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US Healthcare Industry Creating an Endless S**tstorm of Money-Grubbing Bureaucracy and Paperwork, Study Finds

US Healthcare Industry Creating an Endless S**tstorm of Money-Grubbing Bureaucracy and Paperwork, Study Finds

A highly lucrative paper-pushing industry is unnecessarily costing already-broke Americans hundreds of billions of dollars.

By Maxwell Strachan
VICE, January 8, 2020

Capitalist though it may be, the U.S. healthcare industry is a bureaucratic, inefficient and unnecessarily complicated mess, which has created a highly lucrative paper-pushing industry that is unnecessarily costing already-broke Americans hundreds of billions of dollars a year, according to a new study published this week in the Annals of Internal Medicine.

The healthcare industry’s bureaucratic administrative costs set Americans back $812 billion in 2017, or just under $2,500 per person. Another way to think about those numbers: 34 percent of all U.S. costs related to “doctor visits, hospitals, long-term care and health insurance” essentially came from paperwork, according to the analysis, which was performed by researchers at Harvard Medical School, the City University of New York at Hunter College, and the University of Ottawa.

If you look at those numbers and think “Well, maybe that’s just what things cost,” please know this: You’re wrong. That same year, our neighbors to the North, Canada, spent $551 per person on their own health-care administration, or less than one-fourth what we did, which amounts to only 17 percent of their total national healthcare expenditures. Cut U.S. administrative costs to that level, the researchers calculate, and you’ve saved the country more than $600 billion a year. Congratulations.

Not enough for you? Let’s do some U.S. vs Canada comparisons of some more specific per-person administrative costs:

  • Nursing home, home care, and hospice administration: $255 in the U.S.; $123 in Canada.
  • Physicians’ insurance-related costs: $465 in the U.S.; $87 in Canada.
  • Insurers’ overhead: $844 in the U.S.; $146 in Canada.
  • Hospital administration: $933 in the U.S.; $196 in Canada.

So, what gives? Well, for one thing, Canada implemented a publicly funded universal healthcare system all the way back in 1962 that streamlined a lot of the administrative bullshit. Hospitals there are funded through “global budgets that set overall expenditure targets or limits (as opposed to fee-for-service arrangements),” according to Canada’s government website.

Who has lots of fee-for-service healthcare arrangements? Americans do, that’s who! As they say, time is money, and there is a lot of time being spent trying to deduce who owes whom what and when in our exceptionally complicated current insurance system. Ever entered a protracted and maddening multi-pronged battle with a doctor, hospital, and insurance company over an out-of-network bill? That’s some good old-fashioned administration, baby.

As the Los Angeles Times noted, these high administrative costs aren’t exactly leading Americans to the pinnacle of health and wellness. One 2007 study by the U.S. and Canadian governments found our overall health outcomes to be basically the same.

The share of the U.S. healthcare industry that can be lumped into the “administration” bucket has actually increased by around 3 percent since 1999, when the same researchers last performed the same analysis, and most of the reason can be boiled down to “the expanding role that private insurers have assumed in tax-funded programs such as Medicaid and Medicare.”

Not only that, but the researchers also believe their assessment might underestimate how much administrative costs have grown since 1999 for a variety of reasons. For one, they weren’t able to study administrative costs in dentistal care in 2017 like they were back in 1999, since the data for 2017 wasn’t available. So, yeah, it could be even worse than we think.

“The gap in health administrative spending between the United States and Canada is large and widening, and it apparently reflects the inefficiencies of the U.S. private insurance–based, multipayer system,” the authors write in the study’s abstract. “The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.”

Unsurprisingly, the study’s researchers support a Medicare for All-type system.

https://www.vice.com…

Insurance networks have to go

By Valerie Domenici, Ph.D.
The Sentinel (Carlisle, Penn.), Letters, January 8, 2020

Dear Editor:

Every Jan. 1, millions of Americans switch to a new health plan. Inevitably, some of my patients find out I am no longer “in the network.” Treatment comes to a screeching halt while I start the process of joining that new “network” so we can get back to work.

I fill out form after form, obtain multiple background checks, fax copies of documents, sign affidavits, and so on. We wait for all of this to process. If the patient is very lucky, we are back to work in a few months. That’s the best-case scenario. It could take a year, or not happen at all.

Your provider can’t just decide to “take your insurance.” Each provider has to independently go through a long process for every single network they join. As a country, we spend hundreds of billions of dollars a year on unnecessary and burdensome administrative tasks like these.

Healthcare providers either have to stop providing healthcare to complete these tasks, or hire other people to do these tasks for them. As a result, we have armies of administrative staff going through the process of “credentialing and contracting” for every provider, office, and hospital in the country. This is a bloated bureaucracy that serves no legitimate purpose. And it’s expensive.

I support Medicare for All because it is not an efficient use of anybody’s time or money to do the same thing thousands of times when it could be done once. Under a national single-payer system, every doctor and hospital would be covered, and the entire concept of “networks” would cease to exist entirely. “Surprise” medical bills — as well as all other medical bills — would be gone. Patients would regain free choice of doctors and hospitals, and providers would be freed up to just do their jobs.

https://cumberlink.com…

Landmark administrative waste study updated

Health Care Administrative Costs in the United States and Canada, 2017

By David U. Himmelstein, M.D.; Terry Campbell, M.H.A.; Steffie Woolhandler, M.D., M.P.H.
Annals of Internal Medicine, January 7, 2020

Abstract

Background: Before Canada’s single-payer reform, its payment system, health costs, and number of health administrative personnel per capita resembled those of the United States. By 1999, administration accounted for 31% of U.S. health expenditures versus 16.7% in Canada. No recent comprehensive analyses of those costs are available.

Objective: To quantify 2017 spending for administration by insurers and providers.

Design: Analyses of government reports, accounting data that providers file with regulators, surveys of physicians, and census-collected data on employment in health care.

Setting: United States and Canada.

Measurements: Insurance overhead; administrative expenditures of hospitals, physicians, nursing homes, home care agencies, and hospices.

Results: U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada: $844 versus $146 on insurers’ overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians’ insurance-related costs. Of the 3.2–percentage point increase in administration’s share of U.S. health expenditures since 1999, 2.4 percentage points was due to growth in private insurers’ overhead, mostly because of high overhead in their Medicare and Medicaid managed-care plans.

Limitations: Estimates exclude dentists, pharmacies, and some other providers; accounting categories for the 2 countries differ somewhat; and methodological changes probably resulted in an underestimate of administrative cost growth since 1999.

Conclusion: The gap in health administrative spending between the United States and Canada is large and widening, and it apparently reflects the inefficiencies of the U.S. private insurance–based, multipayer system. The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.

From the Results

Total Costs of Health Care Administration: Health care administrative costs in the United States in 2017 totaled $812.0 billion, $2497 per capita ($2696 per insured person), or 34.2% of total spending in the categories for which data are available. The comparable estimates for Canada are $551 per capita ($593, assuming U.S. wage rates in doctors’ offices), or 17.0% of expenditures. The difference amounts to over $1900 per capita (or over $2100 per insured person), equivalent to more than $600 billion in excess administrative spending in the United States.

From the Discussion

Administration accounts for one third of United States health care expenditures, twice the amount in Canada. The gap in dollars per capita is even larger: a greater than 4-fold disparity.

Five decades ago, when the 2 nations’ payment strategies first diverged, their health care systems deployed similar numbers of administrative personnel: 43.8 persons per 10 000 population in the United States versus 40.8 persons per 10 000 population in Canada. In the interim, virtually all billing has been computerized and EHRs have become commonplace, but the promised breakthrough in administrative efficiency has not materialized. In 1983, administration accounted for 22% of U.S. health spending (versus 13.8% in Canada), rising to 31.0% (versus 16.7%) in 1999 and, as we report, 34.2% (versus 17.0%) in 2017. Expressed in per capita 2017 dollars, U.S. administrative costs increased from $818 in 1983 to $2497 in 2017.

https://annals.org…

Health care paperwork cost U.S. $812 billion in 2017, four times more per capita than in Canada

Study in leading medical journal links rise in bureaucracy — now 34.2% of health spending — to surging overhead of private insurers

Physicians for a National Health Program, January 6, 2020

A study published today in the Annals of Internal Medicine finds that health care bureaucracy cost Americans $812 billion in 2017. This represented more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. The study estimated that cutting U.S. administrative costs to Canadian levels would have saved more than $600 billion in 2017.

Health administration costs were more than fourfold higher per capita in the U.S. than in Canada ($2,479 vs. $551 per person) which implemented a single-payer Medicare for All system in 1962. Americans spent $844 per person on insurers’ overhead while Canadians spent $146. Additionally, doctors, hospitals, and other health providers in the U.S. spent far more on administration due to the complexity entailed in billing multiple payers and dealing with the bureaucratic hurdles insurers impose. As a result, hospital administration cost Americans $933 per capita vs. $196 in Canada. The authors note that in Canada hospitals are financed through lump-sum “global budgets” rather than fee-for-service, much as fire departments are funded in the U.S. Physicians’ billing costs were also much higher in the U.S., $465 per capita vs. $87 per capita in Canada.

The analysis, the first comprehensive study of health administration costs since 1999, was carried out by researchers at Harvard Medical School, the City University of New York at Hunter College, and the University of Ottawa. The authors, who also performed the 1999 study, analyzed thousands of accounting reports that hospitals and other health care providers filed with regulators, as well as census data on employment and wages in the health sector. They obtained additional data from surveys of physicians and government reports.

The researchers found that administration’s share of overall U.S. health spending rose by 3.2 percentage points between 1999 and 2017, from 31.0 % to 34.2%. Of the 3.2 percentage point increase, most (2.4 percentage points) was due to the expanding role that private insurers have assumed in tax-funded programs such as Medicaid and Medicare. Private managed care plans now enroll more than one-third of Medicare recipients and a majority of those on Medicaid; Medicare and Medicaid now account for 52% of private insurers’ revenues. Private insurers’ increasing involvement has pushed up overhead in those public programs; private Medicare Advantage plans take 12% or more of premiums for their overhead, while traditional Medicare’s overhead is just 2%, a difference of at least $1,155 per enrollee (per year).

The authors cautioned that their estimates probably understate administrative costs, and particularly the growth since 1999. Their 1999 study included administrative spending for some items such as dental care for which no 2017 data were available. Additionally, private insurance overhead has increased since the study’s completion, rising by 13.2% between 2017 and 2018 according to official health spending figures released in December.

“Medicare for All could save more than $600 billion each year on bureaucracy, and repurpose that money to cover America’s 30 million uninsured and eliminate copayments and deductibles for everyone,” said study senior author Dr. Steffie Woolhandler, a distinguished professor at the City University of New York (CUNY) at Hunter College and lecturer in Medicine at Harvard Medical School, where she previously served as a professor. “Reforms like a public option that leave private insurers in place can’t deliver big administrative savings,” Dr. Woolhandler added. “As a result, public option reform would cost much more and cover much less than Medicare for All.”

According to Dr. David Himmelstein, the study’s lead author who is an internist in the South Bronx, a distinguished professor at CUNY’s Hunter College and lecturer in Medicine at Harvard, “Americans spend twice as much per person as Canadians on health care. But instead of buying better care, that extra spending buys us sky-high profits and useless paperwork. Before their single-payer reform, Canadians died younger than Americans, and their infant mortality rate was higher than ours. Now Canadians live three years longer and their infant mortality rate is 22% lower than ours. Under Medicare for All, Americans could cut out the red tape and afford a Rolls Royce version of Canada’s system.”

“Health Care Administrative Costs in the United States and Canada, 2017.” David U. Himmelstein, M.D.; Terry Campbell, M.H.A.; and Steffie Woolhandler, M.D., M.P.H. Annals of Internal Medicine, published online ahead of print January 6, 2020. doi:10.7326/M19-2818

The Annals of Internal Medicine is the official journal of the American College of Physicians, the largest U.S. medical specialty society with 159,000 members.

In addition to their academic positions, Drs. Woolhandler and Himmelstein founded Physicians for a National Health Program, a 23,000 member organization that advocates for Canadian-style national health insurance in the U.S. Co-author Terry Campbell is Executive Director, Research Operations and Strategies at the University of Ottawa in Canada.

https://pnhp.org…

Comment:

By Don McCanne, M.D.

This meticulous study is an update of the landmark 2003 study by these same authors on comparing the costs of health care administration between the United States and Canada in 1999. That study showed that, though administrative burden in both countries was about the same before Canada implemented its single payer Medicare program, the administrative spending sharply diverged with the United States paying much more per capita than did Canada with its streamlined single payer system. This update shows that, of the further 3.2 percentage point increase in the administrative portion of U.S. health expenditures since 1999, 2.4 percentage points were due to growth in private insurers’ overhead.

The important conclusion is that, if the United States had the same administrative efficiency as does Canada, we could recover more than $600 billion per year by reducing our administrative bureaucracy. That is enough to extend coverage to the uninsured and underinsured while removing the financial barriers of deductibles and other cost sharing for everyone.

It is important to understand that these excess administrative costs are hidden in the prices we pay. Reform proposals that attempt to chisel away at prices while leaving in place this outrageous administrative waste has not and will not effectively address our excessive health care costs. Opponents of single payer reform tend to ignore much of this recoverable waste when they do their analyses that show that single payer reform is “too expensive.” Merely adding a public option – a Medicare for Some – also largely leaves in place these administrative excesses, only adding one more item onto the heap. This is why it is imperative that we implement the single payer model of an improved Medicare for All to reform our health care financing system.

Year after year discussion of such an efficient and equitable model of reform is shelved, often with comments that we need to build incrementally on what we have and eventually we can reach a program of Medicare for All – but we never get there. The incremental measures fail to correct the financing infrastructure defects that result in the profound administrative waste demonstrated in today’s report.

Many of us have been shouting our message from the rooftops for the past 30 years and more, and still the response is that we should tinker with what we have. In today’s dollars that $600 billion per year over the last 30 years amounts to double digit trillions of dollars we have wasted than can never be recovered. Worse, the care that was forgone by the underinsured and uninsured took a massive toll in financial hardship, human suffering and even death, which can never be reversed.

We’ve got $600 billion in recoverable waste to work with. Are we just going to keep dumping it down the administrative sewer?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

U.S. health system costs four times more to run than Canada’s single-payer system

By Melissa Healy
Los Angeles Times, January 7, 2020

Across the border in Canada, where a single-payer system has been in place since 1962, the cost of administering healthcare is just $551 per person — less than a quarter as much.

That spending mismatch, tallied in a study published this week in the Annals of Internal Medicine, could challenge some assumptions about the relative efficiency of public and private healthcare programs. It could also become a hot political talking point on the American campaign trail as presidential candidates debate the pros and cons of government-funded universal health insurance.

Progressive contenders for the Democratic nomination, including Sen. Bernie Sanders of Vermont and Sen. Elizabeth Warren of Massachusetts, are calling for a “Medicare for All” system. More centrist candidates, including former Vice President Joe Biden and former South Bend, Ind., Mayor Pete Buttigieg, have questioned the wisdom of turning the government into the nation’s sole health insurer.

It’s been decades since Canada transitioned from a U.S.-style system of private healthcare insurance to a government-run single-payer system. Canadians today do not gnash their teeth about co-payments or deductibles. They do not struggle to make sense of hospital bills. And they do not fear losing their healthcare coverage.

To be sure, wait times for specialist care and some diagnostic imaging are often criticized as too long. But a 2007 study by Canada’s health authority and the U.S. Centers for Disease Control and Prevention found the overall health of Americans and Canadians to be roughly similar.

Some Canadians purchase private supplemental insurance, whose cost is regulated. Outpatient medications are not included in the government plan, but aside from that, coverage of “medically necessary services” is assured from cradle to grave.

The cost of administering this system amounts to 17% of Canada’s national expenditures on health.

In the United States, twice as much — 34% — goes to the salaries, marketing budgets and computers of healthcare administrators in hospitals, nursing homes and private practices. It goes to executive pay packages which, for five major healthcare insurers, reach close to $20 million or more a year. And it goes to the rising profits demanded by shareholders.

Administering the U.S. network of public and private healthcare programs costs $812 billion each year. And in 2018, 27.9 million Americans remained uninsured, mostly because they could not afford to enroll in the programs available to them.

“The U.S.-Canada disparity in administration is clearly large and growing,” the study authors wrote. “Discussions of health reform in the United States should consider whether $812 billion devoted annually to health administration is money well spent.”

The new figures are based on an analysis of public documents filed by U.S. insurance companies, hospitals, nursing homes, home-care and hospice agencies, and physicians’ offices. Researchers from Hunter College, Harvard Medical School and the University of Ottawa compared those to administrative costs across the Canadian healthcare sector, as detailed by the Canadian Institute for Health Information and a trade association that represents Canada’s private insurers.

Compared to 1999, when the researchers last compared U.S. and Canadian healthcare spending, the costs of administering healthcare insurance have grown in both countries. But the increase has been much steeper in the United States, where a growing number of public insurance programs have increased their reliance on commercial insurers to manage government programs such as Medicare and Medicaid.

As a result, overhead charges by private insurers surged more than any other category of expenditure, the researchers found.

In U.S. states that have retained full control over their Medicaid programs, the growth of administrative costs was negligible, they reported. (The same was true for Canada’s health insurance program.) But in states that shifted most of their Medicaid recipients into private managed care, administrative costs were twice as high.

America’s Health Insurance Plans, a group representing private health insurance companies, said administrative practices shouldn’t be blamed for escalating the cost of care in the United States.

“Study after study continues to demonstrate the value of innovative solutions brought by the free market,” AHIP said in a statement. “In head-to-head comparisons, the free market continues to be more efficient than government-run systems.”

AHIP cited a recent report by the Medicare Payment Advisory Commission (MedPAC), an independent body that advises Congress. The report showed that Medicare Advantage plans — which are privately administered — deliver benefits at 88% of the cost of traditional Medicare.

Even so, the study authors concluded that if the U.S. healthcare system could trim its administrative bloat to bring it in line with Canada’s, Americans could save $628 billion a year while getting the same healthcare.

“The United States is currently wasting at least $600 billion on healthcare paperwork — money that could be saved by going to a simple ‘Medicare for All’ system,” said senior author Dr. Stephanie Woolhandler, a health policy researcher at Hunter College and longtime advocate of single-payer systems.

That sum would be more than enough to extend coverage to the nation’s uninsured, she said.

https://www.latimes.com…

The U.S. Spends $2,500 Per Person on Health Care Administrative Costs. Canada Spends $550. Here’s Why.

By Abigail Abrams
TIME, January 6, 2020

Whether it’s interpreting medical bills, struggling to get hospital records, or fighting with an insurance provider, Americans are accustomed to battling bureaucracy to access their health care. But patients’ time and effort are not the only price of this complexity. Administrative costs now make up about 34% of total health care expenditures in the United States—twice the percentage Canada spends, according to a new study published Monday in Annals of Internal Medicine.

These costs have increased over the last two decades, mostly due to the growth of private insurers’ overhead. The researchers examined 2017 costs and found that if the U.S. were to cut its administrative spending to match Canadian levels, the country could have saved more than $600 billion in just that one year.

“The difference [in administrative costs] between Canada and the U.S. is enough to not only cover all the uninsured but also to eliminate all the copayments and deductibles, and to amp up home care for the elderly and disabled,” says Dr. David Himmelstein, a professor at the CUNY School of Public Health at Hunter College and co-author of the study. “And frankly to have money left over.”

Research has long shown that the U.S., which uses a disparate system of private providers and insurers, has higher administrative costs than other developed countries that use single-payer systems. But the Annals study puts a finer point on it: as the first major effort to calculate administrative costs across the U.S. health system in nearly two decades, the researchers found that the gap between the U.S. and Canada has widened significantly.

The U.S. now spends nearly five times more per person on health care administration than Canada does. The U.S. administrative costs came out to $812 billion in 2017, or $2,497 per person in the U.S. compared with $551 per person in Canada, according to the Annals study.

Along with Himmelstein, co-authors Steffie Woolhandler and Terry Campbell examined administrative costs for insurance companies and government agencies that administer healthcare, as well as costs in four settings: hospitals, nursing homes, home care agencies and hospices and physician practices. For each category, the researchers determined which costs were administrative and conducted analyses to adjust comparisons between relative costs in the U.S. and Canada.

Insurers’ overhead, the largest category, totaled $275.4 billion in the U.S. in 2017, or 7.9% of all national health expenditures, compared with $5.36 billion in Canada, or 2.8% of national health expenditures. The American number included $45 billion in government spending to administer health care programs and $229.5 billion in private insurers’ overhead and profits, which covers employer plans and managed care plans funded by Medicare and Medicaid.

This insurance overhead accounted for most of the total increase in administrative spending in the U.S. since 1999, according to the study. While the share of Americans covered by commercial insurance plans has not changed much, private insurers have expanded their role as subcontractors handling what are known as “managed care” plans for Medicaid and Medicare. The study notes that most Medicaid recipients are now on private managed care plans and about one third of Medicare enrollees now have Medicare Advantage plans. Both of these types of plans have higher overhead costs than the publicly administered alternatives.

“We were struck, and frankly hadn’t expected it until we delved into the data, by the huge increase in insurance overhead,” Himmelstein told TIME.

Other reports, including one by the Center for American Progress published last April, have identified ways to reduce administrative costs without moving the U.S. to a single-payer health care system. But Himmelstein says his study shows that a public option that preserves private insurance wouldn’t provide the same savings as a traditional single-payer system. “We could streamline the bureaucracy to some extent with other approaches, but you can’t get nearly the magnitude of savings that we could get with a single payer,” Himmelstein says, adding, “If the Medicare public option includes the Medicare Advantage plans, it’s actually conceivable that the public option would increase the bureaucratic costs.”

Most of the public option plans proposed by Democratic presidential candidates are not detailed enough to determine exact costs, Himmelstein says. But overall, he believes they won’t result in significant cost savings.

In addition to their research, Himmelstein and Woolhandler have been longtime advocates for single-payer health care. They co-founded the group Physicians for a National Health Program, which advocates for a single-payer system. They also conducted the initial health administrative costs study on 1999 data and have published other studies comparing hospital administrative costs in the U.S. and other countries.

Himmelstein says his team’s estimates of total U.S. administrative costs in the Annals study are likely conservative. When estimating physicians’ administrative costs, the researchers relied on a 2011 study of time spent by physicians and their staffs interacting with insurers. And he notes that while 2017 data was often the latest available when they were conducting this study, 2018 health spending numbers have since come out showing further increases in insurance overhead.

“We can afford universal coverage with a single payer plan, not just universal coverage but first dollar coverage for everybody in our country if we adopted a single-payer Medicare for all approach,” Himmelstein says. “If you’re going to cover everybody without getting those savings you’re going to have to spend more or you’re going to have to have big co-payments and deductibles that deter people from getting the care that they actually need.”

https://time.com…

Patients with Veterans’ health coverage less likely than other insured Americans to skip medications because of cost: Harvard Study

National study finds that Veterans Health Administration (VA) enrollees, especially those with chronic illnesses, have fewer problems paying for medications. Findings support VA pharmacy benefit as a model to make drugs universally affordable

Contact:
Dr. Adam Gaffney, instructor in medicine, Harvard Medical School; President, Physicians for a National Health Program; Division of Pulmonary and Critical Care Medicine, Cambridge Health Alliance; agaffney@cha.harvard.edu
Clare Fauke, communications specialist, Physicians for a National Health Program, clare@pnhp.org

The rising price of prescription drugs has led to a slew of proposals to lower costs and expand access to medications. However, a new study from researchers at Harvard Medical School and the City University of New York at Hunter College suggests that an effective reform model already exists: the pharmacy benefit of the Veterans Health Administration, commonly known as the VA. Researchers found that VA patients are significantly less likely than other insured Americans to go without needed medications, skip doses, or delay filling prescriptions because they are unable to afford them. The study found that VA coverage also reduced racial and economic disparities in prescription drug access.

The VA buys drugs at relatively low cost by using a combination of regulations, bargaining with drug companies to reduce wholesale prices, and utilizing a national formulary. The VA can then afford to provide drugs to veterans with low — or no — patient copays. The investigators assessed whether this benefit design lowered “cost-related medication non-adherence” by analyzing national health surveys conducted from 2014 to 2017. Although VA enrollees were older, sicker, and poorer than other insured Americans, fewer (6.1% of enrollees) reported that costs caused them to go without any medication in the course of a year — compared to 10.9% of non-VA patients. The differences were even larger among patients with serious conditions like heart disease (6.1% vs. 14.4%) and chronic lung disease (6.4% vs. 19.9%).   

“We face a crisis in drug affordability,” noted senior author Dr. Danny McCormick, associate professor of medicine at Harvard Medical School and a primary care physician. “High copays and deductibles are forcing patients to skip their medications — even for serious illnesses like heart disease or lung disease — putting their health, and even their life at risk. The VA shows that there is a better way.”

Previous studies suggest that drug costs would be lower for Medicare if it were allowed to negotiate prices directly with drug companies and use a national formulary, as does the VA. Currently, Medicare’s drug benefits are only available through private plans, which often impose copays, deductibles, and co-insurance for drugs that can add up to thousands of dollars annually. VA enrollees instead pay at most $11 per prescription, and often less. The researchers found that while the VA prevented patients overall from skipping medications due to costs, it was especially beneficial for minority veterans and those with lower incomes.

“Our findings have important implications for the debate about the affordability of health reform,” noted Dr. Steffie Woolhandler, distinguished professor at the City University of New York’s Hunter College and lecturer (formerly professor) in Medicine at Harvard Medical School. “Both the House and Senate Medicare-for-All bills would borrow tools from the VA to cut drug costs, including price negotiations and a formulary. These steps could allow all Americans to afford their medications without burdensome copayments or deductibles,” she added.  

Dr. Adam Gaffney, a pulmonary and critical care physician at Harvard Medical School, noted that while a VA-like drug benefit model could save money, it could also improve patients’ health. “Today, we have better drugs  — more ways to help our patients — than ever before. But these drugs offer no help to patients who can’t afford to take them. By reforming how we pay for prescription medications, we can improve health outcomes, while bringing our drug spending in line with that of other rich nations.” 

“The Effect Of Veterans Health Administration Coverage On Cost-Related Medication Nonadherence,” by Adam Gaffney, MD, MPH; David H. Bor, MD; David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH; and Danny McCormick, MD, MPH. Health Affairs, published online ahead of print January 6, 2020. DOI: 10.1377/hlthaff.2019.00481

Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization whose more than 23,000 members support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.

Health care paperwork cost U.S. $812 billion in 2017, four times more per capita than in Canada

Study in leading medical journal links rise in bureaucracy — now 34.2% of health spending — to surging overhead of private insurers

A study published today in the Annals of Internal Medicine finds that health care bureaucracy cost Americans $812 billion in 2017. This represented more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. The study estimated that cutting U.S. administrative costs to Canadian levels would have saved more than $600 billion in 2017.

Health administration costs were more than fourfold higher per capita in the U.S. than in Canada ($2,479 vs. $551 per person) which implemented a single-payer Medicare for All system in 1962. Americans spent $844 per person on insurers’ overhead while Canadians spent $146. Additionally, doctors, hospitals, and other health providers in the U.S. spent far more on administration due to the complexity entailed in billing multiple payers and dealing with the bureaucratic hurdles insurers impose. As a result, hospital administration cost Americans $933 per capita vs. $196 in Canada. The authors note that in Canada hospitals are financed through lump-sum “global budgets” rather than fee-for-service, much as fire departments are funded in the U.S. Physicians’ billing costs were also much higher in the U.S., $465 per capita  vs. $87 per capita in Canada.

The analysis, the first comprehensive study of health administration costs since 1999, was carried out by researchers at Harvard Medical School, the City University of New York at Hunter College, and the University of Ottawa. The authors, who also performed the 1999 study, analyzed thousands of accounting reports that hospitals and other health care providers filed with regulators, as well as census data on employment and wages in the health sector. They obtained additional data from surveys of physicians and government reports.

The researcher found that administration’s share of overall U.S. health spending rose by 3.2 percentage points between 1999 and 2017, from 31.0 % to 34.2%. Of the 3.2 percentage point increase, most (2.4 percentage points) was due to the expanding role that private insurers have assumed in tax-funded programs such as Medicaid and Medicare. Private managed care plans now enroll more than one-third of Medicare recipients and a majority of those on Medicaid; Medicare and Medicaid now account for 52% of private insurers’ revenues. Private insurers’ increasing involvement has pushed up overhead in those public programs; private Medicare Advantage plans take 12% or more of premiums for their overhead, while traditional Medicare’s overhead is just 2%, a difference of at least $1,155 per enrollee (per year).

The authors cautioned that their estimates probably understate administrative costs, and particularly the growth since 1999. Their 1999 study included administrative spending for some items such as dental care for which no 2017 data were available.  Additionally, private insurance overhead has increased since the study’s completion, rising by 13.2% between 2017 and 2018 according to official health spending figures released in December.   

“Medicare for All could save more than $600 billion each year on bureaucracy, and repurpose that money to cover America’s 30 million uninsured and eliminate copayments and deductibles for everyone,” said study senior author Dr. Steffie Woolhandler, a distinguished professor at the City University of New York (CUNY) at Hunter College and lecturer in Medicine at Harvard Medical School, where she previously served as a professor. “Reforms like a public option that leave private insurers in place can’t deliver big administrative savings,” Dr. Woolhandler added. “As a result, public option reform would cost much more and cover much less than Medicare for All.”

According to Dr. David Himmelstein, the study’s lead author who is an internist in the South Bronx, a distinguished professor at CUNY’s Hunter College and lecturer in Medicine at Harvard, “Americans spend twice as much per person as Canadians on health care. But instead of buying better care, that extra spending buys us sky-high profits and useless paperwork. Before their single-payer reform, Canadians died younger than Americans, and their infant mortality rate was higher than ours. Now Canadians live three years longer and their infant mortality rate is 22% lower than ours.  Under Medicare for All, Americans could cut out the red tape and afford a Rolls Royce version of Canada’s system.” 

— 

“Health Care Administrative Costs in the United States and Canada, 2017.” David U. Himmelstein, M.D.; Terry Campbell, M.H.A.; and Steffie Woolhandler, M.D., M.P.H. Annals of Internal Medicine, published online ahead of print January 6, 2020
doi:10.7326/M19-2818

The Annals of Internal Medicine is the official journal of the American College of Physicians, the largest U.S. medical specialty society with 159,000 members.

In addition to their academic positions, Drs. Woolhandler and Himmelstein founded Physicians for a National Health Program, a 23,000 member organization that advocates for Canadian- style national health insurance in the U.S. Co-author Terry Campbell is Executive Director, Research Operations and Strategies at the University of Ottawa in Canada.

Why insulin is overpriced

The absurdly high cost of insulin, explained

By Julia Belluz
Vox, November 7, 2019

When inventor Frederick Banting discovered insulin in 1923, he refused to put his name on the patent. He felt it was unethical for a doctor to profit from a discovery that would save lives. Banting’s co-inventors, James Collip and Charles Best, sold the insulin patent to the University of Toronto for a mere $1. They wanted everyone who needed their medication to be able to afford it.

https://www.vox.com…

The High Cost of Insulin in the United States: An Urgent Call to Action

By S. Vincent Rajkumar, M.D.
Mayo Clinic Proceedings, January 2020

Alec Smith was 23 when he was diagnosed with type 1 diabetes. He worked as a restaurant manager in Minnesota. At age 26, he could no longer stay on his mother’s health care insurance plan and needed to find his own coverage. On June 1, 2017, he was on his own. The insurance available to him came with a $7600 deductible and a monthly premium of approximately $440. Because he could not afford this, Alec decided to temporarily forego insurance coverage and purchase insulin with cash. Unfortunately for him, the cash price of insulin was far beyond his means. He decided to try and ration the amount of insulin he took till he had enough savings to purchase insurance. Sadly, on June 27, 2017, he was found dead in his apartment of diabetic ketoacidosis.

The most commonly used forms of analog insulin cost 10 times more in the United States than in any other developed country. There have been many other recent reports of deaths in patients with type 1 diabetes because of lack of affordable insulin.

The 3 main reasons cited by pharmaceutical companies for the high cost of new prescription drugs do not apply to insulin. First, the “high cost of development” is not relevant for a drug that is more than 100 years old; even the latest and most commonly used analog insulin products are all over 20 years old. Second, the pricing is not the product of a free market economy. Free market forces are clearly not operational; there is limited competition on price, the person who needs the product is not in a position to negotiate the price, and there is no relationship of price increases over time compared with overall market inflation. The price of insulin has risen inexplicably over the past 20 years at a rate far higher than the rate of inflation. One vial of Humalog (insulin lispro), which used to cost $21 in 1999, costs $332 in 2019, reflecting a price increase of more than 1000%. In contrast, insulin prices in other developed countries, including neighboring Canada, have stayed the same. Insulin pricing in the United States is the consequence of the exact opposite of a free market: extended monopoly on a lifesaving product in which prices can be increased at will, taking advantage of regulatory and legal restrictions on market entry and importation. Third, the arguments that high costs are needed for continued innovation and that attempts to lower or regulate the prices will hamper innovation are not a valid excuse. There is limited innovation when it comes to insulin; the more pressing need is affordability.

Reasons for the High Cost of Insulin

The number 1 reason for the high cost of insulin is the presence of a vulnerable population that needs insulin to survive.

Second, there is virtual monopoly on insulin that has been sustained for decades.

Third, there is the problem of patent evergreening. Newer formulations have prolonged the patent life and extended the monopoly on these products to the present day.

Fourth, there are barriers to the entry of biosimilars. Because insulin is a biological product, similar products that are almost identical to the parent drug are technically referred to as biosimilars and not as generics.

Fifth, there are middlemen who exercise considerable control over market share and stand to gain from a high price. Payments from the insurance company go through a pharmacy benefit manager (PBM) who negotiates the price of insulin with the retail pharmacy (negotiated price) as well as with the pharmaceutical company (in the form of rebates).

Finally, there is the lobbying power of pharmaceutical companies.

Possible Solutions at the State and Federal Policy Level

First, we need protection against monopoly, both for new drugs and for existing drugs.

Second, we need to reform the regulatory and legal processes such that there is an easier path for generics and biosimilars to enter the market.

Third, we need to reform the patent system to prevent overpatenting and patent abuse.

Fourth, we need a governmental or a nongovernmental agency to oversee pricing and make recommendations to Medicare and insurers on the maximum price of new and existing drugs including insulin.

Fifth, we need to ensure that any rebates that are paid by a manufacturer to a PBM are transparent and are passed on to the patient.

Sixth, we need nonprofit generic manufacturing.

Seventh, we need measures and laws that provide access to affordable and safe insulin in emergency circumstances, particularly for patients with type 1 diabetes who find themselves uninsured or unable to afford insulin.

Finally, we need greater advocacy from professional and patient organizations.

The tragedy of insulin prices and the rationing that follows is not something that happens in other developed countries, but it is common in the United States.

https://www.mayoclinicproceedings.org…

Comment:

By Don McCanne, M.D.

The United States has the most expensive health care system in the world yet its performance falls below that of all other wealthy nations. How could this be?

The story of insulin can serve as a proxy for why our system fails so many of us. The original patent for this essential life-saving product was originally sold to the University of Toronto for one dollar, ensuring that it would always be affordable. Yet American exceptionalism, entrepreneurialism, and preferences for markets over public services has driven the price of insulin to a level that people are dying because they cannot afford it.

Whether the sources of financing for health care systems are predominantly public (taxes) or private (cash or insurance), other nations depend on public oversight of their health care system whereas we shift much of that oversight to the private sector even though we pay more per capita through our tax system than do almost all other nations. Handing public money to the private sector has not served us well in controlling health care spending, and especially has failed to ensure that all of us get the health care that we need.

The Mayo Clinic article lists possible solutions to the problem of overpriced insulin. Note that they are largely public sector solutions and certainly would be helpful. But they alone are not enough because all of the other severe deficiencies in our health care financing system would remain in place. Much more than tweaks, we need a fundamental change from a private business culture to a public service culture in the financing of health care. We can do that with a health care delivery system that is composed of both public and private nonprofit institutions (passive investors have to be eliminated in order to change the culture).

Of course, a well designed single payer model of Medicare for All would do precisely that. In contrast, merely adding a public option such as Medicare for Some would fail to change the culture. Worse, those proposals that would tear down the public financing structures that we do have in an effort to further privatize health care financing would leave us even worse off.

Let’s change the culture. Let’s bring everyone under the umbrella of single payer Medicare for All. We can afford it since we are already paying enough to do it, and all of us would get the care we need.

(On a personal note, The Madison Clinic for Pediatric Diabetes at UCSF was named after our granddaughter. She can afford her insulin, but it is not fair that others will die because they cannot afford theirs. Let’s change the culture.)

https://madisonclinic.ucsf.edu…

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Dr. Ken Dolkert on “NH Citizens for Progress”

Granite State PNHP chapter leader Dr. Ken Dolkert appeared on “New Hampshire Citizens for Progress” on January 6, 2020. He discussed the need for a single-payer national health program to address the sorry state of American health care, relative to every other industrialized nation. “We are the only nation on earth where patients are profit centers” he said, in arguing for a non-profit system that would reduce bureaucracy and prioritize patient needs.

Dr. Farzon Nahvi on surprise billing

Dr. Farzon A. Nahvi spoke about surprise medical bills as a kitchen table issue on January 3, 2020. Dr. Nahvi said that many patients, including those with health insurance, avoid seeking care because they are afraid of the financial consequences. He added that only a single-payer national health program would end medial bills once and for all.

For more information on how Medicare for All would address this and other kitchen table topics, visit pnhp.org/KitchenTable.

Growth of Medicare Advantage could suppress support of Medicare for All

Medicare For All Could Die In 2020 As Private Insurers Add Seniors

By Bruce Japsen
Forbes, January 1, 2020

Health insurers are expected to make it more difficult on Presidential candidates pushing single payer versions of “Medicare for All” after they added hundreds of thousands of seniors to their private Medicare Advantage plans this year.

New benefits for seniors under Medicare Advantage began Wednesday, the first day of the 2020 New Year, in what has already been a record for the number of health plans participating in a program that offers seniors the same benefits as traditional Medicare plus extras like preventative care and outpatient healthcare services.

This new Medicare Advantage enrollment comes as most Democrats running for their party’s nomination for the Presidency back off a single payer version of Medicare for All that would uproot the private insurance industry.

Given the expansions of many established health plans into new regions and an increasing number of new entrants and startups selling Medicare Advantage, enrollment for 2020 is expected to eclipse 2019’s record. Enrollment last year in Medicare Advantage plans surpassed 22 million, which is 35% of total Medicare beneficiaries and it’s expected to reach 24 million for the 2020 plan year.

And any additional enrollment for 2020 will be difficult to uproot as candidates are finding out on the Presidential campaign trail.

https://www.forbes.com…

100,000 patients could lose access to doctors at Houston Methodist hospitals due to insurance company’s contract dispute

By Syan Rhodes
Click2Houston.com, January 1, 2020

A hundred-thousand people insured by UnitedHealthcare are scrambling to find new doctors and hospitals after the insurance company and Houston Methodist Hospital could not come to terms over reimbursement rates.

The contract expired at midnight, meaning the seven Houston Methodist hospitals and its outpatient clinics are no longer in-network as of Jan. 1, 2020.

UnitedHealthcare released the following statement:

“Care at Houston Methodist Hospital is significantly more expensive than care at other top-ranked hospitals in Texas as well as some of the most prestigious hospitals in the entire country. Every time we attempted to reach a compromise during the negotiations, Methodist responded with proposals showing that it is intent on maintaining its position as one of the most expensive health systems in the country.”

Houston Methodist Hospital released the following statement:

“Houston Methodist had a contract in place with United for 21 years before they abruptly gave notice of termination a few months ago, creating confusion among our 100,000 patients insured by United. Although Houston Methodist negotiated in earnest, an agreement was not reached by the Jan. 1, 2020 deadline and now those Medicare Advantage and commercial patients must search for new doctors and new facilities.

“We are disappointed by United’s actions — but not surprised given its aggressive actions against providers across the country.”

https://www.click2houston.com…

Comment:

By Don McCanne, M.D.

It has long been the intent of the private insurance industry and many politicians and bureaucrats to privatize the traditional Medicare program. Although the transition has been slow, it has been steady with over one-third of Medicare beneficiaries now enrolled in the private Medicare Advantage plans.

On the other side, advocates of an equitable, egalitarian system of affordable, publicly financed health care for everyone have been attempting to educate the public on the indisputable advantages of the single payer model of reform, commonly called Medicare for All. Such a system would virtually eliminate the private health insurance industry.

The stakes are high. Shall we have a patient service model that guarantees everyone affordable access to all essential health care services, administered by our own public stewards, or shall we have a business model that is designed to ensure the financial success of private administrative entities through business practices that result in tens of millions of individuals being uninsured or underinsured, using policies such as erecting financial barriers to care, limiting the health benefits that would be covered, and limiting coverage of hospitals, physicians and other health care professionals to their restricted provider networks?

People are beginning to understand the difference, and that is why the majority now support the Medicare for All model. But many do not understand that the single payer model does not work when private insurers are involved. That misinformed attitude is reinforced by the heavy marketing of the private Medicare Advantage plans, along with the complicity of some in the government. With the continued growth in the enrollment in the private Medicare Advantage plans, we could reach a state in which the traditional Medicare program is shut down and Medicare for All becomes a fragmented, multi-payer market of Medicare Advantage for All.

People don’t seem to realize how nefarious these private plans have been and will continue to be. Just one hint is in the example this week wherein UnitedHealthcare is cutting off access of their Medicare Advantage and commercial patients to Houston Methodist Hospitals. We do not know the degree of shared blame that rests with Houston Methodist, but we do know that this was strictly a business decision that threw patients to the wind. And shouldn’t our system be about the patients?

The opponents of a national health program have been effective for many decades in forestalling such a development. As we see the current political rhetoric shift from Medicare for All to being able to keep the private insurance you have (a fiction), the intensity of support is diminishing. That allows the insurance industry and their supporters in Congress and the administration to continue to creep forward with the privatization of the health care financing system – to the detriment of almost all of us.

We need to greatly intensify our efforts in education and coalition and grassroots organizing on behalf of the single payer model of an improved Medicare for All. Or will your hospitals and physicians be the next to be cut from your health care coverage?

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Insurers, pharmacies and primary care forming the next generation of managed care

Health insurers and retail pharmacies are making a play for primary care

By Jaimy Lee
MarketWatch, December 28, 2019

A handful of companies like Humana Inc. and Walgreens Boots Alliance Inc. that are better known for operating pharmacy counters and managing health plans are now turning into primary care providers.

CVS Health Corp., Humana HUM, Walgreens, Walmart Inc., and UnitedHealth Group Inc. now operate hundreds of clinics that directly market themselves as primary care providers or provide a majority of primary care services. And they all plan to open more clinics in 2020.

“There is an emerging consensus that the best way to control medical costs in America is to have patients have an old fashioned-style primary care relationship with someone in the health system,” said Dr. Bob Kocher, a partner at venture-capital firm Venrock. “There is a belief that the pendulum is swinging to the next-generation version of managed care.”

“Although maybe only 5% of health care cost is incurred in the primary [care] environment, a good or bad decision determines what the next 95% looks like,” Andrew Witty, CEO of UnitedHealth Group’s Optum business, said during an investor day in early December, according to a FactSet transcript. Optum currently operates 47 primary care clinics, a number that has doubled over the past two years, Witty noted during the investor day.

A Walgreens spokeswoman said the pharmacy giant operates nine primary care clinics, in partnership with several organizations, including primary care-provider Village Medical.

Humana had 230 primary care centers that it owns or that are part of joint ventures, according to comments made during its annual meeting by Humana president and CO Bruce Broussard in April. “We’re not convinced that the primary care model is completely figured out,” Broussard had said in mid-2018, before adding: “I would say that the intensity of it will increase and our commitment of putting more and more in a faster way and scalable way will increase over the next 24 months or so.”

CVS Health, which has opened 50 of its HealthHubs in Atlanta, Houston, Philadelphia and Tampa, Fla., and Walmart, which opened its first health center in Georgia this year, don’t expressly say that they operate primary care clinics. However, spokespersons for each company separately said the majority of the visits to their clinics are for primary-care services.

Startups like Iora Health and One Medical have pulled in hundreds of millions of dollars in private funding. One Medical, which is now the largest independent primary-care practice in the U.S., is reportedly considering an initial public offering early next year, according to CNBC.

“Given all the new market entrants, there is an emerging fight for the front door that can dramatically affect the overall business of health care systems and help the move to drive care out of hospitals,” said Lisa Suennen, a longtime health care investor and leader of Manatt’s venture capital practice.

How that has played out so far is a steady stream of announcements in 2019 about medical practices being opened in or adjacent to drugstores. CVS has plans to open an estimated 1,500 HealthHubs in its stores over the next two years; CEO Larry Merlo told investors in November to expect a material impact from the hubs in 2021. In the case of CVS, the pharmacy retailer also operates the Aetna health plan so its investment in building clinics touches on both retail and health care cost-reduction trends.

Walgreens, on the other hand, this year decided to focus on a partnership model. Its first primary care clinic with VillageMD opened its doors in November in Houston, next door to a Walgreens drugstore. The goal is foot traffic.

“If there’s a primary care—that is why we’re testing these pilots—we’re trying to see the uplifts on both retail and on scripts,” Walgreens CFO James Kehoe said on an earnings call in October. “So you’ve got three sources of income in most cases.”

https://www.marketwatch.com…

Comment:

By Don McCanne, M.D.

So now we are going to have pre-packaged for us health insurers, retail pharmacies and primary care. Walgreens CFO James Kehoe says, “So you’ve got three sources of income,” certainly suggesting what it’s really all about. And Dr. Bob Kocher, a partner at venture-capital firm Venrock, “There is a belief that the pendulum is swinging to the next-generation version of managed care.”

While there is considerable foot-dragging on the shift to single payer Medicare for All, the medical-industrial complex is rushing in to change the health care delivery system to position itself for optimal entrepreneurial advantage. Maybe the political hucksters who claim that we’ll have “Medicare for None” have some insight as to where we’re headed. At any rate, a system designed primarily to enrich passive investors does not sound good from the standpoint of the patients.

With the previous iterations of managed care (network model health maintenance organizations, managed competition, accountable care organizations, horizontal and vertical mergers, etc.), those of us advocating for a universal, equitable system of financing health care for everyone seemed to be considered irrelevant in the national dialogue on reform.

What attitude will the industry have toward us when they have rearranged the health care delivery system to meet their business objectives? Will we be left outside while we merely demonstrate with our “Medicare for All” placards? Or are we ready for a real (though bloodless) revolution? We’re starting a new decade; what will we do with it?

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