What? Increased Medicare spending improves health status?

Posted by on Friday, Jun 3, 2011

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.

Medical Spending and the Health of the Elderly

By Jack Hadley, Timothy Waidmann, Stephen Zuckerman, Robert A. Berenson
HSR, May 24, 2011


Objective. To estimate the relationship between variations in medical spending and health outcomes of the elderly.

Data Sources. 1992–2002 Medicare Current Beneficiary Surveys.

Study Design. We used instrumental variable (IV) estimation to identify the relationships between alternative measures of elderly Medicare beneficiaries’ medical spending over a 3-year observation period and health status, measured by the Health and Activity Limitation Index (HALex) and survival status at the end of the 3 years. We used the Dartmouth Atlas End-of-Life Expenditure Index defined for hospital referral regions in 1996 as the exogenous identifying variable to construct the IVs for medical spending.

Data Collection/Extraction Methods. The analysis sample includes 17,438 elderly (age >64) beneficiaries who entered the Medicare Current Beneficiary Survey in the fall of each year from 1991 to 1999, were not institutionalized at baseline, stayed in fee-for-service Medicare for the entire observation period, and survived for at least 2 years. Measures of baseline health were constructed from information obtained in the fall of the year the person entered the survey, and changes in health were from subsequent interviews over the entire observation period. Medicare and total medical spending were constructed from Medicare claims and self-reports of other spending over the entire observation period.

Principal Findings. IV estimation results in a positive and statistically significant relationship between medical spending and better health: 10 percent greater medical spending over the prior 3 years (mean=U.S.$2,709) is associated with a 1.9 percent larger HALex value (p=.045; range 1.2–2.2 percent depending on medical spending measure) and a 1.5 percent greater survival probability (p=.039; range 1.2–1.7 percent).

Conclusions. On average, greater medical spending is associated with better health status of Medicare beneficiaries, implying that across-the-board reductions in Medicare spending may result in poorer health for some beneficiaries.


Does spending more on Medicare beneficiaries improve health status? This study concludes that, on average, it does. This is an important finding because current innovative efforts to control Medicare spending are based on the Dartmouth studies that conclude that variations in Medicare spending are not correlated with improved health outcomes.

As the authors of this new study indicate, arbitrary across-the-board reductions could result in poorer health for some beneficiaries. Even arbitrarily reducing spending in high cost areas could have detrimental effects if that higher spending were appropriate for the health status of the local population.

Medicare funds belong to all of us, so there is a responsibility for our stewards to spend those funds wisely and properly. They should pay for beneficial care but not pay for detrimental care nor for outrageously expensive care that is of no benefit. That means that we need more information about the benefits and risks of health care. We need comparative effectiveness studies and, yes, cost effectiveness studies. We need the type of information that is being collected, organized and disseminated by the British National Institute for Health and Clinical Excellence (NICE). We need scientific input free of commercial interests such as that provided by our National Institutes of Health.

It is not only Medicare that needs this input.  All care provided by our entire health care delivery system should benefit from this input. Obviously a single payer monopsony would have the ability and power to move funds from detrimental care to beneficial care.

What is Washington doing about this? The Republicans want to give up on government control of Medicare spending and instead shift more of that responsibility to individual Medicare beneficiaries through a defined contribution scheme (premium support). Medicare beneficiaries of limited means and with limited medical sophistication do not make good health care shoppers. The Democrats want to show the Republicans that they can be tough on deficit reduction by including Medicare in the negotiations for budgetary spending cuts – trying to find cuts that inflict the least pain, though painful nevertheless.

Come on. Put away the guillotines, machetes, axes and cleavers. Let’s start spending the right way. Let’s direct our resources to quality care that benefits us all.

About NICE

About NIH

About Single Payer

Means testing Medicare

Posted by on Thursday, Jun 2, 2011

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.

Ryan Says Rich Should Pay More as Sanders Defends Entitlements for Wealthy

By Brian Faler
Bloomberg, May 30, 2011

Bernie Sanders, the U.S. Senate’s only avowed socialist, may be the chamber’s fiercest advocate of taxing the rich to cut the federal deficit. That doesn’t mean he wants to reduce their Social Security and Medicare benefits.

Representative Paul Ryan, the Republican chairman of the House Budget Committee, wants to give the wealthy big tax breaks to encourage them to invest and create jobs. He also wants to take away many of their retirement benefits.

Democrats say Social Security and Medicare have endured because they offer benefits to people of all incomes, and accuse Republicans of trying to kill the programs by stripping away their beneficiaries, beginning with the rich. Republicans say the fairest way to curb the deficit is to scale back the programs for those who need them least.

With polls showing the public supports limiting benefits to the wealthy, and some Democratic leaders signaling a willingness to consider the idea, the rich may face cuts as lawmakers debate how to curb the national debt.

Sanders, 69, said the debate isn’t just about numbers.

“The strength of Social Security and Medicare is that everybody is in,” the Vermont independent said in an interview. “Once you start breaking that universality and you say that if you’re above a certain income, two years later that income goes down and 10 years later it becomes a welfare program.”

Republicans say the waves of retiring baby boomers, as well as increasing health-care costs, are the real threats to the programs because the benefits are unsustainable.

“The thing that tears the social contract is insolvency,” said Ryan, 41, a Wisconsin Republican. “Means-testing is an obvious solution to our fiscal problems,” he said. “The alternative is everybody gets cut, so why don’t we put the money where it should go — to the people who need it.”

Representative James McDermott, a Washington Democrat, said providing benefits to those who don’t need them is a small price to pay to ensure the programs are available to everyone else.

“I don’t worry about paying a few benefits to Warren Buffett or Bill Gates,” he said. “As long as we make absolutely sure we got public support” for the programs.


Paying for health care and receiving health care are two different issues.

Under an ideal system, everyone should receive all essential health care services that they need without having to face financial barriers that might prevent them from accessing that care.

Since health care now has become so expensive that many cannot afford it, an ideal system would also finance that care based on the ability to pay. Those with greater means would pay more. Also, since the need for health care is very unevenly distributed, an insurance function of pooling the costs is absolutely essential.

Assuming that everyone gets the care that they need, there are two fundamental ways of paying for it. You can fund the entire costs in advance through a single risk pool. That is the simplest administratively and certainly would be the most equitable if each person contributed a given amount based on their means – most easily accomplished through progressive taxes.

The other way would be to establish a catastrophic risk pool through taxes or premiums that only partially fund care, and then assess cost-sharing payments (deductibles, co-payments, coinisurance) based on services received, at the time they are received. Since ability to pay remains an issue, to ensure access each individual would have to be means tested to determine what subsidies would be required (as in the Affordable Care Act). This greatly increases the administrative complexity and costs of financing care. The health care provider, the payer, and the patient each must account for each and every service and the allocation of responsibility for payment.

Although insurance premiums are normally thought of as a method of financing the risk pool, they have taken on a new twist in Medicare Part B (physician services) and Part D (drug benefit). Although these programs are partially funded through the tax system, the additional Part B and Part D premiums assigned to the individual beneficiaries are now means tested. In a sense, they are now accounted for as a means tested but negative benefit. The greater one’s means, the less the benefit. This is an important strategy  of the opponents of Medicare because it weakens the support of the more affluent members of our society and risks converting Medicare into a welfare program.

If all health care has already been prepaid by taxes paid into into a common risk pool, then none of this is necessary. The patient simply receives needed care, and that’s it.

Professor Leonard Rodberg, from Queens College/CUNY, has described this concept in these insightful comments (personal communication):

“The central feature of the Canadian health care system is not that it is a single payer system; it is that financial considerations do not enter into the patient’s decision to seek medical care, nor in the doctor’s decision on what treatment to recommend for the patient. It is not only that there is no exchange of money between patient and doctor; the patient has to pay no money for the visit at any time. There is no fighting with the insurance company to get a claim paid, and no complicated bookkeeping on the part of either the patient or the doctor.”

“We in PNHP have often observed that the term ‘single payer’ is not helpful in explaining what we mean by a national health program. I learned in Canada that it also doesn’t describe the essence of what we are seeking. We tend to treat the absence of cost-sharing as simply a feature of the single payer plan we want. I am now convinced that, instead, we should view the removal of financial barriers to care as the core of what we advocate: no billing of patients, no cash exchange between patient and provider, no checking with insurance companies, etc.

“Too often, we speak as if our goal is a single payer system. I believe that is a mistake. Our goal should be the removal of all financial barriers to care; a single payer system is simply a means, and not the only means, to that goal. What makes the Canadian system, and others, work so well is not its single payer character, but the fact that funding of the system is completely separated from the delivery of care. That should be what we seek through a national health program.”

Des Moines Register: VA health system for everyone?

Posted by on Wednesday, Jun 1, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Why don’t we expand VA health system?

DesMoinesRegister.com, May 29, 2011

The Register recently editorialized that it doesn’t make sense to operate a multi-billion VA health care system that runs parallel to the nation’s vast private health care system of hospitals and clinics. It serves only one segment of the population. A better option would be providing veterans health insurance, similar to Medicare for seniors. Then they would be allowed to go to any hospital or clinic, rather than having to travel long distances for care. The thousands of health care workers currently employed by the government could work in the private sector and treat more Americans.

On the opposite page (excerpt and link below), Donald Cooper, director of VA Central Iowa Health Care System, takes issue with that idea. He suggests instead that Americans should learn from the VA. It certainly does have a record of providing good care. For example, it does a better job preventing hospital-acquired infections than private hospitals. A “connected” system of facilities allows for easy access to comprehensive medical records, which can prevent unnecessary tests and medical errors.

He makes good points. And he got us thinking: Maybe the VA shouldn’t be dismantled. Maybe it should be available to everyone. What if the VA’s hospitals and clinics became THE health care system in this country?

After all, a single system would make more sense than the hodgepodge of thousands of private and public hospitals, clinics and insurer plans. The VA is wildly popular with politicians of both political parties. The program pays a fraction of what private insurance companies pay for prescription drugs, and the VA provides not only hospital care but also nursing home care. It’s comprehensive.

Perhaps it should be expanded.

Of course once some politicians figure out that is “socialized” medicine, the idea would go over like a lead balloon. The VA is truly socialized health care. The workers are employed by the government. The buildings are owned by Uncle Sam. The entire operation and all the care is funded with tax money.

This newspaper has supported a taxpayer-financed system of health insurance. Pool tax money to provide everyone with government insurance that helps pay for services offered by private hospitals, clinics and doctors. That’s what some other countries do.

We never have argued the government should also own facilities and employ workers who provide care.

But Cooper — as well as the experts and studies he refers to — certainly should give all of us something to think about. They agree “consistent, safe, high quality care requires a reliable delivery system that sets high standards of clinical practice, monitors clinical performance indicators, and employs systematic use of process improvement tools and practices.” That “best care comes from systems just like VA health care.”

What about the rest of us?

We’ll take it.



VA offers lessons for U.S. health care

By Donald C. Cooper, Director of VA Central Iowa Health Care System
DesMoinesRegister.com, May 29, 2011

As your (prior May 9) article infers, it is widely recognized that our nation is facing a growing health care crisis with a fragmented delivery system, escalating costs, and highly variable quality and financing systems that create an excessive administrative burden and incentives for overutilization of diagnostic procedures and specialized care.

Health care leaders have consistently observed that the best care requires an integrated health care system, one that treats the whole patient and coordinates care across the full continuum of services from primary care to acute specialized care, from post-surgery rehabilitation to nursing home and end-of-life care. We know that the best care comes from comprehensive integrated delivery systems – systems just like VA health care.

Health care experts also agree that consistent, safe, high quality care requires a reliable delivery system that sets high standards of clinical practice, monitors clinical performance indicators, and employs systematic use of process improvement tools and practices. The evidence shows that consistent, high quality care comes from the rigorous application of evidence-based medicine supported by a comprehensive, easily accessible, electronic patient health record. We know that the best care comes from systems just like VA health care, an integrated health system with an award winning lifetime electronic patient record that improves patient safety, enhances coordination of care, and supports consistent application of clinical guidelines and monitoring of quality indicators across 153 medical centers and over 800 community based clinics across the country.


Wow! The Des Moines Register previously has supported single payer reform, but now they seem to be broadening their position by supporting a publicly owned and operated national health service – socialized medicine! Not only should everyone be covered by a universal, taxpayer-financed risk pool, but that pool should be used to pay for integrated health care – a system “just like VA health care.”

Currently there is considerable interest in integrated health care systems. The concept of accountable care organization (ACO) has been advanced as a model for integrating health care delivery. Unfortunately, ACO was narrowly defined in the Affordable Care Act (ACA) which led to a proposed set of rules that have been largely rejected by the health care community. This stumbling block should not prevent us from moving forward with efforts to establish integrated health care that is designed specifically to benefit patients, much like the VA health care system.

H.R. 676, single payer legislation sponsored by John Conyers, calls for conversion of for-profit institutions of the health care delivery system into non-profit, eliminating passive investors, while being run by boards representing the public interest. The VA system would remain independent for the first ten years, at which time merging it with the single payer system would be considered. Could H.R. 676 be an incremental step towards a national health service?

Unfortunately, ACA has left our health care system highly fragmented. The first attempt to form integrated health systems through the ACO model has demonstrated that organizing within such a fragmented system is about like herding cats. Obviously a properly designed single payer system would provide the guidance and incentives to encourage patient-oriented integrated systems. What the VA system has shown us is that government ownership can much more readily facilitate health system integration. It’s already been done – by the government!

The nation most often cited for an example of a national health service is the United Kingdom. For less than half of what we are spending ($3129 vs. $7538 per capita, PPP adjusted), they have achieved most of the goals of a high-performance system that have remained elusive in the United States. Just imagine what an integrated national health service in the United States would be like at our current level of spending.

As the editorial board of the Des Moines Register says, “We’ll take it.” Anyway, it’s definitely something worth thinking about.

Changing physicians’ politics

Posted by on Tuesday, May 31, 2011

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.

As Physicians’ Jobs Change, So Do Their Politics

By Gardiner Harris
The New York Times, May 30, 2011

Doctors were once overwhelmingly male and usually owned their own practices.

But doctors are changing. They are abandoning their own practices and taking salaried jobs in hospitals, particularly in the North, but increasingly in the South as well. Half of all younger doctors are women, and that share is likely to grow.

There are no national surveys that track doctors’ political leanings, but as more doctors move from business owner to shift worker, their historic alliance with the Republican Party is weakening from Maine as well as South Dakota, Arizona and Oregon, according to doctors’ advocates in those and other states.

Because so many doctors are no longer in business for themselves, many of the issues that were once priorities for doctors’ groups, like insurance reimbursement, have been displaced by public health and safety concerns, including mandatory seat belt use and chemicals in baby products.

“It was a comfortable fit 30 years ago representing physicians and being an active Republican,” said Gordon H. Smith, executive vice president of the Maine Medical Association. “The fit is considerably less comfortable today.”

But doctors in Maine have abandoned the ownership of practices en masse, and their politics and points of view have shifted dramatically. The Maine doctors’ group once opposed health insurance mandates because they increase costs to employers, but it now supports them, despite Republican opposition, because they help patients.

Dr. Nancy Cummings, a 51-year-old orthopedic surgeon in Farmington… went to work for a hospital, sees health care as a universal right and believes profit-making businesses should have no role in either insuring people or providing their care. She said she was involved with the Maine Medical Association, for the most part, to increase patients’ access to care.

Dr. Lee Thibodeau, 59, a neurosurgeon from Portland, still calls himself a conservative but says he has changed, too. He used to pay nearly $85,000 a year for malpractice insurance and was among the most politically active doctors in the state on the issue of liability. Then, in 2006, he sold his practice, took a job with a local health care system, stopped paying the insurance premiums and ended his advocacy on the issue.

“It’s not my priority anymore,” Dr. Thibodeau said. “I think Gordon and I are now fighting for all of the same things, and that’s to optimize the patient experience.”

Dr. Cecil B. Wilson, the president of the A.M.A., said that changes in doctors’ practice-ownership status do not necessarily lead to changes in their politics. And some leaders of state medical associations predicted that the changes would be fleeting.

Dr. Kevin S. Flanigan, a former president of the Maine Medical Association, described himself as “very conservative” and said he was fighting to bring the group “back to where I think it belongs.” Dr. Flanigan was recently forced to close his own practice, and he now works for a company with hundreds of urgent-care centers. He said that in his experience, conservatives prefer owning their own businesses.

“People who are conservative by nature are not going to go into the profession,” he said, “because medicine is not about running your own shop anymore.”


Anecdotes and hearsay are not the same as scientifically conducted surveys, but most of us who have been around for a while have seen the trends described in this article. Many physicians seem to be less concerned about personal involvement in the business of medicine and are seeking out approaches that “optimize the patient experience,” and in so doing are optimizing their own professional practice experiences.

Dr. Kevin Flanigan, a former president of the Maine Medical Association, represents the old guard. He says that conservatives prefer owning their own businesses and “are not going to go into the profession because medicine is not about running your own shop anymore.”

AMA President Cecil Wilson doesn’t believe that physicians will change their politics simply because of a change in practice ownership status. That view may be held by the old guard, but those now entering the profession who care more about patients than they do about running a business may well align themselves politically with those who believe in health care justice.

This reminds me of another personal anecdote. When I was interviewed for my application to UCSF by revered pediatrician Moses Grossman, he asked me what I would do if I wasn’t accepted into medical school. I told him that I was confident that I would be accepted somewhere, but, if not, I would most likely become a school teacher. He asked me why I thought he asked that question. I said that I assumed that he wanted to be sure that I had the practical sense to consider other options since realistically many did not make it into medical school. He then said something I’ve never forgotten. He said, “Suppose you told me that instead you would take over your uncle’s fur business… ”

The old guard can have their fur business equivalencies, and hopefully they eventually will go the way of that heartless industry. Let’s welcome the new guard who have decided that they would prefer to join our growing ranks of compassionate, humanitarian stewards of the healing arts.

AMA supports Medicare balance billing

Posted by on Friday, May 27, 2011

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 Patient Empowerment Act

American Medical Association

Rep. Tom Price, MD (R-GA) introduced H.R. 1700, the Medicare Patient Empowerment Act, on May 3, 2011. This bill, in line with AMA policy, would allow Medicare patients and their physicians to enter into private contracts without penalty to either party. It would enable beneficiaries to use their Medicare benefits to see physicians who do not accept Medicare, as opposed to paying for the entire cost of their care out-of-pocket as required under current law. On May 22, Sen. Lisa Murkowski (R-AK) introduced S. 1042, the Medicare Patient Empowerment Act, in the Senate.


AMA letters expressing “strong support for this legislation”:

To Rep. Tom Price:

To Sen. Lisa Murkowski:

Medical organizations supporting this legislation:


Existing law (excerpts):

Sec. 1802.

Use of Private Contracts by Medicare Beneficiaries.—
(1) In general.—Subject to the provisions of this subsection, nothing in this title shall prohibit a physician or practitioner from entering into a private contract with a medicare beneficiary for any item or service—
A) for which no claim for payment is to be submitted under this title, and
(B) for which the physician or practitioner receives—
(i) no reimbursement under this title directly or on a capitated basis, and
(ii) receives no amount for such item or service from an organization which receives reimbursement for such item or service under this title directly or on a capitated basis.

(B) Items required to be included in contract.—Any contract to provide items and services to which paragraph (1) applies shall clearly indicate to the medicare beneficiary that by signing such contract the beneficiary—
(i) agrees not to submit a claim (or to request that the physician or practitioner submit a claim) under this title for such items or services even if such items or services are otherwise covered by this title;
(ii) agrees to be responsible, whether through insurance or otherwise, for payment of such items or services and understands that no reimbursement will be provided under this title for such items or services;
(iii) acknowledges that no limits under this title (including the limits under section 1848(g)) apply to amounts that may be charged for such items or services;
(iv) acknowledges that Medigap plans under section 1882do not, and other supplemental insurance plans may elect not to, make payments for such items and services because payment is not made under this title; and
(v) acknowledges that the medicare beneficiary has the right to have such items or services provided by other physicians or practitioners for whom payment would be made under this title.

(B) Affidavit.

(ii) the affidavit provides that the physician or practitioner will not submit any claim under this title for any item or service provided to any medicare beneficiary (and will not receive any reimbursement or amount described in paragraph (1)(B) for any such item or service) during the 2–year period beginning on the date the affidavit is signed



Proposed law

H.R. 1700 and S. 1042 (excerpts):

Section 1802 of the Social Security Act is amended to read as follows:

(b) Freedom To Contract by Medicare Beneficiaries-
`(1) IN GENERAL- Subject to the provisions of this subsection, nothing in this title shall prohibit a Medicare beneficiary from entering into a contract with a participating or non-participating physician or practitioner for any item or service covered under this title.

(B) ITEMS REQUIRED TO BE INCLUDED IN CONTRACT- Any contract to provide items and services to which paragraph (1) applies shall clearly indicate to the Medicare beneficiary that by signing such contract the beneficiary–
`(i) agrees to be responsible for payment to such physician or practitioner for such items or services under the terms of and amounts established under the contract;
`(ii) agrees to be responsible for submitting claims under this title to the Secretary, and to any other supplemental insurance plan that may provide supplemental insurance, for such items or services furnished under the contract if such items or services are covered by this title, unless otherwise provided in the contract under subparagraph (C)(i); and
`(iii) acknowledges that no limits or other payment incentives that may otherwise apply under this title (such as the limits under subsection (g) of section 1848 or incentives under subsection (a)(5), (m), (q), and (p) of such section) shall apply to amounts that may be charged, or paid to a beneficiary for, such items or services.


(a) In General- No State may impose a limit on the amount of charges for services, furnished by a physician or practitioner, for which payment is made under section 1848 of the Social Security Act (42 U.S.C. 1395w-4), and any such limit is hereby preempted.

http://thomas.loc.gov (enter either H.R.1700 or S.1042)

Sadly, the American Medical Association is showing once again whom they really represent – physicians, but not their patients. This legislation would greatly enhance physician revenues at a considerable cost to their Medicare patients. It would allow physicians to require their patients to pay the full balance of their unrestricted fees, even if far in excess of Medicare allowable charges.

Current law prohibits physicians from billing the patient for any charges other than deductibles and coinsurance that are applied to allowable charges only. All fees beyond the allowable amount must be adjusted off. The only exception is that a physician may enter into a private contract with a patient who agrees to pay the full amount, but only if the physician and patient agree to not bill Medicare for even the allowed charges, and the physician agrees to not bill Medicare for any other patient for a minimum of two years.

Even though we often hear threats that physicians will stop seeing Medicare patients, most really can’t afford to give up their Medicare revenues, and, besides, too many Medicare beneficiaries do not have adequate resources to pay large medical bills in full. The current law provides leverage to ensure that physicians will be there when Medicare patients need them.

The Price/Murkowski legislation would no longer require physicians to exit the Medicare program entirely should they enter agreements to independently bill the patients for the balance of their fees. Also Medicare would still have to pay the allowed charges. As a further insult, the physician can require the patient to do their own Medicare billing. The physician gets the full fee, in cash, including the disallowed charges, and the patient has to do the paperwork. Nice guys, AMA!

If physicians were allowed to bill for the balance of the charges, Medicare as we know it would be destroyed. It is a more direct and more powerful method of shifting payment from the government to individual patients – far worse than the cost shift that would occur with the Ryan premium support proposal for Medicare. Since the greatest contributor to our excessive health care spending is our high prices, the Price/Murkowski legislation would cause health care spending to skyrocket because there would be no limits on physician pricing.

If you check the list of endorsing medical organizations at the link above, it is an embarrassment to those of us who have always thought that the patient comes first, but there is one consolation. Conspicuously absent from the list are the American Academy of Family Physicians and the American College of Physicians. Thankfully, our nation’s primary care physicians still believe that our patients really do come first.

Joe Jarvis and Brent James on Intermountain Healthcare

Posted by on Thursday, May 26, 2011

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 recent Quote of the Day (May 19) discussed Intermountain Healthcare as an example of how an integrated health care system can help to control costs by emphasizing quality improvement. A co-author of the Health Affairs article cited, Dr. Brent C. James of Intermountain Healthcare, has discussed this topic with Dr. Joe Jarvis of the Utah Healthcare Initiative. Although their views on single payer differ, their discussion is a welcome addition to this dialogue.

Utah Health Care Initiative

IHC: A Quality Story
By Dr. Joe Jarvis
May 21, 2011

Dr. Brent James Responds
By Dr. Joe Jarvis
May 23, 2011

Brent James: Senate Testimony on quality
April 29, 2009

Although Brent James has demonstrated that quality is attainable independently of the financing system for health care, his approach requires a degree of altruism which he posses but which has not permeated the entire health care delivery system.

Quality and financing are two different considerations, but there is a tremendous amount of overlap. A well designed single payer system provides tools and incentives for quality enhancement, just as a high quality system provides efficiencies for the financing system.

Dialogues such as this between Dr. Jarvis and Dr. James move the process forward bringing us closer to the day that we can experience a high quality health care system for all that is truly affordable – a financing system that is universal and equitable, and a high quality delivery system that makes it work.

Medicaid maintenance-of-effort

Posted by on Tuesday, May 24, 2011

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.

GOP Pushes To Let States Reduce Medicaid Rolls

By Mary Agnes Carey and Phil Galewitz
Kaiser Health News, May 23, 2011

Medicaid covers about 56 million Americans, with states sharing the costs with the federal government. States have been barred from cutting eligibility for the program since 2009 when economic stimulus legislation gave states billions to prop up their Medicaid program on the condition they didn’t tighten eligibility standards. The 2010 health law extended this requirement until 2014.

President Obama and congressional Democrats say eliminating the “maintenance-of-effort” provision would increase the challenge of expanding Medicaid in 2014; an additional 16 million people will qualify, with the federal government picking up most of the cost.

The House Energy and Commerce Health Subcommittee voted along party lines earlier this month to repeal the Medicaid “maintenance of effort” requirement. The legislation is expected to pass both the full Energy and Commerce panel and the GOP-controlled House. A vote on similar standalone legislation in the Democratic-controlled Senate is unlikely but the measure could end up in a debt-limit package.

But liberals have at times been disappointed by Obama’s concessions, including last year’s deal to extend the Bush-era tax cuts. They worry that the president will ultimately feel compelled to trade away the “maintenance-of-effort” requirements. The White House declined to comment.


As has been said many times in these messages, Medicaid is a welfare program, and our politicians will continue to approach it as such. It will remain underfunded and will always be vulnerable to budgetary decisions. Not only did the Affordable Care Act greatly expand coverage with the highly flawed private insurance plans, it also greatly expanded the highly flawed Medicaid program. It’s still not too late to eliminate these unsatisfactory programs and replace them with an improved Medicare that covers everyone.

S&P Medicare and Commercial Indices

Posted by on Monday, May 23, 2011

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.

US Healthcare Costs Continue to Rise, But At Declining Rates According to the S&P Healthcare Economic Indices

S&P Indices
May 19, 2011

David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s:

“If you look over the last year or so of data, it is apparent that the rates of increase in health care costs continue to slow down. While there was some volatility within months, the general trend has been a slowdown across all nine of the indices we publish. Most of the annual growth rates peaked in the late winter/early spring of 2010. Since then, most of these rates have fallen by 2 percentage points or more. The biggest slowdown has come from the Hospital Medicare Index, where the annual growth rate fell from +8.30% in August 2009 to +1.18% in March 2011. On the other hand, we have not seen an equal trend for the Hospital Commercial Index, where the annual growth rate peaked at +9.36% in May 2010, and is still reporting a healthy +8.36% as of March 2011. This phenomenon could be the possible result of two things: (1) costs for Medicare patients are being better contained than those covered under commercial insurance plans and (2) hospitals are using more procedures and services covered under commercial plans, contributing to the increase in total costs. We see a similar differential across the Professional Services Indices, but not as severe.”

For the past several years, the trend of medical costs funded by commercial insurance plans is significantly greater than those funded by Medicare.

Click on this link for two graphs dramatically demonstrating these differences:

We frequently see reports that attempt to explain away the findings that medical costs funded by private commercial insurance plans are significantly greater than those funded by Medicare. This report from Standard and Poor’s leaves absolutely no doubt that the difference is not only real, but it is very significant.

Just to show how different the people on Wall Street think, the Hospital Commercial Index is reported as “a healthy +8.36% as of March 2011.” Leave it to Wall Street gurus to declare that extremely high private sector (commercially insured) health care cost increases are “healthy.” You would think that businesses paying commercial rates rather than Medicare rates would take notice.

Donald Light responds on Intermountain and single payer

Posted by on Friday, May 20, 2011

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.

Professor Donald Light responds to yesterday’s message on Intermountain Healthcare’s success in improving quality while reducing costs (http://www.pnhp.org/news/2011/may/achieving-aco-goals-without-the-aco):

Hi Don,

Thanks for sending out your excellent synopsis of the new article about how Intermountain Healthcare has saved money while maintaining high quality. As an adviser to the NHS since 1991 who has published critical policy analyses in the BMJ since then of its pro-competition reforms to create a  market internal to its single-payer frame, I took advantage of your free link and read the article. Let me share some thoughts with you and colleagues.

From the first page, it becomes clear that Intermountain is much more like a single-payer health care system than the NHS, back to at least 1986,  because of its integrated and constantly improved data systems measuring costs and clinical processes that form the basis for all of its achievements. I pointed out in 1991 that it was folly for Mrs. Thatcher to allow competing hospitals to choose what they measured and how, and in 1997 I recommended to new leaders at Richmond House who were keen on integrated data that they adapt one of two fully developed integrated data systems available free on the web, one from the VHA (Veterans Health Administration) and the other from Finland. No interest was shown, and the NHS continued to pour large sums each year into contracting with international companies to develop a fresh integrated data system. Fourteen years later none yet exists, and observers have wondered if this is a boondoggle from the government to those corporations?  Intended or not, that has been the result.

Intermountain’s account also exhibits, as does the case of the VHA, strong, consistent leadership over many years dedicated to improving quality and reducing costs. NHS results have been mixed, with some achievements of improved quality but not as part of a “single-payer,” integrated plan to hold down costs while improving quality by reducing large clinical variations. Most important, Intermountain treats its hospital services as integrated with all services outside hospitals, as does the reformed VHA, Kaiser, Marshfield, and others. By contrast, the NHS has sharpened the divides between hospital and community or ambulatory services, and the new reforms led by Langley will entrench them further. This lies at the centre of my new critique of the single-payer NHS reforms, published in Social Science & Medicine [Social Science & Medicine 72 (2011) 821-822]. Note that we recommend the NHS turn to US examples of integrated care like Intermountain, an irony your readers will appreciate.

A key point of the Intermountain article is that reviewing “the entire continuum that patients experience,” such as “home-based, clinic-based or inpatient care” leads to a focus on population-level health rather than on health care services. Marketing shifts from selling the latest procedure to selling health gain. This becomes the key point of the article’s conclusion as it describes how the current US payment system by procedure led Intermountain to lose more than it saved as it lowered costs for high quality, and how this needs to change if the US is going to move forward. Sadly, the NHS reforms now feature pay for performance or “payment by results,” which are really payment by procedures, with little systematic measure of results. The NHS is not the only single-payer system enamoured by market-based competition as the way to make its services more cost-effective, as students learn in the course I teach at Stanford on health care systems in advanced capitalist countries. (See http://www.kaiseredu.org/~/media/Files/EDU/Syllabus%20Library%20Files/Li….) The evidence shows that usually competition raises costs, fragments care as providers focus on more profitable patients or procedures, and increases administrative overhead. In my opinion, this is what has happened in the English NHS. One might think a single-payer national system would focus upstream on health and prevention, and the NHS does in some meaningful ways; but its reforms of medical services work against that goal and draw money away from it towards more costly “payment by results” specialty procedures once patients get seriously ill.

Finally, Michael Dixon, a national leader of GPs, and I have urged since 2004 that the NHS reorganize clinical leadership in an integrated way, and a key sentence in the Intermountain article states that “Physicians led almost all of the changes themselves.” So far, leaders of the English NHS have shown no interest in this idea, which has been critical to the success of Kaiser, Intermountain, and the VHA. I hope these experiences over the past 20 years enable your readers to refine their thoughts about what “single-payer” means and how it works. We need a more deeply textured and fully developed of that concept than reference to how a health care system is funded.

With best regards,

Donald W. Light
Lokey Visiting Professor, Stanford University
Professor, UMDNJ
(See our book, The Risks of Prescription Drugs)

References for Donald Light’s message

Donald Light’s message today included this link to a syllabus for a course he teaches at Stanford on health care systems in advanced capitalist countries; it contains a large number of invaluable references:


These are other references that relate more specifically to today’s message:

“Observations on the NHS reforms:  an American perspective.”  British Medical Journal 1991;303: 568-570.

“Betrayal by the Surgeons.”  Lancet  1996;347: 812-3.

“Managed Care in a New Key: Britain’s Strategies for the 1990s.”  International Journal of Health Services 1998;28:427-44.

“Is NHS Purchasing Serious?  An American Perspective.”  BMJ 1998;316:217-20.

“From Managed Competition to Managed Cooperation: Theory and Lessons from the British Experience.”  The Milbank Quarterly  1997; 75:297-341 (Lead article)

“The real ethics of rationing.”  BMJ (British Medical Journal) 1997;315:112-15.

“Managed Competition: Theory and Lessons from the British Experience.”  Pp. 322-56 in Competitive Managed Care: The Emerging Health Care System.  Edited by John Wilkerson, Kelly Devers and Ruth Given.  SanFrancisco: Jossey-Bass, 1997.

“How Waiting Lists Work and their Hidden Agenda,” Consumer Policy Review (UK) 2000;10(4):126-132

“Here We Go Again: Repeating Implementation Errors.”  BMJ (British Medical Journal) 1999;319:616-8.

“Managed Competition, Governmentality and Institutional Response in the United Kingdom,” Social Science and Medicine 2001;52(8): 1167-82.

Achieving ACO goals, without the ACO

Posted by on Thursday, May 19, 2011

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 Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts

By Brent C. James and Lucy A. Savitz
Health Affairs, May 19, 2011

Since 1988 Intermountain Healthcare has applied to health care delivery the insights of W. Edwards Deming’s process management theory, which says that the best way to reduce costs is to improve quality.

Intermountain Healthcare is an integrated delivery system based in Utah and Idaho. Its network of twenty-three hospitals and 160 clinics provides more than half of all health care delivered in the region. Intermountain’s hospitals range from critical-access facilities in rural areas to large, urban teaching hospitals. Although Intermountain has an employed physician group and a health insurance plan, the majority of its care is performed by independent, community-based physicians and is paid for by government and commercial payers.

In 1986 an Intermountain team launched an effort to measure practice variation, focusing on the details of care in specific, common treatments.

What Intermountain Learned

First, most hospital admissions for a specific treatment had similar characteristics. Even for coronary bypass surgery, more than 80 percent of the patients showed similar severity and complexity of disease on admission, had no major complications, and achieved good clinical outcomes. The team did not find a single instance in which any one physician’s patients demonstrated higher levels of severity or complexity (“my patients are sicker”) than the patients of other physicians in the study.

In contrast, there was massive variation in physicians’ practices. Although use rates of particular treatment elements were consistent for individual physicians, they varied greatly across physicians. For instance, when the team examined individual treatment elements used for patients who were similar at hospital admission and achieved a good final outcome, it found that the highest physician-use rates were 1.6–5.6 times greater than the lowest rates. For each treatment, the hospital’s cost per case, not counting payments to physicians, showed about a twofold variation.

Despite deliberately choosing some of Intermountain’s highest-volume treatments and focusing on high-volume physicians, the study lacked sufficient statistical power to rank physicians accurately. It did not find any physician who was consistently a high or low utilizer across all of the elements tracked. Best patient care did not reside in any one physician. Every physician had something to learn, but also something to teach.

Finally, although the study could not accurately identify which physicians were providing optimal care, Intermountain could legitimately ask why physicians’ use rates were so different and what constituted best care.

Process Management

Accordingly, the findings forced Intermountain to focus on the processes of care delivery that underlie particular treatments, rather than on the clinicians who executed those processes—the “measurement for improvement” approach discussed (in the full article). As the inquiry continued, the system was eventually able to document significant declines in physician variation. Physicians led almost all of the changes themselves. Declines in variation were associated with large declines in costs, while clinical outcomes remained at their original high levels. For example, Intermountain’s average internal cost for performing a total hip replacement fell from more than $12,000 in 1987 to about $8,000 per case in 1989.

The Intermountain clinical quality, financial utilization, and hospital efficiency analyses led the system to process management theory. Quality improvement is the science of process management. W. Edwards Deming, the father of quality improvement, argued that every process always produces parallel physical, cost, and service outcomes. In medicine, clinical outcomes correspond to Deming’s physical outcomes. Cost outcomes represent the resources expended to create the clinical outcome, and service outcomes describe the interactions between a care provider and a patient as the process takes place.

Deming carried his analysis one step further, demonstrating that most process changes that produce better physical outcomes also cause costs to fall, and that in most cases, the best way to reduce cost is to improve quality. Deming’s insights gave Intermountain the tools it needed to take broad advantage of the quality-cost relationship in clinical and administrative services.

Full article – free download for the next two weeks only:

W. Edwards Deming (Wikipedia):

This is what the accountable care organization (ACO) concept is all about. Intermountain Healthcare has confirmed W. Edwards Deming’s principle that “the best way to reduce cost is to improve quality.” Although ACOs have stumbled coming out of the gate (see qotd May 17 at pnhp.org), Intermountian has shown that we can achieve higher quality at lower cost without a cumbersome bureaucratic ACO construct.

Of particular importance is that the focus was placed on the processes of care delivery rather than on the clinicians who executed those processes. This opened up great possibilities for reform without the physicians feeling as if they were tiptoeing through a minefield of punishment and reward. The goal was purely better quality care for patients, and the savings to the system ensued almost automatically.

The full Health Affairs article can be downloaded for free during the next two weeks. I would strongly recommend doing so. It would also be worth your time to review W. Edwards Deming’s concepts, including his fourteen key principles, available at the Wikipedia link above. Both of these resources can help to readjust our mindset to meet the challenges of health care reform that still lie ahead.

What does this have to do with single payer? An automated financing system for health care would allow us to set aside our concerns about payment while we concentrate on quality processes for our patients. Everybody comes out ahead.

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