their proposal.
Experts say that among the reasons for Medicare's gloomy future are the nation's aging population, which increases the number qualifying for Medicare, and advances in technology, which raise medical costs and extend beneficiaries' lives.
Sources: Gordon S. Jones (Seniors Coalition), "Very Scary Medicare," Washington Times, June 5, 1996, and William M. Welch, "Medicare to Go Broke in 2001-- Report," USA Today, June 5, 1996.
Researchers from the RAND Corporation conclude that Medical Savings Accounts (MSAs) could reduce health care expenditures and would be attractive to both sick and healthy, rich and poor. The results of their study were recently published in the Journal of the American Medical Association.
Legislation before Congress would allow nonelderly Americans the option of MSAs to which they would make tax-free deposits and from which they could pay routine medical expenses up to the deductible on a catastrophic insurance policy they would purchase. Congressional plans would also allow employers to fund such accounts for their employees to complement catastrophic insurance in an employer-provided group health plan.
Depending on the design of the MSA plans and the availability of alternatives -- such as traditional fee-for-service insurance and Health Maintenance Organizations (HMOs) -- the authors of the RAND study project these effects:
The study assumes that health care consumers prefer the insurance/MSA alternative that benefits them the most after taxes. However, the authors point out that individuals also consider such nonfinancial factors as control over choice of physician and amount of care when choosing a health care plan.
Source: Emmett B. Keeler, et al., "Can Medical Savings Accounts for the Nonelderly Reduce Health Care Costs?" Journal of the American Medical Association, Vol. 275, No. 21, June 5, 1996.
No doubt hundreds of thousands, even millions of Americans suffer from severe and tragic mental disorders. No one knows the exact number because there is as yet no objective definition of what separates severe psychosis from a multitude of lesser conditions and symptoms -- all the way down the scale to vague uneasiness or unhappiness.
Questions concerning degrees of "mental illness" have arisen in the wake of Senate approval of a provision to mandate mental health coverage on a par with coverage of physical health in the Kassehaurn-Kennedy Health Insurance Reform Act of 1996. This week, Congressional Republicans withdrew support of this particular amendment.
Experts note that proponents of mental health coverage always cite the saddest and most serious cases of derangement to drum up emotional support for their plan. But such cases represent only a small portion of the cases which can and will be made if parity with physical ailments were to become law.
The Senate plan made no distinction between severe and mild categories of mental illness, even though the vast majority of those with alleged disorders were placed in the latter category.
According to one neurologist, that means "anyone whom a psychiatrist, psychologist or social worker wishes to define as suffering from a mental illness." There is no way to refute such a diagnosis, since there are no diagnostic criteria.
Even if parity were to be restricted to agreed-upon "severe" disorders, there is nothing in the diagnostic procedures to prevent mental health practitioners from expanding these categories to cover ever more behaviors, experiences and problems. As one psychiatrist warned, "When you start talking about mental disorders you are into a black hole that includes coverage for ... Woody Allen's 33 years of continuous psychoanalysis."
Source. Richard E. Vatz (Towson State University) and Lee S.Weinberg (University of Pittsburgh), "Good Reasons for Caution on Mental Health Coverage," Wall Street Journal, June 13, 1993.
Requiring that health insurance treat mental health coverage on the same basis as other health care would lead to a loss of insurance coverage for 1.7 million workers and their families unless employers reacted by changing non-mental health benefits. That is the finding of a study by Price Waterhouse LLP of provisions in the health insurance reform passed by the Senate.
The study, commissioned by a coalition of employer groups, found that mental health parity would have a significant impact on premium costs, federal revenues and employer-sponsored coverage.
An earlier Congressional Budget Office analysis estimated that premium costs would increase only by 4 percent and only 900,000 workers and their dependents would lose employment-based coverage.
However, the CBO and other studies did not account adequately for a likely shift from using public mental health facilities to using private mental health care, according to Price Waterhouse. This shift would be almost as significant as reducing the copayment by insured individuals from the 50 percent required under most mental health coverage to the 20 percent required under medical coverage.
Source: "Employer Groups' Study Bolsters Claims of Negative Side of Mental Health Parity," BNA's Health Care Policy Report, Vol. 4, No. 24, June 10, 1996.
The health insurance reform bills passed by the House and Senate could raise insurance premiums by 23 percent in some states and drive purchasers out of the individual insurance market, according to a report from the National Institute for Health Care Management.
The effects of either the Kassebaum-Kennedy bill (S. 1028) or the House bill (H.R. 3103) would vary dramatically among the states. Neither bill would affect rates much in states with extensive regulation already in place, such as New York or Washington; however, in other states, they would have a big impact.
The individual market accounts for between 10 million and 16 million Americans. That is 12 percent of the under-65 population, with New York, California and Texas having the largest potential market.
Both bills eliminate the use of pre-existing conditions to deny coverage, require guaranteed issue to those who have had 18 months of continuous group coverage, provide for state flexibility in designing programs to ensure access and guarantee renewal in the individual market.
Both houses of Congress must approve the same version of the legislation before it is sent to the President for his signature or veto.
Source: "Federal Legislation May Have Negative Effects on Some States," BNA's Health Care Policy Report, Vol. 4, No. 24, June 10, 1996.
New studies from such prestigious organizations as Rand, Harvard and the liberal Urban Institute support the concept of Medical Savings Accounts, rebutting arguments against them advanced by Sen. Ted Kennedy (D-MA).
MSAs give people a new way to pay for health care, involving the option of high-deductible insurance to cover major expenses paired with a personal savings account to pay for routine and preventive medical care. Individuals may withdraw or roll over any moneys left in the account at year's end.
Some 2,000 employers have already adopted some version of MSAs. But employer deposits to MSAs are subject to federal income and payroll taxes, unlike employer-paid health insurance premiums. Kennedy wants to deny MSAs the same tax status because he says they would favor the healthy or wealthy and harm the sick and poor. But the studies show otherwise.
Rand also disputes the claim that they would favor the wealthy.
MSAs would be a welcome option for minorities, according to Urban Institute studies.
Then there is the question as to whether MSAs would help hold down health care costs. According to the Rand study:
A poll by health economists at the Harvard School of Public Health confirmed that patients in managed-care plans face more obstacles to obtaining specialized care and tests, even when both physician and patient believe additional care is needed.
The results of such studies suggest that health care critics such as Sen. Kennedy should focus their attentions on HMOs rather than MSAs.
Source: John C. Goodman (National Center for Policy Analysis), "Kennedy: Off-target on MSAs," Investor's Business Daily, June 18, 1996.
The total cost of the medical malpractice system including claims paid and lawyers' fees comes to less than 1 percent of the nation's medical bills. However, that doesn't include the cost of defensive medicine -- which a new study shows is expensive and widespread.
Two Stanford University economists analyzed hospital expenditures for all elderly Medicare patients hospitalized in 1984, 1987 and 1990 with recently diagnosed heart attacks and other serious heart ailments. Using these data, they found:
They conclude that the recent slowdown in US medical expenditures may partly reflect malpractice reforms adopted by many states over the past decade, as well as the growth in managed care.
Source: Gene Koretz, "Want to Cut Medical Costs? Put a Lid on Malpractice Suits," Business Week, May 13, 1996.
With the financial collapse of the Medicare Trust Fund looming by the year 2001, Democrats are nibbling around the edges of the problem by offering two timid proposals. Last year the Fund's trustees predicted insolvency in 2002, which date they have just moved closer by one year.
First, though, some background on the issues:
U. S. Secretary of Health and Human Service Donna Shalala has recommended what she seems to think is a bold, innovative plan:
This is like going to your spouse and saying the family budget cannot pay for all the expenses that he or she is charging to the family Mastercard account. Then the spouse nods and begins switching some of the charges to the family Visa card.
A second strategy is proposed by President Clinton: create a commission to study the matter. This is the politicians' standard response to issues that are too politically explosive to deal with directly. The commission route also has the beauty of postponing having to do anything at all.
If the President and the Secretary want to shy away from addressing the issue of Medicare's exploding costs, why not follow an eminently sensible suggestion made by Republicans last fall? They proposed legislation that would have kept the Part B Medicare beneficiaries' payment share at nearly a third of total Part B spending -- meaning payments would have increased, but only slightly.
Although Congressional Democrats hooted down the suggestion, the President has said that the differences between the two parties on the numbers are not all that dramatic.
The Republican proposal would, after all, permit seniors to remain in traditional Medicare or allow then to choose among HMOs, private insurance, medical savings accounts, or plans sponsored by former employers or associations -- such as the American Association of Retired Persons.
Source: Former Governor Pete du Pont (National Center for Policy Analysis), "Intrepid Proposals for Medicare Reform," Washington Times, June 21, 1996.
Mammograms may be less beneficial than those who urge a nationwide screening program think, according to cancer researcher David Plotkin. Last year, the research director of the British Institute of Cancer Research quit England's national breast-cancer-screening advisory board because nationwide mammography is "not worth doing."
However, the American Cancer Society supports a national screening program for breast cancer. It advises women age 40 to 49 to have mammograms every one to two years and women age 50 and over to have them annually. But Plotkin claims a nationwide mammography program would be a huge commitment with no proven benefits. He contends:
In contrast, screening 10,000 women with a Pap smear for cervical cancer every three years from their 20s to their 70s would prevent about 200 from developing invasive cervical cancer. If each detected cervical cancer saved an additional 10 years of life, the cost to society would be only about $150,000 per woman benefited.
A breast cancer screening program would be even less likely to benefit women under 50, since breast cancer is relatively rare in women in their 30s or 40s -- with only 9,200 cases annually in women under 40. Of course, the benefits would be much greater for women with a family history of breast cancer or who detect a lump.
More women are diagnosed with breast cancer today -- double the rate of 60 years ago -- due to the growing use of mammography. Adjusting for today's longer life-span and population size, the proportion of women killed every year by breast cancer -- 24.7 to 27.6 per 100,000 -- has varied little since the 1930s.
Source: David Plotkin (Memorial Cancer Research Foundation of Southern California), "Good News and Bad News About Breast Cancer," Atlantic Monthly, June 1996.