Is Charter Oak a Health Care Success?

The governor’s Charter Oak health care plan (remember that?) turned a year old last week, and the governor has been touting the plan’s enrollment. In a release, Rell’s office said that over 10,000 people had already enrolled, with another 5,000 set to become part of the program. The plan provides coverage to anyone who applies, even people with pre-existing conditions, as long as the person has had no health insurance for six months.

So is this a success story? Is Charter Oak a model for what a quasi-public option could look like at the federal level?

Christine Stuart gathered some statistics for her story, including the following:

Community Health Network of CT (CHNCT) reports paying claims for 3,707 inpatient services, 16,392 outpatient services, 15,318 medical/office services and 28,921 other (lab, durable medical equipment, home care, etc.) over the past year.
[…]
Aetna Better Health reports a medical expenses breakdown of about 31% for hospital outpatient; 27% for hospital inpatient; including chemotherapy and dialysis; 27% for physician services; and 15% for other practitioner. The plan reports that about 67% of its members have already accessed health care services.
 
·AmeriChoice by UnitedHealthcare, as an example of access to services, reports paying 182 claims so far for dialysis treatment and other services for one enrollee’s care since January. (Stuart)

The bottom line seems to be that people have enrolled in the program for a reasonable cost, have access to health care, and are receiving that care.

What do you think about Charter Oak so far? Does anyone here use the program, or know someone who uses it? It seems to have flown below the radar for most people in the state.

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39 responses to “Is Charter Oak a Health Care Success?

  1. How much did the program collect in premiums? How much did it pay out? How much did it cost to administer the program?

  2. How satisfied are the recipients?

  3. AndersonScooper

    Moreover, how much taxpayer $$$ was wasted in the marketing of Governor Rell’s bullshit healthplan? (yeah, major medical has always existed, and getting established providers to re-issue it, under the “Charter Oak” brand is little more than a house of cards).

    Genghis, Charter Oak was debunked when it first debuted. Can you link to the original threads, which contained plenty of details?

    My guess is that the surge in enrollment is tied to increased marketing to parents of college students and recent graduates.

  4. Thomas Hooker

    Lots of unanswered questions about Charter Oak after reading the article. First, how is it that there are more doctors signed up for the program than there are patients? And how is it that Charter Oak demands that the uninsured pay insurance premiums when they are- well, unemployed? Only 10,000 signed up a year into the program? That means barely 3% of all the uninsured in the state as of 2007. And given that the unemployed number roughly 100,000, not counting their dependents, it seems that the program is insignificant compared with the need.

    More questions: why are well over half of all applicants denied coverage? And why are a quarter of all those approved (and still in the state) not signed up? Is it too expensive? And what is happening to those denied coverage? Are they just going to emergency rooms and getting the most expensive medical treatment that the insured have to pay for? If so, should we be opening up the program to far more people?

    Furthermore, Aetna reported in its Q2 financial returns that it spent less than 70% of its revenues on actual health care (“medical expenses”). What percentage of the insurance premiums and state subsidies that these private insurance companies receive is siphoned off for admin and profits?

    Is the number of applicants approved going up, or levelling off, or going down? Given how many long-term unemployed there are and the rise in unemployment, if Charter Oak isn’t seeing a major rise in enrollees, then something is wrong with the program.

    Let’s hope that Christine does some more investigative reporting (goodness knows that no one else will!!).

  5. Furthermore, Aetna reported in its Q2 financial returns that it spent less than 70% of its revenues on actual health care (”medical expenses”). What percentage of the insurance premiums and state subsidies that these private insurance companies receive is siphoned off for admin and profits?

    In its second quarter 10Q filing, Aetna reported $8.67 billion in revenue and $6.10 billion in health care costs, so the amount spent on health care divided by TOTAL revenues is just over 70%.

    However, it’s also sort of irrelevant to take Aetna’s healthcare expense and divide by TOTAL revenues, since Aetna has other lines of business. On the healthcare side, it had revenues of $7.03 billion, and on the healthcare costs, it had $6.10 billion, so its actually paid out about 87% of what it took in.

    Other revenues that Aetna collected included other premiums (presumably for life insurance), investment income from its existing cash balances, and other lines of business like dental insurance.

    Overall, Aetna’s pre-tax profits were $515.4 million, or about 5.9% of total revenues. General and administrative expenses were $1.16 billion, or about 13.4% of total revenues.

    So dividing healthcare expenses by total revenues is not meaningful: divide healthcare expenses by healthcare revenues.

  6. Thomas Hooker

    In its second quarter 10Q filing, Aetna reported $8.67 billion in revenue and $6.10 billion in health care costs, so the amount spent on health care divided by TOTAL revenues is just over 70%.

    However, it’s also sort of irrelevant to take Aetna’s healthcare expense and divide by TOTAL revenues, since Aetna has other lines of business. On the healthcare side, it had revenues of $7.03 billion, and on the healthcare costs, it had $6.10 billion, so its actually paid out about 87% of what it took in.

    Other revenues that Aetna collected included other premiums (presumably for life insurance), investment income from its existing cash balances, and other lines of business like dental insurance.

    You could be right. I didn’t look that carefully. But it is the case that for-profit private health insurance companies do pay just under 70% of premiums received on actual medical expenses, or medicare care from the subscribers’ point of view.

    Overall, Aetna’s pre-tax profits were $515.4 million, or about 5.9% of total revenues. General and administrative expenses were $1.16 billion, or about 13.4% of total revenues.

    I will point out that even the pre-tax profit of just under 6%, which is after admin expenses, is triple the entire overhead at Medicare. I will also point out Christine’s recent post that the three entities supplying HUSKY care admitted overcharging the state $40 million on $800 million in revenues received. So that overcharge was 5% of payments. It doesn’t tell us how much more was siphoned off into non-health care expenses.

    The real question is why we need for-profit insurance in the first place. We don’t have a for-profit military, or a for-profit police force anywhere, most American students are educated in government-run schools, our nation’s aviation safety is supervised by a government agency. In short, what is a for-profit health insurance company’s value-added? In no other developed country anywhere in the world is health insurance based on a for-profit model. Given that satisfaction among Medicare recipients is higher than for those on for-profit insurance, clearly it works well here as well as the rest of the world.

  7. , is triple the entire overhead at Medicare.

    Doubtful, more likely a case of creative accounting.

    Besides, have you ever dealt with them?

  8. I will point out that even the pre-tax profit of just under 6%, which is after admin expenses, is triple the entire overhead at Medicare. I will also point out Christine’s recent post that the three entities supplying HUSKY care admitted overcharging the state $40 million on $800 million in revenues received. So that overcharge was 5% of payments. It doesn’t tell us how much more was siphoned off into non-health care expenses.

    Aetna’s pre-tax profits were $515.4 million, but over half of this, $272 million, was from investment and capital gains income, not directly from the insurance business (although some of this was obviously earned from the float of premiums before benefits paid out).

    Believe me, companies don’t want high administrative expenses. Unlike benefits, no one cares if they cut their admin expenses, and any cuts to admin expenses go straight to the bottom line. A lot of it is to comply with regulations, and a lot is to combat fraud.

    The real question is why we need for-profit insurance in the first place. We don’t have a for-profit military, or a for-profit police force anywhere, most American students are educated in government-run schools, our nation’s aviation safety is supervised by a government agency. In short, what is a for-profit health insurance company’s value-added? In no other developed country anywhere in the world is health insurance based on a for-profit model. Given that satisfaction among Medicare recipients is higher than for those on for-profit insurance, clearly it works well here as well as the rest of the world.

    If health insurance should be centrally run by the government, then why shouldn’t food distribution? After all, food is more important than health care. Or housing?

    The value-add is the same as for automobile and life and homeowner’s insurance: to assess risk, and to mitigate the risk of a catastrophic event. At least, that was the original intent, before health insurance sort of morphed into what we have today, like paying for routine dental cleanings. However, there are significant regulations that prevent companies from offering scaled down policies: in Connecticut, for example, health insurance must cover hair transplants and fertilization. All these added mandated benefits increase costs.

  9. David Dearborn

    From CT DSS: The Comptroller’s HUSKY rate-setting review mentioned by Christine was subject of strong disagreement between the Comptroller’s actuarial consultant and the Department of Social Services’ actuarial consultant. The Governor’s supplemental budget recommendation in May effectively superseded the dispute by recommending a reduction in HUSKY capitation rates of 6%, citing the Comptroller’s draft report.

    Since August 2008, Charter Oak has been available to working and non-working uninsured residents from age 19 through 64. It’s noteworthy that the program is open to applicants with pre-existing medical conditions. The same premium rates also apply to applicants with pre-existing conditions, another distinguishing factor of Charter Oak.

    The Governor proposed Charter Oak and the legislature approved it during the 2007 session. The program operates under statute and rules, which include the reduced-price premium structure for applicants earning under 300% of the federal poverty level. The unsubsidized premium level is currently $259 monthly.

    Denials of Charter Oak applications are normally due to applicants already having health insurance and not qualifying for exceptions to the statutory waiting period. These exceptions to the waiting period include loss of employment, loss of health coverage, losing HUSKY coverage due to income or age, and financial hardship in paying current health coverage.

    Charter Oak was created and approved as part of Connecticut’s public policy as an option for Connecticut’s uninsured that shares cost between enrollees and taxpayers. In the current fiscal environment, it is hard to imagine a viable alternative in the budget right now, especially one that includes people with pre-existing health conditions. Charter Oak’s enrollment is 10,200+ and growing, and available to Connecticut’s uninsured right now.

    Prospective applicants can call 1-877-77CTOAK or visit http://www.charteroakhealthplan.com to apply.

  10. AndersonScooper

    Dear Mr. Dearborn,

    Can you tell us how much was spent last year marketing the Charter Oak brand?

    My understanding is that it was the second biggest expense to the healthcare itself.

    Thanks for being so transparent!

  11. The real question is why we need for-profit insurance in the first place. We don’t have a for-profit military, or a for-profit police force anywhere, most American students are educated in government-run schools, our nation’s aviation safety is supervised by a government agency. In short, what is a for-profit health insurance company’s value-added? In no other developed country anywhere in the world is health insurance based on a for-profit model. Given that satisfaction among Medicare recipients is higher than for those on for-profit insurance, clearly it works well here as well as the rest of the world.

    Thomas, in a Time magazine poll, 86% of Americans reported that they are satisfied with their health insurance. Do you think that Medicare’s level of satisfaction is that high?

    Also, I’m glad to see that you’ve stopped peddling your “VA health care is better than private health care, don’t worry!” garbage. As a veteran, I know literally thousands of other veterans, and I don’t know a single one who would willingly give up their health insurance for VA care. (I must be just a mere anecdote, however.) Nothing against VA doctors or nurses — it’s just not as good as private health care, no matter what you say.

  12. Thomas, in a Time magazine poll, 86% of Americans reported that they are satisfied with their health insurance. Do you think that Medicare’s level of satisfaction is that high?

    Medicare has a higher level of patient satisfaction than private insurance.

    Plus, more Medicare customers say they always get the care they need (70%) than private insurance customers (51%).

  13. Medicare has a higher level of patient satisfaction than private insurance.

    According to that study.

    Of course, you guys are overlooking the teeny tiny fact that when someone can’t afford any other kind of health insurance, then the free kind is the best! This applies to just about any VA or Medicare study you read. Try as you might, it’s not apples-to-apples.

    I said before, I’ve never met a veteran who could afford private health care, but would willingly drop it in favor of VA health care. That’s the comparison that needs to be made, and that National Journal study isn’t remotely close to answering the question (probably because everyone knows the answer).

  14. According to that study.

    We’re talking about a sample size of over 490,000 respondents.

    that National Journal study isn’t remotely close to answering the question (probably because everyone knows the answer).

    You don’t know what “that National Journal study” answers, because if you had read the article, you would know that the National Journal didn’t conduct a study.

    Jack, you obviously have the answer you want, and refuse to expose yourself to facts that contradict your predetermined position. That’s your right, of course, but pretending otherwise is dishonest and unworthy of someone who purports to be a veteran.

  15. Thomas Hooker

    Doubtful, more likely a case of creative accounting.

    No, that is established and well reported fact. Indeed, Canada’s single-payer insurance system has total overhead of just over 1% of revenue. And it is also well known that private sector insurance companies do indeed retain over 30% of health insurance premiums in overhead. Contrary to the assertion that they want to keep admin down, in fact, for-profit insurance companies use a great deal of overhead in order to identify those individuals who might get sick and need care, and then exclude them.

    Besides, have you ever dealt with (Medicare)?

    No, but both of my parents were on Medicare, one for over ten years, and the other for almost 20 years. And Medicare worked fine. What didn’t work, however, was Medicare Part D. It was a disaster. The plans were so complicated that no one could actually pick out a plan for my dad that was appropriate. None of the formularies in any plan actually matched up with his requirements. Furthermore, when Part D began, my father’s company, which had been supplying him with a drug plan for retirees, cancelled it. But because he wasn’t all there, he didn’t realize it, missed the enrollment period, and for a year had to pay entirely out of pocket. It is horribly complicated, pays unnecessary subsidies to private companies, and penalizes seniors who are struggling with memory problems as well.

    It’s horrible, unlike Medicare itself, which has worked beautifully for 44 years, covering every single American senior without regard to income or health. Do you see any seniors rebelling against Medicare? Of course not.

  16. Thomas Hooker

    Of course, you guys are overlooking the teeny tiny fact that when someone can’t afford any other kind of health insurance, then the free kind is the best! This applies to just about any VA or Medicare study you read. Try as you might, it’s not apples-to-apples.

    It’s not for the poor, but for every single American citizen aged 65 and over. And everyone on Medicare can see whichever doctor they want, go to whichever hospital they want, and Medicare insurance is accepted everywhere in the country. It’s not inferior in any way.

  17. Thomas Hooker

    Thomas, in a Time magazine poll, 86% of Americans reported that they are satisfied with their health insurance.

    But 15% of Americans don’t have health insurance. And less than three in five Americans get their health insurance from their employer now, and that figure has been dropping by 14,000 every day since 2008. Actually, some 30% of all Americans who have health insurance receive it from a government entity: either the VA or active duty military, Medicare, or Medicaid. And over the past ten years, Americans on private insurance have actually dropped, while Americans with government-supplied health care have risen by 13 million. That is the picture of a private for-profit health care system that is not working.

    Let me repeat that figure: the number of Americans receiving employer-based health insurance actually fell over the past ten years, and since the beginning of 2008, it’s been conservatively estimated that 14,000 Americans have been losing their employer-based health care every single day.

    So that 86% of Americans who are “satisfied” with their health care includes a very large percentage who receive that health care from Medicare, Medicaid, the VA and active duty military, and those are the only health plans that have actually added patients over the past ten years (US Census Bureau data released in June 2009 and available at its website).

  18. Thomas Hooker

    Charter Oak was created and approved as part of Connecticut’s public policy as an option for Connecticut’s uninsured that shares cost between enrollees and taxpayers. In the current fiscal environment, it is hard to imagine a viable alternative in the budget right now, especially one that includes people with pre-existing health conditions. Charter Oak’s enrollment is 10,200+ and growing, and available to Connecticut’s uninsured right now.

    Mr. Dearborn, could you tell us what connection you have to Charter Oak? Are you an employee of an insurance company?

    Perhaps you could explain why so few people have been signed up: 10,200 is a tiny number compared with the total uninsured in this state. And could you explain the rationale for requiring patients on Charter Oak, who are unemployed by definition, to pay hundreds of dollars for insurance premiums, hundreds of dollars that they don’t have? When so many people are struggling to pay their mortgages, why are they required to pay so much for health care as well?

    Also, since you seem to have access to financial information, could you tell us what percentage of the premiums collected by the three insurance companies running the program is actually paid out in medical expenses?

  19. Thomas Hooker

    If health insurance should be centrally run by the government, then why shouldn’t food distribution? After all, food is more important than health care. Or housing?

    Food distribution is relatively simple and cheap. Most people have enough to eat, and those who don’t are subsidized. Check out the state’s department of education website and you will see the percentages of children in each school system who receive subsidized lunches. We also have food stamps.

    But health care is far more expensive and complicated. It’s relatively easy for most people to pay $4 for a McDonald’s meal and survive. But if they have heart disease, without major treatment, they might die. That’s the difference.

    Every other country in the developed world has government-based health care that works for ALL of their people. And they live longer, they never fear going bankrupt and being thrown out of their homes due to medical expenses. It’s just like Medicare, which we’ve had for nearly half a century. Why are people so afraid of government health care when every American has gone on Medicare since 1965? And why fear “pulling the plug on grandma”, when we’ve been protecting everyone’s grandma with Medicare for 44 years?

    That’s the irrational crazy part of the “debate”.

  20. Thomas, in a Time magazine poll, 86% of Americans reported that they are satisfied with their health insurance. Do you think that Medicare’s level of satisfaction is that high?

    Ok Jack Dobb. Anyone that reads the entire time poll would say you took those figures completely out of context.

    No one reading the article from Time would come to the conclusion that people don’t want reform.

    Partisan fights and spin are one thing but your comments are poster child stuff for ‘people desperately opposing Obamacare’

    .http://www.time.com/time/politics/article/0,8599,1913426,00.html

  21. Aetna’s pre-tax profits were $515.4 million, but over half of this, $272 million, was from investment and capital gains income, not directly from the insurance business (although some of this was obviously earned from the float of premiums before benefits paid out).

    Like General Motors, many insurance companies make their real money on the cash flow through investments, asset appreciation, and tax breaks.

    It’s almost impossible from public Income Statements to judge how efficiently these companies use and leverage capital. One thing is certain. Government won’t use and leverage the capital anywhere near as efficiently. We’ll never see a study that fully reports the costs to the economy of moving that capital into the public arena from the private.

    Administrative costs are not really comparable given the way private management operates versus public. A comprehensive Internal Rate of Return on capital would be needed.

    I support a public option but that doesn’t mean I’m blinded to the fact there will be significant displacements in the economy(much of it unseen) if the public option becomes the preferred option and that capital lies fallow or is treated in the way SS and Medicare funds are now.

  22. Let me repeat that figure: the number of Americans receiving employer-based health insurance actually fell over the past ten years, and since the beginning of 2008, it’s been conservatively estimated that 14,000 Americans have been losing their employer-based health care every single day.

    Thomas, why should health insurance be linked to employment at all?

    No one reading the article from Time would come to the conclusion that people don’t want reform.

    I didn’t cite it to argue that people don’t want reform. We should have “reform” — but there’s no compelling reason why the government should expand its foray into the insurance business. That other countries do it isn’t good enough: we’re better than they are.

  23. Thomas Hooker

    Thomas, why should health insurance be linked to employment at all?

    A very good question, Mr. Dobb. Permit me to summarize a longer history of health care’s development in America from Jonathan Cohn’s 2007 book “Sick”, from HarperCollins Publishers (not to be confused with Michael Moore’s film “Sicko”. Mr. Cohn is a senior editor at The New Republic and a researcher on the health care industry).

    Mr. Cohn points out that during the 1930’s, though individual doctors opposed any governmental interference in the way they practiced medicine, the Great Depression had made times financially parlous for hospitals, when “the average cost of a week in the hospital began to exceed what the majority of Americans earned in a month, making illness a scary financial proposition for even the thriftiest middle-class households- and forcing many people to skip medical care altogether.” In 1929 Baylor Hospital in Texas, just days away from insolvency, fixed on a scheme: it offered health care for up to 20 days at its facility to any teacher who agreed to pay 50 cents monthly. That staved off bankruptcy, and the idea began to spread to other hospitals. In 1934 the nation’s first “multihospital insurance plan”, Blue Cross, began in St. Paul,Minnesota. Blue Cross plans were originally coops, and not for-profit. But for-profit insurance companies soon got into the business, offering plans to big corporations and groups that were seen as likely to have lower health requirements.

    As Cohn points out, the federal government encouraged the growth of such employer-based insurance plans during WW II when it exempted those fringe benefits from outside wage controls, which encouraged employers to offer more generous health insurance, something they were eager to do in that very tight labor market with so many men in the military. Then the government exempted those benefits from income tax, also increasing the demand. As Cohn writes, “linking insurance to employment meant that businesses were, in effect, becoming responsible for their employees’ well-being.” But since the economy was booming, and health care needs were low, it wasn’t a burden to the economy.

    When Harry Truman campaigned for universal health care coverage in the 1940’s, many unions declined to support him, because they had won good health coverage through collective bargaining, and most Americans in big (and fast growing) companies were being covered by their employers, so support wasn’t that strong. And by 1980, he points out, most major employers offered good health care coverage. But then things began to change.

    With competition from abroad, large corporations began to be pressed and cut their workforces, resulting in more people working for smaller companies which, needing to keep costs low, frequently did not offer health insurance, or offered far skimpier benefits. Health care costs were rising as the population aged and their requirements for treatment rose. A change in FASB accounting requirements dictated that corporations needed to account more realistically for their future health care costs, a move that cut into current earnings and made managements less inclined to maintain good health coverage. By 2005 less than half of major employer Wal-Mart’s workforce had company-supplied health insurance, and in 2004 General Motors reported that health care costs added $1,400 to the cost of each automobile it produced. As GM continued to slide, its output declined, and the number of employees fell, the company continued to have to pay the health care costs for its under-65 retirees and the workers it had laid off, further damaging its profitability and international competitiveness. Had there been national universal health care with Medicare-like government insurance available to all Americans, that slow-motion health care bomb would not have detonated over GM. Certainly its overseas competitors like Toyota and Nissan in Japan and Hyundai in South Korea enjoyed low-cost national health insurance and weren’t saddled with direct costs as were American producers.

    The other factor that Cohn points to as eventually leading to the current health coverage crisis was the insurance companies’ practice of weeding out people and groups that were likely to get sick and require higher health care. They liked covering employees in big corporations who were generally younger and healthier than the general population. And they moved away from the practice of Blue Cross coops’ of “community pricing” that spread costs across large groups of people, smoothing the costs for the sick by charging the young and healthy.

    In short, our for-profit employer-based system of health care worked well when the population was relatively young and healthy and when major corporations were big employers and those corporations were growing robustly. But with international competition, with employment growth coming much more from smaller corporations that can’t offer the same benefits, and with an aging population that requires more health care than in decades past, it is all coming undone.

    That is why employer-based health coverage has declined over the past decade while the population has risen. And that is why it is finally time to offer every American government-run health insurance like Medicare, which works so well and has worked well for nearly half a century.

    Businesses cannot maintain employer-based health insurance anymore. It bankrupted GM, and it’s bankrupting the economy. It’s time for a change.

  24. David Dearborn

    Perhaps you could explain why so few people have been signed up: 10,200 is a tiny number compared with the total uninsured in this state. And could you explain the rationale for requiring patients on Charter Oak, who are unemployed by definition, to pay hundreds of dollars for insurance premiums, hundreds of dollars that they don’t have? When so many people are struggling to pay their mortgages, why are they required to pay so much for health care as well?

    From CT DSS: Responding to Thomas Hooker (full post from 8/18 @ 10:48 p.m.) , my connection to Charter Oak is as a state employee at the Department of Social Services, administering agency for the program. As communications director, I was contacted by Christine Stuart for her ctnewsjunkie.com piece, which Genghis picked up on for his coverage. I am new at posting and my only intention is to provide straight-down-the-middle public information about the program. I’m a 24-year state employee and, by way of full disclosure, I took a leave of absence from the civil service in 2005-06 to serve in Governor Rell’s communications office. I was involved in the program development of Charter Oak in both the Governor’s Office and Department of Social Services. So Charter Oak — and HUSKY (which I have worked on since 1997) are near and dear to my heart as I see every day the positive effects both programs have on people throughout the state. My office also assists the public directly with information & referral, customer service, and trouble-shooting for individual applicants and enrollees, in support of Charter Oak and HUSKY.

    With that out of the way, I’ll try to address your specific question on cost to Charter Oak enrollees. The program was proposed by the Governor and approved by the legislature in 2007 as a pragmatic approach to the problem of uninsured adults in Connecticut. It was not created as an entitlement program with free coverage, like Medicaid/HUSKY A, but rather a jointly-funded program (public funding and enrollee cost-sharing) that would offer affordable, credible coverage, including no impediment to people with pre-existing medical conditions (an absolutely critical point). The program was set up to offer taxpayer-subsidized, reduced premiums to enrollees earning under 300% of the federal poverty level. These premiums currently range from $75 to $200 monthly. The unsubsidized premium is currently $259 monthly.

    I think your point is well-taken. Some of our unemployed (especially a single person with no other household income) will have a hard time with the premium cost of any health coverage. Some of our working citizens, in fact, elect to stretch their dollars on other priorities besides health coverage and may come on and off the program. However, most familiar with the cost of health coverage in general will affirm that Charter Oak cost is reasonable, compared to other alternatives like COBRA and an individual, private policy. I’ve spoken to newly-unemployed people who look at Charter Oak as a Godsend, because they have nowhere else to turn and cannot possibly afford COBRA. Also to your point, the State of Connecticut is not in the position in this fiscal environment to boost its share of the cost of the program, from my observation. Looking around the country, I think the very fact that Connecticut offers a voluntary program like Charter Oak is absolutely remarkable–most other states don’t. In most other states, there is no alternative that strives to bridge the age gap between services like HUSKY for children and eligible parents and Medicare for elders and people with disabilities.

    Before Charter Oak, if you were a childless, non-pregnant adult under 65 in Connecticut, you either have to be single/unemployable/extremely poor to qualify for State-Administered General Assistance or have a disability to qualify for Medicaid to have access to affordable group health coverage — if you didn’t have it at work. Charter Oak is intended to help bridge that gap for young adults at 19 through young seniors below their 65th birthday.

    You also asked why we think more people aren’t currently enrolled. One way to approach that question is to point out that we have about 6,000 applicants who have been determined eligible after application but who have not yet ‘enrolled’ with a Charter Oak-contracted health plan with premium payment. We have found with non-entitlement HUSKY B over the past 11 years that there’s invariably a few thousand eligible children for whom parents have not taken the step of enrollment. So this dynanic is expected. There could be all sorts of reasons for eligible applicants not taking the enrollment step just yet — spending priorities, job/benefit prospect coming up, the ‘I’m-healthy-so-I’m-not-going-to-write-the-check-yet’ thought, and so forth.

    It’s a voluntary, optional program that has just one year under its belt. A snapshot of some of the tangible ways Charter Oak has helped people so far is at the top of Genghis’ coverage, by way of Christine’s newsjunkie report. I hope the above info has been of some help. People interested in applying can call 1-877-77CTOAK or visit http://www.charteroakhealthplan.com.

  25. Oh, snap, Hooker.

    Actual facts.

    You’re screwed again.

  26. David Dearborn

    From CT DSS: Anderson asked Aug. 18 @ 5:55 p.m. about marketing costs for Charter Oak. I would have to track down actual costs but I don’t believe they were substantial. The program launch in July 2008 was supported by a radio ad campaign. I recall that the second stage of the campaign was cancelled as applications were coming in at a steady clip.

  27. In short, our for-profit employer-based system of health care worked well when the population was relatively young and healthy and when major corporations were big employers and those corporations were growing robustly. But with international competition, with employment growth coming much more from smaller corporations that can’t offer the same benefits, and with an aging population that requires more health care than in decades past, it is all coming undone.

    While I agree with your underlying premise about companies like GM not being able to compete, in part, because they are saddled with health costs, it is a big leap to blame it on the for-profit health care system. I would blame all of those costs on management negotiating away huge benefit packages to union employees that spiraled out of control as health costs increase exponentially. Combined with making cars that no one liked, their costs exceeded their liabilities. Really had nothing to do with for-profit health care and I am not sure how you made that leap.

    Also, the only way reform works is if you reduce overall costs, right? Think about it, whether the comapnies [read: consumers] pay for it for their employees themselves or they pay for if for their employees through taxes it is the same thing. Any government plan would therefore have to reduce costs. How do you do that? Sure, you can hammer doctors on rates, but won’t that just decrease the number of doctors? You can also hammer drug companies on prices, but won’t that just decrease the incentive to make more drugs? You see where I am going with this, right? The only…ONLY….way that the government reduces health care costs in a government run plan is to reduce the amount of care available for people. Or its assets greatly exceed its liabilities and it can’t be sustainedf (see medicare).

    The best way to do it, I think, is instead of taking pricing totally out of the equation (as a government plan does), put it back in. Make people pay for more of their care directly (with HSA’s and high deductible health plans) and prices will come down. As it is right now, we don’t pay for anything directly (see, e.g co-pays).

  28. Rell to State Employees: You’re not blogging enough during your working day.

  29. When the Department of Public Safety starts commenting about the Governor, will they have to open a file on themselves?

  30. Thomas Hooker

    Also, the only way reform works is if you reduce overall costs, right? Think about it, whether the companies [read: consumers] pay for it for their employees themselves or they pay for if for their employees through taxes it is the same thing. Any government plan would therefore have to reduce costs. How do you do that? Sure, you can hammer doctors on rates, but won’t that just decrease the number of doctors? You can also hammer drug companies on prices, but won’t that just decrease the incentive to make more drugs? You see where I am going with this, right? The only…ONLY….way that the government reduces health care costs in a government run plan is to reduce the amount of care available for people. Or its assets greatly exceed its liabilities and it can’t be sustainedf (see medicare).

    Hi, Tony,

    That makes sense in a way. But if we look at other countries with government-run health insurance, we see that it just doesn’t work out as you fear. In no other country do health care expenses total more than 11% of GDP; ours is at least 16% (end 2007). In no other advanced country are less than 100% of the people covered with health insurance; ours is 85%, and it would be much lower without government-run insurance like Medicare, Medicaid, VA and the active-duty military system.

    But if we look at countries like France, Japan, Germany and- yes- Canada, we see that everyone has access to doctors, there are no lines (a myth), and their basic health outcomes are generally better than ours: they live longer and have much lower infant mortality rates. Everyone talks about Britain as a problem and something to avoid. In the same book I mentioned before, “Sick” by Jonathan Cohn, he makes the point that the horror stories are overblown, and the fact that the leader of the Conservative Party in Britain just came out with a ringing defense of the NHS there should suggest that it isn’t the nightmare that some in this country make it. But Cohn points out that it isn’t so much the government-run nature of the system that is the problem, but the fact that Britain is trying to deliver health care “on the cheap”. It spends barely half the percentage of GDP as America does, and some 40% less than France or Germany (8% versus 11% for the latter two). Indeed, Britain’s health care spending is below the average for Europe.

    But you overlook a major cost factor: profit. For-profit insurance companies divert over 30% of all health care premiums to non-health care purposes. And that figure is well established and accepted. Medicare spends barely two cents of every health care dollar it takes in on overhead, and that figure, too, is beyond dispute. As mentioned before, Canada’s government health insurance system (keep in mind that health delivery- doctors, hospitals, etc., are mostly privately run and not government-run), costs less than two cents on the dollar to run. Now how much cheaper could our health care system be if we reduced costs by the percentage of overhead that the private companies now siphon off?

    The private insurance companies know that they can’t compete with Medicare or a public option, and that’s why they’re fighting against it so hard.

    Referring to drug costs, I would agree with you that innovation is important. But drug companies have done precious little innovation for years. Indeed, their budgets for marketing exceed their R&D budgets. Most governments around the world use simple economic principles to negotiate fair bulk discounts with the drug companies. And keep in mind that several major drug makers are based in Europe and are thriving there. If the cost of the drugs they sell were too low, you’d think that they would stop selling, right? But they don’t. Clearly we are overpaying for drugs in this country, and simply using economies of scale to negotiate lower drug prices- prices that are closer to those paid in Europe- would also substantially lower our health care costs. If it’s good for European drug manufacturers in Europe and they keep operating there, why shouldn’t we use the same system?

  31. Thomas Hooker

    Oh, snap, Hooker.

    Actual facts.

    You’re screwed again.

    On the contrary, I welcome factual responses and Mr. Dearborn’s input. I don’t see a problem with that. I would, however, strongly suggest that Mr. Dearborn make certain that in future he reveal that he is a state employee and an official of the agency responsible for this program up front and make clear that he is responding on the record on behalf of the progeram. Nothing wrong with answering questions about the program at all. But full disclosure is certainly recommended.

  32. Thomas Hooker

    From CT DSS: Anderson asked Aug. 18 @ 5:55 p.m. about marketing costs for Charter Oak. I would have to track down actual costs but I don’t believe they were substantial.

    Could you tell us, Mr. Dearborn, what percentage of revenues go to actual medical expenses for the enrollees in the Charter Oak program?

  33. Thomas Hooker

    The best way to do it, I think, is instead of taking pricing totally out of the equation (as a government plan does), put it back in. Make people pay for more of their care directly (with HSA’s and high deductible health plans) and prices will come down. As it is right now, we don’t pay for anything directly (see, e.g co-pays).

    Hi, Tony,

    The problem I have with HSA’s is that they don’t work. First, they’ve been available for several years, yet they’ve certainly not made a dent in our health care crisis. But there are other problems as well.

    First, they provide subsidies in the form of tax deductions that are most valuable to the people who need them least: the wealthiest Americans. Lower income and middle class Americans receive comparatively lower deductions because their tax rates are lower. Second, they are most attractive to younger people who can conceivably get by with fewer health care problems. But permitting the young and healthy to opt out of the health care pool just makes the cost for older and sicker Americans that much higher. The entire point behind national health insurance is that the young and the healthy subsidize the older and the sick. By including everyone, the cost of health care is spread across the population and across age groups. By doing so, we reduce the costs for everyone.

    The other problem with HSA’s is that they discourage preventive care by making people pay high costs for doctor visits. And they also can lead to greater problems when people don’t go to see the doctor for what seem relatively minor problems that could be the beginnings of serious illnesses.

    Another problem with high-deductible insurance policies is that they frequently cap outlays in exchange for low premiums. So even catastrophic health insurance policies frequently include provisions that for any one illness the cap is a certain amount which leaves those who are disabled in serious financial trouble down the road.

  34. First, they provide subsidies in the form of tax deductions that are most valuable to the people who need them least: the wealthiest Americans. Lower income and middle class Americans receive comparatively lower deductions because their tax rates are lower.

    In many cases the benefit is that an employer simply provides an employee with the cash to pay for the first few thousand dollars of care thereby making the tax benefit irrelevant. Besides, no saying you can’t provide it as a credit instead of a deduction, thereby providing more of a benefit to those who make less.

    Second, they are most attractive to younger people who can conceivably get by with fewer health care problems. But permitting the young and healthy to opt out of the health care pool just makes the cost for older and sicker Americans that much higher. The entire point behind national health insurance is that the young and the healthy subsidize the older and the sick. By including everyone, the cost of health care is spread across the population and across age groups. By doing so, we reduce the costs for everyone.

    That actually doesn’t make much sense, on a large enough scale they provide the young and healthy to invest their HSA money and roll it over year after year. This covers costs down the road and only matters until you hit Medicare age. Then you can use that money to buy a medicare supplement, or, if it is somone like you who thinks Medicare is just fine, then you keep the money. In terms of the pool, it doesn’t matter much because everyone is still in a plan, and, if you fund it as outlined above it makes a lot of sense. You also seem to suggest that everyone should have to buy into national health insurance. That is scary. What if you don’t like the national plan? What if it doesn’t offer you what you want covered? That gets back to the rationing argument that I made before that I’d like you to address (along with your leap from correlating GM’s failure to private health insurance).

    The other problem with HSA’s is that they discourage preventive care by making people pay high costs for doctor visits. And they also can lead to greater problems when people don’t go to see the doctor for what seem relatively minor problems that could be the beginnings of serious illnesses.

    Therein lies the benefit of an HSA. If people are responsible for the costs of doctor’s visits and preventative care, the costs will go down. Right now people generally have no idea what a doctor’s visit costs because they simply pay a co-payment to their insurer. If you make people pay for things, the market will determine the right price. Also, preventative care actually can tend to drive costs up, not down.

    Another problem with high-deductible insurance policies is that they frequently cap outlays in exchange for low premiums. So even catastrophic health insurance policies frequently include provisions that for any one illness the cap is a certain amount which leaves those who are disabled in serious financial trouble down the road.

    I don’t know if this is the case or not, but my understanding is that patient costs are capped at their annual deductible.

  35. That makes sense in a way. But if we look at other countries with government-run health insurance, we see that it just doesn’t work out as you fear. In no other country do health care expenses total more than 11% of GDP; ours is at least 16% (end 2007). In no other advanced country are less than 100% of the people covered with health insurance; ours is 85%, and it would be much lower without government-run insurance like Medicare, Medicaid, VA and the active-duty military system.

    You mention 85%, meaning 15% of the people in America are uninsured. Of that 15% the real problem number is those who do not have insurance but need or weant it. At the end of the day, if you are under 24 or over 65 you are covered under various government programs. If you are poor enough you qualify for Medicaid. Now, why not go to a non-employer based system whereby you can buy coverage through any group or entity (including your employer) that wants to pool its resources, without being required to buy certain coverages (state regulations requiring certain care) and give the poor health care vouchers to cover the costs. We do it with food stamps.

    The private insurance companies know that they can’t compete with Medicare or a public option, and that’s why they’re fighting against it so hard.

    I am not so sure that they are fighting it. At all. In fact, the administration got their blessing early in the process putting a mandate in there. They will compete in the sense that they will not only likely provide better customer service (and perhaps even price) if the government doesn’t attempt to put them out of business by subsidizing huge government run losses in the short term, but by providing supplements as they do with Medicare.

  36. As far as I’m concerned, this whole idea of government run health care is just another government handout for “free” health care for the main supporters of the Democrats and Obama. Just trying to buy votes and stay elected.

    Also, isn’t strange that those connected to Obama are also the ones to make out pretty well if this boondogle passes…

    http://news.yahoo.com/s/ap/20090819/ap_on_go_pr_wh/us_health_care_consultants

  37. Maybe we should all join the SEIU, you know, the thugs that get away with beating up young black american’s at town hall meetings, the SEIU is advertising Health insurance for $17.00 a month!

    http://www.seiu775.org/benefits/benefitstrust_overview/default.aspx

  38. Referring to drug costs, I would agree with you that innovation is important. But drug companies have done precious little innovation for years.

    Precious little innovation? Well, the approval process through the FDA takes a long time, so I don’t know what’s happened at drug labs recently (and most of us won’t know unless we read pharmaceutical industry journals or wait until the FDA approval process is done). However, here’s a list of new drugs approved in 2008: http://www.elf.procampus.net/refs/CP9005EX_Lesson.pdf

    Or, if you prefer, look at what some major drug manufacturers are spending on R&D:

    Pfizer spent $7.9 billion on R&D in 2008. Bristol Myers spent $3.3 billion.

    Indeed, their budgets for marketing exceed their R&D budgets.

    Most companies that produce research intensive stuff (like software companies) spend more on sales and marketing than they do on R&D. It’s necessary to do so, in order that people buy your product. In the case of pharmaceuticals, they advertise so you’ll ask your doctor, because not all doctors know about all drugs. Furthermore, you really have to look at the R&D spend industry wide versus S&M industry wide. There are many small venture capital-backed companies doing early trials. They don’t have revenues, and spend almost everything on R&D. If they’re successful, they sell to one of the majors that has a good distribution arm, etc. If they aren’t successful, then the VC investors lose. So some of the research is being done by these firms, but the sales and marketing will be done by the majors after they acquire the small firms.

    Most governments around the world use simple economic principles to negotiate fair bulk discounts with the drug companies.

    When there’s one buyer (the government) and one seller (the drug company), fairness tends to be in the eye of the beholder. There’s a lot of risk in R&D, and if the return is not so great due to price controls, then people won’t spend as much on R&D.

    And keep in mind that several major drug makers are based in Europe and are thriving there. If the cost of the drugs they sell were too low, you’d think that they would stop selling, right? But they don’t. Clearly we are overpaying for drugs in this country, and simply using economies of scale to negotiate lower drug prices- prices that are closer to those paid in Europe- would also substantially lower our health care costs. If it’s good for European drug manufacturers in Europe and they keep operating there, why shouldn’t we use the same system?

    European drug manufacturers have sizable operations in the US. So where the headquarters building is is more or less irrelevant.

    Second, economies of scale. Yeah, drugs have lots of economies of scale, once you do the research. Very few drugs cost more than a few bucks to produce a month’s supply. But same with DVDs: why should DVDs cost $20 new, when the actual production cost is less than $1? Or books? Why shouldn’t books cost a pittance: the raw materials, binding and printing cost of a hardback book is less than $5. Paperbacks are less than $1. Or software. Software could be freely distributed over the internet, with almost infinite economies of scale.

    Drug companies spend on research, for drugs that are successful and for drugs that aren’t. Then when they sell drugs, they have to make back that research. If it cost $100 million to do the research, and $0.10 to make each pill, if it sells each pill for $1.10, it needs to sell 100 million pills to make back its R&D spend. Now, if some government says that within that country, the drug company can sell the pill for only $0.60, it’ll probably still do it, since $0.50 gross profit is still better than nothing. But if every country does that, and if worldwide demand is only going to be 75 million pills, then drug companies will stop innovating. Even when they are making a huge gross profit on each pill. Drugs have a huge fixed cost component: figuring them out. Once that happens, it’s easy. (Some drugs actually do have fairly high costs because of raw materials, but these are relatively rare. Flu vaccines have a fairly high cost of production because they need to be incubated in chicken eggs, but they have a low research element).

    You put price controls on books, saying the max price would be $1 for paperbacks. You’d still have a lot of old books available. But very few people would bother to write new books.

  39. David Dearborn

    From CT Department of Social Services: Responding to Thomas Hooker’s Aug.19 @12:14 p.m. post (Could you tell us, Mr. Dearborn, what percentage of revenues go to actual medical expenses for the enrollees in the Charter Oak program?):

    I think you’re referring to what’s termed medical loss ratio in the health coverage world. Sorry, I don’t have that information at my fingertips but will check on its availability at this point in the program.

    –David Dearborn, CT DSS; david.dearborn@ct.gov

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