Healthcare will be a lot less expensive for everyone—the government, consumers, providers.  —President Donald Trump (1)

The above statement by Donald Trump could not be more uninformed, misguided, and blatantly false. Just one more example of his more than 3,000 documented lies as president. Unfortunately, however, much of conservative thought among policy leaders and economists still holds that deregulation, theoretically allowing unfettered markets to work their magic, will control costs through competition. That may be true in some parts of the economy, but has never been true in health care.

This blog has three goals: (1) to show how deregulation is being implemented under TrumpCare; (2) to describe how deregulation increases costs and prices as competition fails to work in health care; and (3) to summarize some takeaway lessons we should learn from our long experience with the failures of deregulation as a cost containment policy.

Deregulation under TrumpCare
A continuing mantra during Trump’s presidential campaign and his first 18  months in office has been to claim that deregulation of health, safety, labor, financial, and environmental sectors will somehow get us on a better track in this country. He issued an executive order just ten days after his inauguration that government agencies should kill two rules for every one they propose. His Cabinet has been carefully selected to loyally pursue the “deconstruction of the administrative state,” as urged on by Steve Bannon, Trump’s former policy guru. This policy has also been strongly supported by the Freedom Caucus, many trade organizations, and corporate lobbyists. (2)

Subsequent administrative actions by the Trump administration’s Department of Health and Human Services (HHS) have dropped advertising for and shortened the ACA enrollment period, scaled back maintenance of its website, and spread disinformation that discourages enrollees of the ACA’s marketplace. Other actions by HHS include encouraging selling insurance across state lines, marketing short-term plans lasting just less than a year (thereby skirting the ACA’s requirements to cover pre-existing conditions and ten essential benefits), proposing expansion of association health plans with lax requirements, shifting control of health care back to the states, and promoting increasing privatization of public programs, such as Medicare and Medicaid.

How Deregulation Increases Prices and Costs of Health Care
Deregulation of the private health insurance industry in these ways leads to further gaming of the system with the intent to increase insurers’ profits, including increasing premiums for less and less coverage and gaming reimbursement by false claims. As one example, Freedom Health in Florida paid almost $32 million in 2017 to settle allegations that it exaggerated how sick some patients were to increase profits while dropping others that were costing them too much. (3) Centene Corp., the largest private Medicaid insurer in the country, took in $1.1 billion in profits between 2014 and 2016 despite its plans being among the worst performing in California. (4)

Prices of labor and goods, including pharmaceuticals, medical devices, and administrative costs are driving the run-away train of health care inflation in our deregulated market-based system without significant price controls. (5) The profit-driven medical industrial complex adds to the impossibility of achieving cost containment of health care in this country. Giant corporate systems buy up hospitals and physicians’ practices at an increasing rate, raising their market shares to near-monopoly levels with leeway to set prices to what the traffic will bear. (6) They also increase administrative costs of growing bureaucracy to intolerable levels. It is estimated that we waste at least $150 billion a year on hospital bureaucracy and another $300 billion on private insurers and the paperwork they impose on physicians. (7)

Some takeaway lessons
1. Free markets do not control prices or costs through competition in health care.
Within our complex market-based system, there is no real transparency of prices to let patients save money through more information, whether for hospital services, prescription drugs or other services. Don Berwick, M.D., former administrator of CMS and founder of the Institute for Healthcare Improvement, sums up the current situation this way:

I find little evidence anywhere that market forces, bluntly used, that is, consumer choice among an array of products with competitors fighting it out, leads to a health care system you want and need. In the U. S. competition has become toxic: it is a major reason for our duplicative, supply-driven, fragmented health care system. (8)

2. The pervasive business “ethic” to maximize revenue to providers of health care, together with involvement by Wall Street profiteers, work against the public interest.
Ever larger corporations have taken over the medical-industrial complex in recent decades with close ties to Wall Street. Many physicians and other providers are employed by large health systems whereby they are being pushed by administrators to bill for services with higher reimbursement. The traditional ethic of service has largely been replaced by “shareholder capitalism.” As just one example, 20 of the 25 drugs with the fastest-rising prices between 2013 and 2015 were owned by firms that were involved with a hedge fund, private equity ort similar speculative attacks during that time. (9)

3. Our payment policies to date have failed to contain costs or improve quality of health care.
Payment experiments adopted by Medicare in recent years were intended to save costs and improve quality of care. Neither goal has been achieved by such attempts as accountable care organizations (ACOs) or the Pay-for-Performance (P4P) programs. Instead, they have produced no savings and little or no improvement in patient outcomes. Most physicians and health policy experts consider the supposed “quality” measures flawed. (10)

4. We cannot contain health care costs until we reform our financing system.
Containment of U. S. health care costs will require a transformational change in how we finance and pay for health care services. We will need to replace the largely for profit private health insurance industry with a not-for-profit single-payer service-oriented system. This can and should happen with enactment of expanded and improved Medicare for All legislation (H. R. 676 in the House) that will ensure universal access to all necessary health care for all Americans. Much of today’s bureaucracy and waste will be eliminated with a five-fold reduction in administrative costs. Physicians and other health professionals will be paid on a negotiated fee basis. Prices for prescription drugs will be negotiated, as the Veterans Administration has done for many years, achieving discounts of more than 40 percent. Hospitals and other facilities will be paid through global operating budgets.

This system of national health insurance can be funded through a progressive system of taxation whereby 95 percent of Americans will pay less than they do now for insurance and care. National health insurance will recover more than $600 billion a year in wasteful expenditures, including about $500 billion in administrative overhead and $113 billion in prescription drugs through bulk purchasing. (11) Those savings can be applied to expanding health care coverage for the uninsured and underinsured as well as reducing disparities in underserved populations.

Bad as health care costs are, they will get much worse under Trump’s policies of deregulation, industry-friendly policies, relaxing rules on Wall Street, and deceptive rhetoric. Today’s so-called health care “system” is a socially unjust and unsustainable disaster with a growing part of the population not able to afford care. We can expect increasing variability in access to care from one state to another and worse outcomes for tens of millions of people. With health care now the number one issue in national polls across the political spectrum, even above the economy, we will see a growing public backlash to TrumpCare across the country as the 2018 midterms approach. Fortunately, there is a fix on the horizon when Democrats regain the majority in the House, and perhaps also the Senate.

Adapted in part from my forthcoming book, Trumpcare: Lies, Broken Promises, How it is Failing, And What Should Be Done


1. Trump, DJ. As quoted by Jackson, HC. 6 promises Trump made about health care. Politico, March 13, 2017.

2. Steinzor, R. The war on regulation. The American Prospect, Spring 2017, pp. 72-76.

3. Schulte, F. As seniors get sicker, they’re more likely to drop Medicare Advantage plans. Kaiser Health News, July 6, 2017.

4. Terhune, C, Gorman, A. Enriched by the poor: California health insurers make billions through Medicaid. California Healthline, November 6, 2017.

5. Papanicolas, I, Woskie, LR, Jha, AK. Health care spending in the United States and other high-income countries. JAMA, March 13, 2018.

6. Fulton, BD. Health and market competition trends in the United States: Evidence and policy responses. Health Affairs, September 2017.

7. PNHP press release. Bureaucracy consumes one-quarter of U. S. hospitals’ budgets, twice as much as in other nations. Physicians for a National Health Program. Chicago. September 8, 2014.

8. Berwick, D. A transatlantic review of the NHS at 60. British Medical Journal 337 (7663): 212-214, 2008.

9. Hedge funds attack American health care. Hedge Clippers, September 30, 2015.

10. Woolhandler, S, Himmelstein, DU. New prospects for single-payer activists: Swimming in the mainstream . . . with sharks. Physicians for a National Health Program. Chicago, IL, Winter 2018 Newsletter, pp. 14-16.

11. Friedman, G. Funding H. R. 676: The Expanded and Improved Medicare for All Act. How We Can Afford a National Single-Payer Health Plan. Physicians for a National Health Program. Chicago, IL, July 31, 2013.

Adapted in part from my soon to be released book: TrumpCare: Lies, Broken Promises, How It Is Failing, and What Should Be Done.

CMS proposed rule: Paying the same for all office visits regardless of complexity

Posted by on Monday, Jul 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.

Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2019; Medicare Shared Savings Program Requirements; Quality Payment Program; and Medicaid Promoting Interoperability Program

Federal Register, Proposed rule, Centers for Medicare & Medicaid Services

II.I.2.c (page 345)

Minimizing Documentation Requirements by Simplifying Payment Amounts

As we have explained above, including in prior rulemaking, we believe that the coding, payment, and documentation requirements for E/M visits are overly burdensome and no longer aligned with the current practice of medicine. We believe the current set of 10 CPT codes for new and established office-based and outpatient E/M visits and their respective payment rates no longer appropriately reflect the complete range of services and resource costs associated with furnishing E/M services to all patients across the different physician specialties, and that documenting these services using the current guidelines has become burdensome and out of step with the current practice of medicine. We have included the proposals described above to mitigate the burden associated with the outdated documentation guidelines for these services. To alleviate the effects and mitigate the burden associated with continued use of the outdated CPT code set, we are proposing to simplify the office-based and outpatient E/M payment rates and documentation requirements, and create new add-on codes to better capture the differential resources involved in furnishing certain types of E/M visits.

In conjunction with our proposal to reduce the documentation requirements for E/M visit levels 2 through 5, we are proposing to simplify the payment for those services by paying a single rate for the level 2 through 5 E/M visits.

In alignment with our proposed documentation changes, we are proposing to develop a single set of RVUs under the PFS for E/M office-based and outpatient visit levels 2 through 5 for new patients (CPT codes 99202 through 99205) and a single set of RVUs for visit levels 2 through 5 for established patients (CPT codes 99212 through 99215). While we considered creating new HCPCS G-codes that would describe the services associated with these proposed payment rates, given the wide and longstanding use of these visit codes by both Medicare and private payers, we believe it would have created unnecessary administrative burden to propose new coding. Therefore, we are instead proposing to maintain the current code set. Of the five levels of office-based and outpatient E/M visits, the vast majority of visits are reported as levels 3 and 4. In CY 2016, CPT codes 99203 and 99204 (or E/M visit level 3 and level 4 for new patients) made up around 32 percent and 44 percent, respectively, of the total allowed charges for CPT codes 99201-99205. In the same year, CPT codes 99213 and 3 and 4 for established patients) made up around 39 percent and 50 percent, respectively, of the allowed charges for CPT codes 99211-99215. If our proposals to simplify the documentation requirements and to pay a single PFS rate for new patient E/M visit levels 2 through 5 and a single rate for established patient E/M visit levels 2 through 5 are finalized, practitioners would still bill the CPT code for whichever level of E/M service they furnished and they would be paid at the single PFS rate. However, we believe that eliminating the distinction in payment between visit levels 2 through 5 will eliminate the need to audit against the visit levels, and therefore, will provide immediate relief from the burden of documentation. A single payment rate will also eliminate the increasingly outdated distinction between the kinds of visits that are reflected in the current CPT code levels in both the coding and the associated documentation rules.

(The proposed payments are on page 349.)

Federal Register – Proposed Rule  (1472 pages):…


Sniffles? Cancer? Under Medicare Plan, Payments for Office Visits Would Be Same for Both

By Robert Pear
The New York Times, July 22, 2018

The Trump administration is proposing huge changes in the way Medicare pays doctors for the most common of all medical services, the office visit, offering physicians basically the same amount, regardless of a patient’s condition or the complexity of the services provided.

Administration officials said the proposal would radically reduce paperwork burdens, freeing doctors to spend more time with patients. The government would pay one rate for new patients and another, lower rate for visits with established patients.

“Time spent on paperwork is time away from patients,” said Seema Verma, the administrator of the Centers for Medicare and Medicaid Services. She estimated that the change would save 51 hours of clinic time per doctor per year.

“We anticipate this to be a very, very significant and massive change, a welcome relief for providers across the nation,” Ms. Verma said, adding that it fulfills President Trump’s promise to “cut the red tape of regulation.”…

Bizarre. Purportedly paying the same fee for all office visits regardless of the complexity of the care would reduce the administrative time required to code the level of complexity of the visit and would reduce the record keeping requirements even though the complexity level would still be determined and records would still be kept to document the patients’ conditions and care.

What this really does is to sharply reduce fees for caring for patients with complex conditions. What does that accomplish? It appears to be yet another attack on the traditional Medicare program. Physicians caring for patients with the greatest health care needs are already being paid marginally low rates for their services, and this reduction will be enough to cause many physicians to bail out. When patients lose their private physicians and have to turn to community clinics for their complex care, many will not be happy. It is likely that this is intended to pressure more patients to sign up for the private Medicare Advantage plans.

Not only is this another step towards privatization of Medicare, it also might place a damper on the enthusiasm for Medicare for all, by discrediting the traditional Medicare program.

Maybe it’s time to consider placing all physicians on salary. We could do that by nationalizing our health care delivery system, converting it into a national health service. A single payer, improved Medicare for all seems to be a much less disruptive option, but we do need public stewards who believe in and support Medicare. Vote!

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NFIB abandons support of association health plans

Posted by on Friday, Jul 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.

Trump promised them better, cheaper health care. It’s not happening.

By Adam Cancryn
POLITICO, July 19, 2018

President Donald Trump handed an influential business advocacy group what should have been a historic lobbying victory when he recently rolled out new rules encouraging small businesses to band together to offer health insurance.

Trump, who’s touted the expansion of so-called association health plans as a key plank in his strategy to tear down Obamacare, even announced the rules at the 75th anniversary party of the National Federation of Independent Business last month, claiming the group’s members will save “massive amounts of money” and have better care if they join forces to offer coverage to workers.

But the NFIB, which vigorously promoted association health plans for two decades, now says it won’t set one up, describing the new Trump rules as unworkable. And the NFIB isn’t the only one: Several of the nationwide trade groups that cheered Trump’s new insurance rules told POLITICO they’re still trying to figure out how to take advantage of them and whether the effort is even worth it.

That could signal there’s minimal early interest in an initiative the administration says will help lower health care costs — and one that Trump himself has prematurely hailed as a wild success. Trump falsely claimed during rallies in recent weeks that “millions” are signing up, though the new health plans can’t be sold until Sept. 1.

Behind the scenes, the NFIB had already been souring on the idea before Trump’s announcement, concluding that establishing an association health plan would be too complex and not worth the effort. The NFIB, which offered only a vague endorsement of the Trump effort last month, now says it’s abandoned any idea of setting up a national plan for its hundreds of thousands of members.…

For a couple of decades the concept of association health plans (AHPs) has been vigorously promoted by organizations such as the National Federation of Independent Business (NFIB) since AHPs would satisfy the desire to nominally provide health insurance to small business employees at a lower cost than traditional health plans, made possible by the deficiencies in coverage that characterize most of these plans.

Now that the Trump administration is making AHPs available as a replacement for plans established by the Affordable Care Act, the reality seems to be sinking in. The NFIB “now says it’s abandoned any idea of setting up a national plan for its hundreds of thousands of members.”

Small business owners do want to have health insurance for themselves and for their employees. For those who were hoping that AHPs would be the answer, they do not have to give up hope. They should turn to a far better prospect – a single payer improved Medicare for all. Not only would the coverage be far more effective, the costs would also be affordable because the financing mechanism is equitable, based on ability to pay.

Instead of pie-in-the-sky AHPs, the NFIB should take a serious look at an improved Medicare for all – the best model for small businesses and for everyone else.

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Private insurers are not controlling spending growth

Posted by on Thursday, Jul 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.

Growth In Spending On Privately Insured Drives Much Of U.S. Health Spending Growth In 2017 And Early 2018

By Corwin N. Rhyan
Altarum, July 19, 2018

A new Altarum research brief estimates private versus public health spending on a timely basis and finds that:

* Spending and price growth among the privately-insured population accelerated in 2017 and early 2018 relative to Medicare and Medicaid, despite very low growth in private insurance enrollment. This reverses the trend seen from 2009 through 2016, when private spending growth was near or below Medicare and Medicaid rates.

* Since the start of the economic recovery in 2009, total Medicaid spending has grown by 72.6%—more than Medicare (50.7%) and private payer spending (49.4%)—largely due to increases in enrollment, although Medicaid spending has slowed significantly, averaging only 2.3% since January 2017.

* On a per enrollee basis, private payer spending has grown 45.9% since 2009, three times the rate of Medicare and Medicaid per enrollee spending.

* Faster rising private prices are a major factor in the divergence between public and private spending growth, with private prices up 8.2% since June 2014, although recent data show an uptick in public prices as well.

* Breaking down spending growth attributable to enrollment, prices, and utilization & intensity, we find more than half the growth in both Medicare and Medicaid spending since 2014 is due to higher enrollment, while private spending growth over this period has been driven almost entirely by higher prices and increased utilization & intensity, in nearly equal measure.…

This Altarum study shows that half of the growth in spending in Medicaid and Medicare has been due to the increased enrollment in each of these programs. In contrast, there has been little increase in enrollment in private plans so almost all of the spending increase has been due to higher prices and due to increased utilization & intensity of care.

Unlike the total spending increases in each sector, Figure 3 on page 4 of their report (link above) demonstrates the spending increase per enrollee in each sector. Clearly the private plans have been ineffective in controlling prices and in controlling utilization & intensity of care, whereas the government programs – Medicaid and Medicare – have been quite effective, resulting in a much slower spending increase per enrollee.

With everyone being concerned about our very high health care spending, the lesson here shouldn’t be too difficult. Don’t use private health plans to try to control spending. Instead improve Medicare and expand it to cover everyone; that will place us on a sustainable spending trajectory.

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Health insurers are after your personal data

Posted by on Wednesday, Jul 18, 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 Insurers Are Vacuuming Up Details About You — And It Could Raise Your Rates

By Marshall Allen
ProPublica, July 17, 2018


To an outsider, the fancy booths at last month’s health insurance industry gathering in San Diego aren’t very compelling. A handful of companies pitching “lifestyle” data and salespeople touting jargony phrases like “social determinants of health.”

But dig deeper and the implications of what they’re selling might give many patients pause: A future in which everything you do — the things you buy, the food you eat, the time you spend watching TV — may help determine how much you pay for health insurance.

With little public scrutiny, the health insurance industry has joined forces with data brokers to vacuum up personal details about hundreds of millions of Americans, including, odds are, many readers of this story. The companies are tracking your race, education level, TV habits, marital status, net worth. They’re collecting what you post on social media, whether you’re behind on your bills, what you order online. Then they feed this information into complicated computer algorithms that spit out predictions about how much your health care could cost them.

Are you a woman who recently changed your name? You could be newly married and have a pricey pregnancy pending. Or maybe you’re stressed and anxious from a recent divorce. That, too, the computer models predict, may run up your medical bills.

Are you a woman who’s purchased plus-size clothing? You’re considered at risk of depression. Mental health care can be expensive.

Low-income and a minority? That means, the data brokers say, you are more likely to live in a dilapidated and dangerous neighborhood, increasing your health risks.

“We sit on oceans of data,” said Eric McCulley, director of strategic solutions for LexisNexis Risk Solutions, during a conversation at the data firm’s booth. And he isn’t apologetic about using it. “The fact is, our data is in the public domain,” he said. “We didn’t put it out there.”

Insurers contend they use the information to spot health issues in their clients — and flag them so they get services they need. And companies like LexisNexis say the data shouldn’t be used to set prices. But as a research scientist from one company told me: “I can’t say it hasn’t happened.”

At a time when every week brings a new privacy scandal and worries abound about the misuse of personal information, patient advocates and privacy scholars say the insurance industry’s data gathering runs counter to its touted, and federally required, allegiance to patients’ medical privacy. The Health Insurance Portability and Accountability Act, or HIPAA, only protects medical information.

Patient advocates warn that using unverified, error-prone “lifestyle” data to make medical assumptions could lead insurers to improperly price plans — for instance raising rates based on false information — or discriminate against anyone tagged as high cost. And, they say, the use of the data raises thorny questions that should be debated publicly, such as: Should a person’s rates be raised because algorithms say they are more likely to run up medical bills? Such questions would be moot in Europe, where a strict law took effect in May that bans trading in personal data.

This year, ProPublica and NPR are investigating the various tactics the health insurance industry uses to maximize its profits. Understanding these strategies is important because patients — through taxes, cash payments and insurance premiums — are the ones funding the entire health care system. Yet the industry’s bewildering web of strategies and inside deals often have little to do with patients’ needs. As the series’ first story showed, contrary to popular belief, lower bills aren’t health insurers’ top priority.

To understand the scope of what they were offering, consider Optum. The company, owned by the massive UnitedHealth Group, has collected the medical diagnoses, tests, prescriptions, costs and socioeconomic data of 150 million Americans going back to 1993, according to its marketing materials. The company says it uses the information to link patients’ medical outcomes and costs to details like their level of education, net worth, family structure and race. An Optum spokesman said the socioeconomic data is de-identified and is not used for pricing health plans.

Optum’s marketing materials also boast that it now has access to even more. In 2016, the company filed a patent application to gather what people share on platforms like Facebook and Twitter, and link this material to the person’s clinical and payment information. A company spokesman said in an email that the patent application never went anywhere. But the company’s current marketing materials say it combines claims and clinical information with social media interactions.

But patient advocates are skeptical health insurers have altruistic designs on people’s personal information.

The industry has a history of boosting profits by signing up healthy people and finding ways to avoid sick people — called “cherry-picking” and “lemon-dropping,” experts say. Among the classic examples: A company was accused of putting its enrollment office on the third floor of a building without an elevator, so only healthy patients could make the trek to sign up. Another tried to appeal to spry seniors by holding square dances.

The Affordable Care Act prohibits insurers from denying people coverage based on pre-existing health conditions or charging sick people more for individual or small group plans. But experts said patients’ personal information could still be used for marketing, and to assess risks and determine the prices of certain plans. And the Trump administration is promoting short-term health plans, which do allow insurers to deny coverage to sick patients.

Robert Greenwald, faculty director of Harvard Law School’s Center for Health Law and Policy Innovation, said insurance companies still cherry-pick, but now they’re subtler. The center analyzes health insurance plans to see if they discriminate. He said insurers will do things like failing to include enough information about which drugs a plan covers — which pushes sick people who need specific medications elsewhere. Or they may change the things a plan covers, or how much a patient has to pay for a type of care, after a patient has enrolled. Or, Greenwald added, they might exclude or limit certain types of providers from their networks — like those who have skill caring for patients with HIV or hepatitis C.

At the IBM Watson Health booth, Kevin Ruane, a senior consulting scientist, told me that the company surveys 80,000 Americans a year to assess lifestyle, attitudes and behaviors that could relate to health care. Participants are asked whether they trust their doctor, have financial problems, go online, or own a Fitbit and similar questions. The responses of hundreds of adjacent households are analyzed together to identify social and economic factors for an area.

Ruane said he has used IBM Watson Health’s socioeconomic analysis to help insurance companies assess a potential market. The ACA increased the value of such assessments, experts say, because companies often don’t know the medical history of people seeking coverage. A region with too many sick people, or with patients who don’t take care of themselves, might not be worth the risk.

The LexisNexis booth was emblazoned with the slogan “Data. Insight. Action.” The company said it uses 442 non-medical personal attributes to predict a person’s medical costs. Its cache includes more than 78 billion records from more than 10,000 public and proprietary sources, including people’s cellphone numbers, criminal records, bankruptcies, property records, neighborhood safety and more. The information is used to predict patients’ health risks and costs in eight areas, including how often they are likely to visit emergency rooms, their total cost, their pharmacy costs, their motivation to stay healthy and their stress levels.

McCulley and others at LexisNexis insist the scores are only used to help patients get the care they need and not to determine how much someone would pay for their health insurance. The company cited three different federal laws that restricted them and their clients from using the scores in that way. But privacy experts said none of the laws cited by the company bar the practice. The company backed off the assertions when I pointed that the laws did not seem to apply.

Before the conference, I’d seen a press release announcing that the largest health actuarial firm in the world, Milliman, was now using the LexisNexis scores. I tracked down Marcos Dachary, who works in business development for Milliman. Actuaries calculate health care risks and help set the price of premiums for insurers. I asked Dachary if Milliman was using the LexisNexis scores to price health plans and he said: “There could be an opportunity.”

Data scientist Cathy O’Neil said drawing conclusions about health risks on such data could lead to a bias against some poor people. It would be easy to infer they are prone to costly illnesses based on their backgrounds and living conditions, said O’Neil, author of the book “Weapons of Math Destruction,” which looked at how algorithms can increase inequality. That could lead to poor people being charged more, making it harder for them to get the care they need, she said. Employers, she said, could even decide not to hire people with data points that could indicate high medical costs in the future.…

It’s obvious that massive amounts of data are being collected on each one of us, and this data is being purchased by the private health insurance companies. They say that this data is only being used to help patients get the care they need, but does that really fit with the business model of the insurers?

Are they really paying for this data in order to be able to pay for more care that patients would not be receiving except for the wisdom of the insurers in identifying the medical needs of their clients and then arranging for additional care?

When you listen to the quarterly reports of the major health insurers, they boast about increased revenues, increased profits, and low medical loss ratios – the latter being important because it shows that they are being successful in limiting the amount of health care that they pay for. That seems to be the opposite of their avowed use of these massive pools of data to obtain more care for their clients.

Furthermore, when the United States is already infamous for its profoundly wasteful administrative excesses in health care, doesn’t it seem illogical that we would expand these excesses through this superfluous, massive data management?

The full ProPublica article is quite long, but it is worth reading if you wish to understand more details about this nefarious mismanagement of our personal data.

If we had a single payer, improved Medicare for all, would our public stewards be accessing this massive amount of data in order to stratify the needs of various sectors of patients, avoiding those with greater needs? Of course not. The system would be designed to serve all patients well, including those with the greatest needs. The sooner we get rid of the private insurers, the better.

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Since the Republican Congress failed to repeal and replace the Affordable Care Act (ACA), or Obamacare, over the last nine and a half years, including the first 18 months of the Trump presidency, there is widespread confusion and anger in  the public as to what is really going on in U. S. health care.

Trump issued an executive order in October 2017 intended to hasten the demise of the ACA. It called for government agencies to expand association health plans, expand marketing of low-cost barebones health plans of less than one year, increasingly shift responsibility for the burden of health care to the states, and encourage wider use of health reimbursement accounts (HRAs) by employers for their employees. None of these will improve access to affordable health care. Even those already covered by Medicare and Medicaid were worried about threatened cutbacks and increased costs as Congressional Republicans passed  their December 2017 tax bill that slashed “entitlement” funding to help pay down the 1.5 trillion deficit.

As columnist David Leonhardt observed:  TrumpCare has begun, not through legislation but through executive action . . . In doing so, it has both the short-term goal (have the federal government do less to help vulnerable citizens) and a long-term goal (sabotage ObamaCare, so that Congress can more easily repeal the law.) (1)

The ACA has been sabotaged and undermined by past and ongoing actions of the Trump administration to the extent that Trump and the Republicans now own TrumpCare. Lies have pervaded this unstable period under the false cloak of improving health care. With the repeal of the individual mandate as part of the 2017 tax bill, Trump bragged:

In this bill, not only do we have massive tax cuts and tax reform, we have essentially repealed ObamaCare, and we’ll come up with something that is much better. ObamaCare has been repealed in this bill. (2)

Chaos reigns throughout our increasingly expensive, fragmented, and dysfunctional health care system. Corporate mergers and profits are the order of the day, with health care becoming less affordable and less accessible. Private health insurers are dictating the terms of the unfettered marketplace as Americans continue to lose choice of physicians, other providers, and hospitals in restrictive networks subject to change at any time. Some insurers are exiting the market while others are raising premiums by more than 50 percent in a number of states. Family budgets are strained to the limits as many patients forgo necessary care, have worse outcomes if and when they finally get care, and often have to choose between food and medications. While all this is going on, health care stock prices have gone up almost four-fold since the ACA was enacted in 2010, compared to 116 percent in other sectors.  (3)

According to the latest polls by the Wall Street Journal/NBC News, health care is the # 1 issue among voters across the political spectrum, even above the economy. (4)  The Pew Research Center found in January 2017 that 60 percent of Americans felt the government should be responsible for ensuring health care coverage for all Americans. (5) A recent poll by the Kaiser Family Foundation found that one-half of respondents believe that the ACA’s marketplaces are falling apart. (6)

In this series of blogs over the next three months, I will try to give voters a better understanding of the threats of TrumpCare to their own health care and to consider their options during the coming 2018 and 2020 election cycles.

Adapted in part from my forthcoming book, Trumpcare: Lies, Broken Promises, How it is Failing, And What Should Be Done and the recently released pamphlet, Common Sense about Health Care at a Crossroads in the 2018 Congress


NYT: Austin Frakt accurately describes administrative waste in health care

Posted by on Tuesday, Jul 17, 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.

Hidden From View: The Astonishingly High Administrative Costs of U.S. Health Care

By Austin Frakt
The New York Times, July 16, 2018

It takes only a glance at a hospital bill or at the myriad choices you may have for health care coverage to get a sense of the bewildering complexity of health care financing in the United States. That complexity doesn’t just exact a cognitive cost. It also comes with administrative costs that are largely hidden from view but that we all pay.

Because they’re not directly related to patient care, we rarely think about administrative costs. They’re high.

A widely cited study published in The New England Journal of Medicine used data from 1999 to estimate that about 30 percent of American health care expenditures were the result of administration, about twice what it is in Canada. If the figures hold today, they mean that out of the average of about $19,000 that U.S. workers and their employers pay for family coverage each year, $5,700 goes toward administrative costs.

That New England Journal of Medicine study is still the only one on administrative costs that encompasses the entire health system. Many other more recent studies examine important portions of it, however. The story remains the same: Like the overall cost of the U.S. health system, its administrative cost alone is No. 1 in the world.

One obvious source of complexity of the American health system is its multiplicity of payers. A typical hospital has to contend not just with several public health programs, like Medicare and Medicaid, but also with many private insurers, each with its own set of procedures and forms (whether electronic or paper) for billing and collecting payment. By one estimate, 80 percent of the billing-related costs in the United States are because of contending with this added complexity.

“The extraordinary costs we see are not because of administrative slack or because health care leaders don’t try to economize,” said Kevin Schulman, a professor of medicine at Duke. “The high administrative costs are functions of the system’s complexity.”

“One can have choice without costly complexity,” said Barak Richman, a professor of law at Duke. “Switzerland and Germany, for example, have lower administrative costs than the U.S. but exhibit a robust choice of health insurers.”


Reader Comment:

By Don McCanne, M.D.

European private plans such as those in Switzerland and the Netherlands have very little similarity to private plans in the United States since they are very tightly regulated. Changing our fragmented system of public and private plans into a system of highly regulated private plans would be about as disruptive as improving Medicare and providing it to everyone. But the efficiencies of an improved Medicare for all would be much greater (lower administrative costs), and the financing would be more equitable, not to mention that there would be a multitude of other advantages through an improved Medicare for all.

It’s clear that we can’t continue with the same dysfunctional system. If we are going to change it, we might as well do it right.…

It is refreshing to see The New York Times publish an article accurately describing the profound administrative waste that uniquely characterizes the health care financing system in the United States. The public needs to understand how huge this waste is in order to better understand how we would be able to pay for a health care system that was expanded to include everyone without requiring deductibles and copayments.

Austin Frakt’s well researched article includes links to several classic articles on administrative excesses, some of which were authored by the PNHP leadership, especially cofounders Steffie Woolhandler and David Himmelstein. The article is well worth retaining to keep as a reference on administrative waste.

A well designed single payer system – an improved Medicare for all – not only recovers most of the administrative waste (while continuing to finance essential administrative services), it also attacks the problem of out-of-control health care pricing. Other single payer policies such as improving allocation of our health care resources also would make our health care system more affordable and equitable so that all of us can be assured that we could receive the essential health care services that we need.

That starts with getting rid of silly ideas such as the concept that patient-consumers can make health care affordable by shopping wisely, or that health care professionals need to be more accountable for costs when they are already swamped just trying to take care of their patients. Rather we need to begin by recovering the half a trillion dollars that we are wasting on administration and exorbitant pricing and redirecting that to patient care instead.

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The health coach is ready to see you

Posted by on Monday, Jul 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.

Transforming Health Care from the Ground Up

By Vijay Govindarajan and Ravi Ramamurti
Harvard Business Review, July-August 2018

The U.S. health care system desperately needs reform to rein in costs, improve quality, and expand access. Federal policy changes are essential, of course; however, top-down solutions alone cannot fix a wasteful and misdirected system. The industry also needs transformation from the bottom up, by entrepreneurs and intrapreneurs.

Innovation by Start-Ups: Iora Health

Rushika Fernandopulle realized that in order to build the right business model and scale it, he needed private capital. In 2010 he cofounded Iora Health, a for-profit company, and raised more than $6 million from three venture capital firms. The new company opened four offices, each with a self-insured employer or union benefits manager as its chief insurance partner. From the start, he wanted to be sure his model could be scaled geographically, so he selected sites from different parts of the country with different patient mixes. One was in Hanover, New Hampshire (in partnership with Dartmouth College), another in Las Vegas (with the Culinary Health Fund), the third in Brooklyn (with Freelancers Union), and the fourth in Dorchester, Massachusetts (with the New England Carpenters Benefit Funds).

This time, Fernandopulle didn’t mess around with partial solutions. He instituted a fully capitated payment system focused on primary care that required no fees, no coinsurance, and no copays. Instead Iora charged insurers a flat monthly fee per member that was twice their historical spending on primary care. He hired four health coaches for every doctor—paying them a fifth of a doctor’s salary and half of a nurse’s. He spent an outsize chunk of his start-up money on a custom IT system—and had no reservations about the cost.

Patient focus.

Iora’s goal was not to deliver health care but to empower patients to take control of their own health. “What we are really trying to do is change behavior,” Fernandopulle told us. At Iora, that change was driven by three innovations that worked together in a virtuous cycle: a capitation-based business model, a health coach for every patient, and a customized IT platform. Capitated payments eliminated any concern about whether a particular patient interaction was billable, so consultations that once required a visit to a doctor’s office could now take place via convenient technologies such as phone, e-mail, and Skype, and they didn’t necessarily involve a doctor. That cleared the way for more involvement from health coaches, whose frequent patient interactions were facilitated by the IT platform. The platform, which tracked all patient data and made it available to doctors, health coaches, and patients, was designed not to facilitate fee-for-service billing but to enable better health outcomes.

Iora wasn’t the only provider to use health coaches in its practice. Omada Health and others used them, too, but they recruited coaches with prior health care experience, whereas Iora recruited people with qualities such as empathy, compassion, and gregariousness and then trained them in the medical skills they would need.

Iora’s health coaches proactively managed each patient’s well-being and intervened the moment trouble arose, especially with chronic-care patients whose costliest problem was noncompliance. Health coaches did some work that doctors and nurses did—such as taking vital signs and drawing blood—but they also engaged patients in new ways. They ran smoking cessation clinics, and they took diabetic patients to the grocery store and helped them shop for food. They led Zumba classes and served as confidants and cheerleaders. They trained patients to manage some of their care, such as monitoring blood pressure and insulin levels. This kind of task shifting, from doctors to health coaches and from health coaches to patients, saved money. More important, the coaches were better at many aspects of care than doctors—and they loved their work. But it was the capitated payment system that was the real game changer. Under the legacy fee-for-service systems, providers need a high volume of patient visits and procedures in order to make money. Under its capitation system, Iora makes money only if its patients stay healthy and thus require fewer tests and procedures. It was a completely different business model, one focused on value, relationships, outcomes, and the long game. Hybrid payment systems like Renaissance, Fernandopulle realized, created internal conflict. It had to be all or nothing. Iora’s capitated model would save on administrative costs by reducing paperwork and would encourage other cost-saving measures to make the most of the flat-fee dollars. Iora clinics, for example, performed many of their own lab tests and processed their own blood work, which was cheaper and faster than sending the tests out. But the big savings would come from the investment in intensive and creative primary care that would reduce downstream expense on specialist and hospital care as patients stayed healthier. For patients with chronic conditions, Fernandopulle expected to see returns in the first year; the payoff for healthier patients would take longer. But he believed that every dollar he saved his partners in fees for ultrasounds, kidney dialysis, bypass surgeries, and other downstream costs generated additional buy-in for his capitated model.

Cost control.

When necessary, Iora provided patients with specialist care, but there, too, Iora saved money by contracting specialists as consultants to the primary care practice—essentially inviting cardiologists, nephrologists, and others to join the gig economy. When Fernandopulle asked the head of endocrinology at a top hospital what percentage of endocrine clinic patients could be managed by a primary care physician with a little expert advice by phone or e-mail, the answer was an astonishing 80%. A formal study of e-consultations by PCPs across 10 specialty areas, including neurology, rheumatology, dermatology, and nephrology, confirmed that on average, primary care physicians were able to address problems in those areas for 60% of patients. By 2017, seven years after he launched Iora Health, Fernandopulle’s premise had proved itself. It had reduced hospitalizations for its members by 40% and cut total health care spending by 15% to 20%—far beyond the 4% to 5% needed to recoup Iora’s higher spending on primary care. Its patient retention rate was 98%, and its Net Promoter Score among patients was in the 90s. Some 90% of patients had their blood pressure under control, compared with an average of 60% across providers in the industry. Employee attrition, at a mere 2.5%, was off the charts. Iora was increasing the number of patients it served by well over 50% a year, largely by attracting seniors through contracts with Medicare Advantage plans. Iora now has 24 locations in eight cities and employs more than 400 people. It has raised $125 million in venture capital, including from long-term investors such as Rice University’s endowment fund and Singapore’s Temasek.

Lessons for start-up innovators.

Iora’s success, and that of half a dozen other start-ups we studied, suggests some general principles by which innovators can attack U.S. health care’s bloated costs, uneven quality, and access limitations. Fernandopulle and the other visionary founders took a clean-slate approach, building new business models from scratch. They launched ambitious, for-profit ventures right out of the gate. They thought from day one about how to scale their models by tapping into venture capital and private equity funding. They did not hesitate to make big strategic investments, including in technology, as Iora did with its customized IT system. Finally, they thought carefully about what kind of payment system would best fit their purpose, considering risk-sharing alternatives such as capitation and bundled payments.

In our research, we’ve seen several Iora-like start-ups. CareMore, for example, uses health coaches called extensivists to deliver capitated primary care, with a focus on geriatric patients. Other disruptive start-ups we studied look quite different. Consider Health City Cayman Islands, a for-profit hospital launched in 2014 by Dr. Devi Shetty, the founder of Narayana Health in India. Seeking to replicate innovative practices honed in India and to target American patients, Health City opened in a location near the United States but outside its regulatory sphere. This approach involved making innovative, even radical, decisions about where to locate, whether to build or buy (management opted to build from scratch), whom to partner with (it chose Ascension), how to price (bundles), and how to crack the U.S. market. Health City launched as a modest 104-bed facility for cardiology and orthopedic care, but the plan is to develop a large for-profit system, investing $2 billion over the next 10 to 15 years. Health City’s transparent, bundled prices—which are 60% to 75% lower than those in the United States—serve its disruptive strategy of luring American patients from legacy hospitals.

As Fernandopulle points out, if his company and others like it can capture even 20% of the $350 billion in wasted health care spending per year, it would amount to a staggering sum. By our calculation, if companies with Iora’s primary care–focused approach enrolled one-third of America’s projected 55 million seniors in 2020 into Medicare Advantage plans, the country could save $30 billion to $40 billion a year in avoided spending on secondary and tertiary care. And if those companies reaped 20% of the value thus created, their market capitalization could be upwards of $100 billion, even with a price-earnings multiple of just 15.

Numbers like that are a powerful incentive for change. They will no doubt motivate many health care innovators to expand access to quality care, enabling patients to enjoy good health. If you’re looking for a starting point, start there.…

For a health care system that is overpriced and underperforming, it seems that reform should be based on improving our allocation of higher quality essential health care services. By any measure, that requires a top down, comprehensive approach for which governments are best suited. Yet much of the effort comes from the bottom up in the medical-industrial community, with the support and encouragement of business academics such as these authors.

A quick read of the endorsement by Professors Govindarajan and Ramamurti of Rushika Fernandopulle’s creation of Iora seems like just anther description of the successes of venture capital and the individuals driving the innovations. But for those who want to see the changes in our health care system that we desperately need, especially in the financing, Fernandopulle’s model is particularly disconcerting.

In perhaps overly simplified terms, let’s look at what he has done. He begins with venture capital – a financing method designed solely to create monetary rewards – a terrible start when applied to health care since the goal should be to maintain and improve health which requires spending money, not generating more. He then structures his health care model based on primary care, but not the usual team of physicians, nurses and other health care professionals, but rather on an army of health coaches – individuals with no health care qualifications but rather who receive only on-the-job training. These health coaches are intended to replace a significant portion of the functioning of fully trained health care professionals, especially doctors and nurses (ratio of four health coaches to one physician), though much of the work they do is song and dance (taking diabetics grocery shopping, and leading Zumba classes?). For those patients who have more serious problems, often requiring the services of specialists, they have managed to keep the majority of them away from the specialists. They make a big point that a major element of their success is capitation which is why they provide specialized services within the primary care environment. Referring patients out requires paying for those services whereas retaining them within the practice allows them to keep more of their capitation payments (success defined by net profit).

Most of the health care professionals with whom I have been associated would find problems with this. There is something sacred about the science and art of health care as it is applied to the patient. The model described here places business success above all else, and any quasi-semblance of sanctity must fall under other unfamiliar gods that do not frequent the halls of health care justice.

We know what health policies would work to improve the welfare of the American patient. So what is this diversion from health policy science into what some might describe as ethics? Well, that’s precisely it. The business community thrives on matters of money and profits, but the health professions thrive on the well being of the individual.

The authors of this article in Harvard Business Review have simplified this as the advantages of bottom up versus top down management, but if that is what this really is all about, then we need to unify the nation for the top down approach that would bring health care justice to all.

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Higher premiums, higher deductibles, and narrower networks in exchange markets

Posted by on Friday, Jul 13, 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.

The High Cost of Healthcare: Patients See Greater Cost-Shifting and Reduced Coverage in Exchange Markets 2014-2018

Physicians for Fair Coverage, Research by Avalere, July 2018

Executive Summary

The expansion in coverage due to the Affordable Care Act (ACA) increased the number of insured Americans by 20 million. Although access to health insurance has expanded significantly in recent years, and the ACA instituted important protections for patients, those who gained insurance through ACA health insurance exchanges are being offered plans that make them bear an increasing portion of their healthcare costs since the law was implemented. Access to health insurance is not sufficient if patients cannot afford to purchase coverage or utilize their benefits due to high premiums, high out-of-pocket costs, limited networks, and insufficient state and federal patient protections.

This paper outlines the key challenges facing patients in plans insurance companies offer through ACA health insurance exchange markets and details the changes in patient cost-sharing. This paper will demonstrate that:

1. Health plan networks have grown increasingly narrow, limiting patient access to in-network providers, with specialties like anesthesiologists, radiologists, and emergency physicians often out-of-network in exchange plans;

2. Non-subsidized exchange marketplace premiums have increased faster relative to other markets, such as employer-sponsored insurance and Medicare Advantage, since 2014;

3. Deductibles and maximum out-of-pocket limits (MOOPs) have grown across all payers, placing a higher financial burden on sicker patients;

4. Despite the growth in deductibles and MOOPs, cost-sharing for services after the deductible has remained relatively constant, though patients are increasingly required to pay coinsurance to access their care; and

5. Federal and state rules around network adequacy have not kept pace with the growing patient burden.

Key Stats

* In 2017, 68% of healthcare plans in the exchange market offered restrictive networks, compared with 48% in 2014.

* Average ACA exchange market premiums increased 28% from 2014 to 2017.

* Plans covered between 34% – 66% fewer providers than other markets.

* Almost 90% of enrollees in ACA exchange plans had deductibles above $1,300, the IRS definition of a high deductible plan.

* Several top insurance companies saw profit margins in Q1 for 2018 that were the highest in a decade, and all six of the largest insurance companies paid their CEOs over $17 million in 2017.…

Full report:…

A decade ago the individual health insurance market was in total disarray and thus was one of the primary motivators to enact the Affordable Care Act (ACA). Under ACA these plans became more tightly regulated and subsidies inversely related to income were provided to make the premiums and cost-sharing more affordable. How is this working?

To try to keep premiums affordable, the more popular plans were designed to have low actuarial values – the insurers pay a lower percentage of the allowed charges – and the insurers were allowed to limit their networks enabling them to negotiate lower prices. This kept costs down for those eligible for subsidies and credits, but for middle-income individuals who were not eligible, out-of-pocket spending has been excessive and often not affordable.

Has the situation improved since the plans were first implemented? No, it’s worse now. Premiums have increased, high deductibles have become routine, and the use of restrictive networks has expanded, all this while profit margins have increased for the top insurers and their CEOs.

The problem is that this is the nature of private health insurance. Plans are designed to be successful business products. To improve markets they shift risk and costs to patients and they impair patient access to health care through network restrictions and the financial barriers of high deductibles.

Does anybody believe it will get better? Are insurers going to lower their premiums, lower their deductibles, and expand their networks while covering all essential health care benefits? No, they are going to continue to squeeze to enhance their margins. We can anticipate even higher deductibles, higher coinsurance instead of copays, greater tiering of health care services and products, more restrictive access, especially to specialized services, and the new thing will be the introduction of plans with sharply curtailed benefits such as the association health plans that the Trump administration will be pushing.

Yet the politicians have been saying that we need to protect our current system but add the option of being able to purchase a public plan. Some are now latching on to the Medicare for all rhetoric but when pressed they say, “yes, Medicare for all by allowing a buy-in to the Medicare program” – merely a public option with a new but misleading label. Merely adding a public option to our highly dysfunctional, fragmented financing system will have virtually no impact on resolving the problems inherent in our system.

If we want true universality, comprehensiveness, equity, assured access, and affordability for every one us, we are going to have to dump the current system and enact and implement a well designed, single payer, expanded and improved Medicare for all. Nothing else will do, that is unless we are ready to nationalize our entire health care delivery system and convert it into a national health service. Shall we do a poll?

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‘Medicare Advantage Premium Support For All’ – a terrible proposal

Posted by on Thursday, Jul 12, 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.

Creating Medicare Advantage Premium Support For All, Part 4: Financing

By Billy Wynne
Health Affairs Blog, July 9, 2018

In this post, I will illustrate how current spending by the federal government, states, and employers could be repurposed to fund universal Medicare coverage that emphasizes competition among private, Medicare Advantage plans and the traditional fee-for-service option, deployed via a premium support benefit model.

As pundits, commentators, and industry stakeholders begin to converge on the wisdom of “Medicare Advantage for All,” let’s take another step down the path of specifying exactly what that means and why it is both economically and politically viable.

The Tally

Starting with the current Medicare per capita spending of $12,139, age-adjusting that by 44 percent, then taking a 4 percent haircut for premium support-induced competition yields an average cost of providing the existing Medicare benefit to a non-Medicare enrollee of $5,127. That is more than 10 percent less than the per capita funding available from current non-Medicare health care programs ($5,721).

(Here I pause for rabid, health policy wonk golf clapping.)

I’m not here to fool anyone or advance a political agenda. I just think our current approach is radically, audaciously absurd. It’s like we’re investing every last morsel of our industriousness and ingenuity into getting it wrong. I posit that, with about the same amount of effort, we can get it right.

(For a full understanding of the proposal by Billy Wynne you should read all four of his posts. Links to the previous three posts are available in Part 4.)


Posted Comment:

By Don McCanne, M.D.

Premium support is supposedly dependent on competition between private plans, but we’ve had competing private plans for well over half a century, and yet our costs are highest of all nations. This also neglects the profound administrative waste that is uniquely characteristic of our fragmented, dysfunctional health care financing system.

Besides high prices and administrative waste, the premium support model would also perpetuate the loss of choice of health care professionals and institutions because of the dependence on provider networks. Perhaps even worse, the perpetuation of high deductibles and other cost sharing would continue to impair access because of lack of affordability, not to mention creating financial hardship, especially for America’s working families.

A model that would correct these defects without increasing spending would be a single payer, improved Medicare for all. The efficiency of such a system would save a few hundred billion dollars in administrative costs, and administered (negotiated) prices would become sustainable over time. Planning and separate budgeting of capital improvements would improve allocation of our health care resources. That wouldn’t reduce spending much, but it would redistribute it to better serve the currently uninsured and underinsured. Everyone would have free choice of actual health care, not the artificial choice of health plan intermediaries. And the system would be funded equitably though progressive tax policies without the necessity of erecting cost-sharing financial barriers to care.

Considering the money that’s already being wasted in private Medicare Advantage plans, a “Medicare Advantage for All” seems to only perpetuate the high costs and impaired choices in our current health care financing system. It is no wonder that AHIP finds it attractive, but instead we should be supporting reform that would be attractive to patients.…


Financing Medicare Into The Future: Premium Support Fails The Risk-Bearing Test

By Sherry A. Glied
Health Affairs, July 2018


One often-discussed option for controlling Medicare spending is to switch to a premium-support design. This would shift part of the risk of future health care cost increases from the federal treasury to Medicare beneficiaries. The economics of risk bearing suggests that this would be a mistake for three reasons. First, political decisions, not beneficiary choices, are the critical determinants of future health care costs. Second, only Congress can take into account the consequences of cost-containment decisions for both current and future generations. Third, the federal government is best able to diversify against the risk of future cost growth. Tying Medicare spending to the government’s budget so that Congress sees the benefits of tough cost containment choices is the only way to force the program to make those politically difficult decisions. Economic efficiency is served by retaining the program’s current structure instead of shifting risk to beneficiaries.

From the Introduction

Some members of Congress see entitlement reform—namely, a restructured Medicare program—as the best strategy for bringing federal expenditures in line with newly reduced revenues, particularly as the baby-boom generation swells Medicare rolls.

One frequently touted option is to shift the program to a premium-support structure. Under this structure, the federal government would provide each Medicare beneficiary with a specified allotment (sometimes called a voucher or defined contribution) that the beneficiary could use to purchase health insurance. Beneficiaries would be responsible for all additional premium costs if they chose insurance costing more than the allotted amount.

In some respects, premium support resembles the current Medicare Advantage program, under which many beneficiaries opt in to private health plans. If beneficiaries choose a plan that costs less than the Medicare Advantage benchmark, which is based on the local per capita cost of traditional fee-for-service Medicare, they gain extra benefits and save money on premiums and cost sharing. But premium support would change that model in one very significant respect.

The current Medicare Advantage benchmark rises over time as Medicare utilization and congressionally mandated provider payment levels rise. The savings from premium-support plans, however, are realized by changing that benchmark so that it rises more slowly over time.

Advocates of premium support argue that it would control Medicare expenditures by harnessing competition among health plans and by giving beneficiaries strong incentives to make wise health plan choices. That can be debated. But what is clear is that premium support would transform the federal government’s current open-ended obligation, or entitlement, by making the government’s liability more fixed and predictable and shifting much of the risk and burden of unanticipated future health care cost increases to Medicare beneficiaries. Such a reallocation is bad policy because it leads to inefficient risk bearing. It is inconsistent with the clear guidance that economics provides about how to most efficiently allocate risk.

Who should bear the uncertainty of cost projections?

Legislators see the uncertainty of Medicare spending forecasts and the challenges of designing and implementing legislation to slow the growth of Medicare spending as reasons to shift more of the risk of future Medicare spending growth to beneficiaries through a move to premium support. This intuition is backward. Political decisions, not beneficiary choices, are the critical determinants of future health care costs.

Leaving beneficiaries with the responsibility for cost increases also doesn’t make sense. Beneficiaries cannot plausibly forecast their future health care costs, so they cannot effectively save to protect themselves against these costs. They also cannot turn to private insurance for protection. No private market does or can exist against risks that are highly correlated across everyone in a society, and the costs associated with political decisions and unforeseen health care technologies are exemplars of such correlated costs.

The federal government is best situated to bear the risks associated with unanticipated changes in future health care costs, the federal government is best able to shape the future costs of the program, and only the federal government can appropriately trade off current costs and future technological advances against each other. The economic case is clear: The federal government, not individual beneficiaries, should bear the risk of future increases in the cost of Medicare. Premium support is bad economics.…

You can access on the PNHP website ( a multitude of articles on why competing private Medicare Advantage plans and the financing of them through premium support are terrible ideas. The quirk covered today has to do with the extreme to which others are going in order to latch onto the popular “Medicare for All” rhetoric to advance their inadequate or detrimental schemes for reform.

“Medicare Advantage Premium Support For All” is a real head-shaker, representing policies that are just about the opposite of what we mean by a “single payer, improved Medicare for all” (my posted comment on the HA Blog, reproduced above, clarifies this).

Sherry Glied, dean of the Robert F. Wagner Graduate School of Public Service at New York University, explains why premium support is bad economics. She concludes, “The federal government, not individual beneficiaries, should bear the risk of future increases in the cost of Medicare.” That should apply to all of us, and that is why we need an improved Medicare for all.

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