Coverage

HEALTH REFORM: Polls Holding Steady Into Thanksgiving Break

Meredith Hughes — Tue, 24 Nov 2009 18:10:00 -0500

The latest Kaiser Health Tracking Poll is in, and the health care reform approval numbers are holding pretty steady. Slightly more people than last month, 54 percent, believe the country will be better off if health reform passes. And 42 percent -- an improvement from earlier this year -- believe that health reform will personally benefit them or their families.

The number who believe health reform will hurt them (24 percent) or the country (27 percent) is down slightly from last month. Roughly the same one-in-four don't think health reform will affect them. Democrats and Independents are more likely than Republicans to view health reform as positive. However, when asked about specific provisions in the health care bills, a majority ranked as "extremely" or "very" important these components of reform: affordable, available health insurance, coverage for people with pre-existing conditions, providing subsidies to help the uninsured purchase coverage, requiring all Americans to have health insurance, filling the Medicare donut hole, and not adding to the U.S. budget deficit.

The Robert Wood Johnson Foundation Health Care Consumer Confidence Index (RWJF Index) found that Americans' confidence in their health insurance coverage and access to care increased in October, from 96.6 in September to 104.4 points.

The Kaiser tracking poll also asked Americans about health reform financing options, including a tax on high income earners, or a "Cadillac tax" on high value health plans. A near majority of Americans, 47 percent, strongly favor the tax increase for high income individuals and families (like the one found in the House bill), while 29 percent strongly support the Cadillac tax.

The poll also revealed the ongoing problems Americans face in accessing affordable care during economic hard times. In the past year, a majority of Americans (53 percent) reported putting off care because of cost. According to the RWJF index, 20.6 percent of Americans reported difficulty in paying their health care bills.

For more detailed analysis of what polling data means for health reform, check out our earlier posts.

WORLDVIEW: Assume There's Morality

Joanne Kenen — Thu, 19 Nov 2009 21:16:00 -0500

Not many health writers -- not many writers of any ilk, for that matter -- can match T.R. Reid's ability to bring a light, witty touch to really serious topics. Like health policy around the globe.

Tom (that's what the "T" in "T.R." stands for) was the featured speaker at the Peterson Institute of International Economics today. Not the usual venue for the book tour for his best-seller, "Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care." Before his talk, he told me he was planning to stress the moral case for covering everyone. Not the approach, perhaps, that this particular crowd was used to hearing. Go ahead, I told him. It is, after all, a roomful of economists eating a free lunch.

And that's what he did.

Every rich western democracy (and a few of the not so rich and not so democratic ones), he said, covers everyone. We don't.

None of their systems are perfect. Like us, they wrestle with the rising price of pharmaceuticals and medical technology, and with the needs of an aging population. But they all cover everyone. It's time, he said, for us to do the same. It's been time for a long time.

Reid argued that health care is a basic human right -- a controversial notion in the United States, but received wisdom elsewhere. He threw in some economic lingo as well. Covering everyone (and everyone, he said, means everyone) also brings about efficiencie that make the system work better. He talked about "distributional ethics." Every American -- both Bill Gates and the guy who mows his lawn -- each have one vote. But they don't each have one yacht. Health care, he said, should be more like a vote than a yacht.

Nor does he believe (as some Americans seem to, judging from decibel level of our national health reform debate) that expanding coverage is a zero sum game. I get more, you get less. He argues that we can all get more. More efficiency. More morality. If we find the will, other wealthy industrialized countries can show us a plethora of ways.

Two New America colleagues have reviewed his book. Phil Longman in the Washington Post called the book " a service to his nation," Shannon Brownlee in the Washington Monthly wished he had written more on the lack of evidence behind some of the treatments widely used in the U.S. We liked the film Reid did for Frontline last year, "Sick Around the World" and we liked the book, a readable account of different national health systems interspersed with his own amusing but enlightening global search for a fix for his bum shoulder. How can you not like a book that has sentences like:

France [is] a mirror image of the United States when it comes to health care: Americans strongly dislike their national health care system but haven't found the political will to change it; the French are highly satisfied with theirs but change it all the time."

Or, after having his shoulder treated (quite successfully) by traditional healers in India, when he wrote:

When the front office at the Arya Vaidya Chikitsalayam handed me a detailed accounting -- dozens and dozens of pages listing every navarakizhi, every poojah, and ever ancient herbal medication I had experienced -- I realized instantly that my U.S. insurance company was never going to pay this bill.

He didn't care. His shoulder was better -- and he had lost nine pounds.

Reid's message is not always wry or witty. Far from it. At the beginning of his book, and again near the end, he writes about Nikki White. She died of lupus at age 32. Not because her disease was so severe or untreatable. But because once she became too sick to work, she lost her insurance. And once she lost her insurance, she got sicker. She could not get the treatment she needed until she was so sick that it was too late.

"No other rich country would have tolerated the inequality that left Nikki White dead," he wrote. Designing a health system is an economic question, a medical question, a political question, he acknowledged. But in the end, he concluded, " the primary decision to be made is a moral one."

COVERAGE: Evaluating the Public Plan, Man

Paul Testa — Thu, 19 Nov 2009 20:23:00 -0500

Slate's Timothy Noah provides a thoughtful overview of the intellectual origins and political evolution of the public option's place in health reform.

It's a complicated case, the public option. Lotta ins. Lotta outs. But Timothy Noah is the Big Lebowski of health writers, and is the man for the job to keep all these strands together. (Yes, we know we've made that joke before, but like our living room rug it really ties the blog together.)

Noah's goal was to understand why the CBO and others estimated that premiums for a so-called level playing field public option would cost more than private plans. Noah spoke with New America's Len Nichols, whose paper with John Bertko helped outline how a public option with negotiated payment rates could compete on a level playing field with private plans.

At the heart of Noah's question are the assumptions these estimates make about the nature of the public option and the potential for adverse selection between insurers (in this case more sick people choosing the public option over private plans). Noah nicely illustrates the intricacies of this debate, and we'd like to add a few more points to consider.

First, we would argue the fears that a public option will necessarily attract a less healthy (higher cost) population are overblown. Health reform legislation encompasses new insurance market regulations (community rating, affordability standards tied to actuarial values, guaranteed issue and renewal). Coupling those new rules with the requirement that all Americans purchase health insurance removes much of the ability and incentive for private insurers to engage in the kind of cherry picking and lemon dropping that the Slate article addresses. Insurers will still try to attract healthier customers through advertising and marketing, but their ability to actively select customers based on health status and other risk factors would be limited. Risk adjustment will further address variation that might arise through this sort of "soft" risk selection.

Second, it seems unlikely that sicker individuals will drop existing coverage and flock to the public option. If they're offered coverage through an employer and that coverage is deemed affordable relative to their income, they're ineligible for the exchange. Furthermore the transition costs of switching plans when you've already set up a network of providers to care for your conditions are such that if you like what you have, you will probably prefer to keep it.

Finally, there is the question of how a public option would operate -- specifically, how would it employ methods of utilization management. Utilization management is ungainly jargon even for health policy. It should not be conflated with the cherry picking and lemon dropping of risk selection. When practiced correctly, utilization management is about delivering value for our health care dollar. It's about paying for what works, reducing unnecessary tests and procedures, and encouraging healthy behaviors. It's about avoiding the MRI when an X-ray will do, or making it easier for a diabetic to manage her blood sugar and avoid crises and complications that could send her to the ER -- or the OR. Or the ICU.

There are many real world examples where utilization management done right both saves money and improves patient care. But the CBO and others in their estimates basically assume that a public option would ignore the examples of plans like Group Health or Kaiser, and keep paying providers along the lines of fee-for-service Medicare. Why would the Secretary of HHS design a public option to perpetuate broken payment models, when it could be a driver for innovation in payment and delivery system reform? So for all the hand wringing over a public option, when it comes to estimates of adverse selection and utilization, remember, that "yeah, well, you know, that's just, like, your opinion, man." Cost estimates are important, but implementation is what really matters.

COST: The Price is Right for Health Reform

Paul Testa — Thu, 19 Nov 2009 18:50:00 -0500

After weeks of anticipation and speculation, Senate Majority Leader Harry Reid has unveiled the legislation that will bring health reform to the Senate floor in the coming weeks.

While waiting for the details of the bill to come out Wednesday, we created a little office pool, called the Price is Right for Health Reform. In an office-wide email, we asked our peers to guess the CBO's estimates of the gross costs of the bill. Showcase Showdown rules (closest without going over) applied. We were intentionally vague in our question because estimating the true costs of the bill is inherently a difficult process.

The number we were looking for was $848 billion. The CBO's estimate of the gross cost of the bill is essentially the total cost of coverage provisions over the next 10-years. This is the number most frequently reported in the media as the "cost" of the various health reform bills being discussed. But is this really the best indicator of the true costs of health reform? Maybe not. First, timing matters: $848 billion over ten years is a lot different than a $787 stimulus bill where 90 percent of the money is spent within the first 3 years. So do deficits. How much does a bill cost if it's fully paid for and in fact reduces the deficit as is the case for both the House ($109 billion) and Senate ($130 billion) bills?

We received plenty of calls from our co-workers asking just these questions. We tried to stay quiet, because we were interested in what the educated, non-health policy wonks think about the cost of reform. True to our think tank's "post-partisan roots" we got a range of answers from "too little" to "$600 trillion, Obama lies." We got a couple of "$1" which we assume was a reference to the bill's deficit neutrality, and $90 billion which seems like a reasonable estimate of yearly costs. But the majority of the answers clustered within the $800-$900 billion range, surprisingly close to the final answer. Few people seemed willing to go above $900 billion, suggesting the power of the official price tag President Obama put on reform during his September address to a Joint Session of Congress. So who won? The answer after this non-commercial break:

Marc Goldwein, the Policy Director, Committee for a Responsible Federal Budget and Policy, took home the prize for his guess of $845 billion. Lisa Guernsey, the Director, Early Education Initiative, came agonizingly close with pick of $850 billion. New America's President Steve Coll, was the next closest with a prediction of $837 billion.

Marc's prize potentially includes a Dodge Neon from 1996, a natural wood-like dinette set from 1982, or more likely a beer and some wings from the re-opened Black Rooster Pub (take that Peace Corps!). We suspect he'll also want us to plug the excellent work he and his colleagues do on all things budget. Congratulations Marc. Help control the pet population. Have your pets spayed or neutered.

As a side bet, we also asked contestants to name which current Senator looks most like Bob Barker. What do you think?

HEALTH REFORM: Highlights from the Senate Bill

Elizabeth Carpenter — Thu, 19 Nov 2009 16:04:00 -0500

The latest version of Senate health care legislation (pdf available here) crafted by Majority Leader Harry Reid is making its rounds. There is a lot to review, but an initial read shows the bill is close to the legislation approved by the Senate Finance Committee in early October with a few notable changes: more generous subsidies, a higher threshold for the excise tax on insurers who offer high-cost plans, an increase in the Medicare payroll tax for Americans making over $250,000, and the addition of a long-term care insurance program for people with disabilities.

While this legislation also delays the implementation of insurance market reforms and subsidies (when compared to the Senate Finance legislation) there are a number of provisions that would start helping Americans immediately. In particular, the legislation:

Provides $5 billion to enact a temporary insurance program for those who have been uninsured for several months and have a pre-existing condition. Financial assistance would be available for the purchase of such coverage until the exchanges (or new insurance marketplaces) are established.
Prohibits insurers from selling insurance products that have lifetime or annual caps on benefits and from rescinding coverage except in the case of fraud or misrepresentation.
Requires health insurance companies to report publicly the percentage of total premium revenue spent on patient care and quality versus administrative costs. Health insurance companies will be required to refund enrollees if costs not related to patient care exceed a certain threshold.
Establishes small business tax credits to help small employers afford coverage for their workers starting in 2011.
Extends dependent coverage to require all insurers to allow young adults to remain on their parents' insurance until the age of 26.

The fiscal picture of the legislation should also give moderates a lot to cheer about. CBO not only says the legislation would reduce the deficit by $130 billion over the next decade, but it also expects that:

Medicare spending under the bill would increase at an average annual rate of roughly 6 percent during the next two decades -- well below the roughly 8 percent annual growth rate of the past two decades...Adjusting for inflation, Medicare spending per beneficiary under the bill would increase at an average annual rate of roughly 2 percent during the next two decades -- much less than the roughly 4 percent annual growth rate of the past two decades.

In other words...curve benders rejoice!

COVERAGE: Accidental Costs of Being Uninsured in the USA

Allison Levy — Wed, 18 Nov 2009 21:05:00 -0500

Here is more evidence that the uninsured fare worse than the insured. Including trauma patients in the emergency room.

The AP's Carla Johnson reported on a troubling study published in Archives of Surgery, Downwardly Mobile: The Accidental Cost of Being Uninsured. She writes that "uninsured [adult] patients with traumatic injuries, such as car crashes, falls and gunshot wounds, were almost twice as likely to die in the hospital as similarly injured patients with health insurance."

Under a 1986 law known as EMTALA (Emergency Medical Treatment and Active Labor Law), anyone who shows up in an emergency room needing emergency treatment will receive treatment to stabilize him or her. That statute is intended to "prevent hospitals from rejecting patients, refusing to treat them, or transferring them to ‘charity hospitals' or ‘county hospitals' because they are unable to pay or are covered under Medicare or Medicaid."

Despite adjusting for race, gender and age, the researchers concluded that the uninsured still have an 80 percent greater chance of dying than those with insurance. Even in a setting where equitable treatment is mandated by federal law, the uninsured still experience significantly worse health care outcomes.

What gives?

The researchers offer several possible explanations for this glaring disparity:

Uninsured patients may experience treatment delay. (A separate study published in the Journal of Pediatric Orthopaedics demonstrates that children with private insurance receive more timely care than children with public insurance or no coverage at all.)
Uninsured trauma patients are less likely to be admitted to the hospital and receive fewer services during their admission when compared to insured trauma patients.
Institutions treating a higher proportion of uninsured patients may have fewer available resources.
Lower health literacy, and less ease and skill in communicating with ER physicians or other health care providers, may play a role. (In 2008, 88 percent of all uninsured adults in America did not have a college degree.)

"I'm really surprised," Dr. Eric Lavonas of the American College of Emergency Physicians and a doctor at Denver Health Medical Center told the AP, "It's well known that people without health insurance don't get the same quality of health care in this country, but I would have thought that this group of patients would be the least vulnerable."

This leads us to the "accidental" part of the disparity question.

The researchers do acknowledge the limits of their study and that some of their explanations for the gap are speculative. They note that "treatment is often initiated before payer status is recognized; thus, this provokes the question of whether differences exist in processes of care during the hospital stay." (Meaning not the first encounter with the ER but the ongoing care.)

But even in a setting where equitable care is "not only expected but mandated by law" and providers may be unaware of their patients' insurance status -- health outcomes of the uninsured are significantly worse. There must be some other explanation. Or might it just be an "accidental cost" of being uninsured in the United States?

"This is another drop in a sea of evidence that the uninsured fare much worse in their health in the United States," explains senior author Dr. Atul Gawande. As the study concludes, these unintended consequences that the uninsured pay may just be "too high to continue to overlook."

HEALTH REFORM: Passing the Baton

Paul Testa — Mon, 09 Nov 2009 19:39:00 -0500

The House's historic vote on Saturday feels almost like ancient history. By Monday, all eyes turned back to the Senate and the progress of the merged legislation being shepherded by Majority Leader Harry Reid.

H.R. 3962 passed by a margin of 220-215 with 39 Democrats voting against the bill and one Republican representative crossing party lines. (The New York Times has a great graphic illustrating the politics of this vote.) Speaking from the White House Rose Garden on Sunday, President Obama thanked lawmakers for their "courageous vote," and called on the Senate "to take the baton and bring this effort to the finish line on behalf of the American people."

The relay is being held up, however, as Reid waits for the CBO to return scores of the various proposals and options he submitted. Estimates are expected to be released by the end of this week, and merged legislation could be released soon after. Still the Senate is not expected to begin debating the legislation until after Thanksgiving, giving Congress essentially four weeks to try and meet President Obama's goal of signing health reform legislation into law before year's end.

It will be a sprint to say the least. You know our stance on the issue, and the White House, too, is stepping up its pressure to not let this slip into 2010.

At the very minimum, it currently seems Reid will try to pass legislation through the Senate before Christmas.That leaves open the option for conferees to work on merging the House and Senate Bills over the holiday recess and clear the way for a vote on final passage early in January.

In addition to the simple logistics of moving historic legislation through the historically slow moving Senate, Kaiser Health News, Slate, and the Wall Street Journal all give a good lay of the land, and here's our quick overview of some of the biggest issues going forward:

Affordability and Costs: The House is more generous in it's subsidies than the Senate Finance Bill. Splitting the difference requires tough tradeoffs between expanding affordable coverage to all Americans and keeping the total costs of the bill in line. Both bills subsidize coverage up to 400 percent of poverty, but the Senate Finance bill does so at a less generous rate. According to the CBO estimates, the House bill comes in just over a $1 trillion dollars over 10 years while the Senate finance bill weighs in at $821 billion.
Coverage: The House bill will decrease the number of uninsured by 36 million over ten years -- compared to the 29 million in the Senate Finance legislation. The House bill accomplishes this with more generous subsidies, a higher Medicaid eligibility rate, and stronger individual and employer mandates -- meaning there will be plenty of details to be worked out in conference.
The Public Plan: Speaker of the House Nancy Pelosi (D-CA) couldn't get the votes to pass a robust public plan with rates tied to Medicare and settled for a public health insurance option that would negotiate rates directly with providers. Reid faces trouble getting moderate Senate Democrats to pass a similar plan, even with the proposal to allow state opt-outs.
Financing: Pay-fors are never pretty. The House added a tax on bio fuels in the Managers Amendment after one of the bill's funding mechanisms was used by the Senate in legislation to extend unemployment insurance. One of the biggest challenges going forward will be melding the financing mechanisms of the House and Senate legislation: the House raises some $461 billion through a 5.4 percent surtax on individuals earning more than $500,000 and couples earning more than $1 million. The Senate is no fan of this revenue source -- particularly because it's not indexed to inflation. The House is equally unhappy with the Senate Finance Committee's proposed 40 percent excise tax on high value plans -- which they worry will hit organized labor. Despite the divisions, there's probably room for compromise -- maybe by raising the thresholds on each, and indexing the surtax to inflation and/or lowering the rate.
Politics: If pay-fors aren't pretty, politics are even uglier. The abortion debate may not be as intense in the Senate, but it is far from over and will likely come back in conference if not earlier. Other potential wild cards that could derail the debate include immigration and the questions surrounding a certain independent Senator from a small northeastern state. (Not Bernie Sanders)

COST: Can Health Reform Heal the Federal Budget

Paul Testa — Fri, 06 Nov 2009 16:58:00 -0500

Can health reform heal our federal budget? Yes, but whatever passes now is just the beginning, and there will always be room for improvement.

That's our takeaway from an excellent event we tweeted this morning hosted by the US Budget Watch, a joint project between the Committee for a Responsible Federal Budget and The Pew Charitable Trusts.

There was a lot of ground covered by a panel of experts moderated by the Washington Post's Ceci Connolly and featuring New America's director of health policy Len Nichols. They tackled everything from raising Medicaid eligibility rates to fixing the Sustainable Growth Rate formula in a fiscally responsible way. But for now, we'll just give you the highlights of the discussion.

What impressed us the most was how little question there was about whether health reform will be paid for. Sure, James Capretta of the Ethics and Public Policy Center questioned the accounting of the bills and Donald Marron from the Georgetown School of Public Policy wondered if we're using some pay-fors for health reform that should be used elsewhere. For example, the savings from Medicare Advantage could be used to permanently fix the SGR. But all of the panelists agreed that if passed, health reform one way or another will be paid for and that, as Paul Van de Water of the Center for Budget Policies and Priorities says, is a big accomplishment.

The real discussion focused on whether health reform will actually bend the cost curve. Van de Water was quick to list many provisions such as the excise tax, accountable care organizations, medical homes, and bundled payments that have the potential to revolutionize care. Still, Marron and Capretta were skeptical of the real impact of these provisions -- whether cuts would be made and savings realized. During the Q&A, one questioner asked a similar question about how scalable these reforms were and whether best practices could really be universalized using Medicare as a leader. Len replied that past changes in Medicare such as prospective payment and DRGs had dramatic effects -- for example, reducing inpatient stays by two days without lowering the quality of care. The challenge, of course, was taking these principles (which are sort of a form of bundled payments within hospitals) and applying them across the system to promote better and more coordinated care.

Finally, on the question of predictions, AARP's John Rother believes that there will be a signing ceremony in the Rose Garden -- he just doesn't know when and what they'll be signing. He noted that in talking about a federal budget, it is important not to lose sight of costs in the context of households and the system as a whole. The key, Len said, is that the legislation must make a credible commitment to changing business as usual and moving us toward a system that rewards high-value care. He noted that when President Obama pledged to be the last president to take on health care, what he really meant was that he would be the last to discuss "whether." There will still be plenty left to do after reform passes, which Ceci Connolly noted, enhances the prospects for full employment for wonks like us.

COST: The $64,000 Question (Make that the $6.4 Trillion Question)

Joanne Kenen — Wed, 04 Nov 2009 16:59:00 -0500

Ceci Connolly at the Washington Post asks the $64,000 question -- or maybe it's more of a $6.4 trillion question. Do the House and Senate health care bills go far enough in reshaping how we deliver health care so that we can control rising costs?

A lot of experts, she notes, see the approach as too timid by far.

"The bills are directionally correct, but they're not going far enough," said George Halvorson, chairman and chief executive of Kaiser Permanente and the author of "Health Care Will Not Reform Itself."

You've heard it before: we need to move away from fragmented fee-for-service care that rewards quantity over quality. Instead we need to encourage a more coordinated or integrated care system that pays hospitals and doctors for doing better and begins to shift the system away from acute care and more toward chronic diseases. (And chronic diseases nowadays include a lot of diseases we used to think of as more acute conditions but which we may live with for years, such as cancer and some heart-related conditions.) Different experts have different pet phrases for this new vision -- performance based medicine or value based purchasing or multispecialty integrated care -- but the general thrust is the same. Quality and efficiency versus quantity and cost chaos. As Ceci put it:

Under that vision, providers would be given a few years to move to performance-based medicine, in which fees and results are published, money is directed to evidence-based therapies, and harmful errors such as preventable infections are reduced. In short, the goal is to save money by modernizing and improving.

But most of the folks she quotes (OMB chief Peter Orszag is the exception) see the health reform bill as too many half-measures. That's partly for political reasons; you may have noticed that it is hard to get 60 Democratic senators and at least 218 Democratic House members to agree on specifics, especially if they may be disruptive (or even just confusing) to one constituency or another. And, in fairness, while we can point to innovators who are already moving toward these kind of delivery systems, we don't know exactly how all these new systems will work en masse in the real world meaning that the CBO is reluctant to attribute the savings that many experts believe are possible or even probable. Examples she cites:

A Senate plan to tax high-priced insurance policies saves far less money -- and is less likely to change medical consumption -- than eliminating the tax exemption for employer-sponsored coverage.

Proposals on comparative-effectiveness research and a new Medicare cost-cutting commission have been watered down.

An array of Medicare pilot projects aimed at paying doctors and hospitals for quality rather than quantity would take years to be implemented nationally -- if they ever were.

None of the bills addresses medical liability, even though the Congressional Budget Office has concluded that tort reform could save $54 billion over the next decade. (NOTE from us: Section 2531 of the House bill does include a grant program to states working on medical liability alternatives. Senate Finance just had a nonbinding and no-money down "sense of the Senate.")

Most of the savings do come from changes in payment to programs like Medicare advantage, or more drug rebates from Medicaid. They save money, but they don't transform the system.

White House budget chief Peter Orszag is still reasonably chipper about the whole thing. Orszag after all has been highly influential in broadening the reform dialogue to include delivery system change, to make people understand the whole 'less can be more' aspect of health reform. (MedPAC too has had a key role alhough it gets less publicity). He told the Post that he remains pretty optimistic that a set of Medicare pilot projects could dramatically reshape the U.S. medical practice. That includes assorted payment changes aimed at reducing things like hospital acquired infections and unnecessary readmissions, as well as encouraging medical homes, accountable care organizations and other new forms of delivering care.

"There's always the potential to do more," he was quoted as saying. "When you look at the details in the legislation, it is a substantial step, especially within the realm of the politically viable and realistic, as opposed to a think tank or academic ideal."

HEALTH REFORM: Medical Loss Ratio or Just Medical Loss?

Allison Levy — Tue, 03 Nov 2009 21:28:00 -0500

(We are refiling this post to make the paragraph about the SEC a little clearer for our readers.)

"The American people and I are asking a serious question and one that deserves a straight answer -- why are health insurance costs going up each year?" Sen. Jay Rockefeller (D-WV) questioned in a letter (part 1 and part 2) to H. Edward Hanway, the CEO of CIGNA, yesterday. "Are they spending it to make people well when they are sick and keep them healthy? Or is the money they charge going to profits, to executive salaries, and to figuring out how to deny care to people when they really need it?"

Sen. Rockefeller explains:

One of the basic financial measures used in the health care industry is the percentage of health insurance premiums that insurers use to provide health care to their customers. This percentage is commonly known as the "medical loss ratio." For example, if an insurer uses 75 cents out of every premium dollar to pays its customers' medical claims, the company has a medical loss ratio of 75 percent. A medical loss ratio of 75 percent indicates that the insurer is using the remaining 25 cents of each premium dollar to pay expenses that do not directly benefit policyholders, such as salaries, administrative costs, advertising, agent commissions, and profits.

(Ezra Klein of the Washington Post notes that the "industry literally has a term for how much money it ‘loses' paying for health care.")

While the health insurance industry says its average medical loss ratio is 87 percent, a new analysis released by the Senate suggests otherwise.

Back in August, Rockefeller wrote to insurance companies, asking them to reveal their medical loss ratios "broken down by state and by the individual, small, and large group market segments." The goal was to be able to provide valuable information to individuals and companies who are shopping around for health insurance policies. Sen. Rockefeller writes that, "Just as a car buyer might use gas mileage to choose one car model over another, medical loss ratios are a tool that can help consumers compare various health insurance options."

The insurance giants argued that medical loss information is "proprietary" and "business sensitive." So Rockefeller asked the Senate Commerce Committee to investigate. The committee concluded, by examining premium and claims data reported to the National Association of Insurance Commissioners, that the medical loss ratio is significantly lower than the industry would have them believe.

Reed Abelson of the New York Times reports that in 2008, the for-profit average medical loss ratio was 84 percent in policies offered to large employers and 80 percent in policies offered to small businesses. In the individual market, there was an average medical loss ratio of 74 percent. Rockefeller specifically accuses CIGNA of breaking the law and inaccurately reporting information to the NAIC -- they had claimed a medical loss ratio of 93 percent.

The Senate analysis shows that the health insurance industry "provided one set of premium-benefit numbers to the public and to Congress, and presented a different one to their investors." The letter says that America's Health Insurance Plans' (AHIP) claim that the industry spends 87 cents of every premium dollar on medical care was part of an "expensive public relations effort." The publicly-traded health insurers' own financial reporting to the Securities and Exchange Commission does not come close to supporting the figure -- see page 7 of the letter to CIGNA for the individual breakdown.

The Commerce Committee revealed that the "largest for-profit insurance companies appear to be squeezing more profits for Wall Street investors by spending a lower percentage of premium dollars on patient care than other insurers." Wendell Potter, a former CIGNA senior executive, in testimony to the Commerce Committee said:

Wall Street investors and analysts look for two key figures: earnings per share and the medical loss ratio...To win the favor of powerful analysts, for-profit insurers must prove that they made more money during the previous quarter than a year earlier and that the portion of the premium going to medical costs is falling. Even very profitable companies can see sharp declines in stock prices moments after admitting they've failed to trim costs. I have seen one insurer's stock price fall 20 percent or more in a single day after executives disclosed that the company had to spend a slightly higher percentage of premiums on medical claims during the quarter than it did during a previous period. The smoking gun was the company's first-quarter medical loss ratio, which had increased from 77.9 percent to 79.4 percent a year later.

Health reform promises to extend coverage to millions more Americans, but as Rockefeller maintains, it is important that these dollars (billions of which will come from new government subsidies for low income and middle income people to get insured) actually go toward paying for medical care. We can debate the best way to lower our health care costs, but making sure that the dollars we do spend on health care actually get spent on taking care of the ill and keeping everyone else healthy is a good place to start.