Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
26082391
label
HRC Health Care Correspondence 95 - E, F
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
26082391
sourceUrl
contentType
document
title
HRC Health Care Correspondence 95 - E, F
citationUrl
collections
Records of the First Lady's Office (Clinton Administration)
Pam Cicetti's Subject Files
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
26082391
levelOfDescription
fileUnit
otherTitles
42-t-2124771-20140159S-015-006-2015
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
5fe2ce96c9ae0151
ocrText
Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001a. letter
From: Hillary Rodham Clinton, To: Breast Cancer Survivor [partial]
4/20/95
b(6)
(2 pages)
001b. letter
From: Breast Cancer Survivor, to: Mrs. Clinton [partial] (2 pages)
9/23/96
b(6)
001c. letter
From: Blue Cross / Blue Shield of Georgia, To: Breast Cancer
3/28/94
b(6)
Survivor [partial] (1 page)
001d. fax
From: GA Surgery - W Paces, To: Policyholder [partial] (2 pages)
4/5/94
b(6)
001e. letter
From: Breast Cancer Survivor, To: Representative Cynthia McKinney
9/23/94
b(6)
[partial] (1 page)
001f. letter
From: Representative Cynthis McKinney, To: Mrs. Clinton [partial]
10/31/94
b(6)
(1 page)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency ((b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
HRC
HC CORR 95-E,F
PERSONAL
&
CONFIDENTIAL
DETERMINED TO BE AN
ADMINISTRATIVE MARKING
INITIALS: ADB 12-5-13
DATE:
PHOTOCOPY
PRESERVATION
Date: 02/14/95 Time: 08:48
Employers Cut Health Care Costs in 1994 With Moves to Managed Care
WASHINGTON (AP) Employers cut their employee health costs in
1994 by steering more workers into managed-care plans.
The average employer with 10 or more workers spent $3,741 per
employee on health benefits, down 1.1 percent from the year before,
the benefit consulting firm Foster Higgins said Monday.
That was a sharp dropoff from the 8 percent increase the year
before and double-digit increases in earlier years.
The companies did it by boosting the percentage of workers
enrolled in managed care health maintenance organizations,
preferred provider organizations and point-of-service plans from
52 percent to 63 percent in a single year.
Managed-care plans emphasize primary and preventive care,
including low-cost checkups, in hopes of keeping patients healthy.
The growth of managed care was most rapid in the Northeast and
slowest in the South, according to Foster Higgins' survey of nearly
2,100 employers.
Big employers, those with more than 500 workers, had the most
success in holding down their medical bills. Their costs fell by
1.9 percent, to $4,040 per employee.
Those with fewer than 500 employees, which generally offer less
generous coverage, saw their costs climb by 6.5 percent, to $3,452.
For years, health costs have been rising at two and three times
the rate of general inflation. But that spiral slowed dramatically
in 1994 while Congress debated, and eventually discarded, President
Clinton's proposal to make all employers and employees buy health
insurance.
Forty-one million Americans, or 16.1 percent of the population,
are still uninsured, and the number is rising.
`Employers that have embraced and moved to managed care have
been rewarded, said John Welch, a principal with Foster Higgins'
Washington office.
Fifteen percent of employers offered a point-of-service option
in 1994, up from 4 percent in 1993. They charge patients more if
they go outside the plan's network of doctors and hospitals.
Employers for the first time induced a significant number of
retirees to join HMOs. 'Getting this high-cost population into
low-cost plans will have a big impact on employers' health care
liability over the long term, said Dave Rahill, also a Foster
Higgins principal.
In the Northeast, 63 percent of covered workers were in managed
care, up from 34 percent in 1993. Employers' costs declined 9.7
percent, to $3,851 per employee.
In the Midwest, managed-care enrollment grew from 51 percent to
60 percent while costs rose 0.7 percent, to $4,048.
The West, the bellwether for managed care, enrollment grew from
72 percent to 80 percent, and costs rose 2 percent, to $3,693.
In the South, managed-care enrollment inched up from 57 percent
to 58 percent, and costs rose 3.9 percent, to $3,389.
A sample of all employers with 10 or more employees was surveyed
by ICR Survey Research Group for Foster Higgins. The company said
the results are valid for more than 550,000 employers with 68
million employees.
APNP-02-14-95 0850EST
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001a. letter
From: Hillary Rodham Clinton, To: Breast Cancer Survivor [partial]
4/20/95
b(6)
(2 pages)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)|
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information |(a)(1) of the PRAJ
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA|
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRAJ
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA|
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
THE WHITE HOUSE
WASHINGTON
April 20, 1995
(b)(6)
0019
Dear
(b)(6)
0019
Thank you for writing about your difficulty obtaining
payment from Medicare for the mammogram you received last March.
As you point out, Medicare pays for what are called
"screening" mammograms every other year. However, Medicare
places no limit on the number of "diagnostic" mammograms.
Because you were treated for breast cancer last year, the six-
month follow up mammograms your doctor prescribed are diagnostic,
and they will be covered by Medicare.
Many people agree that older women should receive mammograms
every year and, therefore, that Medicare should cover annual
mammograms for women aged 65 and older. However, many other
well-respected scientists and physicians believe that mammograms
performed every other year are just as effective as annual
mammograms. This issue continues to be studied. I have brought
your letter to the attention of Dr. Helen Smits, the Deputy
Administrator of the Health Care Financing Administration, which
runs the Medicare program.
Although it is clear that you are careful to take care of
yourself and your health, you may be surprised to know how few of
the women on Medicare obtain mammograms. Fewer than 40 percent
of older women on Medicare have submitted a claim for a mammogram
in the past two years. I have met with older women around the
country to talk about mammography and Medicare, and during the
next few months, I intend to continue to do what I can to help
spread the word about the importance of mammograms and to urge
older women to take advantage of this crucial Medicare benefit.
I encourage you to remind friends and family who are 65 and older
to obtain a mammogram at least every other year.
(b)(6)
0019
April 20, 1995
Page Two
Thank you again for writing. You have my very best wishes
for your continued good health.
Sincerely yours,
Clenton
Hillary Rodham Clinton
CC: The Honorable Cynthia McKinney
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001b. letter
From: Breast Cancer Survivor, to: Mrs. Clinton [partial] (2 pages)
9/23/96
b(6)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information [(a)(4) of the PRA
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
(b)(6)
001b
September 23, 1994
Hilary Rodman Clinton
The White House
Office of the First Lady
1600 Pennsylvania Avenue
Washington, D.C. 20500
Dear Mrs. Clinton:
I am a 67 year old breast cancer survivor. I can happily say this because
I had a mammogram in conjunction with my annual physical in March of this
year. This is the reason I am writing to you.
Medicare refused to pay for this mammogram because of my age. However, the
mammogram showed very early cancer. I subsequently had a lumpectomy and six
weeks of radiation. Their policy is to pay for a mammogram only every two
years. They consider this a routine procedure. In my humble opinion a
mammogram for women over 65 years old should be considered a diagnostic,
not routine, procedure.
I support your efforts to reform the national health situation. We do need
changes but we also need to review the methods we now have to keep healthy
senior citizens healthy.
The ironic part of this whole episode is that Medicare paid the radiologist
who read the x-ray, all the subsequent tests needed before surgery, a
lumpectomy and the radiation and did not question one charge! Yet, it took
them six months to approve payment of the original mammogram.
I am incensed that Medicare can arbitrarily decide who should and who should
not have a mammogram! How many other women have they denied this procedure
by not paying for it and who may have died of breast cancer because they
were not diagnosed early enough!
My oncologist is scheduling me for a mammogram every six months for the next
two years as a precautionary measure. My first one is scheduled for next
week. I wonder if Medicare will refuse to pay for this one, too.
Enclosed are six documents to substantiate the information in this letter.
Thank you for taking the time to review this information.
Sincerely yours,
(b)(6)
0016
(b)(6)
001.6
Page 2
enc: 1. Medicare letter, dated 3/28/94
2. Pathology report, dated 3/30/94
3. Cover letter from my surgeon, Dr. William A. Reid, dated 4/5/94
4. My appeal letter to Medicare, dated 4/18/94
5. Medicare reply to my appeal letter, dated 4/22/94
6. Medicare notification that bill was paid, after I called and asked
for copy, dated 9/1/94
CC: Rep. Patricia Schroeder
Sen. Barbara Mikulski
Sen. Connie Mack
Sen. Barbara Boxer
Sen. Diane Feinstein
Rep. Cynthia McKinney
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001c. letter
From: Blue Cross / Blue Shield of Georgia, To: Breast Cancer
3/28/94
b(6)
Survivor [partial] (1 page)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information |(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors |a)(5) of the PRAJ
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA|
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
DIUCLIUSS
P.U. BOX 9048
BlueShield
Medicare
Columbus, Georgia 31908-9048
Beneficiary Customer Service - 706-322-4082
®
of Georgia
Provider Customer Service - 706-571-5417
A Member of the Blue Cross and Blue Shield Association,
An Association of Independent Blue Cross and Blue Shield Plans
404 95333550
Federal Medicare
Intermediary
I
-
03/28/94
WEST PACES MEDICAL CENTER
(b)(6)
001c
3200 HOWELL MILL RD NW
ATLANTA GA 30327
RE:
(b)(6)
001c
ICN:
SERVICE DATES: 03/10/94
03/10/94
MEDICARE COVERS A SCREENING MAMMOGRAM FOR A WOMAN OVER 65 EVERY 2 YEARS. A
SCREENING MAMMOGRAM IS ALLOWED ONCE A YEAR FOR WOMEN FROM AGE 50 THRU 64.
COVERAGE IS ONLY ALLOWED ONCE FOR A WOMAN AGE 35 THRU 39. A SCREENING
MAMMOGRAM IS ALLOWED FOR A WOMAN AGE 40 THRU 49 IF AT HIGH RISK OR EVERY TWO
YEARS IF NOT AT HIGH RISK.
ACCORDING TO THE INFORMATION ON YOUR CLAIM YOU DO NOT MEET THE REQUIREMENTS FOR
COVERAGE OF THIS CLAIM. THEREFORE, NO PAYMENT CAN BE MADE FOR THE SERVICES YOU
RECEIVED.
0403 OTHER IMAGING SERVICES - SCREENING MAMMOGRAPHY
1
$62.50
0001 CLAIM TOTALS
0
$62.50
IF YOU DO NOT AGREE WITH THIS DETERMINATION, YOU HAVE THE RIGHT TO APPEAL. YOU
MUST FILE A WRITTEN REQUEST FOR REVIEW WITHIN 6 MONTHS FROM THE DATE OF THIS
NOTICE. YOU MAY MAKE YOUR REQUEST THROUGH THIS OFFICE OR ANY SOCIAL SECURITY
OFFICE.
BLUE CROSS AND BLUE SHIELD OF GEORGIA, INC.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001d. fax
From: GA Surgery - W Paces, To: Policyholder [partial] (2 pages)
4/5/94
b(6)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a))
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information |(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA|
an agency |(b)(2) of the FOIA|
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information |(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
APR- 5-94 TUE 11:10
GA SURGERY-W PACES
FAX NO. 4043522772
P.01
MEDICAL CENTER
DEPARTMENT OF PATHOLOGY
JAME:
(b)(6)
oold
DOB:
(b)(6)
oold
HOSP. NO. 1944026423
OCTOR(S)EREID
ROOM:ASU
PATH. NO. S94-1962
3PECIMEN,LEFT BREAST TISSUE
DATE:03/30/94
Clinical History:LEF BREAST MASS
DIAGNOSIS, INTRADUCTAL CARCINOHA, COMEDO TYPE WITH INTRALUMINAL
MICROCALCIFICATIONS. THE LESION IS IDENTIFIED AT THE LINE
OPTSURGERY AND SHOWS FOCI OF HICROINVAGION - left breast
tissue with localization.
(174.9)
GROSS:
The specimen 18 received in the fresh state for fexitron examination labeled
"left breast tissue". It consists of B lobular mass of flabby fat and breast
tissues with a needle wire identification in place. The specimen measures 4.5
X. 3.5 H 3.0 de. All additional swaller sample weasures 3.0 CM in diameter is
present. The specimen 18 faxityoned in the whole, the identification needle
removed, dipped in India ink, serially sectioned and dexitroned again. The
cut section reveals areas 41 white breast Lissue with & shiny cut surface and
soft consistency. The faxitron study demonstrates presence of clustered
microcalcifications similar to the ones identified in the wassagram.
INTRAOPERATIVE CONSULT: HAHNOGRAPHIC LESION OF MICROCALCIFICATIONS IS
IDENTIFIED IN THE SPECIMEN.
Clustered microcalcifications are identified in four different slices and
these are submitted in cassettes #1 through 4. Additional random samples are
submitted in cassettee #5 through 10.
CA2/jlg
MICROSCOPIC
Ten H & E stained eections are examined. The first four alides represent the
area of microcelcifications identified in the fexitron study which
demonatrates B linear lesion represented by a breast duct with neoplestic
malignant changes of the ductal epithelium, proliferating in a ring-like
fashion with the lumen occupied with cellular debris in which
microcalcifications are present. The features are those of an intreductal
comedo type cercinous and the line of surgery in slides 1 and 3 appeare
involved with the leadon which has been painted with India ink. There are
microscopic foci at breaked hrough with microinvaaion of ductal cells with
desmoplastic reaction de #4 which has been examined at three deeper
levels. Additional of the uninvolved portion of the specimen
dewonatraten breadt tissue with TAC additional evidence of neoplastic lesions.
Carlos A. 2evellos, M.D./Uf
3/31/94
CAYWAIN
MAG J. T. GODWIN, K.D.
C. A. ZEVALLOS, M.D.
SIGNA (RHOLS K.D.
C.P.GARRISON, M.D.
PATHOLOGIST
DR.
ATHOLOGIST
PATHOLOGIST
PATHOLOGIST
IDC
EDC
TELEPHONED REPORT TO:
INSUFIED
x225
FACED
MEDICAL CENTER
PARTMENT OF PATHOLOGY
NAME:
(b)(6)
oold
DOB:
(b)(6)
oold HOSP. NO. 1944026423
DOCTOR (S) 1 REID
ROOM: ASU
PATH. NO. ,594-1962
SPECIMEN,LEFT BREAST TIBSUE
DATE:03/30/94
Clinical History:LEFT BREAST MASS
INTRAOPERATIVE CONSULT: MAMMOGRAPHIC LESION OF HICROCALCIFICATION IS
IDENTIFIED IN THE SPECIMEN.
Carlos A. Zevallos, R.D./jlg
03/30/94
HAG J.T.GODWIN, H.D.
care
C.A. ZEVALLOS, M.D.
C.W. NICHOLS, M.D.
C.P. GARRISON, M.D.
PATHOLOGIST
PATHOLOGIST
PATHOLOGIST
PATHOLOGIST
IDC
EDC
TELEPHONED REPORT TO:
DATE/TIME,
JAN-04-1995 11:04 FROM ADMINISTRATOR'S OFFICE
TO
94567431 P.01
HEALTH CARE FINANCING ADMINISTRATION
ADDRESSEE:
KAREN GUSS
FROM: HELON h, SHITS, M.D.
OFFICE OF THE ADMINISTRATOR
200 INDEPENDENCE AVE., S.W.
ROOM 314G
WASHINGTON, DC 20201
PHONE: 202-690-6726
PHONE: 456-5603
FAX : 202-690-6262
TOTAL PAGES:
ADDRESSEE'S FAX MACHINE NUMBER:
DATE:
CTI
456-7431
1/4/95
REMARKS:
JAN-04-1995 11:04 FROM ADMINISTRATOR'S OFFICE
TO
94567431 P.02
1/4/95
Memo to: Karen Guss
From: Helen Smit
Halm
I gather from the material you sent that Mrs. Clinton's reply to
the breast cancer survivor has not yet gone. Here is some
information that might help in the response:
The q. six month mammograms in the future should be paid because
they are diagnostic (related to the previous cancer) rather than
routine screening. If there was some particular reason to do the
original screening mammogram, such as a family hisotry of the
disease or other factors placing her in a high risk category,
that should also have been coded as diagnostic and paid.
Our real problem with the mammogram benefit in Medicare is that
beneficiaries simply don't use it enough; we're drafting a note:
from Bruce about that which should be over to Mrs. Clinton later
this week. But you're right, we don't intend to increase the
frequency of screening that we will pay for and we are supported
in that by a number of expert organizations, including both
geriatrics and cancer groups.
Let me know if I can be of any other help.
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001e. letter
From: Breast Cancer Survivor, To: Representative Cynthia McKinney
9/23/94
b(6)
[partial] (1 page)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)|
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information |(a)(1) of the PRA]
b(1) National security classified information |(b)(1) of the FOIA)
P2 Relating to the appointment to Federal office |(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA|
an agency |(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy |(b)(6) of the FOIA]
personal privacy |(a)(6) of the PRAJ
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA|
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells [(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
oole
(b)(6)
SEP 27 1994
September 23, 1994
Representative Cynthia McKinney
1 South DeKalb Center
2853 Candler Road
Suite 9
Decatur, Georgia 30034
Dear Representative McKinney:
Enclosed are copies of a letter and supporting documents I am sending to
Mrs. Hilary Clinton in regards to a problem I had with Medicare. They refused
to pay for a mammogram I had in March of this year because of my age. As
you can see by the appeal letter I sent them, if I had not had a mammogram
this year I could possibly be dead next year.
Because of finding the cancer in its earliest stages I was able to just have
a lumpectomy and radiation and now I'm cancer free.
Please continue to fight for health reform and especially for senior citizens!
Miss McKinney, I also want to tell you how helpful your office staff were
to me. I called your Decatur office several months ago to get the addresses
of all the people on the enclosed list. Whoever answered the phone gave me
all the addresses and was most gracious.
Sincerely yours,
(b)(6)
oole
Enclosures: 7
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001f. letter
From: Representative Cynthis McKinney, To: Mrs. Clinton [partial]
10/31/94
b(6)
(1 page)
COLLECTION:
Clinton Presidential Records
First Lady's Office
Pam Cicetti
OA/Box Number: 13598
FOLDER TITLE:
HRC Health Care Correspondence 95 - E,F
2014-0159-S
sb297
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRAJ
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA|
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute |(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA|
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA|
personal privacy [(a)(6) of the PRA|
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA|
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions [(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA|
RR. Document will be reviewed upon request.
CYNTHIA A. McKINNEY
DISTRICT OFFICES:
11TH DISTRICT, GEORGIA
1 SOUTH DEKALB CENTER
SUITE 9
WASHINGTON OFFICE:
2853 CANDLER ROAD
124 CANNON BUILDING
DECATUR. GA 30034
WASHINGTON, DC 20515
(404) 244-9902
(202) 225-1605
120 BARNARD STREET
COMMITTEE ON AGRICULTURE
SUITE 305-A
DEPARTMENT OPERATIONS AND NUTRITION
SAVANNAH, GA 31401
ENVIRONMENT, CREDIT, AND RURAL
DEVELOPMENT
FOREIGN AGRICULTURE AND HUNGER
Congress of the United States
(912) 652-4118
505 COURTHOUSE LANE
COMMITTEE ON FOREIGN AFFAIRS
INTERNATIONAL ECONOMIC POLICY AND TRADE
house of Representatives
SUITE 100
AUGUSTA, GA 30901
WESTERN HEMISPHERE AFFAIRS
(706) 722-7551
Washington, DC 20515-1011
October 31, 1994
Hillary Rodham Clinton
Office of the First Lady
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500
Dear Mrs. Clinton:
Please find enclosed a letter my district office received from a
(b)(6),
001f
001f
(b)(6)
She sent us a letter which she wanted forwarded on to you. It
concerns her fight with breast cancer and also the struggle that ensued with
Medicare. I thought her letter would be of interest to you. With warm personal
regards, I remain
Sincerely,
Cyme
Cynthia McKinney
Member of Congress
CAM: Ism
Enclosures
cc:
(b)(6)
001f
PRINTED ON RECYCLED PAPER
F
THE WHITE HOUSE
WASHINGTON
MEMORANDUM
To:
Hillary Rodham Clinton
From: Chris Jennings
Date: February 17, 1995
Re:
Jackson Hole Group
As I believe you know, Secretary Shalala recently accepted an invitation from Paul
Ellwood to attend a meeting in Jackson Hole this weekend. She is scheduled to respond to
their most recent health care proposal, which is attached for your review.
Also enclosed you will find Secretary Shalala's written response from which she plans
to address the attendees this weekend. As you will note, behind the usual niceties, the letter
is very critical and points out the shortcomings of their most recent take on health care
reform. AARP'S John Rother, we are told, is planning on being at least as critical of the
Jackson Hole proposal.
Lastly, because some essential information on the state-by-state impact of Medicare
and Medicaid cuts will not be available until late in the week, we have decided to postpone
the Wednesday Map Group meeting. We have rescheduled the meeting for Tuesday,
February 28 and it is now on your calendar. Jen and I look forward to seeing you on
Tuesday.
cc:
Melanne Verveer
OF
HUMAN
THE SECRETARY OF HEALTH AND HUMAN SERVICES
WASHINGTON, D.C 2020)
USA
FEB 1 7 1995
Paul M. Ellwood Jr., M.D.
President
Jackson Hole Group
P.O. Box 350
Teton Village, WY 83025
Dear Paul:
Thank you for the opportunity to review the new draft proposal of "Responsible Choices." I
am looking forward to meeting with you and others in Jackson Hole to discuss our respective
ideas for improving the nation's health care system.
I have appreciated the opportunity to work with the Jackson Hole Group in the past, in large
part because we share a common commitment to improving both efficiency and fairness in
the health care system. I think we all agree that health reform requires three elements to be
effective - expanded coverage, lower costs and improved quality - and that a restructured
marketplace is essential to achieving these elements. Our ultimate goal must be universal
coverage in an efficiently operating marketplace.
You and your colleagues have made a significant contribution to the health care debate in this
country by recognizing the critical role that consumer choice and private innovation can play
in our health care system. I think that we both agree that choice is a critical element in
improving quality and efficiency.
I was surprised, then, by the direction reflected in "Responsible Choices." The draft proposal
seems to abandon your previous commitment to addressing the problems of the over 40
million uninsured in this nation. I understand that the political environment has changed, and
that our strategies may need to change as a result. However, that does not alter the
underlying fact that middle class people who lose their jobs, or working families struggling
to get by, need some assistance to be able afford adequate health insurance.
The Jackson Hole Group has recognized this fact in the past, and has advocated substantial
subsidies to assist the uninsured in purchasing private insurance. It deeply troubles me that
the "Responsible Choices" proposal fails even to mention the need to move towards universal
coverage, let alone suggest policies (short or long-term) to do so.
In fact, the arbitrary cap on funding for the Medicaid program proposed in "Responsible
Choices" would actually decrease coverage. Over the past few years, enrollment in
employer-based insurance has fallen by almost six percentage points (from around 66% to
around 60% of the nonelderly population), while the percentage of the population covered by
Medicaid has grown significantly. Between one-third and one-half of the projected annual
growth in Medicaid spending results from projected growth in enrollment.
Page 2 - Paul M. Ellwood Jr., M.D.
Furthermore, I am perplexed and disturbed that you would propose an arbitrary cap on the
Medicare program. Like Social Security, Medicare is an inter-generational compact.
Placing an arbitrary, pre-determined cap on Medicare spending, while at the same time
eliminating its status as an entitlement, would put services to the elderly at risk and would
violate that compact.
A cap on Medicare puts the elderly and disabled at risk. The vast majority of Medicare
beneficiaries have modest incomes. Over 75% of beneficiaries have incomes below $25,000;
30% of beneficiaries get 80% or more of their income from Social Security. So while a
voucher program like that proposed in "Responsible Choices" may expand choice for some
beneficiaries, it would in fact diminish choice for many by effectively forcing them into a
low-cost plan and away from the providers of their choice.
This does not mean that we oppose improving Medicare - quite the contrary. We are
pleased that, during the Clinton Administration, projections for the average annual rate of
growth for Medicare spending for the period 1996 - 2000 have decreased - by more than a
percentage point a year - just in the period between the Mid-Session Review last spring and
the President's Fiscal Year 1996 Budget. We are pressing ahead with improvements in
Medicare management, data processing, contractor oversight, and program integrity
activities.
Among the other improvements we are making in Medicare, I believe that we share a
commitment to expanding and improving the managed care choices available to Medicare
beneficiaries. Today, about 74 percent of Medicare beneficiaries have access to a managed
care plan, and 9% of beneficiaries have enrolled in one. Enrollment is increasing rapidly -
by over 1% per month. We also are working on ways to make our existing managed care
program work better. Examples include our work with the industry to improve quality
measures and the AAPCC methodology for the Medicare risk contracting program, and our
collaboration with Alain Enthoven to design a competitive bidding demonstration. And, as
we have testified in recent weeks, we are in the process of developing new managed care
options under Medicare, including a PPO option.
While managed care appears now to be reaching a critical mass in private sector health
programs, at least in some areas, it has taken many years to achieve this state. Many
employers that have embraced managed care have moved cautiously to avoid disruption, by
maintaining a fee-for-service option at affordable levels or by offering out-of-network options
through point-of-service plans or PPOs. Most Medicare beneficiaries - and particularly the
most elderly among them - have not had the benefit of a gradual exposure to managed care.
I am strongly committed to expanding the managed care options available in Medicare, but
the emphasis must be on choice. We should learn from the private sector and recognize that
we need to move prudently if we are to foster understanding and acceptance of managed care
approaches among beneficiaries.
Page 3 - Paul M. Ellwood Jr., M.D.
I look forward to the upcoming discussions at Jackson Hole. We need to focus on how we
can improve both the private insurance market and public programs. And we must discuss
ways to expand coverage for vulnerable populations. I believe that there are many points on
which we can agree. To me, making responsible choices means finding ways to improve
what we have, not making arbitrary cuts in important programs that can leave the elderly,
disabled, and poor at risk. I hope that we can work together over the coming months to
accomplish meaningful health care reform.
Sincerely,
Donn 98hlole 9
Donna E. Shalala
JACKSON HOLE GROUP
Paul M. Ellwood, M.D.
President
February 9, 1995
Secretary Donna Shalala
Department of Health and Human Services
200 Independence Ave, SW, Suite 615F
Washington, DC 20201
Dear Donna,
This is our first version of "Responsible Choices." We spent considerable time and drew
on expertise in specific fields of relevance in devising the substance of these proposals. As
you will see, the product is a hard-hitting document that lays out the actions that the
private sector and government should take to: bring public programs into line with the
private sector; increase consumer cost-consciousness; expand group purchasing for small
groups and individuals; and establish a fair market with good, comparable information.
Undoubtedly, "Responsible Choices" will produce differences of opinion within the
Jackson Hole Group, particularly in the absence of political pressure for reform. However,
I hope that we can reach consensus and offer the public a comprehensive proposal for
incremental reform.
1 think that the Jackson Hole Group is ahead of the curve with "Responsible Choices." I
have not seen any other broad post-Clinton proposals for health reform, especially ones
that take into account what is occurring in the private sector. Additionally, "Responsible
Choices" will distinguish itself because it is based on actual clinical and operational
experience gained from all participants in the Jackson Hole Group process. I cannot
imagine another comprehensive proposal for reform that could include that level of
experience and expertise.
The section of "Responsible Choices" that corresponds to your topic at the February
meeting is Bringing Medicare into the 1990's. If you would like to discuss it or need
further clarification, contact Graham Rich, MD of the Jackson Hole Group staff at 307-733-
8781, fax: 307-739-9312. I would be grateful if you could ask someone to calculate the
(1) approximate savings which could be made if these proposals were adopted.
We will take up all of "Responsible Choices" in detail at the February meeting. 1 would
value your comments, as soon as possible, to further revise out recommendations. Your
(2)
Mailing Address: P.O. Box 350 Teton Village, WY 83025
Fed-Ex/UPS: 6700 North Ellen Creek Road Jackson, WY 83001
307-739-1176 Fax: 307-739-1177
9502100027
feedback and that coming out of the February meeting will be incorporated before the
document is ready for wider circulation and critique at the end of the month.
Sincerely,
Paul
Paul M. Ellwood, M.D.
RESPONSIBLE CHOICES
FOR ACHIEVING REFORM OF THE
AMERICAN HEALTH SYSTEM
A Draft Discussion Paper
from the
Jackson Hole Group
February 1995
TABLE OF CONTENTS
INTRODUCTION
1
BRINGING MEDICARE INTO THE 1990s
5
Why Update the Medicare Program?
5
Parallels with the Private Sector
6
How Do We Get There?
7
Promoting Consumer Cost-Consciousness
7
Ensuring Plan Competition on the Basis of Price and Quality
8
Intermediate Steps
8
Stage 1: Fiscal Year 1996
8
Stage 2: Fiscal Year 1997
9
Stage 3: Fiscal Year 2002
9
Benefits of Medicare Reform
9
ENCOURAGING STATE SOLUTIONS FOR ACUTE MEDICAID
10
Accelerating the Use of Competitive Managed Care for Acute Medicaid
10
The Federal Contribution
10
Minimizing Federal Reporting
11
INCREASING COST-CONSCIOUSNESS:
REFORMING THE TAX TREATMENT OF HEALTH INSURANCE
11
Tax Credit Structure
12
Variation of Tax Credit
13
A Tax Credit Linked to Group Purchasing
13
Stage 1: A Tax Credit for the Individual Market in 1995
14
Stage 2: A Tax Credit for Employer-Based and Group Purchased Coverage in 1998
15
Target Goals
15
MEDICAL SAVINGS ACCOUNTS
15
MSAs Combined With Catastrophic Coverage Could Damage the Market
16
INSURANCE REFORMS AND GROUP PURCHASING
17
State Efforts
19
The Role of the Federal Government
20
A Tax Credit Linked to Group Purchasing
20
Insurance Reforms
20
The Role of the States: Certifying Voluntary Purchasing Groups and Enforcing
Standards
21
Target Goals
22
I
BENCHMARK BENEFITS
23
The Need for Fair Disclosure and Comparability
23
Assessing Technology
24
An Independent Approach
25
Target Goals
27
A HEALTH ACCOUNTABILITY SYSTEM
27
A New Quality Accountability System for a New Health Care System
27
What Would a Health Accountability System Look Like?
29
Accountability Measures Clearinghouse
29
Health Accountability Foundation
30
Completing the System
31
Target Goals
32
HEALTH SYSTEM INFORMATION
32
Why Is Coordinated Health Data Needed?
32
Why Are the Current Data Inadequate?
33
What Should Be Collected?
33
Cost
34
Coverage
35
Vital Statistics
35
How Can the Goal Be Accomplished?
35
Target Goals
36
CONCLUSION
36
TABLES
1. Functions of the Benchmark Benefits Group
26
2. Elements of a Health Accountability System
30
JHG Responsible Choices: Draft, February 9, 1995
II
INTRODUCTION
Paul M. Ellwood, MD
"Responsible Choices" identifies the actions that the private sector and government should
take to improve the American health system. These suggestions build on the Jackson Hole
Group's approaches outlined in "The 21st Century American Health System" (1991),
which called for accelerating value-based competition in the health care marketplace.
"Responsible Choices" is not based on untested economic and social theory. The
recommendations are taken directly from the actual clinical and operational experience
gained in providing health care and health insurance to over 100 million Americans.
"Responsible Choices" spreads the benefits of better quality, lower cost health care with a
minimum of prescriptive interference by government at no overall increase in cost.
The United States has been rapidly transforming health care by implementing a market-
driven system that works-a unique approach that has resulted in significantly reducing
rate increases for private purchasers and consumers of medical services. This evolution,
turned revolution, which has been underway for at least twenty-five years, is being driven
by corporate purchasers, and cost-conscious consumers. It has created an extraordinary
array of health plans aggressively competing with one another on price and quality.
Managed care plan enrollment has grown by 50 percent since "The 21st Century
American Health System" was written. However, some consumers-such as most
Medicare beneficiaries, individuals with preexisting illnesses, and the employees of small
firms-are not fully benefiting from the health care revolution that is propelling us toward
the twenty-first century. And, despite being the largest single purchaser of health care, the
government has been slow in bringing public programs into line with those in the private
sector.
It has taken at least twenty-five years for the new American health system to become
established. As it continues to evolve, care must be taken not to disrupt its progress. The
market works in health care because multiple purchasers, not only the government, are in
1
JHG Responsible Choices: Draft, February 9, 1995
a position to introduce bold new methods of buying health care and because providers
and insurers have substantial freedom to respond with new approaches to organizing and
paying for care.
Keeping the market working in health care requires the consideration of factors that are
unique to the health sector. When a day in the hospital can cost thousands of dollars,
people need health insurance. But when this is fee-for-service insurance, there are few
incentives for sick individuals and their trusted physicians to try to save money. Those
who are poorly insured and have a great incentive to buy on price are in no position to
shop for medical care based on price once they become sick. Medical care is a product
that is best understood by doctors who are selling it and thus are in a position where they
must make both the key clinical and economic decisions for their patients and their
practices. "Responsible Choices" assumes that these factors, unique to the health sector,
cannot be ignored. If they are disrupted by legislative fiat, the whole system of high-
quality, market driven health care could come unraveled. "Responsible Choices" calls for
intervention in certain facets of the marketplace to make it function better, while warning
policy-makers that preventing further expansion of price and quality competition will
disrupt the progress that the market is making.
As in any industry, genuinely lowering costs means vast increases in productivity. In this
case, change threatens the livelihood of more than 100,000 specialist physicians, one-half
of the country's hospital beds, and hundreds of health insurers.
The U.S. health system has been transformed thus far by adherence to the following
principles:
Health plans should compete on the basis of price and quality. Health plans that both
finance and deliver comprehensive health care must compete on price and quality.
Combining health insurance with health care is perhaps the most important change in
the structure of the health system. It shifts the emphasis from increasing earnings by
JHG Responsible Choices: Draft, February 9, 1995
2
subjecting the patient to more services to reducing demand for costly extended
treatment by keeping people well. To effectively lower costs and improve quality,
health plans must carefully select those providing care and match their numbers and
skills to the needs of their consumers. This practice has been criticized for restricting
doctor opportunities and patient choices, but shepherding resources remains as critical
to health care quality and cost as the management of any enterprise.
Consumers can be cost-conscious when selecting health insurance. Consumers can
be motivated to be cost conscious at the time they select health insurance and choose
lower cost plans when they are convinced that health care will be readily available and
of good quality. Cost consciousness at the time of illness is less predictable and can
cause expensive and dangerous delays in seeking care. This makes capping premium
contributions better than high deductibles in motivating consumer choice.
Group purchasing of health care should continue. Health care must be purchased by
groups large enough to exert real leverage over competing health plans. Size allows
these groups to exploit their knowledge of health plan performance and, above all, to
spread the cost of insurance over both healthy and unhealthy individuals. As in any
market, the presence of many powerful buyers and multiple competing sellers has
been shown to be beneficial to consumers and encourages continued innovation and
vigorous price competition. Diminishing the clout of group purchasers or dividing
consumers into good and bad risks will destroy the burgeoning health market.
Information about the quality of care must be available to consumers. For the health
market to function properly, consumers, purchasers, and providers need
understandable and comparable information on the cost and quality of care from
various health plans. The quality of care information currently available to consumers
is still incomplete and is perhaps the weakest link in the health care revolution.
Because reliable and objective information is not available, the organizations providing
the best quality of care are not necessarily attracting the most consumers. This
JHG Responsible Choices: Draft, February 9, 1995
3
information gap jeopardizes the entire health revolution. The lack of comparative
information on quality also makes the system vulnerable to unsubstantiated criticisms
about costs being down because quality is deteriorating.
Without expanding entitlements or mandates, "Responsible Choices" expands the
revolution in health care by asking government to play by the same rules as the private
sector, by increasing the power of consumers, and by minimizing risk selection against
individuals and small employers. "Responsible Choices" spreads the benefits of better
quality, lower cost health care with a minimum of prescriptive interference by government
at no overall increase in cost.
"Responsible Choices" has five objectives:
1. Align Medicare and Medicaid costs with revenues while expanding choices by offering
public beneficiaries the same cost-conscious choices now available to private
consumers through employers or purchasing groups. Set limits on the per capita
growth of Medicare and Medicaid expenditure linked to revenue growth and allow
competition and consumer choices to do the rest.
2. Make the tax benefits of health insurance coverage equitable, while increasing
consumer awareness of cost and quality through a value-based tax credit for health
insurance.
3. Give individuals and the employees of small firms, regardless of their health status, the
same opportunity to purchase reasonably priced health insurance as large group
purchasers. Insurance reforms mean all purchasers, including the self-insured, and
sellers of health insurance should be subject to the same marketplace rules.
4. Ensure that consumers know what the various health plans offer in terms of benefits,
satisfaction, access, and health outcomes.
JHG Responsible Choices: Draft, February 9, 1995
4
5. Set timely realistic targets and measure results as reform proceeds. Manipulating a
trillion-dollar enterprise may require a change in course if cost containment, health
outcomes, consumer satisfaction, and access to health care do not improve as
predicted.
BRINGING MEDICARE INTO THE 1990s
Graham Rich, MD, MBA
As the largest purchaser of health care in the U.S., the federal government is responsible
for the continual growth in Medicare cost by maintaining a dysfunctional payment
methodology and by failing to encourage intensive price competition and cost-
consciousness. Like any other purchaser, it needs to adopt some aggressive buying
policies so that all taxpayers, including seniors, can benefit from better quality and
efficiency through competition among health plans and a cost-contained traditional
Medicare program.
Even with the present defective system for encouraging enrollment in managed care, the
number of seniors choosing this option is predicted to increase from 2.2 million at the end
of 1994 to 2.5 million at the end of 1995. To enable new seniors to stay in managed care
and to provide more choice for current beneficiaries, we need a better Medicare payment
methodology, better access to comparative information, and the option of participating in
any available health plan. Only then can seniors make responsible choices.
Why Update the Medicare Program?
The federal government's share of total U.S. health care costs was 28 percent in 1990, and
32 percent in 1993. Medicare expenditures were $160 billion, or 2.4 percent of gross
domestic product (GDP), in 1994 and are projected to grow to $460 billion, or four
percent of GDP, by 2005. Meanwhile, private sector HMO premiums, driven down by
JHG Responsible Choices: Draft, February 9, 1995
5
employer purchasers, are projected to decline, on average, 1.2 percent in 1995.' For
example, the California Public Employees Retirement System achieved reductions in
premiums of 0.5 percent in 1994, 1.1 percent in 1995 and two percent for 1996.
Medicare's traditional insurance structure has a negative impact on the rest of the health
care market because:
Cuts in reimbursement cause cost shifting and drive up the cost of care for others.
Hospitals suffer unpredictable changes in DRG rates.
Physicians try to maintain income by increasing volume.
Medigap policies that drive up use by covering first dollars become more attractive
when consumer deductibles are increased in an effort to reduce program utilization.
Low reimbursement rates make it difficult for seniors in some markets to find primary
care physicians who are willing to accept new Medicare patients.
The system rewards doctor's office visits and hospital stays instead of improvements in
health.
Medicare cost problems will only get worse under the current system as managed care
health plans, using resources efficiently, force nonparticipating physicians (particularly
specialists) to depend on Medicare to earn a living. This will exacerbate regional
variations in Medicare costs that have no corresponding premium differences in private
sector managed care. For example, in 1995, the Medicare capitation rate is $467 in San
Francisco and $559 in Los Angeles while the premium for a non-Medicare, non-Medicaid
Kaiser plan is the same for both northern and southern California.
Parallels with the Private Sector
When unsustainable expenditures on health benefits threatened competitiveness,
enlightened employers made the transition from traditional health insurance to offering a
choice of managed care plans. As a result, they have seen a consistent increase in
managed care enrollment with a corresponding reduction in costs. The government could
1
Group Health Association of America (GHAA ), 1994 HMO Performance Report.
JHG Responsible Choices: Draft, February 9, 1995
6
experience the same savings by making consumers more cost-conscious, ensuring that
plans compete on the basis of price and quality, and actively promoting managed care
options.
How Do We Get There?
The ultimate aim should be to reduce the rate of growth in Medicare costs due to
mismanagement of the program. This proposal attempts to hold Medicare entitlements to
the current percentage of GDP, adjusted for the increasing age and number of
beneficiaries. It does not reduce the scope of benefits or deprive beneficiaries of access to
well managed health care. It relies on price competition among health plans coupled with
a government contribution limited to the GDP target. The proposal also requires health
plans to offer a more appropriate set of benefits than the traditional Medicare program (the
federal standard HMO package with a prescription drug benefit) so that Medigap
insurance is unnecessary for seniors who join health plans. Seniors should be able to
choose a health plan with comprehensive benefits while reducing or eliminating the need
for supplemental insurance, deductibles, and copayments. A voucher ultimately set at the
price of the lowest cost plan in the market area will give seniors access to a full range of
plans.² The option to stay with traditional indemnity Medicare would still be available.
Promoting Consumer Cost-Consciousness
The money for Medicare vouchers should be appropriated each year, rather than
mandated as part of the federal budget. The voucher for Medicare health plans should be
initially limited to the amount the government is prepared to spend on traditional
Medicare and should ultimately be based on the lowest priced, high quality plan within
each market area when the market price falls below the government's adjusted GDP target
payment. Seniors who choose a more expensive plan would be responsible for making up
the cost difference, be it traditional Medicare or a health plan. To ensure full choice, all
2
Competitive bidding to set the government contribution has been recommended by Bryan Dowd et al., in "Issues Regarding
Health Plan Payments Under Medicare and Recommendations for Reform": The Milbank Quarterly, vol. 70, no. 3, 1992, 423.
JHG Responsible Choices: Draft, February 9, 1995
7
plans should participate in a coordinated annual open enrollment. In some areas,
especially rural ones, traditional Medicare may be the lowest cost or sole option.
Ensuring Plan Competition on the Basis of Price and Quality
To enable comparison, the Health Care Financing Administration (HCFA), or its designee,
should provide information, including quality and price comparisons of traditional
Medicare and health plans, by market area on all available plans. Health plans should
price and offer a standard benefits package while HCFA does the same for its own
traditional Medicare product. Seniors should be given comparative information on out-of
-pocket costs for care of common conditions, consumer satisfaction data, etc. Responsible
marketing should be encouraged to ensure that seniors understand the options.
Intermediate Steps
To facilitate the transition to managed care, incremental change in the government's
contributions to health plans is suggested. Initially, the value of the government voucher
for health plans would be the same as that for traditional Medicare. Where more than 20
percent of seniors are enrolled in managed care, the government's contribution in the next
year should be based on average health plan prices (excluding traditional Medicare). In
the following year, the contribution for traditional Medicare and health plans should be
set at the price of the lowest priced, high quality plan.
Stage 1: Fiscal Year 1996
The Secretary of Health and Human Services should establish market areas to calculate the
value of the Medicare voucher, as counties are too small for stable prices. The value of
the voucher should be capped at the current level of payment adjusted for GDP growth
and age of beneficiaries within each market area. Legislation should allow health plans
that cost less than the voucher to provide additional benefits or to give consumers rebates.
A health plan that costs more than the voucher value should charge seniors the difference.
HCFA should simplify its approval requirements so that it is less costly for new health
plans to enter the Medicare market.
JHG Responsible Choices: Draft, February 9, 1995
8
Stage 2: Fiscal Year 1997
HCFA, or designee, should establish and coordinate an annual open enrollment period to
ensure that each individual can choose among all available plans. Voucher payments
should be risk adjusted to allow for the extra risks involved in enrolling individuals with
chronic diseases. All participating health plans should be required to offer at least the new
standard benefits package.
Stage 3: Fiscal Year 2002
If the prices of competitive health plans in the Medicare market consistently exceed the
value of the government's voucher, and if traditional Medicare cannot be controlled, the
policy should be reexamined with a possible reduction in the scope of benefits, means
testing, new controls on volume of services, etc. The cap on the government's voucher
should move progressively from the market area to the national level within five years to
smooth out price differences among areas. If employers do not encourage retirees to make
a cost-conscious choice of Medicare health plan by giving them a defined contribution,
then legislative reform of retiree benefits may be required. The federal government should
consider relinquishing its responsibility for providing indemnity insurance by asking
private indemnity plans to take over this function, as long as there is no restriction on
access to providers.
Benefits of Medicare Reform
The phased introduction of premium competition, starting with areas of high managed
care enrollments and where Medicare costs have tended to be high, ensures competition
and early savings. Over time, there should be a reduction in regional Medicare price and
utilization variations. Prices in today's populous high cost areas should come down first,
while utilization and prices may go up in those areas (mainly rural) where seniors seem to
be underserved. Allowing seniors to make the same responsible choices as the rest of the
population will provide greater incentive for plans to improve their cost-effectiveness
while maintaining or improving quality. Seniors and the health system as a whole will
benefit from an expansion of choice and an end to the cycle of cost shifting.
9
JHG Responsible Choices: Draft, February 9, 1995
ENCOURAGING STATE SOLUTIONS FOR ACUTE MEDICAID
Graham Rich, MD, MBA
The dramatic increase in, and unpredictability of, costs in Medicaid programs is a
persistent challenge to state governments. The nation spent $82 billion, or 1.2 percent of
GDP, on Medicaid in 1994; expenditure is projected to increase to $234 billion, or two
percent of GDP, in 2005. States should use the same methods as successful private
purchasers of health care to encourage choice and effective price competition for the
acute care portion of Medicaid. States are already ahead of Medicare in adopting price
competition but have been impeded by the federal waiver process and the lack of health
plan availability.
Accelerating the Use of Competitive Managed Care for Acute Medicaid
States that received section 1115 waivers from HCFA have introduced innovations tailored
to local needs and preferences. These changes brought variations in eligibility based on
income, categorical requirements, new services, and a choice of managed care plans. In
an effort to protect the Medicaid population from what it views as ill-conceived or hasty
reform, HCFA developed detailed criteria for approval and set goals for implementation.
Because criteria and goals can vary from case to case, the approval process may take
several weeks, meanwhile state dollars support inefficient and ineffective financing
mechanisms. To stop such waste, the 104th Congress should grant states the authority to
make the transition to managed care for Medicaid while the federal government focuses
on restructuring the Medicare program.
The Federal Contribution
The federal government should give states block grants for the acute Medicaid program
based on the number of eligible residents. To facilitate state management of the program,
the federal government should specify the rate of growth in the federal capitation rate. If
the current GDP growth rate and inflation remain the same, this could be set at 6.5
percent per year in 1996, six percent in 1997, and five percent in 1998. The only
JHG Responsible Choices: Draft, February 9, 1995
10
circumstance that would necessitate a reconsideration of these ground rules would be for
a drastic change in the number of people eligible for Medicaid.
Minimizing Federal Reporting
Allowing states to define their own solutions puts at risk the comparison of quality, cost,
and coverage information essential to enhance consumer choice and aid policy-making at
the state and national levels. The problem can be overcome if states follow the example
of other purchasers by requiring standardized reporting by health plans (see A Health
Accountability System, page 27, and Health System Information, page 32).
INCREASING COST-CONSCIOUSNESS:
REFORMING THE TAX TREATMENT OF HEALTH INSURANCE
Alain Enthoven, PhD and Sara Singer, MBA
The fact that employer-paid health benefits are tax-free without limit has been a significant
factor in the continuous escalation of health care costs. The tax break is expected to cost
the government $90 billion in 1995. This break disproportionately favors people with
above average incomes over lower income people who need a more powerful incentive to
buy coverage.
The need to motivate responsible, price-sensitive choice of health plan and limit revenue
loss to the federal government underlines the advantages of abolishing the tax break and
replacing it with a refundable tax credit for individuals purchasing health coverage. This
would correct the government-created lack of cost-consciousness by encouraging
employer contribution policies that force consumers to be more responsive to the full
premium price, thereby promoting competition among health plans. To derive maximum
benefit from a tax credit, a choice of plans is necessary. Additionally, it may be
appropriate to encourage employers to make their contributions in fixed dollar amounts
11
JHG Responsible Choices: Draft, February 9, 1995
that do not vary with choice of plan to ensure that all employees make cost-conscious
decisions.
A limit on employer contributions that are tax-free to the employee (a tax cap) is another
alternative and would require the application of rules similar to those for the tax credit.
However, a fixed tax credit has distinct advantages over a tax cap, including:
It means portability for individuals, breaking the link between employment and health
coverage.
Both high and low income people would receive the same credit, though the credit
could be structured to give low-income more.
It can be readily characterized as giving something to people, as opposed to a tax cap,
which is perceived as taking something away.
Tax Credit Structure
A tax credit could be structured as follows3: In 1994, the average family received $4346
in employer-paid health insurance, which allowed them to avoid $1130 in income taxes
(i.e., they received a 26 percent premium subsidy).4 With a tax credit, the average family
could still receive up to $1130 in credit on their income tax; which would allow them to
purchase or receive up to $4346 in coverage without paying any more in taxes than they
do now. If a family purchased or received coverage exceeding $4346, the difference
would be treated as taxable income. The tax credit could be adjusted in future years for
inflation or other factors. Individuals would claim the tax credit when filing a tax return.
Low-income individuals, who do not file a tax return, would claim the tax credit for health
benefits when applying for other assistance programs.
3 For a discussion of tax cap design, see "Managed Competition H," March 1994 or Alain C. Enthoven, "A New Proposal to
Reform the Tax Treatment of Health Insurance."
4 The Tax Treatment of Employment-Based Health Insurance," Congressional Budget Office. March 1994.
12
JHG Responsible Choices: Draft, February 9, 1995
Variation of Tax Credit
In a more complex version, the percentage of premium that a family could claim as a tax
credit could be varied with income. The lower the income level, the higher the
percentage of the health insurance premium that could be claimed as a tax credit. This
solution has problems of complexity, financing, and work disincentives for those at the
poverty level, as well as political problems associated with a tax increase. Additionally,
the tax credit amount could be adjusted for regional factor price differences, although the
added complexity would not be desirable or economically feasible.⁵
It would also be necessary to define rating classes (e.g., individual, couple, single parent
with child(ren), and couple with child(ren)) and age categories to calculate the credit.
Otherwise, a single credit would be too high for some (healthy young individuals) and too
low for others (the elderly and families). Alternatively, by not adjusting the tax credit for
age, the generous tax treatment would encourage more healthy young individuals and
families to purchase insurance.
A Tax Credit Linked to Group Purchasing
The employment-linked tax exclusion is an important part of the glue that holds insurance
purchasing groups together as risk pools. Converting to a tax credit direct to individuals
would weaken the glue and threaten the employment-based group purchasing system
because good risks will seek better rates elsewhere and pooling will be destroyed. A
market based on underwriting at the individual level would perpetuate many or all of
today's pathologies for small employers and individuals. The unraveling of the successful
employment-based market could lead to a political backlash and a single-payer system.
5
Adjusting the tax credit for factor price differences would fairly compensate individuals and families residing in high cost
areas. While it would be possible to adjust the tax credit for medical cost variations, this would not be prudent as it would reward areas
with inefficient utilization of health care resources and costly excess capacity. It would also be possible not to adjust the tax credit. This
would be the simplest approach and would resemble the construction of the recently proposed education deduction. However, a flat tax
credit may be too generous in some areas and not generous enough in others.
JHG Responsible Choices: Draft, February 9, 1995
13
The tax credit can be structured so as not to dismantle the group purchasing based system.
Standards governing the use of a credit would be necessary. For example:
If your employer offers coverage, the credit should be available only if you buy
insurance through your employer. Employers might be mandated to offer, but not
necessarily pay for, several coverage options and could do this by contracting with a
voluntary, certified purchasing group.
If you are self-employed, non-employed, or employed by an employer that does not
offer health care coverage, you should be able to use the credit only through a
voluntary, certified purchasing group that would agree to take all comers and abide by
the rules established for the rest of the insurance market.
If an employer drops coverage, it should be required to offer, but not necessarily pay
for, coverage through a purchasing group to provide for its employees. This approach
would encourage the formation of voluntary, certified groups for those left out of the
employment-based system and ensure the formation of alternative purchasing groups
before allowing the dismantling of employment-based purchasing.
Stage 1: A Tax Credit for the Individual Market in 1995
Since there is mounting urgency to reinstate the 25 percent tax deduction for the self-
employed, this opportunity should be used to shift from tax exemption to a tax credit for
this group. Tax policy changes should start with a tax credit program for the
self-employed, non-employed, and employed whose employers do not offer coverage to
go into effect in 1995. After three years, the tax credit should be restricted to coverage
purchased through a purchasing group. This is attractive for the following reasons:
A tax credit would give this group a greater tax subsidy than they received under the
limited tax deduction. A tax credit would give these people tax-free health benefits
while making them price-sensitive. It would eliminate the tax code inequities that the
self-employed currently face, without expanding the cost-increasing incentives created
by the present tax treatment of health benefits for employed persons.
14
JHG Responsible Choices: Draft, February 9, 1995
Anyone who does not currently receive employment-based health care benefits would
benefit from the tax credit without threatening employment-based health care
purchasing.
By tying the tax credit to group purchasing three years after enactment of the tax credit,
the formation of purchasing groups would be encouraged without penalizing people
who do not have access to group purchasing in the interim.
Stage 2: A Tax Credit for Employer-Based and Group Purchased Coverage in 1998
After successfully implementing a tax credit for individuals, employer-based tax
deductions of health benefits should be replaced by a tax credit in 1998 with provisions to
avoid unraveling employment-based health care purchasing. This should be done at the
same time the tax credit becomes linked to group purchasing-three years after enactment
of the tax credit for the individual market-to ensure adequate access to group purchasing
arrangements.
Target Goals:
Tax credit in place for the individual and employer-purchasing markets by 1998.
At least 75 percent of people claiming the tax credit by the year 2000. If not 75
percent, the policy regarding tax credit eligibility should be reviewed.
MEDICAL SAVINGS ACCOUNTS
Alain Enthoven, PhD and Sara Singer, MBA
The Jackson Hole Group is concerned that Medical Savings Account (MSA) theories, in the
forms currently advocated, would undermine the market forces already under way in the
health system and would increase tax revenue losses. MSA proposals would allow
employers and individuals to contribute to savings accounts (tax sheltered or not) in
conjunction with a health insurance policy that has a high annual deductible, such as
$3000, referred to as a "catastrophic" policy. Since consumers would have to pay the full
15
JHG Responsible Choices: Draft, February 9, 1995
cost of their health care up to the amount of the deductible, this would make them health
and cost conscious. In theory, MSAs seem to encourage saving for retirement or other
purposes rather than spending money on costly medical care; however, in practice, they
would destroy the ability of insurance to spread risks and would jeopardize health plans'
ability to compete on cost and quality. It is difficult to make a proper assessment of the
impact of different MSA proposals because of their variability. For example, if MSAs were
tax deductible, this would create an enormous incentive to purchase a particular type of
health insurance and could increase the federal deficit. As a consequence, the Jackson
Hole Group is eager to analyze each specific MSA proposal to assess its impact. All of the
proposals assume that the health care cost problem is fully attributable to factors that the
individual can control and fail to acknowledge that the chronically ill would lose out as
the healthy opted to leave risk pools.
MSAs Combined With Catastrophic Coverage Could Damage the Market
With catastrophic policies, people are cost-conscious only until they know their
deductible will be reached, after which the cost of more care to them is zero. Since about
70 percent of national health care expenditures are spent on only 10 percent of the
population, MSAs with catastrophic policies do not promote cost-consciousness where the
majority of expenditures occur.
High deductibles only marginally provide financial incentives to encourage healthy
lifestyles and to decrease expenditure on inappropriate medical care. If increasing
deductibles had achieved this goal with an indemnity system, then the development of
managed care would have been unnecessary. High deductibles discourage people from
seeking preventive and primary care since they must pay for these services out of pocket.
Delays in seeking care for serious illness increase costs for everyone. MSAs will disrupt
the market by favoring catastrophic policies over other forms of health coverage.
According to an example used by the American Academy of Actuaries, if a family pays
$5000 for a typical indemnity plan, it could purchase the same policy with a $3000
16
JHG Responsible Choices: Draft, February 9, 1995
deductible for about $3,200. The $1800 savings is not enough to cover the $3000 MSA
that would need to be paid by someone, either the employer, employee, or the
government. If the MSA is tax excludable, it would increase tax losses by $1200 per
family.
Anyone who is healthy and wealthy enough to afford the deductible will prefer the MSA,
especially if there is favorable tax treatment.⁶ This discriminates against the sick, the high
risk, and the poor, who will be left in low deductible plans and health plans whose costs
will increase as the healthiest people opt out. Experience in the FEHBP program showed
that people with the worst risks chose the Blue Cross/Blue Shield low deductible option,
while good risks selected the high deductible option. Even if MSAs could be redesigned
to encourage healthy lifestyles and preventive care while limiting revenue loss to the
federal government, people with cancer, diabetes, heart disease, and other chronic
illnesses would face increasingly higher premiums, as the healthy, good risks opt for tax-
favored MSAs with catastrophic coverage. Even a sophisticated risk adjustment
mechanism would not be able compensate health plans for this degree of adverse
selection. However, it is hard to predict the impact of any MSA proposal, as they are all
based on theory.
INSURANCE REFORMS AND GROUP PURCHASING
Jay Carruthers and Ellen Wilson
The rising costs of health care over the last decade have affected the large and small group
markets in two very different but instructive ways. Cost pressures on large groups have
inspired major innovation, including greater use of managed care, incentives for cost-
conscious purchasing, and better information for making choices. The same cost pressures
when applied to the small group and individual market have had a deleterious effect.
6
Section 125 plans create the same problem, although mitigated by the fact that users lose unused funds at the end of each
year. This has led many to call for the elimination of Section 125 plans.
17
JHG Responsible Choices: Draft, February 9, 1995
Small groups are unable to spread risks, to achieve economies of scale, to benefit from
competition, and usually to offer multiple plans. As a result, the small group and
individual market is characterized by:
High premiums or unavailability of coverage to high-risk individuals.
Steep premium increases (especially for individuals or small groups with individuals
who get sick): small and mid-sized businesses faced an average increase of 14 percent
over the last twelve months. Over the last three years, it totaled about 57 percent.⁷
High administrative costs: a carrier's administrative expense, by one estimate, reaches
40 percent of claims in groups of one to four, compared with less than five percent for
groups of more than 10,000.⁸
Segmentation of the market by risk (i.e., health status).
An inability to influence the development of the market to better meet the needs of
small groups and individuals.
If access to, and affordability of, coverage in the small group and individual market is to be
improved, the state and federal government must act in concert to implement core uniform
standards that foster the development of effective group purchasing.
Group purchasing offers a powerful tool for structuring a competitive, well-functioning
market.
Members are offered a choice of health plans.
Competition is driven by side-by-side comparisons of health plans based on value
(quality and cost).
Risk is spread more broadly; the ability of health plans to discriminate on the basis of
health status decreases.
Administrative costs are significantly reduced. In addition, health plans avoid the high
costs associated with marketing to a multiplicity of small groups.
7 Arthur Andersen, Survey of Small and Mid-Sized Businesses: Trends for 1994."
8 Congressional Research Service, "Private Health Insurance Options for Reform," September 20,1990.
18
JHG Responsible Choices: Draft, February 9, 1995
However, before group purchasers are effectively able to drive the small group and
individual market, certain uniform standards need to be applied across the entire health
care market. Standards should be set by the federal government, implemented by
purchasing groups through private contracts with health plans, and enforced by the states.
Despite current efforts to give states more power in developing local policy solutions in
areas like welfare, there are several reasons why reforming the health system requires
federal standards. First, health care markets do not adhere to state boundaries, making it
impossible for states to structure rules that apply consistently across markets. Second, the
preponderance of large multi-state employers reinforces the need for a federal framework.
Moreover, with the rapid change in the delivery of medical services and the proliferation
of varying levels of risk- bearing arrangements, state regulations designed to monitor
traditional insurance carriers are outdated. Enforcing uniform federal standards, however,
would be a logical extension of the state's traditional role as insurance regulator. It is
important to note that federal standards could be spelled out without creating a new
federal bureaucracy.
State Efforts
Forty-five states have recently adopted some form of insurance reforms as a first important
step toward improving access to coverage in the small group and individual market.
Results, thus far, have been mixed. Some states have had success eliminating the most
blatant forms of risk selection using basic reforms like guaranteed issue of all products,
guaranteed renewal, portability, and limits on preexisting condition clauses. Nearly
twenty states have gone even further by implementing some form of community rating and
experimenting with purchasing groups across the small group and individual market.
Private sector initiatives, such as the Cleveland Council of Smaller Enterprises (COSE) and
Chamber of Commerce purchasing groups, have expanded access to affordable coverage
for their small business members, but criticism has been directed at some of these
arrangements for leaving the individual market largely untouched, rarely pooling risk, and
in some instances, using medical underwriting to exclude the worst risks.
JHG Responsible Choices: Draft, February 9, 1995
19
Despite some progress, states that have carefully crafted insurance reforms are finding their
efforts undermined by the growth of self-insured plans. As states increase regulation in the
small group and individual market to spread risk more broadly and expand coverage to the
poor (e.g., premium taxes), the best health risks opt out of the pool and choose to self-
insure (or drop coverage entirely, as was the case in New York). These plans, protected
under ERISA, do not have to comply with state laws regulating health insurance. If self-
insured plans continue to siphon off the best risks from the small group and individual
market, a risk spiral within the state-regulated market is inevitable. The problems
surrounding ERISA underscore the difficulty in reforming a voluntary health system with
the current division of state and federal regulations. In making limited ERISA reforms,
policy-makers should avoid engendering 50 different sets of laws regulating health
benefits, nor should they permit states to finance expanded access programs by taxing self-
insured plans. Doing so would penalize employers already providing coverage to their
employees.
The Role of the Federal Government
A Tax Credit Linked to Group Purchasing: If tax credit eligibility were dependent on
purchasing coverage through an appropriate group, as recommended in Increasing Cost-
Consciousness: Reforming the Tax Treatment of Health Insurance; page 11, efficient
group purchasing efforts on the part of employers would be maintained while providing
incentive to create other voluntary certified purchasing groups (defined below).
Employees whose employers offered coverage would have to purchase it through them to
receive the tax credit. The self-employed, non-employed and employees whose
employers do not offer coverage would be required to purchase coverage through a
certified purchasing group to receive the tax credit. The individual market would be
replaced by purchasing groups that would be able to pool risk sufficiently as people take
advantage of the tax credit.
Insurance Reforms: The federal tax credit should be part of an incremental reform
package that includes basic insurance reforms. By enacting those insurance reforms at the
JHG Responsible Choices: Draft, February 9, 1995
20
federal level that have already been implemented in most states-e.g., limited guaranteed
issue of all products, guaranteed renewal, portability, limitations of preexisting condition
exclusions, and limited rating restrictions (not community rating)- the most blatant forms
of risk selection would be eliminated while providing greater uniformity to the system.
These reforms are designed to prevent health plans from discriminating on the basis of
health status-a widely accepted principle-and should apply to all health plans regardless
of risk-bearing arrangements, whether it is a traditional insurance carrier, a health plan, or
an ERISA self-funded plan. The cost of overseeing reforms should be borne equally among
all parties in the form of a federal premium tax remitted to the states and other entities
created to apply standards.
The Role of the States: Certifying Voluntary Purchasing Groups and Enforcing Standards
The primary responsibility of the states would be to accredit those voluntary purchasing
groups that meet the criteria to become Certified Purchasing Groups (CPGs), as well as to
enforce compliance with insurance reforms. To receive accreditation and hence enable
members to claim a tax credit, a purchasing group would need to adopt certain standards,
such as:
Accepting all who are eligible and wish to purchase coverage through the group.
Offering a choice of health plans.
Conducting an annual open enrollment period.
Experience rate the group as a whole, with adjustments for age, family status, etc.
Risk adjustment within the purchasing group (developing/adopting an actuarially
sound methodology would be left to the purchasing group and participating health
plans).
Surveying members about their experience with their health plans and provide quality
related information.
Assure insurance reform compliance in contracting with health plans.
JHG Responsible Choices: Draft, February 9, 1995
21
Many purchasing groups already perform several of these functions and could easily
receive state accreditation as a voluntary CPG.9
With such federal and state provisions, employers, employees, and individuals should
react to existing incentives and market forces to maintain and participate in the
appropriate purchasing group. Employers who have been efficiently purchasing health
care-primarily large employers who have been major forces of progress and innovation in
health care purchasing-will find it in their interest to continue doing so. Employers who
are inefficient purchasers, or who have not previously offered coverage, will likely want to
offer coverage through a voluntary CPG. Extending access to purchasing groups for all
small groups and individuals, in conjunction with the implementation of a standard set of
market rules, is a critical step toward structuring an efficient market in which coverage is
more accessible and affordable.
Target Goals:
All fifty states should have at least one voluntary certified purchasing group by
1998-when the tax credit will be given to only those purchasing through the
appropriate group. States without a CPG may need to consider offering incentives for
their establishment.
Everyone in the individual and small group market should have access to group
purchasing by the year 2000.
9
When you have individuals choosing among health plans that sell different sets of medical services, there is the threat of risk
selection. While insurance reforms and the extension of group purchasing to the small group and individual market attempts to minimize
risk selection, in such a complicated and dynamic system the extent to which risk selection will occur is unclear and is something that
should be closely monitored. For example, an upper size limit for employer groups has not been placed on CPG eligibility. But if it turns
out that predominantly bad risk large groups purchase through CPGs, it may be necessary to impose such a limit.
22
JHG Responsible Choices: Draft, February 9, 1995
BENCHMARK BENEFITS
Nancy Ashbach, MD, MBA
The Need for Fair Disclosure and Comparability
Health plans, consumers, pharmaceutical manufacturers, physicians, legislator, the courts,
and others have struggled in the past with benefit plan offerings. In particular:
Consumers have been unclear about the criteria for inclusion of specific benefits in
their health plans. This has led to suspicion that managed care plans are motivated to
skimp on needed care.
Consumers have had difficulty comparing health plan offerings with differing benefits.
Physicians and others have been unclear as to the benefit and technology review
processes in health plans, leading them to view the process as secretive and
unscientific.
Health plans have been hampered in their ability to deny coverage for specific
interventions clearly and concisely and to support such decisions with cogent reasons.
Pharmaceutical and technology manufacturers have suspected that such decisions are
based upon cost alone and that their products are not receiving a fair and open hearing
by health plan policy-makers.
The courts and legislators have received conflicting advice from interest groups.
It is for these reasons that a benchmark benefits package is needed. This product should
be a voluntary, real, and valid offering of all health plans, but need not and should not be
the only offering. Plans can and should be able to offer packages both richer and leaner to
respond to the needs of purchasers. Many plans have had lengthy experience with the
federal HMO benefits package, and we recommend that until the process for revising and
improving upon it is in place, it serve as the initial benchmark package.
The process of defining and maintaining the benchmark benefits package should be open,
fair, understandable, and for information purposes only. The criteria for additions and
deletions should be available and the process should be clear so that coverage decisions
JHG Responsible Choices: Draft, February 9, 1995
23
by the health plan would be protected from unreasonable challenge. Physicians, drug
manufacturers, consumers, purchasers, health plans, and others who might wish to
influence the process of coverage inclusion and exclusion would therefore be able to do
so, and the public would be assured of appropriate care being provided and of coverage
for expensive therapies not being denied solely because of cost. There should be no
opportunity for collusion between health plans for the inclusion or exclusion of benefits.
For the purposes of avoiding antitrust law suits, health plans may need to be excluded
from the process.
In addition to disclosing criteria for coverage, a standard product must be available for
price and quality comparison. In the absence of a voluntary benchmark, plans will vary
benefits to satisfy the demands of various customers, and comparability to the consumer
will remain elusive. By using a benchmark benefits package as a standard product against
which the differing needs and requirements of purchasers can be measured, comparability
of benefits and price offerings can be determined.
Assessing Technology
The benchmark benefit package should be that collection of benefits that is most likely to
produce health in the population. While the federal HMO benefits package is an
excellent starting point, producing health in the population will require ongoing
evaluation, revision, and updating of benefits. Technology assessment and cost-
effectiveness analysis will be necessary to achieve this objective in a rational way.
Currently, such assessments are performed by government, private organizations, and
individual health plans. Such efforts are inefficient and duplicative and furthermore do
not provide health plans with sufficient justification to offer or deny coverage. In the
present environment, such decisions are suspected of being made for cost reasons. As a
consequence, benefit decisions are being challenged and made by the courts and
legislatures rather than on the basis of sound scientific evidence and efficacy. The absence
of an open, clear, fair, and scientific evaluation process is detrimental to all parties.
JHG Responsible Choices: Draft, February 9, 1995
24
Technology assessment and evaluation are necessary because:
Technology in medicine is in a constant state of flux, with new technology entering the
market at a staggering rate. The cost of such technology creates a strong economic
requirement for a valid assessment process to determine coverage under a typical
benefits package.
Much existing technology has not been evaluated for effectiveness. To date we have
had no mechanism for doing so, and many interventions in medicine are covered
under existing benefits packages as a result of historical precedent.
Cost-effectiveness has not been a major element of technology evaluation in the past
but will surely become so in the future as group benefits are valued against individual
demands.
Additionally, individual coverage decisions on the part of health plans often require an
independent evaluation and recommendation, which plans could implement on a
voluntary basis. Such individual evaluations would be carried out by experts in the
appropriate field of medicine and would be free of vested interests to deny coverage based
on cost considerations. Independent expert reviews would support removal of coverage
decisions from the legal system, where judges and jurors often rule in favor of coverage if
there is uncertainty or urgency.
An Independent Approach
A new, independent organization, the Benchmark Benefits Group (BBG), should be
formed to address these needs in the health system. The BBG's proposed functions are
outlined in Table 1. It would be private and not for profit, although government
collaboration would be possible in key areas, such as technology assessment, clinical
trials, Medicare, and Medicaid. Representatives could come from purchasers, consumers,
managed care organizations, self-funded employers, academic medical centers, physicians,
and the government. Funding for the organization would come primarily from user
fees-that is, per capita assessments of the participants and users of the organization's
efforts. Special projects funding could come from foundation grants.
JHG Responsible Choices: Draft, February 9, 1995
25
Table 1
Functions of the Benchmark Benefits Group
Definition, updating, and maintenance of the benchmark benefits package using the
criterion of production or maintenance of health.
Recommendation of inclusion or exclusion of new technology into the benchmark
benefits package based upon technology evaluation done by recognized groups.
Recommendations regarding continuation, limitation, or exclusion of existing
technology.
Cost-effectiveness information and recommendations based upon information from
competent entities.
Individual disputed coverage decisions in defined situations. For example, an
autologous bone marrow transplantation case for breast, ovarian, or cervical cancer
denied as experimental by a health plan would be referred to a group of experts
entirely outside the plan for scientific review.
Since technology assessment is currently done in several different organizations, including
many managed care organizations, careful consideration would be given to using existing
expertise in the private market. This might mean purchasing technology assessment
expertise from organizations such as the Emergency Care Research Institute or the Blue
Cross/Blue Shield Technology Evaluation Committee or networking current expertise. A
principle of the new organization would be to utilize expertise currently available in the
private market in the most effective way without in any way regulating or discouraging the
innovation of the private market.
A critical element to the success of the BBG will be its independence and autonomy.
Many elements of the health care system are characterized by suspicion and doubt as to
the methodology regarding coverage decisions in the policy-making and in the individual
case. The autonomy of this organization will reassure doctors that an appropriate process
exists, with adequate clinical input. It will reassure patients that their interests are being
dealt with fairly, and it will reassure new technology providers -e.g., drug and device
manufacturers-that a fair process exists, facilitating level playing field competition for all.
JHG Responsible Choices: Draft, February 9, 1995
26
Thus, the processes and criteria of the BBG should be open, published, and available for
revision as the health care industry develops and matures.
Target Goals:
90 percent of health plans offering the benchmark benefits package by 1998.
75 percent of health plans utilizing the technology assessment capabilities of the
Benchmark Benefits Group by 1998.
Reconsideration of decisions made in individual cases by the Benchmark Benefits
Group upheld by courts in 60 percent of cases by 1998.
A HEALTH ACCOUNTABILITY SYSTEM
Sarah Purdy, MD
A New Quality Accountability System for a New Health Care System
The expectation that consumers would be able to choose among competing health plans,
on the basis of comparable quality and cost information, has not been realized. This
failure is partly due to information about the quality of health care being not as easily
available, understood, or compared, as information about costs. Consumers have been
inhibited from assuming responsibility for their own health care choices by inadequate
information that does not facilitate side-by-side comparison of health plans or encourage
participation in decisions about health care and treatment. To evaluate the impact of
health care on the population it is necessary to measure the result, or outcome, of the
interaction between individuals and health plans-to hold health plans accountable. At
present there is a health care quality measurement industry that uses different definitions
of quality and differing methodologies to measure quality. We propose a new health
accountability system which would not rely solely on these traditional systems of quality
assurance which fail to disclose health outcomes or assure consumers of receiving
27
JHG Responsible Choices: Draft, February 9, 1995
excellent care by choosing a specific plan. The principles and assumptions upon which
the new health accountability system is based are:
Comparable, reliable, valid quality accountability data must be available to consumers.
A move toward outcome based accountability data is feasible.
Purchasers, consumers, and providers may have different information needs. Quality
improvement activities should result from internal use of quality data.
A clear distinction should be made between defining measurement and disclosure
requirements and verifying that requirements are observed. Organizations that define
data disclosure requirements, and those that audit data, should be independent of each
other, with neither being subject to undue influence by the provider or insurance
communities.
Providers, health plans, and researchers create the capability for choices to be made on
cost and quality, but group purchasers and individual consumers should have input on
the requirements of the system.
The same data on quality should be demanded by, and be available to, both private
and public sector purchasers.
Uniform data disclosure requirements could lead to the formation of regional and
national data bases, which would inform providers, purchasers, and policy-makers.
These principles raise several potentially controversial issues. First, the intention of the
system is to compare health plans, not individual providers. Second, there is debate on
how to compare the results of care provided by different health plans when the health and
demographic characteristics of the populations they serve are not comparable. This issue
of severity adjustment, or case mix, requires continuing refinement. Third, the system
would require health plans to collect additional information about quality and use some
form of standardized record keeping. By cooperating with this, plans would potentially be
putting themselves in a position of being unfavorably compared with competitors. Finally,
the degree to which consumers want and understand information about quality of health
care is still uncertain. However, those whose lives are impacted by health care-patients
JHG Responsible Choices: Draft, February 9, 1995
28
and those who represent their interests-must have the dominant input into the quality
accountability system.
The health accountability system would also require group purchasers, whether public or
private, to provide valid, comparable information to consumers. To achieve this, and
avoid further increase in the number of data sets requested by purchasers, collaboration is
needed within the health industry.
What Would a Health Accountability System Look Like?
Table 2 outlines the proposed system, which suggests collaborative efforts to address two
areas: the research, design, and evaluation of health accountability measures, and the
selection and endorsement of uniform data disclosure requirements.
Accountability Measures Clearinghouse
Many groups and individuals have developed considerable expertise in devising and
implementing health plan performance measures. Currently, no organization documents
all of these efforts and evaluates them, or assists others with questions of methodology or
implementation. A collaborative approach would achieve economies of scale, resulting in
more funding for such projects, greater availability of information, and a reduction in the
duplication of effort. It is proposed that an organization be formed that serves two main
functions:
To act as a clearinghouse for the collation and exchange of information about quality
accountability measures and methodology.
To call attention to the need for research, development, and continual evaluation and
improvement of performance measures.
The clearinghouse is not meant to engage in research. It should be a private/public
partnership, perhaps set up to collaborate with an existing organization, such as the
Agency for Health Care Policy and Research (AHCPR) or a research institution, such as a
JHC Responsible Choices: Draft, February 9, 1995
29
university. Funding would come from foundation grants, government agencies, and per
capita contributions from the industry.
Table 2
Elements of a Health Accountability System
1. Accountability Measures Clearinghouse
Clearinghouse function, to collate and disseminate information about measures,
methodology, and previous experience. Identify areas that need further research.
2. Health Accountability Foundation
Select and endorse uniform data disclosure requirements. Purchaser and consumer
dominated board, permanent executive staff, input from other players.
3. Auditing of Health Plan Data Disclosure
Verification that data has been collected, analyzed, and interpreted in a reliable and
valid manner.
4. Selection of Health Plans by Group Purchasers and Consumers
On the basis of uniform, comparable data disclosed by plans.
5. Quality Improvement
Assist health plans to be proactive in the improvement of quality, and to respond to
the results of the measurement process.
Health Accountability Foundation
A Health Accountability Foundation (HAF) should be established as an independent
collaborative body between the private and public sectors. Its responsibilities would
include setting quality accountability goals and selecting and endorsing uniform measures
of health plan accountability. These measures and the agreed methodology by which they
are collected would then form the core of all health plan reporting activity. Care must be
taken to ensure that standardization does not quash innovation, and that evolution of the
core measures is assured as information capabilities improve. It is important to consider
the clinical implications for plans and providers, and to build incentives and feedback
mechanisms for quality improvement activities to result from the internal use of quality
data. Standard setting should not be isolated from implementation. The experience of the
30
JHG Responsible Choices: Draft, February 9, 1995
health plans and the accrediting bodies will be vital to ensuring a link between the
foundation and clinical practice.
It is envisaged that the HAF would have a permanent staff of scientists, who would
systematically consult with outside experts. They would present recommendations to the
foundation's board, whose majority would be represented by purchasers and consumers
from the private and public sectors. A mechanism needs to be devised, by which health
plans, providers, researchers, the pharmaceutical and technology industry, and the health
care quality organizations would have input. The closest existing model for the HAF is the
Financial Accounting Standards Board (FASB). The recommendations endorsed by the
HAF should be scientifically justified and subject to scrutiny at public hearings. It is
important to link health plans into the system, in order to ensure that the data
requirements specified by the board inform quality improvement and the furthering of
medical knowledge, and are fair and feasible. Data that is valuable to providers is more
likely to be included in medical records and incorporated in computerized medical
information systems.
Funding of the HAF should preserve its independent status. Funding should be assured,
but not dominated by health plans. A possible mechanism would be an annual
subscription, and an assessment on the health plan premiums of those plans that choose to
participate.
The two private sector initiatives proposed in "Responsible Choices" are the Benchmark
Benefits Group and the Health Accountability System. These two functions could work
synergistically under a private umbrella organization sponsored by a broad range of
participants and involved parties and funded by user fees.
Completing the System
The other criteria for the proposed system can be satisfied by well-established mechanisms
already in place. Because organizations like the National Committee for Quality
31
JHG Responsible Choices: Draft, February 9, 1995
Assurance and the Joint Commission on Accreditation of Healthcare Organizations have
considerable experience in accrediting plans and providers, they could play a major role
in auditing the process and facilitating quality improvement activities. The organizations
that focus on internal quality improvement, such as the Institute for Healthcare
Improvement, would be an obvious medium for the quality improvement role.
Continuing education of physicians and other health plan staff members is important to
each stage of the process. There will be considerable overlap between the components,
and continuous feedback to the clearinghouse and HAF functions will be necessary.
Target Goals:
Comparable information about the quality of care provided by health plans should be
available to 100 percent of consumers purchasing through groups by 1998.
Preliminary health plan data on condition specific outcomes by 1998.
HEALTH SYSTEM INFORMATION
Robyn Lunsford, MSE, Nancy Ashbach, MD, MBA and Sarah Purdy, MD
Why Is Coordinated Health Data Needed?
Making responsible choices will require that better information be available on who is
insured, what it costs, and whether better health is the result. As the system changes, data
must be collected faster and from different sources: per capita expenditures by health
plans, for example, are becoming more valuable than the numbers of physician visits and
hospital days. Attempts at federal health care reform last year showed that the data
available was not sufficiently timely or accurate. In fact, inadequate data on consumers'
responses to price competition tilted some proposals toward price controls.
Congressional Budget Office estimates of the cost of various bills were hampered by their
inability to evaluate the effects of undocumented improvements that were under way and
differences in inflation rates from community to community. In order for policy-makers to
address the problems of attaining universal coverage while containing the cost of health
JHG Responsible Choices: Draft, February 9, 1995
32
care, they must have data about the numbers and characteristics of the insured and
uninsured and the cost of different delivery systems. Though multiple sources of health
care data are available, one of the major obstacles is how to access, analyze, and compare
this disparate information.
Why Are the Current Data Inadequate?
Multiple data sets are not comparable or accessible from one source: For example,
information about coverage and utilization of services is collected in the annual
National Health Interview Survey (NHIS), but it does not provide information about
household income or costs.
Data regarding costs and coverage is not timely: e.g., the information from the NHIS
takes twelve months to process. The National Medical Expenditures Survey is
completed only once every ten years.
The validity and accuracy of some sources of health data has been questioned; e.g., the
medical care component of the consumer price index (CPI) does not measure costs
borne by third-party payers, hence it reflects price to the consumer, not true overall
cost.
Data are not available in useful formats: e.g., it would be very helpful to have data
sorted by state to deal with issues such as Medicaid reform.
ited with the existing data sets and with setting up an alternative
dged by federal agencies¹⁰ and at the state level. We have set out
some basic principles for the development of a coordinated system in the following
sections.
What Should Be Collected?
Data will be required in four basic areas in the health system:
1. Cost-What is the per capita cost of health care, to third-party payers and to the
individual?
10 Physician Payment Review Commission, Annual Report, 1994.
33
JHG Responsible Choices: Draft, February 9, 1995
2. Coverage-Who is and is not covered by the health insurance system?
3. Vital Health Statistics-Morbidity, mortality, reportable diseases.
4. Quality-What are the measures of quality of services provided?
Quality of services (health status, outcomes, and consumer satisfaction) was covered in: A
Health Accountability System; page 27). This section focuses on the data needs of cost,
coverage, and vital statistics.
The process of collection should be guided by some basic principles:
Confidentiality of records and privacy rights of individuals must be preserved. Use a
unique, encrypted identifier.
Data must be exchanged electronically, either directly or indirectly.
Data must represent the minimum required to serve the basic needs of the health
system.
The information needs of the health system will change as the payment system
changes.
Data collection must be timely.
The aim of the uniform data system should be to reduce administrative cost in the
health care system.
Determination of which data elements are collected should be driven by a clear
mission-to improve the health of the population.
Data should be collected at the state level, and then aggregated nationally.
Cost: Information is needed on per capita costs for all covered individuals in the health
care system. The purpose of information at this level is to determine the per member costs
of health care-those borne by the health plan and those borne by the individual. It will
be necessary during a period of transition to reconcile the methodology of data collection
between capitated systems and fee-for-service systems. It will be the responsibility of a
federal entity (see page 35) to define appropriate standards to integrate information from
the two payment systems.
JHG Responsible Choices: Draft, February 9, 1995
34
Coverage: Information will be required from health plans and self-insured groups with
respect to numbers of enrollees (including dependents) and member demographics.
Timely information on enrollment and disenrollment will be needed. Statewide
information will be required both on the insured population, which should be available
through health plans, and on the uninsured population. Data on the characteristics of
both groups, such as employment or lack thereof, income, and demographics, should be
collected. The basic questions to be answered in this context are: "Who is covered?" "Is
their coverage adequate?" and "Who is not covered and why?"
Vital Statistics: The new health data system should continue to collect information on
morbidity, mortality, reportable diseases, births, and other issues, possibly including
immunizations. Such information should be collected in a standardized way and
integrated with information collected by providers and health plans for purposes of
comparability and to reduce administrative costs in the health care system.
How Can the Goal Be Accomplished?
We propose the creation of a federal entity to collect uniform, timely, accurate health
system cost and coverage data. Although some may oppose either a new federal entity or
a uniform approach, we believe that the availability of such data is a goal that justifies a
federal presence. Private industry collaboration alone will be neither comprehensive nor
rapid enough. An apolitical Bureau of Health Statistics, analogous to the Bureau of Labor
Statistics, should be established by Congress and report to Congress on progress toward
the goal. It should be separate from all purchasers, including Medicare. The Bureau
would be advised by a Health Data Commission, to be composed of a broad group of
members with expertise in information systems, health care financing, health economics,
and other scientific and technical fields. We propose that the Bureau of Health Statistics
take responsibility for reporting on cost, coverage, and vital statistics. Information on
quality reporting will fall within the purview of the Health Accountability Foundation.
The creation of the Bureau of Health Statistics and the Health Data Commission will
JHG Responsible Choices: Draft, February 9, 1995
35
require federal legislation and reporting of the chosen data elements by all parts of the
health care delivery system as well as by states.
Target Goals:
Health data system should be functioning by the end of 1996.
Data on costs of health services should be available quarterly.
Data on coverage should be available annually, and within the first three months of the
following year.
CONCLUSION
"Responsible Choices" recognizes that the health care market is moving rapidly toward
reform and offers proposals to foster this restructuring. Private purchasers are driving the
market and causing health plans to compete on price and quality. However, not all
purchasers are exerting this force on the market. As the largest purchaser of health care in
the U.S., the federal government has tremendous potential to drive improvement in the
market which it has not yet exercised. Small groups and individuals have limited access to
group purchasing arrangements that pool risk, provide choice, and achieve administrative
savings that would enable them to be active, value purchasers of health care.
This demonstrates that market mechanisms alone are not solving all of the problems.
"Responsible Choices" depends on the willingness of government and the private sector to
work together to improve the American health system. Federal involvement is necessary
to bring public programs into line with the private sector, increase consumer cost-
consciousness, establish a fair market, promote group purchasing that offers the small
group and individual market access to reasonably priced health coverage, and provide
information. "Responsible Choices" recommends a tax credit as the means for bringing
structure to the market. Without the tax credit device, bringing order to the health care
market will be much more complicated and require considerable regulation.
JHG Responsible Choices: Draft, February 9, 1995
36
For its part, the private sector must be willing to be more accountable. Benchmark
benefits and quality reporting are the first steps that the private sector should take to
voluntarily hold itself accountable. Implementing these policies would bring
comparability to the market and provide information enabling consumers to make
informed decisions and drive competition. If the private sector cannot follow through, it
may be necessary to link these proposals to the tax credit by requiring health plans to
price and offer the benchmark benefits package and report on quality in order to receive
tax credit eligibility for their plan.
"Responsible Choices" does not address the issue of achieving universal coverage but
recognizes that other primary problems must be solved first, such as building a better
marketplace so consumers and purchasers can make informed decisions. Other important
issues, such as malpractice and antitrust, are not taken up directly since they are being
actively addressed by others and dealt with in the market. These proposals are the
necessary incremental steps forward in containing costs and fostering effective public and
private purchasing. With these reforms in place, there will be more data and the
capability to effectively and efficiently deal with those left out of the system. The elements
of this proposal can be put in place rapidly and will accelerate the reforms already taking
place in the market.
We welcome, and encourage any comments you have on this draft document. If you have
comments, questions or need any further information please call, fax or write:
Jackson Hole Group
P.O. Box 350
Teton Village, Wyoming 83025
Phone: 307-733-8781
Fax: 307-739-9312
JHC Responsible Choices: Draft, February 9, 1995
37
PUBLIC AFFAIRS
E
minded, top-down, centralized approach
at a time when the world was moving to-
A Triumph
ward decentralization and flexibility-
and when the supposed health crisis was
solving itself anyway. The more people
of Misinformation
learned about this plan. the less they liked
it, and it finally died a natural and well-
deserved death.
Or so goes the conventional wisdom.
Most of what everyone "knows"
as relayed in countless newspaper and
about the demise of health-care reform is probably
magazine postmortems of the health-care
wrong-and, more important, so are the
struggle. The critiques were usually ac-
companied by veiled jabs at Hillary Clin-
vague impressions people have of what was really
ton-what will she do with her time now
in the Clinton plan
that health care's gone?-and outright
ridicule of Magaziner, who was por-
trayed as the smartest person with the
B
Y the time the Clinton health-care-
1993. The scheme was fatally overcom-
dumbest plan since Robert McNamara
reform plan was abandoned, in
plicated. The proposed legislation. 1,342
and the Vietnam War.
September. everyone knew how
pages long, was hard for congressmen
But suppose that what everyone knows
terrible it was. It had been hatched in se-
to read and impossible for anyone except
is wrong. This happens all the time in pol-
cret by an egghead team that knew a lot
the plan's creators, Hillary Rodham Clin-
itics. Barely a year ago, for example,
about policy details but
ton and Ira C. Magazin-
everyone in Washington knew that Con-
had no grasp of political
by James Fallows
er, to understand.
gress was absolutely certain to pass a
reality. The Administra-
The Clinton plan would
health-care program by now. The leaders
tion had wasted time and missed deadline
have imposed sweeping changes on one
of the Administration's health-care-re-
after deadline for presenting the plan to
seventh of the national economy, with
form effort. Hillary Clinton and Magazin-
Congress. causing the plan to miss its
consequences far greater than Congress
er. believe that everyone is wrong again
best opportunity for passage-during the
could possibly consider before casting a
now. I heard them elaborate this view in
President's brief honeymoon period. in
rushed vote. It represented a regulation-
September and October. during a series of
26
Illustrations by Randall Enos
JANUARY 1995
"No one understood
Nebraska. meant a Canadian-style or
ey as they thought best. This limit was the
Medicare-style system. Private doctors
"budget" in Clinton's reference to "com-
this, but the average
and hospitals would provide care. but the
petition within a budget."
government would take over all medical
With numerous changes of detail and
American patient would
payments. financing them with a big new
emphasis. the plan that Starr explained in
medical tax. All Americans would be cov-
his book and that Clinton alluded to in his
have had more choice
ered. Play-or-pay. supported by many De-
campaign became the plan the Clinton-
mocrats. required companies either to buy
Magaziner task force unveiled in 1993.
health insurance for their workers or to
under the Clinton plan
The most important difference lay in
pay into a public fund. which would insure
what was meant by "within a budget":
workers not covered by their companies.
the bill that Clinton presented would
than they now will."
People who were not working would not
have limited total spending not directly,
be insured. An approach popular among
by fiat. but indirectly, by limiting the
Republicans relied on new tax breaks to
amount that insurance premiums could
long background conversations. "Back-
encourage people to buy health insurance
rise each year. The process of working
ground" means that I agreed to check
on their own. Some politicians from both
out these details and emphases kept Mag-
with them on any material I wanted to
parties endorsed a "managed competition"
aziner and some 500 task-force members
quote directly. The gist of their views,
scheme, separate from all these.
busy round the clock during the Adminis-
however, was on the record. It is no sur-
Clinton's reference to "competition
tration's first few months.
prise that they view the reform plan as
within a budget" fit a proposal laid out in
something other than an overcomplicated
the fall of 1992 by Paul Starr. a Princeton
professor, in a short book called The Log-
A
CCORDING to today's conventional
bureaucratic nightmare. The surprise is
wisdom, these meetings doomed the
how much more convincing their version
ic of Health Care Reform. This book
reform effort before it really began, for it
of reality is than the prevailing one.
came closer than any other document to
was here that Magaziner and his fellow
These conversations began at Maga-
anticipating the ultimate shape of the
nerds cooked up their unrealistic schemes.
ziner's suggestion. He and I were friends
Clinton-Magaziner bill.
But did the process seem weird, secretive,
in graduate school, more than twenty
In Starr's plan. which was a variation on
and isolated at the time? Yes, but in only
years ago, and he was obviously betting
a managed-competition scheme. all Amer-
one limited and revealing way.
that I'd listen to him more sympathetical-
icans would be covered-even if they
On matters of substance, the task force
ly than other reporters would. I am bi-
were out of work, even if they had "pre-
went out of its way to hear a variety of
ased, in that I like and respect Magaziner.
existing conditions." The cost of coverage
views. Most members of the task force
But until these meetings I had had no con-
would be paid mainly by companies,
were policy or budget officials borrowed
tact with him during his time as health
which would contribute to the insurance
from other parts of the government, but
czar, and I have not always agreed with
premiums for each of their workers. The
the group also included outside scholars
his ideas. (His worst achievement: help-
government would subsidize coverage for
and experts, plus several doctors and nurs-
ing bring a no-requirements curriculum
those who were unemployed or worked
es. There were no representatives of orga-
to Brown University, when he was the stu-
for small firms. Private insurance compa-
nized outside interests-no delegate from
dent-body president in 1969.) In this case
nies would offer coverage, as they do now.
the American Medical Association, no one
the facts seem to be on his side.
but the government would "manage" the
from the Pharmaceutical Manufacturers of
Let's consider each count in the con-
way they competed for business. Each
America-but the task force met frequent-
ventional bill of indictment against the
company would come up with a list of
ly with outside groups and above all with
Clinton-Magaziner plan.
standard benefits. which it would have to
senators, representatives, and their staffs.
offer at the same price to all customers.
By early May, Congressional Quarterly
F
IRST count: The plan was hatched in
That is. the insurers could not turn down
reported, the task force had met with 572
secret. During the 1992 presidential
people who were already sick. or charge
separate organizations. "We had a couple
campaign Bill Clinton talked frequently
fifty-five-year-old applicants more than
of hundred meetings with the congression-
about his interest in health-care reform
thirty-year-olds. Each year people could
al leadership and individual members,"
and gave a signal about the reform ap-
compare the offers and choose the plan
Magaziner says now. "People were saying
proach he preferred. In a speech in Sep-
they liked best-including a fee-for-ser-
that it was the biggest outreach effort ever
tember he recommended "competition
vice plan that let them go to their family
in laying the groundwork for a bill."
within a budget." To the health-care cog-
doctor. From the customer's point of view,
Indeed they were saying so. A Con-
noscenti this indicated an approach dif-
the system would work like the "open en-
gressional Quarterly headline on May 22
ferent from the main Republican and
rollment" policy at many corporations, in
read. "CLINTON TASK FORCE ALL EARS
Democratic proposals of the time.
which employees can choose a new health
ON THE SUBJECT OF OVERHAUL." The
The most familiar Democratic ap-
plan each year. The government would set
article said,
proaches were "single-payer" and "play-
an overall limit on the amount of money
Most members of Congress give the
or-pay." Single-payer. which was en-
that could be spent on medical care each
president high marks for laying the po-
dorsed during the 1992 Democratic
year. while giving insurance companies
litical groundwork necessary for his
primaries by Senator Robert Kerrey, of
and health plans latitude to spend the mon-
proposal to get the careful considera-
28
JANUARY 1995
tion of both parties.
Clinton has
lasting reputation among reporters as a
publican arguments and how to rebut
been playing the health-care issue with
man who liked to operate in the dark.
them. about the connection between a
an eye to keeping everyone at the
Hillary Clinton is known within the Ad-
health-care bill and a re-election cam-
table. at least at the outset.
ministration for a combative attitude to-
paign in 1996. Week in and week out his
In late September of 1993, when Hillary
ward the press. But she now says that the
memos to Bill and Hillary Clinton con-
Clinton appeared before five congression-
news blackout on emerging details of the
tained head counts of likely Senate and
al committees in three days to explain the
health bill was a major mistake.
House votes-who was leaning, who
rationale behind the bill. not a single legis-
"Even though we had a process unlike
could be pressured and pushed. In his
lator complained about "closed" or "secre-
any other that has drafted a bill." she told
conversations with me Magaziner seemed
tive" deliberations: not Robert Dole. not
me. "-more open. more inclusive-we
to spend half his time sizing up the legis-
Robert Packwood. not John Danforth-
got labeled as being secretive because
lators he had had to deal with: Senator X
Republican senators who all later came
of
our failure to understand that we
was in thrall to Bob Dole because of per-
out against the bill. Senator John Breaux,
should be more available to the press
sonal problems, Congressman Y had to
of Louisiana. a conservative Democrat
along the way. That was something we
start out opposing the bill because of do-
who supported a competing reform plan,
didn't do well
We were not aware of
nations from Interest Group Z.
praised Hillary Clinton for the "truly re-
how significant it is to [shape] the inside
Two fundamental decisions about the
markable" consultations the task force had
story in Washington, in order to make the
plan had much less to do with policy than
carried out.
case
for whatever your policy is."
with judgments of political reality. One
So when did the task force become "se-
Secrecy toward reporters was stupid.
involved handling the single-payer chal-
cretive"? Complaints inevitably arose
But reporters are now acting as if it were
lenge. A Canadian-style single-payer sys-
when Magaziner and his assistants stopped
something worse: closed-mindedness
tem has two big virtues. It is simple to
soliciting outside advice and started an-
about ideas.
administer, since doctors, hospitals, and
nouncing decisions. Those who disagreed
patients no longer have to worry about
felt that they hadn't been listened to.
S
ECOND count: The plan was politi-
dozens of insurance companies with
"Some people say they were excluded be-
cally naive. Everyone now knows
scores of different payment plans. The
cause in this case we didn't agree with
that the health-care reformers drew up
single-payer approach also guarantees
them," Hillary Clinton told me. "But I
their master plan without taking the
that everyone in the country has medical
think that a fair assessment is that we lis-
slightest interest in what most Americans
coverage. But Clinton was dead set against
tened to everybody-and then made rec-
thought or felt. In reality, though, the plan
a single-payer plan. arguing that it would
ommendations based on what we thought
suffered because the Administration was
require sweeping new taxes and would,
made the most sense."
The larger problem was
with the one group that
truly was excluded from
the deliberations-the
Washington press and, by
extension, the public in
whose interest it is sup-
posed to act. During the
brusque early weeks of the
Clinton Administration.
when George Stephan-
opoulos was walling re-
porters out of the White
House press office and the
Administration thought it
could use talk shows to
take its message directly
to the public. over the
heads of the daily press.
Magaziner was told by the
White House communica-
tions office that he and his
associates should not talk
to reporters about what ideas they were
too attentive to shifting political moods.
in effect, abolish the entire medical-in-
considering for the new bill. Instead they
Even before Inauguration Day, Maga-
surance industry. This left the political
were supposed to refer all queries to the
ziner was churning out memos about the
problem of how to deal with the hundred
communications office. This didn't stop
right way to pitch the plan to editorialists
or so members of the House who sup-
leaks. of course. but it gave Magaziner a
and interest groups. about the likely Re-
ported some kind of single-payer plan.
THE ATLANTIC MONTHLY
29'
Without them. no health bill of Clinton's
was to control health-care costs. This ap-
convince the middle class that universal
could possibly pass.
proach won the support of business,
coverage meant them. we wouldn't get
Congress also contained a large num-
since health-insurance costs had for years
the political support.
If you talked
ber of supporters of market-reform and
been rising faster than any other business
about how they could lose their job, how
managed-competition plans. The main
expense. (From 1948 to 1990. Paul Starr
they are one divorce or one pre-existing
advantage of such plans is that they change
points out, business spending on health
condition away from losing coverage,
the incentives of medical practice so that
coverage rose by an average of 15.6 per-
then perhaps they would-get engaged."
doctors. patients. and hospitals are more
cent a year.) Through most of 1993,
By the end of the struggle this sales ap-
conscious of costs when making medical
while the plan was being developed and
proach made the Administration even
decisions. To get a plan passed. Clinton
unveiled. major business groups like the
more vulnerable to Republican charges
had to show that it would reform the med-
U.S. Chamber of Commerce and the Na-
that it was putting out a bighearted, soft-
ical market.
tional Association of Manufacturers sup-
headed. typically liberal plan.
"We had to try to bridge the chasm"
ported its general outlines and accepted
One other enormously important, and
between these groups in drawing up the
even its "employer mandates," which
almost purely political, decision sealed
plan, Magaziner told me. "If we were se-
would require companies to pay most of
the fate of the bill. Magaziner and Hillary
rious about universal coverage, we felt.
the cost of coverage for their employees.
Clinton had hoped to present the bill to
then the single-payer people would buy
But by the summer of 1994 the Adminis-
Congress a few months after the Inaugu-
off even if they didn't like managed com-
tration was selling the plan mainly as
ration, in the spring of 1993. Thanksgiv-
petition. We felt we were doing enough
a matter of fairness and security. Its slo-
ing had nearly come before they were ac-
of the market reforms that the reform
gan was "Health Care That's Always
tually ready to present a finished bill.
people would buy off too. And. by the
There."
That delay had little or nothing to do with
way, we also thought that that was the
In theory the Administration could
best policy."
have kept stressing both aspects of its
But by June of 1993 one of the main
plan-that it would make individuals
Hillary Clinton now
market-reform legislators. Representative
more secure while reducing the strain on
Jim Cooper, of Tennessee. made clear
business. The peculiar logic of health-
says that the news
that he wouldn't buy off. He recommend-
care economics, as revealed in most other
ed seeing to insurance reforms first and
developed countries and in American
blackout on emerging
getting around to universal coverage in a
group-care systems. is that when every-
few years. The single-payer group, of
one is covered, it becomes easier to con-
details of the health-
course, was not going to agree to that. "At
trol overall costs.
that point," Magaziner said, "we knew
The Administration's political experts,
that the only way we could try to bridge
however, recommended a more stream-
care-reform bill was a
the chasm was to start a little bit left of
lined sales approach. Clinton's pollster.
center and try to negotiate toward the
Stanley Greenberg, produced results in
major mistake.
center."
1993 showing that no one believed that a
"Left of center" meant proposing a
government health-care plan could ever
benefits package a little more generous
save money. Although opinion polls tak-
the nuances of policy. It had everything
than what the Administration really want-
en through the end of 1993 showed that
to do with political necessity-and of a
ed. setting the employer's share of total
most people supported the idea behind
sort that everyone knew was sensible at
costs a little bit higher, making the limits
Clinton's plan (once pollsters explained
the time.
on insurance premiums a little bit tighter.
what the idea was), most people also be-
When the Republican Party lost interest
lieved that the plan would drive costs up,
in negotiating, this strategy became a lia-
T
HIRD count: "The First Lady's
not down. Therefore the more the Ad-
whiz-kids wasted precious months."
bility, because it made the Clinton plan
ministration emphasized its cost-control
This was how The Economist stated the
look more extreme than it was meant to
themes. the less believable it would be-
next objection. Rather than getting busy
be.
come. "The polls showed that people will
and presenting the plan when the Admin-
The other purely political calculation
trust the government to guarantee them
istration still had a dewy glow. the health
concerned sales strategy. Throughout his
security," Magaziner told me. "They will
team sat around until it was too late.
campaign Bill Clinton had emphasized
not believe that the government can con-
The Administration's original strategy
the overall cost of medical care as a cen-
trol costs."
was to rush the health plan through as part
tral evil of the U.S. system. Americans
As Republican opposition to the bill
of its first budget-reconciliation bill. That
spend about twice as much money per
increased in 1994, Democratic strategists
would have meant having detailed health
capita on medical care as people in other
decided that "security" would be a more
proposals ready by April at the latest, and
developed nations, with results that are
effective, partisan rallying theme. "You
the task force had been geared toward
not twice as good. Whenever he was
have to mobilize people. and it's hard to
meeting that deadline. The genius of this
asked about cutting the budget deficit or
mobilize people around words like 'cost
approach. little noticed by the public, is
taming the entitlements monster. Clinton
containment' or 'universal coverage,"
that it would have allowed the health plan
said that the first and most important step
Hillary Clinton told me. "So if we didn't
to pass with a simple majority vote.
30
JANUARY
Congressional politics has quietly
moved into the "supermajority" system
Would you kindly do us the
that Lani Guinier was widely denounced
for seeming to recommend. In theory it
favor of filling out this coupon?
takes fifty-one votes to get a bill through
the Senate. In reality it takes sixty votes to
See? Even in our ads
end a filibuster, so Bill Clinton knew that
the Senate's forty-plus Republicans could
stop nearly any legislation they chose.
we Irish treat you differently.
They could not stop budget bills. These
come to the floor under rules that limit
We've been known to go out of our way to
debate, and with only a fifty-one-vote
IRELAND VACATIONS 1995
make guests feel welcome. Take our free
majority required for passage. So if the
vacation planner as just one example. It offers
health-care plan could be made part of the
an array of vacation itineraries to suit
budget bill. the Administration could get
most tastes and budgets. To experience our
it acted on quickly, with enough of its
hospitality in more detail. plan a trip to
own party's votes to see it through.
Ireland. Mail the coupon to Ireland Vacations
The Senate's majority leader, George
'95, P.O. Box 7728. Woodside, N.Y. 11377
Mitchell. endorsed this strategy, but its
or call 1-800-SHAMROCK, extension 171.
de facto parliamentarian, Robert Byrd,
objected. scuttling the plan. The Admin-
Name
istration then decided that it would intro-
Address
duce the health-care plan as soon as the
City
State
w
budget bill passed. But passage was the
Zip
rub. The budget bill. with its big deficit-
os
reduction package, was seen by everyone
IRELAND
in Washington as a major early test of the
Administration's strength. (The struggle
The ANCIENT BIRTHPLACE of GOOD TIMES.
g
over the bill is the subject of Bob Wood-
h-
ward's book The Agenda.)
The budget fight dragged on much
longer than Bill Clinton had hoped or
Read Between Our Lines
a
planned. As it became obvious that the fi-
nal budget vote would be very close (on
e.
August 6 it finally passed the Senate
51-50, with Vice President Al Gore cast-
LEVENGER
ing the deciding vote), the Administra-
tion wanted to avoid any extraneous con-
troversy that might affect it. Clinton had
been scheduled to make the final deci-
sions about the health-care plan in late
May. Because of fears that leaks about
his choices would complicate the budget
vote, the decisions were put off-a delay
that had ripple effects lasting the rest of
the year. Without Clinton's decisions, the
Free Catalog
task force could not prepare detailed leg-
islation: without legislation. it could not
800-544-0880
start negotiations with congressmen and
their staffs. Without final choices on what
would be in the package, it could not pre-
Read about our line of Pocket Briefcases, our line of bookcases, and our lines of pens,
pare budget estimates; without those esti-
stationery, and lamps. Between our regular lines you'll find one-of-a-kind gifts
mates. the Treasury and the Congression-
that mean something special to those who love reading.
al Budget Office could not vet the plan.
Call or write for your free 64-page Levenger catalog-your direct line to thoughtful gifts this season.
By the fall the budget fight was over-
but then NAFTA became the issue of the
LEVENGER
moment. Clinton had been scheduled to
TOOLS FOR SERIOUS READERS
spend most of the month of October trav-
eling and speaking about the health-care
800-544-0880 or Fax 800-544-6910
420 Commerce Drive, Delrav Beach, FL 33445
Code ATCII
THE ATLANTIC MONTHLY
31
plan. As he was flying to his first event. a
When people complained that the plan
figuring they don't need it-while prices
labor convention in California, news came
was grandiose. they had three features
rise for those most likely to need care.
that U.S. soldiers had been killed in Soma-
in mind: universal coverage (everyone
Fewer of them can afford to buy it, more
lia. Clinton flew back to Washington after
would be insured. whether working or
must take advantage of the cruel and inef-
his speech and spent most of the month
not), community rating (everyone in a giv-
ficient fallback of emergency-room cover-
dealing with Somalia and NAFTA: he can-
en region would pay the same premium
age, and overall costs keep going up. The
celed all the other health-care events.
for-coverage, regardless of age or pre-ex-
young, healthy people eventually become
Despite the delays and missteps. when
isting conditions), and employer mandates
old and sick, and are caught too.
the President finally unveiled the plan. in
(forcing businesses to cover much of the
This cycle is known as adverse selec-
September of 1993, it seemed to have a
insurance cost).
tion, and it has been talked about in the
good chance. "The reviews are in and the
All these ideas have been part of the
health-care-reform business for years.
box office is terrific," the political analyst
health-care-reform debate for years. Uni-
Community rating is the main response.
William Schneider wrote just after it was
versal coverage and community rating
It is designed to average each person's
presented. "President Clinton's health
sound like bleeding-heart concepts. but
medical costs over the course of his or
care reform plan is a hit.
The more
they are based on tough economic rea-
her whole life and to make sure that peo-
people read and hear about the plan, the
soning. The idea behind both is that
pie have coverage at the times of their
more they seem to like it."
piecemeal reform of a health-care system
lives when it's most necessary. In pro-
Six weeks after the Inauguration, Mag-
can be worse than no reform at all.
posing community rating the Clinton
aziner had written a memo to Bill and
The fairness argument for universal
team was hardly making waves.
Hillary Clinton saying that if health-care-
coverage is obvious. Even people who are
Even the part of the plan that sounded
reform legislation was not presented and
poor deserve care when they are sick or
strangest and most radical, its "mandato-
passed immediately, it probably could
hurt. This is why every developed nation
ry alliances." is already familiar to mil-
not be passed during "your first term."
except the United States offers universal
lions of Americans under a different
With Republican midterm gains in Con-
care. The economic argument has become
name. Anyone who works for a big com-
gress, it now appears that this prediction
almost as familiar. Even people without
pany or a state or federal agency knows
will be borne out. But the delay was nei-
health insurance ultimately receive treat-
about the open-enrollment system for se-
ther negligent nor intentional. It is a re-
ment, when they show up in emergency
lecting health insurance. The company or
minder of how quickly events spin out of
wards; hospitals cover the cost by pad-
agency negotiates with HMOs, insurance
a President's control, and how rare it is
ding charges for everyone else. This
companies, and local medical networks
for him to be able to advance his own
backhanded form of coverage is neither
that want to offer coverage to its employ-
agenda rather than respond to someone
economically efficient nor humane. As
ees. Once a year employees choose which
else's emergency.
recently as the fall of 1993 Bob Dole was
plan they want. The employer then de-
saying that universal coverage was a
ducts money from their paychecks, adds
F
OURTH count: The plan had delu-
"non-negotiable goal of reform."
its own share, and passes the money on
sions of grandeur. Now we move to
Community rating is a closely related
to the medical providers.
the substance of the plan. which has been
idea. Every health-care-reform scheme in
This. with small variations, is also how
described as a regulatory rat's nest, a
America is concerned with holding down
the task force's mandatory alliances would
nightmare of overambitious social engi-
costs. In most businesses market compe-
have worked. They would have taken
neering, and a sweeping solution where
tition does the job, but competition in the
bids from insurance companies, HMOs,
modest reforms would do.
health-insurance area often works in a
and other health providers and then let
The reality is that very little in this plan
perverse way. Insurance companies have
each household choose the plan it liked
was new or unprecedented, and that it
tended to compete not by improving the
best. Each provider would have been re-
was barely more complex or comprehen-
incentives, habits. and nature of medical
quired to set a price for a standard bene-
sive than most other plans.
treatment-which in the long run is the
fits plan, so that customers could make
only way to limit expenses-but by be-
easy price comparisons among the offer-
coming choosier about whom they will
ings. The alliances would not, as has of-
According to the
insure. If they can limit their coverage to
ten been assumed, have tried to provide
young, healthy people and rule out those
medical care themselves, through big new
peculiar logic of health-
who are already sick, then they can offer
government clinics.
coverage at a lower price, without having
The most ominous-sounding aspect of
care economics, when
done anything to improve the efficiency
the new alliance system was its "mandato-
of care.
ry" nature. Everyone would have been
everyone is covered, it
This is what has happened to the health-
obliged to choose and buy a standard ben-
insurance business in the past generation.
efits plan from an alliance. (Contrary to re-
becomes easier to
In the old days Blue Cross offered cov-
peated claims by opponents of the bill,
erage to everyone in the same geographic
people would have been free to buy any
control overall costs.
area at the same price. Now younger,
extra coverage they wanted. or get any ad-
healthier people can get cheaper cover-
ditional treatment from any doctor they
age-which many of them skip anyway,
chose, as long as they did it with their own
32
JANUARY 1995
money. Employers would
to, the task force believed
also have been free to offer
that it was changing the sur-
additional coverage.) The
face of health care as little
health-care task force argued
as possible while altering its
that the alliances had to be
underlying economic struc-
mandatory in order to create
ture. The alliance system,
the community-rating effect.
despite its strange name,
Otherwise. young, healthy
was meant to look familiar
people would stay out of the
to people who already had
system. and the pernicious
coverage. The employer-
cycle of adverse selection
mandate system of finance,
would begin. An exception
in which companies would
was made for employees of
bear most of the health-in-
very large companies, who
surance costs, reflected the
would still have been able to
fact that 90 percent of the
buy through their own firms'
people who now have insur-
open-enrollment plans. The
ance (excluding those on
reasoning was that a General
Medicare) get it through
Motors or an AT&T had a
their employer. The em-
work force large and diverse
ployer mandate is a de facto
enough to constitute a com-
tax but a well-established
munity-rating pool all by it-
one. and a familiar concept
self. Everyone would have
in health-policy circles.
been forced into a pool one
Many Republicans, includ-
way or another.
ing Robert Packwood and
Some health-care-reform
Richard Nixon (!), have over
plans have no mandatory
the years endorsed employ-
component. Several versions
er-mandate plans.
of managed competition,
Indeed, none of the indi-
for instance, would set up
vidual elements of the Clin-
alliances like those in the
ton plan was a shocking
Clinton bill but not require
new entrant into the health-
anyone to buy from them.
care debate. The plan's sys-
It is virtually impossible,
tem for controlling expendi-
though, to achieve universal coverage
least one fee-for-service plan that would
tures, through premium caps that limited
without some element of compulsion.
permit a family to stay with the indepen-
how fast the cost of basic coverage could
(Medicare offers universal coverage for
dent doctor it had been using.
rise, departed from Paul Starr's recom-
those over sixty-five, but everyone who
After the plan was withdrawn, Uwe
mendations. But it closely resembled a
works is compelled to pay a Medicare
Reinhardt, an economist at Princeton Uni-
plan offered by a group of congression-
tax.) Moreover, Magaziner argued, for
versity, told The New York Times, "No
al moderates that included the Republi-
most people the mandatory system would
one understood this. but the average
can senators John Danforth and Nancy
in practice mean more choice and free-
American patient would have had more
Kassebaum.
dom than they now enjoy.
choice under the Clinton plan than they
To say that the resulting package of
When he ran a small business in Rhode
now will. If you work for a particular
proposals was "too complex" is like say-
Island. Magaziner said. he covered all
company, your choice of HMOs is what-
ing that an airplane's blueprint is too
health-insurance costs for his employees
ever that company offers you." Some crit-
complicated. The Medicare system is
but could give them only two plans to
ics argued that the Clinton plan would de-
complex. So is every competing health-
choose from. Handling the bidding and pa-
stroy the market for coverage beyond the
care-reform plan. Most of the 1,342 pages
perwork for a broad range of plans would
plan's basic benefits, and that as a result
of Clinton's Health Security Act (which I
have been impossible. "If there had been
people would find it difficult to buy as
have read) are either pure legal boilerplate
an alliance. I could have paid my dues-to
much coverage as they might like. But that
or amendments to existing law. Conven-
the alliance and let people choose among
is different from the widespread belief that
tional wisdom now holds that the sheer
all the plans." The alliances in the Clinton
extra coverage would be against the law-
bulk of the bill guaranteed its failure. The
bill would have been required to offer
and for most people the range of choice
NAFTA bill was just as long, and so was
customers a choice among all plans that
would probably be broader under Clin-
the crime bill that passed last summer. If
met basic certification requirements. In big
ton's plan.
the health bill had been shorter and had
cities a dozen or more plans might be
Far from concocting a system that
not passed. everyone would know that
available. The minimum offering would
would look and feel radically different
any proposal so sketchy and incomplete
be three kinds of coverage, including at
from what Americans were accustomed
never had a chance.
34
JANUARY
F
IFTH count: It was a coercive ap-
less impressed with her scholarly pre-
make those decisions. They will pay
proach to one seventh of the econo-
cision after I compared her article with
more for fewer benefits. How deeply this
my-and to a problem that was solving
the text of the Clinton bill. Her shocked
sinks in and how much it motivates polit-
itself.
claim that coverage would be available
ical action, I don't know."
Much of the problem for the plan
only for "necessary" and "appropriate"
seemed. at least in Washington. to come
treatment suggested that she had not
I
F this plan did not perish because it
not even from mandatory alliances but
looked at any of today's insurance poli-
had been designed in intolerable secre-
from an article by Elizabeth McCaughey.
cies. In claiming that the bill would make
cy, or because its designers knew nothing
then of the Manhattan Institute. published
it impossible to go outside the health plan
about politics, or because it was full of
in The New Republic last February. The
or pay doctors on one's own. she had
unacceptable new ideas, or because it was
article's working premise was that Mc-
apparently skipped past practically the
so much more complex than any prede-
Caughey, with no ax to grind and no pre-
first provision of the bill (Sec. 1003),
cessors, then what happened to it?
conceptions about health care, sat down
which said.
The Administration's view, for which,
for a careful reading of the whole Clinton
again. there is ample evidence, is that it
bill. Appalled at the hidden provisions
Nothing in this Act shall be con-
went down because of two zero-sum
strued as prohibiting the following:
she found, she felt it her duty to warn
games, one political and one economic.
(1) An individual from purchasing
people about what the bill might mean.
Health-care reform became a battle in
any health care services.
The title of her article was "No Exit." and
which some would win and others would
the message was that Bill and Hillary
It didn't matter. The White House is-
lose-and Clinton lost.
Clinton had proposed a system that
sued a point-by-point rebuttal, which The
Through most of 1993 the Republicans
would lock people in to government-run
New Republic did not run. Instead it pub-
believed that a health-reform bill was in-
lished a long piece by McCaughey at-
evitable. and they wanted to be on the
tacking the White House statement. The
winning side. Bob Dole said he was ea-
To say that the resulting
idea of health policemen stuck.
ger to work with the Administration and
So did the idea that one seventh of the
appeared at events side by side with
package of proposals
national economy would be transformed
Hillary Clinton to endorse universal cov-
overnight. Of the vast American com-
erage. Twenty-three Republicans said
was "too complex"
merce in health care. more than 40 per-
that universal coverage was a given in a
cent is already paid for by the federal
new bill.
is like saying that an
government, mainly through Medicare.
In 1994 the Republicans became con-
Under the Clinton plan the rest of the
vinced that the President and his bill
airplane's blueprint is
money would still go through most of the
could be defeated. Their strategist, Will-
insurance companies. HMOs. doctors,
iam Kristol. wrote a memo recommend-
too complicated.
hospitals, and laboratories that are receiv-
ing a vote against any Administration
ing it now.
health plan, "sight unseen." Three com-
mittees in the House and two in the Sen-
care. "The law will prevent you from go-
T
HE final element in the conventional
ate began considering the bill in earnest
wisdom is that this cumbersome.
early in the year. Republicans on several
ing outside the system to buy basic health
flawed plan was in any case unnecessary,
committees had indicated that they would
coverage you think is better." McCaugh-
because the health-care problem was go-
collaborate with Democrats on a bill; as
ey wrote in the first paragraph. "The doc-
ing away. Medical costs rose by "only"
the year wore on. Republicans dropped
tor can be paid only by the plan. not by
5.9 percent in 1993-yet that was more
their support, one by one, for any health
you."
than twice as fast as wage growth and al-
bill at all. Robert Packwood, who had
George Will immediately picked up this
most twice as fast as the overall inflation
supported employer mandates for twenty
warning, writing in Newsweek that "it
rate. Over the past several decades med-
years. discovered that he opposed them in
would be illegal for doctors to accept
ical costs have risen about three percent
1994. "[He] has assumed a prominent role
money directly from patients. and there
faster than the overall inflation rate: in
in the campaign against a Democratic al-
would be 15-year jail terms for people
1993 the gap was 2.9 percent.
ternative that looks almost exactly like his
driven to bribery for care they feel they
"There is no persuasive evidence that
own earlier policy prescriptions." the Na-
need but the government does not deem
we are in either a stabilized or an improv-
tional Journal wrote. Early last summer
'necessary." The "doctors in jail" concept
ing health-care-financing environment,"
conservative Democrats and moderate
soon turned up on talk shows and was
Hillary Clinton told me. "In fact, many of
Republicans tried to put together a "main-
echoed for the rest of the year.
the problems will only continue to get
stream coalition" supporting a plan with-
These claims, McCaughey's and
worse. The problems that middle-class
out universal coverage, without employer
Will's. were simply false. McCaughey's
Americans care the most about-like
mandates. and without other features that
pose of impartiality was undermined by
what doctor they can see-will likely be-
Republicans had opposed. In August,
her campaign as the Republican nominee
come appreciably worse, because many
George Mitchell, the Democratic Party's
for lieutenant governor of New York
will be forced into managed care over
Senate majority leader. announced a plan
soon after her article was published. I was
which they have no say. Employers will
that was almost pure symbolism-no
36
JANUARY
y
employer mandates, very little content ex-
is
cept a long-term goal of universal cover-
it-
age. Led by Bob Dole and Newt Ging-
rich, Republicans by September were
opposing any plan. "Every time we
NEWS
it
moved toward them, they would move
e-
away," Hillary Clinton says.
not noise.
"We always knew that in the end peo-
of
ple's trust of the President and First Lady
as
would be crucial." Ira Magaziner says.
What really happened
e-
"The debate was going to be complicat-
this week? Watch
ed, and that trust factor was very impor-
h.
tant." Whitewater eroded the trust factor.
Washington Week
it
The President looked beatable, and he
In Review, the news
m
lost.
program that sorts
ic.
Economic factors counted too. Doctors
in
out the facts from the
had fought bitterly against Medicare in
Id
the early 1960s, but for the most part they
fluff. Join moderator
sat this battle out. If they weren't con-
Ken Bode and
ns
trolled by the government. they would
Washington's most
n-
be controlled by insurance companies,
savvy reporters every
ne
which in some ways were worse. But
a-
other interest groups had more to lose.
Friday at 8 pm
d
Health-insurance agents would be put out
on your PBS station.
th
of business. Health-insurance companies
V-
could have their premiums capped. For-
id
Produced by
profit hospitals thought they would lose
a
money. Manufacturers of medical equip-
WETA
WASHINGTON, D.C.
ment thought that market growth might
n-
slow. Large businesses that did not al-
ill
ready offer health care for workers knew
II-
Ford
the employer mandate would cost them
d-
money. (These were mainly corporations
Funded by Ford
Motor Co.
on
like PepsiCo and General Mills, which
At Ford. Quality
n-
is Job One.
own restaurant chains whose part-time
n-
workers are uninsured.)
st
During the 1992 campaign the Clinton
al
war room excelled at answering negative
Id
charges immediately, before damaging
WASHINGTON
as
impressions could set in. But even flatly
ed
untrue attacks on the health plan went
WEEKIN
th
unanswered-direct-mail campaigns say-
REVIEW
11111111
id
ing that everyone would have to go to a
ty
government clinic, daily doses of misin-
in
formation from Rush Limbaugh, TV ad-
le
vertisements fanning McCaughey-style
1-
fears of jail terms for people who wanted
TURKEY
ISTANBUL
WEEKLY DEPARTURES
NOV TO MAR
is
to stick with their family doctor. Last
10 Days
FLIGHT FROM NY
transfers. hotel.
1-
March The Wall Street Journal found that
$
799
breakfast daily
er
a panel of citizens preferred the provi-
te
sions of the Clinton plan to the main
(800) 223-9169 (212) 2935-92102
ANATOLIAN CIVILIZATIONS
1-
alternatives-when each plan was de-
Istanbul, Pergamum, Ephesus,
1-
scribed by its contents alone. But when
Aphrodisias, Antalya, Cappadocia,
Ankara
er
pollsters explained that the preferred
17 Days
R/T FLIGHTS FROM NY
at
group of provisions was in fact "the Clin-
$
1545
at transfers. all hotels.
all sightseeing, of meals
ton plan," most members of the panel
S
changed their minds and opposed it. They
n
knew. after all. that Clinton's plan could
TURSEM
o
never work.
THE ATLANTIC MONTHLY
37
DETERMINED TO BE AN ADMINSTRATIVE
MARKING Per E.O. 12958 as amended, Sec. 3.3 (c)
Initials: ADB
Date 12-5-13
THE WHITE HOUSE
November 3, 1995
Mrs. June Freeman
9 Southern Pines Drive
Pine Bluff, Arkansas 71603
Dear June:
Thank you for your letter and for your
good wishes about my trip to Beijing. It
was a tremendous honor to speak to so many
women from around the world who share our
commitment to human rights.
I also very much agree with the point
you made in your letter that we need to
focus on wellness to prevent disease before
it starts. Just this spring, the Clinton
Administration launched a year-long Medicare
Mammography Campaign to educate older women
about the importance of detecting breast
cancer early and about Medicare coverage of
mammography services. Unfortunately, only
about forty percent of women on Medicare
take advantage of the Medicare mammography
benefit. For most women, a mammogram puts
their mind at ease. Those few who do have
breast cancer can identify it early and get
the treatment they need. We hope that our
campaign will encourage older women to get
regular mammograms.
Mrs. June Freeman
November 3, 1995
Page 2
I also truly enjoyed your son's
newsletter. These kinds of outreach
efforts, both local and national, help
educate people about how to take care of
themselves now to avoid serious and costly
illnesses later.
Thank you again for writing and for your
commitment to helping Americans lead
healthier lives.
With best wishes, I am
Sincerely yours,
Hillary Hillary Rddham Clinton
serving artist/collector/community
9 Southern Pines Drive
Pine Bluff, Arkansas 71603
artsource
501 534-1305
August 20, 1995
Dear Millary,
the White Have that you will have
Shape by the time This reaches
been able to complete your plane
for attending The women's conference need a
Chena. believe we
in presence there in The person of an
autsphen advacate of human rile rights.
I've been thinking of your interest
as first health lady, issues. in light I'd of like your to see you
in focus on willness, to get people to
work Loward preventing illness.
If people ate well that and momoted practiced
other williveing measures physical and mental, all how of
such on wellness is an it.
you could do it. he matter obtainable of
wonderful that would be for one is us.
goal pan Please Minh about
my oldest The editor son is of me a done
one that I fairly recent issues been Daved,
another is believe Lo very well
Emlowed a gradeeate is a by the due way has No interest pretting
lees mis in prevention. for Hope it
yoll out the past years. has same
value to you
Always June freeman
THE WHITE HOUSE
WASHINGTON
January 31, 1995
Mr. Nick Franklin
Senior Vice President
Public Affairs
FHP International Corporation
9900 Talbert Avenue
Fountain Valley, California 92708
Dear Nick:
Thank you for writing to me about FHP's Medicare
program. I enjoyed meeting you at the recent
breakfast at the White House, and I appreciate
your following up on our discussion. I've asked
Carol Rasco to look into the issues you raised and
have passed along your invitation to my scheduler
for consideration.
As we continue working to improve our health care
system, I am grateful for your support. I hope
you'll stay involved.
Sincerely,
This Wintern
Cc. Carol Resco
your with warguat
BillyWebstn
Thanks-
celtis Castu to
HRC, Ensline, been
B
To Jen + Chris Jennings-
Please review letter and
evaluate Claims in Nt form.
PHOTOCOPY
HRC HANDWRITING
Thanks- - H
FHP®
FHP International Corporation
Public Affairs Department
HEALTH CARE
9900 Talbert Avenue
Fountain Valley, CA 92708
714.378.5767
January 12, 1995
William Jefferson Clinton
President of the United States
The White House
Washington, DC
Dear Mr. President:
I enjoyed the opportunity to meet you at the breakfast you hosted for members of the
Democratic Leadership Councils at the White House on December 7, 1994.
You asked me to write to you and let you know how FHP is able to save Medicare
beneficiaries and the federal government money under FHP's Medicare risk contract with the
Health Care Financing Administration (HCFA), while providing beneficiaries with a broader
range of benefits, including prescription drug coverage. I trust the following provides the
information you requested.
I should begin with a brief background of the Company and its Medicare business. FHP
International Corporation is a federally qualified health maintenance organization which
began 33 years ago in Long Beach, California. Over the years, the Company has expanded
and now serves people in 11 states and the Pacific Islands of Guam and Saipan. Over 1.7
million individuals today receive all of their health care from FHP. Our customers, or
members, include the employees of over 5,000 small, medium, and large corporations;
Medicaid recipients; military dependents; federal, state, county, and city employees; and
hearly 350,000 Medicare beneficiaries.
FHP receives a capitated payment, a fixed amount of money every month, for each of its
members and in return contracts to provide all of that member's health care needs
irrespective of the cost or intensity of care. Approximately 20% of our members receive
(their care through our staff-model network of over 60 company-operated medical centers and
five hospitals. The balance of our members receive their care through private physicians and
(hospitals with whom FHP has contracted.
Under our Medicare contract with the federal government, HCFA pays FHP an amount equal
to 95% of what HCFA would otherwise pay to the fee-for-service physicians and hospitals in
that geographical area. FHP in turn provides all of the benefits required under Medicare.
In addition, FHP provides outpatient prescription drugs and other benefits not covered by
Medicare, including covering hospital and physician deductibles. For this FHP charges $5
for a prescription, $5 for an office visit, and charges no premium. The results are
impressive. For example, the 5% savings to the federal government for our 350,000
Medicare members amounts to more than $60 million per year. Because FHP charges no
premium and adds benefits over and above the standard Medicare benefits, we save each of
our 350,000 Medicare members an average of more than $1,200 a year. These direct
savings to our Medicare members total more than $348 million a year.
Through these efficiencies, FHP is removing over $400 million a year of unnecessary and
wasteful health care costs from the health care system for our Medicare members alone. As
evidence of the senior population's acceptance of this program, our Medicare membership
grew on average 21% each year over the last five years.
We are able to accomplish these results by applying a series of basic principles which we
have learned over the years, and which are readily applicable to the nation as a whole as we
seek to provide health care to all Americans in a cost-effective way:
I.
We remove the financial barriers to seeking early care. We know that if there are
limited benefits, pre-existing condition exclusions or deductibles, many people will
defer seeing the doctor until the disease or problem becomes unbearable. By the time
they see the doctor, it is likely that more expensive procedures and possible
hospitalization will be required. We know that if we remove the financial barriers to
seeking early care we are often able to stabilize or correct the problem before it gets
out of hand, and thereby avoid more expensive treatment later on. Not only does this
save money, but it is a higher quality of medical care since no one wants to be sick or
in the hospital if he or she can avoid it. The use of a hospital is the most expensive
part of medical care, and FHP's use of hospital bed days is one of the lowest in the
country.
II.
Access to an individual's primary care physician on weekends and in the evenings is
very important to the control of health care costs. If their doctor is not available, then
typically, the patient will wind up in the emergency room of a hospital. Emergency
room care is very expensive and is used by hospitals as a major source of admissions.
Many of FHP's medical centers are open in the evenings and on the weekends. The
centers are full-service medical centers which include both primary care doctors and
specialists, a pharmacy, minor surgery, laboratory, x-ray, physical therapy, and even
child care while the patient is receiving medical care.
III.
Under the HMO Act, every federally qualified health maintenance organization must
provide a minimum level of benefits as prescribed in the act. Except for outpatient
drugs, this benefit level is all inclusive; but FHP adds prescription drugs to every one
2
of its benefit packages. This is particularly important for Medicare beneficiaries since
many do not have the funds to fill a prescription. Without a drug benefit, the
prescription would likely either not be filled or would be filled and spread over a
longer period of time than is therapeutically required to cure the illness. From
experience we know that the additional cost of a drug benefit is more than offset by
lower hospital use and lower utilization of health care.
IV.
The incentive for the physicians must be aligned with the HMO's and the nation's
incentives to reduce costs while simultaneously improving quality. Under the fee-for-
service system, providers are paid based on services performed. This incentive has
lead to abuses and over utilization. At FHP, our staff and contract physicians have
incentives to provide members with rapid access and to deliver high quality care.
These incentives not only control costs, but also enhance quality-to do otherwise
would result in lawsuits and loss of members. Holding back on appropriate utilization
would also, as discussed earlier, actually result in eventual higher health care costs.
Our efforts to control costs while delivering high-quality care have had impressive
results. Over the past months, our efforts to assure the highest standards of quality
have been recognized by a number of organizations. The National Committee for
Quality Assurance has awarded our plans in Arizona, New Mexico, Southern
California, and Utah with unqualified certifications of quality care. The American
College of Surgeons recognized FHP's exceptional quality of care in treating our
members who have cancer.
V.
FHP's Medicare program is community rated. This is an essential part of the
program's success. Under a community rating system, HCFA pays FHP the same
monthly amount, adjusted for age, for each member in each geographical area served
by FHP, irrespective of the Medicare member's health. At any time, some of our
Medicare members will be sick and some will be well. The key is that we have
enrolled a large number of Medicare beneficiaries so that the cost of caring for the ill
members can be spread over our entire 350,000 Medicare population, making health
care on average affordable for any one individual.
VI.
Physician choice is important, but not in the way most people think of it. Having the
absolute, unchecked freedom to seek the services of any doctor, including expensive
specialists, at any time and at any frequency, is not a prerequisite to receiving quality
health care. One of the reasons FHP is so popular with its Medicare members is that
we have carefully screened, credentialed, and regularly recredential each of our in-
house and contracted physicians. We inquire into their malpractice history, their
technical competence, where they went to school, where they trained, the amount of
their training and experience, and the status of their licensure. When an FHP
member selects one of our physicians, the member can have confidence in the level of
care they will receive. This is not necessarily the case in the unmanaged, fee-for-
service system.
3
Mr. President, my colleagues at FHP and I are convinced that HMOs offer the best solution
to controlling the growing cost of health care, generally, and Medicare, in particular, while
assuring coordinated high-quality care. The number of Americans in HMOs has grown
steadily in recent years with more than 25 percent of Americans receiving health care
through a managed care plan. The savings to the private sector have been significant, with
health costs growing at the lowest level in years (indeed, for many employers, costs have
actually declined with no loss in quality). Yet only some ten percent of Medicare
beneficiaries receive their care through HMOs.
FHP is convinced that the Medicare program and beneficiaries can realize similar cost
savings while assuring coordinated quality of care. We have been excited by the recognition
managed care has been receiving from Members of the Congress as a way to address the
Medicare programs problems. The biggest challenge will be to encourage beneficiaries to try
something which for many of them will be new.
Our surveys, like those of the other Medicare HMOs, demonstrate enormous satisfaction by
our Medicare patients with the quality, cost and additional benefits they receive. We are
sure, given the chance, other beneficiaries would be similarly satisfied.
We would be pleased to work with you and others in your Administration to bring the
beneficial cost and quality results of managed care to a greater number of Medicare
beneficiaries. Also, we would be delighted for you to visit our medical and corporate
headquarters campus in Southern California the next time your travels bring you to the West
Coast. I think you will be very impressed with what you see.
Thank you for asking me to provide you with this information and for your leadership on
health care issues. If you have any questions or if I can be of any further assistance, please
do not hesitate to call me directly at: 714-378-5631.
Sincerely,
nin7
Nick Franklin
Senior Vice President,
Public Affairs
cc:
Carol H. Rasco, Assistant to the President for Domestic Policy
g:\klein\whitehse.bf
4