Paul Krugman on Thomas Piketty’s “Capital”

Posted by on Thursday, Apr 10, 2014

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.

Why We’re in a New Gilded Age

By Paul Krugman
The New York Review of Books, May 8, 2014

Review of “Capital in the Twenty-First Century”

By Thomas Piketty, translated from the French by Arthur Goldhammer
Belknap Press/Harvard University Press, 685 pp., $39.95

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age — or, as Piketty likes to put it, a second Belle Époque — defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work.

The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

This is a book that will change both the way we think about society and the way we do economics.

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.

The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe.

But this doesn’t have to happen.

At times, Piketty almost seems to offer a deterministic view of history, in which everything flows from the rates of population growth and technological progress. In reality, however, Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation — in particular taxation of wealth and inheritance — can be a powerful force limiting inequality. Indeed, Piketty concludes his masterwork with a plea for just such a form of taxation. Unfortunately, the history covered in his own book does not encourage optimism.

Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.…

Hopefully the excerpts above from Paul Krugman’s review of Thomas Piketty’s “Capital in the Twenty-First Century” will entice you to read Krugman’s full review, and then that will entice you to read Piketty’s full book. If you do so, you’ll understand why Krugman says, “we’ll never talk about wealth and inequality the same way we used to.”

Although a book on capital would seem to be off the topic of health care, Piketty provides us with the background to understand why we can’t seem to get health care financing right here in the United States, though he doesn’t discuss it specifically.

We do use progressive tax policies to partially fund health care through general revenues, but we also burden wage earners with the cost of health plans partially financed through regressive tax expenditures – the tax deductibility of employer-sponsored plans paid by employees through forgone wage increases.

Whereas median household income in the United States is now about $50,000, the cost of health care for the typical family of four is now about $22,000 (Milliman Medical Index). These numbers no longer compute, but they tend to be lost in the fragmented, dysfunctional way in which we finance health care. They cry out for reform.

There are two general approaches – on spending and on revenues – that seem to be imperative. One would be to reduce the wasteful spending in health care that occurs from our profound administrative excesses, our high prices, and the maldistribution of our resources due to a lack of adequate public oversight. A single payer system would redirect our resources to much better use.

The other approach that we need – as the disconnect between income and health costs demonstrates – would be to fund the single payer system through much better defined progressive taxes. Piketty’s treatise shows us that we really don’t have any other alternative. And since we already spend such a large portion of our GDP on health care, a progressively financed single payer system would provide a significant step in the visionary direction that Piketty has laid out for us.

New patient? What insurance do you have?

Posted by on Wednesday, Apr 9, 2014

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.

Primary Care Access for New Patients on the Eve of Health Care Reform

By Karin V. Rhodes, MD, MS; Genevieve M. Kenney, PhD; Ari B. Friedman, MS; Brendan Saloner, PhD; Charlotte C. Lawson, BA; David Chearo, MA; Douglas Wissoker, PhD; Daniel Polsky, PhD
JAMA Internal Medicine, April 7, 2014

The goal of the current study was to simulate the experience of nonelderly adults with 1 of 3 insurance types—private, Medicaid, and uninsured—seeking new patient appointments in 10 diverse states to obtain precise estimates of primary care access before the ACA coverage expansions.

Between November 13, 2012, and April 4, 2013, we made 12,907 calls to 7788 primary care practices requesting new patient appointments. Across the 10 states, 84.7% of privately insured and 57.9% of Medicaid callers received an appointment. Appointment rates were 78.8% for uninsured patients with full cash payment but only 15.4% if payment required at the time of the visit was restricted to $75 or less.

This study reveals the success rates in obtaining a primary care appointment as a new patient by non-elderly adults, prior to full implementation of the Affordable Care Act. So what was it like then, what will the Affordable Care Act do for that, and what would single payer have done to change the results?

Being privately insured provided the greatest probability of success in obtaining an appointment – 85% were able to do so. Close to that – at 79% – were new patients who would pay cash in full at the time of the visit. Medicaid patients had more difficulty – with only 58% being able to make an appointment. Worst of all was for those who would pay cash, but no more than $75 at the time of the visit – only 15% were successful.

Of course, this is what we’ve known all along. Privately insured patients have good access, Medicaid patients have poorer access by virtue of being covered by an underfunded welfare program, and uninsured patients with limited resources have the worst access of all. Those willing to pay cash in full may have been covered by a high-deductible plan but, in any event, were likely to to have the means to pay upfront charges. So money or good insurance will open the doors, whereas Medicaid is dependent on the willingness of the primary care provider to participate in the Medicaid program, and being poor and uninsured… well, good luck.

What will happen now that ACA is well on its way to full implementation? The answer is complex, which is no surprise because the ACA model is itself complex. Let’s look at each category of coverage.

For the very wealthy who are quite willing to pay full fees in cash, and the scheduling staff of the primary care practice understands that, access should approach 100%. If any queues exist, those individuals likely can buy their way to the front of the queue.

For privately insured individuals, whether obtaining coverage through employment or through individually purchased plans within or outside of the exchanges, access may be less than it is now since insurers with the new narrower networks exclude many primary care professionals from their panels. Most individuals will not want to select an out-of-network primary care professional, especially since out-of-pocket costs could be staggering since the cap applies only to in-network care (except for certain emergencies).

Even those employer-sponsored plans that ACA was designed to protect are now moving in the direction of higher deductibles, narrower networks, and even private exchanges with a shift to defined-contribution vouchers. Although the percentage of practices accepting specific insurance plans will decline because of the doctor being excluded from the networks, patients will probably still choose private plans as being their best option. It’s just that they will have to shop more before they find practices that accept their specific insurance.

Finding primary care practices that accept Medicaid may be more difficult. Although there is a temporary increase in primary care evaluation and management payments, that will end very soon. It is likely that there will not be much of an increase in the number of physicians who will agree to accept the low Medicaid payment rates. If those who do accept Medicaid find that the increased volume is crowding out their privately insured patients, then they may feel that they have to cut back or eliminate accepting new Medicaid patients as well.

With an increase in Medicaid managed care organizations, Medicaid patients may have this option, but then that limits their access since they must go to the managed care providers. Also the low payment rates for Medicaid managed care organizations may result in relatively spartan care merely because of the insufficiency of funds. Another possibility is that federally-qualified health centers may be able to increase their capacity because of new funds authorized by ACA. Hopefully these two expansions will provide enough capacity to ensure access of Medicaid patients to at least some form of primary care.

Access for the low-income uninsured – and there will be tens of millions of them – will certainly continue to be impaired. If Congress further expands the funding of federally-qualified health centers, then the uninsured will have that option. But specialized care will likely be out of reach for most.

So, in general, access to primary care is unlikely to change to any major degree as the result of the provisions of ACA. Patients will have less choice of providers, more exposure to out-of-pocket costs, but an increase in funding should improve access to other options such as Medicaid managed care organizations or federally-qualified health centers – especially important for low-income individuals.

What if we had a single payer system instead? Primary care practices would never have to ask a new patient what insurance they had, or whether they intended to pay cash. Patients would never have to check network lists to see whom they could call. (There would still be some “networks” such as Kaiser Permanente, but they would be integrated health systems that patients would choose because of their own preferences.)

With single payer, never again would a new patient have to hear this response from a receptionist: “New patient? What kind of insurance do you have? Oh, I’m sorry. The doctor isn’t able to accept any new patients now.”

Private Medicare Advantage insurers are scamming the nation again

Posted by on Tuesday, Apr 8, 2014

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.

(Unless you are a masochist, skip down to the comment at the end. The following excerpts from the CMS documents are merely to provide verification for the statements in the comment.)

CMS Ensures Higher Value and Quality for Medicare Health and Drug Plans

CMS, April 7, 2014

Today, the Centers for Medicare & Medicaid Services (CMS) issued the 2015 rate announcement and final call letter for Medicare Advantage and prescription drug benefit (Part D) programs.

Payments to Medicare Advantage Plans:

*  CMS estimates that the overall net change to plan payments between 2014 and 2015 to be +0.4 percent, compared to the estimated overall net change to plan payments of -1.9 percent for the proposals in the Advance Notice Individual plan payments will vary by plan based on, but not limited to, its location and star rating.

*  Before the Affordable Care Act, Medicare Advantage plans were paid more than 10 percent compared to traditional Medicare, costing the program more than $1,000 per person each year, while quality and health outcomes were similar to those enrolled in traditional Medicare. The changes underway reduce excessive payments to Medicare Advantage plans, while incentivizing quality improvements by basing part of Medicare Advantage payment on plan quality performance.

*  To provide for continued stability in the Medicare Advantage program, CMS will implement a new phase-in schedule for the Part C risk adjustment model introduced in 2014. In addition, to improve payment accuracy, CMS has refined its risk adjustment methodology to account for the impact of the influx of baby boomers. In addition, for 2015, CMS will not finalize the proposal to exclude diagnoses from enrollee risk assessments.…


Announcement of Calendar Year (CY) 2015 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter

CMS, April 7, 2014

Key Changes from the Advance Notice:

Growth Percentages

CMS-HCC Risk Adjustment Models for CY2015

Medicare Advantage Enrollee Risk Assessments

Normalization Factors

RxHCC Risk Adjustment Model

International Classification of Diseases-10 (ICD-10) Code Sets and Diagnosis Data Sources for 2015 Risk Scores:

Attachment III

Section A. Final Estimate of the National Per Capita Growth Percentage and the Fee-for- Service (FFS) Growth Percentage for Calendar Year 2015

Comment: Several commenters had concerns about the magnitude of changes proposed in the Advance Notice and the potential impact to Medicare beneficiaries and plans. Commenters raised concerns that the payment reductions described in the Advance Notice would lead to significantly higher MA premiums, significantly reduced benefits, or both. Some commenters argued that these cuts would lead to MA plans exiting the market. Some providers noted that the reductions to MA contained in the Advance Notice would seriously threaten their ability to provide high quality care to beneficiaries. We also received comments that the cuts would lead to market contraction, less competition, and ultimately less access for beneficiaries. Commenters requested that we keep Medicare Advantage revenue flat for 2015.

Response: We are committed to a strong, stable Medicare Advantage program and to continued access to high quality plan choices for Medicare beneficiaries. Over the past several years, even as the Medicare Advantage program transitioned to payments that are more aligned with FFS Medicare costs, enrollment in Medicare Advantage has increased to an all-time high of approximately 15 million beneficiaries. Today, nearly 30 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan and benefits remain stable. We believe that the proposals outlined in the Advance Notice will continue the transition to payments that are more comparable to FFS costs, while at the same time continuing the trend toward greater enrollment in high quality plans.

Section G. CMS-HCC (Hierarchical Condition Category) Risk Adjustment Model for CY 2015

Comment: We received a few comments opposing our proposal to use a blend of the 2013 CMS-HCC model and 2014 CMS-HCC model in 2015, and supporting instead calculating risk scores using exclusively the 2013 CMS-HCC model. Many commenters were in support of continuing to use a blend of risk scores from two different models. Two commenters were in favor of ending the phase-in of the clinically revised model introduced in 2014 and calculating risk scores in 2015 using only this model.

Response: As we remain committed to the clinically revised model introduced for the 2014 payment year, we will not use risk scores exclusively from the 2013 CMS-HCC model as recommended by some commenters. Because we still believe that additional time to transition to the 2014 model is needed, we also will not use risk scores from the 2014 model exclusively as recommended by two commenters, and will continue for 2015 payment year to blend the risk scores calculated using the 2013 CMS-HCC and 2014 CMS-HCC models.

In light of the impact of the final payment updates and changes for 2015, however, we are concerned that the use of the 2014 blend percentages of 75% and 25% that we proposed to continue in the Advance Notice would not have the same effects on payment stability that they had last year, and that we assumed they would have when proposing them this year. As in 2014, we will continue to blend the risk scores from the old and new models, in order to both support our intention to move to the updated model while also providing time for plans to transition to its use in payment. Thus, to further our goal of promoting stability and given concerns about the impact of payment changes for 2015, we will blend the two scores using a 67 percent and 33 percent blend, respectively. Specifically, we will blend the risk scores calculated using the 2014 CMS-HCC model with risk scores using the 2013 CMS-HCC model, each appropriately normalized, weighting the normalized risk scores from the 2013 model by 67 percent and the normalized risk scores from the 2014 model by 33 percent. These risk scores from the 2013 and 2014 CMS-HCC models will include the risk scores calculated from the community, institutional, new enrollee, and C-SNP new enrollee segments of the model and will be used in Part C payment for aged/disabled beneficiaries enrolled in MA plans. See Section II.G of the 2014 Advance Notice and Section III.D of the 2014 Rate Announcement for more details on the clinically revised CMS-HCC model.

Section H. Medicare Advantage Enrollee Risk Assessments

Comment: Many commenters opposed the proposal to exclude diagnoses that resulted from home visits, including enrollee risk assessments, unless there was a subsequent clinical encounter.

Response: CMS continues to support the use of enrollee risk assessments for wellness, care coordination, and disease prevention; however, we remain concerned that many home visits are being used primarily for the gathering of diagnoses for payment rather than to provide treatment and/or follow-up care to beneficiaries. We recently instituted a new requirement for MA organizations to identify, in the diagnoses they submit to CMS, which diagnoses are from home visits. These new data will enable CMS, for the first time, to evaluate how many diagnoses are identified in home visits and to assess what effect the home assessments have on the care provided to beneficiaries. In order to allow our policy to be informed by this analysis, we have decided not to implement the proposal to exclude diagnoses from home visits for 2015 payments. We will study the data submitted by MA organizations to determine appropriate policy options for consideration for 2016 and future years.

Section J. Normalization Factors

Comment: The majority of commenters supported CMS’ proposal to calculate the normalization factors for the CMS-HCC and RxHCC risk scores using a methodology to better capture the increased proportion of younger beneficiaries known as the “baby boomers.” Several commenters recommended that CMS make retroactive adjustments to the normalization factors.

Response: We appreciate the support for modifying the normalization factor methodology to account for the influx of baby boomers to the Medicare population. CMS uses historical data to develop normalization factors prior to a payment year in order to promote stability for bidding purposes. Given this policy, CMS will not retroactively change the normalization factors for prior years. However, we did consider whether using more historical data could better inform the calculation of the 2015 normalization factors (in the Advance Notice we proposed using 2012 and 2013 risk scores to estimate annual trends for the CMS-HCC models). By using a quadratic functional form fit to risk scores from 2010 through 2013, the normalization factors will better reflect more recent changes in the population trends. Thus, we are finalizing the 2015 normalization factors for the CMS-HCC and RxHCC models as shown in Table III-2:

Excerpts from Table III-2 2015 Normalization Factors:

0.992  CMS-HCC model implemented in 2013

0.978  Clinically revised CMS-HCC model implemented in 2014

Comment: A number of commenters asked for more transparency around the calculation of the normalization factors.

Response: In Table III-3. below, we show the risk scores used to calculate the normalization factors for 2015.

Excerpts from Table III-3. 2010-2013 Risk Scores Used to Calculate 2015 Normalization Factors

CMS-HCC model implemented in 2013

2010  0.986

2011  0.977

2012  1.009

2013  1.008

Clinically revised CMS-HCC model implemented in 2014

2010  0.978

2011  0.988

2012  0.997

2013  0.995

To access this 154 page announcement, at the following link select “Announcements and Documents” from the left column, and then select “”2015 Announcement” with a release date of “2014-04-07”:


Washington insiders crossing the line in defense of Medicare Advantage

Quote of the Day, April 3, 2014

The Affordable Care Act included provisions to reduce these overpayments to levels comparable to the costs of patients in the traditional Medicare program. AHIP has already used its influence to convince the administration to use chicanery to reduce the cutbacks in the first two years of the reductions (by issuing phony quality awards and by using accounting gimmickry with the scheduled but deferred SGR adjustments). Since the administration seems to be resisting further chicanery (we’ll soon find out) AHIP has intensified its public campaign using some of Washington’s “finest.”…

In an effort to privatize Medicare, conservatives in Congress enacted legislation to provide private Medicare Advantage plans with a 14 percent overpayment in order to unfairly compete with the traditional Medicare program. The Affordable Care Act included measures to gradually eliminate this overpayment. CMS appears to be thwarting the intent of Congress to correct this injustice.

Because of pressure from the insurance industry, the Obama administration used chicanery in the first two years of the ACA implementation to maintain higher Medicare Advantage rates. This year the reduction was to have been 1.9 percent. So the insurance industry initiated an intensive campaign to reverse these reductions. Once again, CMS has used more chicanery to convert their reduction into a 0.4 percent gain – reassuring private insurers that they can continue to expand their private takeover of Medicare.

There are numerous gimmicks that were used, and some of them are quite obscure. For instance, perhaps the most important revision was in the “normalization factors.” Because of the influx of baby boomers into the Medicare program, it was decided to use “a quadratic functional form fit to risk scores from 2010 through 2013” in the CMS Hierarchical Condition Category. To provide “transparency around the calculation of the normalization factors,” they showed “the risk scores used to calculate the normalization factors for 2015.” Glad that’s clear.

Seriously, CMS has used innovative accounting to increase payments to Medicare Advantage plans based on the fact that there is an influx of baby boomers – a subset of Medicare beneficiaries that is younger, healthier, and less expensive than the older beneficiaries already enrolled. Taxpayers will pay more for lower cost beneficiaries. I remember the quadratic equation, but I don’t remember it ever being used to cheat taxpayers and reward the private insurer rentiers.

Rentiers? Those are individuals whose income is derived from capital, and now our nation’s capital is being concentrated in the top centile. If you missed yesterday’s Quote of the Day on Thomas Piketty’s “CAPITAL,” you should not bother reading the CMS song and dance above, and instead read yesterday’s message.

Congress and the Obama administration are serving the interests of the rentiers, and this Medicare Advantage payment scam is only one example. It is time for the people to take control. As Thomas Piketty wrote, “if we are to regain control of capitalism, we must bet everything on democracy.”

qotd: Thomas Piketty – “CAPITAL in the Twenty-First Century”:…

Thomas Piketty – “CAPITAL in the Twenty-First Century”

Posted by on Monday, Apr 7, 2014

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.

CAPITAL in the Twenty-First Century

By Thomas Piketty
Harvard University Press

The overall conclusion of this study is that a market economy based on private property, if left to itself, contains powerful forces of convergence, associated in particular with the diffusion of knowledge and skills; but it also contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based.

The principle destabilizing force has to do with the fact that the private rate of return on capital, r, can be significantly higher for long periods of time than the rate of growth of income and output, g.

The inequality r>g implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental legal contradiction. The entrepreneur inevitably tends to become a rentier, more and more dominant over those who own nothing but their labor. Once constituted, capital reproduces itself faster than output increases. The past devours the future.

The consequences for the long-term dynamics of the wealth distribution are potentially terrifying, especially when one adds that the return on capital varies directly with the size of the initial stake and that the divergence in the wealth distribution is occurring on a global scale.

The problem is enormous, and there is no simple solution.

Many people worry that moving toward greater cooperation and political integration within, say, the European Union only undermines existing achievements (starting with the social states that the various countries of Europe constructed in response to the shocks of the twentieth century) without constructing anything new other than a vast market predicated on ever purer and more perfect competition. Yet pure and perfect competition cannot alter the inequality r>g, which is not the consequence of any market “imperfection.” On the contrary. Although the risk is real, I do not see any genuine alternative: if we are to regain control of capitalism, we must bet everything on democracy.

Although the English translation of Thomas Piketty’s “CAPITAL in the Twenty-First Century” was published only this month, it has already become a classic in the economics literature. This book is not about health care, but it provides us with an excellent background for understanding why we need to reform our current health care financing system. It is a must read, not just for those advocating for health care reform, but for everyone.

Our health care system is designed to support rentiers. Current trends in income and in wealth accumulation indicate that a disproportionate share of global income will continue to shift more and more to the control of the rentiers. We are already seeing a relative decline in financing of health care for wage earners, manifested by higher cost sharing and by more limited access through narrower, lower-cost provider networks.

Piketty shows us how the concentration of capital at the top drives an ever greater percentage of income upwards, with the rentiers having to do nothing further to accomplish that feat. He explains how the solution is progressive income taxes and progressive wealth taxes.

Expanding progressive financing through single payer would provide a step forward in implementing solutions to the iniquities of concentrated wealth. And it would be a significant move since health care constitutes such a large part of our GDP.

Without intervention, there is the risk of major social disruption. If we wish to avoid this, people are going to have to rediscover democracy. As Thomas Piketty says, “if we are to regain control of capitalism, we must bet everything on democracy.”

Do we want to avoid low-value care?

Posted by on Friday, Apr 4, 2014

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.

Avoiding Low-Value Care

Panel: Atul A. Gawande, M.D., M.P.H., Carrie H. Colla, Ph.D., Scott D. Halpern, M.D., Ph.D., M.Bioethics, and Bruce E. Landon, M.D., M.B.A., M.Sc.
The New England Journal of Medicine, April 3, 2014

(Excerpts here are not in continuity.)

Atul Gawande:  When a service is widely recognized as providing little or no benefit, or maybe even harm, what should be done to reduce its use?

I want to start with a seemingly simple question. How do you define low-value care?

Bruce Landon:  It turns out that there are very, very few services that are low-value in all clinical situations. So I actually think it’s really important to use a clinical lens, and particularly for, as I’m taking care of patients, it’s a lens that really focuses on that patient in front of me.

Scott Halpern:  Well, I think it’s incredibly difficult to draw lines, particularly because all our definitions are predicated at the population level. And population-level estimates don’t apply very naturally to individual patients.

So when we describe something as low-value, I think what we’re typically trying to do is to distinguish it from something that is no-value. But it turns out that no-value interventions, first of all, are probably very few and far between. There are very few things we do in medicine that truly could not help any patient to which we might consider applying it.

Landon:  I think it’s going to be hard to address the problem of low-value care by having payers and policymakers make rules, because there’s this clinical heterogeneity story.

Halpern:  The right rates at which we utilize these quote-unquote low-value services is not zero. We don’t want to practice so frugally that we’re missing opportunities to provide benefits to patients by not intervening. So I think at some level, physicians should be comfortable that they can make clearly well-thought-out choices that, although there are recommendations not to do things for the overwhelming majority of patients who fit a particular description, that there may be exceptions where the service is in fact a reasonable choice.

Carrie Colla:  I think that there’s a danger that blunt payment instruments will reduce the high-value care as well, and so I think to some extent that’s why thinking about it at a broader level while also monitoring outcomes, but thinking about it at a broader level in terms of payments makes more sense.

Gawande:  What would you say that the policies of the government ought to be, or of insurers ought to be, in order to make sure decision making more effective for both patients and physicians under these circumstances?

Halpern:  If we had one health insurance coverage system, all the prices would be a lot easier to keep track of, for physicians and patients alike. And it would be much easier to have a set menu at the bedside as these conversations are unfolding, of all the types of information that we would want. I recognize that may be a long way away. But it is one of the sort of unintended consequences of our variegated reimbursement system as it exists today.

Video (30 minute) and link to transcript:

Diagnostic and therapeutic interventions that are of low value remain a dilemma. In this age with an emphasis on containing costs, should interventions that have a high cost in relation to an anticipated minimal or negligible benefit be avoided simply to help “bend the cost curve”? Or should such interventions be offered since even the smallest potential benefit should not be withheld from the patient if the patient desires such?

The easiest decision to be made would be about interventions that clearly provide no benefit under any circumstances, and may even potentially inflict harm. This is not low-value care, but rather it is no-value care. Obviously such interventions should be abandoned. For the few health care professionals using them who fail to respond to educational processes, discipline should be considered.

What about interventions that have a significant risk of major harm but could provide a small benefit that is not commensurate with the potential harm? Clinical judgement begins to enter here, but it would be a rare circumstance where other factors may warrant proceeding with the intervention.

What about the intervention that is very expensive but potentially provides only minimal benefit? Although some might use measures such as anticipated increase in quality-adjusted life years (QALY), there are levels of spending that common sense tells you are far beyond the value of the potential benefit. Rejecting such interventions risks being labeled as rationing, but such a charge does not mean that common sense should be abandoned.

A variation of this category would be lucrative procedures in widespread use for which only a paucity of conflicting data provides a rationale for these practices – high cost but low benefit. Sometimes these correlate with excess capacity in the system, a problem that separate budgeting of capital improvements could improve. Also, administered pricing could lower payments to more closely match the extent of the benefit.

What about the expensive diagnostic intervention that has a very low probability of of turning up a disorder for which therapeutic interventions could be of great benefit, perhaps even life saving? This is where clinical judgement and being sure that the patient is well informed play a crucial role. This is also where those citing the Dartmouth studies hope to reduce health care spending. But if a low-yield test has a real chance of leading to an intervention of potentially great benefit, then the payer should not intervene.

A frequent criticism is that such low-yield tests are done too often to reduce the risk of a malpractice lawsuit, and that we could reduce the costs of malpractice if we did away with these “unnecessary” tests. Since such tests are low yield, frequently nothing significant is found and therefore no lawsuit was prevented. But the judgement should not be based on the cost per lawsuit prevented, but rather on the clinical benefit to the patient. This is why attacking low-yield tests is not a productive way of reducing malpractice costs.

What about the patient who demands an intervention when it is clear that there is no value in what the patient wants? It is the health care professional’s responsibility to inform the patient why such an intervention should not be entertained. Most patients will appreciate informed advice. For the rare ones that do not, physicians should never conspire with a patient to do wrong, even if it results in the patient seeking care elsewhere.

In all of these situations, the interests of the patient must come first. Clinical judgement is required for most of them.

So how do we address the costs? The current leading approaches are to erect financial barriers to care and to impair access by using narrow provider networks. These interventions are inappropriate because they save costs by preventing the patients from receiving appropriate care that they should have.

There is a far better method of reducing inappropriate spending, and that would be to enact a single payer system – an improved Medicare for all. Such a model dramatically reduces administrative waste and improves pricing of health care services. Under a single payer system it is much easier to match payment with value.

Washington insiders crossing the line in defense of Medicare Advantage

Posted by on Thursday, Apr 3, 2014

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.

Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program

By Mark Duggan, Amanda Starc, and Boris Vabson
National Bureau of Economic Research, March 2014

Our results strongly suggest that increased subsidies for private insurance in the Medicare market result in increased insurer advertising, but little additional monetary or medical benefit for consumers.

The measures of plan financial characteristics and quality that we use suggest that only about one-sixth of the policy-induced increase in plan reimbursement is captured by consumers.

While reimbursement increases have an ambiguous welfare impact on consumers, they unambiguously increase costs, through increased numbers of MA enrollees and through increased government spending per MA enrollee. A back-of-the-envelope estimate suggests that this additional spending amounted to approximately $6.4 billion during the final year of our sample period


40 Senators Sign Bipartisan Letter Urging CMS to Maintain Current Medicare Advantage Payment Levels in 2015

AHIP, February 18, 2014…


Stakeholder Groups Send Bipartisan Letter Urging CMS to Protect Seniors in Medicare Advantage

AHIP, March 7, 2014…


140 Physician Organizations Sign CAPG Letter Urging CMS to Protect Seniors in Medicare Advantage

AHIP, March 10, 2014…


204 Members of Congress Sign New Bipartisan Letter Urging CMS to Protect Seniors in Medicare Advantage

AHIP, March 13, 2014…


What They Are Saying: Bipartisan Group of 262 Members of Congress Urges CMS to Protect Seniors in Medicare Advantage

AHIP, March 28, 2014…


Dr. Kavita Patel and John Rother: Proposed Medicare Advantage Cuts “Unjustifiable”

AHIP, March 19, 2014…


Medicare cuts put coordinated care at risk

By John Rother, JD and Kavita K. Patel, MD MS
The Hill, March 13, 2014

In the last few years, growth in healthcare spending has begun to moderate, fueled in part by Medicare’s shift toward new forms of payment based on outcomes and quality. But short-sighted regulations proposed last week would impose dramatic cuts to Medicare Advantage (MA) that may stifle this exciting transformation.

Many of the new cost-containment strategies now underway in original Medicare were pioneered in Medicare Advantage. The models for the Affordable Care Act (ACA)’s Accountable Care Organizations were integrated delivery systems like Intermountain, Kaiser Permanente and Geisinger, which all operated MA plans.

The Center for Medicare and Medicaid Innovation is currently testing a nurse-led care coordination program in nursing homes that is strikingly similar to United Healthcare’s Evercare program. And under the so-called Dual-Eligibles Demonstrations, states, Medicaid and Medicare are working together to implement the successful chronic care strategies pioneered by specialized MA Special Needs Plans like SCAN Health Plan, Caremore and XL Health.

Last year the very plans that developed these innovations weathered a 6.7 percent cut in payment. The effect of the cut was predictable: a majority of counties across the country saw fewer plan options, premiums climbed 6 percent and out of pocket maximums jumped an average of $560.   But now, after federal regulators issued a new proposal February 21, MA appears to be headed for an entirely new round of cuts.

The new cuts would slice another 5.9 percent from Medicare Advantage this year. That amounts to nearly 15 percent in cuts over just two years. This trend is unsustainable without imposing real costs to Medicare and its beneficiaries.

Regulators have offered several rationales for these cutbacks, which can sound plausible at first when considered one by one. After all, Congress did redirect some MA funding to offset costs associated with the ACA, and slower cost growth elsewhere in Medicare arguably would mean some adjustment for MA. However, after examining the overall, cumulative impact of this latest proposal, it’s clear that regulators are missing the forest for the trees.

Continued cuts of this magnitude put at risk the next generation of new cost-saving and quality-enhancing reforms. Even as today’s models of accountable care and primary care innovation are taking hold elsewhere in health care, MA plans would be falling behind due to the forced limit on their investment in cost-curbing strategies. That is bad news for the taxpayers who must help finance Medicare today and in the decades to come.

But the consequences for beneficiaries are even more concerning. As the proposed cuts force plans to pull back from markets they currently serve, some seniors and disabled Americans will have fewer integrated care options from which to choose, or even none at all. For any Medicare enrollee, this is a scenario to avoid. But when you consider how 41% of Medicare beneficiaries make less than $20,000 a year, the proposal becomes unjustifiable.

The Center for Medicare and Medicaid Services (CMS) has the authority to prevent this scenario. They must exercise it.

One element of a smarter approach could be to extend a recently-concluded quality demonstration project. Current law requires CMS to pay bonuses to MA plans that earn 4 or 5 stars in CMS’ 5 star plan evaluation system. But when a now-concluded demonstration program allowed CMS to offer bonuses to 3 and 3.5 star plans, there was a marked improvement in plan quality across MA as plans invested in better care management and partnered with providers to offer the high-value care that patients need. Resurrecting the demonstration would be win/win by mitigating damaging rate cuts for plans while promoting even better quality across the MA program. And rather than denying many beneficiaries the option of pursuing integrated care, continuing the quality demonstration would actually improve the quality of the options availability to them.

Whatever the exact regulatory levers used to reverse the proposed cuts, CMS must change its course. Blunt cuts will only stifle the very innovation which policymakers, providers and patients are so desperate to pursue in a new era of delivery system reform.…

The extraordinary power of AHIP – the health insurance lobby organization – is currently being demonstrated by its astonishing ability to massively recruit Washington insiders and politicians in its effort to salvage the overpayments being made to the private Medicare Advantage plans.

If you review the letters, op-eds, and press releases of the various individuals and organizations that have recently spoken out in support of Medicare Advantage, you will see that they all use the rhetoric of AHIP. The AHIP release of March 28 (link above) shows the extent of involvement of members of Congress, including links to their letters and op-eds, obviously orchestrated by AHIP.

The op-ed reproduced in full above demonstrates not only the use of obvious AHIP rhetoric, but it shows how pervasive the AHIP efforts have been in that they were able to recruit two respected members of the policy community to sign on to this op-ed – John Rother and Kavita Patel. This Washington sellout to AHIP is not just sad, it’s tragic.

It is not as if there were some saving grace in the private Medicare Advantage plans. The new study from NBER (above) is only the latest amongst the innumerable reports showing that most of the extra funds paid to the plans are going to the insurers rather than the beneficiaries. This particular study shows that the insurers are using our tax funds to buy advertising to sell more plans to jack up their revenues. The advertising campaign has been successful in that one-third of Medicare beneficiaries have now enrolled in the private plans.

The Affordable Care Act included provisions to reduce these overpayments to levels comparable to the costs of patients in the traditional Medicare program. AHIP has already used its influence to convince the administration to use chicanery to reduce the cutbacks in the first two years of the reductions (by issuing phony quality awards and by using accounting gimmickry with the scheduled but deferred SGR adjustments). Since the administration seems to be resisting further chicanery (we’ll soon find out) AHIP has intensified its public campaign using some of Washington’s “finest.”

The main claim that AHIP has induced these Washingtonians to make is that seniors on the Medicare Advantage program will have to pay more since the insurers will have to increase premiums and cost sharing to make up for the reduced government payments. What they don’t point out is that reductions in premiums and cost sharing amount to only about one-sixth of the overpayments that the insurers receive.

Think about those numbers. If the Medicare Advantage program were shut down and everyone in Medicare were granted the same reductions in premiums and cost sharing as those in the Medicare Advantage plans, then the entire cost would be only half of total amount of the overpayments that the Medicare Advantage plans are already receiving (tripling the number of people receiving one-sixth of the overpayments).

If members of Congress cared more about the people instead of the insurers, they would respond to the pleas of “don’t cut my Medicare” by telling their constituents that not only will they protect the savings the Medicare Advantage patients are receiving, but they also will give the same savings to everyone else on Medicare, and they will pay for it by getting rid of the Medicare Advantage plans and have a lot of money left over.

What we don’t want to pay for is more expensive advertising to draw people into a program that wastes our taxpayer dollars while rewarding AHIP’s sponsors. Even if John Rother and Kavita Patel become remorseful and do the right thing, unfortunately the members of Congress know that AHIP lobbyists are the ones who will show them the money.

If we expect to use an improved version of Medicare as a model for single payer reform, we are going to have to get rid of the private insurers – the Medicare Advantage plans.

Now the churning begins

Posted by on Wednesday, Apr 2, 2014

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 Ongoing Importance of Enrollment: Churn in Covered California and Medi-Cal

By Miranda Dietz, Dave Graham-Squire, and Ken Jacobs
UC Berkeley Labor Center, April 2014

Projections for enrollment in the new insurance options created under the Affordable Care Act (ACA) are often point-in-time estimates. But just as people frequently move in and out of being uninsured, insurance coverage through Covered California (California’s health insurance marketplace) or through Medi-Cal is dynamic and can change for an individual over the course of a year.

Following each cohort across 12 months and observing changes in income, take up of employer sponsored insurance (ESI), and loss of insurance recorded in the SIPP, the analysis predicts the share of those originally enrolled who will remain in the same type of coverage at the end of the 12 months.

For individuals enrolled in Medi-Cal:

74.5%  Stay in Medi-Cal

16.5%  Income increases, eligible for Covered California

9.1%   Leave for job-based coverage

0.0%   Become uninsured (zero “unlikely to hold in reality”)

For individuals enrolled in Covered California (range between stronger and weaker retention scenarios):

57.5%-53.3%  Stay in Covered California

21.3%-20.5%  Take up Medi-Cal/public coverage

19.0%-18.3%  Leave for job-based coverage

2.2%-7.9%    Become uninsured

Enrollment in Medi-Cal and Covered California will be dynamic as Californians move in and out of coverage and change coverage sources. This policy brief predicts a significant level of churn out of Medi-Cal and Covered California each year. Approximately one-fifth of the cohort of Covered California enrollees are expected to transition to public coverage such as Medi-Cal, and another fifth are expected to transition to employer-sponsored coverage.

Understanding the extent and nature of churn can help in planning for ongoing enrollment, ensuring smooth health coverage transitions and continuity of care, and reducing uninsurance.

*  Effective implementation of the changes aimed at streamlining the redetermination processes is required for the stability of the Medi-Cal population to actually increase.

*  It will be vital for the enrollment infrastructure — from outreach, to the website, to in-person and call-center assistance — to be available and active even outside of open enrollment periods.

*  Making sure that people successfully transition from one type of insurance to another will depend not only on the ease of enrollment, but also the extent to which Covered California and Medi-Cal take advantage of existing institutional points of connection to people undergoing these life transitions, e.g., COBRA notices or government services like unemployment, CalFresh (food stamps), or the Department of Motor Vehicles.

*  It will be important that outreach, enrollment assistance, and effective sign up processes are available throughout the year for Medi-Cal and for those who experience life transitions that qualify them for mid- year enrollment in Covered California.

Bouts of uninsurance are known to have negative health consequences. The uninsured have higher mortality overall, and are more likely to go without care. Those who are not continuously insured underutilize preventive care, and have been found to use more care when they do become insured.

One of the fundamental policy flaws with a fragmented, multi-payer system of financing health care is that the eligibility of each individual for various sources of coverage is dynamic – ever changing – requiring movement in and out of various forms of coverage or ending up with no coverage at all. This study from the UC Berkeley Labor Center shows that just the movement out of California’s Medicaid (Medi-Cal) and exchange plans (Covered California) is projected to be considerable during a twelve month period.

About one-fourth of Medi-Cal enrollees will leave the program because of income increases exceeding eligibility levels for the program, or because of becoming qualified for job-based coverage. For the Covered California exchange, almost half will leave because of a decline in income to levels eligible for Medi-Cal, or because of a transfer into job-based coverage, or simply because of falling into the ranks of the uninsured.

When you look at their recommendations to ameliorate the instability of coverage, it demonstrates once again that ACA is increasing the administrative complexity of our system when what we need is the administrative simplicity of a single payer system.

This study does not address the many other circumstances that can result in a change or loss of coverage, especially with employer-sponsored plans. Unstable coverage – churning – can have negative consequences because of disruption of continuity of care such as through your source of primary care, especially if you have or will have a chronic disorder requiring ongoing medical management.

The following paragraph is from a 2008 Quote of the Day (before ACA) that describes a few but by no means all of the reasons for churning. Churning is not a new discovery. Unfortunately, the ACA improvements have only a minimal impact in reducing churning. With the new mandates, eligibility requirements and other ACA provisions, churning may actually show a net increase. Reading this paragraph will once again remind you why we need single payer reform – an improved Medicare that covers absolutely everyone, forever. With single payer, churning is eliminated.

“You may have changed jobs, likely more than once, and lost the coverage that your prior employer provided. Your employer may have changed plans because of ever-increasing insurance premiums. Frequently your insurer introduces plan innovations such as larger deductibles, a change from fixed-dollar copayments to higher coinsurance percentages, tiering of your cost sharing for services and products, reduction in the benefits covered, dollar caps on payouts, and other innovations all designed to keep premiums competitive in a market of rapidly rising health care costs. You may have lost coverage when your age disqualified you from participating in your parents’ plan. You may have found that health benefit programs have been declining as an incentive offered by new employers. Your children may have lost coverage under the Children’s Health Insurance Program when your income, though modest, disqualified your family from the program. Your union may not have been able to negotiate the continuation of the high-quality coverage that you previously held. Your employer may have reduced or eliminated the retirement coverage that you were promised but not guaranteed. Your employer may have filed for bankruptcy without setting aside the legacy costs of their pensions and retiree health benefit programs. You may have decided to start your own small business and found that you could not qualify for coverage because of your medical history, even if relatively benign, or maybe your small business margins are so narrow that you can’t afford the premiums. You may have been covered previously by a small business owner whose entire group plan was cancelled at renewal because one employee developed diabetes, or another became HIV infected. Your COBRA coverage may have lapsed and you found that the individual insurance market offered you no realistic options. You may have retired before Medicare eligibility, only to find that premiums were truly unaffordable or coverage was not even available because of preexisting medical problems.”…

Paul Krugman: “Obamacare IS the conservative alternative”

Posted by on Tuesday, Apr 1, 2014

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.

Obamacare Lives!

By Ross Douthat
The New York Times, March 31, 2014

Back when rate shock, website problems and lagging enrollment were threatening to unravel the new health care law before it fully took effect, I concluded a column on Obamacare’s repeated near-death experiences with the following warning to conservatives:

“The welfare state’s ability to defend itself against reform, however, carries a cautionary message for Obamacare’s critics as well. What isn’t killed outright grows stronger the longer it’s embedded in the federal apparatus, gaining constituents and interest-group support just by virtue of its existence even if it doesn’t work out the way it was designed. And as disastrous as its launch has been, if the health care law can survive this crisis in the same limping, staggering way it survived Scott Brown and the Supremes, then it will be a big step closer to being part of the status quo, with all the privileges and political strength that entails.

“So yes — it’s possible that this brush with death will be fatal, possible that the law will fall with the lightest, most politically painless push. But it’s still likely that Obamacare will be undone only if its critics are willing to do something more painful, and take their own turn wrestling with a system that resists any kind of change.”

With the latest numbers showing exchange enrollment climbing toward 7 million, I think we can safely retire that “possible,” and change the “likely” to an “all-but-definite.” Not because rising enrollment proves that Obamacare is definitely working, in the sense that both its friends and critics would have originally understood the term. We don’t know yet what the paid enrollment looks like or how successfully the program is actually enrolling the uninsured. (After some grim estimates, this Rand study is making liberals feel a little more optimistic, but still suggests a below-expectations result.) We don’t know what the age-and-health-status composition of the enrollee pools looks like or what that means for premiums next year and beyond. We don’t know if any of the suspended/postponed provisions of the law will actually take effect. And we certainly don’t know what any of this means for social policy in the long run.

But we do know that there won’t be an immediate political unraveling, and that we aren’t headed for the kind of extremely-low-enrollment scenario that seemed conceivable just a few months ago, or the possible world where cancellations had ended up outstripping enrollment, creating a net decline in the number of insured. And knowing that much has significant implications for our politics. It means that the kind of welfare-state embedding described above is taking place on a significant scale, that a large constituency will be served by Obamacare (through Medicaid as well as the exchanges) in 2016 and beyond, and that any kind of conservative alternative will have to confront the reality that the kind of tinkering-around-the-edges alternatives to Obamacare that many Republicans have supported to date would end up stripping coverage from millions of newly-insured Americans. That newly-insured constituency may not be as large as the bill’s architects originally hoped, or be composed of the range of buyers that the program ultimately needs. But it will be a fact on the ground to an extent that was by no means certain last December. And that fact will shape, and constrain, the options of the law’s opponents even in the event that Republicans manage to reclaim the White House two years hence.

Such political and policy constraints, I should note, are potentially a good thing for would-be conservative reformers, since the serious right-of-center alternatives to Obamacare have always included policies to expand coverage, and with a coverage expansion accomplished, Republicans may find themselves effectively forced in a more serious direction. (This is a drum that Avik Roy, among others, has been beating for some time.) Or so I would hope; of course, they might just end up drifting toward gimmicky micro-reforms instead, or find themselves embroiled a ruinous civil war over how hard to push toward some kind of full repeal.

But wherever they go and whatever they do, they will have to deal with the reality that Obamacare, thrice-buried, looks very much alive.


Obamacare, The Unknown Ideal

By Paul Krugman

No, I haven’t lost my mind — or suddenly become an Ayn Rand disciple. It’s not my ideal; in a better world I’d call for single-payer, and a significant role for the government in directly providing care.

But Ross Douthat, in the course of realistically warning his fellow conservatives that Obamacare doesn’t seem to be collapsing, goes on to tell them that they’re going to have to come up with a serious alternative.

But Obamacare IS the conservative alternative, and not just because it was originally devised at the Heritage Foundation. It’s what a health-care system that does what even conservatives say they want, like making sure that people with preexisting conditions can get coverage, has to look like if it isn’t single-payer.

I don’t really think one more repetition of the logic will convince many people, but here we go again. Suppose you want preexisting conditions covered. Then you have to impose community rating — insurers must offer the same policies to people regardless of medical history. But just doing that causes a death spiral, because people wait until they’re sick to buy insurance. So you also have to have a mandate, requiring healthy people to join the risk pool. And to make buying insurance possible for people with lower incomes, you have to have subsidies.

And what you’ve just defined are the essentials of ObamaRomneyCare. It’s a three-legged stool that needs all three legs. If you want to cover preexisting conditions, you must have the mandate; if you want the mandate, you must have subsidies. If you think there’s some magic market-based solution that obviates the stuff conservatives don’t like while preserving the stuff they like, you’re deluding yourself.

What this means in practice is that any notion that Republicans will go beyond trying to sabotage the law and come up with an alternative is fantasy. Again, Obamacare is the conservative alternative, and you can’t move further right without doing no reform at all.



There have been many isolated efforts to define the conservative, or Republican, or libertarian proposal to replace the Affordable Care Act (ACA or Obamacare), but there is no one model that the Republicans wish to advance in Congress at this time. The Republican controlled House of Representatives has voted fifty times to repeal ACA, but they have not voted on any substitute to address the widely acknowledged deficiencies in health care financing.

Conservative Ross Douthat and liberal Paul Krugman now provide us with a perspective on the conservative/Republican alternative for reform.

Douthat acknowledges that a conservative goal is to expand coverage (especially for the more vulnerable), whereas the current “tinkering-around-the-edges alternatives to Obamacare that many Republicans have supported to date would end up stripping coverage from millions of newly-insured Americans.” He suggests that the policy restraints of an ACA already in place would force Republicans “in a more serious direction.”

Krugman, on the other hand, writes, “Obamacare IS the conservative alternative.” Not only does it meet many of the conservative goals of insurance reform, it was even designed by the conservatives. The liberal position would have been to support a single payer model.

Single payer was abandoned in favor of the conservative model that would bring Republicans on board with a new, post-partisan president, while liberals would forfeit the single payer advantages in exchange for a politically feasible, bipartisan accord.

Think of where that puts us now. If the conservatives were to gain complete control, they would tweak ACA to loosen regulation of insurers, to reduce federal funding, and to place greater control within the states. If the liberals were to gain complete control, they would tweak ACA to correct many of the defects that were left in place when the negotiations refining the legislation were halted abruptly because of the Democrats having lost a filibuster-proof majority in the Senate (not to mention the sabotage of a former Democratic vice-presidential nominee).

The fact that further battles will all take place over on the right is a tragedy. The fundamental structure of ACA is irreparably flawed, as would be any modifications that the Republicans would make to move the insurance function further into the private marketplace. Already we have seen a great multitude of very serious flaws that scream out for remedial legislation. But each new patch creates more complexity. The fundamental infrastructure cannot be repaired by patches. We need a new infrastructure (and it would be better and cheaper!).

Krugman says, “in a better world I’d call for single-payer.” Let’s make this a better world.

The High Burden of Health Care Costs on Insured Adults

Posted by on Monday, Mar 31, 2014

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.

Beyond Coverage: The High Burden of Health Care Costs on Insured Adults in Massachusetts

By Sharon K. Long
BCBS of Mass Foundation, RWJ Foundation, Urban Institute, March 2014

These findings highlight the vulnerability that Massachusetts families experience when faced with high health care costs. Overall, 42.5 percent of all nonelderly adults in the state reported that health care costs had resulted in financial problems or health care access problems for their families in the past year, with the burden greater for low-income adults (46.5 percent for those with income at or below 138 percent FPL) and middle-income adults (53.9 percent for those with income between 139 and 399 percent FPL). Nearly three-quarters (70.6 percent) of those who were uninsured for all or part of the year reported problems with health care costs. However, neither higher income nor health insurance coverage protected Bay State families: 31.7 percent of higher-income adults and 38.7 percent of adults with insurance coverage for the full year also reported that health care costs had resulted in problems for their families.

Health care costs are creating difficult choices for families in Massachusetts. Insured adults frequently reported going without needed care because of costs, cutting back on non-health-related spending to pay for health care, and reducing their family’s financial security to pay for health care, both by reducing savings and by taking on debt, including credit card debt. As a result, medical debt had a significant impact on many families, particularly middle-income families, with contacts from collection agencies quite common.…


Health Insurance Coverage Is Just The First Step: Findings From Massachusetts

By Sharon Long, Kate Willrich Nordahl, Kaitlyn Kenney Walsh, Kathy Hempstead, and Ariel Fogel
Health Affairs Blog, March 26, 2014

The challenges faced by low-income and middle-income Massachusetts families are particularly worrisome given that the consumer protections for out-of-pocket health care costs are generally better in Massachusetts than those required under the ACA. For individuals with family income between 100 and 200 percent of poverty who are enrolled in the state’s subsidized health insurance program, out-of-pocket spending for covered prescriptions and medical services is limited to $1,000 per benefit year. The ACA allows individuals in this income cohort to have out-of-pocket costs that can sum to more than double this amount ($2,250).…

The provisions of the Affordable Care Act (ACA) have provided the nation with health care coverage similar to that which has existed in Massachusetts. However, “the consumer protections for out-of-pocket health care costs are generally better in Massachusetts than those required under the ACA.” Though Massachusetts has better coverage, “Overall, 42.5 percent of all nonelderly adults in the state reported that health care costs had resulted in financial problems or health care access problems for their families in the past year.”

Over half of middle-income adults in Massachusetts also “reported that health care costs had resulted in financial problems or health care access problems for their families.”

Furthermore, “neither higher income nor health insurance coverage protected Bay State families: 31.7 percent of higher-income adults and 38.7 percent of adults with insurance coverage for the full year also reported that health care costs had resulted in problems for their families.”

This is the shocking truth about our new national standard of underinsurance: In spite of having greater financial protection than that offered through the Affordable Care Act, over one-half of middle-income adults and nearly one-third of higher-income adults in Massachusetts still had problems with health care costs. And many of those who didn’t have problems likely avoided them by being fortunate enough to remain healthy. That is not the way an egalitarian health care financing system should work.

This ACA turkey won’t fly. All of us, including many of those with higher incomes, would benefit from single payer.

Canada is paying more and getting less from private insurers

Posted by on Friday, Mar 28, 2014

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.

Canadians spend more on private health insurance for smaller payouts

Medical Xpress, March 24, 2014

Spending by Canadians on private health insurance has more than doubled over the past 20 years, but insurers paid out a rapidly decreasing proportion as benefits, according to a study published today in the CMAJ (Canadian Medical Association Journal).

The study, by University of British Columbia and University of Toronto researchers, shows that overall Canadians paid $6.8 billion more in premiums than they received in benefits in 2011.

Approximately 60 per cent of Canadians have private health insurance. Typically obtained as a benefit of employment or purchased by individuals, private health insurance usually covers prescription drugs, dental services and eye care costs not paid by public health care.

Over the past two decades, the gap between what insurers take in and what they pay out has increased threefold. While private insurers paid out 92 per cent of group plan insurance premiums as benefits in 1991, they paid only 74 per cent in 2011. Canadians who purchased individual plans fared even worse, with just 38 per cent of their premiums returned as benefits in 2011.

“Small businesses and individual entrepreneurs are the hardest hit – they end up paying far more for private health coverage,” says study lead author Michael Law, an assistant professor in UBC’s Centre for Health Services and Policy Research, “It’s essentially an extra health tax on one of our main economic drivers.

“Our findings suggest that private insurers are likely making greater profits, paying higher wages to their executives and employees, or spending more on marketing,” Law adds.…

CMAJ article (first page, paywall for rest):

Although Canada’s single payer system provides excellent coverage for most health care, a market for private health insurance sprung up to cover prescription drugs, dental services and eye care that were not covered by the original program. The for-profit insurers did what they are expected to do. They began by retaining 8 percent of premiums for administrative costs and profits. But after two decades, they now retain as much as 62 percent of premiums for profits, high executive compensation, marketing and other administrative costs.

Although some are calling for more regulation of Canada’s private insurers, they should have learned from the experience in the United States. No amount of regulation will eliminate their inefficiencies and waste. Coverage for these services should be rolled over into the public single payer system.

Opponents protest that Canada cannot afford to offer these benefits in their public program. Nonsense. Most Canadians are already receiving drugs, dental care and eye care, and it is being paid for out-of-pocket or through private insurance. The money is already being spent; it just needs to be spent better. Placing these benefits into the public program would do the following things: 1) administered pricing would ensure value, 2) financial barriers to care would be reduced, 3) financing would be more equitable, and 3) the excesses and waste of the private insurers would be eliminated.

When we enact our single payer system here in the United States, we’ll need to be sure that we don’t make the same mistakes as Canada, though they are far fewer than our blunders.

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