Medicare Advantage plans pay hospitals less than does traditional Medicare

Posted by on Friday, Aug 19, 2016

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.

By Laurence C. Baker, M. Kate Bundorf, Aileen M. Devlin and Daniel P. Kessler
Health Affairs, August 2016


There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

From the Discussion

Knowing how Medicare Advantage prices compare to those of FFS Medicare is important for public policy. Health spending is the product of price and quantity. If Medicare Advantage prices are lower than those of FFS Medicare, then Medicare can obtain the same quantity of services for less money through Medicare Advantage than through FFS Medicare.

Contrary to conventional wisdom, we found that Medicare Advantage plans paid lower prices for hospital services than FFS Medicare — around 8 percent lower in both 2009 and 2012 — once the DRG and geographic-area mix of FFS Medicare was made comparable to those of Medicare Advantage.

If differences in hospital mix are also accounted for, Medicare Advantage’s hospital prices are about 5.6 percent less than those of FFS Medicare. Thus, about a third of the 8 percent difference is attributable to the narrower hospital networks in Medicare Advantage, compared to FFS Medicare.

Our results also show how Medicare Advantage can be used to get a better deal (at least from hospitals) for the Medicare program as a whole, by adjusting administered prices across geographic areas and DRGs to better reflect the market.

Finally, consistent with previous research, we found that the rates commercial plans pay to hospitals are significantly higher than those of either Medicare Advantage or FFS Medicare and that they are rising.

The pro-market authors of this study have shown that the private Medicare Advantage plans pay hospitals less than traditional Medicare pays, concluding that the private plans “get a better deal for the Medicare program.” But that conclusion is not true if you look at the whole picture.

Because the private Medicare Advantage plans were being paid more than what was being paid for comparable care in the traditional Medicare program, Congress included in the Affordable Care Act adjustments to reduce the overpayments. However, the private plans have continued with their mastery of gaming the system to increase their payment rates, such as selective marketing to healthier populations and upcoding to receive greater payments through risk adjustment. This has been with the complicity of the people in HHS who have used innovative administrative tools and creative accounting to more than offset the required reductions. The private plans are still receiving greater payments than are being made for comparable patients in the traditional Medicare program.

Since the private plans are receiving larger payments, and, according to this study, are paying less for health care, the Medicare program is getting a worse deal, and it is the private insurers themselves who are getting a great deal, at a cost to taxpayers. This extra money that the insurers are siphoning out of the system is going to overpriced administrative services and, yes, to extra profits.

Although the private insurers are pulling out of the ACA exchanges because they cannot make their business model work there, they boast to their investors that their commercial accounts are highly profitable (employer-sponsored plans) and that their government accounts – especially the Medicare Advantage plans – are producing extraordinary returns for the investors (and humongous compensation packages for the corporate executives). We are paying for this through higher premiums for private plans and greater taxes for privately-managed government programs. A well designed single payer system should fix that.

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Bernie Sanders is not giving up on Medicare for all

Posted by on Wednesday, Aug 17, 2016

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.

Sanders Statement on Aetna’s Decision to Withdraw from Health Insurance Exchanges

By Senator Bernie Sanders
August 16, 2016

U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement Tuesday after Aetna announced plans to withdraw from Affordable Care Act health exchanges in 11 of 15 states where it currently operates:

“It is disappointing that Aetna has joined other large for-profit health insurance companies in pulling out of the insurance marketplace. Despite the Affordable Care Act bringing them millions more paying customers than ever before, these companies are more concerned with making huge profits than ensuring access to health care for all Americans.

“In my view, the provision of health care cannot continue to be dependent upon the whims and market projections of large private insurance companies whose only goal is to make as much profit as possible. That is why we need to join every other major country on earth and guarantee health care to all as a right, not a privilege. That is also why we need to pass a Medicare-for-all single-payer system. I will reintroduce legislation to do that in the next session of Congress, hopefully as part of the Democratic Senate majority.”

Since the Clinton Camp was successful in keeping single payer out of the Democratic Party platform, much of the media seems to believe that it has completely gone away as an issue. The good news is that Bernie Sanders assures us that it hasn’t. We need to do our part to be sure that the nation knows that.

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Aetna, UnitedHealth and Humana provide important lesson on feasibility

Posted by on Tuesday, Aug 16, 2016

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

Aetna to Quit Most Obamacare Markets, Joining Major Insurers

By Zachary Tracer
Bloomberg, August 15, 2016

Health insurer Aetna Inc. will stop selling individual Obamacare plans next year in 11 of the 15 states where it had been participating in the program, joining other major insurers that have pulled out of the government-run markets in the face of mounting losses.

While the Affordable Care Act, known as Obamacare, has brought coverage to millions, the new markets have proven volatile for some of the largest for-profit insurers. Aetna said earlier this year that it expected to lose $300 million on the plans. UnitedHealth Group Inc. and Humana Inc., which Aetna has agreed to buy for $37 billion, are also pulling out after posting hundreds of millions of dollars of losses.

“The vast majority of payers have experienced continued financial stress within their individual public exchange business,” Aetna Chief Executive Officer Mark Bertolini said in the statement. “Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool.”


Aetna to Pull Back From Public Health Care Exchanges

By Robert Pear
The New York Times, August 16, 2016

Kevin J. Counihan, the chief executive of the federal insurance exchange, said the marketplace would remain strong and vibrant despite Aetna’s decision.

“It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality, rather than by denying coverage to people with pre-existing conditions,” Mr. Counihan said Monday.

Three of the nation’s largest insurers – Aetna, UnitedHealth and Humana – are pulling out of the ACA insurance exchanges because they have been unable to use their business model to make a profit. Although over fourth-fifths of enrollees are receiving government subsidies for these plans, that is not enough for the insurers. They also want the government to pay for those who need significant amounts of care (reinsurance). They want to abandon covering risk while they sell us wasteful administrative services.

The failure stems from the fact that our public administrators and legislators bent over backwards to try to make reform work for the private insurers, but health care is now so expensive that the insurers’ model requires unaffordable premiums and unaffordable deductibles and other cost sharing. They pushed the limit on premiums and deductibles and that has resulted in tens of millions remaining uninsured or unable to pay their out-of-pocket costs.

And the government’s response? The marketplace remains “strong and vibrant” because insurers compete on “cost and quality” rather than “denying coverage to those with pre-existing conditions.” Yet the nation’s largest insurers cannot compete on those terms.

It is difficult to believe that members of the administration and Congress are so dense that they cannot see that it is this model of health care financing that is creating so many of our problems. Mention a model that actually does work – single payer – and they plead that it is not feasible, that it is not capable of being done. But they have already proven that the fragmented system under ACA is not capable of covering everyone with affordable health care. It is not a feasible method of ensuring affordable health care for all. Single payer is.

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TPP and pharmaceutical regulation in Canada and Australia

Posted by on Monday, Aug 15, 2016

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 Trans Pacific Partnership Agreement and Pharmaceutical Regulation in Canada and Australia

By Joel Lexchin and Deborah Gleeson
International Journal of Health Services, August 11, 2016


The Trans Pacific Partnership Agreement (TPP) is a large regional trade agreement involving 12 countries. It was signed in principle in February 2016 but has not yet been ratified in any of the participating countries. The TPP provisions place a range of constraints on how governments regulate the pharmaceutical sector and set prices for medicines. This article presents a prospective policy analysis of the possible effects of the TPP on these two points in Canada and Australia. Five chapters of relevance to pharmaceutical policy are analyzed: chapters on Technical Barriers to Trade (Chapter 8), Intellectual Property (Chapter 18), Investment (Chapter 9), Dispute Resolution (Chapter 28), and an annex of the chapter on Transparency and Anti-Corruption (Chapter 26, Annex 26-A). The article concludes that the TPP could have profound effects on the criteria these countries use to decide on drug safety and effectiveness, how new drugs are approved (or not) for marketing, post-market surveillance and inspection, the listing of drugs on public formularies, and how individual drugs are priced in the future. Furthermore, the TPP, if ratified and enforced, will reduce future policy flexibility to address the increasing challenge of rising drug prices.

From the Conclusion

The final text of the TPP Agreement holds significant possible risks for pharmaceutical regulation and access to affordable medicines in both Australia and Canada. For Australia, the final provisions related to biologic products in the intellectual property chapter are worryingly ambiguous and unclear. This ambiguity was intended to be constructive, but it may have unintended effects if the United States insists on a certain interpretation, in the event of a dispute, or if the provisions have a chilling effect on future regulatory reform to bring biosimilars to the market more speedily.

Aside from the biologics provisions, there are a number of other provisions in the intellectual property chapter that will lock in existing policy settings and could potentially frustrate future reform efforts to reduce pharmaceutical expenditure in both Australia and Canada. Adopting detailed, prescriptive policy settings negotiated in a fraught political context—largely out of the view of stakeholders and involving bargaining and trade-offs between the objectives of different sectors—does not amount to sensible health or intellectual property policy making, which is attuned to current and future domestic needs.

The TPP’s investment chapter, and in particular its investor-state dispute settlement mechanism, also bring new threats to the affordability of medicines. It is likely that multinational pharmaceutical companies will quickly take advantage of this new avenue, along with the provisions in Chapter 8 on the Technical Barriers to Trade, to contest and frustrate Australia’s and Canada’s pharmaceutical policy making.

It is also worth repeating that the U.S. pharmaceutical industry was not satisfied with the outcome of the TPP negotiations, especially with respect to the provisions on intellectual property rights. As a result, it is likely the industry will be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.

The Trans Pacific Partnership trade agreement (TPP) has raised concerns about giving private sector industries too much control over the public affairs of participating nations. In health care we are particularly concerned about the benefits that the agreement would provide to the pharmaceutical sector at a cost to the citizens of participating nations.

Some have suggested that adopting a single payer system would protect the United States since the government could negotiate as a monopsony to ensure availability and fair pricing of their products. But this article discusses the problems that Canada and Australia could face with ratification of TPP – problems that would not be prevented by their single payer systems.

In a previous post I had mentioned, as a typical concern, that the industry was successful in including in TPP the principle that they would be rewarded with the value that use of their products would provide to patients. Thus the drugs for hepatitis C that reduce morbidity and prolong life should command the high prices that they do simply because the pharmaceutical firms  believe that they should have ownership of the benefit of their products transferred to them regardless of the fact that research, production and distribution costs may be a very small fraction of the prices they wish to command. It takes a lot of gall to support the concept that “I saved your life therefore I own the value of your life.”

Although both leading presidential candidates have stated their opposition to TPP, there is considerable pressure to ratify TPP during the lame duck session – an approach which is supported by President Obama. Also Hillary Clinton, overwhelmingly favored to win the election, has previously supported TPP and likely will not give more than token verbal opposition to ratification, allowing leeway for President Obama to orchestrate the process.

If TPP is ratified, it is likely that the U.S. pharmaceutical industry would “be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.” As this article indicates, that would be harmful to Canada and Australia plus other participating nations, but it would also be harmful to the people of the United States as well, sacrificing our health for the wealth of the drug industry investors.

More generally, just because the presidential candidates of the two major parties have expressed token opposition, we should not relax our efforts to inform the public that the TPP is designed to make the rich much richer at the cost of working families in participating nations.

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Two mergers of health insurance giants in the U. S.—Anthem/Cigna and Aetna/Humana—are in process, although now being challenged in the courts. If approved, they will collectively cover more than 132 million Americans, controlling most of the market share for private health insurance in this country (1). With less and less competition in concentrated markets, the industry has wide latitude to set their premiums with little regulation. It threatens to leave the Affordable Care Act’s (ACA’s) exchanges, thereby unraveling the Obama administration’s signature domestic program, if it is not further protected from claimed financial losses.

Humana plans to pull out of Obamacare exchanges in all but a few states in 2017, citing losses of almost $1billion. (2) UnitedHealth Group and Aetna are also planning to cut back sharply from the exchanges next year amidst deepening losses. (3) The CEO of Anthem has recently said that the future success of the ACA’s exchanges hinges on whether his $54 billion offer to buy Cigna can be completed. Wendell Potter, former long time executive at Cigna and author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans, observes:

What the insurers are implying here is that if the Obamacare marketplace doesn’t “stabilize” to their satisfaction (even though the companies will still be making money hand over fist) they’ll threaten to take their marbles and go home . . . big for-profit insurers are simply not reliable partners for the government (or any other customers for that matter). (4)

This is in effect a last ditch holdup of the federal government as the industry faces a future of less profitability unless it once again gets its way for further subsidization. From the beginning, it has been clear that the Obama administration and the insurance industry need each other, and also that the industry has the upper hand in negotiating their way forward. The ACA needs maximal enrollment in the exchanges, as a way of sharing risks, making it vulnerable to insurers leaving the market when that enrollment falls short.

Despite the ACA, insurers still have all kinds of ways to increase their revenues by issuing policies with less and less value. These include high-deductible plans that won’t even cover initial physicians’ visits; changing, narrowed networks without out-of-network coverage; networks that exclude a majority of physicians and some major hospitals in an area; high co-insurance for specialty drugs; manipulation of risk scores to get higher Medicare payments; restrictive interpretations of what constitutes a medical emergency; marketing short-term plans in order to avoid the ACA’s coverage requirements; and denial of services.

Insurers are finding that their enrollees are sicker than they expected and costing them more, so they raise their premiums. (5) As examples, the Providence Health Plan, the largest insurer for people buying coverage through the Oregon health exchange, is seeking an average premium increase for 2017 of 29.6 percent , while a competitor, Moda Health Plan Inc., is asking for an average increase of 32.3 percent after an increase of 25 percent last year. (6) The largest health insurer in Texas is seeking rate increases of 59 percent. (7)

The industry claims financial distress even when its shareholders have seen its stocks recording the highest gains of any sector in the S & P 500, and its CEOs taking in huge sums. As one example, Stephen Hemsley, CEO of UnitedHealth Group, had $66 million in salary, stock options and other forms of compensation in 2014, lower than his total pay of $102 million five years earlier. (8)

These examples from across our market-based system illustrate how we get less and pay more as a result of the insurance industry’s profiteering:

  • Insurers have been gaming the ACA’s risk-coding program, under which they are paid more by covering older and sicker enrollees, by overstating their health risks. (9)
  • Medicare Advantage beneficiaries who need nursing home and home health care disproportionately leave it for traditional Medicare, raising questions about how well privatized Medicare plans serve sicker higher-cost Medicare beneficiaries. (10)
  • Many patients who believe they are enrolling in the traditional Medicare program are surprised to find themselves automatically enrolled in private Medicare Advantage plans; CMS actually secretly allows these plans to enroll traditional Medicare patients without requiring them to opt in. (11)
  • Overpayments by the government to private Medicaid managed care plans are endemic in more than 30 states, often involving unnecessary or duplicative payments to providers and calling for more scrutiny by auditors. (12)
  • Some states have received federal waivers to impose premiums and/or copays to Medicaid patients; this cost-sharing has been shown to result in disenrollment and decreased access to care. (13)

These latest demands by the industry show how desperate it has become to protect these financial rewards even when it is so obviously gaming the system for maximal profit and least service to the public. The industry is on a death march, kept alive mainly by government subsidies and the generous provisions of the ACA. The industry doesn’t deserve any further bailout by the government. It has proved itself unworthy of the public trust and too inefficient and wasteful to be propped up indefinitely.

There are three major alternatives before us in financing U. S. health care—tweaking the ACA as Hillary Clinton proposes, repealing or replacing it as part of the GOP’s “plan”, or adopting single-payer national health insurance, as Bernie Sanders has called for. Whatever happens depends on results of the elections and who controls the White House and Congress. The incoming president could well be faced with an Obamacare meltdown early in 2017. (14) Gridlock or further bailout of the industry will perpetuate an insoluble problem. Single-payer national health insurance is the only long-term solution to our system problems of restricted access, runaway costs and prices, unaffordability and unacceptable quality of health care. To get there, we need a government that works in the public interest, as John Adams, second president of the United States and one of our founding fathers, recognized more than two centuries ago:

 Government is instituted for the common good: for the protection, safety, prosperity and happiness of the people; and not for the profit, honor, or private interest of any one man, family or class of men.(15)

John Geyman, M.D. is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans



  1. Mattioli, D, Hoffman, L, Mathews. AW. Anthem nears $48 billion Cigna deal. Wall Street Journal, July 23, 2015: A1.
  2. Ferris, S. Humana to leave ‘substantially all’ ObamaCare markets. The Hill, July 21, 2016.
  3. Mathews, AW. Aetna backs off plans to expand its ACA business. Wall Street Journal, August 3, 2016.
  4. Potter, W. The insurance empire strikes back. Wendell Potter Blog, August 2, 1016.
  5. Pear, R. Newest policyholders under health law are sicker and costlier to insurers. New York Times, March 30, 2016.
  6. Radnofsky, L, Mathews, AW. Health insurers struggle to offset new costs. Wall Street Journal, May 5, 2016: A1.
  7. Associated Press. Insurance rates going up: New concerns for Obamacare. New York Times, June 2, 2016.
  8. Whitman, E. Rising costs of medical care, health insurance: Median pay for CEOs in health care companies higher than any other industry. International Business Times, May 26, 2015.
  9. Potter, W. Health insurers working the system to pad their profits. Center for Public Integrity, August 15, 2015.
  10. Rahman, M, Keohane, L, Trivedi, AN et al. High-cost patients had substantial rates of leaving Medicare Advantage and joining traditional Medicare. Health Affairs 34 (10): 1675-1682, October 2015.
  11. Jaffe, S. Some seniors surprised to be automatically enrolled in Medicare Advantage Plans. Kaiser Health News, July 27, 2016.
  12. Herman, B. Medicaid’s unmanaged managed care. Modern Healthcare, April 30, 2016.
  13. Levey, N. Four largest states have sharp disparities in access to health care. Los Angeles Times, April 10, 2015.
  14. Ferris, S. Next president faces possible ObamaCare meltdown. The Hill, August 11, 2016.
  15. Adams, as quoted by Hartmann, TA. A red privatization story. The Progressive Populist, November 15, 2014, p. 11.

Reinhardt and Cheng: The ethical structure of sustainable health spending

Posted by on Thursday, Aug 11, 2016

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 NEXT DEBATE IN HEALTH CARE: Transforming the Ethical Structure of U.S. Health Care

A presentation by Uwe E. Reinhardt and Tsung-Mei Cheng
Altarum Center for Sustainable Health Spending, July 12, 2016


The theme of these Altarum symposia has been what can be done to make our health system – especially spending thereon – “sustainable.”


“Sustainability” is a much-mouthed word, although few people using the word actually define it. We can think of at least two distinct meanings in the context of health care:

A. Economic sustainability – the ability of the macro-economy to absorb further growth in health spending;

B. Political sustainability – the willingness of families in the upper-income strata to subsidize through taxes or health insurance premiums the health care of families in the lower income strata.

Total health spending is the product of health-care utilization and prices.

Under our system of governance, in which the sympathy of politicians literally can be purchased retail, it has been very difficult to control prices overall, other than in government programs.

Indeed, because prices for identical services or products vary enormously across the U.S., within regions and even within cities, it is hard even to measure what prices actually are in this country. What price is representative?

So the focus of health-care cost containment in the U.S. naturally has been and will continue to be mainly on health-care utilization.

The question then becomes whose ox is likely to be gored in our quest to reduce utilization – that is, who will be asked to do most of the belt tightening in health-care.

That question will be the focus of our presentation.

We shall abandon erstwhile dreams of an egalitarian health-care system and instead develop platforms that will allow policy makers to ration health care by income class, without ever openly saying so or debating that policy. By 2030 at the latest these new platforms are likely to be cemented in place.





Although anyone can clearly discern these sharply different views on the distributive social ethic of U.S. health care, Americans are invariably reluctant ever to debate them openly, because that could be divisive.

So we talk about the distributive ethic of our health system in code words where, for example, “freedom of choice” may be just code for “you should make do with whatever financial resources you may have, but you are free to deploy them any way you want.”

To progressives, the very idea of rationing health care by income class is anathema – hence their penchant for a single-payer system that at least tries to be egalitarian.

To conservatives, rationing by income of the timeliness, amenities and quality of health care does not seem anathema, because we routinely apply it to other basic necessities such as food, clothing, housing, education and even the administration of justice. Why should health care be different?

Between these more extreme views on the ethics of health care is the confused, large group of citizens without firm views, at least as long as they are healthy.

Correlated with the views on the distributive ethics of health care are views concerning the degree to which the supply side of the health care market should be allowed to extract the maximum revenue from the rest of society through their pricing policies.

Health policy in the past 40 years basically has been a civil war between the two more extreme views on health care, although, as noted, we have debated it mainly in code words, given our reluctance to confront ethics forthrightly.

On the ground, this civil war has taken the form of a myriad of small legislative skirmishes at the federal and state levels, giving victory sometimes to one side and at other times to the other side.

Overall, however, victory has gone to the conservative side.


So what do we need in the structure of a health system designed to ration health care by income – at least a good bit of it? We need two distinct platforms:

A. we need a platform for varying the quality of the health insurance policy by income class, and

B. we need high cost sharing by patients at point of service, to ration health care utilization when illness strikes.

If you think of it, we have been busily building these two platforms during the past 20 or so years, brick by brick.


Health insurance exchanges – public or private – are the ideal platforms for tiering the quality of health insurance by income class. ObamaCare explicitly acknowledges it with its metal tiers.

The instruments for tiering here are:

* narrowness of the network of providers
* narrowness of the drug-formularies
* limits on services covered
* other features of the benefit package

The often proposed conversion of the egalitarian Medicare program from its defined benefit structure to a defined contribution structure (the premium support model) is one of the bricks for the desired platform.

Likewise, the idea to move Medicaid beneficiaries out of that defined benefit program onto the insurance exchanges can be interpreted in the same way.

Finally, the conversion of employment-based health insurance from defined benefit to defined-contribution plans, coupled with private health insurance exchanges, is another brick in the strategy.

It will finally permit the quality of health-insurance coverage within a company to vary by income level.


High-deductible health insurance policies are ipso facto an instrument for rationing health care by income class, unless the deductible were closely linked to income.

One does not need a Ph.D. in economics to realize that a low income family confronted with a high deductible will tighten its belt in health care much more than would a high income family confronting the same deductible.

Similarly, under our progressive income-tax structure, the idea of tax-preferred Health Savings Accounts (HSAs) ipso facto makes health care for high income people cheaper than for low income people – an amazing ethical proposition.


At this time, the gradual transformation of our health-care system into one that allows us to ration health care by income is not yet complete.

Part of the problem is that it is not yet politically correct for politicians or the policy wonks who advise them openly to state that rationing by income class is their goal.

The desired structure therefore has to be developed quietly, and so that the general voting public does not know what is happening to their health system.

Indeed, sometimes the steps toward this goal are marketed to the voting public in classic Orwellian lingo – e.g., “Consumer Directed Health Care” (CDHC) that will “enable consumers [formerly patients] to sit in the driver’s seat in health care to shop around for cost-effective care.”

Absent solid, consumer-friendly information on binding prices and the quality of health care produced by different providers of health care – still typically the norm in the U.S. – CDHC actually has turned out to be a cruel hoax.

For the most part, CDHC has been merely an instrument to ration health care by income.

We came across the following paper that goes along with our thesis on rationing: “Wealthy spending more on health care than poor and middle class, reversing trend”


It is not our place to render a value judgment on the merits of this development. That is a matter of ideology and of ideas of what is a “just society.”

But register our amazement — almost our admiration — at the ease with which one faction of the nation’s elite has been able to further this transition – a development of which the voting public hardly seems aware (except when illness strikes).

It can be doubted that the general populace of other countries – France, Germany, the U.K., Canada – would accept this transition with such astounding equanimity.

It is only of recent that the American public seems to have lost faith in the wisdom and beneficence of the nation’s policy-making elite.

We shall see how far that elite can push rationing health care by income before the American public becomes fully alert to that policy.

In an honest referendum, with full knowledge of what is underfoot, the general voting public probably would not support a move to rationing more and more health care by income.

More likely the voting public would opt for a more egalitarian system, which can explain why it is not yet politically correct for politicians openly to advocate rationing health care by income.

“Americans Overwhelmingly Prefer This Presidential Candidate’s Healthcare Plan, Study Shows”

According to Gallup…the overwhelming favorite was the single-payer plan offered by Bernie Sanders. Overall, 58% of respondents favored the idea, with just 37% opposing it and another 5% having no opinion.

In a separate question, Gallup asked respondents to choose between putting a single-payer system in place versus keeping Obamacare in place,and single-payer won by an even broader margin — 64% to 32%.

Everyone should master understanding the concept presented here. Should the distributive ethic in health care represent a social good for all or an individual responsibility for each of us?

We are transitioning further into the individual responsibility ethic through the platforms of tiering insurance by income (narrow networks and limited benefits) and tiering health care by income at the point of service (high deductibles, health savings accounts, and consumer-directed health care). Thus we are rationing health care by ability to pay, and that will only increase further as we expand our current health care policies. Too many people will not be receiving the care that they should have.

This slide set was expanded to include some of the narrative so that we can understand better how our current approach to sustainability is political rather than economic – supporting an ethic that preserves the wealth of the wealthy by suppressing redistribution, while making the health care system sustainable by making health care less affordable for the majority.

This presentation by the insightful team of Uwe Reinhardt and Tsung-Mei Cheng should be downloaded and shared with as many other concerned individuals as possible. We need to deliver the egalitarian message that the people of other nations take for granted: we can have health care for everyone in a system that is truly sustainable.

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The role of Medicare in integrating the nation’s hospitals

Posted by on Wednesday, Aug 10, 2016

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.

1965: The Year That Brought Civil Rights To The Nation’s Hospitals

By Michelle Andrews
Kaiser Health News, August 9, 2016

In his new book, David Barton Smith takes us back to the mid-1960s, when a small band of civil rights activists-cum-government bureaucrats toiled to get the nascent Medicare program up and running. In the process, they profoundly changed the way health care is delivered in this country.

It stands in marked contrast to the political turmoil over health care of recent years.

“In four months they transformed the nation’s hospitals from our most racially and economically segregated institutions to our most integrated,” Smith writes in “The Power to Heal: Civil Rights, Medicare, and the Struggle to Transform America’s Health Care System.”

“In four years they changed patterns of use of health services that had persisted for half a century. The fundamental moral imperative — that those needing medical care should receive it — began for the first time to reflect actual use of services. A profound transformation, now taken for granted, happened almost overnight.”

Michelle Andrews:
Over the course of several months, a small group of government workers implemented the Medicare program. From the start, they said that hospitals that discriminated couldn’t participate. How did they manage it?

David Barton Smith: Wilbur Cohen and the people in the Social Security Administration were absolutely masterful in pulling this together in such a short period of time. They knew exactly how to get things done and they paid attention to the details. It’s remarkable that without the computers that we have today or the Internet, they were able to do this all in 11 months. They were just good professionals.

Michelle Andrews: There has been talk at various times about creating “Medicare for All.” Given what you know, what are the odds of that ever happening here?

David Barton Smith: The odds are better now than a few years ago. Because of the ACA, but also because people are beginning to understand some of the limitations of a privately insured system. It’s more complicated, it’s more costly, it’s harder to get good competitive pricing from hospitals or from drug companies. And this idea is something that’s been resisted by the insurance industry. But I get the sense that people are getting a little bit more impatient. Although a lot of Republicans bash Obamacare, I don’t hear a lot of them bashing Medicare. The resistance would be strong, certainly. This is a very interesting year.

The story of using Medicare to rapidly integrate our nation’s hospitals is inspiring. It should give us hope that an Improved Medicare for All could be used to leverage corrections of other health care injustices.

David Barton Smith reminds us that people are beginning to understand some of the limitations of a privately insured system and that they are becoming more impatient. Let’s leverage that.

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What changes in ACA might the election bring?

Posted by on Tuesday, Aug 9, 2016

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.

Could Trump loss spur ACA deal with Clinton?

By Harris Meyer
Modern Healthcare, August 6, 2016

With Donald Trump’s presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.

Their focus is on a possible “grand bargain” that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law’s insurance exchange structure with their own innovative models.

To win GOP backing for measures to stabilize the exchanges, Republicans will seek changes to make ACA coverage more attractive and affordable for younger people, said James Capretta, a conservative health policy expert at the American Enterprise Institute. That includes allowing lower premiums for young people, a wider range of benefit designs and premium subsidies for plans bought outside the exchanges and easing minimum benefit requirements.

Clinton’s best opportunity might be to persuade GOP governors and lawmakers in non-expansion states to accept Medicaid expansion by giving them more leeway on program design.

Although elections can be unpredictable, this time we can make a couple of predictions that are a near certainty.

Donald Trump will not be able to change his image as a dangerous incompetent before the election, and Hillary Clinton will be elected by default, even though she will remain unpopular.

Gerrymandering as a result of the 2010 Census will remain unchanged in this election, so the Republicans will maintain control of the House of Representatives with Paul Ryan as the Speaker. Although the Tea Party faction will have been diminished in numbers, enough will be reelected such that Ryan will have to include them in legislative negotiations.

Although it is uncertain which party will hold the majority in the Senate, it is clear that each of the two major parties will still have the ability to block most legislation through the filibuster. For the Democrats, that means that they can forget about a Medicare buy-in starting at age 55, and they can forget about a government-administered public option to compete with the private plans. For the Republicans, that means that they can forget about a repeal of the Affordable Care Act, and they can forget about completing privatization of Medicare through premium support.

So for the time being, the Affordable Care Act is here to stay. Both sides will want changes in it, but only modest incremental changes will be possible, and they must satisfy both sides or they will not clear Congress.

Democrats will want expanded enrollment in the ACA exchanges and in Medicaid. Republicans will want less regulation in these programs. For the exchange plans both will want lower premiums to make insurance more affordable, and they may do that by easing the minimum benefit requirements, by allowing more flexible innovations in insurance design, by reducing premiums for young adults, and perhaps even by allowing premium subsidies for plans outside of the exchanges. For Medicaid, through waivers or through new legislation they may allow greater flexibility and further privatization to encourage non-participating states to join in the program to expand Medicaid.

These compromises will further reduce the numbers of uninsured and make health insurance more affordable, but affordable access to actual health care is already a major problem and these measures will make it much worse. Increasing the numbers of individuals who are nominally insured should not be considered a success when the tradeoff is the erection of financial and logistical barriers to essential health care services. Leaving patients sick and broke is not the direction in which we want to be headed.

What are the political prospects for single payer post-election? This January Hillary Clinton said, “I want you to understand why I am fighting so hard for the Affordable Care Act. I don’t want it repealed, I don’t want us to be thrown back into a terrible, terrible national debate. I don’t want us to end up in gridlock… People who have health emergencies can’t wait for us to have a theoretical debate about some better idea that will never, ever come to pass.”

Never, ever. The political barricade is up. It is up to us to break it down.

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The 3Rs have failed to stabilize the exchanges

Posted by on Monday, Aug 8, 2016

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.

Struggling To Stabilize: 3Rs Litigation And The Future Of The ACA Exchanges

By Mike Adelberg and Nicholas Bagley
Health Affairs Blog, August 1, 2016

Six years after passage of the Affordable Care Act (ACA), the individual and small-group insurance markets — the markets that the ACA remade — are still having growing pains. Health insurers have endured large losses and a number of ACA-created co-ops and other small insurers have failed. Consolidation among providers and insurers is an increasing and concerning trend. And many insurers are poised to raise premiums substantially for 2017, further stoking frustration with the insurance industry.

Part of insurers’ difficulty is that the risk pool in the individual and small-group markets, particularly on the exchanges, is sicker and smaller than originally projected. But the three programs — reinsurance, risk corridors, and risk adjustment — that the ACA’s drafters hoped would help stabilize premiums in the revamped markets have also not performed as expected. Dashed expectations have led to market instability and to a flurry of lawsuits around the “3Rs.”

But make no mistake about it: trouble with the 3Rs has spooked insurers and raised questions about the viability of the ACA-reformed markets. Based on preliminary analyses, the 2017 exchanges will have fewer options, larger premium increases, and less generous benefits than any year since the ACA marketplaces came on line in 2014. Congressional intervention has damaged the ACA markets — hurting both insurers that sell health plans and the consumers who purchase them. Perhaps the exchanges will find their footing again, but the difficulties with the 3Rs serve as a stark reminder that ACA implementation remains much harder than supporters anticipated.


Risk Adjustment Gone Wrong

By Jonathan Halvorson
The Health Care Blog, August 7, 2016

The Affordable Care Act was intended to usher in a new era of competition and choice in health insurance, and at first it succeeded. But increasingly, provisions in the law are undermining competition and wiping out start-up after start-up. If something isn’t done soon, the vast majority of new insurers formed in the wake of the ACA will fail, and many old-line insurers that took the opportunity to expand and compete in the new markets will leave.

Risk adjustment requires an insurer to report on the health risk of its members, and to do that it needs good data. Plans that played the game better from the start set a high priority on collecting and reporting on that information. However, it is much harder to get good data if a member just joined than if you have had that member enrolled prior to the ACA exchanges and can mine your data warehouse for all those ICD codes that boost the risk score. The dominant pre-ACA players had more years of member data, and mature analytics capabilities, to help them maximize their risk scoring. This has created a serious penalty for new entrants in the first few years which CMS has not addressed.

The 3Rs – reinsurance, risk corridors, and risk adjustment – were designed to stabilize the ACA insurance exchanges, but we’re seeing market instability instead. Next year, only risk adjustment remains, and the insurers have demonstrated to us that they know how to game the system.

Considering that the exchanges insure less than four percent of our population, you might think that we would be ready to abandon this failed experiment and move on. But, no. The powers that be know that pressure will be on to enact their dreaded single payer system, so they struggle on. Far be it from us to enact a system that would actually achieve the goals of reform.

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When President Harry Truman brought forward a proposal for national health insurance in 1945, he emphasized that this was only a financing mechanism, and that the delivery of health care would remain in the private sector’s marketplace of hospitals, other facilities, physicians and other health professionals. As he said at the time:

Socialized medicine means that all doctors are employees of the Government. The American people want no such system. No such system is here proposed. (1)

But Dr. Morris Fishbein, then the president of the American Medical Association, quickly countered with this extreme reactionary overstatement:

[This] is the first step toward the regimentation of utilities, of industry, of finance, and eventually of labor itself. This is the kind of regimentation that led to totalitarianism in Germany and the downfall of that nation . . . no one will ever convince the physicians of America that the . . . bill is not socialized medicine. (2)

Since then, conservatives have repeatedly condemned any mention of national health insurance (NHI) as socialized medicine, as an intentional and uniformed way to block debate over the issue.

This myth is generally based on misunderstanding of what socialized medicine means. England is a good example of socialized medicine, with the government owning hospitals and other facilities and employing physicians and other health professionals. Despite some of its critics on this side of the border, Canada does not have socialized medicine, since its public, single-payer financing system is coupled with a private delivery system.

Our own Veterans Administration (VA) has already qualified for many years as an example of socialized medicine, with ownership by the government of facilities and employer of health professionals. There is no way that we would want to eliminate it on this basis, despite the attempts of many conservatives to privatize it. Privatization would bring less efficiency, higher costs, restricted services, and new overhead costs and profits, not improved health care for veterans.

In his 2011 book, The “S” Word: A Short History of an American Tradition . . . Socialism, John Nichols, Washington correspondent for The Nation magazine, brings this important insight:

This country, which was founded on a radical interpretation of enlightenment ideals, which advanced toward the realization of those ideals with an even more radical assault on the southern aristocracy, which was made more humane and responsible by the progressive reforms, the New and Fair Deals and the wars on poverty and inequality of the first three quarters of the twentieth century, is now tinkering around the edges of the challenges posed by the twenty-first century. Our dumbed-down debate is narrower, more constrained, and more meaningless than at any time in our history. One need not embrace socialism ideologically or practically to recognize that public-policy discussions ought to entertain a full range of ideas—from right to left, not from far right to center right. Historically,
America welcomed that range of ideas, and benefited by the discourse. (3)

Since it was first introduced by presidential candidate Theodore Roosevelt in 1912, opponents of NHI have defeated it through recurrent bitter debates featured by demagoguery and disinformation. NHI was never on the table in the last go-around over health care reform that brought us the Affordable Care Act (ACA) in 2010, when powerful economic and political interests of the corporate medical industrial complex prevailed. As a result, what we now have is a government subsidized private insurance industry that largely calls the shots, loss of free choice of physician and hospital through narrow networks, no significant containment of prices or costs of health care, growing unaffordability of care for much of the population, consolidation of hospitals and other facilities with more market share and less competition, almost two-thirds of U. S. physicians employed by others (especially expanding hospital systems), increasing dissatisfaction and burnout of physicians dealing with the growing bureaucracy of some 1,300 private insurers, and corporate profiteering on the backs of patients, their families, and taxpayers.

NHI would bring us public financing tied to a private delivery system, not a government takeover as conservatives claim. So it is long overdue to ask these kinds of questions when opponents of NHI (Medicare for All) again trot out the claim that it is socialized medicine. Is it socialized medicine to:

  • want health care to be available and affordable based on medical need, not ability to pay?
  • believe that all Americans should have free choice of physician and hospital wherever they live?
  • think that everyone should pay into the system based on a progressive tax system and ability to pay?
  • replace the wasteful multi-payer, for profit financing system with a simplified, not-for-profit single-payer system that will cost 95 percent of Americans less than they already pay for health insurance and actual care?
  • want the most efficient and least bureaucratic system possible?
  • want a large risk pool—our entire population—that most effectively shares risk for whatever health care all of us will need?
  • combat health care fraud by close oversight and stewardship of taxpayer dollars?
  • expect that health care services that are provided have been found to be effective and cost-effective by the best available scientific evidence?
  • accept health care as an essential human right, as most industrialized countries have long recognized, as well as the United Nations since 1948 and the World Health Organization in later years?

If NHI were to be decided upon through a democratic process, instead of through the political power and lobbying of corporate stakeholders in the status quo, we would have had it long ago. We have seen majority support for NHI based on public surveys for some 50 years. As one recent example, a national Gallup poll two months ago found that 58 percent of more than 1,500 adult U. S. respondents favored Bernie Sanders’ federally-funded  Medicare for All proposal; that number included 73 percent of Democrats/Leaners and 41 percent of Republicans/Leaners. A Kaiser poll in December, 2015, also found that 58 percent of Americans want NHI, compared to just 40 percent favoring the ACA. (4) Another recent Kaiser survey found that 54 percent of enrollees in the ACA’s individual plans rate their coverage as “only fair” or “poor”, while almost one-half are dissatisfied with their plans’ annual deductibles. (5) As for physician support for NHI, a 2008 national survey of more than 2,200 U. S. physicians in all specialties found that 59 percent support NHI. (6)

The November elections give us an important opportunity to move toward real health care reform. Hillary Clinton once believed that the momentum for single-payer would sweep the country, as she said to a group at Lehman Brothers Health Corporation in 1994 before the Clinton Health Plan died in a congressional committee:

 If there is not health care reform this year, and if, for whatever reason, the Congress doesn’t pass health care reform . . . I believe that by the year 2000 we will have a single payer system. . . I don’t even think it’s a close call politically. I think that the momentum for a single payer system will sweep the country . . . it will be such a huge popular issue . . . that even if it’s not successful the first time, it will eventually be.  (7)

We need to hold her to her words since she tells us how much she knows about health care in this country. This will require her to move farther left than the current Democratic platform and endorse single-payer NHI as a part of her Party’s platform. She talks support for universal access, which the ACA will never accomplish. Now is the time for her to walk the walk.

John Geyman, M.D. is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans



  1. Truman, HS. Special Message to the Congress Recommending a Comprehensive Health Program, November 19, 1945.
  2. Fishbein, M. As quoted in “Fishbein assails new health plan, Truman’s national program condemned as ‘socialized medicine’ at its worst.” New York Times, November 19, 1945.
  3. Nichols, J. The “S” Word: A Short History of an American Tradition . . . Socialism. London. Verso, 2011, p. 260.
  4. Healthcare-NOW! Republican support for single-payer. May 16, 20126.
  5. Hamel, L, Firth, J, Levitt, L et al. Survey of non-group health insurance enrollees, Wave 3. Kaiser Family Foundation, May 20, 2016.
  6. Carroll, AE, Ackermann, RT. Support for national health insurance among U. S. physicians: five years later. Ann Intern Med 1481: 566-567, 2008.
  7. Clinton, H. speaking to a group at Lehman Brothers Health Corporation, June 15, 1994, as reported by Health Care for All-WA Newsletter, Winter 2015, p. 9.
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