Is administrative savings a myth?

Posted by on Friday, Nov 21, 2008

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.

5 Myths on Our Sick Health Care System

By Shannon Brownlee and Ezekiel Emanuel
The Washington Post
November 23, 2008 (Web posting Nov. 21)

… we dispel a few myths about how health care works and how much reform Americans are willing to stomach.

3. We would save a lot if we could cut the administrative waste of private insurance.

The idea that we could wring billions of dollars in savings this way is seductive, but it wouldn’t really accomplish that much. For one thing, some administrative costs are not only necessary but beneficial. Following heart-attack or cancer patients to see which interventions work best is an administrative cost, but it’s also invaluable if you want to improve care. Tracking the rate of heart attacks from drugs such as Avandia is key to ensuring safe pharmaceuticals.

Let’s just say that we could wave a magic wand and cut private insurers’ overhead by half, to what the Canadian government spends on administering its health-care system — 15 percent. How much would we save? Not as much as you may think. Private insurers pay a little more than a third of what we spend on health care, which means that we’d cut a little more than 5 percent from our total budget, or about $124 billion. That’s not peanuts, but it’s not even enough to cover everybody who’s currently uninsured.

More to the point, we only get to save it once. That’s because administrative waste isn’t what’s driving health-care costs up faster than inflation. Most of the relentless rise can be attributed to the expansion of hospitals and other health-care sectors and the rapid adoption of expensive new technologies — new drugs, devices, tests and procedures. Unfortunately, only a fraction of all that new stuff offers dramatically better outcomes. If we’re worried about costs, we have to ask whether a $55,000 drug that prolongs the lives of lung cancer patients for an average of a few weeks is really worth it. Unless we find a cure for our addiction to the new but not necessarily improved, our national medical bill will continue to skyrocket, regardless of how efficient insurance companies become.

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/20/AR2008112002420.html

The authors understand that a single payer or “Medicare for all” model of reform is the most rational competitor to their preferred model of reform – thus their attack on the administrative savings that a single payer system would bring us. They concede that the savings are not a myth as they are considerable, but they still understate the savings because they exclude the tremendous financial burden that our dysfunctional, fragmented, multi-payer system places on the health care delivery system. They also incorrectly state that the administrative savings are a one-time event. In fact, the efficiencies that are achieved are permanent, shifting the trajectory of health care cost increases downward.

Their dismissal of single payer reform (see Emanuel’s “Healthcare, Guaranteed”) as merely an inadequate administrative measure, considering the complexity of the systemic problems in our health care delivery system, ignores the most important benefit of the single payer model. A single payer system creates our own public monopsony, or single purchaser of health care services. Many economists agree that, by controlling the spending of our health care dollars, we can finally demand value in our health care purchasing, introducing infrastructure changes that will lead to the high-performance system for which we are already paying, but not experiencing.

Because Medicare controls health care spending for only about 15 percent of our population, it is a very weak monopsony. Nevertheless it has been able to introduce some spending efficiencies. Think of how effective it would be if it covered all of us.

Medicare is our most popular, most efficient, and most equitable health care financing program, yet it is being dismissed as a model for all of us because of the idea that it somehow represents an ideological extreme. In health care, political compromise based on ideology is not only bankrupting individuals, it is killing them.

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/20/AR2008112002420_Comments.html

11/21/2008 12:36:15 PM

A letter to our new president

Posted by on Friday, Nov 21, 2008

Dear President-elect Obama:

As you prepare to begin your presidency during a period of severe recession, you will be searching to make financially sound decisions for our country. You have promised to reform the health care system, and only one solution will enable you to create an effective system and save money: a single-payer national health program.

During your campaign, you proposed a health plan to extend coverage to the 45 million uninsured Americans by expanding private and public programs, with the help of federal subsidies and mandates. This will only add to the cost of our health insurance system, currently a hefty $7,129 per person. However, if we adopt a single-payer national health program rather than attempting to expand our dysfunctional multiple payer, private insurance system, we would save money.

Drs. David Himmelstein and Steffie Woolhandler, health care researchers at Harvard Medical School, have calculated that the United States could save $350 billion/year by adopting a single-payer national health program. A single-payer program would eliminate private insurance companies and the enormous expense of their administrative costs and profits.

Every other industrialized country in the world has a national health plan that covers everyone and is administered by the government. And other countries spend less than half as much per person on health care as we do in the United

States. One reason they are able to provide health care for everyone for much less money is because their administrative costs are a small fraction of the costs in our country.

A single-payer national health program would also be a real boon to individuals faced with rapidly rising health insurance costs, and would rescue people who are falling into bankruptcy and are losing their homes because of medical debts. American automakers might not need bailouts if they didn’t have to provide insurance for their workers and retirees. Small businesses would no longer shoulder the expense and administrative burden of providing health insurance for their workers.

Not only would we save money for the government, business, and the individual, but a single-payer national health program would also cover everyone, and we would all have access to more comprehensive benefits. These benefits would include medical care, mental health care, dental care, prescription drugs, and long-term care, which is a primary concern for the baby boomers who have been watching their life savings and retirement funds evaporate with the collapse of Wall Street.

A group of 15,000 U.S. doctors in the organization Physicians for a National Health Program have called on you to enact a single-payer program. A Massachusetts poll revealed that 64 percent of doctors support single-payer health care, and the American College of Physicians has voted its support for a national health program as well.

As a Massachusetts resident, I am witnessing an attempt at health care reform that has similarities to your proposed plan, and is being touted as a model for our country. This program has expanded health insurance coverage to people who were previously uninsured, but it is not economically sustainable for our state government or for individuals. Many people are unhappy with the current health insurance program in Massachusetts, which has not reduced rapidly rising premium costs, co-payments and deductibles for the working individual. Massachusetts residents who were able to vote on local ballot initiatives in their legislative districts on Nov. 4, supported single-payer health care by landslide margins. Opinion polls also show that two-thirds of the public supports this kind of reform.

You have a mandate from the American people, and from many doctors and other health care professionals who actually provide our care. You have the opportunity to seize this moment of economic crisis, and create financially sound, sustainable health care reform. As Dr. Quentin Young, a long-time single-payer advocate, has said, “Adopting a nationwide single-payer system will build on the great achievement of Medicare, further unify our people, strengthen our country’s economic competitiveness and assure President Obama’s legacy as an American hero.”

AHIP & BCBSA support guaranteed issue and individual mandate

Posted by on Thursday, Nov 20, 2008

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

Health Plans Propose Guaranteed Coverage for Pre-Existing Conditions and Individual Coverage Mandate

AHIP (America’s Health Insurance Plans)
November 19, 2008

Summary of AHIP’s Proposal to Guarantee Coverage for Pre-existing Conditions and Promote Affordability in the Individual Insurance Market:

  • Guarantee-issue coverage with no pre-existing condition exclusions;
  • Establish an individual coverage requirement with an insurance coverage verification system, an automatic enrollment process and effective enforcement of the requirement that all individuals purchase and maintain coverage;
  • Promote affordability by: providing refundable, advanceable tax credits for moderate-income individuals and working families; and promoting tax equity whether coverage is obtained through an employer or the individual market; and
  • Ensure premium stability for those with existing coverage through a broadly funded reimbursement mechanism that spreads costs for the highest-risk individuals.

http://www.ahip.org/content/pressrelease.aspx?docid=25068

And…

BCBSA Announces Support for Individual Mandate Coupled with a Requirement for Insurers to Offer Coverage to All

BlueCross BlueShield Association (BCBSA)
November 19, 2008

To assure truly meaningful reform, the Blue Cross and Blue Shield Association (BCBSA) and the 39 member Blue Cross and Blue Shield companies today announced support for every individual being required to have coverage and all insurers being required to accept everyone regardless of their health status.

http://www.bcbs.com/news/bcbsa/bcbsa-announces-support-for.html

If anyone has any remaining doubt that comprehensive reform is close at hand, just look at the response of the private insurance industry. AHIP, representing 1,300 insurance companies, and BlueCross BlueShield Association, insuring over 100 million individuals, in simultaneous press releases have confirmed that they understand that, if they want to continue to insure the majority of Americans, they must abandon their current business model and come to the table with policies that work. Policies that work means that everyone must be included, and that risk must be distributed in an equitable manner, based on ability to pay.

So what is their current business model that no longer works? They have been successful in limiting their exposure to the very large numbers of us who are relatively healthful: the healthy workforce, their young healthy families, and the healthy sector of the individual insurance market. But health care costs are now so high that the premiums that must be charged for these healthy risk pools are no longer affordable for the majority of us.

The industry’s response was to reduce benefits thereby reducing the upward pressure on premiums, but that has resulted in the rapidly growing epidemic of underinsurance. As a result, health care is now often unaffordable even for those who do have insurance. Also, in response to high premiums and mediocre coverage the numbers of uninsured continue to rise.

The private insurance industry has been trying to ride this out, but no more. Their hand is being forced by the political tidal wave that is sweeping over our health care system with the demand for reform that works for all of us.

They understand that in a truly universal system they must guarantee coverage for everyone regardless of preexisting conditions. Since that would push premiums up, they know that they must add larger numbers of healthy individuals to dilute the risk in their pools. An obvious source is the large numbers of young, healthy individuals who are uninsured. But the only way those individuals would pay the high premiums would be by forcing them to participate. Thus an individual mandate must be coupled with guaranteed issue.

The industry pretends that an individual mandate with guaranteed issue is all that they need to be major players, but they are reticent on revealing the most crucial barrier that they face. Although premiums for private plans are already too high for average-income individuals to afford, they must reverse the innovations that have led to underinsurance. Obviously that will significantly increase premiums. Also, since they currently sell to mostly healthy individuals, adding those with preexisting disorders will result in even higher premiums.

What to do, what to do? The AHIP release gives us a couple of hints.

Those supporting universal coverage through private health plans have long conceded that tax credits (or vouchers) must be used to assist low-income individuals with the purchase of their plans. In their press release, AHIP now states that we must use “refundable, advanceable tax credits for moderate-income individuals and working families.” Finally, the industry explicitly concedes that most of us can no longer afford to purchase their health plans. So who is going to help? The taxpayers. Gee, isn’t that us?

The other problem is how are they going to pay for the high-risk individuals who now must be covered? Their solution is somewhat more cryptic. They are going to “ensure premium stability for those with existing coverage through a broadly funded reimbursement mechanism that spreads costs for the highest-risk individuals.” “Premium stability” means that other sources will be paying the higher costs of the higher-risk individuals. What other sources? They propose “Guarantee Access Plans” which are “loosely modeled on state high-risk pools.” Oops. The taxpayers – us – again.

Think about it. The private insurance industry has just the solution for us, but only if we agree to foot the bill for those who actually need health care, while they continue to collect large premiums to pay for their egregiously wasteful administrative excesses.

Their proposal is to shift the real costs of health care to the taxpayer. They are right. We need to establish a universal risk pool and fund it equitably based on ability to pay. The only sensible way to do that is through a single payer national health program. Why would we want to implant on our health care financing system the cancer of private health plans?

HHS Secretary-elect Daschle's plan for reform

Posted by on Wednesday, Nov 19, 2008

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.

Daschle Nominated to Human Services Cabinet Post

By Helene Cooper
The New York Times
November 19, 2008

President-elect Barack Obama has offered the nomination of Secretary of Health and Human Services to Tom Daschle of South Dakota, the former Democratic Senate leader who was an early supporter of Mr. Obama’s run for the presidency.

Democratic officials said that Mr. Daschle has accepted the nomination.

Mr. Obama’s transition team announced on Wednesday that Mr. Daschle will also oversee Mr. Obama’s health policy working group to develop a health care plan, which could take care of what his friends say was one of Mr. Daschle’s conditions for considering the HHS post. He was concerned that he not just be the head of a huge bureaucracy but a chief player on the subject he has literally written a book on.

Mr. Daschle’s book about health policy “Critical: What We Can Do About the Health-Care Crisis” came out in February. In it he proposes creating a Federal Health Board, similar to the Federal Reserve System, and the merging of employers’ plans, Medicaid and Medicare with an expanded federal employee health benefits program that would provide universal coverage.

http://thecaucus.blogs.nytimes.com/2008/11/19/daschle-takes-human-services-cabinet-post/?hp

And…

Critical: What We Can Do About the Health-Care Crisis

By Senator Tom Daschle with Scott S. Greenberger and Jeanne M. Lambrew
Macmillan

Daschle’s solution lies in the Federal Reserve Board, which has overseen the equally complicated financial system with great success. A Fed-like health board would offer a public framework within which a private health-care system can operate more effectively and efficiently — insulated from political pressure yet accountable to elected officials and the American people. Daschle argues that this independent board would create a single standard of care and exert tremendous influence on every other provider and payer, even those in the private sector.

http://us.macmillan.com/critical

Today’s quote leads to a question: Can Sen. Daschle’s Federal Health Board do for the crisis in health care what the Federal Reserve Board has done for nation’s financial crisis?

Stay tuned.

The uninsured give but rarely receive transplants

Posted by on Tuesday, Nov 18, 2008

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.

Insurance Status of U.S. Organ Donors and Transplant Recipients: The Uninsured Give, but Rarely Receive

By Andrew A. Herring, Steffie Woolhandler, and David U. Himmelstein
International Journal of Health Services
Volume 38, Number 4

In September of 2005, one of us (Herring), then a third-year medical student, cared for a previously healthy 25-year-old uninsured day laborer who arrived at the emergency department with rapidly advancing idiopathic dilated cardiomyopathy. The patient was ultimately deemed unsuitable for cardiac transplantation. The decision on transplantation was driven, in part, by realistic concern about the patient’s inability to pay for long-term immunosuppressive therapy and to support himself during recovery. Absent such resources, the likelihood of a successful outcome is compromised. The clinicians caring for him faced a wrenching dilemma: deny the patient a transplant, or use a scarce organ for a patient with a reduced chance of success. He died of heart failure two weeks after his initial presentation. This tragedy inspired us to examine data on the participation of the uninsured in organ transplantation, both as recipients and as donors.

Abstract

Organ transplantation is an expensive, life-saving technology. Previous studies have found that few transplant recipients in the United States lack health insurance (in part because patients may become eligible for special coverage because of their disability and transplant teams vigorously advocate for their patients). Few data are available on the insurance status of U.S. organ donors. The authors analyzed the 2003 National Inpatient Sample (NIS), a nationally representative 20 percent sample of U.S. hospital stays, and identified incident organ donors and recipients using ICD-9-CM diagnosis and procedure codes. The NIS sample included 1,447 organ donors and 4,962 transplant recipients, equivalent after weighting to 6,517 donors and 23,656 recipients nationwide; 16.9 percent of organ donors but only 0.8 percent of transplant recipients were uninsured. In multivariate analysis, compared with other inpatients organ donors were much more likely to be uninsured (OR 3.41, 95% CI 2.81-4.15), whereas transplant recipients were less likely to lack coverage (OR 0.08, 95% CI 0.06-0.12). Many uninsured Americans donate organs, but they rarely receive them.

http://pnhp.org/organ_donors/Transplants.pdf

Because of the mismatch between the numbers of individuals who are candidates to receive organ transplants and the numbers of donors available, sometimes difficult decisions have to be made as to who will receive the transplants. As complex as these decisions are, it is a sad commentary that, in the United States, we add one additional complicating factor: Does the potential recipient have insurance?

It is reassuring to note that the dedicated transplant teams can sometimes break through this barrier through vigorous advocacy on behalf of their patients. But it is wrong that they should have to do that. And it is especially wrong that uninsured candidates may be unsuccessful in negotiating this barrier.

These life and death decisions are not based on a lack of money; we are already spending more than enough. Rather people are dying merely because of the way we allocate that money. A single payer national health program would remove money as a consideration and allow us to concentrate on the other moral and ethical factors that should determine who lives and who dies.

What a terrible decision to have to make. But let’s not make it based on ability to pay.

Aetna creates "Medical Home." Really?

Posted by on Monday, Nov 17, 2008

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.

Aetna and Partners in Care Test New Approach to Health Care Services

Aetna
News Release
November 13, 2008

New Model Creates a “Medical Home” for Patients that is Based on a Strong Primary Care Relationship and Close Coordination with Other Care Providers

Aetna (NYSE: AET) and Partners In Care, Corp. (PIC) today announced a pilot program to test an innovative new health care model that will make the health care system an easier place for patients. Called a “Patient-Centered Medical Home” the model emphasizes the role of the primary care physician (PCP) in managing and coordinating patient care across a range of care providers, including specialists and hospitals.

The Patient-Centered Medical Home concept of care has been under development since the mid-90s and is based on a patient having an ongoing relationship with a personal physician trained to provide first contact and continuous, comprehensive care. This personal physician leads a team of care providers at the practice level who collectively take responsibility for the ongoing care of patients, looking beyond the walls of their own office, and communicating with the patient’s other providers to assure the treatment plans are followed. The concept is designed to nurture and strengthen the relationship between the patient and physician.

“PIC sees its role as a physician organization as finding ways to support the practicing physicians in their effort to improve the overall quality of care provided to their patients, and by rewarding physicians for achieving national certification standards. This joint effort will have a significant impact,” said Kevin O’Brien, President & CEO, Partners In Care.

http://www.aetna.com/news/newsReleases/2008/1113_PICCorp.html

And…

Partners in Care, Corp.

Constituted as a for-profit, closely held, New Jersey corporation, the equity is held by seventy individual shareholders belonging to the United Medical Group (UMG).

Using the techniques developed under full-risk contract management, PIC has bundled patient health advocacy, managed care administration, and medical informatics into a series of customizable product and service lines. Our customer base includes individual physician practices, large physician organizations, mid-sized employers, health plans, and benefit consultants / brokers.

http://www.piccorp.com/aboutus.htm

Our very expensive but highly dysfunctional system of financing health care has resulted in serious deficiencies and neglect of the infrastructure of our health care delivery system. Foremost amongst these problems is the rapid deterioration of the primary care infrastructure.

It is not as if we have remained unaware of this very serious deficiency. In fact, the American Academy of Family Physicians, the American College of Physicians, the American Academy of Pediatrics, and the American Osteopathic Association have supported the medical home concept as a model for reinforcing primary care. The label is not important. What is important is the concept that everyone should have available a primary care entry point that improves access to coordinated, comprehensive health care services. This is not about gatekeepers. It’s about everyone receiving the health care that they need.

Our dysfunctional, fragmented, multi-payer and no payer system of financing health care has been incapable of realigning incentives and appropriately allocating resources to build and maintain the primary care structure that we need. We spend more money and we get less.

Don’t worry. Aetna, in partnership with Partners in Care, has usurped the “medical home” label to… provide us with a comprehensive primary care system? Well… No. On top of our flawed systems of financing and delivering care, they are adding “customizable product and service lines.” With our system already weighted down with an excess of egregiously wasteful administrative services, they are using the medical home label to sell us even more egregiously wasteful administrative services!

Uwe Reinhardt on why health care costs so much

Posted by on Friday, Nov 14, 2008

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

Why Does U.S. Health Care Cost So Much? (Part I)

By Uwe E. Reinhardt
The New York Times
November 14, 2008

The graph (available at the link below) tells a compact story of United States health spending relative to that of other nations.

Shown on the horizontal axis is the gross domestic product per capita in 2006. The vertical axis represents 2006 health spending per capita. The data points in the graph represent two dozen developed countries that are members of the Organization for Economic Cooperation and Development (O.E.C.D.).

The data are expressed in Purchasing Parity Dollars (PPP$). This metric is designed to adjust for cross-national differences in the purchasing power of national currencies relative to the real goods and services. One can think of PPP$s as dollars that buy roughly the same basket of real goods and services in different countries.

You’ll notice that there is enormous variation in health spending per capita in different countries within the O.E.C.D. But the graph also indicates that there exists a very strong relationship between the G.D.P. per capita of these countries (roughly a measure of ability to pay) and per-capita health spending.

Just knowing the G.D.P. per capita of nations helps us explain about 86 percent of the variation in how much different countries pay for health care for the average person. Canada, for example, on average spent only PPP$3,678 on health care per person in 2006, which is about 55 percent of the amount the United States paid per person. But Canada’s G.D.P. per capita in 2006 was also smaller than the comparable United States figure, although not that much smaller (it was 84 percent of the American level).

The line helps us estimate that roughly $1,141 of the $3,036 difference between Canadian and American health spending per capita — or 38 percent — can be explained by the underlying difference in G.D.P. per capita alone.

An additional insight from the graph, however, is that even after adjustment for differences in G.D.P. per capita, the United States in 2006 spent $1,895 more on health care than would have been predicted after such an adjustment. If G.D.P. per capita were the only factor driving the difference between United States health spending and that of other nations, the United States would be expected to have spent an average of only $4,819 per capita on health care rather than the $6,714 it actually spent.

Health-services researchers call the difference between these numbers, here $1,895, “excess spending.” That term, however, is not meant to convey “excessive spending,” but merely a difference driven by factors other than G.D.P. per capita. Prominent among these other factors are:

1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services;

2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems;

3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries;

4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative.

There are three other explanations that are widely — but erroneously — thought among non-experts to be cost drivers in the American health spending. To wit:

1. that the aging of our population drives health spending

2. that we get better quality from our health system than do other nations, and

3. that we get better health outcomes from our system

I will comment in more detail on factors that do and do not drive health spending in subsequent posts.

http://economix.blogs.nytimes.com/2008/11/14/why-does-us-health-care-cost-so-much-part-i/

Whoa. This one’s pretty heavy, but you really don’t have to understand Purchasing Parity Dollars and the other economic lingo to be able to understand the take-home message.

There is an important reason to present the economic data, and that is that we need to approach health care reform using highly credible factual data. Many individuals have an opinion as to why heath care costs in the United States are so high, but those views are often based on nothing more than hearsay, and often are incorrect. Reform must be based on solid facts.

So what is Prof. Reindardt’s take-home message? Although somewhat repetitive, it is worth emphasizing these points again.

What does NOT increase costs:

1. Living longer does NOT contribute significantly to health care costs. Most health care spending occurs near the end of life, and we are allocated only one death apiece. That spent on chronic diseases during the additional years of life expectancy is negligible when compared to end-of-life spending.

2. Higher quality of health care in the United States is NOT a cause of increased health care costs for the simple reason that the quality of our health care is quite mediocre, on average, when compared with other nations.

3. Better health outcomes are NOT a reason for higher health care costs simply because our outcomes are not better by most measures, and on several measures we are worse.

What DOES increase costs:

1. Nations with a high GDP have more money to spend on health care, and they spend it. (The graph in the original article demonstrates this point well. It also demonstrates that the United States is the single outlier of the two dozen nations, with much higher per capita spending than would be projected by our very high GDP.)

2. The United States pays higher prices for health care services and products than do other nations for the same services and products. This was demonstrated in the Health Affairs article, “It’s the Prices, Stupid.” Our dysfunctional system of financing health care has not been capable of optimizing prices (think of pharmaceuticals). We could do much better using negotiated pricing through a single financing system.

3. Our fragmented, multi-payer system has resulted in profound administrative waste, adding significantly to our high health care costs. Proposals to limit administrative costs of private insurers to 15 percent of their revenues will have very little impact since many are already at that level, and this limit will not provide any relief for the administrative burden that our multi-payer system has placed on the health care delivery system. Administrative savings would be possible only by adopting a simpler health insurance system.

4. Our costs are higher because of our greater use of expensive, high-tech services and equipment that all too often provides no benefit and may even be detrimental. We need to identify those services not providing value so that we can redirect our resources elsewhere (a complex but doable task).

5. Our American tort system has provoked the use of flat-of-the-curve defensive medicine that wastes resources, thereby increasing costs. How we should reform the tort system remains controversial, but it must be addressed.

6. The contraction of our primary care infrastructure has contributed indirectly to our high health care costs. Primary care environments provide quality care at a lower cost. Shifting health care access to specialized environments increases costs through some of the mechanisms listed above. Overuse of emergency departments is a problem because of the strain on the capacities of the system, but it is not much of a contributor to increased costs since the marginal costs of the additional load are quite small.

Everyone agrees that health care reform must address the high costs of health care. Most current proposals merely expand the way we are already paying for care without changes that will have any major impact on these cost drivers.

Instead of expanding our current dysfunctional financing system and then attempting to transform it into a social insurance model, it would be so much easier and much less expensive to simply replace it with a single payer national health program.

Lessons from the U.K.

Posted by on Thursday, Nov 13, 2008

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.

Lessons from the U.K.

By Martin Roland, D.M.
The New England Journal of Medicine
November 13, 2008

The United Kingdom takes the importance of primary care for granted. The U.K. government is effectively the country’s single payer, and successive administrations have been convinced by mounting evidence that primary care promotes high-quality, cost-effective, and equitable health care. If anything, the U.K. government has become more convinced over the past 15 years that strong primary care needs to be at the heart of the country’s health care system — quite the reverse of the situation in the United States. U.K. primary care physicians now have average earnings of $220,000 (in U.S. dollars), which is more than many specialists earn.

Having a single-payer system helps a great deal in terms of organizing quality-improvement activities.

U.K. primary care physicians increasingly work in multidisciplinary teams, with nurses taking on an increasing proportion of the work. Nurses see patients with minor illnesses and assume responsibility for the routine management of chronic diseases.

Having a single-payer system also means that U.K. primary care physicians hold each patient’s lifelong record, which includes a letter regarding every visit to a specialist. Virtually all primary care physicians use electronic medical records, and laboratories now generally download lab results directly into family practitioners’ computer systems. Again, the government took advantage of having a single-payer system to define common standards to which all suppliers of electronic medical records must adhere.

It is hard to discuss U.K. medical care without mentioning universal coverage. Although it may not be politically achievable in the United States, universal access to care is probably the key factor behind findings that U.K. citizens have better health outcomes than their U.S. counterparts despite having health care costs that are a fraction of those in the United States.

http://content.nejm.org/cgi/content/full/359/20/2087-b

What can we learn from the U.K.? Through a single payer system the U.K. has been able to build a strong primary care infrastructure with teams organized to provide high-quality coordinated care for everyone. They have done this at a fraction of the costs of U.S. health care, while compensating their primary care physicians very generously.

And how is the U.S. going to use this information? We are going to reject it because it is not a uniquely American solution. Instead, we are about to expand our dysfunctional, fragmented, wasteful, costly system of financing health care, simply because it is uniquely American!?

The U.K. system, like that of many other nations, uses their power as a monopsony to purchase much greater value in health care. The United States now wants to use our tax dollars as credits to help us purchase individual plans that do not cooperate but compete. That competition not only results in tremendous administrative waste, it also destroys any prospect of creating an effective monopsony.

So we are going to tax ourselves to provide even more funds to our unique, corporate-model private insurers to allow them to burn up more resources while establishing a barrier to much needed delivery system reform (a barrier because the financing is fragmented).

We do have a very weak monopsony in the form of Medicare. Can’t we learn lessons from Medicare, and then project the improvements that we could make if it were converted into a strong monopsony? Maybe as a single payer that wouldn’t be uniquely American, but couldn’t we pretend it is until we achieve the structural reform that we desperately need?

Reform proposal of Sen. Baucus

Posted by on Wednesday, Nov 12, 2008

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.

Senator Takes Initiative on Health Care

By Robert Pear
The New york Times
November 11, 2008

Without waiting for President-elect Barack Obama, Senator Max Baucus, the chairman of the Finance Committee, will unveil a detailed blueprint on Wednesday to guarantee health insurance for all Americans by facilitating sales of private insurance, expanding Medicaid and Medicare, and requiring most employers to provide or pay for health benefits.

… would eventually require everyone to have health insurance coverage, with federal subsidies for those who could not otherwise afford it.

… broadly compatible with Mr. Obama’s campaign promises. But Mr. Baucus’s 35,000-word plan would go further than Mr. Obama’s in one respect, eventually requiring all people — not just children — to have coverage.

… create a nationwide marketplace, a “health insurance exchange,” where people could compare and buy insurance policies. The options would include private insurance policies and a new public plan similar to Medicare.

Insurers could no longer deny coverage to people who had been sick. Congress would also limit insurers’ ability to charge higher premiums because of a person’s age or prior illness.

People would have a duty to obtain coverage when affordable options were available to all through employers or through the insurance exchange. This obligation “would be enforced, possibly through the tax system,” the plan says.

People age 55 to 64 should be able to buy Medicare coverage if they do not have access to a public insurance program or a group health plan.

Medicaid would be available to everyone below the poverty level…

The State Children’s Health Insurance Program would be expanded to cover all uninsured youngsters in families with incomes at or below 250 percent of the poverty level …

He would offer tax credits to small businesses to help them defray the costs of providing health benefits to employees.

To make insurance more affordable for those who buy coverage on their own, Mr. Baucus would offer tax credits to individuals and families with incomes at or below four times the poverty level…

http://www.nytimes.com/2008/11/12/washington/12health.html

And…

Call to Action, Health Reform 2009

Senator Max Baucus, Chairman, Senate Finance Committee
November 12, 2008

Individual Responsibility

Once affordable, high-quality, and meaningful health insurance options are available to all Americans, it will be each individual’s responsibility to have coverage. This step is necessary to make the entire health care system function properly.

Premium Subsidies

In order to make health coverage affordable for all Americans, refundable tax credits would be available to individuals and families with incomes at or below four times the Federal poverty level. These tax subsidies would be available to individuals and families who purchased coverage through the Health Insurance Exchange. The Independent Health Coverage Council would define what an “affordable” premium is, taking into account the reasonable percent of income to be spent on health care coverage. The premium subsidy would make up the difference between the amount suggested by the Council and the premium amount charged by the plan. The amount of the subsidy could be based on a benchmark that would be equal to a locally adjusted, average premium in the Exchange. This construct would encourage individuals to be prudent purchasers of health care policies.

Conclusion

Each of the key challenges facing our health care system — lack of access to care, the cost of care, and the need for better-quality care — must be addressed in concert. Covering millions of uninsured through a broken health system will be fiscally unsustainable. Attempting to address the inefficiencies plaguing our system and the perverse incentives in the delivery system without covering the uninsured will fail to alleviate the burden of uncompensated care and cost shifting. The time for incremental improvements has passed; health care reform must be comprehensive in scope.

This Call to Action provides a starting point for the upcoming health care reform debate. It is a vision and not a legislative proposal. It is comprehensive but not an exhaustive exploration of every health care issue that can or should be considered.

The next crucial step is a constructive dialog on policy priorities among policymakers, stakeholders, health policy thought leaders and the public. Consensus will be difficult to achieve, but common ground from which to build can and must be found.

Call to Action, Health Reform 2009 (98 pages):
http://finance.senate.gov/healthreform2009/finalwhitepaper.pdf

And…

2009 Health Reform Plan

Sen. Max Baucus
C-SPAN
November 12, 2008
News Conference

Sen. Baucus: “Some people suggest the United States should have a single payer system. I disagree. I don’t think a single payer system makes sense in this country.”

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=282373-1

As the powerful chairman of the Senate Finance Committee, and as a person passionately dedicated to comprehensive health care reform, we need to listen to what Sen. Max Baucus has to say. “Call to Action, Health Reform 2009” is his white paper describing serious problems with our health care system, and includes a collection of legislative proposals to address those problems. It is an important report because it does represent what seems to be the prevailing views in Washington, D.C. on the direction for reform.

There are many valuable recommendations in this report. Some of them should be enacted soon as possible as urgent measures to hold us over while we are pressing forward with comprehensive reform. Others can be enacted independently of the comprehensive legislative package. But some represent flawed policy concepts and should never be enacted.

Only one of the major flaws will be touched on here: the mandate for individuals to purchase their own health plans should they not be covered under their employers’ plans.

Under this proposal, a family of four will have to fully fund their own coverage if their income is over $84,800 (four times the poverty level). According to the 2008 Milliman Medical Index, a family of four is already paying an average of $15,600 for health care. That means that this family would be paying over 18 percent of their income for health care. Since this is average, many families would be paying a much higher percentage.

Many in the policy community believe that health care expenditures over 10 percent of income expose individuals or families to the potential of financial hardship. To keep expenditures at 10 percent, a family of four with average medical expenses would require an income over $156,000. Those with above average expenses would require even greater incomes.

Financing health care with private health plans no longer makes sense. We need a single universal risk pool that is funded equitably using progressive tax policies. Sen. Baucus says that he doesn’t think that a single payer system makes sense in this country, but it’s the only system that does.

Medical group challenge of getting paid

Posted by on Tuesday, Nov 11, 2008

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.

Bottom line blues

By Karen Caffarini
American Medical News
November 17, 2008

Medical Group Management Assn. members were asked to name the tasks their practices found most challenging.

50.1% Collect from self-pay, high deductible and/or health savings account patients

28.7% Collect from commercial payers

14.5% Collect from Medicare

http://www.ama-assn.org/amednews/2008/11/17/bisa1117.htm

Medical groups certainly have many challenges, but one of the more important is getting paid. This survey of Medical Group Management Association members provides some important lessons.

Twice as many groups found that collecting from private health insurers was very challenging compared to the challenge of collecting from Medicare. This is not a surprise. Previous studies have confirmed that private insurers do place a significant administrative burden on the health care delivery system. It is difficult to comply with the various rules and procedures of a multitude of private plans, especially when those plans use innovative methods to delay (work the float) or avoid altogether paying claims for legitimate services.

Medicare does contribute to a lesser degree to this burden. Medicare is much more consistent in applying their rules, and they do not engage in behavior designed to avoid paying for services rendered in good faith. But Medicare does add to the complexity by using rules and administrative procedures that differ from those of the private plans. If Medicare were the only payer, the one set of rules designed to pay for legitimate services would greatly simplify the process for the providers of health care.

Much has been written about how out-of-pocket expenses have impaired access to beneficial health care products and services. Although cost sharing has caused some patients to decline services that they perceive to be of marginal value, many have also declined services that they know they should have. Many in the policy community oppose cost sharing because it is a blunt instrument that impairs access, and because it has only a negligible impact on our total health care spending.

This survey reveals another problem with patient cost sharing. Medical groups have found that collecting the patients’ share of the payments has been even more challenging. About twice as many groups find that this is a challenge compared to that of collecting from private insurers, and almost four times as many as that of collecting from Medicare. Cost sharing represents another excessive, inappropriate administrative burden placed on the health care delivery system.

The solution? A single payer national health program. (Yes, this is repetitive, but isn’t anyone listening?)

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