‘Cadillac tax’ threatening public union health benefits

Posted by on Monday, Aug 5, 2013

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.

Health Care Law Raises Pressure on Public Unions

By Kate Taylor
The New York Times, August 4, 2013

Cities and towns across the country are pushing municipal unions to accept cheaper health benefits in anticipation of a component of the Affordable Care Act that will tax expensive plans starting in 2018.

The so-called Cadillac tax was inserted into the Affordable Care Act at the advice of economists who argued that expensive health insurance with the employee bearing little cost made people insensitive to the cost of care. In public employment, though, where benefits are arrived at through bargaining with powerful unions, switching to cheaper plans will not be easy.

Steven Kreisberg, the director of collective bargaining and health care policy at the American Federation of State, County, and Municipal Employees, said the term Cadillac tax was misleading, because it “connotes a certain aspect of luxury in these health plans that is just factually incorrect.”

Cities including New York and Boston, and school districts from Westchester County, N.Y., to Orange County, Calif., are warning unions that if they cannot figure out how to rein in health care costs now, the price when the tax goes into effect will be steep, threatening raises and even jobs.

“I think it was misguided all along,” Robert B. Reich, the former labor secretary, said in an e-mail. When the law was being written, he said, he worried that the tax was “a blunt instrument that could too easily become a bargaining chit for cutting back benefits of workers.”

“Apparently, that’s what it’s become,” Mr. Reich, who is a professor of public policy at the University of California, Berkeley, said.

Under the tax, plans that cost above a certain threshold in 2018 — $10,200 annually for individual plans and $27,500 for family plans, with slightly higher cutoffs for retirees and those in high-risk professions like law enforcement — will be taxed at 40 percent of their costs in excess of the limit. (The thresholds will rise with inflation after 2018.)

State and local governments across the country tend to offer more expensive health plans than private businesses do, and workers often accept smaller wage increases to retain their benefits. Because of this, state and local government employees are expected to be disproportionately represented among those whose plans will be subject to the tax.

So the administration of Mayor Michael R. Bloomberg, in its final months in office, is asking municipal unions to agree to seek new bids for the city’s health insurance business, hoping to lower premiums. But lower-cost plans are likely to involve greater out-of-pocket costs and more limited networks of doctors, and so far, the response from labor has been cool.

Jonathan Gruber, an economist at the Massachusetts Institute of Technology who was a paid consultant to the Obama administration on health care policy, said forcing state and local governments to rein in health care costs was exactly what the tax was intended to do.


Obama demands tax on Cadillac plans

Comment by Don McCanne
Quote of the Day, January 7, 2010

What is the deal on the excise tax on high-premium “Cadillac” health plans, and why is President Obama pushing this tax so vigorously in the final stages of enacting health care reform?

Well, he is pushing it because his advisers tell him that it would help to achieve his first and foremost goal of slowing the increase in health care spending. The rhetoric being used implies that taxing high-premium plans would reduce the waste of paying for extravagant, non-essential benefits that are of little practical value. We’ll first dismiss this misperception and then follow with an explanation of why this form of cost management results in detrimental health outcomes.

The so-called Cadillac plans are merely plans with high premiums. The Health Affairs article by Jon Gabel and his colleagues (at link below) demonstrates that only 3.7 percent in the variation in premiums can be explained by the actuarial value inherent in the benefit design. In most instances, the higher premiums are not due to “Cadillac” benefits, but they are due to other factors, such as the type of industry providing the employment and the medical costs in the region.

Employers will not want to pay the excise tax, so they will demand from the insurers premiums that are at or below the tax threshold. Insurers will not simply reduce the premiums and continue to offer the same benefit packages. They will lower their benefits, lowering the actuarial value of the plans. There is absolutely no doubt that high and ever-increasing deductibles will be the norm.

The philosophy of controlling health care spending by shifting the financial burden to individuals and families is the most serious defect in the legislation before Congress. The excise tax on high-premium plans is only an example of this shift. The most glaring example is that the national standard proposed for basic plans has an actuarial value set at the unacceptably low level of 70 percent or even less. Making insured individuals pay money they don’t have to access care that is unaffordable is the worst way to control health care spending.


Many of the health policies in Obamacare are not only highly flawed, they were known to be so as the Act was being crafted. The tax on Cadillac plans – standard full benefit plans that are expensive only because health care is expensive – is one of these we-told-you-so, seriously flawed policies.

Unions representing public employees have been more successful in maintaining the actuarial value of their plans, that is, ensuring that the plans will prevent financial hardship for those who need health care. Now Obamacare has provided local governments with a tool – the Cadillac tax – to bring employees’ health plans into compliance with high-deductible, low actuarial value underinsurance plans that have become the norm in the individual insurance market and are becoming more prevalent in the workplace. It is well established that these plans cause worse health outcomes and greater financial hardship.

It is complete nonsense to take good plans and wreck them so that they’ll all be equally bad, when what we need to do is to provide everyone with protection against financial hardship when accessing essential health care services. This is precisely what the health policies of the single payer model are designed to do. Let’s get our policies right.

Steve Auerbach on Stossel

Posted by on Friday, Aug 2, 2013

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.

A Healthy Debate

Fox Business Channel, April 25, 2013

On John Stossel’s show, pediatrician Steve Auerbach debates orthopedist Lie Hieb.

7 minute video:


Steve Auerbach is a member of the executive board of the N.Y. Metro chapter of Physicians for a National Health Program (PNHP) which supports a single payer system – an improved Medicare for all. John Stossel, the moderator, is a libertarian, and, as such, is not supportive of government programs such as single payer. Lee Hieb is a past president of the Association of American Physicians and Surgeons (AAPS) which supports a free market medical system and is opposed to government or corporate intervention.

The debate, such as it is, is no contest. Considering the limited time, Dr. Auerbach presents a convincing case for single payer reform, whereas Stossel gains no ground with his libertarian pitches, and Dr. Hieb is simply not credible as she presents the AAPS distortions and untruths.

In this video, Dr. Auerbach provides us with lessons on taking the higher moral ground.

EHealth moves in for the kill

Posted by on Thursday, Aug 1, 2013

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.

EHealth Wins Approval to Sell Obamacare Health Plans

By Alex Wayne
Bloomberg, July 31, 2013

Online health insurance broker EHealth Inc. (EHTH) won permission from the U.S. government to enroll customers for subsidized plans offered under the federal health-care law.

EHealth will be able to tap into a government computer system allowing the company to determine whether people shopping for plans at its website are eligible for tax subsidies for their health insurance, the Mountain View, California company said today in a statement. The information will enable EHealth to offer customers subsidized plans available in their state.

The company has been lobbying the federal government for the agreement (for 36 states not electing to establish their own exchanges), as well as urging similar permission from 14 states that are building their own marketplaces called exchanges to sell insurance to people who don’t get it at work.

It won’t cost the government or customers anything extra when people enroll through EHealth, (Chief Executive Officer Gary) Lauer said in a May 14 conference call with reporters. The company will instead collect a commission from insurance companies such as UnitedHealth Group Inc. (UNH) when it enrolls people in their plans.

EHealth collects about 7 percent of monthly premiums as commission for the plans it sells now, Lauer said. Carriers will probably negotiate a lower commission for plans sold in government exchanges because “the risk is a little bit more unknown,” he said.

EHealth shares gained 28 percent to $30.74 at the close in New York, the biggest single-day increase since October 2006.


Today’s comment is a repeat of the Quote of the Day comment from November 9, 2009. It is more evidence that we have been trying to warn the nation about the intolerable flaws in the Affordable Care Act and that there is a far better alternative, but the people who can do something about it are not listening.

eHealth is ready to connect America
Quote of the Day, November 9, 2009

eHealth is ready to become the nation’s broker for private health insurance.

This is yet one more reason why the model of reform selected by Congress and the Obama administration is the most expensive of all. With all of the other wasteful administrative expenses, brokers’ fees are added on top, though often hidden in the premium as a commission rather than a fee.

Compare this to Medicare enrollment. The administrative costs for automatic enrollment in Medicare, at that only once in a lifetime, are negligible for the government and its taxpayers.

Imagine the simplicity and efficiency of automatic, lifetime Medicare enrollment at birth for everyone. But Congress won’t go there… not until the nation demands it.

Friedman analysis of HR 676: Medicare for All would save billions

Posted by on Wednesday, Jul 31, 2013

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.

‘Medicare for All’ would cover everyone, save billions in first year: new study

Physicians for a National Health Program
July 31, 2013

Upgrading the nation’s Medicare program and expanding it to cover people of all ages would yield over a half-trillion dollars in efficiency savings in its first year of operation, enough to pay for high-quality, comprehensive health benefits for all residents of the United States at a lower cost to most individuals, families and businesses.

That’s the chief finding of a new fiscal study by Gerald Friedman, a professor of economics at the University of Massachusetts, Amherst. There would even be money left over to help pay down the national debt, he said.

Friedman says his analysis shows that a nonprofit single-payer system based on the principles of the Expanded and Improved Medicare for All Act, H.R. 676, introduced by Rep. John Conyers Jr., D-Mich., and co-sponsored by 44 other lawmakers, would save an estimated $592 billion in 2014. That would be more than enough to cover all 44 million people the government estimates will be uninsured in that year and to upgrade benefits for everyone else.

“No other plan can achieve this magnitude of savings on health care,” Friedman said.

His findings were released this morning [Wednesday, July 31] at a congressional briefing in the Cannon House Office Building hosted by Public Citizen and Physicians for a National Health Program, followed by a 1 p.m. news conference with Rep. Conyers and others in observance of Medicare’s 48th anniversary at the House Triangle near the Capitol steps.


Funding HR 676: The Expanded and Improved Medicare for All Act: How we can afford a national single-payer health plan

By Gerald Friedman, Ph.D.
July 31, 2013

Executive Summary

The Expanded and Improved Medicare for All Act, HR 676, introduced into the 113th Congress by Rep. John Conyers Jr. and 37 co-sponsors, would establish a single authority responsible for paying for medically necessary health care for all residents of the United States.

Under the single-payer system created by HR 676, the U.S. could save an estimated $592 billion annually by slashing the administrative waste associated with the private insurance industry ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). In 2014, the savings would be enough to cover all 44 million uninsured and upgrade benefits for everyone else. No other plan can achieve this magnitude of savings on health care.

Specifically, the savings from a single-payer plan would be more than enough to fund $343 billion in improvements to the health system such as expanded coverage, improved benefits, enhanced reimbursement of providers serving indigent patients, and the elimination of co-payments and deductibles in 2014. The savings would also fund $51 billion in transition costs such as retraining displaced workers and phasing out investor- owned, for-profit delivery systems.

Health care financing in the U.S. is regressive, weighing heaviest on the poor, the working class, and the sick. With the progressive financing plan outlined for HR 676 (below), 95% of all U.S. households would save money.

HR 676 (Section 211, Appendix 2) specifies a financing plan for single-payer that includes
• Maintaining current federal financing for health care
• Increasing personal income taxes on the top 5% of income earners
• Instituting a modest tax on unearned income
• Instituting a modest and progressive tax on payroll, self-employment
• Instituting a small tax on stock and bond transactions

The following progressive financing plan would meet the specifications of HR 676:
• Existing sources of federal revenues for health care
• Tax of 0.5% on stock trades and 0.01% tax per year to maturity on transactions in bonds, swaps, and trades
• 6% high-income surtax (applies to households with incomes > $225,000)
• 6% tax on unearned income from capital gains, dividends, interest, profits, and rents
• 6% payroll tax on top 60% of income earners (applies to incomes over $53,000, tax paid by employers)
• 3% payroll tax on the bottom 40% of income earners (applies to incomes under $53,000, tax paid by employers)

HR 676 would also establish a system for future cost control using proven-effective methods such as negotiated fees, global budgets, and capital planning. Over time, reduced health cost inflation over the next decade (“bending the cost curve”) would save $1.8 trillion, making comprehensive health benefits sustainable for future generations.


This is the report that single payer advocates have been waiting for. Economics Professor Gerald Friedman of the University of Massachusetts at Amherst has provided us with an analysis of the financing of John Conyers’ HR 676: The Expanded and Improved Medicare for All Act. The results are quite impressive, especially considering the comprehensiveness of the HR 676 reforms. Dr. Friedman’s report will be invaluable in our advocacy for a single pager national health program.

The analysis shows that we really can provide everyone with comprehensive health care without causing a financial hardship for anyone. This is made possible by depending on progressive tax policies. Since it is likely that the opposition will become apoplectic when they see the proposed taxes, we should be prepared to explain why progressive tax policies to fund health care are a good thing rather than a bad thing.

Let’s begin with two fundamental principles: 1) All of us should have the health care that we need, and 2) Obtaining health care should not ever result in financial hardship. Having health problems is enough without adding the financial penalties of paying for health care simply because of having the misfortune of being sick or injured.

Our audience is not those who disagree with these principles. We will never be able to satisfy them. Rather we need to address those who agree but cringe and withdraw when they see a recommendation for TAXES!

We need to keep in mind that we are not working with the spending baseline that we had when we began to advocate for single payer a couple decades ago. (They should have listened to us then!) Health costs are now a much larger percentage of our economy. Health care costs for the average working family of four are now over $22,000, when median household income is about $50,000. It is now impossible to meet the goal of providing affordable health care for everyone without making the wealthy pay more than the rest of us. Financing must be progressive it we are to meet our goals.

The Affordable Care Act (ACA) has included several policies that do increase the progressivity of financing, but it depends on an administratively wasteful, fragmented system that is the source of many of the problems in health care today. Many who cannot afford their allocated share will still pay too much, and many more will not even receive the care that they should have merely because of the dysfunctional financing method perpetuated by ACA. In contrast, the administrative simplicity of progressive taxes ensures an equitable method of financing care, making it affordable for everyone.

For those who say that we can’t afford the taxes, remind them that the taxes displace much of our current spending for health care. Because of the efficiencies of the single payer model of financing, the amount that we would spend in increased taxes for health care is less than the amount we would save in recovering the administrative and clinical waste of our current system. Not only will we be paying less in taxes than the excessive amount that we are currently paying for our dysfunctional system, the payment will become much more transparent so that we finally would know what health care really costs us. Much of the costs are hidden today.

People often think that health care costs are what they or their employers pay in private insurance premiums, plus out-of-pocket expenses. In fact, in 2012 we paid only about $884 billion in private insurance premiums, though our total national health expediters were about $2,831 billion. It is that other $1,947 billion of relatively hidden health care costs that we are already paying that will be more transparent under a public tax system. When you think of these numbers, you can better understand why the proposed taxes seem to be so high.

Rather than fixating on just the taxes proposed in HR 676, it is much more important to look at the change in income that each person faces as a result of these tax policies. Use the link above to access Professor Friedman’s report and go to Figure 2. The bar graph and its explanation in the note below should be studied carefully to understand the changes.

The four bars on the left represent the bottom four quintiles of household income – 80 percent of the population. The four bars on the right represent the top 20 percent. The fifth bar, representing those with incomes from the 80th to the 95th percentile have an average household income of $216,922. Yet they and also those with incomes below them – 95  percent of all households – will see an INCREASE in their net income in spite of what they may perceive to be onerous taxes. It is only the top 5 percent that will be paying more in taxes than they will be receiving in health care benefits.

Okay. That’s fair for most of us, but is it really fair for those with incomes of a half million dollars or more – especially for those with average incomes of $3 million or even $166 million? Remember that wealth has moved upwards with high income individuals benefiting from the increased productivity of the workers, while workers’ incomes have remained flat. This massive, unfair upward shift of income and wealth screams out for justice. Progressive tax policies are precisely what we need to correct this injustice. HR 676 does exactly that – not only ensuring health care for everyone, but finally making it affordable for everyone while establishing public policies to slow the financial drain that the wealthy have placed upon the rest of us.

The Koch brothers and the Walton family may not like this proposal, but it’s not like we’re taking away their mansions or their personal jets. They’ll never miss the money that HR 676 would divert to taxes. Even those with a current $500,000 after tax income will see their net income reduced to about $460,000. They may whine, but if they are honest with themselves, they would have to agree that they really won’t see any significant differences in their lifestyles either. Some of them will even think that it is worth it if it ensures that absolutely everyone finally has the right to affordable health care.

We can have an Expanded and Improved Medicare for All if we simply dispense with our irrational tax phobia.

Montana government clinic: Maybe single payer is aiming too low

Posted by on Tuesday, Jul 30, 2013

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.

Montana’s State-Run Free Clinic Sees Early Success

By Dan Boyce
NPR, July 30,2013

A year ago, Montana opened the nation’s first clinic for free primary healthcare services to its state government employees. The Helena, Mont., clinic was pitched as a way to improve overall employee health.

A year later, the state says the clinic is already saving money.

(Government employees still have their) normal health insurance provided by the state. But at the clinic, (there are) no co-pays, no deductibles. It’s free.

That’s the case for the Helena area’s 11,000 state workers and their dependents. With an appointment, patients wait just a couple minutes to see a doctor.

“For goodness sakes, of course the employees and the retirees like it, it’s free,” says Republican State Sen. Dave Lewis.

He and others faulted then-Gov. Brian Schweitzer for moving ahead with the clinic last year without approval of the state legislature, although it was not needed.

Now, Lewis is a retired state employee himself. He says, personally, he does like going there, too.

The state contracts with a private company to run the facility and pays for everything — wages of the staff, total costs of all the visits. Those are all new expenses, and they all come from the budget for state employee healthcare.

Even so, division manager Russ Hill says it’s actually costing the state $1,500,000 less for healthcare than before the clinic opened.

“Because there’s no markup, our cost per visit is lower than in a private fee-for-service environment,” Hill says.

Physicians are paid by the hour, not by the number of procedures they prescribe like many in the private sector. The state is able to buy supplies at lower prices.

Bottom line: a patient’s visit to the employee health clinic costs the state about half what it would cost if that patient went to a private doctor. And because it’s free to patients, hundreds of people have come in who had not seen a doctor for at least two years.

Montana recently opened a second state employee health clinic in Billings, the state’s largest city. Others are in the works.


Let’s see. This Montana state-run free clinic is government owned, the physicians are salaried, there are no deductibles or co-pays, employees and retirees including Republicans like it, and it costs the state “about half what it would cost if that patient went to a private doctor.” Wow!

The single payer model of social insurance usually calls for a government-run insurance program that pays for our largely private health care delivery system, with all of its inefficiencies and inequities. But what if it paid for a government owned and financed health care delivery system similar to this Montana clinic, but with government ownership expanded throughout the entire delivery system.

Instead of just aiming for the goal of a single payer social insurance program, we could have a program of socialized medicine – government ownership of the delivery system. Considering that it is a much lower cost system with which everyone is happy, is that such a bad idea?

WellPoint/employer conspiracy on reference pricing

Posted by on Monday, Jul 29, 2013

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.

WellPoint program lets employers name their price for doctors

By Sue Ter Maat
American Medical News, July 29, 2013

Physicians collecting from WellPoint-insured patients who haven’t met their deductible or have a co-pay might have one more reason to send them a bill — to collect the difference between the price the insurer has negotiated with the doctor, and what the employer is willing to pay.

WellPoint plans to launch a program in 2014 in which self-insured companies can determine what they will pay for certain procedures. WellPoint would present a price range to the employer based on what has been negotiated with doctors. Then the company would determine the maximum price it’s willing to pay.

Patients insured through a participating employer would have access to a website that shows, in as much detail as possible, physician price and quality information, including what they would expect to pay out of pocket. Physicians would still be able to charge based on the rate WellPoint negotiated, but any difference between that rate and what a company is willing to pay would have to be collected from the patient, not the insurer.

Companies examine cost distributions for procedure midpoints to determine reference prices, said George Lenko, program director of national networks for WellPoint. So, for instance, hip surgery can range between $20,000 and $100,000. In that case, an employer may set what’s called a reference price at any point in between, Lenko said. If a physician’s contract with WellPoint calls for less than that amount, the doctor would be paid at that previously negotiated rate. But if a doctor’s negotiated charge was higher than the desired price, he or she would have to bill the remainder to the patient.

Reference-based benefits are becoming popular as it becomes easier to compare costs for the same service, Lenko said.

He said when employees know how much services cost, and they are sharing in that cost, they become more engaged with their health care. “The patient becomes a better consumer,” Lenko said. “The more they shop for their own health care, the more efficient they will be.”


WellPoint has been a leader in private insurance innovations. These innovations have worked very well for WellPoint, but for the patients, providers, and purchasers? Well, let’s see how this new innovation in reference pricing for self-insured employers seems to be designed.

For employers who want to insure their own losses in their health benefit programs but who need help in the administration of these programs, private insurers offer health plan administrative services without assuming any of the risks of medical losses (health care bills). As part of their services, they provide employers with lists of network providers – physicians and hospitals who have agreed to contracted rates for their services.

However, those contracted rates may be higher than the employer would be willing to spend, that is, the employer’s reference price. So what happens when the providers bill for their services? If the charges are higher than rates contracted with WellPoint, then WellPoint, using the self-insured employer’s funds after the deductibles are paid by the patient, pays the contracted rate and the rest is adjusted off – just as is done today with in-network services in the typical PPO plan. If the charges are higher than the reference price that the employer is willing to pay, even though at or lower than the WellPoint contracted rate, then WellPoint pays only that reference price on behalf of the employer. Yet the provider’s contract allows the full negotiated fee. So who pays the difference? The patient!

What is going on here? Well, a few things. First, insurers have not been as effective as public programs such as Medicare in obtaining optimal lower pricing for their contracted networks. Also, some economists have suggested that employers should be playing a more active role in slowing the escalation of health care costs. Introducing reference pricing allows them to do just that. They find the lowest prices for which the services can be realistically provided, and then they set their allowed rates at that level. In addition, those who believe that patients should be financially involved in their utilization of health care services (consumer-driven health care) support reference pricing because it requires patients to either shop prices more effectively, or to be personally responsible for prices that are higher than the reference prices.

Who wins? Employers with self-insured plans experience a reduction in their health benefit payments. Insurers who are providing only administrative services are able to market these less expensive models to employers, while selling them yet more administrative services, increasing insurer revenues without any exposure to risk. Providers who reduce their rates to the level of reference pricing will receive fewer revenues per unit of their services, but they will increase their market share if the patients actually do end up choosing providers who will cost them less out-of-pocket. Providers who are unable to match reference prices will lose market share.

Who loses the most? The patients. They cannot always shop prices, and even when they can, they may find that the providers offering reference prices may be their least preferred choices, or they may find that they are simply not accessible due to distances or scheduling difficulties. Not only do patients lose their choices of their preferred providers, they are once more the victims of the current trend in shifting the costs of health care from insurers and employers to the patients themselves. This insurer/employer conspiracy is yet one more manifestation of The Great Risk Shift (Hacker) – moving funds from the workers to the uber-wealthy.

Single payer would jettison this nefarious conspiracy.

Is accountability for patients? Or for policy wonks?

Posted by on Thursday, Jul 25, 2013

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.

Accountable Prescribing

Nancy E. Morden, M.D., M.P.H., Lisa M. Schwartz, M.D., Elliott S. Fisher, M.D., M.P.H., and Steven Woloshin, M.D.
The New England Journal of Medicine, July 25, 2013

Physicians spend a lot of time treating numbers — blood pressure, cholesterol levels, glycated hemoglobin levels. Professional guidelines, pharmaceutical marketing, and public health campaigns teach physicians and patients that better numbers mean success.

The first line of defense against poor prescribing should be clinicians’ commitment to responsible, evidence-based practice. Unfortunately, clinicians frequently prescribe medications that improve numbers without necessarily improving health.

To avoid rewarding poor prescribing, we could more closely align quality measures with evidence. The table (available at link below) highlights widely used quality measures that span a spectrum in terms of encouraging accountability; we suggest revisions for those that we believe don’t adequately require prescribers to pursue evidence-based, cost-effective choices. Although some physicians may disagree with specific suggestions, our main interest is in the principle of moving beyond numerically driven quality measures to measures that match treatment goals to the best evidence and encourage use of the safest, most effective, and lowest-cost drugs or nondrug treatments.

Payers could accelerate implementation of accountable prescribing. The table provides a starting point for revising existing measures. In addition, payers could advance and facilitate less onerous measures through claims analysis. Although claims and surveys are the basis of some quality measures, much performance is assessed through Web reporting: payers provide practices with measure-specific lists of eligible patients, and physician groups or institutions review records and report performance for each patient according to definitions of the target care. This is the approach used by the Centers for Medicare and Medicaid Service (CMS) for accountable care organizations (ACOs) and by the PQRS. Because organizations such as ACOs are responsible for defined populations, payers could monitor quality through claims analysis. Prescribing quality may be particularly amenable to this approach. Performance measures based on prescriptions claims could include, for example, the population-level ratio of second-line treatments to first-line options or the ratio of brand-names to generics in drug classes in which ample generics exist. Monitoring could permit efficient determination of clinicians’ response to new drug warnings, and claims analysis could quantify long-term adherence to safe, effective drugs.

Accountable prescribing measures could also incorporate cost. Though some payers may hold providers accountable for prescription spending, CMS programs do not yet do so. CMS shared-savings calculations are currently based on inpatient and outpatient expenditures only, but that doesn’t preclude the inclusion of prescription spending in quality measures. Although prescribing decisions should be driven primarily by safety and effectiveness, cost can be an appropriate tiebreaker among drugs that are equally safe and effective. Considering costs may also discourage use of newly approved brand-name drugs that lack safety or efficacy advantages — drugs with potential shortcomings that have had less time to emerge.

As insurance coverage expands, we must ensure that greater access to prescription drugs confers better health, not harm. The need to advance performance measures as health care reform proceeds is well recognized. Ideally, we should assess outcomes valued by patients, but for reasons of feasibility, many measures focus instead on surrogate end points. To improve health, such end points must be based on strong evidence, and how you get there matters. Refining measures to incorporate best evidence and the notion of accountable prescribing could promote use of the safest and most effective drugs, better align measures with our professional responsibilities, and maximize the chance that meeting goal-driven performance measures will translate into improved population health.


In the mania surrounding the implementation of Obamacare, the hope for controlling spending and improving quality lies in assigning accountability in the delivery of health care, especially through accountable care organizations. Supposedly we should be able shift from payments based on quantity of services to payments based on accountability for quality outcomes (certainly a sketchy premise). How is that playing out?

This article from the Dartmouth Institute gives a hint of how accountability might be measured in practice, in this case through accountable prescribing. Read what they propose and then use your imagination. First you extract the required data from the patient. Then, after you get the patient out of your way, you will need to access the algorithms for prescribing. Next you can go ahead and follow the appropriate algorithm pathway on your computer. After a period of interacting with your keyboard and your mouse you will have arrived at prescription nirvana, having determined the highest quality and lowest cost drug selection for your patient.

Of course, this is only the drugs. But since the goal is to include adequate measurements to determine the full level of accountability, similar algorithms will have to be followed for other aspects of the diagnostic and therapeutic interventions. Of course, there may be some complexity with the more technical aspects of care, such as the complex algorithms of intensive care, or of surgical management, or whatever.

But establishing accountability is the goal and is what must be measured. Today’s policy wonks are leading the way. The payers, to be led by Medicare, are to determine appropriate distribution of funds based on how well the providers follow the wonks’ algorithms. And the patient? Oh yes, if she hasn’t left the room yet, you can let her know that the computer’s algorithm has prescribed metformin as the next step in management of her diabetes. Score 100. One step closer to collecting your reward from the Medicare shared savings program.

And, oh, the patient. She says she wasn’t there for management of her diabetes? She’s there because her husband can’t give up sexting, and she’s profoundly depressed as a result? Gee, is there an algorithm for that? And doesn’t this mess things up by requiring a greater quantity of care? And would there be a way of lowering the cost for that care? In fact, not only does the situational depression need to be managed, but doesn’t something need to be done about the husband’s sexting paraphilia? Never mind. There is no accountability algorithm for that yet anyway. Besides this encounter has already received a perfect score for the shared savings program. Next patient.

Message to accountability policy wonks: The health care system doesn’t exist merely to assign and measure accountability of the health care professionals and institutions, which in itself is a time consuming and administratively burdensome endeavor. It exists to take care of patients. Can’t we get back to that?

By Leonard Rodberg, Ph.D.

We in PNHP often give the impression that the principal problem with America’s health care system is the extraordinary waste associated with its multi-payer private insurance system. We cite the 15 percent administrative waste that we calculate is due to that insurance system, including not only the marketing and utilization-control costs and the profits reaped by the insurance companies, but also the costs imposed on physicians, hospitals, and other providers by the complexity of the insurance system. (S. Woolhandler, et al, “Costs of Health Administration in the U.S. and Canada,” New England Journal of Medicine 349(8) Sept. 21, 2003.)

However, any comparison of our spending with that of other countries reveals that this must be only part of the story. As a share of GDP, U.S. spending is nearly twice the median of the rest of the industrialized world and 60 percent greater than the next most expensive systems.

Why is this? One conventional answer is that the prices charged by U.S. health care providers are much higher. (See Gerard F. Anderson et al, “It’s The Prices, Stupid: Why The United States Is So Different From Other Countries,” Health Affairs May 2003 22:89-105.) But this doesn’t explain anything; it is simply another way of stating the same observation: Health care costs far more in the United States than in any other country.

The explanation is, in fact, clear, but is seldom pointed out, even by critics such as ourselves. It is a consequence of the fact that the United States is not only the only country that finances health care through market-driven private insurance, but we are also the only country that allows prices to be set through the private marketplace.

It is not only that we pay for health care through a third-party reimbursement system – many countries use third-party reimbursement – but that the rest of the system consists, in essence, of a vast number of independent, entrepreneurial providers of health care services and marketers of pharmaceuticals and medical supplies who are free to set their fees and prices as they see fit.

No other country allows such freewheeling price-setting in its health care system. All use a form of administered prices, even when the actual funding is through multi-payer (if essentially nonprofit) insurance funds.

Our own Medicare program uses administered pricing, attempting to tie payments to the actual cost of services, and it has been modestly successful in holding costs down. But its payments cannot get too far out of line from the rest of the entrepreneurial system, or physicians and hospitals would not accept its patients.

It has been known for at least fifty years, ever since publication of Kenneth Arrow’s seminal article in the American Economic Review on medical care and welfare economics – see, for instance, Paul Krugman, “Why markets can’t cure healthcare” – that the provision of health care bears no resemblance to a true market. Consumers (that is, patients) cannot comparison-shop; the methods, consequences, and costs of medical care are uncertain; and even the ethical principles of health care differ from those of a conventional market.

So the price of medical care is seldom discussed before being undertaken, and there is no effective countervailing force to the entrepreneurial drive, by all providers, to raise their incomes as high as they are able.

Nevertheless, the U.S. continues to treat health care as if it were a commodity to be purchased, rather than a service to be provided, and there are persistent efforts by the industry itself and by government officials, aided and abetted by numerous economists, to allow health care to continue to be treated as a market commodity.

The consequences of this can be seen, not only in the fact that health care costs in this country are far above those of any other advanced country, none of which allow their providers and suppliers to set their own prices, but the consequences can be seen as well in the complete irrationality of the prices of individual “items” of medical care amounting, in effect, to price gouging.

These wide and inexplicable variations in price have been chronicled in a lengthy investigative piece in Time magazine by Steven Brill, “Bitter Pill: Why Medical Bills are Killing Us,” and in Elisabeth Rosenthal’s recent reports in The New York Times on the cost of colonoscopies, “The $2.7 Trillion Medical Bill: Colonoscopies Explain Why U.S. Leads the World in Health Expenditures” and of childbirth, “American Way of Birth, Costliest in the World.”

In other words, the problem with the American health care system is not just the waste in the insurance system. It is that we have allowed a Wild West approach to the business of medical care to develop in this country. The “invisible hand” doesn’t exercise any control, and so there is nothing but naked self-interest and, occasionally, ethical considerations, to constrain the cost of medical care.

Today we are witnessing the consolidation of hospital systems and medical supply firms which, as the evidence has shown, can then set their own prices and force insurance companies, who must have them in their networks, to accept whatever charges they impose. Other countries avoid this situation through government mechanisms which lay a strong hand on the system, even when it is not the sole payer. Fees, charges, insurance premiums are all regulated by government to ensure that the system is affordable for the society while still maintaining universal access to health care.

The Affordable Care Act avoids anything remotely resembling price regulation.

The ACA is built on the idea that, through competition among insurance companies, costs can be brought under control. This is a fantasy. Increasingly, the insurance companies are “cost takers,” not “cost makers.” On the one hand, they will face, in the exchanges/marketplaces, increased competition from lower-cost insurers, but they will also face pressure from the hospital “empires” for higher prices and to keep those institutional giants within their networks.

There are attempts to constrain costs by imposing cost-sharing (“skin in the game”) on patients. Some economists claim this will lead patients to act more like smart consumers. However, there is a mountain of evidence that this is a false belief.

Co-pays and deductibles have their greatest effect on the decision to seek primary care, but this is the least-costly portion of health care. Cost-sharing has no serious effect on the most costly parts of medical care, inpatient care and expensive procedures. (See especially reviews by Katherine Swartz, “Cost Sharing: Effects on Spending and Outcomes,” and Dahlia Remler and Jessica Greene, “Cost-sharing: A Blunt Instrument.” Also, Patryk Perkowski and Leonard Rodberg, “Does Cost-Sharing Affect Health Care Spending: An International Comparison,” forthcoming.)

As a consequence, simply replacing insurance companies with a single payer will not, alone, cure the problems of the American health care system. We probably know this, but we don’t articulate it. The agency acting as the single payer must also impose cost discipline on the system, something that we are not accustomed to, and that will perhaps be much more objectionable to the health care industry than the single payer alone.

So, from an advocacy perspective, are we better off not mentioning this, since it will arouse stiff opposition among providers, or should we use it to gain support from those many Americans who are devastated by the costs they face, or expect to face, when they are ill?

Eventually, the providers will understand this without our telling them, but the public will not. Americans take for granted that doctors and hospitals set their own charges. The fact that there is another way to run a health care system is not something that is ever discussed. No one will tell them but those of us who take a critical, systemic view of the health care landscape and can show that there is a real alternative that works, everywhere else in the world but here.

Leonard Rodberg, Ph.D., is professor and chair of the Urban Studies Department at Queens College, City University of New York. He serves as research director of the N.Y. Metro chapter of Physicians for a National Health Program.

Institutional Corruption of Pharmaceuticals

Posted by on Wednesday, Jul 24, 2013

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.

Risky Drugs: Why The FDA Cannot Be Trusted

By Donald W. Light
Harvard University, The Lab @ Edmond J. Safra Center for Ethics

A forthcoming article for the special issue of the Journal of Law, Medicine and Ethics (JLME), edited by Marc Rodwin and supported by the Edmond J. Safra Center for Ethics, presents evidence that about 90 percent of all new drugs approved by the FDA over the past 30 years are little or no more effective for patients than existing drugs.

All of them may be better than indirect measures or placebos, but most are no better for patients than previous drugs approved as better against these measures. The few superior drugs make important contributions to the growing medicine chest of effective drugs.

The bar for “safe” is equally low, and over the past 30 years, approved drugs have caused an epidemic of harmful side effects, even when properly prescribed. Every week, about 53,000 excess hospitalizations and about 2400 excess deaths occur in the United States among people taking properly prescribed drugs to be healthier. One in every five drugs approved ends up causing serious harm, while one in ten provide substantial benefit compared to existing, established drugs. This is the opposite of what people want or expect from the FDA.

Prescription drugs are the 4th leading cause of death. Deaths and hospitalizations from over-dosing, errors, or recreational drug use would increase this total. American patients also suffer from about 80 million mild side effects a year, such as aches and pains, digestive discomforts, sleepiness or mild dizziness.

The forthcoming article in JLME also presents systematic, quantitative evidence that since the industry started making large contributions to the FDA for reviewing its drugs, as it makes large contributions to Congressmen who have promoted this substitution for publicly funded regulation, the FDA has sped up the review process with the result that drugs approved are significantly more likely to cause serious harm, hospitalizations, and deaths. New FDA policies are likely to increase the epidemic of harms.



Institutional Corruption of Pharmaceuticals and the Myth of Safe and Effective Drugs

By Donald W. Light, Joel Lexchin and Jonathan J. Darrow
Social Science Research Network (SSRN), Journal of Law, Medicine and Ethics, Vol. 14, No. 3, 2013, June 1, 2013


Over the past 35 years, patients have suffered from a largely hidden epidemic of side effects from drugs that usually have few offsetting benefits. The pharmaceutical industry has corrupted the practice of medicine through its influence over what drugs are developed, how they are tested, and how medical knowledge is created. Since 1906, heavy commercial influence has compromised Congressional legislation to protect the public from unsafe drugs. The authorization of user fees in 1992 has turned drug companies into the FDA’s prime clients, deepening the regulatory and cultural capture of the agency. Industry has demanded shorter average review times and, with less time to thoroughly review evidence, increased hospitalizations and deaths have resulted. Meeting the needs of the drug companies has taken priority over meeting the needs of patients. Unless this corruption of regulatory intent is reversed, the situation will continue to deteriorate. We offer practical suggestions including: separating the funding of clinical trials from their conduct, analysis, and publication: independent FDA leadership; full public funding for all FDA activities; measures to discourage R&D on drugs with few if any new clinical benefits; and the creation of a National Drug Safety Board.

Restoring Institutional Integrity for Safer Drugs

Many concerned experts have suggested ways to reduce conflicts of interest and improve the safety and effectiveness of drugs.

First, while research companies play important roles in discovering and developing superior drugs, they should play no role in testing them. Over the years, expert bodies and prominent scientists have called for an independent institute to test drugs because commercial trials were so poor, biased, and conflicted. Yet this bedrock reform has never been accomplished, as the industry’s lobbying of Congress and its contributions to Congressional campaigns have soared.

Second, the FDA needs new leadership to restore public trust and build a new culture focused on safety through enforcement of its existing rules. Hearings through the 1960s and 1970s documented how frequently the FDA fails to adhere to its own rules and protocols.

Third, user fees must end and the FDA must be entirely funded by taxpayers-as-consumers. The FDA should be entirely clear about whom it serves.

Fourth, while approval criteria should allow for a sufficient number of therapeutically equivalent drugs in a class to give clinicians a range of choices, they should also require patient-relevant evidence of superiority. Non-inferiority trials should be allowed only if one can ethically justify entering patients into a trial in which there can be no benefit for them. All adverse events, including those occurring among subjects who drop out, must be reported with follow-up for two years.

Fifth, Congress needs to restore trust by creating a National Drug Safety Board with adequate powers, funds, and mandates to independently investigate and report on drug safety issues. The creation of this board would support the position that all data related to how drugs and vaccines affect people are a public good and that access to this data is a human right. Both the inadequacy of pre-approval safety testing and the lack of systematic post-approval monitoring need urgent attention.

None of this is likely to happen until third-party payers, politicians, and the people decide they want to stop paying so much for so many drugs of little value and then for treating the millions harmed by those drugs. Nor is it likely until the campaign to restore institutional integrity to Congress through funding elections by the 99 percent, rather than by the one percent, is successful.


Millions of people are being harmed by drugs, many of which have only negligible therapeutic value, and tens of thousands are dying. We need much greater government oversight of pharmaceuticals, certainly more than that which currently is being provided by the FDA.

The Motley Fool on Medicare for All

Posted by on Tuesday, Jul 23, 2013

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.

How Much Could Medicare for All Save You?

By Rich Smith
The Motley Fool, July 21, 2013

But could it be that the ACA isn’t really needed at all? Could an alternative idea — “Medicare for all” — actually do a better job of controlling medical costs, and making health care affordable for Americans?

Harvard Medical School visiting professors David Himmelstein and Steffie Woolhandler recently noted on the pages of The New York Times that a Medicare-for-all health care system — known commonly as “single-payer” — is an incredibly efficient operation, in terms of costs.

On average, only 2% of the revenues that flow through Medicare are needed to cover overhead costs. In contrast, patients who subscribe to private health insurance spend 14% of their money — seven times as much — just paying for the overhead costs doctors incur from juggling the multitude of insurance procedures required for different patients subscribing to insurance plans.

In contrast, the U.S. government itself agrees that the ACA — the system we’ve settled upon instead of offering Medicare for all — costs more than a move to a cheaper, more efficient, and better single-payer system. The U.S. Government Accountability Office calculates that a switch to single-payer would shave $400 billion a year off the national health-care bill.

Little wonder, then, that a 2008 survey published in the Annals of Internal Medicine found that 59% of physicians polled support Medicare for all.

If an individual consumers think they’re better off with a private health insurance plan from WellPoint — or from UnitedHealth Group, Aetna, or Cigna — then fine. They could still sign up for one of those, either as a supplement to Medicare-for-all or, if they prefer, as an exclusive plan, and choose not to participate in Medicare at all. For that matter, there should be no need to require anyone to buy any insurance whatsoever.

Excerpts from representative Comments:

“Well, of course! But isn’t the ACA a step in the right direction?”

“Medicare for all would be far superior to any other plan, which was why it was killed before it could get out of committee.”

“ahh, if only the Republicans had not fought the entire idea so hard, that would have been the ideal solution.”

“A big concern, that not a lot of people know about-more and more doctors are refusing to take on new Medicare patients.”

“Medicare is an existing program that could simply be expanded and fixed a bit where necessary. This seem like a much much more common sense approach than a whole new bureaucracy.”

“Authors often site Medicare’s discount rate and admin cost. Both are a mirage. The Medicare discount rate is so low that it does not pay lights on costs.”

“It’s true that Medicare is already set up very well and that a minor legislative action could make it available to all…ObamaCare puts more power into the hands of private insurance companies and BigPharma, and how do you think those will use it?”

“Of course “single payer” would be better, but was not proposed in anticipation of Republican opposition to “socialized medicine” and their insistence on the primacy of a role for the private health insurance companies. As to Medicare for all on a voluntary basis, it still does not answer what to do about the uninsured who get sick. Who pays for them?”

“DUH! How soon could America deal Rich Smith and “Medicare for All” for Ovomit and OvomitCare?”

“Of course Medicare for all makes sense.”

“Regarding hospital charges vs. what insurers pay ($24,000 vs. $4000). . .that is a HUGE problem in healthcare that in a way, single payer WOULD correct.”

“You are dreaming in theory. The Complete Lives System that withholds medical care from infants, special needs children and reduces the amount of medical care available each year by a dollar amount to anyone over 50.”

“the money saving answer is to repeal the ACA and start over with insurance pools and letting those who could afford insurance and don’t have it suffer for their sin”

“PS: don’t forget that Obamacare expands IRS and gives IRS much control over your healthcare”

“Physicians often limit total Medicare patients, and broadening the program will just further stratify medical care from those who have the money to pay and those who do not.”

“Medicare for all would work but only if the discounts were renegotiated.”

“Obamacare will be the destruction of America !! Obama wouldn’t have it any other way !!! Hail to ol RACE BAITER IN CHIEF !!!”

“More and more doctors are refusing new Medicare patients since the pay is too low and it takes too long to get reimbursed. If we moved to a Medicare-based system, what would happen? We would all have insurance, but it would be next to impossible to find a doctor that accepts the insurance. Yeah, that’s smart. Real smart.”

“You don’t have the right to infringe on someone else’s liberties and that is exactly what happens when the government taxes one person to give it to another. Freedom is the answer. God Bless America.”

“This is exactly what Dr. Ben Carson has been proposing the past two years. EACH and every American citizen would have a medicare spending plan and credits to that fund would start immediately upon birth.”

“i think eveyone knows that single-payer is the only efficient answer, but the scum in washington d.c. won’t allow it – they their souls to big pharma”

“Great article. This is so straightforward anyone could understand it. Maybe even congresspeople?”

“Of course this is a step in the right direction, and someday a single payer system will prevail.”


About The Motley Fool

The Motley Fool is a multimedia financial-services company dedicated to building the world’s greatest investment community. Reaching millions of people each month through its website, books, newspaper column, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company’s name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king — without getting their heads lopped off.


This article is truly remarkable because of its source. The Motley Fool “champions shareholder values and advocates tirelessly for the individual investor.” Although they didn’t get everything right (they would include private insurance options and would have no requirement to even be insured), nevertheless this is a particularly strong statement for Medicare for All from a Wall Street source that is just now joining the parade.

Perhaps even more remarkable are the comments posted in response to this article. Considering that these comments are from the investment community, there is strong support for Medicare for All. Inevitably, as with most comment sections, there is a representation of ill-informed, ideologically-driven and sometimes belligerent comments, but those can be ignored.

We should take home from this the lesson that many in the investment community understand that Medicare for All really does make sense from the business perspective. We should tailor our message accordingly.

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Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

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