Cantor To Uninsured Woman With Growing Tumors: Get ‘An Existing Government Program’ Or Find Charity

From Think Progress

At the Richmond Times-Dispatch “public square” forum yesterday, Rep. Eric Cantor (R-VA) fielded open questions from his constituents on the health reform debate for the first time this summer.

Patricia Churchill relayed a story about a close family member who recently lost a high paying job and her health insurance. Churchill told Cantor that her relative was dying of stomach tumors and needs an operation as soon as possible. Cantor responded by suggesting that Churchill’s relative should seek “existing government programs” or find charity.

Cantor, who serves as the chief whip for his party, has said that he cannot support a health reform bill with a public option. But despite his political opposition to government insurance programs, Cantor then emphasized to Churchill that every American should be given an “option” for health care, including a government program:

CHURCHILL: I have a very close relative, a woman in her early forties, who did have a wonderful, high-paying job, owns her own home and is a real contributing member of society. She lost her job. Just a couple of weeks ago, she found out that she has tumors in her belly and that she needs an operation. Her doctors told her that they are growing and that she needs to get this operation quickly. She has no insurance. [...]

CANTOR: First of all I guess I would ask what the situation is in terms of income eligibility and the existing programs that are out there. Because if we look at the uninsured that are out there right now, there is probably 23, 24% of the uninsured that is already eligible for an existing government program [...] Beyond that, I know that there are programs, there are charitable organizations, there are hospitals here who do provide charity care if there’s an instance of indigency and the individual is not eligible for existing programs that there can be some cooperative effort. No one in this country, given who we are, should be sitting without an option to be addressed.

In an interview with ThinkProgress after the event, Churchill explained that her relative, who needs help now, probably won’t qualify for a low-income government program like Medicaid and that there are very long waiting periods for charity programs. Asked about Cantor’s response to her question, Churchill said, “it was helpful in a sense, but of course nowhere near as helpful as having this healthcare reform bill passed so that we could know that she could definitely go and get taken care of.”

Today, Cantor called for “scrapping” President Obama’s proposed public option insurance program

Cantor to Uninsured Woman: Get a Government Option or Public Charity

The Numbers and Health Care Reform

NY Times Editorial, Sept. 22

Two authoritative surveys in recent days have underscored why all Americans have a stake in successful health care reform. Too many people are being hit with relentlessly rising premiums or are at serious risk of losing their coverage to allow the status quo to continue.

A survey by the Kaiser Family Foundation found that, once again, health insurance premiums rose faster last year than either wages or general inflation. A study by the Treasury Department found that almost half of all Americans below Medicare age have gone without insurance at some point over the last decade.

The Kaiser study, conducted jointly with the Health Research and Education Trust, an affiliate of the American Hospital Association, found that the average premium for a family policy offered at work rose above $13,300 in 2009 — up from $5,800 in 1999. The average employer paid more than $9,800 of that, while the workers contributed more than $3,500. The workers were also hit with larger co-payments and deductibles, while their policies often offered fewer benefits.

The premium increase this year was a relatively modest 5 percent, far below the 13 percent rate in two previous years. But that still far outpaced a 3.1 percent growth in wages and a small decrease in inflation. Absent meaningful reform, worse is sure to come.

Kaiser estimates that, if increases revert to the average of the last 10 years, health insurance premiums in 2019 will average a whopping $30,800, which it calls “a very scary number.” More immediately, a fifth of the employers surveyed said they are very likely to increase the amount that employees pay for premiums next year.

Meanwhile, the Treasury Department’s study highlighted how vulnerable Americans are to losing their coverage.

It found that, between 1997 and 2006, 48 percent of nonelderly Americans went without health insurance for at least one month, 41 percent lacked coverage for at least six months and 36 percent were uncovered for a year or more. That happened during a decade of strong economic growth. The number of uninsured is likely to be higher over the next decade, the study warns.

The argument for reform seems clear. Americans without insurance need guaranteed access to coverage. Those with insurance need a guarantee that they will not be dropped by their insurers and will be able to buy an affordable policy if their employers decide to drop coverage. And ways must be found to slow the rise in health care costs and ease the burden of paying for insurance.

Protect Insurance Companies

Protect Insurance Companies PSA from Will Ferrell

Wall Street Pursues Profit in Bundles of Life Insurance

Note from Greetings:

Many of these companies are also in the health insurance biz. I wonder just how hard they are going to work to keep their health insurance clients healthy? THEN you might see some of the "death panels" the anti-healthcare bill opponents are talking about... but from their backers!

By JENNY ANDERSON, NY Times, August 6, 2009

After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.

Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.

The idea is still in the planning stages. But already “our phones have been ringing off the hook with inquiries,” says Kathleen Tillwitz, a senior vice president at DBRS, which gives risk ratings to investments and is reviewing nine proposals for life-insurance securitizations from private investors and financial firms, including Credit Suisse.

“We’re hoping to get a herd stampeding after the first offering,” said one investment banker not authorized to speak to the news media.

In the aftermath of the financial meltdown, exotic investments dreamed up by Wall Street got much of the blame. It was not just subprime mortgage securities but an array of products — credit-default swaps, structured investment vehicles, collateralized debt obligations — that proved far riskier than anticipated.

The debacle gave financial wizardry a bad name generally, but not on Wall Street. Even as Washington debates increased financial regulation, bankers are scurrying to concoct new products.

In addition to securitizing life settlements, for example, some banks are repackaging their money-losing securities into higher-rated ones, called re-remics (re-securitization of real estate mortgage investment conduits). Morgan Stanley says at least $30 billion in residential re-remics have been done this year.

Financial innovation can be good, of course, by lowering the cost of borrowing for everyone, giving consumers more investment choices and, more broadly, by helping the economy to grow. And the proponents of securitizing life settlements say it would benefit people who want to cash out their policies while they are alive.

But some are dismayed by Wall Street’s quick return to its old ways, chasing profits with complicated new products.

“It’s bittersweet,” said James D. Cox, a professor of corporate and securities law at Duke University. “The sweet part is there are investors interested in exotic products created by underwriters who make large fees and rating agencies who then get paid to confer ratings. The bitter part is it’s a return to the good old days.”

Indeed, what is good for Wall Street could be bad for the insurance industry, and perhaps for customers, too. That is because policyholders often let their life insurance lapse before they die, for a variety of reasons — their children grow up and no longer need the financial protection, or the premiums become too expensive. When that happens, the insurer does not have to make a payout.

But if a policy is purchased and packaged into a security, investors will keep paying the premiums that might have been abandoned; as a result, more policies will stay in force, ensuring more payouts over time and less money for the insurance companies.

“When they set their premiums they were basing them on assumptions that were wrong,” said Neil A. Doherty, a professor at Wharton who has studied life settlements.

Indeed, Mr. Doherty says that in reaction to widespread securitization, insurers most likely would have to raise the premiums on new life policies.

Critics of life settlements believe “this defeats the idea of what life insurance is supposed to be,” said Steven Weisbart, senior vice president and chief economist for the Insurance Information Institute, a trade group. “It’s not an investment product, a gambling product.”

After Mortgages

Undeterred, Wall Street is racing ahead for a simple reason: With $26 trillion of life insurance policies in force in the United States, the market could be huge.

Not all policyholders would be interested in selling their policies, of course. And investors are not interested in healthy people’s policies because they would have to pay those premiums for too long, reducing profits on the investment.

But even if a small fraction of policy holders do sell them, some in the industry predict the market could reach $500 billion. That would help Wall Street offset the loss of revenue from the collapse of the United States residential mortgage securities market, to $169 billion so far this year from a peak of $941 billion in 2005, according to Dealogic, a firm that tracks financial data.

Some financial firms are moving to outpace their rivals. Credit Suisse, for example, is in effect building a financial assembly line to buy large numbers of life insurance policies, package and resell them — just as Wall Street firms did with subprime securities.

The bank bought a company that originates life settlements, and it has set up a group dedicated to structuring deals and one to sell the products.

Goldman Sachs has developed a tradable index of life settlements, enabling investors to bet on whether people will live longer than expected or die sooner than planned. The index is similar to tradable stock market indices that allow investors to bet on the overall direction of the market without buying stocks.

Spokesmen for Credit Suisse and Goldman Sachs declined to comment.

If Wall Street succeeds in securitizing life insurance policies, it would take a controversial business — the buying and selling of policies — that has been around on a smaller scale for a couple of decades and potentially increase it drastically.

Defenders of life settlements argue that creating a market to allow the ill or elderly to sell their policies for cash is a public service. Insurance companies, they note, offer only a “cash surrender value,” typically at a small fraction of the death benefit, when a policyholder wants to cash out, even after paying large premiums for many years.

Enter life settlement companies. Depending on various factors, they will pay 20 to 200 percent more than the surrender value an insurer would pay.

But the industry has been plagued by fraud complaints. State insurance regulators, hamstrung by a patchwork of laws and regulations, have criticized life settlement brokers for coercing the ill and elderly to take out policies with the sole purpose of selling them back to the brokers, called “stranger-owned life insurance.”

In 2006, while he was New York attorney general, Eliot Spitzer sued Coventry, one of the largest life settlement companies, accusing it of engaging in bid-rigging with rivals to keep down prices offered to people who wanted to sell their policies. The case is continuing.

“Predators in the life settlement market have the motive, means and, if left unchecked by legislators and regulators and by their own community, the opportunity to take advantage of seniors,” Stephan Leimberg, co-author of a book on life settlements, testified at a Senate Special Committee on Aging last April.

Tricky Predictions

In addition to fraud, there is another potential risk for investors: that some people could live far longer than expected.

It is not just a hypothetical risk. That is what happened in the 1980s, when new treatments prolonged the life of AIDS patients. Investors who bought their policies on the expectation that the most victims would die within two years ended up losing money.

It happened again last fall when companies that calculate life expectancy determined that people were living longer.

The challenge for Wall Street is to make securitized life insurance policies more predictable — and, ideally, safer — investments. And for any securitized bond to interest big investors, a seal of approval is needed from a credit rating agency that measures the level of risk.

In many ways, banks are seeking to replicate the model of subprime mortgage securities, which became popular after ratings agencies bestowed on them the comfort of a top-tier, triple-A rating. An individual mortgage to a home buyer with poor credit might have been considered risky, because of the possibility of default; but packaging lots of mortgages together limited risk, the theory went, because it was unlikely many would default at the same time.

While that idea was, in retrospect, badly flawed, Wall Street is convinced that it can solve the risk riddle with securitized life settlement policies.

That is why bankers from Credit Suisse and Goldman Sachs have been visiting DBRS, a little known rating agency in lower Manhattan.

In early 2008, the firm published criteria for ways to securitize a life settlements portfolio so that the risks were minimized.

Interest poured in. Hedge funds that have acquired life settlements, for example, are keen to buy and sell policies more easily, so they can cash out both on investments that are losing money and on ones that are profitable. Wall Street banks, beaten down by the financial crisis, are looking to get their securitization machines humming again.

Ms. Tillwitz, an executive overseeing the project for DBRS, said the firm spent nine months getting comfortable with the myriad risks associated with rating a pool of life settlements.

Could a way be found to protect against possible fraud by agents buying insurance policies and reselling them — to avoid problems like those in the subprime mortgage market, where some brokers made fraudulent loans that ended up in packages of securities sold to investors? How could investors be assured that the policies were legitimately acquired, so that the payouts would not be disputed when the original policyholder died?

And how could they make sure that policies being bought were legally sellable, given that some states prohibit the sale of policies until they have been in force two to five years?

Spreading the Risk

To help understand how to manage these risks, Ms. Tillwitz and her colleague Jan Buckler — a mathematics whiz with a Ph.D. in nuclear engineering — traveled the world visiting firms that handle life settlements. “We do not want to rate a deal that blows up,” Ms. Tillwitz said.

The solution? A bond made up of life settlements would ideally have policies from people with a range of diseases — leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet.

As an added precaution, DBRS would run background checks on all issuers. Also, a range of quality of life insurers would have to be included.

To test how different mixes of policies would perform, Mr. Buckler has run computer simulations to show what would happen to returns if people lived significantly longer than expected.

But even with a math whiz calculating every possibility, some risks may not be apparent until after the fact. How can a computer accurately predict what would happen if health reform passed, for example, and better care for a large number of Americans meant that people generally started living longer? Or if a magic-bullet cure for all types of cancer was developed?

If the computer models were wrong, investors could lose a lot of money.

As unlikely as those assumptions may seem, that is effectively what happened with many securitized subprime loans that were given triple-A ratings.

Investment banks that sold these securities sought to lower the risks by, among other things, packaging mortgages from different regions and with differing credit levels of the borrowers. They thought that if house prices dropped in one region — say Florida, causing widespread defaults in that part of the portfolio — it was highly unlikely that they would fall at the same time in, say, California.

Indeed, economists noted that historically, housing prices had fallen regionally but never nationwide. When they did fall nationwide, investors lost hundreds of billions of dollars.

Both Standard & Poor’s and Moody’s, which gave out many triple-A ratings and were burned by that experience, are approaching life settlements with greater caution.

Standard & Poor’s, which rated a similar deal called Dignity Partners in the 1990s, declined to comment on its plans. Moody’s said it has been approached by financial firms interested in securitizing life settlements, but has not yet seen a portfolio of policies that meets its standards.

Investor Appetite

Despite the mortgage debacle, investors like Andrew Terrell are intrigued.

Mr. Terrell was the co-head of Bear Stearns’s longevity and mortality desk — which traded unrated portfolios of life settlements — and later worked at Goldman Sachs’s Institutional Life Companies, a venture that was introducing a trading platform for life settlements. He thinks securitized life policies have big potential, explaining that investors who want to spread their risks are constantly looking for new investments that do not move in tandem with their other investments.

“It’s an interesting asset class because it’s less correlated to the rest of the market than other asset classes,” Mr. Terrell said.

Some academics who have studied life settlement securitization agree it is a good idea. One difference, they concur, is that death is not correlated to the rise and fall of stocks.

“These assets do not have risks that are difficult to estimate and they are not, for the most part, exposed to broader economic risks,” said Joshua Coval, a professor of finance at the Harvard Business School. “By pooling and tranching, you are not amplifying systemic risks in the underlying assets.”

The insurance industry is girding for a fight. “Just as all mortgage providers have been tarred by subprime mortgages, so too is the concern that all life insurance companies would be tarred with the brush of subprime life insurance settlements,” said Michael Lovendusky, vice president and associate general counsel of the American Council of Life Insurers, a trade group that represents life insurance companies.

And the industry may find allies in government. Among those expressing concern about life settlements at the Senate committee hearing in April were insurance regulators from Florida and Illinois, who argued that regulation was inadequate.

“The securitization of life settlements adds another element of possible risk to an industry that is already in need of enhanced regulations, more transparency and consumer safeguards,” said Senator Herb Kohl, the Democrat from Wisconsin who is chairman of the Special Committee on Aging.

DBRS agrees on the need to be careful. “We want this market to flourish in a safe way,” Ms. Tillwitz said.

Nelson: If Reformers Keep Attacking Me, Health Care May Be Dead By End Of August

Note from Greetings: Nelson is one of the biggest recipients of health care dollars from the industry. Perhaps it would be better to run MORE ads, to let the people of his state know where he stands on their personal well being, as opposed to his pocketbook. He's likely to try to kill it anyway.

Talking Points Memo, By Brian Beutler - July 31, 2009, 5:40PM

Sen. Ben Nelson (D-NE) sure doesn't like being called out by health care reformers. Here's an ad that's been running in Nebraska, criticizing him for slowing down the legislative process.

In response, Nelson's spokesman says he's "looking to support bipartisan legislation that reduces health care costs, boosts the quality of care and expands coverage to people who can't obtain it now." But: "If this is an indication of the politics going into August, then health care reform may be dead by the end of August."

Shorter version: Critics should shut up about me and my fellow centrists or we'll kill health care reform. You can read the entire statement below the fold.

"Nebraskans don't need outside special interest groups telling them what to think. Senator Nelson has nothing but praise for Nebraska groups working toward health care reform. Unfortunately, he says, these outside groups undermine the sincere and dedicated efforts of people in our state.

"Recently, similar ads have run in Nebraska. Those ads by other special interests prompted hundreds of Nebraskans to call our offices, with 9 to 1 urging Senator Nelson to do exactly the opposite of what the special interest group wanted. In short, the ads backfired.

"If the impact is the same this time, Howard Dean's Democracy for America will be sorely disappointed. Further, these scare tactics are certain to further divide the public on health care reform, make it less likely Congress will pass real reform and call into question the motives of those who say they want reform, but use the issue to raise money to try to buy influence inside the Beltway.

"Senator Nelson believes that while most Nebraskans want health care reform, they don't want it rushed; they want it done right. He has said he will consider a "public plan" as long as it doesn't undermine the health coverage 200 million Americans have now. He supports Medicare, TRICARE and S-CHIP, and each is a public plan. He also helped establish Kids Connection, Nebraska's public-plan health insurance for children.

"In the Washington debate, various 'public plans' are still being considered, but no single plan has emerged. So, it's ridiculous to suggest that Senator Nelson is "leading the charge" --as the ad says--against something that doesn't exist.

"Nebraskans know Ben Nelson is an independent thinker. He also has a long record in the governor's office and the U.S. Senate of bringing people together and working constructively so important legislation becomes law. Today, he's looking to support bipartisan legislation that reduces health care costs, boosts the quality of care and expands coverage to people who can't obtain it now.

"If this is an indication of the politics going into August, then health care reform may be dead by the end of August."

Blue Double Cross

By PAUL KRUGMAN, NY Times

That didn’t take long. Less than two weeks have passed since much of the medical-industrial complex made a big show of working with President Obama on health care reform — and the double-crossing is already well under way. Indeed, it’s now clear that even as they met with the president, pretending to be cooperative, insurers were gearing up to play the same destructive role they did the last time health reform was on the agenda.

So here’s the question: Will Mr. Obama gloss over the reality of what’s happening, and try to preserve the appearance of cooperation? Or will he honor his own pledge, made back during the campaign, to go on the offensive against special interests if they stand in the way of reform?

The story so far: on May 11 the White House called a news conference to announce that major players in health care, including the American Hospital Association and the lobbying group America’s Health Insurance Plans, had come together to support a national effort to control health care costs.

The fact sheet on the meeting, one has to say, was classic Obama in its message of post-partisanship and, um, hope. “For too long, politics and point-scoring have prevented our country from tackling this growing crisis,” it said, adding, “The American people are eager to put the old Washington ways behind them.”

But just three days later the hospital association insisted that it had not, in fact, promised what the president said it had promised — that it had made no commitment to the administration’s goal of reducing the rate at which health care costs are rising by 1.5 percentage points a year. And the head of the insurance lobby said that the idea was merely to “ramp up” savings, whatever that means.

Meanwhile, the insurance industry is busily lobbying Congress to block one crucial element of health care reform, the public option — that is, offering Americans the right to buy insurance directly from the government as well as from private insurance companies. And at least some insurers are gearing up for a major smear campaign.

On Monday, just a week after the White House photo-op, The Washington Post reported that Blue Cross Blue Shield of North Carolina was preparing to run a series of ads attacking the public option. The planning for this ad campaign must have begun quite some time ago.

The Post has the storyboards for the ads, and they read just like the infamous Harry and Louise ads that helped kill health care reform in 1993. Troubled Americans are shown being denied their choice of doctor, or forced to wait months for appointments, by faceless government bureaucrats. It’s a scary image that might make some sense if private health insurance — which these days comes primarily via HMOs — offered all of us free choice of doctors, with no wait for medical procedures. But my health plan isn’t like that. Is yours?

“We can do a lot better than a government-run health care system,” says a voice-over in one of the ads. To which the obvious response is, if that’s true, why don’t you? Why deny Americans the chance to reject government insurance if it’s really that bad?

For none of the reform proposals currently on the table would force people into a government-run insurance plan. At most they would offer Americans the choice of buying into such a plan.

And the goal of the insurers is to deny Americans that choice. They fear that many people would prefer a government plan to dealing with private insurance companies that, in the real world as opposed to the world of their ads, are more bureaucratic than any government agency, routinely deny clients their choice of doctor, and often refuse to pay for care.

Which brings us back to Mr. Obama.

Back during the Democratic primary campaign, Mr. Obama argued that the Clintons had failed in their 1993 attempt to reform health care because they had been insufficiently inclusive. He promised instead to gather all the stakeholders, including the insurance companies, around a “big table.” And that May 11 event was, of course, intended precisely to show this big-table strategy in action.

But what if interest groups showed up at the big table, then blocked reform? Back then, Mr. Obama assured voters that he would get tough: “If those insurance companies and drug companies start trying to run ads with Harry and Louise, I’ll run my own ads as president. I’ll get on television and say ‘Harry and Louise are lying.’ ”

The question now is whether he really meant it.

The medical-industrial complex has called the president’s bluff. It polished its image by showing up at the big table and promising cooperation, then promptly went back to doing all it can to block real change. The insurers and the drug companies are, in effect, betting that Mr. Obama will be afraid to call them out on their duplicity.

It’s up to Mr. Obama to prove them wrong.

Out-of-Network Payment Practices

NY Times Editorial, Published: April 7, 2009

There has been a justifiable cloud in recent years over the way the insurance industry decides how much to pay for the services of doctors who are outside a company’s network. The procedures are rendered suspect by conflicts of interest and look as if they have been manipulated to shortchange patients by hundreds of millions of dollars over the past decade.

A tough settlement negotiated between New York’s attorney general, Andrew Cuomo, and the UnitedHealth Group early this year will clean up much of the mess — not only in New York but in other states as well. Still, there are loose ends that need attention, so it is helpful that the Senate commerce committee has held two hearings to explore the need to expand and secure what Mr. Cuomo has achieved.

The hearings were a useful reminder of how badly the industry behaved in using a UnitedHealth subsidiary to calculate the “reasonable and customary” charges by physicians in a particular region. When patients leave the network, insurers typically pay about 70 percent of these charges and the patient pays the remaining 30 percent — plus any additional amount charged by a doctor above the supposedly reasonable charge.

Linda Lacewell, who led Mr. Cuomo’s investigation, testified that the industry engaged in fraudulent and deceptive practices to understate the “reasonable and customary” rate and thus keep its reimbursements low. Although the industry denies any such wrongdoing, UnitedHealth agreed to cough up $350 million to settle a class-action suit and agreed to shift responsibility for the calculations to an independent nonprofit organization. Eleven insurers, including some of the largest, have agreed to help finance the new database and use its findings wherever they operate.

That should go a long way toward cleaning up dubious practices, and New York is working on a new regulation to codify what insurers must do. But New York’s settlement won’t reach all insurers in all states. The Senate commerce committee will need to explore what further steps may be required to force insurers to use either the new database or some other measure that is reliable and free of conflicts of interest. All insurers should enable customers to determine, in advance, how much they will have to pay for services outside their network.

U.S. 'Not Getting What We Pay For'

Many Experts Say Health-Care System Inefficient, Wasteful

By Ceci Connolly
Washington Post Staff Writer
Sunday, November 30, 2008; A01

Talk to the chief executives of America's preeminent health-care institutions, and you might be surprised by what you hear: When it comes to medical care, the United States isn't getting its money's worth. Not even close.

"We're not getting what we pay for," says Denis Cortese, president and chief executive of the Mayo Clinic. "It's just that simple."

"Our health-care system is fraught with waste," says Gary Kaplan, chairman of Seattle's cutting-edge Virginia Mason Medical Center. As much as half of the $2.3 trillion spent today does nothing to improve health, he says.

Not only is American health care inefficient and wasteful, says Kaiser Permanente chief executive George Halvorson, much of it is dangerous.

Those harsh assessments illustrate the enormousness of the challenge that awaits President-elect Barack Obama, who campaigned on the promise to trim the average American family's health-care bill by $2,500 a year. Delivering on that pledge will not be easy, particularly at a time when the economic picture continues to worsen.

Senate Finance Committee Chairman Max Baucus (D-Mont.) has already warned that improving and expanding health care will cost money in the short run -- money that his Republican counterpart, Sen. Charles E. Grassley (Iowa), argues the government does not have.

Yet among physicians, insurers, academics and corporate executives from across the ideological spectrum, there is remarkably broad consensus on what ought to be done.

Go to link on title, above for full article

One fundamental problem is how doctors are paid, he said. Under the current fee-for-service scheme, "the more you do, the more you make," Kaplan said. There is no incentive to keep people out of doctors' offices, hospitals, imaging centers and dialysis clinics.

More tests lead to more procedures, which often result in mistakes, complications, misdiagnoses or the use of untested therapies, said Donald Berwick, president of the Institute for Healthcare Improvement in Cambridge, Mass. "The current system is very hospital-centric," he said. "We wait for people to get sick, and then we invest enormous sums to fix them up. We should build primary care as the core."

It is possible to change the incentives, Kaplan said. Partnering with Starbucks and the insurer Aetna, Virginia Mason devised a new strategy for dealing with back pain, the leading medical complaint of Starbucks' coffee-pouring baristas. Virginia Mason made big money on MRIs, but there is little scientific data that the scans resolve the problem.

So they flipped the process, trying physical therapy first. To make up for some of Virginia Mason's lost revenue, Aetna increased its payment for the therapy. Today, the majority of Starbucks employees with back trouble return to work within 48 hours without an MRI or a prescription, Kaplan said.

"We've shown that you can have superior outcomes at lower costs," Kaplan bragged. He acknowledged, however, that the success on back pain is "one small vignette" in a mega-mess.

Moving from pricey, high-tech solutions such as MRIs to older, low-tech approaches such as physical therapy requires solid data and a culture change, said Helen Darling, president of the National Business Group on Health, which represents large employers. Americans are attracted to innovations, regardless of cost or whether they have been proven to achieve results.

A whole-body scan that is covered by insurance may seem like a bargain, Darling said. "But one way or another we're all paying" for it in higher premiums, increased government expenditures and even false-positive results that lead to more costly, invasive procedures.