By Ed Weisbart, M.D., CPE, FAAFP
Accountable Care News, April 2017
President Donald Trump has declared that the Affordable Care Act (ACA) needs to be replaced with “reforms that expand choice, increase access and lower costs, while providing better healthcare.”1 I agree with those goals and believe they can be accomplished without compromising the advances brought by the ACA—20 million fewer uninsured Americans, increased support for lower-income Americans and a host of reforms of insurance practices, such as guaranteed issue and prohibition against rescission and against annual or lifetime caps.
Despite these advances, many problems remain. Tens of millions of Americans remain uninsured. Many more are underinsured, finding the cost of care increasingly prohibitive and their choices of physicians and hospitals increasingly constrained by their insurance network administrators. Compared to other modern nations, our per capita healthcare costs remain outlandishly high and our life expectancy tragically short.
Only 72.7% of our healthcare dollar is spent on actual clinical care; 18% is spent on billing and insurance-related administration, including 7.5% by private insurers, 1.3% by public insurers, 2.7% by physicians, 2.8% by hospitals and 3.6% by other services. (An additional 9.4% of our total expense is on administration unrelated to billing and insurance.) If our billing and insurance-related administrative expenses were reduced to levels seen in most other modern nations, we would reap $375 billion in annual savings.2
Unable to address these wasteful inefficiencies, insurers have turned to financial barriers (copayments, coinsurance and deductibles) to reduce utilization and increasingly restrictive networks that inevitably conflict with patient choice. Our system is the most complex, redundant and least aligned with the interests of public health.
Public health campaigns do not align well with today’s business imperatives and simply cannot be given adequate support by the private insurance industry. Churning demands its own long-term strategies. There is no business case for public health.
I have spent many years in executive roles within the health insurance industry and been frequently stymied by the industry’s fiduciary pressures against long-term, public health initiatives. Even when insurers want to pursue such initiatives, their 20% to 25% annual turnover in membership demands that such clinical initiatives quickly produce favorable financial results. For many insurers, roughly half of their membership today will have migrated to a competing plan within three years and been replaced by members from those same plans. Those who ignore this pressure find themselves improving the health of their competitors’ membership.
The ‘Replace’ Portion of ‘Repeal and Replace’
U.S. Representative John Conyers (D-MI), along with 59 cosponsors, recently introduced the most prudent solution to each of these problems, “Expanded and Improved Medicare For All,” as HR676.3 Politics aside, HR676 should be the “replace” portion of the demand to “repeal and replace” ACA. It alone meets each of the stated goals of our new president.
HR676 would address these and other concerns. It is a short bill, just 30 pages, and a relatively easy read.
At a high level, the bill says two things: Fix the problems with Medicare and expand it to all Americans. The bill calls for public funding of healthcare while preserving and enhancing support for private delivery. This is essentially the model used in Canada today.
Medicare would be improved by removing financial barriers and plugging gaps in coverage, providing a single comprehensive benefit design of all medically necessary services as articulated within the bill. It would be expanded to cover virtually all U.S. residents, with specific eligibility criteria established by the program’s director.
According to a recent article in Annals of Internal Medicine,4 the cost of these changes would be offset by a 68% reduction in insurance overhead and administration of public programs (saving $220 billion); a 52.6% reduction in billing and administration for hospitals (saving $149.3 billion); a 40.1% reduction in billing and administration for physicians (saving $75.3 billion); and an additional $59 billion in administrative savings for nursing homes, home care agencies, non-physician practitioners and employers.
The authors also project a 31.2% reduction in the cost of outpatient prescription drugs, representing $113.2 billion, bringing the total savings from these components to $616.8 billion. Of note, there are at least 25 other studies5 on both a state and federal level that consistently show these savings would fully pay for expansion and improvements.
HR676 calls for financing the program through the establishment of a new Medicare for All Trust Fund built from existing funding sources, including public programs and public employee benefits. In addition, it calls for increasing personal income tax on the top 5% of income earners, and modest and progressive taxes on payroll, self- employment income, unearned income and stock and bond transactions.
The overall program budget would be set through negotiations by providers, state directors and regional directors but ultimately approved and divided regionally by the program director. This budget would contain three discrete, non-fungible sections: operations, capital and education. Health professionals would either be reimbursed through a negotiated, fee-for-service schedule or a salary through a globally budgeted institution, group practice or non-profit, HMO. Balance billing of patients is expressly prohibited.
The bill establishes a diversely representative, 15-member National Board of Universal Quality and Access, with a director of quality of control appointed by the president with the advice and consent of the Senate.
Obviously, HR676 would transform the health insurance landscape, virtually eliminating the market for employer-based and individual private insurance, Medicaid, Medicare supplements, wraps and Parts C and D programs. Most of the employees displaced from their positions within the insurance industry would have a two-year, transition benefit up to $100,000 per year, plus first priority at retraining and job placement within the new system.
Perhaps most importantly, HR676 would establish the foundations of a business case for long-term improvements in public health—something nearly unobtainable in an insurance industry adapted to high levels of membership turnover.
In some ways, Medicare already accomplishes this for our seniors. The Institute of Medicine found that once Americans reach the age of eligibility for Medicare, our life expectancy as compared to that in 17 other modern nations begins to improve. Until age 65, we rank at or near the worst among our peers. Once we reach Medicare eligibility, our ranking by age improves until age 85, when our life expectancy has risen to among the best three nations.6
U.S. vs. Canadian Healthcare
We can also project the value of HR676 by comparing the results of our healthcare system with Canada’s. In 1971, President Richard Nixon signed into law the HMO Act, creating the managed care experiment. The same year, Canadian Medicare was fully implemented in all provinces. Until that point, our two nations were nearly identical in overall healthcare costs as a percentage of GDP, and our life expectancies were within one year of each other.
Since that milestone, our overall cost trends have remained unchanged whereas the trend in Canada nearly flattened out.7 Simultaneously, their life expectancy rate improved more rapidly than ours so that Canadians now enjoy a 2.5-year advantage.8 We were the same; now we spend much more, and they live longer.
Canadians have virtually no risk of bankruptcy from the costs of medical care—even when unable to continue working.
Like all others, the Canadian healthcare system is imperfect. Six percent of Canadians report having unmet health needs due to waiting lists or frankly unavailable services, compared to 1% of Americans reporting this. However, only 1% of Canadians report unmet health needs due to the cost of care, compared to 8% of Americans.9 We can do better than Canada, but their results today trump ours in many meaningful ways.
Among many similar studies, a recent Gallup poll found that 58% of Americans, including 73% of Democrats and 41% of Republicans, “support a federally funded, healthcare program for all Americans.”10
Fifty-nine percent of physicians want national health insurance.11 More than 2,500 prominent physicians have publicly endorsed the June 2016 proposal by the Working Group on Single-Payer Program Design.12
President Trump has called for a healthcare strategy that expands choice, increases access, lowers costs and provides better healthcare. An obvious solution is already in Congress—HR676.
Ed Weisbart M.D., CPE, FAAFP, chairs the Missouri chapter of Physicians for a National Health Program, a 30-year-old, non-profit research and education organization. He may be reached at pnhpMO@gmail.com. Visit pnhp.org/hr676 for more information on HR676.
1. Remarks by President Trump in Joint Address to Congress. Feb. 28, 2017.
2. Jiwani A, Himmelstein D, Woolhandler S, et al. “Billing and Insurance-Related Administrative Costs in United States’ Health Care: Synthesis of Micro-Costing Evidence.” BMC Health Services Research. Nov. 13, 2014.
3. “H.R.676—Expanded and Improved Medicare for All Act.” Congress.gov. Accessed March 10, 2017.
4. Woolhandler S, Himmelstein D. “Single-Payer Reform: The Only Way to Fulfill the President’s Pledge of More Coverage, Better Benefits, and Lower Costs.” Annals of Internal Medicine. Feb. 21, 2017.
5. “How Much Would Single Payer Cost?” Physicians for a National Health Program. Accessed March 10, 2017
6. “Shorter Lives, Poorer Health.” Institute of Medicine. Jan. 9, 2013.
7. “Canada’s Slow Health Spending Growth Continues.” Canadian Institute for Health Information. Oct. 29, 2015.
8. “Comparing the U.S. and Canadian Health Care Systems.” The National Bureau of Economic Research. Accessed March 10, 2017.
10. Newport F. “Majority in U.S. Support Idea of Fed-Funded Healthcare System.” Gallup. May 16, 2016.
11. Carroll, A, Ackerman R. “Support for National Health Insurance Among U.S. Physicians: 5 Years Later.” Annals of Internal Medicine. April 2008; 148 (7): 567.
12. “Beyond the Affordable Care Act: A Physician’s Proposal for Single-Payer Health Care Reform.” The Working Group on Single‐ Payer Program Design. Accessed March 10, 2017.
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