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Citizens’ Health Care Working Group Meeting

Wednesday, May 11, 2005
Crystal City, VA



Randy Johnson, the Chair of the Citizens’ Working Group (CWG), called the meeting to order as scheduled; all members were present except Brent James. Highlights of the discussion for the day are presented below.

Building the Foundation: Overview of the American Health Care System

John Iglehart, Project Hope, “America’s Thinning Social Contract”

See John Iglehart’s Powerpoint Slides and CWG-provided Comments. For a verbatim record of the speaker’s statements, see Transcript.

The three slides reported summary data on polling questions seeking to determine public attitudes toward health care coverage. The major point of the slides is that fewer people today believe that higher income individuals should pay more to assist lower income individuals obtain the care they need. The United States provides a lower rate of coverage than other industrialized countries. Iglehart quoted statements indicating that the problem in the country is that there is a lack of social commitment to providing care. Many of the uninsured are employed full time. Health care expenditure growth has been outstripping the rates of increase in wages and non-health expenditures. According to Iglehart, our individualistic culture has contributed to acceptance of increasing numbers of people without health care coverage. Among 30 OECD countries, tax receipts are lowest in the United States, but our expenditures for health care are highest and the government role in payment is growing.

Employer-based coverage remains popular because it is known and in part because employees believe the employer pays for the coverage; however, economists believe that employees bear the cost in the form of lower wages. Administrative costs, in particular tend to be higher than in public systems. The health “tax expenditure” (foregone tax revenues resulting from statutory exclusions) amounts to $100 billion/year and is, in effect, the government’s third largest health expenditure. Popularity of this arrangement is one of the chief obstacles to moving to a more market-based system. In response to limitations on expansion of market-based system, the public-based systems have increased. Medicaid is now the largest publicly-financed health care system. There is great concern among state Medicaid directors and an increasing competition within states for funds for other activities such as education.

The Veterans Administration health care system has largely escaped competitive market constraints and has also made strides toward better quality.

There are three broad types of reform possible:

• rely on individual consumers to make economic trade-off choices;
• rely on government to apply price or quantity controls; and
• (an intermediate approach) have fixed budgets for third parties, although the backlash on managed care has illustrated the difficulty of this approach.

Non-medical factors such as lifestyle are having a growing impact on health care costs
and outcomes.

What role can the CWG play? The country is in a lull of health care-related actions right now so the timing is good for another look at what is needed. What is lacking is a societal will to move in one direction or another; not an issue of the right or the left, politically. There is a chasm between the elites in Washington and the individuals in the rest of the country who are living their lives, paying bills. Iglehart recommends that the Working Group travel around the country looking for the compelling personal stories that have a relevant policy perspective. Personal stories resonate with policy makers.


Randy Johnson, Chair of the Working Group: What are the options for an individual who has left his employment as an early retiree? Iglehart responded that COBRA is one program available for at least 18 months; there wasn’t support for a previous legislative proposal for expanding Medicare to the 55-64 year age group. It will probably require continued incremental movement; the subject isn’t much on the minds of legislators right now.

Joe Hansen: What portion of total health care costs does the Veterans Administration account for? Iglehart indicated that the VA provides care to poor veterans; it represents about 10% or less of the whole although it has been a growing part of the VA budget. It is a form of socialized medicine and it also delivers care at much lower cost than other systems.

Frank Baumeister: The speaker made valid observations regarding the disconnect between the practicing physician and direct delivery of care versus the policy makers and think tank experts who don’t have direct experience with the real problems health care providers face. Iglehart agreed and indicated that a group like the CWG has a national mandate enabling them to go around the country and hear more of what individuals have to say.

Aaron Shirley: Would it be useful if the CWG could comment on the problems that individuals were facing? Iglehart reiterated that the CWG had a special mandate to add the personal perspective to the empirical work of groups such as the Institute of Medicine.

Patricia Maryland: Would reports of the struggles corporations are having influence Congress? Iglehart thought this would be the case.

Montye Conlan: Personal stories seem to work less and less well over time in convincing policy makers to act. In the absence of consumer-friendly or managed care, what is the best approach to take to achieve broader care coverage? Iglehart indicated that while expansion is going to be difficult, the strength of the Medicaid program is such that it is likely to continue.

Richard Frank: Who is the backlash against managed care coming from? Iglehart believes that backlash is from employees. Frank also asked about willingness of individuals to assume risk and whether individuals were willing to assume more risk for a reduced cost.

Catherine McLaughlin: There is a disconnect between people’s knowledge about health care services, the choices they make, and the real costs or limits their choices entail. Focusing primarily on collecting personal stories raises some concern. What will be different here is that the personal stories should lead to dialogue. They will be heard by the public, and should be a starting point for discussion. We shouldn’t over-promise what we can achieve if we are to garner and maintain public support. Iglehart indicated that the first thing the CWG needs is a “marketing ace” to help spread the news of what the CWG is seeking; media coverage would have a multiplier effect and be helpful in reaching the majority of people who are healthy most of the time and have not read the details of their health care coverage plan.

Dotty Bazos: How can we get more money “upstream” when there is a crisis “downstream?” Iglehart indicated the CWG could choose to look at the social factors that influence care, not just at health care coverage issues. The Department of Health and Human Services, 2010 Healthy People report had 10 leading indicators but these don’t resonate to the man on the street – it’s a tough thing to sell. However, Tommy Thompson focused more on the prevention issues than many others had done.

Frank Baumeister: There is a gulf between being a purchaser of health care versus being a consumer of services. Oregon has struggled with question of what should constitute a basic health care plan. A large proportion of the costs for health care are for end of life care, especially for the last year of life. Iglehart agreed that the cost and ethical issues regarding end of life care are difficult.

Montye Conlan: Health care consumers need to be empowered and we need to find ways to broaden the support for commitment to a social contract as it applies to health care.

Mike O’Grady: Different products fit different people’s lives. How you prevent adverse selection is important. It seems desirable to avoid a “one size fits all” approach to health care. As regards cost analyses, certainly we ought to have actuaries in both the public and the private sector go “head to head” examining what makes the health care choices comparable.

Randy Johnson: Corporations are having to make choices such as either sending production off shore to reduce costs or sharing more of the premiums expenditures with employees, which may have the effect of causing greater numbers of employees choose not to participate in the available plans.

In closing, Iglehart indicated that as a “curious journalist,” he envies the mandate for the CWG and believes that the effort will be well worth it. He indicated that there are significant questions about the impact of health care coverage and quality on such corporate concerns such as absenteeism and employment choice. The CWG may also want to refer to the final report of the Committee on the Costs of Medical Care, Medical Care for the American People, 1932.

Christine Wright: Setting social policy is difficult.

Deborah Stehr: We need to find a way to identify health care as a social good. Iglehart agreed, observing that Congress clearly wants to hear from citizens. There may be pro bono marketing advice/assistance available so that cities that are to be visited would be actively engaged in these visits ahead of time; this could make a major difference in whether the CWG was a success. Time spent on focusing on this issue could be beneficial.

Building the Foundation: Public Insurance Programs: Medicare, Medicaid and SCHIP

Bill Scanlon, Health Policy R & D

See Bill Scanlon’s Powerpoint Slides and CWG-provided Comments. For a verbatim record of the speaker’s statements, see official Transcript.


Randy Johnson: What is the role of Medicaid? Scanlon indicated that efforts to control costs for Medicaid have included limiting benefits and reducing payments and controlling the number of nursing home beds. At the maximum rate, States receive a match of 79%; meaning that for every dollar spent, the Federal government pays $0.79. Even so, States are experiencing significant budget crunches. One needs also to discuss “creative financing” by which money “makes a round-trip” such that States may reimburse the county for expenditures the counties and States previously claimed against the Medicaid program. These financing activities are difficult to curb because some very capable financial advisors have provided advice to states.

Richard Frank: What is the Federal budgetary impact of health care expenditures? Scanlon responded that by 2050, Medicare and Medicaid would amount to 50% of the Federal budget . While Federal spending overall now accounts for 20 percent of GDP, by 2050 spending for Medicare, Medicaid and SCHIP would account for 20 percent of GDP. These projections are very sensitive to debt, which has a cumulative effect. . Frank pointed out that there will be a big jump in expenditures because of the Medicare Modernization Act of 2003 (MMA). Scanlon agreed but also indicated that the really big jump will come from the aging baby boom generation, in about 15 years.

Michael O’Grady: The large cost increases in MMA are in the out years. The cheapest Medicare beneficiary is someone who has just turned 65; during their first year under the program, health care costs for beneficiaries are the lowest. The big costs come later in the retirement years.

Aaron Shirley: When a state cuts Medicaid spending, what is the net economic gain or loss in jobs or revenue compared to financing employing people by floating development bond issues for the same amount? Which represents the best return on investment from a business point of view? Scanlon indicated that there is wide variation across the country regarding service utilization. There’s also the question of whether we are paying the right price for care services. An alternative way of looking at the tradeoffs is to determine the best mix of investment with pubic and private expenditures. Increasing health spending at the point where we are may not maximize value. Cost containment remains important.

Deborah Stehr: What’s the effect of cost shifting where companies encourage their employees to sign up for public health insurance programs? Scanlon indicated that he hasn’t studied this issue directly but that we need to look at what the net change in coverage is. When enacted in 1997, the SCHIP program was very popular, regardless of the “crowd out” result (that meant that some coverage funded under SCHIP was not net gain but shifting of coverage from employer-sponsored insurance--editor).

Frank Baumeister: Oregon had a difficult time getting a waiver for Medicaid even though its per-unit costs were low. Oregon is unusual by virtue of the state’s efforts to set priorities. The concept was that a more flexible Medicaid would result in broader coverage. But, while the state could generate some efficiencies in order to be able to expand coverage, they were hard to sustain over time without adding costs.

Michael O’Grady: There is an unavoidable conflict in states’ efforts to reduce costs at the same time there are more people that need coverage. One of the challenges we’re facing is how to pool funds that are available in order to provide broader coverage that is also not so fragmented. HIFA waivers are one approach.

Catherine McLaughlin, Vice Chair: Can you (Scanlon) break out what is driving the future expenditure predictions? Scanlon indicated that long term health care costs will grow at gross domestic product (GDP) plus one percentage point (but that less optimistic projections suggest it will be GDP plus 2%). McLaughlin indicated the need for the CWG to provide information to the American people that is both understandable and reliable. Scanlon asserted that the projected growth in health care expenditures over the next 40 years is based on past trends, factoring in demographics. He said the real question is whether we are in the right ball park. He believes that the projection, that health care will account for 20% of GDP by 2080, is likely to be a “gross underestimate.” He believes we need to focus on what we want utilization and cost to be. He is very worried about lack of planning for people’s long term care needs; especially since there aren’t going to be many adult children around to care for the rapidly growing number of aged.

Patricia Maryland: We need to see a “matrix” of the breakdown of where expenditures are going. What do we know about service utilization and clinical outcomes when comparing managed care versus other types of care? What types of provider tax approaches are being used? Scanlon indicated that most of these were “creative financing.” Narrow versions of these arrangements have been banned although more broadly based arrangements are still allowable..

Michael O’Grady: We don’t have a “trustees” report for Medicaid and consequently we don’t have good long term projections. The expenditure projections are an under-estimate but we need some visuals to start people thinking about what we should expect. Scanlon recommended that the CWG think separately about acute care and long term care as two different sets of issues.

Christine Wright: Is there state-to-state portability of coverage, for individuals with disability conditions? Scanlon indicated that under Medicaid, it is necessary to reenroll in each state. Further complicating enrollment is that many states administer their Medicaid programs at the county level.

Dorothy Bazos: Will there be future opportunities to expand Federally qualified health centers? Scanlon indicated he isn’t in a position to make a prediction.

Montye Conlan: In the future, Medicaid waivers may limit available state coverage. Scanlon commented that state waivers vary greatly. There are tradeoffs regarding state waivers and how much risk states can be expected to take. Greater risk may cause states to be less willing to take on additional service liabilities.

Joe Hansen: What is the way to view the link between increasing premiums and the willingness or ability of individuals to retain coverage? Scanlon indicated that Medicare coverage is a very good deal compared to private coverage; however, for the drug benefit, beneficiaries face difficult choices.

Randy Johnson: What areas should we be emphasizing regarding health care for the future: wellness care, long term care, acute care, etc.? Scanlon replied that this is a difficult value question since each dimension commands attention. Acute care is absorbing about $1.3 trillion of the total health care expenditures; LTC costs about $150 billion per year and these costs are very concentrated.. Long term care is a distinct type of care that is not yet well understood by most citizens. Many of the public believe that Medicare covers long term care. The American people need to know more about it.

Building the Foundation: The Uninsured

Peter Cunningham, Center for Studying Health System Change

See Peter Cunningham’s Powerpoint Slides and CWG-provided Comments. For a verbatim record of the speaker’s statements, see official Transcript.


Michael O’Grady: How much of the uninsured is small firms and low income individuals? Cunningham indicated that offering rates across all employers are relatively stable. It appears that reductions in numbers of people who are insured are the result of more people not taking up employer insurance as it becomes increasingly less affordable.

Rosario Perez: Is there an opportunity for small employers to form purchasing cooperatives? Cunningham acknowledged that there could be but that it was difficult for them to do on their own or without assistance and laws supporting such activities.

Joseph Hansen: Is the behavior of WalMart, which offers health care insurance at premium levels that increasing numbers of employees find too costly, a trend that is representative of other firms? Cunningham indicated that it is difficult to determine what the trends are; we need to look at behavior by service industries. Historically, larger firms have been the most generous with employee benefits.

Montye Conlan: Is it correct that public employers are increasingly moving to temporary employees and contracting or outsourcing of work, so that more individuals are becoming ineligible for benefits? Cunningham indicated that it is cost that has been the overriding factor in driving the level of insurance coverage. He indicated that the variation of insurance coverage across the country is very great.

Cunningham commented that Community Health Centers need funding from other sources besides the federal subsidy and more research on cost of untreated illness is needed.

Randy Johnson: Is lack of education a factor in reduced insurance coverage rates? Cunningham indicated there may be some link. The troubling thing is that there is no real easy solution to cost, quality, coverage triad; managed care didn’t work and has retreated. The current trend is passing higher costs on to employees while controlling utilization. Cost and access are inherently related. Costs will have to be controlled before access can be expanded. Randy indicated that a lot of potential employees indicate their preference for being contract employees because they would rather have the cash than the benefits. Cunningham indicated that this may result from dual income households where one has insurance from a spouse’s job. Studies indicate that the area of highest erosion of insurance coverage is for single income households. Christine Wright indicated that this tended to be the case for nurses for the reasons Cunningham cited.

Mike O’Grady: Regarding studies of the uninsured, it is difficult for the Census Bureau to break out the details of different groups who have insurance coverage and to accurately explain where undercounting (particularly of Medicaid) may be a factor in the numbers reported. Actuaries found that the undercount of the uninsured was 9 million. The current lack of a more definitive number of the uninsured makes it more difficult to advance policy. And knowing who the uninsured are is essential in order to better target policy.

Joseph Hansen: Is it at least definite that the number of the uninsured is increasing? Cunningham affirmed this to be so, adding that that some have estimated that $32 billion of uncompensated care is being provided annually. Since the insured use more care than the uninsured these costs would increase if coverage were provided to this population. Some states, like Massachusetts, have uncompensated care funds; but a lot of hospitals are not compensated.

Patricia Maryland: Disproportionate share reimbursement is insufficient to cover full costs. It’s essential to find ways to pay for the services. It is much more difficult for hospitals to increase their charges to pay for uncompensated care. Along with malpractice costs, it is becoming more difficult – especially to find necessary funding for sub-specialists.

Richard Frank: What’s been happening to trend and take-up rates for Medicaid? Cunningham believes the take-up rate is about 66%, lower than take-up rates for employer-sponsored insurance. Mike O’Grady indicated that there were about 3-3.4 million who are eligible for but not taking up Medicaid (?) insurance. Catherine McLaughlin cited experiences where states that permitted parental expansion (coverage) were the most successful in getting increase in children’s insurance coverage take-up rates. Cunningham indicated that many individuals will sign up at the point that they need care; a lot of programs are successfully using this mechanism. The big question remains: in a voluntary system, how high can we expect the rates of insurance coverage to go? In a voluntary system, there will always be some who opt out.

Michael O’Grady: The disproportionate share hospital payments were designed to help hospitals that had an excessive number of individuals who were unable to pay. This is different from directly addressing the uninsured. It suggests that one line of inquiry is to examine ways in which the disproportionate share payments could be reprogrammed in some way to foster expanded coverage of the uninsured.

Rosario Perez: How much does it cost to provide health care? Cunningham responded that we know how much we spend per person on health care, through various surveys. People have made projections.

Dorothy Bazos: Have there been studies of the cost or subsidy that would be needed to induce those not taking up insurance to do so? Cunningham indicated it is difficult because of the discrepancy between what people or firms say they would do and what their actual observed behavior is or would be. Especially for low income individuals, demand for use of resources is tight.

Michael O’Grady: Who the uninsured are is not an easy thing to make clear. Indians under the Indian Health Service are counted as uninsured even though that system provides care; similarly many of those eligible for Veterans Administration health care coverage are counted as uninsured. In terms of how much it costs, on average, for health care services, one estimate is that the average cost per person each year is about $5,500.

Catherine McLaughlin: Studies have found that the price necessary to increase insurance take-up rates would have to be very low; almost “give it away” levels in order to induce the uninsured to purchase or accept insurance. The average cost involved in covering the uninsured is difficult to determine because it is hard to know the difference between costs and charges. We’re already paying for uncompensated care now. By covering the uninsured, there would be some additional costs and some additional savings to “society” from these changes. What is important to think through is the additional costs incurred for services that the newly insured did not receive when uninsured. These would be primarily discretionary services, which would go up; mandatory treatments are already being paid for by the system. And the added costs of those discretionary health care services are not likely to be very high. The high costs, in general, are for health care already received by the uninsured. We don’t know whether the uninsured would behave differently than the insured when they become covered.

Michael O’Grady: Regarding tax benefits, a policy objective is portability of coverage. The primary intent is to actually increase the number of uncovered individuals for whom coverage is provided . When expanding coverage merely provides subsidized coverage for those already covered, that is inefficient..

In closing, Cunningham indicated that social science research has inherent error because one is dependent upon what people are reporting. We obtain different numbers from different survey data instruments because questions are asked in different ways and survey methodologies differ. The Medical Expenditure Survey ( MEPS) is a strong data source because its surveyors go to people’s houses and have a carefully structured interview and thoughtful methodology. While there may always be error around the confidence interval or individual recall,,the central data tendencies remain fundamentally reliable.

Working Group Meeting, Open to the Public

Carolyn J. Lukensmeyer, America Speaks

Carolyn Lukensmeyer provided an overview of the kind of work that America Speaks has engaged in and an explanation of how this approach might be appropriate for the CWG. She characterized it as polling and sampling activity. An example of America Speaks work was gathering 5,000 inhabitants and workers from lower Manhattan, engaging in structured feedback carried out with the assistance of 500 trained volunteer facilitators (one for each round table seating 10), wireless communications, central computer systems, expert trained analysts, instant feed back, use of personal data entry technology insuring anonymity, deliberative processes, and formal feedback on consensus decisions by the end of the day. Lukensmeyer stated that the strength of this approach is to engage in real deliberation and decision-reaching actions. She indicated that the approach was also used for targeted application searching for feedback concerning a limited set of issues regarding Social Security.

More information is available at America Speaks web sites: and

Executive Director

Randy Johnson introduced the prospective Executive Director, George Grob, who spoke briefly about his background (see Resume).

April 11-12 Meeting Summary

The summary from the April 11-12, 2005 meeting was distributed and the CWG members were asked to comment on it by the end of the day, May 13, after which the Summary would be posted on the CWG web site.

Working Group Meeting, Closed to the Public

The Chair closed the public session and opened an Executive Session. The purpose of this session was to discuss administrative principles and procedures to be followed by the Working Group Members in future meetings. Present also were Larry Patton, Designated Federal Official, and George Grob, the incoming Executive Director.



Randy Johnson, Chair
Catherine McLaughlin, Vice Chair
Frank J. Baumeister, Jr.
Dorothy A. Bazos
Montye S. Conlan
Richard G. Frank
Joseph T. Hansen
Therese A. Hughes
Patricia A. Maryland
Rosario Perez
Aaron Shirley
Deborah R. Stehr
Christine L. Wright
Michael J. O’Grady


George Grob, Executive Director
Andy Rock
Caroline Taplin
Ken Cohen


John Iglehart, Project Hope
Bill Scanlon, Health Policy R & D
Peter Cunningham, Center for Studying Health System Change
Carolyn J. Lukensmeyer, America Speaks

Editor’s note: The Citizens’ Health Care Working Group is an independent body whose members were selected by the Comptroller General of the United States. The Agency for Healthcare Research and Quality provides administrative support as directed by the Medicare Modernization Act.

For more information, contact the Working Group at (301) 443-1502.

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