This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
The Evolving Role of Emergency Departments in the United States
By Kristy Gonzalez Morganti, Sebastian Bauhoff, Janice C. Blanchard, Mahshid Abir, Neema Iyer, Alexandria Smith, Joseph V. Vesely, Edward Okeke, Arthur L. Kellermann
RAND Health, May 20, 2013
To develop a more complete picture of how EDs (emergency departments) contribute to our modern health care system, the Emergency Medicine Action Fund asked RAND to conduct this mixed-methods study.
Key findings include the following:
• Between 2003 and 2009, inpatient admissions to U.S. hospitals grew at a slower rate than the population overall. However, nearly all of the growth in admissions was due to a 17 percent increase in unscheduled inpatient admissions from EDs. This growth in ED admissions more than offset a 10 percent decrease in admissions from doctors’ offices and other outpatient settings. This pattern suggests that office-based physicians are directing to EDs some of the patients they previously admitted to the hospital.
• In addition to serving as an increasingly important portal of hospital admissions, EDs support primary care practices by performing complex diagnostic workups and handling overflow, after-hours, and weekend demand for care. Almost all of the physicians we interviewed—specialist and primary care alike—confirmed that office-based physicians increasingly rely on EDs to evaluate complex patients with potentially serious problems, rather than managing these patient themselves.
• As a result of these shifts in practice, emergency physicians are increasingly serving as the major decisionmaker for approximately half of all hospital admissions in the United States. This role has important financial implications, not only because admissions generate the bulk of facility revenue for hospitals, but also because inpatient care accounts for 31 percent of national health care spending.
• Although the core role of EDs is to evaluate and stabilize seriously ill and injured patients, the vast majority of patients who seek care in an ED walk in the front door and leave the same way. Data from the Community Tracking Study indicate that most ambulatory patients do not use EDs for the sake of convenience. Rather, they seek care in EDs because they perceive no viable alternative exists, or because a health care provider sent them there.
• Medicare accounts for more inpatient admissions from EDs than any other payer. To gain insight into whether care coordination makes a difference in the likelihood of hospital admission from an ED, we compared ED admission rates among Medicare beneficiaries enrolled in a Medicare Choice plan versus beneficiaries enrolled in Medicare fee-for-service (FFS). We found no clear effect on inpatient admissions overall, or on a subset of admissions involving conditions that might be considered “judgment calls.”
• Irrespective of the impact of care coordination, EDs may be playing a constructive role in constraining the growth of inpatient admissions. Although the number of non-elective ED admissions has increased substantially over the past decade, inpatient admissions of ED patients with “potentially preventable admissions” (as defined by the Agency for Healthcare Research and Quality) are flat over this time interval.
Our study indicates that: (1) EDs have become an important source of admissions for American hospitals; (2) EDs are being used with increasing frequency to conduct complex diagnostic workups of patients with worrisome symptoms; (3) Despite recent efforts to strengthen primary care, the principal reason patients visit EDs for non-emergent outpatient care is lack of timely options elsewhere; and (4) EDs may be playing a constructive role in preventing some hospital admissions, particularly those involving patients with an ambulatory care sensitive condition. Policymakers, third party payers, and the public should be aware of the various ways EDs meet the health care needs of the communities they serve and support the efforts of ED providers to more effectively integrate ED operations into both inpatient and outpatient care.
This RAND Health report provides an excellent perspective on how emergency departments (EDs) have evolved into institutions providing a greater central role in health care delivery. It is a particularly valuable report because it sets aside many misperceptions about ED functions – misperceptions that can lead to flawed policy recommendations.
It is crucial that we continue to assess and recommend improvements in the health care delivery system. This report reflects the benefit of such an approach since EDs have expanded their roles in very beneficial ways. As they continue to evolve, integration with both inpatient and outpatient care should become more efficient, especially from the perspective of benefiting patients.
The current focus of policy reform seems to be not so much on the improvement of health care delivery, but rather on mechanisms that supposedly would slow the growth in health care spending. Accountable care organizations, bundling of payments, innovative insurance designs such as those that erect financial barriers to care, are the types of policy approaches that will have very little impact on overall costs while inappropriately expanding the administrative excesses of our dysfunctional system.
This report is well worth downloading. As you read it, you can see many opportunities to further expand the progress that we have seen through the evolving improvements in the role of EDs in our health care system. Thinking about how further improvement in integrating their role with both inpatient and various community outpatient services can help us envision further opportunities to achieve the goals of a high-performance system.
An example of the misguided and misdirected emphasis on innovative payment reform is the failure to find any clear effect on inpatient admissions when comparing the public Medicare program with the much more expensive private Medicare Advantage plans. Payment innovation is simply not where it’s at.
We need to get this right. Let’s continue to work on fixing the health care delivery system so that it works best for patients. That is the key to improving value in health care. It will work as long as we adopt a financing system that is designed exclusively to fund a high-performance health care system (single payer), as opposed to one that is designed to keep policy wonks and insurance administrators employed in bringing us ever-expanding payment innovations that we don’t want (Obamacare).
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Employers Eye Bare-Bones Health Plans Under New Law
By Christopher Weaver and Anna Wilde Matthews
The Wall Street Journal, May 19, 2013
Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.
Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all.
Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing.
The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs.
But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. C +0.20% report. Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty.
Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms.
Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.
Firms now offering low-cost policies known as mini-meds, generally plans that cap benefits at low levels, could favor the tactic. Companies sought federal health department waivers to cover nearly four million with mini-meds and other similar plans, which will be barred next year. Some employers are “thinking of this as a replacement for the mini-med plan,” said Tracy Watts, national leader for health-care reform at Mercer, a consulting unit of Marsh & McLennan Cos.
San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will replace its own mini-med with a new, skinny plan in July. The new plan… will cover only preventive services, six annual doctors’ visits and generic drugs. X-rays and tests at a local urgent care chain will also be covered. It wouldn’t cover surgeries or hospital stays.
Tex-Mex restaurant chain El Fenix also said it would offer limited plans to its 1,200 workers, covering doctors visits, preventive care and drugs, but not hospital stays or surgery.
Imagine health insurance not covering hospitalizations nor surgery. Yet this is still possible because the Affordable Care Act applies the essential health benefit requirement only to plans for small businesses and individuals and not to larger employers.
This has opened up the opportunity for a conspiracy between larger employers who could care less whether or not their employees have health insurance and private insurers who are quite willing to sell these almost worthless bare-bones products as long as there is a profitable market for them.
The solution is obvious. Cover all care that people need, and then provide that coverage to everyone, automatically. Maybe these uncaring employers might not like that, but when the taxes to pay for an equitable system are obligatory, they would get used to the idea of their employees being able to obtain health care when they need it. Not such a bad idea after all, especially when their competitors are treated the same.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Growing risk of inequality and poverty as crisis hits the poor hardest
OECD, May 15, 2013
Income inequality increased by more in the first three years of the crisis to the end of 2010 than it had in the previous twelve years, before factoring in the effect of taxes and transfers on income, according to new OECD report and data.
After taxes and transfers, the richest 10 per cent of the population in OECD countries earned 9.5 times the income of the poorest 10 per cent in 2010, up from 9 times in 2007. The gap is largest in Chile, Mexico, Turkey, the United States and Israel, and lowest in Iceland, Slovenia, Norway and Denmark.
Gini Coefficient (higher = greater inequality)
0.316 OECD average (after taxes and transfers)
0.380 United States (after taxes and transfers)
0.499 United States (before taxes and transfers)
0.320 Canada (after taxes and transfers)
0.447 Canada (before taxes and transfers)
Relative Income Poverty Rates
11.1% OECD average (after taxes and transfers)
17.4% United States (after taxes and transfers)
28.4% United States (before taxes and transfers)
11.9% Canada (after taxes and transfers)
26.0% Canada (before taxes and transfers)
OECD report (8 pages): http://www.oecd.org/els/soc/OECD2013-Inequality-and-Poverty-8p.pdf
Compared to the average member nation of the Organization for Economic Cooperation and Development (OECD), the United States has higher levels of poverty and a greater inequality in income.
This OECD report does demonstrate that taxes and transfers (social welfare programs) do reduce the gap, but when you compare the United States and Canada on the amount of redistribution that takes place as a result of these policies, you see that we are much less equitable than Canada.
Although our politicians claim that our taxes are too high and that we need to cut social programs, these results suggest the opposite – that we need more progressive taxes and more generous social benefit programs – maybe like Canada’s single payer Medicare program.
Publicly Financed Health Care in Canada: Who Pays and Who Benefits Over a Lifetime?
Canadian Institute for Health Information, May 2013
All Canadian taxpayers contribute to publicly financed health care, regardless of their use of the system. Publicly funded health care services are available to all on the basis of need, regardless of ability to pay. When we look at the relationship over a lifetime, only the most affluent (the top 20%) contribute significantly more to health care than they receive. For other income groups, the value received from publicly funded health care is approximately the same as or more than the value of taxes paid to fund those services. The redistributive effect of publicly funded health care in Canada is a 16% reduction in the income gap between the highest- and lowest-income groups. Without the publicly financed health system, the lowest-income Canadians would be at risk of going without needed health care or of being impoverished by paying for it.
This report from Canada demonstrates one of the more important functions of a well designed single payer system. To ensure access while preventing impoverishment, financing must be redistributive, because health care costs are unaffordable for moderate and low income individuals and families. Not only does the redistributive financing ensure universal access, it also ameliorates, to a limited extent, the impact of the worsening Gini coefficient (measure of income inequality).
GOP Candidates’ Top Campaign Issue Will Be Obamacare ‘Train Wreck’
By Wendell Potter
The Huffington Post, May 6, 2013
Will the implementation of some of the most important provisions of ObamaCare this fall and next year result in the “train wreck” Senate Finance Chairman Max Baucus (D-Mont.) predicted a few days ago?
No. But you can be certain that there will be no shortage of political candidates and high-powered political spin doctors who will be working relentlessly between now and the 2014 midterms to convince us that it will be.
If the Democrats and consumer advocates who support ObamaCare are not at work developing their own strategies to counter the coming barrage of misleading spin, the GOP will have an excellent chance of controlling Capitol Hill after the next elections.
Of those who are serious about health care reform, some want to abandon the Affordable Care Act (ACA) and immediately enact single payer, and others want to abandon the single payer cause and move full steam ahead with implementation of the ACA. But should we really abandon either approach?
It is clear that ACA alone will be grossly deficient. Thirty million people will remain uninsured, inadequate low actuarial value plans will become the new standard, and wasteful spending will continue because of the highly flawed, administratively complex model of ACA. So single payer should not be abandoned since it is an imperative if we want to have affordable health care for everyone.
Why shouldn’t we abandon ACA? Because, quite simply, it is all that we have right now, and it will provide some limited relief for millions of people. If we were to abandon ACA now, mobilizing a social movement and then enacting and implementing single payer would still take many years – too long for those who would receive some benefit from ACA now.
So we should do both. Let the ACA enthusiasts continue with the implementation, while single payer forces step up the social movement for health care justice though advocacy for an improved Medicare for everyone.
So where is the train wreck? There isn’t any. But Wendell Potter is right. The opponents of reform will latch onto every ACA implementation glitch, real or imagined, and onto the criticisms which will inevitably follow. They will attempt to frame the implementation as a debacle, and run with that in their effort to use election politics to advance their anti-government agenda.
This complicates the message for the single payer camp. We need to educate people as to why ACA will fall intolerably short of reform goals, but we do not want that to become part of the Repeal ACA message. The opponents initially supported Repeal and Replace, but they have largely abandoned Replace, concentrating on Repeal. So how do we counter the Repeal message?
We need to emphasize the positive message of single payer – truly affordable health care for everyone. We can add that we don’t need to repeal ACA since it can help some during the transition to single payer. But our action message should be Replace – letting the public know that we really do have a much better program that will work for everyone, whereas the opponents do not.
So perhaps a unifying message for the supporters of health care justice should be:
Forget Repeal, REPLACE!
Healthcare puts Jerry Brown, Capitol Democrats on different sides
By Anthony York and Chris Megerian
Los Angeles Times, May 10, 2013
With California’s deficit wiped out and its economy starting to hum, this was to be a year when Gov. Jerry Brown was free of the budget logjams that have paralyzed the Capitol.
But instead, the governor has a fight on his hands — with his fellow Democrats. He is on a collision course with them over how to reshape the state’s sprawling, complicated healthcare system to conform with President Obama’s national overhaul.
The sticking points in extending public healthcare to more Californians include how many to add to state insurance rolls, how much to pay doctors and hospitals, and how much money to give counties for their care of the indigent.
The Democrats who control the Legislature — with a veto-proof supermajority — want to make it easier to obtain public insurance than Brown does and send more money to the doctors, hospitals and counties than the governor wants to part with.
The major bill that would expand public insurance under Medi-Cal is from Assembly Speaker John A. Pérez (D-Los Angeles). The measure would make it easier for Californians to enroll in the program by allowing people to sign up online and eliminating requirements that recipients file semiannual financial reports to prove they are still eligible.
Administration officials have said the governor opposes those changes out of concern that the easier enrollment process could lead to fraud.
Isn’t the idea of the Affordable Care Act to get as many people covered as is possible, considering the administrative complexities of this highly flawed model of reform? So what does California Governor Jerry Brown recommend? Do not make enrollment easier since it might lead to fraud!
Enrollment fraud could not possibly occur under a single payer system since it automatically enrolls everyone. We need a change in attitude. A single payer system would start us thinking in the right way about how to cover everyone and still pay for it.
Medicare Overpayments to Private Plans, 1985-2012: Shifting Seniors to Private Plans has Already Cost Medicare $282.6 Billion
By Ida Hellander, David U. Himmelstein, Steffie Woolhandler
International Journal of Health Services, Volume 43, Number 2 / 2013, Posted online May 10, 2013
Previous research has documented Medicare overpayments to the private Medicare Advantage (MA) plans that compete with traditional fee-for-service Medicare. This research has assessed individual categories of overpayment for, at most, a few years. However, no study has calculated the total overpayments to private plans since the program’s inception. Prior to 2004, selective enrollment of healthier seniors was the major source of excess payments. We estimate this has added US$41 billion to Medicare’s costs since 1985. Medicare adopted a risk-adjustment scheme in 2004, but this has not curbed private plans’ ability to game the payment system. This has added US$122.5 billion to Medicare’s costs since 2004. Congress mandated increased payment to private plans in the 2003 Medicare Modernization Act, which was mitigated, to a degree, by the subsequent Affordable Care Act. In total, we find that Medicare has overpaid private insurers by US$282.6 billion since 1985. Risk adjustment does not work in for-profit MA plans, which have a financial incentive, the data, and the ingenuity to game whatever system Medicare devises.
How Does Medicare Overpay Private Plans?
1. The selective enrollment of healthier beneficiaries before 2004, or what we will call “old cherry-picking.” Under the payment formula in effect until 2004, Medicare paid private plans a premium that was risk-adjusted only for a few demographic factors, such as age, gender, disability, whether an enrollee resided in a nursing home, and Medicaid eligibility (a proxy for poverty). Hence a healthy 70-year-old man would bring the same premium as his sicker, 70-year-old neighbor. Private plans used marketing, benefit design, enrollment office location, and other techniques to recruit the healthy and discourage sicker seniors from enrolling.
2. Gaming of Medicare’s more complex risk-adjustment scheme, known as Hierarchical Condition Categories (HCCs). Since 2004, private plans have been selectively enrolling beneficiaries with very mild cases
of the medical conditions included in the HCC risk-adjustment formula; such patients have, on average, substantially lower costs than the risk-adjusted premium payment that Medicare pays the private plan on their behalf. We refer to this as “new cherry-picking.”
3. Congressionally-mandated overpayments included in the 2003 Medicare Prescription Drug, Improvement, and Modernization Act (MMA), including duplicate payments for indirect medical education. The provisions that generated this overpayment were tacked onto the MMA after heavy lobbying by the private insurance industry.
4. Bonus payments from the $8.35 billion CMS Medicare Advantage Quality Bonus Payment Demonstration, an expansion of the $3 billion in quality bonuses contained in the ACA. This demonstration will award bonuses to plans covering more than 90 percent of MA beneficiaries and offset more than one-third of the cuts to MA overpayments mandated by the ACA between 2012 and 2014. According to the General Accountability Office (GAO), the demonstration is so poorly designed that it will generate almost no useful findings to improve quality.
5. Duplicate payments for private plan members who receive all or part of their care at Veterans Health Administration (VA) facilities. Medicare pays the private plan a full premium payment, no matter how much of the patient’s care is delivered (and paid for) by the VA. In an extreme case, a senior might receive all care at the VA, making the premium given to the private plan pure profit. In 2009, 8.3 percent of all MA enrollees were enrolled in the VA.
Advocates of market-based Medicare reforms suggest that competition among private plans will induce greater efficiency and result in cost savings. Our findings indicate that the opposite is true. Private plans have drained more than $280 billion from Medicare since 1985, most of it in the last eight years. Increasing private enrollment through voucher-type Medicare reform (as suggested by Republicans) or through quality bonuses and financial incentives to plans to enroll dual-eligible beneficiaries (as enacted by President Barack Obama’s administration) will almost certainly raise Medicare’s costs, not lower them.
Funds wasted on overpayments to private MA plans could instead have been used to improve benefits for seniors, extend the life of the Medicare Trust Fund by more than a decade, or reduce the federal deficit. Private insurers have enriched themselves at the expense of the taxpayers.
It is time to end Medicare’s long and costly experiment with privatization. The U.S. needs to adopt a single-payer national health insurance program with proven, effective methods for controlling costs.
http://baywood.metapress.com/app/home/contribution.asp?referrer=parent&b… (you may have to cut and paste this link)
Now we know that the private Medicare plans have been overpaid $282 billion in taxpayer funds. The Obama administration has continued to add to the overpayments by expanding eligibility for extra quality award payments to which the plans were not entitled, and by using a bookkeeping gimmick for suspended SGR adjustments. Congress and the administration, in using our taxpayer funds to reward this unprincipled industry, should pay a political price for their misdeeds.
Administration Offers Consumers an Unprecedented Look at Hospital Charges
Centers for Medicare and Medicaid Services, May 8, 2013
New data released today show significant variation across the country and within communities in what hospitals charge for common inpatient services.
“Currently, consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Secretary Sebelius said.
These amounts can vary widely. For example, average inpatient charges for services a hospital may provide in connection with a joint replacement range from a low of $5,300 at a hospital in Ada, Okla., to a high of $223,000 at a hospital in Monterey Park, Calif.
“Transformation of the health care delivery system cannot occur without greater price transparency,” said Risa Lavizzo-Mourey, M.D., RWJF president and CEO.
Medicare Provider Charge Data: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trend…
So now we have access to hospital chargemaster prices – meaningless numbers that nobody pays. And that is going to make us better health care shoppers?
What matters are payments, not prices. Actual payments are negotiated prospectively by private insurers, and even more effectively by Medicare. Cash paying patients usually feebly attempt to conduct negotiations retroactively, if they pay at all.
This CMS effort on hospital price transparency will have almost no impact on controlling total health care spending since chargemaster prices are a fabrication.
There is a far better way to control spending without forcing patients to make unwise health care decisions in their efforts to avoid the financial burdens of health care. Each hospital should be placed on a global budget, just as we do with our police and fire departments. That way, services are rendered simply when needed, without having an associated price tag.
Requiring price shopping as a prerequisite to health care access is anathema to health care justice.
Primary physician shortage calls for intervention
By Sen. Bernie Sanders
Politico, May 7, 2013
The American approach to primary health care is one of the more glaring failures of a dysfunctional health care system that costs almost twice as much per capita as that of any other major country — often with worse results.
Instituting major reforms in primary care and enabling people to see a doctor when they need one will save lives, ease suffering and save billions of dollars in wasteful health care costs. What should we do?
First, we need to substantially increase the number of primary-care practitioners. In most countries, about 70 percent of doctors practice primary care while 30 percent are specialists. We have it backward. Only 30 percent of doctors in America practice primary care.
Second, we must implement a major change in the culture of our medical schools. Some medical schools do an excellent job educating primary-care physicians, but too many do too little and some — believe it or not — do nothing at all. In 2011, about 17,000 doctors graduated from American medical schools. Only 7 percent of those graduates chose a primary-care career.
Third, we need to greatly expand the Federally Qualified Health Center program which today provides high quality and affordable health care, dental care, mental health treatment and low-cost prescription drugs to 22 million Americans, regardless of income. This is a program that provides some of the most cost-effective health care in the country and serves as a medical home for millions with nowhere else to go.
Finally, we should greatly expand the National Health Service Corps, which provides loan-forgiveness and scholarships to students who are prepared to provide medical, dental and mental health care in underserved areas. Like the community health center program, the health service corps has expanded in recent years. In 2012, the corps provided financial help to nearly 10,000 clinicians, nearly three times more than in 2008. That’s a good step forward, but nowhere near enough.
The bottom line is that we need a revolution in primary health care services and accessibility.
(Sen. Bernie Sanders (I-Vt.) is chairman of the Subcommittee on Primary Health Care and Aging of the Senate Health, Education, Labor and Pensions Committee.)
Every expert understands the pressing need to reinforce our primary care infrastructure – a need that grows more urgent with the implementation of the Affordable Care Act. The inevitable transformation into a single payer system will be much smoother if we already have a high-performance primary care infrastructure in place.
Sen. Bernie Sanders provides us with a framework for expanding that system. It’s too bad that we don’t have a Congress that is willing to support the reforms that we need. We need to keep Sen. Sanders and his allies and replace the rest of them.
Tackling the Cost Conundrum
Health Affairs, May 2013
Medicare Essential: An Option To Promote Better Care And Curb Spending Growth
By Karen Davis, Cathy Schoen and Stuart Guterman
We describe a new option we call Medicare Essential, which would combine Medicare’s hospital, physician, and prescription drug coverage into an integrated benefit with an annual limit on out-of-pocket expenses for covered benefits. Cost sharing would be reduced for enrollees who seek care from high-quality low-cost providers. Out-of-pocket savings from lower premiums and health care costs for a Medicare Essential enrollee could be $173 per month, compared to what an enrollee would pay with traditional Medicare, prescription drug and private supplemental coverage. Financed by a budget-neutral premium, we estimate that this new plan choice could reduce total health spending relative to current projections by $180 billion and reduce employer retiree spending by $90 billion during 2014–23. Given its potential, such an alternative should be a part of the debate over the future of Medicare.
Supplemental Coverage Associated With More Rapid Spending Growth For Medicare Beneficiaries
By Ezra Golberstein, Kayo Walsh, Yulei He and Michael E. Chernew
Supplemental coverage makes health care more affordable for beneficiaries but also makes beneficiaries insensitive to the cost of their care, thereby increasing the demand for care. We found that supplemental insurance coverage was associated with significantly higher rates of overall spending growth. Specifically, employer-sponsored and self-purchased supplemental coverage were associated with annual total spending growth rates of 7.17 percent and 7.18 percent, respectively, compared to 6.08 percent annual growth for beneficiaries without supplemental coverage. Results for Medicare program spending were more equivocal, however. Our results are consistent with the belief that current trends away from generous employer-sponsored supplemental coverage and efforts to restrict the generosity of supplemental coverage may slow spending growth.
Public Financing Of The Medicare Program Will Make Its Uniform Structure Increasingly Costly To Sustain
By Katherine Baicker, Mark Shepard and Jonathan Skinner
In this article we describe a model incorporating the benefits of public programs and the cost of tax financing. The model implies that the “one-size-fits-all” Medicare program, with everyone covered by the same insurance policy, will be increasingly difficult to sustain. We show that a Medicare program with guaranteed basic benefits and the option to purchase additional coverage could lead to more unequal health spending but slower growth in taxation, greater overall well-being, and more rapid growth of gross domestic product.
Our model thus helps explain the rapid growth in US health care expenditures relative to other countries. More important, the model highlights the trade-offs in different approaches to reining in public spending — from the current approach of providing a uniform benefit that increasingly crowds out other programs, to a less egalitarian model that guarantees only a basic benefit and redirects some redistribution toward other programs.
Our analysis suggests that the policy of providing a uniform benefit to all — rather than a basic benefit that higher-income residents can augment — may be increasingly untenable if health care expenditures continue to rise.
Why has the United States diverged so dramatically from its counterparts? This divergence is probably not explained by commonly cited factors such as administrative costs — already high by the 1980s — or physician salaries, which have stagnated over the past decade.
The implications of our model are not dissimilar to the idea of voucher-type premium support suggested over the years by Ezekiel Emanuel and Victor Fuchs, Henry Aaron and Robert Reischauer, and Rep. Paul Ryan (R-WI). Indeed, it may appear that this plan most closely resembles a Ryan-style premium support plan.
Our “basic” plan does not correspond so much to a high-deductible or higher-cost-sharing plan, but rather to one that covers a more limited set of treatments or providers. Unlike high-deductible plans, the basic plan need not expose poorer households to the risk of substantial cost sharing. Instead, it is designed to limit coverage to treatments with proven effectiveness at a reasonable cost. Of course, identifying which treatments are of high value — and for which patients — poses substantial challenges.
Perhaps the greatest challenge to offering this kind of plan choice more widely in Medicare is that it would require setting aside the egalitarian goals enshrined in the Medicare legislation of 1965. Publicly providing only basic coverage would implicitly recognize that higher-income households would probably elect to procure more generous coverage — and, ultimately, to obtain more health care and possibly better health outcomes.
Background paper (40 pages): “Optimal Healthcare Spending with Redistributive Financing”
Three Large-Scale Changes To The Medicare Program Could Curb Its Costs But Also Reduce Enrollment
By Christine Eibner, Dana P. Goldman, Jeffrey Sullivan and Alan M. Garber
With Medicare spending projected to increase to 24 percent of all federal spending and to equal 6 percent of the gross domestic product by 2037, policy makers are again considering ways to curb the program’s spending growth. We used a microsimulation approach to estimate three scenarios: imposing a means-tested premium for Part A hospital insurance, introducing a premium support credit to purchase health insurance, and increasing the eligibility age to sixty-seven. We found that the scenarios would lead to reductions in cumulative Medicare spending in 2012–36 of 2.4–24.0 percent. However, the scenarios also would increase out-of-pocket spending for enrollees and, in some cases, cause millions of seniors not to enroll in the program and to be left without coverage.
Additional Reductions In Medicare Spending Growth Will Likely Require Shifting Costs To Beneficiaries
By Michael E. Chernew
The Affordable Care Act created a projected trajectory for Medicare spending per beneficiary that is lower than historical growth rates. Although opportunities for one-time savings exist, any long-term savings from Medicare, beyond those already forecast, will probably require a shift in spending from taxpayers to beneficiaries via higher beneficiary premium contributions (overall or via means testing), changes in eligibility, or greater cost sharing at the point of service.
At a time when our politicians have decided to open discussions on reducing government spending in Medicare, it likely is no coincidence that this cluster of articles on ways of reforming the financing of Medicare appears in the leading journal of health policy – Health Affairs. But beware; the thrust of most of the articles should raise our concerns.
The most alarming articles are the pair from Katherine Baicker and her colleagues. They support unlimited care with “better health outcomes” for higher-income households, with only “basic” care for for the rest of us, even though they note that defining basic care “poses substantial challenges.” Class division in health care seems to be a uniquely American concept. “It would require setting aside the egalitarian goals enshrined in the Medicare legislation of 1965.”
The article by Ezra Golberstein and his colleagues calls for diminishing the financial protection offered by supplemental Medigap and retiree health benefits “to restrict the generosity of supplemental coverage,” making beneficiaries more sensitive to the cost of their care, even though “results for Medicare program spending were more equivocal.” Feeling the pain of their health care spending seems to be the policy goal even if the total reduction in Medicare spending is only nominal.
Christine Eibner and her colleagues propose, “imposing a means-tested premium for Part A hospital insurance, introducing a premium support credit to purchase health insurance, and increasing the eligibility age to sixty-seven” as three means of reducing overall Medicare spending, even though these measures would shift costs to the beneficiaries and cause perhaps millions of them to withdraw from Medicare and remain uninsured.
Michael Chernew keeps it simple. Lowering the projected trajectory for Medicare spending “will probably require a shift in spending from taxpayers to beneficiaries via higher beneficiary premium contributions (overall or via means testing), changes in eligibility, or greater cost sharing at the point of service.” In other words, reduce the tax transfer by sticking it to the seniors.
We can thank Karen Davis, Cathy Schoen and Stuart Guterman for not causing us to lose all hope. Their proposal – “Medicare Essential” – is designed to increase the coverage and efficiency of Medicare. They would combine the hospital Part A, physician Part B, and drug Part D programs into a single program with less administrative complexity. They would also add much needed catastrophic coverage by placing a maximum on out-of-pocket expenses. They would also fold in the benefits of supplemental plans eliminating the need for wasteful, superfluous Medigap and retiree health plans. Their proposal would actually reduce spending for most Medicare beneficiaries while enhancing the benefits.
They would leave in place the flawed Medicare Advantage plans, although competing with a truly superior public plan could make them obsolete – the goal of “the public option.” They would have the deductible apply to Part A, opening the treacherous territory of a path for more cost shifting to beneficiaries. Also they do not mention that Medicare Essential could eventually be expanded to include everyone, becoming an improved Medicare for all. There are many other important features of the PNHP version of the single payer model that they do not address, and that we won’t mention here. Suffice it to say, that Medicare Essential is only a tiny though important step in the direction in which we should be headed.
For incrementalists, Medicare Essential should captivate you. For those of us who are impassioned single payer supporters, we should continue to advocate for moving the political process forward toward achieving an Improved Medicare for All single payer program as soon as possible.
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