On Kenneth Thorpe’s Analysis of Senator Sanders’ Single-Payer Reform Plan

By David Himmelstein and Steffie Woolhandler
Huffpost Politics, January 29, 2016

Professor Kenneth Thorpe recently issued an analysis of Senator Bernie Sanders’ single-payer national health insurance proposal. Thorpe, an Emory University professor who served in the Clinton administration, claims the single-payer plan would break the bank.

Thorpe’s analysis rests on several incorrect, and occasionally outlandish, assumptions. Moreover, it is at odds with analyses of the costs of single-payer programs that he produced in the past, which projected large savings from such reform (see this study, for example, or this one).

We outline below the incorrect assumptions behind Thorpe’s current analysis:

1. He incorrectly assumes administrative savings of only 4.7 percent of expenditures, based on projections of administrative savings under Vermont’s proposed reform.

However, the Vermont reform did not contemplate a fully single-payer system. It would have allowed large employers to continue offering private coverage, and the continuation of the FEHBP and Medicare programs. 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. Vermont’s plan proposed continuing to pay hospitals and other institutional providers on a per-patient basis, rather than through global budgets, perpetuating the expensive hospital billing apparatus that siphons funds from care.

The correct way to estimate administrative savings is to use actual data from real world experience with single-payer systems such as that in Canada or Scotland, rather than using projections of costs in Vermont’s non-single-payer plan. In our study published in the New England Journal of Medicine we found that the administrative costs of insurers and providers accounted for 16.7 percent of total health care expenditures in Canada, versus. 31.0 percent in the U.S. – a difference of 14.3 percent. In subsequent studies, we have found that U.S. hospital administrative costs have continued to rise, while Canada’s have not. Moreover, hospital administrative costs in Scotland’s single-payer system were virtually identical those in Canada.

In sum, Thorpe’s assumptions understate the administrative savings of single-payer by 9.6 percent of total health spending. Hence he overestimates the program’s cost by 9.6 percent of health spending — $327 billion in 2016, and $3.742 trillion between 2016 and 2024. Notably, Thorpe’s earlier analyses projected much larger administrative savings from single-payer reform — closely in line with our estimates.

2. Thorpe assumes huge increases in the utilization of care, increases far beyond those that were seen when national health insurance was implemented in Canada, and much larger than is possible given the supply of doctors and hospital beds.

When Canada implemented universal coverage and abolished copayments and deductibles there was no change in the total number of doctor visits; doctors worked the same number of hours after the reform as before, and saw the same number of patients. However, they saw their healthy and wealthier patients slightly less often, and sicker and poorer patients somewhat more frequently. Moreover, the limited supply of hospital beds precluded the kind of big surge in hospitalizations that Thorpe predicts. In health policy parlance, “capacity constraints” precluded a big increase in system-wide utilization.

Thorpe bases his estimates on what has happened when a small percentage of people in a community have had copayments eliminated or added. But in those cases there are no capacity constraints, so it tells us little about what would happen under a system-wide reform like single-payer.

Thorpe does not give actual figures for how many additional doctor visits and hospital stays he predicts. However, his estimates that persons with private insurance would increase their utilization of care by 10 percent and that those with Medicare-only coverage would increase utilization by 10 to 25 percent suggest that he projects about 100 million additional doctor visits and several million more hospitalizations each year – something that’s impossible given real-world capacity constraints. There just aren’t enough doctors and hospital beds to deliver that much care.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada.

3. Thorpe assumes that the program would be a huge bonanza for state governments, projecting that the federal government would relieve them of 10 percent of their current spending for Medicaid and CHIP — equivalent to about $20 billion annually.

No one has suggested that a single-payer reform would or should do this.

4. Thorpe’s analysis also ignores the large savings that would accrue to state and local governments — and hence taxpayers — because they would be relieved of the costs of private coverage for public employees.

State and local government spent $177 billion last year on employee health benefits – about $120 billion more than state and local government would pay under the 6.2 percent payroll tax that Senator Sanders has proposed. The federal government could simply allow state and local governments to keep this windfall, but it seems far more likely that it would reduce other funding streams to compensate.

5. Thorpe’s analysis also apparently ignores the huge tax subsidies that currently support private insurance, which are listed as “Tax Expenditures” in the federal government’s official budget documents.

These subsidies totaled $326.2 billion last year, and are expected to increase to $538.9 billion in 2024. Shifting these current tax expenditures from subsidizing private coverage to funding for a single-payer program would greatly lessen the amount of new revenues that would be required. Thorpe’s analysis makes no mention of these current subsidies.

6. Thorpe assumes zero cost savings under single-payer on prescription drugs and devices.

Nations with single-payer systems have in every case used their clout as a huge purchaser to lower drug prices by about 50 percent. In fact, the U.S. Defense Department and VA system have also been able to realize such savings.

In summary, professor Thorpe grossly underestimates the administrative savings under single-payer; posits increases in the number of doctor visits and hospitalizations that exceed the capacity of doctors and hospitals to provide this added care; assumes that the federal government would provide state and local governments with huge windfalls rather than requiring full maintenance of effort; makes no mention of the vast current tax subsidies for private coverage whose elimination would provide hundreds of billions annually to fund a single-payer program; and ignores savings on drugs and medical equipment that every other single-payer program has reaped.

In the past, Thorpe estimated that single-payer reform would lower health spending while covering all of the uninsured and upgrading coverage for the tens of millions who are currently underinsured. The facts on which those conclusions were based have not changed.

Drs. David Himmelstein and Steffie Woolhandler are professors of health policy and management at the City University of New York School of Public Health and lecturers in medicine at Harvard Medical School. The opinions expressed here do not necessarily reflect the views of those institutions.

http://www.huffingtonpost.com/david-himmelstein/kenneth-thorpe-bernie-sanders-single-payer_b_9113192.html?1454092127

***

Comment:

By Don McCanne, M.D.

In the political battle over Bernie Sanders’ proposal for a single payer national health program, it is unfortunate that the perspective of just how much single payer would benefit Americans is being lost in all of the clamor.

This is not an issue with two opposing sets of facts. There is only one truth and that is that a well designed single payer system would bring comprehensive health care to everyone, while removing financial barriers to care and making our national health expenditures sustainable well into the future.

It is not at all clear why so many progressives have decided to attack Sanders’ single payer proposal. Most of them do understand the clear advantages in improving access while controlling costs, but they seem fixated on opposing it based on the alleged lack of political feasibility. It is fine to condemn the politics, but that should give us even more reason to advance a clearly superior model of health care financing reform.

The latest attack that is being circulated widely is that by Kenneth Thorpe, a highly respected Emory University professor. David Himmelstein and Steffie Woolhandler lay the record straight. It is crucial that we not be caught up in the numbers being bandied about – the trees – when we need to see the forest – the fundamental principles of the single payer model.

Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidates for public office.

On Kenneth Thorpe’s Analysis of Senator Sanders’ Single-Payer Reform Plan

By David Himmelstein and Steffie Woolhandler
Huffpost Politics, January 29, 2016

Professor Kenneth Thorpe recently issued an analysis of Senator Bernie Sanders’ single-payer national health insurance proposal. Thorpe, an Emory University professor who served in the Clinton administration, claims the single-payer plan would break the bank.

Thorpe’s analysis rests on several incorrect, and occasionally outlandish, assumptions. Moreover, it is at odds with analyses of the costs of single-payer programs that he produced in the past, which projected large savings from such reform (see this study, for example, or this one).

We outline below the incorrect assumptions behind Thorpe’s current analysis:

1. He incorrectly assumes administrative savings of only 4.7 percent of expenditures, based on projections of administrative savings under Vermont’s proposed reform.

However, the Vermont reform did not contemplate a fully single-payer system. It would have allowed large employers to continue offering private coverage, and the continuation of the FEHBP and Medicare programs. 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. Vermont’s plan proposed continuing to pay hospitals and other institutional providers on a per-patient basis, rather than through global budgets, perpetuating the expensive hospital billing apparatus that siphons funds from care.

The correct way to estimate administrative savings is to use actual data from real world experience with single-payer systems such as that in Canada or Scotland, rather than using projections of costs in Vermont’s non-single-payer plan. In our study published in the New England Journal of Medicine we found that the administrative costs of insurers and providers accounted for 16.7 percent of total health care expenditures in Canada, versus. 31.0 percent in the U.S. – a difference of 14.3 percent. In subsequent studies, we have found that U.S. hospital administrative costs have continued to rise, while Canada’s have not. Moreover, hospital administrative costs in Scotland’s single-payer system were virtually identical those in Canada.

In sum, Thorpe’s assumptions understate the administrative savings of single-payer by 9.6 percent of total health spending. Hence he overestimates the program’s cost by 9.6 percent of health spending — $327 billion in 2016, and $3.742 trillion between 2016 and 2024. Notably, Thorpe’s earlier analyses projected much larger administrative savings from single-payer reform — closely in line with our estimates.

2. Thorpe assumes huge increases in the utilization of care, increases far beyond those that were seen when national health insurance was implemented in Canada, and much larger than is possible given the supply of doctors and hospital beds.

When Canada implemented universal coverage and abolished copayments and deductibles there was no change in the total number of doctor visits; doctors worked the same number of hours after the reform as before, and saw the same number of patients. However, they saw their healthy and wealthier patients slightly less often, and sicker and poorer patients somewhat more frequently. Moreover, the limited supply of hospital beds precluded the kind of big surge in hospitalizations that Thorpe predicts. In health policy parlance, “capacity constraints” precluded a big increase in system-wide utilization.

Thorpe bases his estimates on what has happened when a small percentage of people in a community have had copayments eliminated or added. But in those cases there are no capacity constraints, so it tells us little about what would happen under a system-wide reform like single-payer.

Thorpe does not give actual figures for how many additional doctor visits and hospital stays he predicts. However, his estimates that persons with private insurance would increase their utilization of care by 10 percent and that those with Medicare-only coverage would increase utilization by 10 to 25 percent suggest that he projects about 100 million additional doctor visits and several million more hospitalizations each year – something that’s impossible given real-world capacity constraints. There just aren’t enough doctors and hospital beds to deliver that much care.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada.

3. Thorpe assumes that the program would be a huge bonanza for state governments, projecting that the federal government would relieve them of 10 percent of their current spending for Medicaid and CHIP — equivalent to about $20 billion annually.

No one has suggested that a single-payer reform would or should do this.

4. Thorpe’s analysis also ignores the large savings that would accrue to state and local governments — and hence taxpayers — because they would be relieved of the costs of private coverage for public employees.

State and local government spent $177 billion last year on employee health benefits – about $120 billion more than state and local government would pay under the 6.2 percent payroll tax that Senator Sanders has proposed. The federal government could simply allow state and local governments to keep this windfall, but it seems far more likely that it would reduce other funding streams to compensate.

5. Thorpe’s analysis also apparently ignores the huge tax subsidies that currently support private insurance, which are listed as “Tax Expenditures” in the federal government’s official budget documents.

These subsidies totaled $326.2 billion last year, and are expected to increase to $538.9 billion in 2024. Shifting these current tax expenditures from subsidizing private coverage to funding for a single-payer program would greatly lessen the amount of new revenues that would be required. Thorpe’s analysis makes no mention of these current subsidies.

6. Thorpe assumes zero cost savings under single-payer on prescription drugs and devices.

Nations with single-payer systems have in every case used their clout as a huge purchaser to lower drug prices by about 50 percent. In fact, the U.S. Defense Department and VA system have also been able to realize such savings.

In summary, professor Thorpe grossly underestimates the administrative savings under single-payer; posits increases in the number of doctor visits and hospitalizations that exceed the capacity of doctors and hospitals to provide this added care; assumes that the federal government would provide state and local governments with huge windfalls rather than requiring full maintenance of effort; makes no mention of the vast current tax subsidies for private coverage whose elimination would provide hundreds of billions annually to fund a single-payer program; and ignores savings on drugs and medical equipment that every other single-payer program has reaped.

In the past, Thorpe estimated that single-payer reform would lower health spending while covering all of the uninsured and upgrading coverage for the tens of millions who are currently underinsured. The facts on which those conclusions were based have not changed.

Drs. David Himmelstein and Steffie Woolhandler are professors of health policy and management at the City University of New York School of Public Health and lecturers in medicine at Harvard Medical School. The opinions expressed here do not necessarily reflect the views of those institutions.

http://www.huffingtonpost.com/david-himmelstein/kenneth-thorpe-bernie-sanders-single-payer_b_9113192.html?1454092127

In the political battle over Bernie Sanders’ proposal for a single payer national health program, it is unfortunate that the perspective of just how much single payer would benefit Americans is being lost in all of the clamor.

This is not an issue with two opposing sets of facts. There is only one truth and that is that a well designed single payer system would bring comprehensive health care to everyone, while removing financial barriers to care and making our national health expenditures sustainable well into the future.

It is not at all clear why so many progressives have decided to attack Sanders’ single payer proposal. Most of them do understand the clear advantages in improving access while controlling costs, but they seem fixated on opposing it based on the alleged lack of political feasibility. It is fine to condemn the politics, but that should give us even more reason to advance a clearly superior model of health care financing reform.

The latest attack that is being circulated widely is that by Kenneth Thorpe, a highly respected Emory University professor. David Himmelstein and Steffie Woolhandler lay the record straight. It is crucial that we not be caught up in the numbers being bandied about – the trees – when we need to see the forest – the fundamental principles of the single payer model.

Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidates for public office.

Check The Fine Print: Some Work-Based Health Plans Exclude Outpatient Surgeries

By Jay Hancock
Kaiser Health News, January 25, 2016

Last year regulators blocked companies with millions of lower-wage workers from claiming that coverage with no inpatient hospital benefits met Obamacare’s strictest standard for large employers.

Now that those so-called “skinny plans” aren’t allowed, insurance administrators and many cost-conscious employers are purporting to meet the rules with a new version that excludes another major category: outpatient surgery. The new plans may not survive regulatory scrutiny any more than the old ones did, some experts believe.

For 2016, such insurance has been marketed primarily to staffing companies, home health agencies, hoteliers and other lower-wage employers that had historically never provided major medical coverage. Those are the same firms that were sponsoring skinny coverage a year ago, industry consultants say.

“I really wonder whether they can do that,” said Timothy Jost, a law professor at Washington and Lee University in Virginia who is an authority on the health law. “Refusing to cover any outpatient physician surgical services is arguably a violation.”

Unlike insurance sold to individuals and small businesses through online marketplaces, large employers are not required to offer a list of “essential health benefits.” Instead, they must offer minimum value — roughly comparable to that of a high-deductible, “bronze” marketplace plan — as determined by an online calculator and regulatory guidance, or face a penalty. There is also a lesser standard for large employers — “minimum essential coverage” — that triggers different fines for noncompliance. But nearly all workplace-based plans that offer some types of preventive care meet this requirement.

http://khn.org/news/check-the-fine-print-some-work-based-health-plans-exclude-outpatient-surgeries/

***

Comment:

By Don McCanne, M.D.

One of the arguments made for choosing the incremental policies of the Affordable Care Act  (ACA) over a comprehensive single payer model of reform was that the politicians wanted to avoid disrupting the part of health care financing that was working well – particularly the employer-sponsored health plans. So are employees being assured of adequate health care coverage?

The onslaught of higher deductibles and narrower networks indicates that maybe these plans are not working so well after all. But you cannot underestimate the conniving behavior of some of the private sector employers in shirking their responsibilities for providing adequate coverage, as supposedly was intended by the architects of ACA.

Since the employers are allowed considerable flexibility in plan design, some thought that they could exclude inpatient hospital benefits. That, of course, would be disastrous for anyone requiring hospitalization. Fortunately that loophole was closed.

Now they claim that they can exclude outpatient surgery. Considering that now about two-thirds of surgeries are done on an outpatient basis, that too will lead to financial disaster for far too many patients. It is likely that our federal stewards will also disallow the exclusion of outpatient surgery. But then what scheme will they think up next?

Leaving the private sector in control inevitably leads to devious behavior designed to save money for the employers or insurers at a cost to the patients. That is the way the private sector and their markets work. In contrast, responsible public stewards act in the interests of patients, and part of that means ensuring an adequate health delivery infrastructure to take care of the patients.

We really do need to dismiss private managers of health care funds and replace them with our own public administrators. That’s precisely what a single payer national health program would do.

Check The Fine Print: Some Work-Based Health Plans Exclude Outpatient Surgeries

By Jay Hancock
Kaiser Health News, January 25, 2016

Last year regulators blocked companies with millions of lower-wage workers from claiming that coverage with no inpatient hospital benefits met Obamacare’s strictest standard for large employers.

Now that those so-called “skinny plans” aren’t allowed, insurance administrators and many cost-conscious employers are purporting to meet the rules with a new version that excludes another major category: outpatient surgery. The new plans may not survive regulatory scrutiny any more than the old ones did, some experts believe.

For 2016, such insurance has been marketed primarily to staffing companies, home health agencies, hoteliers and other lower-wage employers that had historically never provided major medical coverage. Those are the same firms that were sponsoring skinny coverage a year ago, industry consultants say.

“I really wonder whether they can do that,” said Timothy Jost, a law professor at Washington and Lee University in Virginia who is an authority on the health law. “Refusing to cover any outpatient physician surgical services is arguably a violation.”

Unlike insurance sold to individuals and small businesses through online marketplaces, large employers are not required to offer a list of “essential health benefits.” Instead, they must offer minimum value — roughly comparable to that of a high-deductible, “bronze” marketplace plan — as determined by an online calculator and regulatory guidance, or face a penalty. There is also a lesser standard for large employers — “minimum essential coverage” — that triggers different fines for noncompliance. But nearly all workplace-based plans that offer some types of preventive care meet this requirement.

http://khn.org/news/check-the-fine-print-some-work-based-health-plans-ex…

One of the arguments made for choosing the incremental policies of the Affordable Care Act  (ACA) over a comprehensive single payer model of reform was that the politicians wanted to avoid disrupting the part of health care financing that was working well – particularly the employer-sponsored health plans. So are employees being assured of adequate health care coverage?

The onslaught of higher deductibles and narrower networks indicates that maybe these plans are not working so well after all. But you cannot underestimate the conniving behavior of some of the private sector employers in shirking their responsibilities for providing adequate coverage, as supposedly was intended by the architects of ACA.

Since the employers are allowed considerable flexibility in plan design, some thought that they could exclude inpatient hospital benefits. That, of course, would be disastrous for anyone requiring hospitalization. Fortunately that loophole was closed.

Now they claim that they can exclude outpatient surgery. Considering that now about two-thirds of surgeries are done on an outpatient basis, that too will lead to financial disaster for far too many patients. It is likely that our federal stewards will also disallow the exclusion of outpatient surgery. But then what scheme will they think up next?

Leaving the private sector in control inevitably leads to devious behavior designed to save money for the employers or insurers at a cost to the patients. That is the way the private sector and their markets work. In contrast, responsible public stewards act in the interests of patients, and part of that means ensuring an adequate health delivery infrastructure to take care of the patients.

We really do need to dismiss private managers of health care funds and replace them with our own public administrators. That’s precisely what a single payer national health program would do.

Retirement Giant Fidelity Now Wants Workers’ Health Insurance

By Zachary Tracer
Bloomberg Business, January 25, 2016

Fidelity Investments is already the U.S.’s No. 2 mutual fund company. Now, it wants to get bigger in the health insurance business.

The financial services firm is introducing a shopping website for health insurance and other employee benefits called Fidelity Health Marketplace. Targeted at businesses with as many as 2,500 workers, the site, known as a private health exchange, complements Fidelity’s existing benefits products such as retirement accounts.

The private exchanges set up by companies like Fidelity are separate from the government-run websites created under the 2010 Patient Protection and Affordable Care Act. But they share some of the same features and goals, such as letting customers shop for the best deal by examining the cost and coverage offered by different health plans. They can also help limit the cost to employers, by giving workers a set amount to spend.

In a private exchange, when a worker enrolls in a more expensive plan, the added expense comes out of their paychecks. If a plan costs less, the employees can use the extra funds to buy life insurance or other benefits on the same platform.

It’s a change that echoes the shift from pensions to employee-funded retirement accounts that happened in the U.S. over the past decades, and helped give rise to investment management giants like Fidelity.

“What they’re trying to do is move to a model where employers are defining a contribution amount for employees to use on their benefits,” according to Mike Trilli, senior health-care analyst at Aite Group, a research and consulting firm.

Fidelity may also be able to use the health offerings to draw customers to its investing products, according to Amy Gurchensky, an analyst at consulting firm NelsonHall. When customers pick a high-deductible health plan — for example, one that pairs a $5,000 deductible with a tax-free savings and investment account — Fidelity will be able to offer its own investing services.

http://www.bloomberg.com/news/articles/2016-01-26/retirement-giant-fidelity-now-wants-workers-health-insurance

***

Comment:

By Don McCanne, M.D.

Although a majority of Americans favor a national health program, many in the policy and political communities express a preference for incrementally building on the existing multi-payer system, as modified by the Affordable Care Act (ACA). Although 64 percent of our heath system is already funded through our taxes, our government gives control of much of our total spending to the private sector, such as the private insurance companies. Thus the private sector is the source of much of the incremental changes that are taking place. Now that Fidelity Investments is entering the scene, what incremental change are they offering that will benefit patients?

*  They are introducing Fidelity Health Marketplace – similar to the government insurance exchanges under ACA except that they are privately owned and operated. Since they are targeted at small businesses, they are an additional intermediary that increases administrative complexity and expenses. That adds to the cost of the insurance, so that does not benefit the patient.

*  The plans will be purchased with a defined contribution from the employer. Because the contribution is fixed, more of the premium costs are shifted to the employee, especially over time. Either the employee must contribute more to the premium, or choose a plan with fewer benefits, which then increases financial exposure in the event of medical need. That does not benefit the patient.

*  Fidelity already offers health savings accounts – savings accounts that are linked with high deductible health plans and can be used to pay the deductibles and other cost sharing. Since high deductible plans have lower premiums which are less likely to exceed the defined contribution, Fidelity will no doubt heavily market the plans which are linked to their own health savings accounts. Since employers would use the Fidelity Marketplace to reduce their own health benefit spending, by offering a defined contribution, it is likely that employees will have difficulties keeping their health savings accounts funded. Higher deductibles linked to an empty savings accounts certainly does not benefit the patient.

*  If an employee or family member has an expensive chronic disorder then a more comprehensive plan should be selected to mitigate the higher costs. But with the smaller defined contribution, the portion of the premium that the employee must pay is significantly greater, and often unaffordable. That does not benefit the patient.

Private sector solutions in health care financing, including insurers and other fiscal intermediaries, are designed primarily to benefit the industry, usually at a cost to the patient, though often opaque and thus deceptive. Public sector solutions, such as Medicare and Medicaid, are designed to benefit the patient. But even there the private sector has moved in with their private Medicare Advantage plans and their private Medicaid managed care programs, to the detriment of patients and taxpayers.

How much more of this private incremental invasion of our already dysfunctional health care financing system can we take? The next time you hear a politician say that we need to build on the system we have through incremental steps, do not remain silent. Say something. Yell, if necessary. Scream, if that’s what it takes. But do not let them con us out of the national health program that a clear majority of us want.

Retirement Giant Fidelity Now Wants Workers’ Health Insurance

By Zachary Tracer
Bloomberg Business, January 25, 2016

Fidelity Investments is already the U.S.’s No. 2 mutual fund company. Now, it wants to get bigger in the health insurance business.

The financial services firm is introducing a shopping website for health insurance and other employee benefits called Fidelity Health Marketplace. Targeted at businesses with as many as 2,500 workers, the site, known as a private health exchange, complements Fidelity’s existing benefits products such as retirement accounts.

The private exchanges set up by companies like Fidelity are separate from the government-run websites created under the 2010 Patient Protection and Affordable Care Act. But they share some of the same features and goals, such as letting customers shop for the best deal by examining the cost and coverage offered by different health plans. They can also help limit the cost to employers, by giving workers a set amount to spend.

In a private exchange, when a worker enrolls in a more expensive plan, the added expense comes out of their paychecks. If a plan costs less, the employees can use the extra funds to buy life insurance or other benefits on the same platform.

It’s a change that echoes the shift from pensions to employee-funded retirement accounts that happened in the U.S. over the past decades, and helped give rise to investment management giants like Fidelity.

“What they’re trying to do is move to a model where employers are defining a contribution amount for employees to use on their benefits,” according to Mike Trilli, senior health-care analyst at Aite Group, a research and consulting firm.

Fidelity may also be able to use the health offerings to draw customers to its investing products, according to Amy Gurchensky, an analyst at consulting firm NelsonHall. When customers pick a high-deductible health plan — for example, one that pairs a $5,000 deductible with a tax-free savings and investment account — Fidelity will be able to offer its own investing services.

http://www.bloomberg.com/news/articles/2016-01-26/retirement-giant-fidelity-now-wants-workers-health-insurance

Although a majority of Americans favor a national health program, many in the policy and political communities express a preference for incrementally building on the existing multi-payer system, as modified by the Affordable Care Act (ACA). Although 64 percent of our heath system is already funded through our taxes, our government gives control of much of our total spending to the private sector, such as the private insurance companies. Thus the private sector is the source of much of the incremental changes that are taking place. Now that Fidelity Investments is entering the scene, what incremental change are they offering that will benefit patients?

*  They are introducing Fidelity Health Marketplace – similar to the government insurance exchanges under ACA except that they are privately owned and operated. Since they are targeted at small businesses, they are an additional intermediary that increases administrative complexity and expenses. That adds to the cost of the insurance, so that does not benefit the patient.

*  The plans will be purchased with a defined contribution from the employer. Because the contribution is fixed, more of the premium costs are shifted to the employee, especially over time. Either the employee must contribute more to the premium, or choose a plan with fewer benefits, which then increases financial exposure in the event of medical need. That does not benefit the patient.

*  Fidelity already offers health savings accounts – savings accounts that are linked with high deductible health plans and can be used to pay the deductibles and other cost sharing. Since high deductible plans have lower premiums which are less likely to exceed the defined contribution, Fidelity will no doubt heavily market the plans which are linked to their own health savings accounts. Since employers would use the Fidelity Marketplace to reduce their own health benefit spending, by offering a defined contribution, it is likely that employees will have difficulties keeping their health savings accounts funded. Higher deductibles linked to an empty savings accounts certainly does not benefit the patient.

*  If an employee or family member has an expensive chronic disorder then a more comprehensive plan should be selected to mitigate the higher costs. But with the smaller defined contribution, the portion of the premium that the employee must pay is significantly greater, and often unaffordable. That does not benefit the patient.

Private sector solutions in health care financing, including insurers and other fiscal intermediaries, are designed primarily to benefit the industry, usually at a cost to the patient, though often opaque and thus deceptive. Public sector solutions, such as Medicare and Medicaid, are designed to benefit the patient. But even there the private sector has moved in with their private Medicare Advantage plans and their private Medicaid managed care programs, to the detriment of patients and taxpayers.

How much more of this private incremental invasion of our already dysfunctional health care financing system can we take? The next time you hear a politician say that we need to build on the system we have through incremental steps, do not remain silent. Say something. Yell, if necessary. Scream, if that’s what it takes. But do not let them con us out of the national health program that a clear majority of us want.