Gerald Friedman: The Unhappy Marriage of Economics and Health Care

Posted by on Monday, May 6, 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.

The Unhappy Marriage of Economics and Health Care

By Gerald Friedman, Ph.D., Professor of Economics, University of Massachusetts at Amherst
Unions for Single Payer Health Care, May 6, 2013

America’s health care system is collapsing, and we can blame the Economics profession. Most economists approach health care in the wrong way, viewing it as a commodity like shoes or the laptop on which I write. Instead, health care is an idiosyncratic commodity, subject to uncertainty and “asymmetric information” leading to destructive behavior. Trying to force health care into a box, treating it like other commodities, economists have promoted cost sharing, market competition, and insurance oversight of health care providers that have inflated the administrative burden while denying ever more Americans access.

While other countries have controlled health care costs by restraining administrative expenses and drug prices, ballooning costs in the United States come from policies promoted by economists who have urged governments and providers to control costs by making consumers responsible for more of the costs even while raising administrative costs and ignoring monopolistic pricing of pharmaceuticals. Viewing the injured, sick, and disabled as “consumers,” economists see insurance as the source of rising costs because they are not responsible for the costs of care they receive and, therefore, overuse health care. Rising copayments and deductibles are intended to discourage “consumers” from “abusing” health care, as if the victims of auto accidents or cancer should shop around for cheaper, and competition among insurers while limiting provider services by providing more administrative supervision. Ignoring evidence that Americans are less likely to see doctors and other health providers than are residents of other affluent countries, these economists have blamed the high cost of our health care on insurance which, they assume, leads to wasteful over-practice and the provision of unnecessary health care services. Their solution is greater cost sharing, more regulation of providers, capitation, and even the end to insurance by substituting medical savings accounts for insurance.

For 40 years, many economists’ have promoted increasing cost sharing through higher copayments and deductibles, the replacement of fee-for-service payment systems with capitation where providers are paid a fixed amount for patients as in Health Maintenance Organizations, and competition where multiple insurers offer a variety of plans catered to individual consumer’s interests and in competition with each other. Far from limiting health care cost increases, these practices have produced the worst of all worlds, rising costs along with restrictions on access. Costs have risen because these recommendations have inflated the administrative burden in health care, the costs of the billing and insurance activities within provider offices as well as the cost of the health insurance industry itself. While restricting access, limiting the benefit to Americans of some of the dramatic improvements in health care practice of the last decades, these practices have not bent the cost curve or slowed health care inflation even while denying more and more Americans access to affordable health care.

The waste involved in the current system has a redeeming feature: it provides abundant space for an improved system that could improve access and services even while dramatically lowering costs by eliminating administrative waste. If we lowered administrative costs and drug prices to the Canadian level, we could save nearly $600 billion dollars, more than enough to provide coverage to all of the uninsured while improving access for the millions of underinsured. If we see past the bad recommendations of market-fundamentalists, we can improve health care and save money. An outcome that even economists should favor.…

Which comes first, economic theory or policy? Intuitively, it seems that a solid understanding of economics should form the basis for developing policies. The obvious flaw is that economics is not a hard science, allowing you flexibility to choose economic theory that conforms to whatever policy you favor.

In the United States we have relied heavily on economists who are market-fundamentalists. They begin with market theory, and then they establish policies that supposedly would provide us the greatest value in health care. Yet we have ended up with a profoundly expensive, highly wasteful system of mediocre-to-poor quality, while falling far short of the goals of making health care affordable and accessible for everyone.

It seems unlikely that the market-fundamentalists would contend that they choose policies first and then use market theory to reach their goals. If so, then they would have to explain to us why they wanted today’s outcomes.  So much for market fundamentalism.

Advocates of health care justice first choose policies that would ensure quality care for everyone that is affordable for society as a whole. Then they apply economic theory to achieve the goals of those policies. Other nations have shown that this works.

In his article, Massachusetts Professor Gerald Friedman explains how we can get it right – producing better health care while saving money – an outcome that all economists should favor, that is if they are pure to the art and science of their profession.

Oregon Experiment update: Medicaid works, sort of

Posted by on Thursday, May 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.

The Oregon Experiment — Effects of Medicaid on Clinical Outcomes

By Katherine Baicker, Ph.D., Sarah L. Taubman, Sc.D., Heidi L. Allen, Ph.D., Mira Bernstein, Ph.D., Jonathan H. Gruber, Ph.D., Joseph P. Newhouse, Ph.D., Eric C. Schneider, M.D., Bill J. Wright, Ph.D., Alan M. Zaslavsky, Ph.D., and Amy N. Finkelstein, Ph.D. for the Oregon Health Study Group
The New England Journal of Medicine, May 2, 2013

Our study provides evidence of the effects of expanding Medicaid to low-income adults on the basis of a randomized design, which is rarely available in the evaluation of social insurance programs. We found that insurance led to increased access to and utilization of health care, substantial improvements in mental health, and reductions in financial strain, but we did not observe reductions in measured blood-pressure, cholesterol, or glycated hemoglobin levels.


Protecting Finances and Improving Access to Care with Medicaid

By Richard Kronick, Ph.D., and Andrew B. Bindman, M.D.
Editorial, The New England Journal of Medicine, May 2, 2013

Insurance has three main purposes: to protect financial assets in the event of illness, to improve access to care, and to protect health.

First, Baicker and colleagues found that insurance provided a low-income population with considerable financial protection.

Second, Medicaid was associated with dramatically improved access to care.

It is less clear how well Medicaid accomplished the third goal — improving health.

The minimal effects of Medicaid coverage on measures of physical health are not entirely surprising given the many steps needed between the availability of insurance coverage and the delivery of appropriate care. In addition, the short follow-up period of the study, the small number of persons with chronic conditions in the study sample, and the limited number of outcomes may have contributed to a false negative result. This study did not or could not address many important potential health benefits of health insurance, including early detection of cancer, a reduction in sick days from school or work, and a reduction in mortality.

The Oregon Health Insurance Experiment (A concise summary of findings):

The Oregon Experiment unequivocally demonstrates that Medicaid improves access to care and provides considerable financial protection for the low-income population that it serves. Although it was not powered to demonstrate statistically significant improvements in health outcomes, a multitude of other research studies have already confirmed that the health-care interventions studied here are clinically effective.

Today there is a barrage of responses from conservatives and libertarians attacking Medicaid because this study supposedly shows that Medicaid had no significant effect on health outcomes. Thus they challenge the wisdom of implementing the Affordable Care Act provision that would greatly expand the Medicaid program.

Although there are many reasons to consider better options to Medicaid (e.g. single payer), withholding access to and affordability of care that has already been proven to be effective is certainly not one of them.

Perhaps the most significant set of observations in this study is the reduction in financial barriers to care. Most importantly, catastrophic expenditures (over 30 percent of household income) were reduced from 5.5 percent in the uninsured group to 1.0 percent in the Medicaid group. Those with medical debt were reduced from 57 percent to 44 percent, and those who had to borrow money to pay medical bills, or simply walked away from the bills, were reduced from 24 percent to 10 percent.

These reductions in financial barriers improve access which, in turn, improves health outcomes, although these numbers are still not good enough. With a well-designed single payer system, we could do much better.

Freestanding emergency departments?

Posted by on Wednesday, May 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.

Freestanding emergency department growth creates backlash

By Sue Ter Mat
American Medical News, April 29, 2013

Dr. McLaughlin, part-owner of Texas-based Elite, is among those embracing one of the growing segments of health care — freestanding emergency departments. The stand-alone emergency departments have similar equipment as hospital emergency departments but are usually miles from main hospitals. They can look from the outside like urgent care centers, but freestanding EDs can take more severe cases. If the centers take Medicare or Medicaid, they are subject to the federal Emergency Medical Treatment and Active Labor Act and must accept all patients regardless of their ability to pay.

Centers are opened by hospitals and physicians, sometimes separately, sometimes in alliance. Generally, local hospital EDs have agreements with the centers to take cases too severe for the freestanding centers, or to admit patients.

The centers’ numbers have doubled during the past decade, up to 284 in 45 states.

With that growth, however, has come a backlash over freestanding EDs charging, or attempting to charge, a facility fee, as a hospital ED would. Facility fees are charges that hospitals collect from insurers for operating EDs and cover the cost of running the departments.

Urgent care centers also have viewed freestanding emergency departments as a competitive threat.

Freestanding EDs are more lucrative than urgent care centers. Average net revenue per patient for urgent care centers range from $105 to $135, while average revenue is $350 to $500 for freestanding EDs.

A major concern has been that freestanding EDs take care of minor health problems like urgent care clinics but charge emergency departments fees.…

What is the difference between an urgent care center and a freestanding emergency department?

Urgent care centers are equipped and staffed to provide immediate care for urgent problems which arise when care may not be convenient or accessible at the patient’s primary source of health care. Emergency departments also provide urgent care, but, in addition, they triage patients, admitting patients with more serious disorders to the hospital with which they are associated.

Free standing emergency departments really are not much different from urgent care centers since the latter also can transfer patients to acute care hospitals when necessary. The primary difference seems to be that the freestanding emergency department will have an entrepreneurial arrangement with a hospital in order to be able to gouge patients and insurers with outrageous “facility fees” – a trick used by hospital emergency departments to increase revenues, partly to offset costs of EMTALA requirements that prohibit them from turning away uninsured or underinsured patients with conditions serious enough to require hospital admission. Urgent care centers typically have the facility fee built into their other charges.

Like urgent care centers, freestanding emergency departments do not have the financial responsibility for caring for patients requiring admission, yet they still charge the facility fee as if they did. If they accept Medicare and Medicaid patients, the only extra obligation of the freestanding emergency departments is to arrange transfer to an acute care hospital.

Freestanding emergency departments are established primarily to make money. Hospital emergency departments are established primarily to meet the health care needs of the community. They are different animals, as this scheme to cheat people by charging unwarranted facility fees demonstrates.

Under the PNHP single payer model, two issues presented here are addressed. One is that, through central planning, facilities are planned and developed based on the health-care needs of the community, rather than being based on the greatest opportunity for profit while avoiding communities with fewer resources. The other is that for-profit institutions are prohibited in the PNHP model; all resources go to patient care with none being diverted to investors.

Single payer is not just a matter of shooing away intrusive and wasteful private insurers. It is a matter of redesigning the health-care financing and delivery infrastructures to best meet the health-care needs of the community, while providing the greatest value in health care – for all of us.

Brookings’ disappointing recommendations for bending the cost curve

Posted by on Tuesday, Apr 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.

Bending the Curve: Person-Centered Health Care Reform: A Framework for Improving Care and Slowing Health Care Cost Growth

Authors: Joseph Antos, Katherine Baicker, Michael Chernew, Dan Crippin, David Cutler, Tom Daschle, Francois de Brantes, Dana Goldman, Glenn Hubbard, Bob Kocher, Michael Leavitt, Mark McClellan, Peter Orszag, Mark Pauly, Alice Rivlin, Leonard Schaeffer, Donna Shalala, Steve Shortell
Engelberg Center for Health Care Reform, Brookings, April 29, 2013

We propose a framework for health care reform that focuses on supporting person-centered care. With continued innovation toward more personalized care, this is the best way to improve care and health while also bending the curve of health care cost growth.

Simplify and Standardize Administrative Requirements

The time cost to clinicians of interacting with health plans has been estimated to be as high as $23 to 31 billion annually. Further, clinicians, health plans, and other participants in health care reform are currently subject to a wide range of diverse reporting requirements that add to costs and reduce the availability of actionable information. Some steps have been taken recently to reduce these administrative costs through standardization. Further administrative simplification steps should include the following, all of which can be accomplished through existing standard-setting entities and public-private implementation initiatives:

*  Implementation of an updated standardized claim form.

*  Standard methods for quality reporting by providers and plans, including clinical, outcome, and patient-level measures — this would be an administrative benefit for providers that adopt value-based payment reforms across all of their payment systems and would lead to reduced reliance on cumbersome coding for specific types of providers.

*  Standard methods for timely data sharing by plans with health care providers and patients who are involved in the financing reforms described in this report. Data sharing accomplished according to consistent standards would reduce the burden on providers and patients, and the it vendors who serve them, for implementing the analytic tools needed to achieve greater improvements in care.

*  Support for state investments to update their Medicaid information systems including standard quality measure reporting and access to CMS data for quality improvement.

Reforms for Private Health Insurance Markets and Coverage

*  Support employer efforts to engage employees in reducing overall health care costs through Employment Retirement Income Security Act (ERISA) and other health plan regulations that promote value-based insurance designs and tiered benefit designs, narrow networks of providers that demonstrate high performance, and employees’ ability to share in the savings from health care choices and changes in behavior that reduce costs.

Bending the Curve (49 pages):…

This newest report on recommending changes to control health care costs is being presented as a “bipartisan” consensus representing “broad agreement” on reform. Those who have followed the national policy dialogue will recognize that the list of authors does, in fact, include representatives of both major political parties. Nevertheless, the views presented in the report confirms the presumption that these Democratic authors have moved into the Republican camp in the policy debate.

As an example, their recommendations for reducing administrative waste totally ignores the well documented sources of that waste, resulting in recommendations that will have no impact at all on the problem, when recovery of administrative waste should be front and center in reform.

As another an example of their right-wing approach, they recommend “value-based insurance designs and tiered benefit designs, narrow networks of providers that demonstrate high performance, and employees’ ability to share in the savings from health care choices and changes in behavior that reduce costs.” This is code language for consumer-driven approaches that shift more costs to those needing health care – terrible policies that defeat principles of health care justice.

The only good thing about this report is that you can quickly dump it with the “delete” button, without the environmental consequences of wasting 49 pages of paper.

ACA’s negative impact on employment

Posted by on Friday, Apr 26, 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.

Governments may push workers out of employer health care and into health exchange

By Associated Press
The Washington Post, April 24, 2013

In a quest to save money, political leaders in Washington state are exploring a proposal that would shift some government workers out of their current health plans and onto the insurance exchange developed under President Barack Obama’s health care law.

Lawmakers believe the change, which could affect thousands of part-time state employees and education workers, would save the state $120 million over the next two years.

The Washington proposal has been advanced as a way to help deal with a $1.2 billion budget shortfall. Under it, Washington state would make policy changes and secure agreements in which staffers who work between 20 and 30 hours a week would get extra compensation but lose their current health coverage. They would then be eligible to get health care in the federal plan, without any consequence for the state.

“I think it’s a great way to fully take advantage of the Affordable Care Act,” said Republican Sen. Andy Hill, one of the state’s top budget writers.

While few states are following Washington’s path at the moment, there has been concern about how private employers will handle the new health care law and the possibility that some may shed insurance coverage. The owner of Olive Garden and Red Lobster restaurants, for example, began experimenting last year with putting more workers on part-time status.

Virginia is doing something similar, with Republican Gov. Bob McDonnell directing that all part-time state employees work less than 29 hours weekly. That is creating a financially crippling problem for many of Virginia’s 9,100 adjunct faculty members at the state’s 23 community colleges on 40 campuses statewide.

“I’ve never anticipated getting rich off being a teacher,” said J. Gabriel Scala, an adjunct English professor at J. Sargeant Reynolds Community College in Richmond.

“But the rent has to be paid. And I have to eat. And gas has to be put in the car — and $17,000 a year isn’t going to do it,” she added.…

One of the most important design features of the Affordable Care Act was that the employer-sponsored sector of health care coverage was to be largely left alone since allegedly it was functioning so well – not only covering the largest sector of our population, but also an important source of health care financing that was already in place. What could possible go wrong with this strategy?

What are employers to think when they see that the two primary features of the Affordable Care Act – the expansion of Medicaid and the establishment of exchanges of private insurance plans – were to be partially or completely financed with government funds? If lower-income employees could be shifted into the exchanges, the federal government would provide subsidies that would help fund the health care needs of employees. The only condition is that the employee must be part time, not working more than 30 hours per week.

Private employers have already begun to reduce their employees’ hours to qualify them for the exchange plans, and now we see that state governments are considering the same approach.

The important point is that employees in this sector that was to be left intact – those with employer-sponsored plans – are not only experiencing changes in their health insurance coverage, they are also experiencing a major loss of income due to the requirement of sharply limiting the hours worked per week. Since many of these individuals already have very low incomes, the cutback will be financially catastrophic.

It is really tragic that a program theoretically designed to expand health care coverage is having such a negative impact on employment itself. This would never have happened had we enacted a single payer system. We still can, you know.

A noted Republican physician executive talks about single payer

Posted by on Thursday, Apr 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.

I Am A Republican… Can We Talk About A Single Payer System?

By David May
ACC-in-Touch Blog, American College of Cardiology, April 23, 2013

I am a Republican. For those who know me that is not a surprise. I live in a red state. I have never voted for a Democratic presidential candidate. I can field strip, clean and reassemble a Remington 12-gauge pump blindfolded. And on top of it, I think we should talk about having a single payer national health care plan. The reason is quite simple. In my view, we already have one; we just don’t take advantage of it.

Firstly, Medicare and the Center for Medicare and Medicaid Services (CMS) are de facto setting all of the rules now. They are a single payer system.  When we go to lobby the Hill, we lobby Congress and CMS.  Talking to Blue Cross, Aetna, Cigna and United Health care is essentially a waste of time. All the third party payers do is play off the Medicare rules to their advantage and profit. They have higher premiums, pay a somewhat higher benefit and have a significantly higher level of regulation which impedes the care of their customers.  This is no longer consumer choice but effectively extortion, a less than hidden shake down in which the “choice” for a family of four is company A at $900 per month or company B at $1100 per month.  The payers are simply taking advantage of the system, playing both ends against the middle.

Secondly, in order to move forward with true health care finance we need complete transparency in cost and expense… and we need it now. As was noted in a recent Time magazine piece on the hidden cost of health care, our current system is a vulgar, less than honorable construct more akin to used car sales than medical care, cloaked under the guise of generally accepted accounting principles and hospital cost shifting.

Thirdly, with a single payer system would potentially come real utilization data, real quality metrics and real accountability. The promise of ICD-10 with all of its difficulties is that of a much more granular claims-made data. We could use some granularity in health care data and we will never achieve it in big data quantities without a single payer system.

Lastly, I think that the physicians should be in charge of health care and not the insurance companies and hospital systems. With a single price structure, it becomes all about medical decision making, efficiency, the provision of care to our patients, and shared decision making, all of which we do well.

How, you might say, could a Republican come to such a position? The simple answer is I really think it is quite Republican.  Oh, I know there will be many raised eyebrows and many critics. I accept that.  I understand the fact that no single payer system is perfect, that it is “socialist,” that it is “un-American.”

I would submit to you, however, that it is un-American to allow many of our citizens to be uninsured, that it is un-American to shunt money away from a strong military in order to support a bloated, inefficient and fraud-laden health care system, that it is un-American not to be open and above board with the cost of what we do, the expense of that service and the profit that we make. Mostly, it is un-American to let this outrageous health care injustice continue.

(David May, MD, PhD, FACC, is chair of the Board of Governors of the American College of Cardiology. He invites responses to his comments at the link below.)…

David May provides an important lesson for those who think that the single payer concept falls on the far left of a linear political spectrum. Society is not linear; it’s four dimensional. If we look at all dimensions, single payer clearly prevails. We can thank Dr. May for shattering the traditional but flawed construct of health care ideology.

Workers not prepared financially for unexpected health costs

Posted by on Wednesday, Apr 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.

American Workers on an Uphill Road with Consumer-Driven Health Care

2013 Aflac WorkForces Report, April 24, 2013

New Aflac survey reveals employees are not prepared for increased costs, may not want control and lack education

The 2013 Aflac WorkForces Report is the 3rd annual Aflac employee benefits study examining benefit trends and attitudes.

Not Prepared Financially

*  Only 24 percent of workers completely agree or strongly agree they will be financially prepared in the event of an unexpected emergency or serious illness.

*  Further, 46 percent of employees have less than $1,000 to be able to pay for out-of-pocket expenses associated with an unexpected serious illness or accident, and 25 percent of employees have less than $500.

*  Four-in-ten (40 percent) workers would have to borrow from their 401(k), friends and family to pay for out-of-pocket expenses associated with an unexpected serious illness or accident; 28 percent would have to use a credit card.

Press release:

Fast Facts:


The Center for Consumer Information & Insurance Oversight
Centers for Medicare and Medicaid Services

Section 1402 of the Affordable Care Act requires reductions in the maximum out-of-pocket limits on silver plans for individuals with household incomes between 100 and 400 percent of the FPL. However, the statute also requires the Secretary to ensure that the reductions in the maximum out-of-pocket limits do not cause the AVs (actuarial values) of these silver plan variations to exceed certain levels.

For reasons described in more detail below, we do not plan to reduce the maximum out-of-pocket limits for individuals with income between 250 and 400 percent of FPL.

With a major trend expanding in the direction of employer-sponsored consumer-driven health care, this new Aflac report shows that workers are not ready for the change. If you look only at the financial challenge, workers may never be ready. They cannot afford to pay the out-of-pocket expenses that they would face should they or their families develop significant medical problems.

Although the Aflac study was limited to employer-sponsored benefit programs, most people purchasing plans in the new state insurance exchanges also will be selecting plans that use high-deductibles – the defining characteristic of consumer-driven health plans.

The Affordable Care Act (ACA) does require reductions in out-of-pocket expenses for individuals with household incomes between 100 and 400 percent of the federal poverty level (FPL), but another ACA requirement prohibits the covered silver plans from having an actuarial value over 70 percent (the percent the plan pays on average) for individuals with household incomes over 250 percent of FPL ($27,925 for an individual). Since it is impossible to keep the actuarial value down at 70 percent if out-of-pocket expenses are subsidized, it was decided to eliminate out-of-pocket support for individuals above 250 percent of FPL.

Some workers will benefit from employer contributions to health spending accounts (HSAs and HRAs), just as some individuals will benefit from out-of-pocket subsidies in the exchanges. In either instance, it can be anticipated that far too many still will not be prepared financially for unanticipated medical costs, just as the Aflac study reported.

Newer employer-sponsored plans and plans under ACA are moving in the wrong direction. We need a program that removes financial barriers to care, not plans that erect them. All you have to do is read the 16 page CCIIO/CMS bulletin on actuarial value and cost-sharing reductions (link above) to see how ridiculously complicated and irrational we made this system.

We really do need a single payer system. Then everyone would be prepared financially in the event of medical need.

Is the slowdown in health care spending good news?

Posted by on Tuesday, Apr 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.

We still have a health-care spending problem

By Drew Altman and Larry Levitt
The Washington Post, April 21, 2013

For the past several months, analysts at the Kaiser Family Foundation and the Altarum Institute have been analyzing the recent slowdown in health spending. On average, health spending grew by 4.2 percent per year from 2008 to 2012, down from the recent peak of 8.8 percent from 2001 to 2003 and the lowest rate of growth in five decades. Our main conclusion is that most of this slowdown, 77 percent, has been due to years of a weak economy, which causes people to put off health services when they can and prompts employers and states to reduce health spending. The other 23 percent is explained by changes in the health system, including increased consumer cost-sharing, tighter managed care and modifications in payment and delivery (we can’t precisely pinpoint the separate effects of these three factors).

We need to be realistic about the fact that health spending will start going up more rapidly again as the economy improves. But how much costs escalate is at least in part within our control, and that matters a lot for federal and state budgets, employers and families. The place to start is by recognizing that the problem of health-care costs is far from solved.

Drew Altman is president and chief executive of the Kaiser Family Foundation, of which Larry Levitt is senior vice president.…

KFF Snapshot – Assessing the Effects of the Economy on the Recent Slowdown in Health Spending:

We are now experiencing the slowest growth in health-care spending in the past half century. Though most agree that the weak economy slowed the rate of growth, many now claim that implementation of the Affordable Care Act is responsible for the protracted slowing while predicting that further implementation will finally bring excessive cost escalation under containment. What is really happening here?

Although the growth of spending – at 4.2 percent – is much lower than recent historical trends, it still represents excess growth since inflation has been flat and the growth of GDP has been very sluggish. Should we return to a more vibrant economy and more typical inflation rates, with no other changes, the rate of growth in health-care costs would be in the higher ranges that we no longer tolerate. So the good news in the slowing of health-care spending may not be such good news after all.

An important finding in this Kaiser Family Foundation report is that over three-fourths of the slowing has been due to the weak economy. We are not only facing a disappointing recovery, this factor in the slowing of health-care spending does not bode well for the future. If the economy recovers fully, high rates of spending increases will return. If, as some economists warn, we remain in a protracted stagnant economy with relatively high unemployment rates – a new “normal” for our economy – rates in the mid-single digits will still represent excess rates of increased health-care spending.

What about the other trends that have slowed spending? Of course, they are not as important as the vibrancy of the economy since they represent less than one-fourth of the slowing, but we can use any help. Or can we?

This study was not able to quantify the effect of the provisions of the Affordable Care Act in reducing spending. What is clear though is that much of the slowing not related to the economy has been due to the imposition of greater cost sharing, especially higher deductibles, and to the ratcheting up of managed care intrusions such as more restrictive provider lists and greater use of tiering of benefits. For containing costs, these are unwise policies because they create barriers that impair access to health-care services that patients should have. That is a terrible way to control spending.

So what hope is there? The policy community seems to be hanging its hat on accountable care organizations ACOs) and bundled payments. Think about what percentage of services delivered would be significantly altered by these tools. There should be very little change in the amount of appropriate care. Teasing out inappropriate care is difficult if for no other reason than there are few guidelines to determine what should be eliminated. Further, how much can you really pare off of the spending, when, even if bundled, most of the services would still have to be rendered? Are you really reducing spending, or just shifting the costs? Even if ACOs and bundled payments worked as intended, the amount of savings would be negligible when considering the magnitude of the problem.

Drew Altman and Larry Levitt write, “The place to start is by recognizing that the problem of health-care costs is far from solved.” If ever there was a time to pull out the drawer and look for proven policy solutions, that time is now. The single payer model is a proven model, and is just what we need. Without it, we can anticipate higher health-care spending and worse health-care access in an economy that is working well for the wealthy, but not very well for the rest of us.

Businessman Allan Tweddle responds to Uwe Reinhardt on “one size fits all”

Posted by on Monday, Apr 22, 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.

Allan Tweddle responds to Uwe Reinhardt on “one size fits all”

(Quote of the Day for April 16, 2013

I am no expert, just a Canadian born US Citizen with family still north of the border.  I have seen the personal value of their system many, many times.  From horrific cancer in children, to heart and cancer in elderly, to total hip replacements, all covered at zero expense to the citizen patient.

And even that needs clarification.  In the Canadian Immigration web page, once a person is accepted by their immigration department, a new arrival into Canada will get full coverage within 3 months after arrival.  That is remarkable, considering that that person has not yet contributed one dime to the system.

Their system, like in Britain, provides basic health care for all and lets the private insurers pick up the tab for luxury items like fancy hospital suites, Viagra, etc.

The Canadian system is controlled, designed and managed by each province.  It has Federal dollars in each plan, so while their experience is NOT “One size fits all”, they have made it work for 30 years or more.  Did we make any attempt to study their success and learn from their mistakes?  I doubt it.

However, there are only 10 provinces.

Our ACA plan that tries to take into consideration 50 States does look far too complicated. I’ve been in briefings for the West Virginia plan alone, and it’s too complicated.  We need to just lower the eligibility age of Medicare to age zero less 9 months!

We need a single payer for the basics so we eliminate bankruptcy due to unexpected and financially catastrophic health care costs to individuals.  It is my understanding that in the U.S., medical debt contributes to 62% of all bankruptcies. In Canada that number is ZERO!

Shouldn’t we be protecting the citizens and not the greed-driven insurance industry?


Our emerging manufacturing company has been considering a location for our production operations.  We have concluded, like so many automobile companies* have, that Southern Ontario would be financially attractive due, among other reasons, to the differential in payroll burden.  Aerospace payroll burden here is about 36%, whereas it is 15 to 18% in Ontario.  That’s a significant differential…20%!  And from everything we have been able to determine, the difference is health care expense. (*Did you know that the expense of health care is almost always cited as a primary reason for the announcement of new plants in Ontario, so that now more cars are made and assembled in Ontario than Michigan?)

The financial/economic value of a universal single payer system is obvious to us.  And when you learn that the system they have there has better health results, then the choice becomes clear.  And if any right-wing free enterprise enthusiast who has an open mind would pay attention to the sheer economic advantages, they would join us on a bandwagon to get it here.

But we cannot wait for that to happen, so we will in all probability be locating there.

Allan Tweddle, of Charleston, West Virginia, is Chairman and CEO of an aerospace manufacturing firm. His email address:

We should listen to this Canadian-born, U.S. businessman who is very familiar with the health-care systems and the business climates in both the United States and Canada. The lure of Canada’s health-care system may be too great for his company to establish production operations here in the United States. That should awaken us all, especially the business community.

Much less important, a comment on “one size fits all” is warranted. That phrase has been used endless times to dismiss single payer reform. Used this way, it implies that there are many “sizes” in health care. In reality, when you need health care, you aren’t checking out “sizes.” You merely want unrestricted access to the health care delivery system that we have.

The “sizes” they speak of usually refer to different insurance products, ranging from almost worthless mini-med plans to comprehensive, integrated HMOs. (For purposes this discussion, integrated health care delivery systems such as Kaiser and Group Health are considered components of our health care delivery system rather than as intermediary insurers.)

When individuals select their own insurance plans, which do they choose most often? They select high-deductible, preferred provider organizations. That is, they select a “size” that works if they stay healthy. Should they develop significant health problems, that particular “size” will prevent them from being able to have free choice of their health care professionals and institutions, and it will leave them with out-of-pocket financial burdens – neither of which is the “size” that they really wanted, especially when they find out too late that it didn’t fit.

Mr. Tweddle points out that Canada’s single payer system is not “one size fits all” since it is separately administered in each of their ten provinces. But, refocusing, the Canada Health Act does pull all of the provinces together into one “size” that is universal, comprehensive, accessible, portable, and publicly administered. Quite clearly, this is not a “size” that is inflexible to varying needs, but rather it is a comprehensive program that fits all.

When you shop for health insurance, it is important to keep in mind that all of the private insurance choices are the wrong size, to varying degrees. The only right size out there is the health care delivery system which can be readily accessed by getting all of the wrong-sized insurers out of the way, except for the one right-sized program that really does fit everyone – a single payer national health program, or improved Medicare for all.

Uwe Reinhardt on “one size fits all”

Posted by on Monday, Apr 22, 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.

Author Interview

JAMA, April 16, 2013

Uwe E. Reinhardt, PhD, economics professor at Princeton:  On this point, I’m very disappointed that we Americans couldn’t even get the exchanges right. As Atul said, an exchange is really just like the personnel benefit department at General Motors. It’s just an electronic market to buy health insurance. I could show you the Swiss or the German exchanges. We have now made a horrendous mess of these exchanges. It cost close to a billion dollars to implement the California exchange, and heaven knows what’s happening in the other states. I was thinking if this generation of Americans had to plan the Normandy invasion, I think they would never have gotten there, or by the time they got there, the Russians would have been there. It is just unbelievable what an administrative nightmare the Affordable Care Act has become. Americans always tell me – I’m just an immigrant trying to learn about this country – they always tell me, oh, one size doesn’t fit all. Well, tell that to McDonald’s or to the Holiday Inn. In fact, Americans invented the idea that one size fits all, and built great industries on it – the auto companies, the food services, the hotels, the department stores – they’re all one size fits all.

Ed Livingston, deputy editor of JAMA:  You mentioned that companies like McDonald’s and Holiday Inn have been very successful in building large industries with uniformities, but those are private industries. Is the problem that when the government tries to take on something this complex they just can’t seem to get it done?

Uwe Reinhardt:  Well, it’s for the reason that Atul mentioned, that somehow we give enormous respect to regional variations, and, because we do, we make everything enormously complex. Imagine if you ran the U.S. Army that way. Soldiers from every state could pick their own rifles, and so on and so forth. Sometimes you have to do national things. I recently wrote a Health Affairs piece and said, every American is a dual citizen. He has citizenship in the state that they live in and citizens in America. And it really depends when you draft federal legislation, which citizenship do you make supreme. Typically you find Democrats put American citizenship up on top. The idea being that a baby in Mississippi should have the same rights to access to health care as a baby in Massachusetts, because they are both Americans. I think more on the Republican side they would say, no, what happens to a Mississippi baby is up to the people down there, and you can do what you want to a Massachusetts baby up there in Massachusetts. Now, that’s a different conception, neither right or wrong, but I’m saying on some issues we really, in my view, should have national policies because it would be much more easy to administer. After all, that’s what we said in Medicare. We said no matter where the elderly live, they should have the same deal in health care, and we created Medicare. Has Medicare been that much of a disaster?

Audio (April 16,2013):


“It is just unbelievable what an administrative nightmare the Affordable Care Act has become.”

“…they always tell me, oh, one size doesn’t fit all. Well, tell that to McDonald’s or to the Holiday Inn.”

“…but I’m saying on some issues we really, in my view, should have national policies because it would be much more easy to administer.”

“We said no matter where the elderly live, they should have the same deal in health care, and we created Medicare. Has Medicare been that much of a disaster?”

So can we draw the conclusion that we should adopt the administrative simplicity of a national, one-size-fits-all Medicare that gives everyone the same deal in health care? Seems like a really good idea.

About this blog

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.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.