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.
Second Convention of the Medical Committee for Human Rights, March 25, 1966
“Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” — Dr. Martin Luther King, Jr.
Oxfam, Issue Brief, January 19, 2015
Global wealth is increasingly being concentrated in the hands of a small wealthy elite. These wealthy individuals have generated and sustained their vast riches through their interests and activities in a few important economic sectors, including finance and pharmaceuticals/healthcare. Companies from these sectors spend millions of dollars every year on lobbying to create a policy environment that protects and enhances their interests further.
* In 2014, the richest 1% of people in the world owned 48% of global wealth, leaving just 52% to be shared between the other 99% of adults on the planet.1 Almost all of that 52% is owned by those included in the richest 20%, leaving just 5.5% for the remaining 80% of people in the world.
* The very richest of the top 1%, the billionaires on the Forbes list, have seen their wealth accumulate even faster over this period. In 2010, the richest 80 people in the world had a net wealth of $1.3tn. By 2014, the 80 people who top the Forbes rich list had a collective wealth of $1.9tn; an increase of $600bn in just 4 years, or 50% in nominal terms. The wealth of these 80 individuals is now the same as that owned by the bottom 50% of the global population, such that 3.5 billion people share between them the same amount of wealth as that of these extremely wealthy 80 people. In 2010, it took 388 billionaires to equal the wealth of the bottom half of the world‟s population; by 2014, the figure had fallen to just 80 billionaires.
* In 2014 there were 1,645 people listed by Forbes as being billionaires. This group of people is far from being globally representative. Almost 30% of them (492 people) are citizens of the USA.
* Between 2013 and 2014 billionaires listed as having interests and activities in the pharmaceutical and healthcare sectors saw the biggest increase in their collective wealth. Twenty-nine individuals joined the ranks of the billionaires between March 2013 and March 2014 (five dropped off the list), increasing the total number from 66 billionaires to 90, in 2014 making up 5% of the total billionaires on the list. The collective wealth of billionaires with interests in this sector increased from $170bn to $250bn, a 47% increase and the largest percentage increase in wealth of the different sectors on the Forbes list.
* During 2013, the pharmaceutical and healthcare sectors spent more than $487m on lobbying in the USA alone. This was more than was spent by any other sector in the US, representing 15% of $3.2bn total lobbying expenditures in 2013. In addition, during the election cycle of 2012, $260m was spent by this sector on campaign contributions. Twenty-two of the 90 pharmaceutical and healthcare billionaires are US citizens.
In 1966, Martin Luther King, Jr. famously noted that injustice in health care was the most shocking and inhumane form of inequality. The Oxfam brief issued today – Martin Luther King, Jr. Day – gives some insight as to how well we are fulfilling his dream of social justice for all. We are seeing exponential increases in wealth inequality and the fastest expansion of that inequality is in the pharmaceutical and health care sectors.
Are we still learning from him, or have we given up?
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 at 50 — Origins and Evolution
By David Blumenthal, M.D., M.P.P., Karen Davis, Ph.D., and Stuart Guterman, M.A.
The New England Journal of Medicine, January 14, 2015
Many Americans have never known a world without Medicare. For 50 years, it has been a reliable guarantor of the health and welfare of older and disabled Americans by paying their medical bills, ensuring their access to needed health care services, and protecting them from potentially crushing health expenses. However, as popular as Medicare has become, Congress created the program only after a long and deeply ideological struggle that still reverberates in continuing debates about its future.
Medicare is a much larger, more comprehensive, and more complex program than it was in 1965. In its response to cost and quality concerns, it has also become much more assertive in trying to improve the performance of the national health care system. For much of its history, Medicare just paid bills. Now, it has joined private-sector insurers in the effort to manage care as well.
Despite these changes, however, Medicare continues to face major challenges, which will be discussed in more detail in part two of this series. Perhaps the most important of these challenges is its cost. Growth in Medicare spending per beneficiary has slowed sharply in recent years, and although that slowdown is projected to continue over the next few years, the growth in total program spending is projected to outpace that in the overall economy as the retiring baby-boom generation increases the number of beneficiaries. This will put more pressure not only on Medicare finances but also on the federal budget, with Medicare spending projected to rise as a share of federal revenues from 17% in 2014 to 27% in 2050 and to approach 40% by the end of the century.
The current structure of Medicare is anachronistic and unnecessarily complex. Most employers offer their employees a comprehensive benefit package that includes hospital care, physician services, and prescription drugs. Medicare, in contrast, offers its beneficiaries fragmented coverage, with separate parts for each of these services. As a result of its substantial deductibles and the lack of a ceiling on out-of-pocket costs, most beneficiaries purchase supplemental private insurance to cover gaps in Medicare. Low-income beneficiaries, unable to afford care provided through substantial cost sharing in Medicare, can enroll in Medicaid to obtain help in paying Medicare premiums and out-of-pocket costs, but each state has its own income and asset rules. As a result, the complexity of the current insurance system for the elderly becomes truly startling. This complexity frustrates efforts to coordinate care for the sickest and frailest patients and to create an understandable and consistent set of incentives for providers.
Despite the importance of Medicare in improving its beneficiaries’ access to care, the program does have substantial limitations in coverage. These limitations result in large out-of-pocket payments for the most vulnerable beneficiaries. Although Medicare covers some rehabilitation services and limited home care, it does not pay for extended long-term services and supports, a gap that surprises many elderly persons and their families when they need such care. Medicaid does cover these benefits but only for the poorest elderly. The role of Medicare in addressing growing societal needs for long-term services remains uncertain.
These and other issues suggest that preserving and strengthening Medicare over the next 50 years will continue to require active, wise, and humane policy development. Such a task would be a challenge for the federal government under any circumstances but particularly if the current intense partisan divisions persist.
Although Medicare is the most popular health insurance program in the nation, it still has some serious deficiencies. As an example, 27 percent of Medicare beneficiaries spend more than 20 percent of their income for out-of-pocket health care expenses.
There are two pressing reasons why efforts should be made to strengthen Medicare. The most obvious is that current Medicare beneficiaries should have at least the level of financial security and health security that citizens of other nations receive through their health care financing systems.
The other reason is that Medicare is thought by many to be a natural model for a national health program that covers everyone. It is important that the model be improved so that we can do away with wasteful and inefficient supplementary programs such as Medigap coverage, retiree health benefits, Medicare Advantage plans, and Part D drug plans, and, while we are at it, eliminate the financial barriers of cost sharing that impair access to care. Once we have an improved Medicare we can combine it with the other important features of a single payer national health program, finally realizing our dream of an expanded and improved Medicare for all.
For those who wish to be reminded of the key features of single payer that should be combined with an improved Medicare, a brief list is at this link:
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 Rise in Health Care Coverage and Affordability Since Health Reform Took Effect
By Sara R. Collins, Petra W. Rasmussen, Michelle M. Doty, and Sophie Beutel
The Commonwealth Fund, January 15, 2015
New results from the Commonwealth Fund Biennial Health Insurance Survey, 2014, indicate that the Affordable Care Act’s subsidized insurance options and consumer protections reduced the number of uninsured working-age adults from an estimated 37 million people, or 20 percent of the population, in 2010 to 29 million, or 16 percent, by the second half of 2014. Conducted from July to December 2014, for the first time since it began in 2001, the survey finds declines in the number of people who report cost-related access problems and medical-related financial difficulties. The number of adults who did not get needed health care because of cost declined from 80 million people, or 43 percent, in 2012 to 66 million, or 36 percent, in 2014. The number of adults who reported problems paying their medical bills declined from an estimated 75 million people in 2012 to 64 million people in 2014.
For the first time since it was launched in 2001, the Commonwealth Fund Biennial Health Insurance Survey has found significant declines in the number and share of U.S. adults who lack health insurance. The survey also finds evidence to suggest that the coverage gains are allowing working-age adults to get the health care they need while reducing their level of financial burden because of medical bills and debt.
But, while there were minor improvements reported by insured adults in cost-related access and medical bill problems, rates of these problems remain high, especially among adults with low incomes. Prior Commonwealth Fund survey results have found that the increasing size and prevalence of high deductibles and copayments in private health plans, including employer-based plans, is leading many people with low and moderate incomes to avoid or delay needed health care. Excessive cost-sharing for Americans across all insurance types could jeopardize improvements in access to care and medical bill burdens documented in the survey.
States’ decisions to reject the Medicaid expansion have left large numbers of the poorest Americans in the country without health insurance. Since the survey was fielded in July, one additional state has expanded its program, seven others are in discussions to move to forward, and still others may follow their lead this year.
The media reports on the new Commonwealth Fund study are celebrating the reduction in the numbers who remain uninsured and the reductions in the financial consequences of being uninsured, supposedly proving that the Affordable Care Act is working. What is difficult to celebrate is confirmation that there are still 66 million people who did not get needed health care because of cost, and there are 64 million people who still reported problems paying their medical bills.
Rather than celebrating a modest improvement in the statistics we should be be using this report to condemn the gross inadequacies of the Affordable Care Act that leave in place the financial barriers that have negatively impacted over 60 million people, and have the potential to have the same negative impact on tens of millions more should they incur a need to access the health care system.
For those who say, “But this is working,” it is not working for the vast majority for whom our prior system fell cruelly short. Continuing this highly flawed experiment constitutes unethical experimentation when we know that a single payer system with full prepaid financing will remove the financial barriers and hardships that are perpetuated by the Affordable Care Act.
When you have a forest fire, you don’t pull out the candle snuffers; you call in the tankers. Likewise, when our health care financing system is leaving tens of millions broke and without adequate care, you don’t tweak what we have; you mobilize a powerful system that actually would work – an improved and expanded Medicare for all.
CO-OP (Consumer Operated and Oriented Plan) Health Plans under the Affordable Care Act
PNHP, Quote of the Day, July 18, 2011
From the comment by Don McCanne:
The proposed rule has now been released for the establishment of CO-OPs under the Affordable Care Act. The CO-OPs are private, nonprofit organizations that sell insurance, like HMOs and PPOs, under the same rules as the other private insurers. The most important difference is that a CO-OP is controlled by a board of directors that is elected by the individuals enrolled in the CO-OP.
These are new organizations, and, as such, require a new infusion of capital to meet the reserve requirements for future claims. These are the same requirements that have been established by the states for other private insurers already competing in the marketplace.
Private, for-profit insurers have the capability of establishing start-up costs and solvency reserves by selling shares of stock. Since the CO-OPs are nonprofit, they don’t have this resource to tap. Recognizing this, the Affordable Care Act included provisions for government loans for start-up costs and other loans for solvency (reserve funds for future claims). It is important to understand that these are not grants but are loans that must be repaid, with interest, within five years for start-up loans and fifteen years for solvency loans.
Think about that. The CO-OPs are required to compete with the private insurers under the same terms, while having the additional requirement of paying back these loans. Since their only revenue source is premiums for the insurance they are selling, these loan costs that their competitors don’t have will have to be recovered through higher premiums. Under these terms, how could they possibly compete with the private insurers?
There are many other issues. How long would it take to establish a critical threshold of enrolling enough members to create a viable entity? Since it is likely that the CO-OPs would be subject to adverse selection (enrolling a larger share of patients with greater health care needs), there would be further upward pressure on their premiums (death spiral) since current risk adjustment tools do not recover the full excess losses (as if health care is a “loss”).
It’s too bad. CO-OPs should have offered us the opportunity to establish altruistic health care organizations. Instead, the politicians bent over backwards not only to keep the government out of these programs, but also to protect the private insurers’ marketplace by being sure that the CO-OPs were not allowed a fair playing field by saddling them with insurmountable debt.
We needed a seat at the table.
Health Insurance Startup Collapses In Iowa
By Clay Masters, Iowa Public Radio
NPR/Kaiser Health News, January 14, 2015
CoOportunity Health has failed. The Affordable Care Act set aside funding for health care co-ops, to enable the organizations to compete in places where there aren’t many insurers. CoOportunity Health was the second largest co-op in the country in terms of membership, and one of the largest in terms of the federal funding it received.
But then CoOportunity hit a kind of perfect storm, says Peter Damiano, director of the University of Iowa’s public policy center. First, the co-op had to pay a lot more medical bills than those in charge expected.
“CoOportunity Health’s pool of people was larger than expected, was sicker than expected,” Damiano says. “So their risk became much greater than the funds that were available,”
When the Obama administration in late 2013 allowed people to keep the insurance plan they already had, many customers happy with Wellmark stayed put. Damiano says this meant many of the customers who flocked to CoOportunity tended to be… people with expensive health problems who’d had trouble paying for insurance before, in the market Wellmark dominated.
“It was always going to be a challenging market to try to reach,” says Damiano, “and on top of that, the whole idea of co-ops was relatively new and experimental. But it was to try to create competition, on that private sector approach,” says Damiano.
According to Nick Gerhart, Iowa’s insurance commissioner… the co-op thought it was going to get more federal money. “On December 16 around 4 o’clock we were informed they weren’t going to get any further funding,” he says. “Nothing was pulled — it just wasn’t extended further.”
“Ours was the second largest in the country, so you’ve got to look at it that way.” Gerhart says. “If the second largest can’t make it, how viable are the other ones? I don’t know. But at the end of the day they didn’t have enough capital to support 120,000 members.”
Those of us who watched closely as the health care reform process unfolded were outraged by many of the decisions made by the members of Congress. As single payer supporters we were denied a seat at the table. Regardless, we still tried to inform the process but we were routinely ignored. “What you guys want is just not politically feasible.”
Look what I wrote July 18, 2011: “It’s too bad. CO-OPs should have offered us the opportunity to establish altruistic health care organizations. Instead, the politicians bent over backwards not only to keep the government out of these programs, but also to protect the private insurers’ marketplace by being sure that the CO-OPs were not allowed a fair playing field by saddling them with insurmountable debt.”
Now look at what happened to CoOportunity – the second largest co-op in the country. Not only did they enroll patients with greater health care needs, as we predicted, but the government loans were inadequate to maintain its viability. The success in enrolling large numbers of members accelerated the demise of this co-op, but what about the others? With the premiums they receive, how will they be able to pay for the health care services of a higher risk population plus service their loans at the same time – loans that competing private insurers do not have to face?
It isn’t that we didn’t know how to design a proper health care financing program. We clearly did – single payer. What is tragic is that the Affordable Care Act was designed to take special care of the private insurance industry while supposedly showing some vague, deceptive semblance of improving access and affordability for the patients served, though caring for patients was certainly a lower priority than catering to the private insurers.
With 30 million people being left uninsured, and with the establishment of a new insurance standard of unaffordable under-insurance, our members of Congress sure did a crappy job – not just crappy but far worse – it was callous and inhumane.
High Health-Care Prices: More Talk Than Action
By Drew Altman
The Wall Street Journal, January 12, 2015
People in the U.S. go to the doctor less frequently and have much shorter hospital stays than people in other countries that spend far less per capita on health care. But health services are consistently more expensive here than in comparably wealthy countries.
Price is the major factor that distinguishes the cost of our system from those in other developed nations. The sticker shock of some medical services and drugs is also the dimension of the health-cost problem most visible to the public. So it’s interesting that most efforts in this country to address health-care costs don’t focus on price much at all. Instead, they focus on reforming the delivery of health care and provider reimbursement to reduce the volume of health care Americans use and to weed out unnecessary procedures and hospitals days.
To be sure, high medical prices are talked about a lot. One reason there is more talk than action is the anti-government environment, which would inhibit regulatory action to constrain prices. Taking on price also means taking on health care’s powerful industry interests. More effective competition between providers would help reduce prices, but the health-care industry appears to be consolidating more than competing, as is the health insurance industry.
It would be a mistake to make price the only focus of a cost-reduction strategy. But it’s striking that while price is such an important reason our system appears to cost so much more than others, efforts to reduce the high prices of medical care are not a meaningful part of current cost-reduction efforts.
Drew Altman is president and chief executive officer of the Kaiser Family Foundation.
U.S. hedge fund plans to take on big pharma over patents
Reuters, January 7, 2015
U.S. hedge fund manager Kyle Bass, who won fame for predicting the subprime mortgage crisis in 2008, plans to take on some of the world’s biggest drug producers by challenging the patents of their top brands, he said on Wednesday.
Bass, the founder of Dallas-based Hayman Capital Management, L.P., said some drug firms were hanging onto patents in questionable ways and he planned to take around 15 firms into a so called Inter Partes Review (IPR) process created by the America Invents Act. in 2012.
“We are going to challenge and invalidate patents through the IPR process … (and) we are not going to settle,” Bass said in a presentation in Oslo, Norway’s capital.
“The companies that are expanding patents by simply changing the dosage or the way they are packaging something are going to get knee capped,” he said.
Bass said the firms he planned to challenge had a combined market capitalisation of $450 billion and if he succeeded that could halve, benefitting his investments and reducing medicine prices in the United States.
“This is going to lower drug prices for Medicare and for everyone,” he said.
Bass did not name any targets and also declined to elaborate on how he planned to make a financial gain from the challenges. He also declined to give details on his investment position.
Health care prices are much higher in the United States than in other nations. The difference seems to be that other nations rely much more on government administration of pricing whereas we depend more on the marketplace, especially on the private insurance industry that has a relatively weak negotiating power over our medical-industrial complex, worsened by ongoing consolidation within the industry.
That is not to say that the government does not play any role. The administered pricing of our Medicare program has been more effective than the private insurers in slowing the increases in the costs of health care. The private insurers have slowed the increase in insurance premiums but at the terrible cost of transferring risk and payment responsibilities to patients.
That said, government administered health care pricing in the United States is still too weak. We even prohibit the government from negotiating drug prices in the Medicare Part D program. Drug pricing is not only obscene, it is criminal, or at least it should be a crime when companies can price their drugs at tens of thousands of dollars only because our dysfunctional market will bear those prices.
Since we have not allowed our government to take a more active role, we should ask if the private sector can be capable of providing greater value. Up to this point it has not been so, as is verified by the fact that we have far higher prices than other nations.
But suppose the private sector did move in using their unique tools to control markets. Consider the approach of hedge fund manager Kyle Bass. He is famous for creating large fortunes by betting against the market with tools such as credit default swaps in the subprime mortgage crisis and credit default swaps on government bonds in Greece.
Based on this Reuters article, apparently now Bass wants to bet against drug firms that seem to be abusing the patent laws to drive up drug prices. He is quoted as saying that these companies are “going to get kneecapped.” Wow! When he is finished, he says, “This is going to lower drug prices for Medicare and for everyone.” Although he has not revealed his strategy, it does not take too much imagination to come to the conclusion that he may well use credit default swaps to make another fortune once he is effective in disabusing the industry of their belief that these innovative patents are valid.
Which is better? Is it better to allow the private sector to use innovations such as credit default swaps to bring about fairer pricing of drugs, even though considerable funds are redirected upwards, further increasing income and wealth inequality? Or is it better to have government administered pricing wherein there is no opportunity to create new fortunes by using Wall Street tools to divert health care dollars to the wealthy? If for no other reason, you would think that government administered pricing should be preferred simply because it is more effective.
Since we do not seem to be inclined on relying on our government to serve our needs, maybe we should think more about private sector opportunities. For starters, someone might want to secure a patent on kneecap replacements. Our friends on Wall Street would no doubt recognize the investment potential, and the venture capitalists would be lined up at your door.
Billing and insurance-related administrative costs in United States’ health care: synthesis of micro-costing evidence
By Aliya Jiwani, David Himmelstein, Steffie Woolhandler and James G Kahn
BMC Health Services Research, Online November 13, 2014
Background: The United States’ multiple-payer health care system requires substantial effort and costs for administration, with billing and insurance-related (BIR) activities comprising a large but incompletely characterized proportion. A number of studies have quantified BIR costs for specific health care sectors, using micro-costing techniques. However, variation in the types of payers, providers, and BIR activities across studies complicates estimation of system-wide costs. Using a consistent and comprehensive definition of BIR (including both public and private payers, all providers, and all types of BIR activities), we synthesized and updated available micro-costing evidence in order to estimate total and added BIR costs for the U.S. health care system in 2012.
Methods: We reviewed BIR micro-costing studies across healthcare sectors. For physician practices, hospitals, and insurers, we estimated the % BIR using existing research and publicly reported data, re-calculated to a standard and comprehensive definition of BIR where necessary. We found no data on % BIR in other health services or supplies settings, so extrapolated from known sectors. We calculated total BIR costs in each sector as the product of 2012 U.S. national health expenditures and the percentage of revenue used for BIR. We estimated “added” BIR costs by comparing total BIR costs in each sector to those observed in existing, simplified financing systems (Canada’s single payer system for providers, and U.S. Medicare for insurers). Due to uncertainty in inputs, we performed sensitivity analyses.
Results: BIR costs in the U.S. health care system totaled approximately $471 ($330 – $597) billion in 2012. This includes $70 ($54 – $76) billion in physician practices, $74 ($58 – $94) billion in hospitals, an estimated $94 ($47 – $141) billion in settings providing other health services and supplies, $198 ($154 – $233) billion in private insurers, and $35 ($17 – $52) billion in public insurers. Compared to simplified financing, $375 ($254 – $507) billion, or 80%, represents the added BIR costs of the current multi-payer system.
Conclusions: A simplified financing system in the U.S. could result in cost savings exceeding $350 billion annually, nearly 15% of health care spending.
From the Discussion
Eliminating added BIR costs of $375 billion per year (14.7% of US health care spending) would provide resources to extend and improve insurance coverage, within current expenditure levels. Since uninsured individuals have utilization of about 50% of insured individuals, the current 15% uninsured could be covered with roughly half of the $375 billion. Remaining savings could be applied to improved coverage for those already insured.
PNHP release: $375 billion wasted on billing and health insurance-related paperwork annually: study
Previous studies have demonstrated the waste of billing and insurance-related functions in health care in United States. This study refines and unifies the estimates of these costs and shows how much could be recovered if we were to switch to a simplified financing system such as Canada’s single payer system for providers, and U.S. Medicare for insurers. The $375 billion recovered would be enough to cover the uninsured and bring the coverage for the underinsured up to standard.
The PDF of the full study is available through open access at the biomedcentral link above. It should be filed under landmark articles in every health policy library.
What Happened in Vermont: Implications of the Pullback from Single Payer
By Steffie Woolhandler, M.D., M.P.H., and David U. Himmelstein, M.D.
Jan. 10, 2015
Gov. Peter Shumlin’s Dec. 17, 2014, announcement that he would not press forward with Vermont’s Green Mountain Care (GMC) reform arose from political calculus rather than fiscal necessity. GMC had veered away from a true single payer design over the past three years, forfeiting some potential cost savings. Yet even the diluted plan on the table before Shumlin’s announcement would probably have lowered total health spending in Vermont, while covering all of the state’s uninsured.
Decades of exemplary grassroots organizing (and strong labor union support) in Vermont put single payer on the agenda. During Shumlin’s 2010 gubernatorial campaign, he promised to implement a single payer reform, which was a factor in the Progressive Party’s decision not to field a candidate. But the details of Shumlin’s plan weren’t fleshed out during the campaign.
After his victory, Shumlin and the legislature commissioned economist William Hsiao to study options for health reform in Vermont, including single payer. Rejecting a fully public single-payer plan, Hsiao instead proposed a “public-private hybrid” model and projected $580 million in savings, including large administrative cost savings, in the program’s first year.
Spurred by Hsiao’s positive projections, in 2011 the legislature passed a health reform law that laid out plans for implementing the Affordable Care Act in the short term, and called for a later transition to a single payer GMC plan. But while the law gave a detailed prescription for implementing the ACA (including construction of an exchange whose final cost was about $250 million), the sections on single payer were vague, and punted decisions on critical issues to the GMC Board to be appointed by the governor. That board would determine whether critical services like long-term care would be covered; the amount of copayments; how hospitals and doctors would be paid; and whether capital funds would be folded into operating budgets or allocated through separate capital grant (the sine qua non of effective health planning). Critically, the bill included no plan for funding the single payer program.
An early signal of trouble was Shumlin’s appointment of Anya Rader Wallack to chair the new GMC board. Wallack had deep ties to the private insurance industry, having held key positions (including the presidency) at the Blue Cross Blue Shield of Massachusetts Foundation. That foundation played a central role in designing and pushing for Massachusetts’ 2006 Romneycare reform, and subsequently issued a series of glowing evaluations of Romneycare that helped buttress the case for replicating its structure in the ACA.
From the outset, Shumlin’s team embraced an Accountable Care Organization payment strategy that would enroll most Vermonters in large hospital-based, HMO-like organizations that would be overseen by a “designated entity” – presumably Blue Cross. To-date, ACOs have shown little or no overall cost savings, have increased administrative costs, and have driven hospitals to merge and gobble up physician practices. The consolidation of ownership triggered by ACO incentives has raised concern that regionally dominant ACOs will use their market power to drive up costs. In Vermont, Dartmouth Hitchcock and the University of Vermont’s Fletcher Allen system dominate the market, and have initiated a for-profit, joint venture ACO.
The design for GMC incorporated several other features that increased the administrative complexity, and hence administrative costs of the proposed reform. The plan never envisioned including all Vermonters in a single plan, instead retaining multiple payers. Hence, hospitals, physicians’ offices, and nursing homes would still have had to contend with multiple payers, forcing them to maintain the complex cost-tracking and billing apparatus that drives up providers’ administrative costs. It proposed continuing to pay hospitals and other institutional providers on a per-patient basis, rather than through global budgets, similarly perpetuating the expensive billing apparatus that siphons funds from care. And hospitals would have continued to rely on surpluses from day-to-day operations as their main source of capital funds for modernization and expansion. This undermines health planning and raises bureaucratic costs by forcing hospital administrators to undertake the additional work needed to identify and pursue profit opportunities.
Some of this complexity was forced on Vermont by federal statutes that may preclude folding Medicare and the military’s Tricare program into a state single payer plan, and restrict states’ ability to outlaw private employer-provided coverage that duplicates the public plan. But the decisions to abandon lump-sum hospital payment, and separate grants for capital came from the governor and his advisers.
The End Game of Vermont’s Reform
Vermont’s November 2014 gubernatorial election had very low voter turnout, a circumstance that generally favors the right. Gov. Shumlin – who had hedged on health reform during the campaign – eked out a narrow plurality, leaving the state legislature to decide between him and the Republican candidate and greatly weakening Shumlin’s position. A month later, while awaiting the legislature’s decision (they elected him to a third term on January 9), Shumlin announced his pullback from reform.
Shortly thereafter, he released the detailed cost projections which he said had convinced him not to go ahead. The report by his staff estimated zero administrative savings from its proposed plan. It also projected zero savings on drugs and medical devices, tacitly acknowledging that GMC wouldn’t use bargaining clout to rein in prices, and ignoring the fact that Quebec, its neighbor to the North, has gotten big discounts.
The Shumlin administration’s cost estimates also incorporated an old (too high) estimate of the number of uninsured Vermonters, inflating the projected increase in utilization and cost. Finally, it assumed that doctors would expand their work hours (and incomes) to care for the newly insured, rather than maintaining their current work hours by seeing their other patients a little less frequently – as happened with the implementation of single payer coverage in Quebec.
But even the administration’s inflated cost estimates indicate that universal coverage under its quasi-single payer plan would cost somewhat less overall than the current system. The voluminous report includes detailed tabulations of new costs to the state treasury under the proposed reform. But the report scrupulously avoids providing any figures for the impact of reform on the total cost of health care (public and private) in the state. Economist Gerald Friedman has estimated these overall impacts using the report’s data, previous estimates of health expenditures in Vermont, and CMS figures on Medicare spending and expected health care inflation under the ACA. He estimates that even the diluted reform proposed by the governor’s team would cut overall health spending in Vermont by about $500 million annually.
So why did Gov. Shumlin declare the reform unaffordable? Many have noted that the $2.5 billion in new state expenditures required under the reform would nearly double the state’s previous budget. But these numbers are meaningless absent an accounting of the savings Vermont households would realize by avoiding private insurance premiums and out-of-pocket costs. As detailed above, these savings would more than offset the new taxes.
But although the total costs of care would have fallen even under the GMC plan, some – mostly higher-income, healthy Vermonters whose taxes would go up the most – would have paid more. Although the GMC tax plan was far from progressive, it was far less regressive than the current pattern of health care funding in the state. The GMC Board estimated that most of the 340,214 families earning less than $150,000 annually would have gained, while most of the 24,102 families above that income level would have lost. Overall, employers’ costs would have risen by $109 million – with many small businesses experiencing cost increases, a political sore point.
It’s a misnomer to label Vermont’s Green Mountain Care plan “single payer.” It was hemmed in by federal restrictions that precluded including 100 percent of Vermonters in one plan, and its designers further compromised on features needed to maximize administrative savings and bargaining clout with drug firms, and improve health planning.
But even the watered-down plan that emerged could have covered the uninsured, improved coverage for many who currently face high out-of-pocket costs, and actually reduced total health spending in the state – albeit far less than under a true single payer plan. A true single payer plan would have made covering long-term care affordable, and allowed the elimination of all copayments and deductibles.
Vermont’s experience holds important lessons for single payer advocates.
1. Effective grassroots organizing makes a difference. It got real health care reform on the political radar screen in Vermont, and can get it back on the radar there and elsewhere. Indeed, single payer forces in Vermont are already rallying to reverse Shumlin’s decision. The virtues, value, and simplicity of a single payer approach have broad popular appeal.
2. Federal restrictions impose significant compromises on state-level single payer plans. For this, as well as other reasons, organizing for single-payer state plans and organizing for national legislation are not competing strategies, but complementary ones. The ultimate goal for both is a single, inclusive program for the entire nation.
3. As single payer work advances, we need to anticipate that corporate opposition will mobilize – often behind the scenes. The only effective antidote is continued grassroots mobilization. Delayed implementation and punting key decision to the future opens the door for corporate influence and smear campaigns.
4. Beware of “experts” with a track record unsympathetic to single payer. Economic projections are always based on assumptions, which are often highly political.
5. Even when we don’t get the whole pie, demanding it often yields a significant piece. Although a major single payer effort was stymied in Vermont, it achieved substantial progress. It’s no accident that Vermont’s uninsurance rate has come down to 3 percent; that virtually all children in that state are covered; that its Medicaid program is among the best; that its hospitals have come under tighter fiscal regulation; and that single payer remains in the limelight there. Even as he backed off from single payer for now, the governor promised to press for future health reform.
Dr. Steffie Woolhandler and Dr. David U. Himmelstein are internists, professors at the City University of New York’s School of Public Health at Hunter College, and lecturers at Harvard Medical School. They co-founded Physicians for a National Health Program.
The special weekend release of this commentary is designed for widespread distribution to help bring together members of the single payer community, not only within PNHP but also including all individuals and organizations that have been and will continue to be dedicated to the cause of health care justice for all.
The value of this commentary by Steffie Woolhandler and David Himmelstein is that it provides a general perspective on what actually did happen, and leaves us with a positive sendoff on the path forward.
Their description of the events that actually took place allows us to dismiss the tangle of minutiae that has not only been disruptive within the single payer camp but has also allowed the conservatives and libertarians to falsely label the single payer concept as an abject failure. Much more importantly, this commentary provides lessons that can help reunite all of us, on both the state and national levels, in our common quest for single payer reform.
Please share the commentary or the link to it with your single payer colleagues and organizations.
Variations In County-Level Costs Between Traditional Medicare And Medicare Advantage Have Implications For Premium Support
By Brian Biles, Giselle Casillas and Stuart Guterman
Health Affairs, January 2015
Concern about the future growth of Medicare spending has led some in Congress and elsewhere to promote converting Medicare to a “premium support” system. Under premium support, Medicare would provide a “defined contribution” to each Medicare beneficiary to purchase either a Medicare Advantage (MA)–type private health plan or the traditional Medicare public plan. To better understand the implications of such a shift, we compared the average costs per beneficiary of providing Medicare benefits at the county level for traditional Medicare and four types of MA plans. We found that the relative costs of Medicare Advantage and traditional Medicare varied greatly by MA plan type and by geographic location. The costs of health maintenance organization–type plans averaged 7 percent less than those of traditional Medicare, but the costs of the more loosely structured preferred provider organization and private fee-for-service plans averaged 12–18 percent more than those of traditional Medicare. In some counties MA plan costs averaged 28 percent less than costs in traditional Medicare, while in other counties MA plan costs averaged 26 percent more than traditional Medicare costs. Enactment of a Medicare premium-support proposal could trigger cost increases for beneficiaries participating in Medicare Advantage as well as those in traditional Medicare.
From the Discussion
This analysis of the relationship between the costs to provide Medicare benefits by MA private plans and by traditional Medicare in the same county found that these costs varied widely by the type of MA plan and the level of costs in traditional Medicare at the county level.
Most notably, Medicare Advantage HMO plans had lower costs than traditional Medicare in areas in the nation where the average costs per beneficiary in traditional Medicare were relatively high compared to the national average. In contrast, the three less tightly organized MA plan types had higher costs than traditional Medicare in almost all areas of the nation, and their costs were much higher where the average costs in traditional Medicare were lower than the national average.
Although both traditional Medicare and MA plans are changing, these findings have broad implications for future Medicare policy, especially for proposals to transform Medicare into a premium support-based program.
Nationwide, MA plans in rural areas have costs that average 115 percent of local costs in traditional Medicare. In some metropolitan areas, MA plan costs to provide Medicare benefits are also higher than in traditional Medicare. In cities such as Rochester, New York; Sacramento, California; and Seattle, Washington, Medicare Advantage HMO plan costs are higher than costs in traditional Medicare by 18 percent or more. In these areas, with low costs in traditional Medicare, a premium-support program would not lead to an increase in the monthly Medicare premium to traditional Medicare beneficiaries. It would, however, reduce payments to MA plans, which would then need to raise their monthly premiums to Medicare members and reduce any supplemental benefits that they now provide.
This analysis suggests that reform of Medicare based on the premium-support model will inevitably result in major changes in costs for health insurance coverage and health care services for elderly and disabled beneficiaries in substantial portions of the nation. The analysis finds that only the more tightly organized Medicare Advantage HMO–type plans have costs that are lower as a national average than traditional Medicare costs in the same area. Medicare Advantage HMO–model private plans, although very successful in some high-cost urban regions, have proved expensive and difficult to develop and expand in other areas with lower costs in traditional Medicare. After thirty years of federal and private support, the most tightly organized Medicare Advantage HMOs have achieved significant cost savings relative to local costs in traditional Medicare in only a limited number of urban counties.
The lesson is that these less structured MA plans, which mostly mimic the fee-for-service payment system for which traditional Medicare is criticized, have costs that are substantially higher than those of traditional Medicare in the same area and would not contribute to lower Medicare costs.
Finally, the analysis finds that the traditional Medicare program is not as universally inefficient and expensive relative to private plans as is often suggested. The findings described here indicate that MA plans have average costs that are higher than costs in traditional Medicare in five of the ten US county cohorts with the lowest traditional Medicare costs. In the three county cohorts with the lowest traditional Medicare costs, even HMO plans have costs that exceed those of traditional Medicare, by more than 10 percentage points.
The contention that private Medicare Advantage (MA) plans competing with the traditional Medicare program are able to lower costs has been proven repeatedly to be a fiction. Yet there continues to be a push to convert Medicare into a premium support system in which patients would use vouchers to purchase private plans under the false promise of lower costs through market competition.
Although tightly organized HMO-type Medicare Advantage plans may have lower costs in areas where the costs of the traditional Medicare program were higher, more loosely structured PPO and private fee-for-service Medicare Advantage plans averaged 12 to 18 percent more than the costs of the traditional Medicare program.
Understanding the distinction between tightly organized HMOs and loosely organized PPOs and private FFS plans is important to be able to make sense of the economic impact of these models. PPO and FFS Medicare Advantage plans are business models of private insurance designed to be marketed as insurance products that partially cover losses due to health care. These models are associated with very high administrative costs, a fact acknowledged in the Affordable Care Act since similar plans are permitted to consume 15 to 20 percent of the premiums for their own administrative costs and profits. These administrative costs are far higher than those of the traditional Medicare program, as mentioned above.
Tightly organized HMOS, such as Kaiser Permanente, are designed as patient service models providing prepaid health care. These models have been shown to be effective in improving efficiency and sometimes reducing health care costs. What distinguishes them from the loosely organized models is that these HMOs are integrated health care delivery systems whereas the loosely organized models are simply intermediary insurance plans that contract with mostly non-integrated private providers.
Why is this important? Integrated systems such as Kaiser that are a part of the delivery system would be covered under a single payer national health program – an improved Medicare for all. The loosely organized models are simply private insurers that are not part of the health care delivery system. Under single payer they would be replaced by an improved Medicare. Thus we would be keeping efficient prepaid delivery systems while dumping the wasteful and intrusive private insurer intermediaries.
How would premium support change this? The advocates would provide generous vouchers for these wasteful intermediaries while failing to provide adequate cost adjustments for the traditional Medicare program. We know that they would do this because they already are doing it. Although the Affordable Care Act called for the reduction of the Medicare Advantage overpayments, a conspiracy between the insurance industry and the administration has resulted in various accounting innovations that have preserved these overpayments, though in a disguised form. So they would eventually displace traditional Medicare with a thriving market of private plans, but, as patients would eventually discover, plans with unaffordable cost sharing and limited choice of narrow networks.
This study is yet one more that demonstrates the irrationality of using wasteful private insurance plans in a public program. Yet it also shows that those who prefer to obtain care through an integrated delivery model, such as Kaiser Permanente, could continue to do so under single payer since it is a prepaid health delivery system rather than a private, superfluous, intermediary insurer. But, by all means, be prepared to protest vociferously when you hear talk of premium support.
State Trends in the Cost of Employer Health Insurance Coverage, 2003–2013
By Cathy Schoen, David Radley, and Sara R. Collins
The Commonwealth Fund, January 8, 2015
From 2010 to 2013—the years following the implementation of the Affordable Care Act—there has been a marked slowdown in premium growth in 31 states and the District of Columbia. Yet, the costs employees and their families pay out-of-pocket for deductibles and their share of premiums continued to rise, consuming a greater share of incomes across the country. In all but a handful of states, average deductibles more than doubled over the past decade for employees working in large and small firms. Workers are paying more but getting less protective benefits. Costs are particularly high, compared with median income, in Southern and South Central states, where incomes are below the national average. Based on recent forecasts that predict an uptick in private insurance growth rates starting in 2015, securing slow cost growth for workers, families, and employers will likely require action to address rising costs of medical care services.
From the Overview
For workers and their family members who are insured through employers, annual premium increases have far exceeded wage growth for more than a decade—with premiums rising three times faster than wages. In every state in the country, from 2003 to 2013, the total costs of insurance premiums rose far faster than median household income.
From the Discussion
Costs per person for private insurance have risen faster than in Medicare since 2008. Over the next decade, federal projections indicate that per-enrollee medical spending among the privately insured will continue to rise faster than in Medicare, increasing to an average of 4.7 percent per year from 2014 to 2023. Concerns are mounting that the recent wave of hospital mergers and hospital acquisition of physician practices will result in higher prices paid by private insurers, regardless of the quality of care provided. The higher prices paid in the United States relative to other high-income countries account for a large portion of the share of national income that is consumed by health care in the U.S.
Although the Affordable Care Act offers a platform from which to build, securing a more affordable future will likely require action beyond those reforms, focusing on costs of care, particularly for the privately insured.
The key question is how to slow health care cost growth in a way that benefits middle class and lower-wage working families—that is, keeping premium growth in check without eroding benefits. This will likely require concerted efforts that span the private and public sectors. The challenge to policy leaders will be to pursue reforms that improve the quality of health care, rein in cost growth, and ensure that savings are shared with patients and families across the income spectrum.
Although some news reports are celebrating the slowdown in the growth of premiums paid by employers for their employee health benefit programs, the news is not so good for those the coverage is designed to serve – workers and their families. As this report states, “Workers are paying more but getting less protective benefits.”
Specifically, “the costs employees and their families pay out-of-pocket for deductibles and their share of premiums continued to rise, consuming a greater share of incomes across the country.” Further, “Costs per person for private insurance have risen faster than in Medicare.”
Employer-sponsored health insurance – the best coverage that the private insurance industry has to offer – is further burdening workers and their families, yet still falls short of Medicare in its effectiveness in containing health care spending.
Although the Affordable Care Act was specifically designed to perpetuate the role of employer-sponsored coverage, our experience shows that the best that the private insurance industry had to offer is still not good enough. Medicare is certainly better, although it has problems that need to be addressed. But it would be far easier to fix Medicare – a system designed for patient service – than it would be to harness the private health insurance industry – a system designed to serve business interests.
It’s time to relieve employers of their responsibility of providing health benefit programs for their employees. We need to move forward with enacting and implementing an expanded and improved Medicare for all.
Creating the Consumer Bureau
Consumer Financial Protection Bureau (CFPB)
Beginning in 2007, the United States faced the most severe financial crisis since the Great Depression. Millions of Americans saw their home values drop, their savings shrink, their jobs eliminated, and their small businesses lose financing. Credit dried up, and countless consumer loans—many improperly made to begin with—went into default. Today, we’re still in the process of recovering.
In July 2010, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act created the Consumer Financial Protection Bureau (CFPB). The CFPB consolidates most Federal consumer financial protection authority in one place. The consumer bureau is focused on one goal: watching out for American consumers in the market for consumer financial products and services.
Consumer Advisory: 7 ways to keep medical debt in check
By Gail Hillebrand
Consumer Financial Protection Bureau, December 11, 2014
Debt collection is the top complaint we’ve received since September 2013. Out of all debt types, medical collections make up 52 percent of collection accounts on credit reports, far outpacing all other types of debt.
Medical collections are so widespread, that an estimated 43 million consumers with an account in collection have medical debt. We analyzed medical collections in our latest report, to explain why medical debt is affecting so many more credit reports than any other type of debt.
In the financial crisis of the recent Great Recession, people lost their jobs, lost their homes, lost their savings, and their consumer loans went into default. The role of Wall Street compounded and sometimes even created these problems, and that led to greater increases in income and wealth inequality that have adversely impacted America’s working families. In response, Elizabeth Warren, Barney Frank, Chris Dodd and others were instrumental in establishing the Consumer Financial Protection Bureau. So what is the number one complaint that the bureau is now receiving? Medical debt!!
Specifically, debt collection is the top complaint, and medical collections, at 52 percent of collection accounts on credit reports, far outpace all other types of debt.
With first dollar coverage under a single payer system, this problem would disappear. Let’s do it.
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