Is higher U.S. health care spending on cancer worth it?

Posted by on Wednesday, Apr 11, 2012

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.

An Analysis Of Whether Higher Health Care Spending In The United States Versus Europe Is ‘Worth It’ In The Case Of Cancer

Tomas Philipson, Michael Eber, Darius N. Lakdawalla, Mitra Corral, Rena Conti and Dana P. Goldman
Health Affairs, April 2012

The United States spends more on health care than other developed countries, but some argue that US patients do not derive sufficient benefit from this extra spending. We studied whether higher US cancer care costs, compared with those of ten European countries, were “worth it” by looking at the survival differences for cancer patients in these countries compared to the relative costs of cancer care. We found that US cancer patients experienced greater survival gains than their European counterparts; even after considering higher US costs, this investment generated $598 billion of additional value for US patients who were diagnosed with cancer between 1983 and 1999. The value of that additional survival gain was highest for prostate cancer patients ($627 billion) and breast cancer patients ($173 billion). These findings do not appear to have been driven solely by earlier diagnosis. Our study suggests that the higher-cost US system of cancer care delivery may be worth it, although further research is required to determine what specific tools or treatments are driving improved cancer survival in the United States.

Cancer Survival

Survival data for patients diagnosed with cancer were obtained from the Surveillance, Epidemiology, and End Results (SEER) database for the United States and from the EUROCARE (European Cancer Registry on Survival and Care of Cancer Patients) databases for countries in Europe.

Twenty-three countries are included in the EUROCARE databases, but only ten reported data consistently over the 1983–99 period: Finland, France, Germany, Iceland, Norway, Scotland, Slovakia, Slovenia, Sweden, and Wales. Our analysis relies on these ten countries, which account for 36 percent of the total European Union population. – Additionally, whereas most of the European countries we analyzed are covered by national registries that include the full population of each country, coverage from France and Germany is based on regional registries, which might not fully represent the experience of these countries.

The term survival gains refers to increases in years of life expectancy from cancer diagnosis seen over time. We decided to focus on examining survival gains over time because doing so provides insight into the progress that countries have made relative to their own baselines

Value Of A Statistical Life

A statistical life worth $5–$12 million equates to $150,000–$360,000 for each statistical life-year. We conservatively chose a value of $150,000 per life-year for our survival calculations.

Costs Of Cancer Care

These costs include expenses associated with treatment, including radiation and drug regimens, as well as diagnosis, such as mammography and prostate-specific antigen screening.

Net Value Calculations

To calculate the value of survival gains in the United States relative to that in the European countries, we subtracted the additional costs of care in the United States from the value of additional US survival gains expressed as gains in years of life expectancy.

Sensitivity Analysis: Population Mortality Rates

Next, we examined changes in cancer-specific population mortality rates in the United States and Europe. We used the World Health Organization Cancer Mortality Database to address the question of whether our conclusions are a result of earlier diagnoses and hence do not necessarily reflect improvement in life expectancy.

For example, if cancer cases are simply detected six months earlier, with no corresponding change in patients’ prognosis, it may still appear that survival from the date of diagnosis has risen by six months. This illusory gain in survival is known as lead-time bias. However, simply diagnosing people earlier would have no effect on the rate at which people die from disease.

By analyzing population mortality rates, which are insensitive to lead-time bias, we show that US cancer mortality rates fell faster than cancer mortality rates in the European Union. This must be due to real improvements in cancer survival (see the Technical Appendix for further explanation of this approach).


Value Of Cancer Survival

For cancer patients diagnosed during 1995–99, adjusted average survival was 11.1 years from diagnosis in the United States, compared with 9.3 years from diagnosis among the European countries—a difference of 1.8 years. This difference reflected higher US survival levels for most cancer types, with the exception of chronic myeloid leukemia, acute myeloid leukemia, Hodgkin’s lymphoma, and testicular cancer, for which the European countries experienced improved survival. All survival differences were statistically significant except for those for Hodgkin’s lymphoma and thyroid cancer.

Costs Of Cancer Care

Meanwhile, US spending on cancer care, in 2010 US dollars, increased from $47,000 per cancer case to $70,000 per case from 1983 through 1999—a 49 percent increase. In the ten European countries, spending on cancer care in 2010 US dollars increased from $38,000 per cancer case to $44,000—a 16 percent increase.

Net Social Value

The net value of US survival gains in excess of European survival gains… was $61,000 on average, ranging between $51,000 and $94,000 over the seventeen-year analysis period.

Sensitivity Analysis: Population Mortality Rates

To examine the effect of earlier diagnosis on the value of additional survival gains—the lead-time bias—we also looked at population mortality rates for cancer over time in the United States and in Europe, which are not sensitive to changes in the time of cancer diagnosis. According to this analysis, cancer mortality rates fell faster in the United States than in the ten European countries over a similar time period, 1982–2005.

For example, faster declines in population mortality rates in the United States corresponded to 222,000 prostate cancer deaths averted and 87,000 breast cancer deaths averted in that time period. Converting the declines in mortality rates into gains in life expectancy showed a gain of 1.8 years in life expectancy for prostate cancer patients and a gain of 0.8 years in life expectancy for breast cancer patients. This suggests that lead-time bias did not confound our results (see the Technical Appendix for further discussion).


The high costs of cancer care in the United States are frequently cited as evidence of a poorly functioning health care system, compared to those of other developed countries. Using conservative market estimates of the value of a statistical life, this study presented evidence that US cancer survival gains are worth more than the corresponding growth in the cost of US cancer care according to the most recent data available for analysis, 1983–99.

Our sensitivity analyses demonstrated that our findings are probably not confounded by lead-time bias. Overall, we found that the United States generated more than $500 billion of additional value for cancer patients, net of its higher costs of treatment.

Technical Appendix to this article

Population Mortality Rates

Measures of survival from cancer diagnosis may be influenced by changes in the reference point of cancer diagnosis associated with increased screening. This would serve to inflate estimates of improvements in patient outcomes as measured by survival. Consider as an example a completely untreatable cancer that is typically detected 24 months before patient death. A new technology that detects this cancer 36 months until death would appear to increase survival by 12 months, even though the actual prognosis is unchanged for these patients. This is a phenomenon often referred to as “lead-time bias” in the epidemiological literature. Note that this new detection technology would not change the rate at which people die from this cancer. As a result, population mortality rates are not sensitive to lead time bias or its sources.

If US data show both survival gains and mortality reductions, this is likely to reflect real improvements in health; the alternative interpretation requires a scenario in which the diagnosis rate is rising in the US while the actual number of cancer cases is falling.

Appendix Table 1 shows changes in mortality rates in the US over 1982-2005 in excess of changes observed in European countries by cancer site. Additionally, the corresponding numbers of deaths are shown. For prostate cancer, the US experienced an additional reduction of 15.8 deaths per 100,000 male population relative to Europe over the period 1982-2005, which corresponded to 222,000 deaths averted. For breast cancer, US trends in population mortality corresponded to 87,000 deaths averted. In contrast with the survival analysis, the US exhibited more rapid improvement in colorectal cancer mortality rates than European countries. Stomach cancer mortality rates exhibited substantially more rapid declines in the European countries examined; however US mortality rates for stomach cancer remained lower than rates for any European country included in the analysis, despite the slower observed declines.

In addition, we calculated, using the declines in mortality rates estimated from the model, as well as US mortality rates obtained from CDC National Vital Statistics Reports, the expected change in life expectancy for prostate and breast cancer patients associated with the declines in population mortality rates to compare with the results of the primary survival analysis. We examined the average rate of deaths averted over the analysis period 1982-2005 for both prostate cancer and death cancer. This corresponded to 385 prostate cancer deaths averted per 100,000 prostate cancer cases and 139 prostate cancer deaths averted per 100,000 breast cancer patients. Additionally, we calculated the total US death rate from prostate cancer in 2005 to be 1380 deaths per 100,000 prostate cancer cases and the total death rate from breast cancer to be 1850 deaths per 100,000 breast cancer patients. We assumed a prevalence of 2,400,000 prevalent prostate cancer cases in the United States and 2,600,000 breast cancer cases in the US based on estimates from US SEER data. Assuming a constant risk of death, these methods imply that the additional mortality rate reductions observed in the US corresponded to a gain of 1.8 years in life expectancy for prostate cancer patients and a gain in life expectancy of survival of 0.8 year for breast cancer patients.

Appendix Table 1: US Changes in Population Cancer Mortality Rates Relative to European Changes, 1982-2005

Listed for each cancer are the additional deaths avoided (incurred) in US, with the P value for change in US death rates in excess of EU change

Breast  86,913  (0.001)
Colorectal  281,932  (0.07)
Hodgkin  -8,025  (<0.001)
Leukemia  23,347  (0.64)
Melanoma  15,050  (0.04)
NHL  67,826  (0.001)
Prostate  221,747  (<0.001)
Stomach  -224,212  (0.001)
Testis  -4,175  (0.08)
Thyroid  -11,556  (<0.001)
Uterus  14,990  (0.76)


Is high spending on cancer care ‘worth it’?

By Sharon Begley
Reuters, April 9, 2012

With the United States spending more on healthcare than any other country — $2.5 trillion, or just over $8,000 per capita, in 2009 — the question has long been, is it worth it? At least for spending on cancer, a controversial new study answers with an emphatic “yes.”

Cancer patients in the United States who were diagnosed from 1995 to 1999 lived an average 11.1 years after that, compared with 9.3 years for those in 10 countries in Europe, researchers led by health economist Tomas Philipson of the University of Chicago reported in an analysis published Monday in the journal Health Affairs.

Philipson is a fellow at the conservative American Enterprise Institute and at the Manhattan Institute, served in the administration of President George W. Bush and was a healthcare adviser to Sen. John McCain’s 2008 presidential campaign.

Experts shown an advance copy of the paper by Reuters argued that the tricky statistics of cancer outcomes tripped up the authors.

“This study is pure folly,” said biostatistician Dr. Don Berry of MD Anderson Cancer Center in Houston. “It’s completely misguided and it’s dangerous. Not only are the authors’ analyses flawed but their conclusions are also wrong.”

For the new analysis, Philipson and his colleagues analyzed the survival of cancer patients diagnosed from 1983 to 1999 with any of 13 common cancers, including breast, prostate, colorectal, and leukemias.

Survival means how long a patient lived after being diagnosed. Philipson’s team focused in particular on survival gains; that is, how long did patients diagnosed in later years live compared with those diagnosed earlier in the period? Such gains, they argued, show what progress countries made in treating cancer.

While that may seem straightforward, survival data is among the most problematic cancer statistics, Philipson’s team acknowledges. In particular, they are plagued by something called lead-time bias.

If a tumor is diagnosed very early in its existence – if it has a long “lead time” – the patient may survive, say, two years if the tumor is very aggressive. If an identical tumor is found in that patient’s identical twin later, the twin will survive, say, six months. But the twins die at the same age. The first survived longer with cancer due to lead-time bias, but did not have a longer lifetime.

Crediting medical care with “improving survival” is therefore misleading, cancer experts have long argued. Lead-time bias makes it seem patients live longer, but the only thing that is longer is the number of years they know they have cancer, not their lifespan.

The authors of the “worth it?” study nevertheless base their analysis on survival data. They argue that because U.S. cancer mortality rates fell faster than those in Europe, the survival gains must be real and not an artifact of lead-time bias.

Others call that approach fatally flawed. “Lead-time bias is an issue,” said MD Anderson’s Berry. “I can see no hint of logic in their statement that ‘lead-time bias did not confound our results.'”

Even more problematic, said Berry, is a problem cancer experts have only recently recognized: overdiagnosis. Because cancer screening is much more widespread in the United States than in Europe, especially for breast and prostate cancer, “we find many more cancers than are found in Europe,” he said. “These are cancers that tend to be slowly growing and many would never kill anyone.”

Screening therefore turns thousands of healthy people into cancer patients, even though their tumor would never threaten their health or life. Counting these cases, of which there are more in the United States than Europe, artificially inflates survival time, experts said.

“As long as your calculation is based on survival gains, it is fundamentally misleading,” said Dr. H. Gilbert Welch, a healthcare expert at the Dartmouth Institute for Health Policy & Clinical Practice.

n the new analysis, the survival gains in the United States compared with Europe were greatest for prostate cancer, at more than triple the gains for breast cancer, the cancer with the second-greatest U.S. survival edge. “These are the two cancers where screening has raised the most serious issues about lead-time bias and overdiagnosis,” said Welch.


Considering When It Might Be Best Not to Know About Cancer

By Gina Kolata
The New York Times, October 29, 2011

After decades in which cancer screening was promoted as an unmitigated good, as the best — perhaps only — way for people to protect themselves from the ravages of a frightening disease, a pronounced shift is under way.

Now expert groups are proposing less screening for prostate, breast and cervical cancer and have emphasized that screening comes with harms as well as benefits.

Two years ago, the influential United States Preventive Services Task Force, which evaluates evidence and publishes screening guidelines, said that women in their 40s do not appear to benefit from mammograms and that women ages 50 to 74 should consider having them every two years instead of every year.

This year the group said the widely used P.S.A. screening test for prostate cancer does not save lives and causes enormous harm.

Two recent clinical trials of prostate cancer screening cast doubt on whether many lives — or any — are saved

A new analysis of mammography concluded that while mammograms find cancer in 138,000 women each year, as many as 120,000 to 134,000 of those women either have cancers that are already lethal or have cancers that grow so slowly they do not need to be treated.

Cancer experts say they cannot ignore a snowballing body of evidence over the past 10 years showing over and over that while early detection through widespread screening can help in some cases, those cases are small in number for most cancers. At the same time, the studies are more clearly defining screening’s harms.

In recent years, researchers have found that many, if not most, cancers are indolent. They grow very slowly or stop growing altogether. Some even regress and do not need to be treated — they are harmless.


Critical Diagnosis

By Tomas J. Philipson, Paul Howard
American Enterprise Institute, February 2, 2010

But the U.S. commitment to fighting cancer is second to none. We have recently documented enormous societal gains from the war on cancer. We found that from 1988 to 2000 life expectancy for all cancers combined increased by about four years–translating to about 23 million additional life-years and roughly $1.9 trillion of added social value of cancer care, even after subtracting research costs and spending on medical care for cancer patients.

The U.S. experience greatly contrasts with Europe’s, where centralized government funding for cancer care and price controls on new medicines have slowed the battle against cancer, leading to worse outcomes for patients. In a recent study demographers Samuel H. Preston and Jessica Yu documented that the U.S. outperforms almost all European countries in its cancer screening and treatment efforts.

It is important to recognize that innovation and access to care are complementary, not contradictory goals. Rather than opting for an expensive new insurance entitlement that the nation cannot afford, Congress’ main objective should be to help those who cannot afford health care, not take over the market for those who can. Stimulating the demand of the low-income uninsured is a laudable goal and is pro-innovation since it raises demand. Restricting care for those who can afford it by using government price controls to strong-arm producers is not. Cancer serves as a great example of the value of the U.S. model over the European model. In health care, as in most other markets, you get what you pay for.


We Can’t Lose Our Global Leadership In Medical Innovation

By Tomas Philipson, April 23, 2010

Because the most significant components of Obamacare do not take effect for several years, there is still time to reshape it, both to expand affordable safety-net coverage and encourage innovation. But first we must reject the common assumption that the only form of solidarity worth pursuing is universal coverage – the “right” for all citizens, regardless of their means, to access low-cost medical care. Instead, we must emphasize our solidarity with future generations. Whatever short-term benefits in coverage reforms might bring, our children and grandchildren will inevitably pay the price if the U.S. adopts European-style price controls at the cost of the medical innovations that have done so much for the world.

This widely-reported study suggests that the high costs for cancer care in the United States are well worth it, providing $800 billion in the value of additional survival gain for prostate and breast cancers alone. A critical review of this study casts great doubt on this conclusion.

The authors purport to show that cancer care in the United States accounts for increased survival time compared to ten selected European nations, and that this benefit is valued at $150,000 per additional year of survival.

It is important to understand the difference between survival and mortality. Survival relates to how long a person lives after the diagnosis of cancer is made. Mortality refers simply to how long a person lives. Lead time refers to how much of a head start a person gets on cancer treatment based on how early in its course it is diagnosed.

Having a survival of five years doesn’t mean much if mortality is unchanged. A group of individuals with the same cancer who die at the same time have the same mortality, yet if some have the cancer diagnosed earlier than the others, the five year survival is better for those diagnosed earlier even though the duration of life is not extended.

In this study the authors decided to look at survival rather than mortality in spite of problems with the lead time. They provide an Appendix which purportedly shows that “By analyzing population mortality rates, which are insensitive to lead-time bias, we show that US cancer mortality rates fell faster than cancer mortality rates in the European Union. This must be due to real improvements in cancer survival.”  Thus they contend that their estimates of survival were reflected in an improvement in mortality.

Having read their Appendix several times, I remain unconvinced of this argument. In fact, contained in their Appendix was the statement, “We examined the average rate of deaths averted over the analysis period 1982-2005 for both prostate cancer and death cancer.” Death cancer? The fact that this was published on the Health Affairs website without correction makes me wonder if anyone really read their Appendix critically.

Assuming that it was reviewed (though not by the Health Affairs editors), let’s look at Appendix Table 1 which purportedly shows the improved mortality in the United States compared to nine European nations. Of the eleven cancers listed, four showed additional deaths that were supposedly avoided, three showed additional deaths that actually were incurred, and the other four were not statistically significant at a p value of .05. Removing breast and prostate cancer for reasons mentioned below, that leaves only two cancers with additional deaths that were supposedly avoided. Not very convincing evidence for lower U.S. cancer mortality to say the least.

The two cancers that the authors highlighted were breast cancer and prostate cancer. According to H. Gilbert Welch (a highly credible authority from the Dartmouth Institute for Health Policy, and author of “Overdiagnosed”), “These are the two cancers where screening has raised the most serious issues about lead-time bias and overdiagnosis.”

Even the authors of the Health Affairs report state, “If US data show both survival gains and mortality reductions, this is likely to reflect real improvements in health; the alternative interpretation requires a scenario in which the diagnosis rate is rising in the US while the actual number of cancer cases is falling.” In fact, because of an increase in intensive screening, the diagnosis rate is rising, whereas the very large number of cancers detected that would have remained harmless  – especially many of the prostate and breast cancers – in a way might be considered to be a decline since, with no change in survival or mortality, these individuals more appropriately should have been classified with the population group without cancer, and never counted as cancer patients in the first place. Treatment of these harmless cancers certainly should not be counted as having increased cancer survival in the United States.

Regarding the integrity of this study, of some concern is that one of the authors, Mitra Corral, is an employee of Bristol-Myers Squibb, a company that produces cancer drugs and could benefit from the high visibility that Health Affairs gives this article touting the financial benefits of our higher spending on cancer care.

Of greater concern is the background of the lead author, Tomas Philipson, who is associated with conservative think tanks – specifically the American Enterprise Institute and the Manhattan Institute. These and other conservative sources have been dismissing health care reform with the claim that we don’t need reform because we have the best health care system in the world. They then use our “superior” cancer statistics to prove it. Because our system is so great, the implication is that we don’t need to fix it. Is this policy science, or is it ideological demagoguery?

With reluctance, we might accuse Professor Philipson of allowing his ideology to tarnish his academic purity, but we don’t have to. His own words will suffice, “But first we must reject the common assumption that the only form of solidarity worth pursuing is universal coverage – the ‘right’ for all citizens, regardless of their means, to access low-cost medical care. Instead, we must emphasize our solidarity with future generations. Whatever short-term benefits in coverage reforms might bring, our children and grandchildren will inevitably pay the price if the U.S. adopts European-style price controls at the cost of the medical innovations that have done so much for the world.”

Concerns over physician-owned cardiac specialty hospitals

Posted by on Tuesday, Apr 10, 2012

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.

Lower Mortality Rates At Cardiac Specialty Hospitals Traceable To Healthier Patients And To Doctors’ Performing More Procedures

By Liam O’Neill, and Arthur J. Hartz
Health Affairs, April 2012

Physician-owned cardiac specialty hospitals advertise that they have outstanding physicians and results. To test this assertion, we examined who gets referred to these hospitals, as well as whether different results occur when specialty physicians split their caseloads among specialty and general hospitals in the same markets. Using data on 210,135 patients who underwent percutaneous coronary interventions in Texas during 2004–07, we found that the risk-adjusted in-hospital mortality rate for patients treated at specialty hospitals was significantly below the rate for all hospitals in the state (0.68 percent versus 1.50 percent). However, the rate was significantly higher when physicians who owned cardiac specialty hospitals treated patients in general hospitals (2.27 percent versus 1.50 percent). In addition, several patient characteristics were associated with a lower likelihood of being admitted to a cardiac hospital for cardiac care, such as being African American or Hispanic and having Medicaid or no health insurance. After adjustment for patient severity and number of procedures performed, the overall outcomes for cardiologists who owned specialty hospitals were not significantly different from the “average outcomes” obtained at noncardiac hospitals. In contrast to previous studies, patient outcomes were found to be highly dependent on the type of hospital where the procedure was performed. To remove a potential source of bias and achieve a more balanced comparison, the quality statistics reported by physician-owned cardiac hospitals should be adjusted to incorporate the high rates of poor outcomes for the many procedures done by their cardiologists at nearby noncardiac hospitals.

Primarily because of conflict of interest considerations, physician-owned specialty hospitals, such as the cardiac specialty hospitals reported in this study, have remained controversial.

Physician owners tout the lower mortality rates and higher quality ratings in their own cardiac specialty hospitals. This study confirms a very high patient selection bias with the disturbing result that these same physicians have offsetting higher mortality rates when they admit Medicaid, uninsured, and minority patients to noncardiac hospitals. Thus, overall these physicians are not improving their own personal performances but rather are cream skimming their patients whom the admit to their cardiac hospitals in which they have an ownership interest.

The single payer model supported by Physicians for a National Health Program not only provides the administrative efficiencies of establishing a single, equitably-funded, universal risk pool, but it also calls for elimination of for-profit ownership and for separate budgeting of capital improvements. Under such a model a cardiac specialty hospital would be built only if it best served the interests of the patients – all patients. It would not be built for the purpose of advancing the fame and fortune of physician owners.

Capretta and Moffit – “How to Replace Obamacare”

Posted by on Monday, Apr 9, 2012

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 to Replace Obamacare

By James C. Capretta and Robert E. Moffit
National Affairs, Spring 2012

(Following is a distillation of the authors’ 19 page article.)

When the Patient Protection and Affordable Care Act (commonly known as “Obamacare”) was signed into law in the spring of 2010, congressional opponents vowed that the fight was not over.

The “repeal and replace” formulation quickly caught on, but it was not without its critics. That Obamacare should be “repealed” was obvious, given how strenuously conservatives and many independents objected to the new law. But “replace”?

[R]epeal will not be enough, for a simple reason: Although Obamacare would worsen many of the problems with our system of health-care financing, that system clearly does call out for serious reform.  After all, a repeal-only approach would leave many of the most grievous flaws in our system of financing health care unaddressed.


But for all its considerable strengths, the system suffers from pervasive weaknesses as well. The most serious of these is rapidly rising costs.

Of course, government health-care programs and policies are largely responsible for these rising costs in the first place. To begin, the design of Medicare is terribly flawed: Because the program pays providers of care based on the volume of their services, it creates a massive incentive for inefficiency and overuse. And because Medicare is the biggest payer in most health-care markets in America, that incentive badly distorts the economics of the entire sector. Furthermore, the Medicaid program inflates costs by (among other policies) having states control how the program is run while the federal government pays most of the bills. The result is that neither party has both the incentive and ability to keep costs in check.

The third driver is the tax exclusion for employer-provided insurance: The federal government does not count the amount that employers spend on health insurance for their employees toward workers’ taxable income. This tax exclusion inflates costs by effectively rewarding higher-premium plans and by encouraging employer-purchased insurance, thereby preventing a real consumer market in coverage.

Proponents of Obamacare like to create the impression that there are tens of millions of Americans trapped by their pre-existing conditions, sick and stuck with lousy insurance and no options. In truth, the vast majority of working Americans have good and secure coverage today, including many millions of people with expensive health conditions.

But a small percentage of our large population is still a lot of people. There is no denying that cracks in the system exist, and that many Americans fall through them. This is particularly true of people who need to move from job-based coverage into the individual market. People who leave the work force and need to buy insurance on their own can face sky-high premiums for weak coverage just because they happen to suffer from a health condition over which they often have little control.

Starting in the middle of 2009, the president and his top aides took to calling their plan “insurance reform,” as if the law’s most important elements were simply new rules designed to protect hapless consumers from unscrupulous insurance companies.

This is, of course, a gross mischaracterization of what Obamacare actually does. Among other features, the law implements a massive expansion of taxpayer obligations. It adds two new entitlement programs at an expense of at least $1 trillion over a decade. In that same period, it raises taxes by more than $500 billion. Most egregiously, it puts the federal government in command of the health sector, giving bureaucrats immense new power to decide matters ranging from what services must be covered in every American’s insurance plan to how doctors and hospitals organize themselves and do business.


The first crucial component of any serious reform must be a “defined contribution” approach to the public financing of health care — the essential prerequisite for a functioning marketplace that imposes cost and quality discipline. In most sectors of our economy, the normal dynamics of supply and demand keep costs in check and reward suppliers that find innovative ways to deliver more for less.

Under this approach, health coverage would be provided through competing insurance plans; government’s involvement would come through the provision of a fixed financial contribution toward the purchase of insurance by each beneficiary. That subsidy would not vary based on a person’s insurance plan, giving Americans every incentive to shop for good value in their health coverage and to get the most for their defined-contribution dollars.

In the context of Medicare and Medicaid, meanwhile, the government would similarly provide a fixed (though of course far more generous) level of support, sometimes called “premium support,” that would guarantee insurance coverage to beneficiaries but would allow them to choose among competing options and encourage them to seek out the best value for their money.

The second pillar of reform should be personal responsibility and continuous-coverage protection. Obamacare attempts to address the challenge of covering people with pre-existing conditions with heavy-handed mandates, especially the requirement that all Americans enroll in government-approved insurance plans (the so-called “individual mandate”). A replacement program for Obamacare should come at the problem from the opposite direction, with government forsaking coercion and instead extending a new commitment to the American people: If you stay continuously enrolled in health insurance, with at least catastrophic coverage, you will never again face the prospect of high premiums associated with developing a costly health condition.

Because some workers who leave job-based plans for the individual market could be quite sick, a credible Obamacare replacement plan would also need to include a new approach to covering the high insurance costs for these Americans. Different proposals have offered different mechanisms, but all would move the burden away from the sick patients themselves to a larger and broader pool of people, either through regulation or through a direct government program such as a high-risk pool. For people who have not been continuously insured, these protections generally would not apply.

The third pillar of reform must be a genuine partnership with the states.

To respect federalism and reap its benefits, nothing in an Obamacare replacement agenda should compel state adoption, instead leaving the participation of state governments completely voluntary. Those states that do participate in any federal initiative should be given meaningful control over the most important components of regulation, especially the power to design and operate their own health-insurance markets (within minimal federal standards).

States should be given two tasks: informing consumers of their insurance options, and easing their enrollment into the plans they choose by cooperating with the federal government to facilitate the payment of credits and vouchers directly to private insurers.

Defined-contribution financial support, protection for Americans who remain continuously enrolled in insurance plans, and genuine federalism are the essential overall concepts that must define any serious health-care reform. But policymakers will also need to apply these principles to the transformation of today’s funding and financing mechanisms: the tax exclusion for employer-provided health coverage, and the Medicaid and Medicare systems.


The fourth pillar of a real reform agenda would therefore address the tax treatment of employer-sponsored plans. Today’s arrangement is somewhat counterintuitive: Because the tax exclusion for health-care premiums is open-ended, workers and employers have an incentive to make health benefits a disproportionately large share of total compensation. And because employers obtain and manage health plans for their workers, there is far too much distance between those who purchase care and those who consume it.

The most plausible way to implement such a change would be to transform today’s tax exclusion for employer-provided insurance into a standard tax credit that would extend to all Americans, regardless of employment status, which they could then use to purchase the private coverage of their choice.


The fifth key component of a genuine health-care reform plan must be an overhaul of Medicaid. Medicaid is actually three separate programs: health insurance for lower-income working-age adults and their children, health and long-term care for the non-elderly with severe disabilities, and long-term care for the frail elderly. For the purposes of replacing Obamacare, the relevant program to change is insurance coverage for working-age adults and children; the other parts will need reform as well, but should be addressed in a separate legislative effort.

In replacing Obamacare, policymakers should move lower-income people out of the limited sphere of Medicaid options and into the same private health-insurance markets in which their fellow citizens purchase coverage.

There is more than one way to accomplish this objective. …existing financing for acute care provided through Medicaid and the State Children’s Health Insurance Program would be transformed into a large pool of funding to be re-allocated to current beneficiaries and other low-income Americans in the form of a federal health-care subsidy (the equivalent of a “refundable tax credit”) for private insurance.

A similar approach would give Medicaid recipients the same federal tax credit that workers would receive in a reformed marketplace for health insurance. The federal government could then convert Medicaid into a per-person allotment to the states, funded through a block grant, that would supplement the base credit for a state’s low-income residents. The federal allotment to the states would be set so that, when combined with the federal support for the base tax credits or vouchers for the Medicaid-eligible population, total federal spending on the Medicaid population in a state would equal the amount that would have been spent under pre-Obamacare Medicaid. After the first year, the federal allotment to the states could be set to grow commensurate with the economy or some other reasonable measure of inflation.

The same move toward market incentives and efficiency should characterize our approach to Medicare reform in the wake of Obamacare’s repeal. The sixth pillar of a replacement plan must therefore be a premium-support reform of Medicare.

Of all the changes that are necessary to bring more cost discipline to health care, moving Medicare toward a defined-contribution structure, and away from today’s open-ended defined-benefit structure, is certainly the most vital. Medicare is the largest payer for services in most markets; the system of hospital and physician care in most communities has been built up around Medicare’s financial incentives.

In lieu of today’s open-ended benefit, a premium-support system would allow new beneficiaries (after the transition) to decide how to use a fixed-dollar contribution provided by Medicare. Each beneficiary would choose from a menu of approved insurance plans. If a beneficiary’s premium for his chosen plan was higher than the Medicare contribution, he would pay the difference out of his own pocket. If he chose a less expensive plan, he would pay lower premiums and keep the savings. This structure would provide a powerful incentive for the program’s participants to find high-value plans that charge low premiums for quality care, and therefore for insurers to offer such plans.


Finally, as a key criticism of Obamacare is the danger it poses to federal finances, the seventh pillar of a serious health-care reform plan must be the full offset of all new costs through spending cuts.


The enactment of Obamacare has created a political opening for a credible alternative to the health-care status quo. But it would be foolish to assume that this opening will last very long; once it has closed, it is not likely to appear again.

Conservatives thus have a rare opportunity to advance their vision of reform. It will entail some controversy and political risk, which cannot be avoided in a policy arena as complex as health care. But the policy and political upsides are well worth the effort. A market-driven alternative can beat Obamacare on every metric that matters. It will be less costly to taxpayers, more flexible in meeting the diverse needs of citizens, less bureaucratic, and consistent with the Constitution and our values.

James C. Capretta is a visiting fellow at the American Enterprise Institute and a fellow at the Ethics and Public Policy Center. Robert E. Moffit is a senior fellow in the Center for Policy Innovation at the Heritage Foundation.

Why on earth would a single payer advocate grant so much space on health care reform to prominent conservatives, allowing them to frame the problems in a manner that supports their specific policy recommendations? By better understanding their framing and the flawed policies that flow from that, we can explain to the nation why they are so terribly wrong, and why the policies of a single payer national health program are an imperative.

Everyone agrees that the status quo in our health care system is totally unacceptable. We are spending far more than other nations on a system that falls intolerably short in performance. So how is this framed?

Single payer supporters see the problems as too many individuals without insurance, too many with inadequate insurance, quality deficiencies related to improper allocation of our health care resources, and the tremendous administrative waste inherent in our current financing system. A single payer national health program would correct these defects.

The authors of this article – James Capretta and Robert Moffit – present a framing of the problems from the perspective of their conservative organizations – the American Enterprise Institute and the Heritage Foundation. To them, the primary problem is that excessive government involvement is driving our unacceptably high health care spending, coupled with the problem that we fail to use adequate market forces to control these excesses. They are not totally insensitive to the needs of the uninsured and low-income individuals – needs that can never be met in a totally free market – so they do recommend some government involvement in oversight and in tax policies.

When you step back for perspective, it seems like the differences aren’t so much in the goal of trying to get everyone insured, but more in the process of how we do that. Well, the contrasting approaches – government versus market – do have a significant influence on the outcomes of reform. The conservatives first look at using markets, and then try to make reform comply. The single payer advocates first look at what patients need, and then look for a pathway to get there. Other nations have shown that successful pathways are always laid out by the government and not by unregulated markets. Even when private insurers are used, they travel through a government pathway.

Capretta and Moffit would invoke the principle of defined contribution. Instead of providing a package of health care benefits that patients need, they would provide a set amount of money – the defined contribution – that would leave most of us directly exposed to health care costs on the disproven theory that we could still obtain the care that we need but at a better price because of our shopping acumen in the health care markets. What is proven is that the cost sharing of a defined contribution approach erects financial barriers to appropriate health care, whether through unaffordable insurance premiums, or through unaffordable deductibles, coinsurance and co-payments, or through provider network restrictions, or through the limitation of benefits.

Their proposal supposedly is aimed at increasing the numbers of insured, though independent analyses of similar proposals have shown that their policies would produce little net gain towards this goal. They would use competitive market incentives to lower the price of insurance products which inevitably would result in grossly inadequate products that have been well documented to fail to provide sufficient financial security in the face of medical need. Further, they would leave the choice of whether or not to be insured to individuals themselves and to financially-challenged state governments. After decades of increasing health care costs and flat wages, and now eliminating the tax subsidy of employer-sponsored plans, far too many individuals would decide that they would have no other option than to go without coverage.

Looking closer at the choice that lower-income individuals would have under this proposal, they would be offered subsidies or vouchers which could be used to purchase whatever cheap plans the insurers could create to sell at the low competitive market price set by the subsidy or voucher – coverage that could never provide adequate health care benefits. Capretta and Moffit propose that health care consumers would have the choice of using their own funds to buy-up to a plan that actually provided adequate coverage, but is that really a choice when they are having difficulties simply paying for their food and rent?

In past articles, we have covered extensively the inadequacies of market-priced insurance products for middle-income workers and their families. These products attempt to balance the premiums, which turn out to be too high, with the health care benefits, which turn out to be too spartan. With median household income at $49,000 and the average cost of health care for a worker’s family of four now over $19,000, no amount of free market magic can ever make these numbers compute.

The experience of the past half century has already proven that our supposed markets for private health insurance and for health care itself have been totally ineffective in controlling health care costs, yet Capretta and Moffit are calling for even more of the same flawed market pseudo-incentives. They ignore the fact that administered pricing by public agencies has been effective in other nations and would certainly be so here as well.

Okay, so the conservatives’ solution is to try to protect freedom and markets at the cost of adequate health care for the majority of us, so why should we bother even reading their polemic? Could there be a middle ground somewhere between single payer and market dynamics? Well, that supposed middle ground is the Affordable Care Act, based on an earlier version of the proposal of the Heritage Foundation which the Obama administration presented as a centrist approach to reform. Yet Capretta and Moffit now claim that this model “puts the federal government in command of the health sector” – a concept anathema to the ideologues in their camp.

The reason that we need to understand thoroughly their views is that we have to be able to explain why their approach is intolerably flawed. It would grant free rein to the private insurance industry to wreak even more havoc on our health care, while falling short of achieving the conservatives’ goal of removing the government and its power to tax from the health care equation. As if our financing system were not already bad enough, they would introduce changes that would prevent the system from working adequately for all but the very wealthiest of us.

It would be worth reading and critically interpreting their entire article to better understand the extent to which they would go to control health care spending by making it much less affordable for most of us – in the name of consumer empowerment. There are far too many flawed policies to begin to cover them in today’s comment – policies such as offsetting all costs through spending cuts instead of taxes, and privatizing Medicare through defined contributions for private plans.

Even if today’s breed of conservatives takes over all branches of the government, people power through an informed electorate will be essential in blocking the institution of such harmful health care policies, just as the people were able to prevent George W. Bush from privatizing Social Security. Being informed is key.

On the other hand, if we elect enough political leaders who are truly concerned about the future of health care in America, regardless of political affiliation, then we do have a chance of sorting good policies from bad policies, and enacting the good ones. But we do have to know which are which.

State calls Aetna health insurance rate hike ‘unreasonable’

By Jan Norman
The Orange County Register, April 5, 2012

Connecticut-based Aetna Life Insurance Co. has raised its health insurance premiums on small employers with 73,000 members an average 30.3 percent over two years, which the California Department of Insurance on Thursday called “unreasonable.”

The latest increase effective April 1 is an average 8 percent annually with a 30.3 percent hike over 24 months for small employers with Aetna’s PPO health insurance policies.

The department found that Aetna made projections about medical cost increases higher than the U.S. Bureau of Labor’s medical cost inflation index and unsupported by Aetna’s actual claims experience.

Aetna released the following statement:

“While rate increases are never easy, our rates are based on actuarially sound data and reasonable projection of future cost, which will impact approximately 16,000 customers.  Our Medical Loss Ratio is at 86.7%, which is higher than any of the filed rates by our competitors. Medical loss ratio is the percentage of health insurance premiums that insurers use to provide health care to their customers.”

In making its finding, the Department of Insurance noted that the Aetna subsidiary that sells health insurance in California made a 27.7 percent profit in 2011 and paid $1.7 billion in dividends to its parent company.

Aetna California rate filing  (185 pages):

We are inundated with stories about “unreasonable” rate increases by private health insurers, so why should we bother with this one?

Remember that the default benchmark for defining “essential health benefits” to be offered in the state health insurance exchanges will be the small group plan with the largest enrollment in the state. This two year 30.3 percent premium increase is for small employers with Aetna’s PPO health insurance policies. These plans will typify the new national standard for private health insurance exchange plans.

If you believe Aetna, their medical loss ratio (MLR) is 86.7 percent which is well within compliance of the 80 percent MLR requirements for individual and small group plans. Since medical loss ratios are dependent on how much the insurers spend on actual health care, this premium increase should signal what we might expect for small businesses, certainly if the individual mandate is struck down by the Supreme Court and adverse selection continues.

Even if the mandate is upheld and insurers are able to include healthier individuals mixed in with the sick, actual health care costs continue to increase well in excess of the rate of inflation and will still result in “unreasonable” premium increases.

The insurers are correct when they say that health insurance premiums are increasing because health care costs are increasing. But what is especially relevant are the reasons that Aetna gives for our high health care costs and what Aetna is doing to try to control them (obviously not very successfully).

Read pages 43-49 (labeled 1-7, but 43 pages into the filing) of the Aetna California rate filing (link above). You will see that Aetna has absolutely no control over many major factors contributing to health care inflation. You will also  see that Aetna is fumbling around with many programs that will have little impact on health care costs, except that they do increase administrative expenses. You will also see that several of their measures smack of the intrusive and choice-limiting insurer behaviors of the managed care revolution.

Instead of sympathizing with Aetna in their ineffectual struggles to control health care spending, we should look at their waste and their intention to sacrifice high system performance on behalf of their own business interests. Foremost we should look at those perverse cost increases over which Aetna pleads they have no control and then imagine the power that our own single payer national health program would have in the same situation.

You really have to read the 7 pages to better understand the power that we would have, though keep in mind that this was written by Aetna in their own defense. Fortunately, you don’t even need to read between the lines to see why we should fire all of the private insurers and put in place our own beneficent single payer monopsony. Then we would have much more control of our own health care destiny.

Media’s “false equivalency” and single payer

Posted by on Thursday, Apr 5, 2012

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.

False-Equivalence Watch: The Platonic-Ideal Form

By James Fallows
The Atlantic, April 4, 2012

Yesterday Barack Obama went to the annual Associated Press luncheon and exhorted journalists to avoid the “false equivalence” syndrome in coverage of controversial events. If you’ve missed the previous 10 million items on this theme, you can read his speech or my precis of it. In short, the false equivalence problem is that although it’s convenient and “objective”-seeming for reporters simply to quote “both sides” of a public issue, the results can be misleading when one of the sides is simply making things up.

Today the same Associated Press published an article on his speech that perfectly exemplified the problem Obama was complaining about, and was all the more piquant for being presented as a “fact check.” The subject was the now-infamous “individual mandate” provision of the administration’s health-care plan.

As Obama pointed out in his speech, the individual mandate originated as a conservative/Republican idea. Conservatives preferred it precisely because it was an alternative to government-run “single-payer” coverage, like Medicare or the VA. This was part of the reason Mitt Romney embraced the mandate in his health-care plan in Massachusetts. Yesterday Obama said:

“So as all of you are doing your reporting, I think it’s important to remember that the positions I’m taking now, … if we had been having this discussion 20 years ago, or even 15 years ago, would have been considered squarely centrist positions.  What’s changed is the center of the Republican Party.”

Today the AP was back with its “fact check”:

“[I]f Republicans have moved to the right on health care, it’s also true that Obama has moved to the left. He strenuously opposed a mandate forcing people to obtain health insurance until he won office and changed his mind.”

This is false equivalence in its Platonic-ideal form. It’s presented as being “objective” — These politicians! They all just flip and flop! — but in fact is deeply misleading about the realities. As Brian Beutler pointed out today on TPM, making things seem symmetrically unprincipled in this case requires either lack of awareness of, or knowing manipulation of, the basic facts.

Yes, Obama’s position on health care has changed. But his embrace of the “individual mandate” represents a move TO THE RIGHT, not leftward as the story claims. Before that, he had been in favor of (a) single-payer coverage, in his days as an Illinois politician, and (b) the “public option” during his 2008 primary campaign against Hillary Clinton. His decision to build “ObamaCare” around the individual mandate — rather than on the public option or a single-payer concept — reflected pressure on the administration to make the plan more “centrist,” not more leftist or radical. When the switch to individual mandate was announced, by far the most heated criticism came from the left, on grounds that Obama had sold out supporters of the public option. Meanwhile, the likes of the impeccably conservative Senator Charles Grassley of Iowa were saying that there was a “bipartisan consensus” in favor of the individual mandate compromise. So: the current Republican hostility to the individual mandate represents a rightward shift, and so too does Obama’s embrace of the plan.

Beutler sums up the achievement of this latest “fact check”:

“His hosts [at AP] weren’t listening — and as a result they’ve made Obama’s points about Republicans and the media for him….

“It’s true that Obama campaigned against an individual mandate in 2008, only to embrace it — however reluctantly — after he became president. But to say that constitutes a move to the left betrays a lack of understanding about the origins and purpose of the individual mandate, and of Obama’s broader evolution on health care reform.”…

Within the mainstream media there is hardly an article on politics that doesn’t make some effort to present “both sides” of the issue, often settling on reporting suggesting that “centrist” views best represent an application of the facts. Where does single payer fit in this?

For the past few years, single payer was largely considered irrelevant and not included in most discussions. Earlier, the “public option” – a public insurance program to be offered as an option in the insurance exchanges – was considered to represent the position of the left.

Some of us dedicated single payer supporters were loudly protesting that the public option was merely a decoy to create the impression that the legislation was centrist, rather than actually being merely a perpetuation of the highly dysfunctional financing system that we have. The mainstream media again dismissed us as irrelevant and covered “both sides” as if this dispute were over support for the public option representing the views of the left, and opposition to the option representing the views of the right.

In truth, most in the progressive community had latched onto the public option, and so the media was not totally off track. A very large sector the progressive community had moved far to the right by supporting the public option, thereby implicitly supporting the model being created in Congress – the Heritage/Republican mandate proposal requiring individuals to purchase private insurance plans.

And where are we now? Most progressives have set aside their demands for the public option and are asking the Supreme Court to support the right-wing individual mandate! Thus the media is presenting “both sides” as the left supporting the mandate and the right opposed – a dispute taking place in far-right territory.

Not all progressives have followed the lemmings. A group of fifty noble physicians and a couple of single payer organizations have submitted an amicus in opposition to the individual mandate. The rationale is that we should get rid of this horrendous legislation and clear the way for the only other alternative – a single payer national health program. The amicus was a tactical decision on which passionate single payer supporters could differ.

The leadership of Physicians for a National Health Program – a single payer advocacy organization strongly opposed to the financing model of the Affordable Care Act – elected not to take a position either for or against the Supreme Court challenge since it was a distracting diversion from PNHP’s mission. Instead, we made the tactical decision that we would be more effective continuing with our unrelenting advocacy for single payer while condemning the cruel and inhumane financing system perpetuated in the Affordable Care Act.

In the heat of the Supreme Court debate we are seeing the issue of single payer creeping back into the national dialogue. In an effort to present both sides, many reporters, in covering the debate over the mandate, have included the view of those who believe that rejecting the mandate will result in turning to the only other option – single payer.

And, by the way, “both sides” does not mean the right and the left. There are many on the right who support the single payer concept, and some on the left oppose it.

Let’s do all we can to dump the false-equivalence debate over the public option and the individual mandate and move on to covering what are truly “both sides” – an efficient, equitable and affordable single payer system versus the wasteful, costly, inequitable, and fragmented financing system of the Affordable Care Act which would leave far too many of us sick and broke.

Obama can’t get single payer out of his head

Posted by on Wednesday, Apr 4, 2012

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.

Video: Obama Blasts GOP Medicare, Medicaid Plans

Kaiser Health News, April 3, 2012

Speaking in Washington to an association of newspaper editors, Obama not only attacked Republican budget proposals, but in response to a question, he also laid out a defense of the 2010 health law and why he thinks the Supreme Court will uphold the law as constitutional.


Question:  … If the court were to overturn individual mandate, what would you do or propose to do for the 30 million people who wouldn’t have health care after that ruling?

President Obama:  … And the point I think that was made very ably before the Supreme Court, but I think most health care economists who have looked at this have acknowledged, is there are basically two ways to cover people with pre-existing conditions or assure that people can always get coverage even when they have bad illnesses.

One way is a single-payer plan. Everybody is a under a single system, like Medicare. The other way is to set up a system in which you don’t have people who are healthy but don’t bother to get health insurance, and then we all have to pay for them in the emergency room. That doesn’t work, and so as a consequence, we’ve got to make sure that those folks are taking their responsibility seriously, which is what the individual mandate does.

So I don’t anticipate the court striking this down. I think they take their responsibilities very seriously.

But I think what’s more important is for all of us, Democrats and Republicans, to recognize that in a country like ours, the wealthiest, most powerful country on earth, we shouldn’t have a system in which millions of people are at risk of bankruptcy because they get sick or end up waiting until they do get sick and then go to the emergency room, which involves all of us paying for it.

Video and transcript:


White House pushes back on single-payer claims

By Byron Tau
Politico, April 3, 2012

President Obama’s advisers are pushing back against claims that the president floated single-payer, government-run health care as a possible solution to the individual mandate.

Obama said during remarks Tuesday that either a mandate or a single-payer government health plan were the only way to ensure coverage of everyone with pre-existing conditions.

“The President was simply explaining the individual responsibility provision in the context of the decades-long debate about fixing America’s healthcare system. He was not talking about any hypothetical situation where ACA is overturned, nor has the White House commented on such hypotheticals, because we firmly believe the law is Constitutional and will be upheld,” a White House official said.

The Barack Obama whom we had hoped was elected as president, on the topic of health care coverage, once again has stated clearly, “One way is a single-payer plan. Everybody is a under a single system, like Medicare,” whereas “The other way is to set up a system in which you don’t have people who are healthy but don’t bother to get health insurance, and then we all have to pay for them in the emergency room. That doesn’t work, and so as a consequence, we’ve got to make sure that those folks are taking their responsibility seriously, which is what the individual mandate does.”

The ease with which single payer flows from his consciousness while the awkwardness of his expression of the individual mandate concept seem to be telling. He understands. Yet he is the central cog in a complex White House machine driven by politics rather than policy. That is why the White House felt compelled to release a statement dismissing single payer without even mentioning it by name.

Let’s hope that, if he is reelected, he replaces the political machinery within the White House with machinery that is driven by sound, compassionate policy.

Using insurance products to penalize unhealthy patients

Posted by on Tuesday, Apr 3, 2012

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

Employers Tie Financial Rewards, Penalties To Health Tests, Lifestyle Choices

By Julie Appleby
Kaiser Health News, April 2, 2012

Gone are the days of just signing up for health insurance and hoping you don’t have to use it. Now, more employees are being asked to roll up their sleeves for medical tests — and to exercise, participate in disease management programs and quit smoking to qualify for hundreds, even thousands of dollars’ worth of premium or deductible discounts.

Proponents say such plans offer people a financial incentive to make healthier choices and manage chronic conditions such as obesity, high blood pressure and diabetes, which are driving up healthcare costs in the USA. Even so, studies of the effect of such policies on lifestyle changes are inconclusive. And advocates for people with chronic health conditions, such as heart disease and diabetes, fear that tying premium costs directly to test results could lead to discrimination.

Nonetheless, such plans could be the wave of the future. Faced with crippling healthcare costs, the number of employers embracing such programs shot up from 49 percent in 2010 to 54 percent last year — and more say they expect to do so soon, according to a survey by consultants Aon Hewitt. Big-name participants include insurer UnitedHealthcare, car rental firm Hertz, postage meter maker Pitney Bowes and media owner Gannett, owner of USA TODAY.

And more employers are expected to adopt them starting in 2014, when the health law allows them to offer larger incentives or penalties than they can now.

Starting in 2014, federal law allows employers to raise the value of the perk or penalty from 20 percent of the cost of a worker’s health insurance plan, to 30 percent. Based on the average cost of employer-offered insurance today, that means firms will be able to offer annual discounts or penalties of more than $4,500 a family, or $1,600 for individuals.

Given the available data, it’s hard to parse how much of the reported savings from such programs come from improved health, and how much from the frequent pairing of such programs with high deductible policies, which shift more costs onto workers.

Because we continue to insist that private insurance remains a mainstay of financing health care, we perpetuate the confusion between the health insurance product itself and the actual health care that people need. A well functioning health care financing system should remove financial barriers to health care that people need.

Single payer supporters understand that a universal pool should be financed equitably through progressive taxes, and that full payment for necessary health care should come from this pool – pretty much as they do in Canada. When people need health care, they get it, and the bill goes to the public agency.

In the United States we have inserted these very expensive and wasteful insurer intermediaries that continue to manipulate the patients and the health care providers primarily to meet the requirements of their own insurer business model. To cater to these intermediaries, we are paying them far too much for their administrative excesses while we fail to improve the payment system with the goal of obtaining optimal value in our health care purchasing.

Today’s message demonstrates more of the innovative approaches designed to keep the insurers in business while pretending that these financing innovations improve health, when there is a paucity of evidence for that. Smoking cessation programs are an exception, but they should be separate programs unrelated to health insurance.

Blaming the patient for hypertension, hyperlipidemia, obesity, and diabetes is misdirected since most of these patients have little control over being inflicted with their chronic disorders. Yes, interventions should be instituted where effective, but that does not mean that these people should be financially penalized. Supposed rewards for not having these disorders are really penalties for those that do since the pooled funds are directed away from the patients in need and to the healthy.

This is just another example of attacking the social contract under which we should all receive the care that we need, and transferring the responsibility to individuals who have greater needs. These programs use not only cash penalties and penalties disguised as pseudo-rewards, but also they usually are combined with greater cost sharing, especially higher deductibles. That transfers more of the responsibility to the “consumers” who then have greater control over their own health care – or so the phony argument goes. In reality, these individuals have less control because of the financial barriers being erected between them and their health care – the exact opposite of policies which we should be adopting.

Today Kaiser Health News published a haiku which I wrote in response to Julie Appleby’s article above about penalties being assessed for failing certain health tests. In the haiku, my hyperbole is within the bounds of poetic license since it represents the continuing trends under private insurers:


Bad health? Pay up here.
Social contract? That’s passe.
You are on your own.

-Don McCanne, MD

GOP attorney general suing over ACA supports single payer

Posted by on Monday, Apr 2, 2012

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 Attorney General Suing Over Obamacare Supports Single-Payer: ‘I Trust The Government More’

By Scott Keyes
Think Progress, March 30, 2012

According to one Republican attorney general in the lawsuit against the health care individual mandate, the problem with Obamacare is that it’s not a government takeover of health care.

ThinkProgress spoke with Louisiana Attorney General Buddy Caldwell outside the Supreme Court on Wednesday. Caldwell opposes Obamacare and the individual mandate, but for a different reason than most of his fellow litigants: it props up the private health insurance industry. “Insurance companies are the absolute worst people to handle this kind of business,” he declared. “I trust the government more than insurance companies.” Caldwell went on to endorse the idea of a single-payer health care system, saying it’d “be a whole lot better” than Obamacare:

KEYES: You don’t think the subsidies for low-income people are going to be helpful?

CALDWELL: No, no. The worst thing you can do is give it to an insurance company. I want to make my point. All insurance companies are controlled in their particular state. If you have a hurricane come up the east coast, the first one that’s going to leave you when they gotta pay too many claims is an insurance company. Insurance companies are the absolute worst people to handle this kind of business. I trust the government more than insurance companies. If the government wants to put forth a policy where they will pay for everything and you won’t have to go through an insurance policy, that’d be a whole lot better.

Louisiana Attorney General Buddy Caldwell, a Republican, who has joined the lawsuit against the Affordable Care Act, certainly understands the greatest flaw in the legislation. “The worst thing you can do is give it to an insurance company.” Leading to his conclusion, “If the government wants to put forth a policy where they will pay for everything and you won’t have to go through an insurance policy, that’d be a whole lot better.”

Profusion of single payer responses to Supreme Court deliberations

Posted by on Friday, Mar 30, 2012

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.

NOTE: Wait! Don’t go away! You are not expected to read today’s message in its entirety. This is merely a sampling of the plethora of new articles that suggest that single payer may be the answer to the constitutionally-challenged Affordable Care Act. They represent the views of enthusiastic liberals, reluctant conservatives, and everyone in between. If you read only one entry, I would suggest the very last one, which is my response to today’s New York Times Economix blog by Uwe Reinhardt. Although at times it seems like we single payer activists are hollering in the wind, the profusion of responses demonstrates that single payer is now widely recognized as a model that would work for all of us. Keep hollering!

On The Individual Mandate: Towards A Single-Payer System Or Public Option?

By Renée Landers
Health Affairs Blog, March 29, 2012

Early in the arguments, in an exchange with the Solicitor General, Justice Kennedy raised the idea that one alternative available to Congress may be to “use the tax power to raise revenue and to just have a national health service, single payer.”

Toward the end of the day’s arguments, Justice Sotomayor pressed Mr. Carvin on the same point:  “I want to understand the choices you’re saying Congress has.  Congress can tax everybody and set up a public health care system.”

These discussions leave the Court, conservatives, and the public with a curious dilemma.  Through the Affordable Care Act, Congress has tried to regulate private insurance markets to solve the market problem of making health insurance affordable for the uninsured, whatever their individual health status.  If that market-based approach does not survive a Commerce Clause challenge, what alternatives are left to Congress?  One alternative is to do nothing, which does not seem to be economically responsible given accelerating health care costs and certainly leaves tens of millions of Americans in a precarious and untenable situation.

The other option would be for the government, as the last resort, to create the “public option” that was so controversial during the debates over the Affordable Care Act, or to move entirely to a single-payer system, eschewing markets.


A stronger prescription for what ails health care

By Eugene Robinson
The Washington Post, March 29, 2012

Our only choice is to try to hold the costs down. President Obama tried to make a start with a modest approach that works through the current system. If this doesn’t pass constitutional muster, the obvious alternative is to emulate other industrialized nations that deliver equal or better health care outcomes for half the cost.

I’m talking about a single-payer health care system. If the Supreme Court strikes down ObamaCare, a single-payer system will go from being politically impossible to being, in the long run, fiscally inevitable.


Judicial activists in the Supreme Court

By E.J. Dionne Jr.
The Washington Post, March 28, 2012

The irony is that if the court’s conservatives overthrow the mandate, they will hasten the arrival of a more government-heavy system. Justice Anthony Kennedy even hinted that it might be more “honest” if government simply used “the tax power to raise revenue and to just have a national health service, single-payer.” Remember those words.


My Mom, the Supreme Court, and the Affordable Care Act

By Emil Guillermo
San Francisco Chronicle, March 28, 2012

My mom died before the Clintons attempted their push for reform, and before Obama came up with his intricate compromise. Before then, Mom’s old fashioned Medicare plan worked just fine.

So I know this crazy Supreme Court debate to overturn the Affordable Care Act would have surely given her chest pains.

She’d ask, “Why can’t the government just extend Medicare to all?” (Seniors have a way of getting to the point. Unlike lawyers.) Medicare is a single payer system that doesn’t have people crying “Socialism!” It doesn’t get conservatives’ dander up about individual liberty and the broad powers of the federal government.

And it works. Everyone gets the care they need.


If only mom were alive and in charge.


If Obamacare is overturned, will that lead to single payer? And would that be a good thing?

By Ezra Klein
The Washington Post, March 29, 2012

Eventually, we end up with something close to a single-payer system, as a majority of Americans — and particularly a majority of Americans who have significant health risks — are covered by the government.


Single-Payer or Bust

By Steve Erickson
The American Prospect, March 30, 2012

Striking down the individual mandate leaves only one of two options: adopt a system in which government pays for health care, or do nothing.


RedBlueAmerica: Will ‘Obamacare’ survive?

Scripps Howard News Service, March 29, 2012

Joel Mathis:  The insurance mandate was a half-step toward that goal. Let’s take the full step: Single-payer health insurance, run and administered by the government, with no private-sector middlemen to add costs and reap profits from taxpayers.

Ben Boychuk:  The problem with the single-payer fantasy is it makes promises the government cannot keep. The health-care budget is not unlimited. Government would make choices about your health care based not on what you need, but how much a procedure costs. In truth, that’s becoming the case more and more under our existing system, which is why reform remains essential.


What if Supreme Court strikes down Obama healthcare act?

By Mark Mardell
BBC News, March 29, 2012

(A Democrat strategist I’ve spoken to) adds that defeat might make Democrats more radical and argue that what is called here a “single payer system” – a tax-funded national health system as we have in the UK – is the only real answer, rather than President Obama’s market-sensitive half-way house.


Obamacare health-insurance exchanges are set up to fail

By Paul Mulshine
The Star Ledger, March 25, 2012

The real threat is not that Obamacare will take over Medicare. It’s the other way around, says Mike Cannon, a health-care expert with the free-market Cato Institute in Washington.

“These exchanges are built to fail,” said Cannon. “They’ll drive private insurance companies out of the market. When they do, the whole thing will collapse.”

At that point, some sort of single-payer system would be needed to cover the people the private insurers don’t want. Those who’ve been arguing Medicare should be extended to everyone would probably win at the polls.


If Health Law Is Overturned, What Will Liberals Do?

By Michael D. Shear
The New York Times, March 28, 2012

If Democrats make little progress on alternatives, some purists might decide it’s best to just renew the case for a single-payer system in which all Americans receive health care paid for by the government.

Sidney M. Wolfe, the director of the Health Research Group at Public Citizen, an advocacy group, has been pushing for government-run health care for decades.


Overturning health care law could lead to a single-payer system

By Peter Morici
SunSentinel, March 26, 2012

Conservatives, by persuading a majority of Justices to overturn the individual mandate, could reverse Washington’s relentless push to over regulate individual and business behavior, but they could ultimately instigate their worst nightmare — a single payer system akin to the British system.


After the Ruling

By Maggie Fox
National Journal, March 29, 2012

There is one easy solution to the issue—a single-payer health system that strictly controls costs and administrative fees, using evidence-based science to determine which interventions, drugs, and diagnostic tests are worth the money and effort.


ACA Alternatives Waiting in the Wings

By Emily P. Walker
MedPage Today, March 29, 2012

While Republicans are crafting limited-government alternatives to the Affordable Care Act (ACA), some on the other side of the political spectrum are trumpeting a single-payer, government-run system as the preferred alternative to the ACA.

The irony is that while the public option wasn’t popular enough to pass, no one disputes the Supreme Court wouldn’t be considering the case if a single-payer plan had passed, because expanding Medicare and taxing everyone more would have been well within the powers of Congress.


Experts: Medicaid Expansion Will Stand; Mandate’s Fate Unclear

By George Lauer
California Healthline, March 29, 2012

Some see the potential for a quicker move toward single payer solutions if all or part of the ACA is ruled unconstitutional.

While he didn’t go so far as to call for provisions of the ACA to be struck down, Bill Skeen, executive director of the California chapter of Physicians for a National Health Program, did see potential for progress in such a scenario.

“If the ACA is dismantled, I don’t predict there will be an easy road for single payer, but there is the sort of last-man-standing feeling that — OK, the plan Congress put together isn’t holding up. Single payer is the last best option.”


Chris Matthews, Ezra Klein Identify Strategy To Impose ‘De Facto Single Payer System’

By Noah Rothman
Mediaite, March 29, 2012

On Wednesday, Hardball host Chris Matthews and Washington Post columnist Ezra Klein discussed the potential for all or part of President Obama’s health care reform law to be ruled unconstitutional in the Supreme Court and the ways in which progressives could move forward with health care reform in a post-Affordable Care Act world. Klein confirmed conservative’s latest fear: striking down the health care law could pave the way for a single payer system that could be implemented over time through the budget reconciliation process in the Senate.


Growth & Justice lays out its case for Minnesota single-payer health care

By Beth Hawkins
MinnPost, March 29, 2012

What if single-payer were feasible?

On Wednesday, the St. Paul-based progressive-leaning think tank Growth & Justice made its case, releasing a first-of-its-kind analysis showing that a unified system of health care could provide all Minnesotans with guaranteed cradle-to-grave care at a projected savings of about $190 billion over 10 years. By 2023, overall savings could be 12 percent to 33 percent per year, it said.

During his gubernatorial campaign, Mark Dayton supported a single-payer system for Minnesota, Smith added. The advent of ACA presents a good opening to put the topic back in the public discourse.

“This option needs to stay on the table,” he said. “It is an attempt to change the conversation. … This is one of the last big hurdles for a fair and just society. You can’t just check out of the social contract.”


The Wall Street Journal: Unwitting Advocates of Single-Payer

By David Frum
The Daily Beast, March 29, 2012

The crazy thing about the litigation over the Affordable Care Act is this… nobody disputes that Congress has full authority to set in motion a national healthcare program. Congress could tax all American at any rate — or any schedule of rates, no matter how confiscatory for those at the top — and then use the money to fund a British-style National Health Service.


If Health Care Reform Falls, Look in the Mirror

By Karen Dolan
The Huffington Post, March 29, 2012

Candidate Barack Obama campaigned on universal coverage. He told would-be supporters that, if he were “starting from scratch,” single-payer would be ideal. Indeed, he even understood that the only true reform, that would sufficiently control costs and actually achieve universal coverage, was a single payer, government-sponsored health care system. The evidence is overwhelming that only such a system can achieve those goals.

Isn’t it time to fight for Medicare for all?


How Obamacare’s Rejection Would Lead to Single Payer

By Josh Barro
Forbes, March 28, 2012

Strike down Obamacare, and single payer instantly becomes the number one organizing cause for liberals in America. This Congress won’t pass a single payer insurance law, but you can bet Democrats would the next time they control both the legislative and executive branches.


Single-Payer Briar Patch

By Timothy Noah
The New Republic, March 28, 2012

The professional Obama-hater Dick Morris said today on Fox News that if President Obama is elected to a second term after the Supreme Court strikes down Obamacare (as is looking more likely) then “he’ll move to a single payer system.”


Take It From Me: Defending Obamacare is Super-Hard

By Reid Cherlin
GQ, March 27, 2012

It would have been easy for Verrilli—or any of us—to explain single-payer health care. “Look,” we could have said, “the government is paying for everyone to have coverage.” End of story. But single-payer is not what our brilliant, world-leading political system gave us.


Lawmakers Propose Single-Payer System For Mass.

By Meghna Chakrabarti
WBUR, March 28, 2012

A major national story is playing out in the halls of Beacon Hill: this week’s Supreme Court hearings on the national Affordable Health Care Act.

Some lawmakers want the state to push health care reform to the next level. They’ve introduced a bill that would bring a “single-payer” system to the Bay State.


What’s really wrong with Obamacare

By Cathy Young
Newsday, March 29, 2012

If the Affordable Care Act is struck down, the eventual outcome may be better health care reform — or it may be a more socialistic road, such as a single-payer system.

Libertarian and conservative voices are essential to the health care debate. But they should be careful not to lapse into a defense of freeloading or unconstrained spending on expensive (and not always beneficial) medical procedures. Freedom is a key conservative and libertarian principle; so is responsibility.


If the Mandate Fails, Single Payer Awaits

By George Zornick
The Nation, March 27, 2012

One obvious option, besides just doing nothing and allowing health care costs to continue their exponential growth while more people lose coverage, is a single-payer health insurance plan. There is no doubt about the constitutionality here — the government is clearly allowed to levy taxes to fund public benefits.

So if health care reform goes down, the next logical step may well be just extending Medicare to everyone.


Kucinich: Single-payer healthcare on its way regardless of how Supreme Court rules

By Julian Pecquet
The Hill, March 26, 2012

The Supreme Court’s review of President Obama’s healthcare reform law is just another step on the inevitable path toward a single-payer medical system, Rep. Dennis Kucinich (D-Ohio) said Monday.


Health Care Jujitsu

By Robert Reich
The Huffington Post, March 26, 2012

But with a bit of political jujitsu, the president could turn any such defeat into a victory for a single-payer healthcare system — Medicare for all.


Individual Mandate Is Ryan Tax Credit by Other Name

By Ezra Klein
Bloomberg, March 28, 2012

The real fight is over whether the Affordable Care Act should exist at all. Republicans lost that battle in Congress, where they lacked a majority in 2010. Now they hope to win it in the Supreme Court, where they hold a one-vote advantage. The argument against the individual mandate is a pretext to overturn Obamacare. But it’s a pretext that could set a very peculiar precedent.

If the mandate falls, future politicians, who will still need to fix the health-care system and address the free-rider problem, will be left with the option to move toward a single payer system or offer incredibly large, expensive tax credits in order to persuade people to do things they don’t otherwise want to do. That is to say, in the name of liberty, Republicans and their allies on the Supreme Court will have guaranteed a future with much more government intrusion in the health-care marketplace.


The Supreme Court and the National Conversation on Health Care Reform

By Uwe E. Reinhardt
The New York Times, Economix, March 30, 2012

Once again America is having one of its “national conversations” on health care reform. This time the buzz is over arguments before the Supreme Court on the constitutionality of certain provisions in the Affordable Care Act. The justices’ rulings will be landmark decisions, because they will indirectly go much beyond the act itself to our entire system of governance.

The two major substantive decisions the Supreme Court has to make are:

1. Whether Congress has the constitutional authority to mandate every legal resident in the United States to have insurance coverage for a specified package of health benefits (hereafter the “mandate”) or whether that is an issue for the states to decide.

2. Whether Congress has the constitutional authority to expand eligibility for Medicaid benefits from the highly varied income thresholds that currently define eligibility to anyone under 133 percent of the federal poverty level.

Reader Comment:

By Don McCanne
San Juan Capistrano, CA

The intense attention being given to the constitutionality of the individual mandate and the severability of guaranteed issue and community rating and to the constitutionality of the Medicaid expansion superficially seems to have detracted from the fundamental issue of whether or not the Affordable Care Act itself should serve as a durable model for health care reform.

With the best possible outcome of the Supreme Court deliberations, we’ll still be faced with uninsurance (at least 26 million uninsured), underinsurance (low actuarial value plans with spartan essential benefits) and unaffordability (lack of effective systemic cost containment).

Right now we are seeing a surge in commentaries declaring that we will end up with single payer (Medicare for all) if the mandate and guaranteed issue and community rating are struck down by the Supreme Court, simply because that’s the only rational financing option left for us.

We will, in fact, end up with single payer, but not because of the pending Supreme Court decision. We will adopt a single payer system simply because we will not be able to continue to tolerate uninsurance, underinsurance and unaffordability.

Another P4P dud

Posted by on Thursday, Mar 29, 2012

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 Long-Term Effect of Premier Pay for Performance on Patient Outcomes

By Ashish K. Jha, M.D., M.P.H., Karen E. Joynt, M.D., M.P.H., E. John Orav, Ph.D., and Arnold M. Epstein, M.D.
The New England Journal of Medicine, March 28, 2012

Tying financial incentives to performance, often referred to as pay for performance, has gained broad acceptance as an approach to improving the quality of health care. The Centers for Medicare and Medicaid Services (CMS) recently completed a 6-year demonstration of pay for performance for hospitals through the Premier Hospital Quality Incentive Demonstration (HQID), and the Affordable Care Act calls for CMS to expand this program to nearly all U.S. hospitals in 2012. The policy of tying financial incentives to the quality of performance has strong face validity — that is, paying for better care should promote improvements in quality and, ideally, lead to better patient outcomes. Whether pay for performance will lead to better patient outcomes, however, is unclear.

Although there is evidence from the Premier HQID that pay for performance is associated with modest improvements in the processes of care, much less is known about its effect on patient outcomes.

We found little evidence that participation in the Premier HQID program was associated with declines in mortality above and beyond those reported for hospitals that participated in public reporting alone, even when we examined care over a period of 6 years after the program’s inception. Furthermore, we found no differences in trends in mortality between conditions for which outcomes were explicitly linked to incentives and conditions for which outcomes were not linked to incentives.

Prior studies of the Premier HQID showed that the early gains in process quality had mostly dissipated after 5 years under the program. Werner et al. found that the modest benefits in adherence to process measures were most perceptible for hospitals that were eligible for larger bonuses, that were well financed, or that operated in less competitive markets. We failed to find that these factors were associated with a significantly greater effect on outcomes.

In summary, we found little evidence that participation in the Premier HQID program led to lower 30-day mortality rates, suggesting that we still have not identified the right mix of incentives and targets to ensure that pay for performance will drive improvements in patient outcomes. Even though Congress has required that the CMS adopt pay for performance for hospitals, expectations with regard to programs modeled after Premier HQID should remain modest.

Pay for performance (P4P) is one of the measures in the Affordable Care Act (Sec. 3001) that supposedly is designed to improve quality and reduce costs. The recommendation was based on data such as this Medicare Hospital Quality Incentive Demonstration (HQID) which had shown that providing financial bonuses and penalties improves processes of care. But does it improve outcomes?

This large study of hospital performance had already shown early but non-sustained improvement in processes, but it turns out that paying for this performance did not improve patient outcomes. P4P did not improve 30 day nor 6 year mortality for the conditions studied – three medical conditions (acute myocardial infarction, congestive heart failure, and pneumonia) and two surgical procedures (coronary-artery bypass grafting [CABG] and total knee or total hip replacement). Yet the Affordable Care Act requires that all hospitals participate in the value-based purchasing (VBP) program, which provides financial incentives for both high achievement and improvement in performance – an approach closely modeled after the Medicare HQID.

This “teach to the test” P4P experiment did, in fact, result in rewards and penalties for hospitals based solely on process measures, though having no impact on outcomes. Such programs seem to promote gamesmanship much more than they promote actual improvements in quality – appealing to hospitals that were “eligible for larger bonuses, that were well financed, or that operated in less competitive markets.” It is yet another example of the multitude of unproven or minimally effective quality and cost measures in the Affordable Care Act.

The tragedy is that Congress and the President rejected the proven model of reform that would have achieved these goals – a single payer national health program. One benefit of the Supreme Court hearings this week is that there has been a resounding response that single payer is the answer. If only we could convert that perception into action. If only…

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