NORC poll shows affording health care remains a serious problem

Posted by on Tuesday, Mar 27, 2018

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.

Americans’ Views of Healthcare Costs, Coverage, and Policy

West Health Institute, NORC at the University of Chicago, March 2018

Five Things You Should Know

1) Three quarters of Americans say that our country doesn’t get good value for what we spend on healthcare.

2) Forty percent say they skipped a recommended medical test or treatment in the last 12 months due to cost, and 32 percent were unable to fill a prescription or took less of it because of its cost.

3) Four in 10 say they fear the costs associated with a serious illness, which is more than the number who say they fear the illness itself.

4) Over half of Americans say they received a medical bill they thought was covered by insurance or where the amount they owed was higher than expected, and more than a quarter say they had a medical bill turned over to a collection agency in the past 12 months.

5) About half of Americans disapprove of the way their representative in Congress is handling the cost of healthcare.


Americans’ support for a single payer healthcare system has increased from 2017 to 2018.

In February 2018, 46 percent of Americans strongly or somewhat favored a single payer healthcare system, compared to 38 percent who said the same in an AP-NORC poll conducted in January 2017. Opposition to single payer has decreased during the same period, to 28 percent in 2018 from 39 percent in 2017. The number who say they neither favor nor oppose has remained steady in 2018 compared to 2017 (24 percent vs. 22 percent).

Americans who say they have experienced significant financial consequences due to healthcare costs are slightly more likely to favor a single payer system (50 percent vs. 41 percent). Employed adults are more likely to favor single payer healthcare (52 percent vs. 38 percent), as are Democrats compared with independents or Republicans (62 percent vs. 35 percent and 29 percent). On the other hand, blacks are more likely to oppose single payer than Hispanics (29 percent vs. 18 percent).…

This new NORC poll confirms once again that our health care financing system is failing too many Americans, with 40 percent saying they skipped a recommended medical test or treatment in the last 12 months due to cost. In fact, the financial barriers are so great that more fear the costs associated with a major illness than fear the illness itself.

Although this poll does not show quite as much support for single payer as do most other polls, it does show that more individuals support single payer than oppose it and that support has increased in the past year while the opposition has decreased.

The most common reason given for continued opposition to single payer is that it would be disruptive to the dominant coverage in the United States – employer-sponsored health plans. Yet this poll shows that employed adults are more likely to favor single payer (52 percent favor vs. 38 percent oppose).

We still have more educating to do, but this poll shows that we’re certainly headed in the right direction.

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Documentation of why ‘volume to value’ is failing us

Posted by on Monday, Mar 26, 2018

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.

Transformation of the Health Care Industry: Curb Your Enthusiasm?

By Lawton R. Burns and Mark V. Pauly
The Milbank Quarterly, March 5, 2018

Policy Points

* Policymakers seek to transform the US health care system along two dimensions simultaneously: alternative payment models and new models of provider organization.

* This transformation is supposed to transfer risk to providers and make them more accountable for health care costs and quality.

* The transformation in payment and provider organization is neither happening quickly nor shifting risk to providers. The impact on health care cost and quality is also weak or nonexistent.

* In the longer run, decision makers should be prepared to accept the limits on transformation and carefully consider whether to advocate solutions not yet supported by evidence.



There is a widespread belief that the US health care system needs to move “from volume to value.” This transformation to value (eg, quality divided by cost) is conceptualized as a two‐fold movement: (1) from fee‐for‐service to alternative payment models; and (2) from solo practice and freestanding hospitals to medical homes, accountable care organizations, large hospital systems, and organized clinics like Kaiser Permanente.


We evaluate whether this transformation is happening quickly, shifting risk to providers, lowering costs, and improving quality. We draw on recent evidence on provider payment and organization and their effects on cost and quality.


Data suggest a low prevalence of provider risk payment models and slow movement toward new payment and organizational models. Evidence suggests the impact of both on cost and quality is weak.


We need to be patient in expecting system improvements from ongoing changes in provider payment and organization. We also may need to look for improvements in other areas of the economy or to accept and accommodate prospects of modest improvements over time.

From the Conclusion

In conclusion, analysts and advocates may need to come to terms with the likelihood that the triple aim cannot be achieved over the long term. Rising real incomes for consumers and technical progress in discovering health‐improving but cost‐increasing new technologies may mean that cutting spending growth rates much further is not a practical goal. We may need to have more realistic expectations that, for example, the kind of high‐value but cost‐increasing care that led to dramatic improvements in cardiovascular health may be the best we can expect, and along with these improvements we should expect continuation of spending growth at an uncomfortable but not breakaway pace.

The transformation from “volume to value” in health care at this point appears to be driven more by ideology and aspiration than by evidence. To date, APMs show limited improvements in quality and even more limited reduction in costs. If improving quality does not consistently lead to lower costs but only to better health outcomes, we need to rethink the triple aim, tolerate a time when we get more health than wealth, and continue to search for other undiscovered strategies of cost containment.…

This well researched analysis (182 references!) reveals that all of the attention given to transforming our health care system from “volume to value” is misguided primarily because it is driven by ideology and aspiration rather than by evidence.

The data we do have on accountable care organizations (ACOs) and alternative payment models (APMs) have thus far failed to show greater accountability through risk transfer to providers, and thus there has been only a negligible impact on health care cost and quality. New models of provider organization through vertical and horizontal integration have failed to provide significant improvements in the triple aim (care, health and cost).

The reason this failure is so important to understand is that the attention of policymakers, politicians, and the industry has been diverted to these ineffective but intrusive, administratively wasteful, and sometimes expensive interventions while ignoring proven policies that not only would improve quality and control costs but would also address other important goals of reform that are being neglected such as universality, accessibility, efficiency, and equity. Of course, those goals would be achieved by enacting and implementing a well designed single payer national health program – an improved Medicare for all – though the authors of this article do not venture there.

The publisher has allowed free access to this article. Although long (53 pages) it is worth downloading (at least the link) to use as an explanation to incrementalists and others of just why the the misguided campaign for volume to value needs to be set aside so that we can move forward with proven policies that will ensure quality health care for everyone.

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When competition isn’t working, FDA’s Gottlieb recommends more competition

Posted by on Friday, Mar 23, 2018

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.

Capturing the Benefits of Competition for Patients

Speech by Scott Gottlieb, M.D., Commissioner of Food and Drugs
America’s Health Insurance Plans’ (AHIP) National Health Policy Conference, March 7, 2018


Congress has charged FDA with advancing policies that maintain a balance between encouraging and rewarding medical innovation and facilitating robust and timely market competition.

I want to focus my remarks today on access to generic and other follow-on medicines and, in particular, on the market for biosimilars – or follow on versions of branded, innovator biologics.

I firmly believe in the importance of market based incentives that encourage continued entrepreneurship, investment and risk taking – all leading to the discovery and costly development of new medicines.

At the same time, robust competition expands patient access to more affordable products like generics and biosimilars.

I’m concerned about that balance today. Because while we see a growing number of sponsors pursuing biosimilar development programs, the economics of development are currently unstable; and the pipeline of biosimilar products that we hope for could be dramatically affected by the weakening of market incentives to bring these products to patients.

In competitive insurance markets, savings from the competition between branded drugs, generics, biologics, and biosimilars should be passed along to patients, employers, and payors.

But I’m concerned that, in some cases, this isn’t the way markets are operating today.

Current rebating and contracting practices — combined with the increased consolidation that we’re seeing in many segments of the drug supply chain — has produced some misaligned incentives.

The top three PBMs control more than two-thirds of the market; the top three wholesalers more than 80%; and the top five pharmacies more than 50%. Market concentration may prevent optimal competition. And so the saving may not always be passed along to employers or consumers.

Too often, we see situations where consolidated firms — the PBMs, the distributors, and the drug stores — team up with payors. They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers.

In the long run, the interests of patients, providers, and manufacturers are not well served by these arrangements, precisely because these practices encourage large list price increases to fuel the pricing schemes.

And so, we continue to see a backlash against these Kabuki drug-pricing constructs — constructs that obscure profit taking across the supply chain that drives up costs; that expose consumers to high out of pocket spending; and that actively discourage competition.

Patients shouldn’t be penalized by their biology if they need a drug that isn’t on formulary. Patients shouldn’t face exorbitant out of pocket costs, and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries, or is used to buy down the premium costs for everyone else. After all, what’s the point of a big co-pay on a costly cancer drug? Is a patient really in a position to make an economically-based decision? Is the co-pay going to discourage overutilization? Is someone in this situation voluntary seeking chemo?

Of course not. Yet the big co-pay or rebate on the costly drug can help offset insurers’ payments to the pharmacy, and reduce average insurance premiums. But sick people aren’t supposed to be subsidizing the healthy.

That’s exactly the opposite of what most people thought they were buying when they bought into the notion of having insurance.

Now I understand that there’s a perverse incentive to use that rebated money to lower premium costs, since most health plans compete on the sticker cost of their premiums. But we’re living in a world where financial toxicity is a real concern for patients. And every member of the drug supply chain needs to take responsibility for addressing it.

Bringing more drug competition to the market, and addressing the high cost of medicines, is a top priority of the Administration and of the Secretary of Health and Human Services.

And we’re working closely with Secretary Alex Azar on crafting policy options that can improve competition, access, and the chance for patients to benefit from safe, effective, and lower cost biosimilar alternatives.

Currently, PBMs and insurers profit from the spread between Wholesale Acquisition Cost (WAC) and the actual rebated price.  These rebates can amount to tens or hundreds of million dollars in annual PBM revenues.

Manufacturers typically tie these rebates to volume, or having a health plan maintain a drug on a preferred formulary status. So, if a health plan puts a biosimilar in that preferred formulary position, the plan might lose the rebates on their entire volume of the innovator biologic.

Here’s the rub.

When biosimilars launch, their initial discount is typically on the order of 15% or 20%. And unless the plan can switch all their patients over to the biosimilar, the cost of the lost rebates on the patients who remain on the original biologic won’t be offset by value of the discount on the biosimilar, and the smaller number of patients who are started on it.

This is especially true since the number of patients who’ll immediately migrate to biosimilar therapy is likely to be small, making it difficult for biosimilar sponsors to launch with deep, volume-based rebates.

This means that PBMs have a significant financial incentive to limit the uptake of biosimilars to continue the flow of large rebate payments.

And health plans have a big disincentive to switch to the biosimilar, and lose the incumbent rebates paid on the innovator biologic.

Everybody wins. The health plans get the big rebates. The PBMs get paid on these spreads. And branded sponsors hold onto market share.

Everyone that is, but the patients, who in the long run, don’t benefit from the full value of increased competition Congress intended.

I truly believe that we’re in the midst of an epoch of medical innovation.

The impact of the innovations we’re laying claim to will be comparable to the introduction of antibiotics in the mid-20th Century.

But patient access to these innovations will depend on reforms that require every incumbent in the drug supply chain to take greater restraint for putting patients at the heart of their decision-making process.

It will depend on steps we take, working together, to empower market competition based on delivering the best clinical outcomes. Doing this with the long run in mind. And patient care at the heart of what we do.

We’re not there today.

Instead, we have a lot of finger pointing that ignores shared complicity for pricing practices that are eroding trust in both payors and innovators.…

FDA Commissioner Scott Gottlieb, in this address to AHIP, the insurance lobby organization, explains how the pharmaceutical industry and especially the middlemen intermediaries are benefiting greatly from our supposedly market based system of financing drugs. But while the industry prospers, patients are ending up on the short end.

Clearly market competition is not working to benefit the patient-consumer. So Dr. Gottlieb says, “patient access to these innovations will depend on reforms that require every incumbent in the drug supply chain to take greater restraint for putting patients at the heart of their decision-making process.”

But that is not the way markets work. They do not put patients at the heart of their decision making. They do not volunteer to place restraints on their profits. Profits are what drive businesses, and prices tend to be set at what the market will bear.

Yet Gottlieb says that we must work together “to empower market competition.” No, in health care that does not work. Instead we need to empower our own government to distribute our resources based on patient need. The most effective, efficient and equitable way to do that would be to enact and implement an improved Medicare for all. The sooner the better.

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The myth that medical bankruptcies are rare

Posted by on Thursday, Mar 22, 2018

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.

Myth and Measurement — The Case of Medical Bankruptcies

By Carlos Dobkin, Ph.D., Amy Finkelstein, Ph.D., Raymond Kluender, B.S., and Matthew J. Notowidigdo, Ph.D.
The New England Journal of Medicine, March 22, 2018

During the push to pass the Affordable Care Act, President Barack Obama often described the “crushing cost of health care” that was causing millions of Americans to “live every day just one accident or illness away from bankruptcy” and repeatedly stated that the high cost of health care “causes a bankruptcy in America every 30 seconds.” Stories of illnesses and injuries with financial consequences so severe that they caused households to file for bankruptcy were used as a major argument in support of the 2010 Affordable Care Act. And in 2014, Senators Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) cited medical bills as “the leading cause of personal bankruptcy” when introducing the Medical Bankruptcy Fairness Act, which would have made the bankruptcy process more forgiving for “medically distressed debtors.” But it turns out that the existing evidence for “medical bankruptcies” suffers from a basic statistical fallacy; when we eliminated this problem, we found compelling evidence of the existence of medical bankruptcies but discovered that medical expenses cause many fewer bankruptcies than has been claimed.

Policymakers’ beliefs about the frequency of medical bankruptcies are based primarily on two high-profile articles that claim that medical events cause approximately 60% of all bankruptcies in the United States. In these studies, people who had gone bankrupt were asked whether they’d experienced health-related financial stress such as substantial medical bills or income loss due to illness. People were also asked whether they went bankrupt because of medical bills. People who reported any of these events were described as having experienced a medical bankruptcy. This approach assumes that whenever a person who reports having substantial medical bills experiences a bankruptcy, the bankruptcy was caused by the medical debt. The fact that, according to a 2014 report from the Consumer Financial Protection Bureau, about 20% of Americans have substantial medical debt, yet in a given year less than 1% of Americans file for personal bankruptcy, suggests that this assumption is problematic. Clearly, many people face medical debt but do not go bankrupt. Even after correction for overly broad definitions of “medical” expenses, the existing, widely cited evidence on medical bankruptcy is built on the fallacy that when two things occur together there is necessarily a causal relationship between them.

To understand the problem, consider an analogous line of inquiry: suppose we want to know which factors increase a person’s chances of becoming a technology billionaire. Investigation of recent technology giants might suggest that dropping out of college is a high-return strategy (think: Bill Gates, Steve Jobs, and Mark Zuckerberg [dropping out of Harvard seems to have a particularly high payoff]). By examining only college dropouts who have already became technology billionaires rather than all college dropouts, this analysis misses the fact that most college dropouts do not go on to lucrative careers in the tech business. A similar problem pervades the current literature on medical bankruptcy. The studies mentioned above examine the experiences only of people who went bankrupt, but it is impossible to infer the role of medical expenses in causing bankruptcy without information on the proportion of the population with large medical expenses that did not go bankrupt.

To estimate the share of bankruptcies actually caused by medical factors, we therefore selected a sample of people who were admitted to the hospital in California and tracked information on their annual credit reports, including whether and when they filed for bankruptcy. Because we examined the relationship between when people go to the hospital and the timing of any bankruptcy, we were able to estimate the increase in bankruptcy filings caused by illness or injury, rather than the fraction of people filing for bankruptcy who happen to have substantial medical expenses.

Our study was based on a random stratified sample of adults 25 to 64 years of age who, between 2003 and 2007, were admitted to the hospital (for a non–pregnancy-related stay) for the first time in at least 3 years. We linked more than half a million such people to their detailed credit-report records for each year from the period 2002–2011.

The results show a clear effect of hospital admission on bankruptcy: the rate of bankruptcies rises sharply in the years after hospital admission, and this change is statistically significant (at conventional levels) both 1 and 4 years after the admission, after which bankruptcies appear to level off. This finding indicates that the expenses that result from the illness or injury that caused the hospital admission — for example, out-of-pocket medical costs and lost labor income — cause some people to file for bankruptcy. However, the magnitude of the bankruptcy effect is much smaller than previously thought: we estimate that hospitalizations cause only 4% of personal bankruptcies among nonelderly U.S. adults, which is an order of magnitude smaller than the previous estimates described above.

Of course, these results do not cover all potential medical bankruptcies. They do not consider hospitalizations for children or for the elderly — although in other work we found that hospitalizations have no effect on bankruptcy rates among the elderly. Our results are also specific to our population — people in California hospitalized for non–childbirth-related conditions who have not had a hospital admission in the previous 3 years (although they may, and often do, have additional admissions over the subsequent years).

Perhaps most obviously, our analysis excludes illness and injuries that do not result in a hospital admission. However, our sample of hospitalized people is likely to include most people with large medical expenses: in the Medical Expenditure Panel Survey, we estimated that about 63% of people in the top 5% of annual medical spending (at least $8,433) had had a hospitalization in that year. This finding suggests that focusing on hospitalized people probably does not lead to vast underestimation of the effect of all illness and injury on bankruptcy rates.

Our results also do not speak to the financial costs of hospital admissions outside the bankruptcy-filing decision. We have found that hospitalizations cause increased out-of-pocket spending on medical care, increased medical debt, and decreased employment and income. These costs may have considerable adverse consequences, and evidence from the Oregon Health Insurance Experiment indicates that they can be partially ameliorated by health insurance. But our findings suggest that medical factors play a much smaller role in causing U.S. bankruptcies than has previously been claimed. Overemphasizing “medical bankruptcies” may distract from an understanding of the true nature of economic hardship arising from high-cost health problems.…


The Economic Consequences of Hospital Admissions

By Carlos Dobkin, Amy Finkelstein, Raymond Kluender, and Matthew J. Notowidigdo
The American Economic Review, February 2018


We use an event study approach to examine the economic consequences of hospital admissions for adults in two datasets: survey data from the Health and Retirement Study, and hospitalization data linked to credit reports. For non-elderly adults with health insurance, hospital admissions increase out-of-pocket medical spending, unpaid medical bills and bankruptcy, and reduce earnings, income, access to credit and consumer borrowing. The earnings decline is substantial compared to the out-of-pocket spending increase, and is minimally insured prior to age-eligibility for Social Security Retirement Income. Relative to the insured non-elderly, the uninsured non-elderly experience much larger increases in unpaid medical bills and bankruptcy rates following a hospital admission. Hospital admissions trigger less than 5 percent of all bankruptcies.…


Illness And Injury As Contributors To Bankruptcy

By David U. Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler
Health Affairs, February 2, 2005


In 2001, 1.458 million American families filed for bankruptcy. To investigate medical contributors to bankruptcy, we surveyed 1,771 personal bankruptcy filers in five federal courts and subsequently completed in-depth interviews with 931 of them. About half cited medical causes, which indicates that 1.9–2.2 million Americans (filers plus dependents) experienced medical bankruptcy. Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness. Medical debtors were 42 percent more likely than other debtors to experience lapses in coverage. Even middle-class insured families often fall prey to financial catastrophe when sick.

From the Discussion

Only broad reforms can address these problems. Even universal coverage could leave many Americans vulnerable to bankruptcy unless such coverage was much more comprehensive than many current policies. As in Canada and most of western Europe, health insurance should be divorced from employment to avoid coverage disruptions at the time of illness. Insurance policies should incorporate comprehensive stop-loss provisions, closing coverage loopholes that expose insured families to unaffordable out-of-pocket costs. Additionally, improved programs are needed to replace breadwinners’ incomes when they are disabled or must care for a loved one.…


Medical Bankruptcy in the United States, 2007: Results of a National Study

By David U. Himmelstein, M.D., Deborah Thorne, Ph.D., Elizabeth Warren, J.D., Steffie Woolhandler, M.D., M.P.H.
The American Journal of Medicine, August 2009


BACKGROUND: Our 2001 study in 5 states found that medical problems contributed to at least 46.2% of all bankruptcies. Since then, health costs and the numbers of un- and underinsured have increased, and bankruptcy laws have tightened.

METHODS: We surveyed a random national sample of 2314 bankruptcy filers in 2007, abstracted their court records, and interviewed 1032 of them. We designated bankruptcies as “medical” based on debtors’ stated reasons for filing, income loss due to illness, and the magnitude of their medical debts.

RESULTS: Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.

CONCLUSIONS: Illness and medical bills contribute to a large and increasing share of US bankruptcies.

From the Discussion

Medical impoverishment, although common in poor nations, is almost unheard of in wealthy countries other than the US. Most provide a stronger safety net of disability income support. All have some form of national health insurance.

The US health care financing system is broken, and not only for the poor and uninsured. Middle-class families frequently collapse under the strain of a health care system that treats physical wounds, but often inflicts fiscal ones.…


Getting Sick Can Be Really Expensive, Even for the Insured

By Margot Sanger-Katz
The New York Times, March 21, 2018

When you get really sick, the medical bills may not be your biggest financial shock.

New research shows that for a substantial fraction of Americans, a trip to the hospital can mean a permanent reduction in income. Some people bounce right back, but many never work as much again. On average, people in their 50s who are admitted to the hospital will experience a 20 percent drop in income that persists for years. Over all, income losses dwarfed the direct costs of medical care.

The authors of the paper, published in The American Economic Review, were surprised by how often an illness or injury could upend the finances of Americans with health insurance.

“I had sort of  assumed that if they had health insurance, then they had economic protections against health shocks,” said Amy Finkelstein, an economist at M.I.T. and an author of the paper.  “I hadn’t thought about the idea that even with the best gold-plated, fancy health insurance, you could still have a lot of economic risk.”

The researchers focused on hospitalization because it’s one of the easiest ways to pinpoint when a person’s health declines substantially.

But the costs of illness are not always limited to medical bills. Being sick can make it hard to work. Though people who had insurance were better protected from hospital bills than people who were uninsured, both groups faced a substantial risk that they would lose income, and a substantially increased chance that they would declare bankruptcy after leaving the hospital.

To the authors, the lesson of the paper is that standard health insurance isn’t enough — policymakers need to think about ways to better protect people against the income risks that accompany illness.

David Himmelstein, a professor of public health at Hunter College, was the co-author of a much-cited paper estimating that medical problems were responsible for a large proportion of American bankruptcies. (Another co-author was the Harvard Law professor Elizabeth Warren, now a Massachusetts senator.) Dr. Himmelstein said, based on his research and his experience as a physician, that he wasn’t surprised to see how lost work was contributing to the financial travails of the sick. His original paper called not just for health insurance, but also for disability insurance.

“It’s why when we wrote about this we titled our paper ‘illness and injury’ as a cause of bankruptcy, not ‘medical expenses’ as a cause of bankruptcy,”  he said.…



By David Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.

The NEJM commentary (and the longer NBER paper on which the commentary is based) use slanted statistics based on unsupportable assumptions to reach a wrong conclusion.

The authors’ whole estimate rests on four incorrect assumptions:

Faulty Assumption 1 – That illness starts at the moment of an initial hospitalization. Dobkin et al’s own data strongly suggests that this is not true, since the bankruptcy filing rates were already climbing in the three years prior to the initial hospitalization. This incorrect assumption would cause them to substantially underestimate the true medical bankruptcy rate of hospitalized persons.

Faulty Assumption 2 – That people with a hospitalization within the three years prior to the period they looked at have the same medical bankruptcy rate as those with no prior hospitalizations. In essence, their study leaves out most people with very frequent hospitalizations – the sickest group and probably a group at high risk of medical bankruptcy.

Faulty Assumption 3 – That people who were not hospitalized are at no risk of medical bankruptcy. They justify this assumption by citing data that most high COST patients are hospitalized. While that is true, people who are hospitalized during the year account for less than 20% of total out-of-pocket spending. So their study assumes that non-hospitalized people (who incur more than 80% of out-of-pocket costs) do not experience medical bankruptcy.

Faulty Assumption 4 – That overall bankruptcy rates were stable during the study period. In fact, a major bankruptcy reform occurred midway through their data collection period, the 2005 BAPCA law. BAPCA was designed to reduce debtors’ access to bankruptcy courts, and caused a dramatic dip in bankruptcy filings. This would tend to reduce bankruptcies in the period after hospitalization (relative to the pre-hospitalization baseline) and cause them to underestimate the bankrupting effects of illness.

Although our health care financing system is the most expensive in the world it all too often has failed to prevent financial hardship in the face of medical need. Insured or not, patients often face onerous medical bills compounded by reduction in income due to their illness or injury.

In their original landmark article, “Illness And Injury As Contributors To Bankruptcy,” David Himmelstein and his colleagues stated, “Insurance policies should incorporate comprehensive stop-loss provisions, closing coverage loopholes that expose insured families to unaffordable out-of-pocket costs. Additionally, improved programs are needed to replace breadwinners’ incomes when they are disabled or must care for a loved one.”

There is no question that medical debt, including loss of income due to injury or illness, has been a major contributor to personal bankruptcy, though usually not the sole cause. Without medical debt and disability, many would have avoided the formality of bankruptcy, and thus the label of “medical bankruptcy” is appropriate. Regardless of labels, the $3.3 trillion we are spending on health care is not preventing financial hardship for too many of those with medical needs. We clearly need a better method of financing health care – a single payer national health program, aka Improved Medicare for All – plus better financial support systems for disability and unemployment due to medical causes.

Carlos Dobkin and his colleagues have published an article concurring with the problem of financial hardship for a selected set of individuals requiring hospitalization, emphasizing the great burden of loss of income in association with those illnesses or injuries. In their original paper they challenge the studies demonstrating the high prevalence of medical bankruptcy by concluding, “Hospital admissions trigger less than 5 percent of all bankruptcies.”

Yet in the New York Times article co-author Amy Finkelstein states, “I had sort of  assumed that if they had health insurance, then they had economic protections against health shocks. I hadn’t thought about the idea that even with the best gold-plated, fancy health insurance, you could still have a lot of economic risk.” So medical need and financial hardship clearly do go hand in hand here in the United States.

What is more difficult to understand is why they use their study of selected hospitalizations to try to dismiss the concept of medical bankruptcy when they recognize what a problem medical debt is.

Further, in their comment above, David Himmelstein and Steffie Woolhandler explain why peculiarities – faulty assumptions – of the Dobkin study extrapolated an underestimate of the prevalence of medical bankruptcies. Dobkin et al are right in their emphasis on loss of income associated with large medical expenses, but they are wrong to be dismissive of medical bankruptcy.

The primary reason for this long message is that Carlos Dobkin and his colleagues now apparently feel compelled to publish an article in The New England Journal of Medicine titled, “Myth and Measurement — The Case of Medical Bankruptcies.” Though acknowledging the tremendous burden of medical debt, they state, “Overemphasizing ‘medical bankruptcies’ may distract from an understanding of the true nature of economic hardship arising from high-cost health problems.” What? Economic hardship is economic hardship.

The problem with their NEJM article is that we are going to hear over and over again from the opponents of comprehensive reform the statement, “MEDICAL BANKRUPTCY IS A MYTH.”

What does that contribute to the cause? Do they contend that their spuriously low number indicating hospitalizations cause 5 percent of bankruptcies is a perfectly acceptable consequence of our dysfunctional health care financing system? Why did they do this? Extrapolating, do they think that they really made a case for rejecting an improved Medicare for all? They didn’t. They just helped to make the case for it while pouring more poisonous rhetoric onto the fire.

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High US drug prices are not due to other nations’ free riding

Posted by on Wednesday, Mar 21, 2018

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.

Trump blames free riding foreign states for high US drug prices

By Donald W Light, Arthur L Caplan
BMJ, March 16, 2018

Why are drug prices in the US so high? In a recent and long awaited white paper, the US Council of Economic Advisers provides erroneous answers to a problem that is threatening household, state, and national budgets.

The advisers tell the White House and Congress that other affluent countries in the Organisation for Economic Cooperation and Development (OECD) force drug companies to overcharge Americans because “centralized pricing” in these countries sets prices so low that they act as “foreign free riders,” who allegedly fail to pay for the cost of research and development. As explained in The BMJ years ago and updated here, industry leaders, the US trade association for pharmaceuticals, and the commissioner of the FDA made this claim in the early 2000s to redirect widespread anger at high prices. Independent reports and evidence then and now indicate that prices for patented drugs in other affluent countries such as the UK and Canada do pay for research and development. Higher prices in the US simply generate extra profits.

Take for example the UK’s Pharmaceutical Price Regulation Scheme. Even the UK pharmaceutical trade association says it’s an “integrated, holistic agreement” that supports innovative research, economic growth, and industry vitality by letting companies set their prices on new drugs to cover documented costs and fair profits. Unlike the US, the UK policy features transparency, accountability, and fairness. It also supports innovative new companies better. The resulting UK prices are among the lowest in Europe. Prices are 231% higher in the US.

US system failure

Companies charge much more in the US because it has no system for dealing with the fact that about 90% of newly approved drugs add few or no clinical benefits since regulators do not require evidence that they do. Most drug research aims to generate new patents on minor variations in order to charge patent protected prices. Safety evidence is so weak that one in four new drugs results in serious harm.

American laws and practices allow companies to charge any price they like and to keep raising prices on older drugs.

Relentless promotion of the “foreign free rider” claim by industry supported science writers, policy experts, journalists, and lobbyists has nearly every policy maker furious and ready to make other countries pay up. Yet the whole story makes no sense.

The economic advisers urge the White House and Congress to force other countries to raise their prices in order to lower US prices, but companies do not act that way. For example, so called free trade agreements require all trading partners to raise patent trade barriers for prescription drugs that protect high prices. The resulting higher drug prices in other countries have not lowered US prices. They have just made new drugs less affordable to millions of people with treatable conditions.

The economic advisers note that while the US paid $270bn (£195bn; €220bn) for patented drugs in 2016, OECD countries paid more—$316bn. This is hardly a free ride. Most OECD countries also spend more of their healthcare budgets on drugs than does the United States. Trump’s economic advisers fail to report that dollar for dollar, European researchers have developed more first-in-class and global drugs than US researchers.

Trump’s economic advisers should tell the White House, Congress, and Americans that they could and should pay far less than companies currently charge them. Americans are not subsidising research costs for Europe and the OECD. The advisers should recommend requiring that payers first obtain direct evidence that new drugs will benefit patients, and that they are safe. US prices could be much lower if a national value based pricing programme is put in place that provides reasonable profits as well as covering verifiable costs for research, production, and distribution of new drugs that are demonstrably better for patients than the old ones.…

In this article, Donald Light and Arthur Caplan help to dispel some of the excuses given for outrageous drug pricing in the United States, especially the myth that our drug prices are higher because of other nations’ free riding on our drug research.

We rely too heavily on the private sector and markets to set drug prices. When the private sector is failing, the government needs to step in. We do not have to nationalize the drug industry, but we need much more effective regulation. If we don’t we’ll soon have new products priced at seven figures; there are already many at six figures. We really can’t afford that.

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Impact of prior authorization on patients and physicians

Posted by on Tuesday, Mar 20, 2018

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.

2017 AMA Prior Authorization Physician Survey

Survey conducted December, 2017

Patient Impact

Average wait time for PA responses

Q: In the last week, how long on average did you and your staff need to wait for a prior authorization (PA) decision from health plans?

64% report waiting at least one business day
30% report waiting at least three business days

Care delays associated with PA

Q: For those patients whose treatment requires PA, how often does this process delay access to necessary care?

92% report care delays

Abandoned treatment associated with PA

Q: For those patients whose treatment requires PA, how often do issues related to this process lead to patients abandoning their recommended course of treatment?

78% report that PA can at least sometimes lead to treatment abandonment

Impact of PA on clinical outcomes

Q: For those patients whose treatment requires PA, what is your perception of the overall impact of this process on patient clinical outcomes?

92% report that PA can have a negative impact on patient clinical outcomes

Physician Impact

Physician perspective on PA burdens

Q: How would you describe the burden associated with PA for the physicians and staff in your practice?

84% report high or extremely high burden

Change in PA burden over last five years

Q: How has the burden associated with PA changed over the last five years for the physicians and staff in your practice?

86% report PA burdens have increased over the past five years

Additional PA practice burden findings

Volume: 29.1 average total PAs per physician per week (13.9 prescription, 15.1 medical)

Time: Average of 14.6 hours (approximately two business days) spent each week by the physician/staff to complete this PA workload

Practice resources: 34% of physicians have staff who work exclusively on PA

Repetition: 79% of physicians are sometimes, often or always required to repeat PAs for prescription medications when a patient is stabilized on a treatment regimen for a chronic condition…

Prior authorization is unique to our dysfunctional health care financing system here in the United States. It is the requirement that permission be obtained from private insurers to provide certain procedures and services or to prescribe certain medications for the patients. What is its purpose?

Our health care system should be designed to benefit patients. So considering that, prior authorization should refine and improve the heath care recommendations of the patients’ health care professionals. Wait a minute. A distant clerk at an insurance company is going to provide better health care advice than a physician or nurse practitioner at the scene? Of course not. So if prior authorization is not designed to benefit the patient, then what is it for?

To understand that, we need to understand what the private insurance company is for. There are basically two functions. One is to pool risk and redistribute funds based on medical need, though for self-insured employers, the insurers may provide only administrative services. And that is the second function of insurers – to sell us administrative services and as much as the market will bear.

Now take another look at prior authorization. As far as redistributing risk pool funds is concerned, if the insurer creates enough onerous administrative barriers then the patients and their professionals suffer administrative fatigue and may abandon the attempt to receive authorization for beneficial health care services. The insurer is then able to keep the funds that were not drawn out of the risk pool. With persistence, sometimes including appeal processes, almost all prior authorization requests are approved indicating that the services requested are almost invariably appropriate. Prior authorization is designed as a barrier to appropriate care – clearly not beneficial but detrimental to patients.

Why does Wall Street pay so much attention to the medical loss ratio of the insurers – the percentage of premiums that are paid out in medical benefits? It is because the lower the ratio, the greater amount of administrative services that have been sold and thus the greater the profits realized. Under the Affordable Care Act, the medical loss ratio is 15 to 20 percent for private insurers, whereas the medical loss ratio for traditional Medicare – a government program – is under 2 percent. Opponents of Medicare for All complain of the inherent bureaucratic waste of the program, but it is not Medicare, it is the private sector insurers that have mastered how to create and capture that waste.

Our policymakers are still fixated on managed care, but their tool of prior authorization provides just one more demonstration on why the private insurers and their managed care excesses have to go. Look again at the numbers in the AMA survey. Those who claim that the managed care burden is diminishing should note that 86 percent of physicians report that the prior authorization burden has increased over the past five years – since the implementation of the Affordable Care Act. That is a burden for both patients and their health care professionals that we need to dump.

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The Economist: Rent seeking in America’s health care system

Posted by on Monday, Mar 19, 2018

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.

Which firms profit most from America’s health-care system

The Economist, Schumpeter, March 15, 2018

Every year America spends about $5,000 more per person on health care than other rich countries do. Yet its people are not any healthier. Where does all the money go? One explanation is waste, with patients wolfing down too many pills and administrators churning out red tape. There is also the cost of services that may be popular and legitimate but do nothing to improve medical outcomes.

The most controversial source of excess spending, though, is rent-seeking by health-care firms. This is when companies extract outsize profits relative to the capital they deploy and risks they take. Schumpeter has estimated the scale of gouging across the health-care system. Although it does not explain the vast bulk of America’s overspending, the sums are big by any other standard, with health-care firms making excess profits of $65bn a year. Surprisingly, the worst offenders are not pharmaceutical firms but an army of corporate health-care middlemen.

In crude terms, the health-care labyrinth comprises six layers, each involving the state, mutual organisations and private firms. People and employers pay insurance companies, which pay opaque aggregators known as pharmacy-benefit managers and preferred provider organisers. They in turn pay doctors, hospitals and pharmacies, which in turn pay wholesalers, who pay the manufacturers of equipment and drugs. Some conglomerates span several layers.

To work out who is stiffing whom, Schumpeter has examined the top 200 American listed health-care firms. Excess profits are calculated as those earned above a 10% return on capital (excluding goodwill), a yardstick of the maximum that should be possible in any perfectly competitive industry.

Total excess profits amount to only about 4% of America’s health-care overspending. But this still makes health care the second biggest of the giant rent-seeking industries that have come to dominate parts of the economy. The excess profits of the health-care firms are equivalent to $200 per American per year, compared with $69 for the telecoms and cable TV industry and $25 captured by the airline oligopoly. Only the five big tech “platform” firms, with a figure of $250, are more brazen gougers.

Everyone hates pharmaceutical firms, but their share of health-care rent-seeking is relatively trivial, especially once you include the many midsized and small firms that are investing heavily. Across the economy, average prices received by drug manufacturers have risen by about 5% per year, net of the rebates. But their costs have risen, too. As a result, even for the 15 biggest global drugs firms, returns on capital have halved since the glory days of the late 1990s, and are now barely above the cost of capital.

As the drug industry has come back down to earth, the returns of the 46 middlemen on the list have soared. Fifteen years ago they accounted for a fifth of industry profits; now their share is 41%. Health-insurance companies generate abnormally high returns, but so do the wholesalers, the benefit managers and the pharmacies. In total middlemen capture $126 of excess profits a year per American, or about two-thirds of the whole industry’s excess profits.

The dark view is that pockets of rent-seeking have become endemic in America’s economy. Wherever products are too complex for customers to understand, and where subsidies and complex regulation add to the muddle, huge profits can opaquely be made.…


The Price of Inequality

By Joseph E. Stiglitz

Our political system has increasingly been working in ways that increase the inequality of outcomes and reduce equality of opportunity. This should not came as a surprise: we have a political system that gives inordinate power to those at the top, and they have used that power not only to limit the extent of redistribution but also to shape the rules on the game in their favor, and to extract from the public what can only be called large “gifts.” Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by trapping a larger share of the wealth that would otherwise have been produced without their effort. Those at the top have learned to suck out money from the rest in ways that the rest are hardly aware of – that is their true innovation.…

Joseph Stiglitz defines rent seeking as “getting income not as a reward to creating wealth but by trapping a larger share of the wealth that would otherwise have been produced without their effort.” Investopedia defines it as “obtaining economic gain from others without reciprocating any benefits to society through wealth creation.” Rent seeking is an important phenomenon to understand because it has been a major contributor to the injustices of increasing income and wealth inequality, especially in the United States.

The Economist’s Schumpeter column discusses the middlemen in the U.S. health care system – insurance companies, pharmacy benefit managers, preferred provider organizers, etc. – and describes as rent seeking their all-too-prevalent profits in excess of a 10 percent return on capital. Their share has now grown to 41 percent of industry profits. “In total middlemen capture $126 of excess profits a year per American, or about two-thirds of the whole industry’s excess profits.”

Although this egregious spending is particularly offensive, it is still relatively small compared to the wasted expenditures on high prices and profound administrative excesses in our health care system. But these middlemen add to our high health care costs without providing any additional health care services. If we changed to a well designed single payer national health program – an improved Medicare for all – not only would health care finally be priced fairly and administrate waste dramatically reduced, we would also get rid of these rent seeking leeches.

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Andy Slavitt gives his candid views on single payer

Posted by on Friday, Mar 16, 2018

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.

Perspectives from Former CMS Administrators: The Path Forward

Healthcare Costs Innovation Summit
West Health, February 21, 2018

Joseph Smith, Moderator:
At lunch we talked briefly about millennials and their absence of appetite for complexity, and looking for simpler solutions perhaps. And we talked about how health care is wildly complicated, at least the cost structure around it is wildly complicated, and it can frustrate the understanding of many people in the room. And so you were encouraging us to think about single payer systems as something that a larger cohort of the populous might be interested in. Can you expand on that?

Andy Slavitt:
Oh, I think if you asked me and probably most of us two years ago whether or not single payer would even be part of the conversation let alone a real possibility, most of us would have been pretty skeptical. And, you know, I think I’m not as skeptical any longer in large part because I think over the last year public opinion has been really influenced by being exposed to the messiness, messiness that many of the experts in this room probably see every day. But it seems to scare the crap out of the public, and it’s not just people on the left, people on the right as well. Things that are more radical and transformational, more radical than we talk about every day – I mean the stuff we’re talking about is not radical compared to some of these things – find favor in public polling. Now we can all say that they don’t understand and all those other things, but I wouldn’t be so quick to write that off. I think there is a sentiment that is not just among young people but among many that this needs to be part of the conversation, and it’s going to be part of the political dialogue, no matter what. So I think it is that moment, where that has entered the lexicon, has arrived and is arriving, and quite frankly this group probably underrepresents the part of the public that’s pushing it.

As Acting Administrator of CMS under President Obama, Andy Slavitt dutifully supported the implementation of the Affordable Care Act. Since he left office he has led the formation of United States of Care – an organization with the mission “to ensure that every single American has access to quality, affordable health care regardless of health status, social need, or income.”

He tried to make the organization non-partisan but a disproportionate number of the board members are conservative and none of them are active proponents of single payer reform. Some of us were concerned that the crucial topic of single payer might be left out of their deliberations. Thus it is reassuring to see what Slavitt’s candid views are in this Q&A before a meeting heavily attended by members of the medical-industrial complex.

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Why is health care spending in the United States so much greater?

Posted by on Thursday, Mar 15, 2018

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

Health Care Spending in the United States and Other High-Income Countries

By Irene Papanicolas, Ph.D.; Liana R. Woskie, M.Sc.; Ashish K. Jha, M.D., M.P.H.
JAMA, March 13, 2018

Key Points

Question: Why is health care spending in the United States so much greater than in other high-income countries?

Findings: In 2016, the United States spent nearly twice as much as 10 high-income countries on medical care and performed less well on many population health outcomes. Contrary to some explanations for high spending, social spending and health care utilization in the United States did not differ substantially from other high-income nations. Prices of labor and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending.

Meaning: Efforts targeting utilization alone are unlikely to reduce the growth in health care spending in the United States; a more concerted effort to reduce prices and administrative costs is likely needed.

From the Discussion

The data also suggest that some of the more common explanations about higher health care spending in the United States, such as underinvestment in social programs, the low primary care/specialist mix, the fee-for-service system encouraging high volumes of care, or defensive medicine leading to overutilization, did not appear to be major drivers of the substantially higher US health care spending compared with other high-income countries. Instead, the data suggest that the main driving factors were likely related to prices, including prices of physician and hospital services, pharmaceuticals, and diagnostic tests, which likely also affected access to care. In addition, administrative costs appeared much higher in the United States. These findings indicate that efforts targeting utilization alone are unlikely to reduce the gap in spending between the United States and other high-income countries, and a more concerted effort to reduce prices and administrative costs is likely needed.…

This consequential study confirms, once again, that the most important contributors to our greater health care spending are high prices and wasteful administrative excesses. It also demonstrates again our underperformance when compared with ten other wealthy nations.

This article is particularly helpful because it also analyzes other factors commonly cited as causes of our high spending, demonstrating that, to the contrary, they are not major drivers of higher spending when compared to other nations. This is really important because having this knowledge is essential when designing policies to correct what is actually wrong with our system.

As an example, our fee-for-service financing has been cited as a driver of high volumes of care which has led to policies that are supposedly designed to replace volume with value which in turn has led to the establishment of intrusive solutions such as accountable care organizations. Yet this study shows that fee-for-service is used in many other nations and has not resulted in health care costs as high as ours. In fact, many of the misguided policy solutions being implemented are actually increasing administrative excesses and increasing total health care spending (e.g., all those computers and their vendors don’t come for free).

There are four editorials accompanying this article, each with a predictable theme (that I perhaps exaggerate to make my points). Ezekiel Emanuel seems hesitant to accept the simple truth of the conclusion and continues to advance the tweaking of Obamacare. Katherine Baicker, supported by Amitabh Chandra, pushes studying minutiae in policy science to meticulously craft new policies to address what are really straightforward problems for which simple solutions already exist. Stephen Parente pushes his typically disconnected thoughts on market-based reform, criticizing the authors for not mapping out “all the important factors that drive this issue.” The editorial that stands out is a tribute to Uwe Reinhardt by Editor in Chief Howard Bauchner and Executive Editor Phil Fontanarosa, reminding us of Reinhardt’s regrets that we tolerate such a great social injustice.

The ideal solution to the problems of high prices and administrative excesses is a well designed single payer system. Not only would that meet the problem of high spending head on, it would also correct many of our other problems – ending uninsurance and underinsurance while reducing inequity, maldistribution of resources, impaired access, and some of the other serious flaws in our system.

JAMA has provided free access to this article. It will be a classic, so it should be downloaded as an important resource for crafting and advocating for sound policies based on actual facts rather than ideology, pipe dreams, and wishing upon stars. When others try to ram through their pet solutions, we can hold up this policy cross constructed of facts to ward off the policy vampires. (Okay, too cute. But this detailed ten page paper plus supplementary material will provide an abundance of solid facts which is the best antidote to policy folly.)

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California ‘Select Committee’ report has important lessons for the U.S.

Posted by on Wednesday, Mar 14, 2018

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.

Single-payer bill all but dead this year as California lawmakers craft new health package

By Angels Hart
The Sacramento Bee, March 13, 2018

California Democratic lawmakers are quietly working on a package of up to 20 health care bills that would soften the political blow from the all-but-certain death of a single-payer universal care bill this year.

Senate Bill 562 cleared the Senate last year but stalled in the Assembly when Speaker Anthony Rendon blasted it as “woefully incomplete.” The legislation still lacks a plan to cover its $400 billion price tag, a way to control rising health care costs and a strategy to secure federal waivers needed from the Trump administration.

Rendon has not formally killed the bill, but he told The Sacramento Bee earlier this month that a fresh health care package is in the works – the clearest sign yet that Senate Bill 562 is dead.

Democratic Assemblymen Jim Wood of Healdsburg and Joaquin Arambula of Fresno, who chair a special health committee formed by Rendon last year after the single-payer bill passed the Senate, said Tuesday they are eying legislation this year that seeks to improve quality, expand access and lower rising health care costs.

Both expressed doubt, however, that single-payer bill could move forward this year.

“I would say single-payer is not a reality this year because of the complexity of the steps that we need to go through,” Wood said.

To capture current federal health care funding and use it to fund a state-based single-payer system, California would have to secure numerous federal waivers. Voters would likely have to approve changes to the state Constitution and massive tax increases would be required.

Wood and Arambula declined to say what specific bills they’re planning to introduce, but said they’re considering legislation based on a broad set of recommendations released Tuesday by a trio of health policy experts who produced a report analyzing the committee’s work over the past four months in identifying a path forward on universal care.

Wood said he’d like to focus on a politically and financially obtainable approach to creating a universal health care system.

“I think that our report, our hearings illustrate pretty clearly that you can’t go from concept to execution of a complicated, complex, completely transformative system in a really short amount of time,” Wood said. “If you read our report…you’ll understand a little better why we couldn’t just pass 562 and the next day everybody has health care. It just can’t work that way.”

Assemblywoman Laura Friedman, D-Glendale, said she’s contemplating a bill that would establish a single-payer system in future years — once other benchmarks are met, such as achieving specific cost containment goals and obtaining needed federal waivers.

“I’m looking at legislation we could adopt that sets up a roadmap to single payer, just like we have with (Assembly Bill 32) that gives us a roadmap to reducing greenhouse gas emissions,” Friedman said. “I’m also very interested in what can give people very real relief in the short-term.”…


A Path to Universal Coverage and Unified Health Care Financing in California

By Andrew B. Bindman, MD, Marian Mulkey, M.P.P., M.P.H., and Richard Kronick, Ph.D.
University of California, San Francisco, March 12, 2018

The California State Assembly contracted with the University of California San Francisco in order for the authors of this report to (a) serve as research and subject matter experts to the co-chairs of the Select Committee on Health Care Delivery Systems and Universal Coverage (Select Committee) ; (b) assist in fact-finding for Select Committee hearing preparation; (c) attend Select Committee hearings and summarize the content of the hearings; (d) assist Select Committee in identifying and analyzing the components of a sustainable and affordable universal health care system; and (e) provide a report to Select Committee summarizing the Select Committee’s hearings, including any findings and potential options.

This report reflects the authors’ attempts to explain information that emerged from the six  Select Committee hearings and yo assemble the findings from the hearing into a coherent set of possible recommendations for the California Assembly.

This report describes health coverage and care in California and identifies remaining challenges related to access, coordination, and cost. It presents a range of options to expand coverage, address issues of fragmentation and cost under our current mixed public-private financing system, followed by options and considerations should the state move toward a state-based publicly financed approach. It concludes with a discussion of potential paths forward in the near future and over the longer term.


California has established itself as a leader in using the opportunities created by the Affordable Care Act to increase insurance coverage. Building on that foundation, as discussed during the hearings and summarized in this report, state leaders can take steps now to make coverage more widely available, increasing coverage from its current level of 93% to very close to 100%. Further, state leaders can take steps to reduce financial barriers to care for people who are insured. Something close to universal coverage can be achieved even with continuation of the current fragmented system in which Medicare, Medi-Cal, employer-sponsored insurance and the individual market continue to be the main channels through which Californians obtain coverage.

Testimony during the hearings also suggested a number of options for mitigating the deleterious effects of fragmentation and reducing the rate of growth of health spending within the context of a fragmented financing system. This report has summarized many of those suggestions and provided an assessment of the some of their major advantages and disadvantages.

Many people who testified during the hearings also voiced the opinion that the surest way to achieve universal coverage and the most likely way to substantially improve equity, quality and efficiency would be to implement a system of unified public financing. Under such a system, all Californians would have health insurance coverage by virtue of living in the state, and the separate coverage systems of Medicare, Medi-Cal, employer sponsored insurance and the individual market would be eliminated.

However, testimony also made clear that there are substantial legal, political and technical obstacles to implementing such a system. Substantial changes in federal law and federal waivers would be required to transform Medicare, Medi-Cal and the funds used for premium tax credits for Covered California enrollees into a system of unified public financing, and to allow the federal government to transfer funds to California in lieu of continuing to pay for Medicare, the federal portion of Medi-Cal and premium tax credits. In addition, the state would need to raise new revenue to replace most of the money currently spent by employers and employees for employer-sponsored insurance.

While there are obvious shortcomings in the design and implementation of the Medicare program, the Medi-Cal program, employer-sponsored insurance, and Covered California, 93% of Californians currently have insurance through one of these channels. Transitioning the vast majority of Californians into a new system of coverage, which does not have an established track record in the state, involves uncertainty and some risk. Policymakers have a responsibility to educate the public about the benefits and risks of various options to provide health care coverage and to incorporate the public’s values and priorities into their decision-making.

Short-term changes to increase coverage and improve equity, quality, and efficiency make sense given uncertain prospects and a multi-year timeline for achieving unified public financing. This is particularly true if short term changes are pursued in ways that facilitate rather than impede a potential future transition to unified public financing. Short-term efforts to expand coverage, improve access, reduce fragmentation, and improve transparency, coupled with development of a longer-term path toward unified public financing, would help secure a future in which all Californians have access to the health care they need and deserve.…

Those following the latest single payer effort in California know that SB 562 passed the Senate but has been held back in the Assembly, substituting in its place a series of hearings by the Select Committee on Health Care Delivery Systems and Universal Coverage to be followed by a report of its findings. That report has now been released.

It was known from the beginning that this was not an effort to advance SB 562, the stalled single payer bill, but rather it was an elaborate effort to build support for incremental measures that would build on our current system. The report does make such recommendations. Statements from the legislators involved have made it clear that the process for SB 562 would be too complex to move forward with the legislation at this time. They say that they will now introduce a package of bills in support of some of the incremental steps proposed in the Select Committee report.

The report did not remain silent on “a unified, publicly financed approach that assures coverage for all state residents; pools funds for health coverage across Medicare, Medi-Cal and other major financing sources and dramatically reduces or eliminates variations in eligibility, benefits and payments” (what we would refer to as single payer). Much to its credit it did discuss some of the many considerations that would have to be addressed to achieve such a goal. They explain why the barriers are formidable as far as enacting single payer legislation in this session of the state legislature.

That said, they do discuss in general terms a roadmap to achieve unified public financing in California. They suggest establishing a planning commission tasked with resolving design features, overseeing analyses of options for financing, recommending a management plan, educating the public regarding the proposed changes, assist in the drafting of state legislation and ballot propositions necessary to implement recommendations, and then assist state policymakers in drafting needed federal statutory changes, developing federal waiver requests, and negotiating with the federal executive branch and Congress. They say that at a minimum this would require a multi-year process.

How many times do we have to start the multi-year process all over again?

It looks like California will move forward with patching ACA, even though that is the most expensive model of reform and falls far short of our goals. So the lesson is, don’t depend on California to lead the way, at least anytime soon. Medicare did not start in one state. A bona fide single payer Medicare for all will not either. California has shown us once again that we need to get on with enacting a national single payer program – an improved Medicare for all.

SB 562 may be dead this year, but the dream of single payer is alive and well.

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