PNHP

Reinhardt: Placing “All-Payer” in the reform dialogue

Reinhardt: Placing “All-Payer” in the reform dialogue

The Many Different Prices Paid To Providers And The Flawed Theory Of Cost Shifting: Is It Time For A More Rational All-Payer System?

By Uwe E. Reinhardt
Health Affairs, November 2011

Abstract

In developed nations that rely on multiple, competing health insurers — for example, Switzerland and Germany — the prices for health care services and products are subject to uniform price schedules that are either set by government or negotiated on a regional basis between associations of health insurers and associations of providers of health care. In the United States, some states — notably Maryland — have used such all-payer systems for hospitals only. Elsewhere in the United States, prices are negotiated between individual payers and providers. This situation has resulted in an opaque system in which payers with market power force weaker payers to cover disproportionate shares of providers’ fixed costs — a phenomenon sometimes termed cost shifting — or providers simply succeed in charging higher prices when they can. In this article I propose that this price-discriminatory system be replaced over time by an all-payer system as a means to better control costs and ensure equitable payment.

http://content.healthaffairs.org/content/30/11/2125.abstract

This is an important contribution to the health policy literature. It is intended to be a seminal paper designed to displace the useless discussion of cost shifting between public programs and private insurers with a discussion of reducing price discrimination (charging individuals, private insurers or government programs different prices for the same services) by shifting to an all-payer system that would better control costs and ensure equitable payment.

An all-payer system simply establishes “uniform price schedules that are either set by government or negotiated on a regional basis between associations of health insurers and associations of providers of health care.”(1) Why is this important?

Although there is considerable variation in prices throughout the health care system, high prices, on average, have been a major contributor to our very high per capita spending on health care.(2) As Uwe Reinhardt explains, much of this excessive pricing has resulted from private insurers, with a weak market presence, negotiating with health care providers, especially hospitals, that dominate their respective markets. The health care provider consolidation that is taking place can only compound the impact of this market distortion.

Although private insurers also are consolidating, competing plans are still not in a position to extract major price concessions from dominant health care providers. All-payer price setting through government or association negotiation is designed to displace the ineffectual private insurers as price negotiators while establishing both better cost control and more equitable payments for health care.

(In some areas, private insurers have been able to hold prices down at Medicare rates for physicians where the physicians have a very weak negotiating clout. This is less true of hospitals that have a weaker clout.)

Price discrimination – charging different prices for the same services – hits especially hard those who have the weakest bargaining power: individual patients who are now bearing more of the costs of health care. Contrary to widely held ideological beliefs, here it is price discrimination in the private insurance market and not the government that has created the perversity of rationing based on the ability to pay.

In his article, Reinhardt explains, “It should be recognized that the higher the fraction of health care spending that individuals and families must bear out of their own resources, the more heavily the model relies on rationing health care by price and the patient’s ability to pay — that is, rationing by income level. It may surprise some readers that anyone would associate markets with rationing. But as economists tell their students, free markets represent just one of many styles of rationing. Relying on price and ability to pay is precisely how markets in general manage to ration scarce resources among unlimited ends.”(1)

One of the reasons that this article on all-payer systems is so important is that we are at a crossroads in the reform process. He writes, “At this time, the US health system appears to stand at a clearly delineated crossroads. On one road, Americans would seek better control over national health spending through an all-payer system, such as the one operated by Maryland for the hospital sector. On the other road, Americans would seek better control of health care prices and national health spending through greater reliance on market forces for most of the health system. Depending on how that road is traveled, it could entail more pronounced rationing of health care by income class, meaning less health care for those who cannot afford it. The battle over US health policy in the coming decades is likely to be over which road to take.”(1)

Since an all-payer system would correct only a portion of the flaws in our health care financing, why shouldn’t we go full bore and enact a single payer system? Reinhardt brings up the political feasibility argument, as follows, “In any event, an all-payer system with multiple private insurers would be likely to be more broadly politically feasible than a government-run single-payer system, such as Canada’s provincial, government-run single-payer insurance systems. A single-payer system, of course, would be another alternative that would eliminate price discrimination and any cost shifting.”

Reinhardt discusses the effectiveness of all-payer for hospitals in the state of Maryland. In a previous response to the Maryland all-payer system, I stated, “If we can succeed in reestablishing a public service role for government, then wouldn’t it be reasonable to simply enact an all-payer system for hospitals? The problem is that it only makes one change in our fragmented, dysfunctional system of financing care, and not a complete change at that. Under all-payer, only the rates are controlled, but each service still must be accounted for and paid for independently, and the hospitals would still have multiple public and private payers with which they would have to interact.”(3)

So what about Switzerland? Reinhardt mentions it as having successfully applied an all-payer system. In another previous message on the OECD/WHO report on Switzerland, I stated, “It is not clear why so many in the U.S. are enamored of the Swiss health insurance system when this OECD/WHO report confirms that it is highly inefficient and fragmented, with profound administrative waste, inequitably funded, with regressive financing and with wide variations in premiums, has the highest out-of-pocket costs, has an increasing prevalence of managed care intrusions, and is controlled by a private insurance industry that has learned how to game risk selection at significant cost to those on the losing end.”(4)

Uwe Reinhardt is to be highly commended for moving us in the right direction, but…

We’ve said it before and we’ll say it again. If political feasibility is the barrier to enacting a single payer system, let’s not simply jettison single payer; let’s change the political feasibility instead! All-payer might be a modest incremental improvement (modest when compared to what needs to be done), but why settle for that when we can have it all through an improved and expanded Medicare for all?

(1) http://content.healthaffairs.org/content/30/11/2125.full

(2) https://pnhp.org/system/assets/drupal/docs/Its-The-Prices-Stupid.pdf

(3) https://pnhp.org/news/2011/september/hospitals-all-payer-or-global-budgets

(4) https://pnhp.org/news/2011/october/oecdwho-report-on-the-swiss-health-system

Healthcare Reform 2.0 – Woolhandler and Himmelstein

Healthcare Reform 2.0

By Steffie Woolhandler, MD, MPH and David Himmelstein, MD
CUNY School of Public Health, Social Research, Fall 2011

So while the American people want an expanded and improved Medicare for All — that is, a single-payer system — corporations dead-set against single-payer reform have come to dictate the agendas of both political parties. Hence, the only way to win national health insurance is to build a popular movement to counter corporate power.

http://www1.cuny.edu/mu/forum/2011/11/09/dr-steffie-woolhandler-and-dr-david-himmelstein-on-their-recent-publication-“healthcare-reform-2-0″-in-the-fall-2011-issue-of-social-research/

Healthcare Reform 2.0 (12 pages):
http://www1.cuny.edu/mu/sph/files/2011/11/783_Woolhandler-Himmelstein_719-730.pdf

Comment: 

By Don McCanne, MD

This brief primer (9 short pages plus references) on Healthcare Reform 2.0 will provide little new information for those who have followed the research and educational efforts of the leadership of Physicians for a National Health Program. Nevertheless, it should be downloaded to be used as an advocacy piece to explain to others why Healthcare Reform 1.0 (Affordable Care Act) will remain a failure, and why we have to move on to Healthcare Reform 2.0 (expanded and improved Medicare for All). By distributing this, electronically or in hard copy, you can become a part of the popular movement to counter corporate power.

Massachusetts struggles with cost control after reducing uninsured

National health reform may show similar results because it was based largely on the state's model, according to advocates of a single-payer system

By Doug Trapp
amednews.com, November 4, 2011

Health system reforms in Massachusetts may have reduced its uninsured population to the smallest of any state, but the effort has not controlled growth in health care costs — at least not yet.

Five years after Massachusetts launched its groundbreaking health reform initiative, health care costs continue to grow, emergency department visits have increased, and many more residents have high-deductible health plans, according to a critique released on Oct. 25 by Physicians for a National Health Program, an advocacy group with 18,000 members who support a single-payer health system.

These trends could become a national story under the health system reform law, which largely was based on Massachusetts’ reforms, Benjamin Day said. He is the report’s lead author and executive director of “Mass-Care: The Massachusetts Campaign for Single-Payer Health Care.” The state’s health insurance exchange offers health plans with income-based subsidies, while a Medicaid expansion covers virtually all residents earning up to 150% of the federal poverty level.

“Based on what we’ve seen in Massachusetts … it’s reasonable to expect a similar course for the Affordable Care Act: a significant initial expansion of insurance coverage and a moderate improvement in access to care,” Day said.

As few as 2% of Massachusetts residents are uninsured, according to state estimates, but ongoing physician shortages have been exacerbated by thousands more residents gaining health coverage, according to the report. The state still has some of the costliest insurance premiums and the highest per capita health spending in the country. Emergency department visits have increased 13% since 2006. In addition, 11% of residents have health coverage with deductibles of $1,000 or more compared with 3% in 2006, mirroring a national trend.

However, some health care cost increases have been held in check. For example, premium hikes for Massachusetts’ subsidized exchange coverage have been limited to about 3% annually, said Richard Powers, spokesman for the Massachusetts Health Connector, the independent agency that runs the insurance exchange.

Also, state leaders continue to work on legislation to enact global payments, a type of pay bundling that is expected to restrain cost growth further. A significant first step in this movement occurred on Oct. 5, when Partners HealthCare — a local network of hospitals, health centers and physicians — signed a risk-based global payment contract with Blue Cross Blue Shield of Massachusetts. The contract requires Partners to meet or exceed quality standards for its patients, keep cost growth lower than the insurer’s network average, and accept financial risk. The contract is expected to save the insurer $240 million over three years.

Meanwhile, Massachusetts residents have significant concerns about health care costs, according a poll published Oct. 21 by the Blue Cross Blue Shield of Massachusetts Foundation. For example, 78% of residents believe health care costs in the state are a major problem or a crisis. Residents were divided on the solutions, with one-third expecting government action to solve the problem, 27% expecting insurance companies to help control costs, and 17% saying hospitals and doctors could help.

The Physicians for a National Health Program report is available online (www.pnhp.org/news/2011/october/the-fundamental-flaws-
in-the-massachusetts-and-aca-model), as is the Blue Cross Blue Shield of Massachusetts Foundation poll about public perceptions of health care costs (bluecrossfoundation.org/).

http://www.ama-assn.org/amednews/2011/10/31/gvse1104.htm

Pension Trusts Strapped

By SHARON TERLEP And MATTHEW DOLAN
The Wall Street Journal, November 7, 2011

DETROIT—Retirement trust funds created to cover billions of dollars in medical costs for unionized workers and their families are running short, forcing the funds to cut costs, trim benefits, and ask retirees and companies to pony up more cash.

The biggest such fund—a trio of United Auto Worker trusts covering benefits for more than 820,000 people, including Detroit auto-maker retirees and their dependents—is underfunded by nearly $20 billion, according to trust documents filed with the U.S. Labor Department last month.

The funds, known as VEBAs, or voluntary employee beneficiary associations, are being hit by rising medical costs and poor investment performance. Their funding comes in part from company stock, rather than just cash payments, making them vulnerable to the market’s volatility.

Fearing a shortfall, the UAW is looking for answers in its U.S. government-orchestrated bailout deals with General Motors Corp. and Chrysler. The union, under new labor accords reached last month with GM, Ford Motor Co. and Chrysler, will seek to divert 10% of active workers’ profit-sharing checks into the VEBA funds, but the plan still needs to clear legal hurdles and could get blocked by the auto makers.

Improved investment returns could reduce the shortfall over time. And, if the union doesn’t win approval to transter funds, it has some leeway to make benefit cuts before the funds run short of cash because UAW retirees still get richer benefits than most retired workers,

Without some sort of intervention, the gap could grow quickly. This past summer, Joe Ashton, the UAW’s top official dealing with GM, said the VEBA performance was weighing on the union. “It’s definitely an issue,” he said.

The UAW also isn’t the only union being squeezed.

In Pittsburgh, the United Steel Workers union is laboring to provide benefits to tens of thousands of employees covered by more than 30 VEBAs. “No matter how good your investment performance is, you are not going to be able to keep up with health-care inflation,” says Tom Conway, vice president of the USW. “The trustees are having to take a serious look at increasing premiums, and the retiree contribution has to be bigger.”

Union-run VEBAs gained popularity in the last decade as a way to clear retiree-benefit obligations off companies’ books and shift the burden to independent trust funds. Often, they were last-ditch efforts by unions to salvage health-care benefits for their members amid major restructurings or bankruptcies. But now that the VEBAs are running low on cash, unions are the ones doing the slashing.

Two years ago, when the UAW VEBA cut its ties with auto makers and became an independent trust, it quickly trimmed some prescription benefits, including free Viagra, and boosted co-payments for retirees. Next year, it will increase deductibles and out-of-pocket payments by participants, according to a statement posted on its Web site this fall.

Vincent Forbes, a GM retiree from Lansing, Mich., says he has managed without the dental and vision benefits he lost in the shift to the VEBA. “It’s the reality of what people are dealing with today,” he says. “Other people have to pay for these kinds of benefits. I don’t mind paying a little bit more.”

VEBA benefits are considered generous by many standards and many other retirees have lost benefits as companies eliminated retiree health-care funding. Just 26% of large U.S. companies that provide health care extend those benefits to retirees, down from 37% a decade ago, according to the Kaiser Family Foundation.

The UAW first agreed to let the Detroit Three auto makers offload their obligation to fund health-care benefits for retirees in a 2007 labor agreement. By the end of that year, GM had spent $4.6 billion on health care for active and retired workers, more than it spent on steel.

Under the 2007 pact, the auto companies paid into the separate trust immediately and agreed to a series of future payments. Combined, the three auto makers committed $54 billion. Today, the trust is one of the largest private health-care providers in the nation.

Since then, the Detroit car companies have heralded the agreement as transformative because their health-care costs had made them uncompetitive with their nonunionized rivals.

In 2009, when GM and Chrysler fell into bankruptcy, the government-brokered restructuring allowed the auto makers to use more company stock to fulfill their obligation to contribute to the VEBA. (The trust cashed out its holdings in Ford in 2010.)

That year, it also became clear that the UAW would have to do something to shore up the VEBA. The fund was stretched because returns were falling short of assumptions and health-care costs were rising faster than expected, people involved in the restructuring say. The volatility increased after the UAW agreed to accept more payments from GM and Chrysler in stock. GM shares have dropped 28% since its IPO last year, further affecting the VEBA’s bottom line.

GM declined to comment.

“At that time, everybody understood the VEBA would probably not cover all of retirees’ health care benefits and that the UAW or trustees of the VEBA would have to made decisions about cutbacks,” said Steven Rattner, who headed the Obama administration’s bailout and restructuring of the U.S. auto industry. “It was going to their problem, not the companies’ problem.”

The UAW VEBA has indeed fallen short of the 9% annual return that was assumed at the fund’s creation to be enough to provide current benefits to retirees for 80 years, says UAW President Bob King . Health-care costs, meantime, have risen far more quickly than the 5% a year assumed by the union.

According to VEBA trust officials, the funds for all autos averaged a 9.7% rate of return in 2010. They decline to say how the funds have performed in 2011 but, in response to written questions, they say the fund has adopted a more conservative assumption of 7% going forward. At GM, the fund currently has total assets of $33.23 billion and total benefit obligations of $44.68 billion, resulting in an $11.4 billion, or 26%, shortfall.

In negotiations this year with GM, union bargainers sought help to cover itsVEBA costs, according to two people familiar with the discussions. GM quickly shot down the idea but the two sides reached a compromise.

The UAW, if it clears legal hurdles, will look to transfer 10% of the profit sharing GM pays current workers under the contract directly to the VEBA. Such a step is expected to increase funding by around $40 million a year. The original court settlements bar the company from making additional direct contributions, but they permit this transfer, according to lawyers who worked on the deal. GM, in negotiations, expressed “serious threshold accounting, tax, legal and other concerns,” according to UAW documents. If those concerns are addressed within a year, the union could begin diverting cash.

Mr. King, speaking to reporters, said he is “really confident” the transfer from profit sharing will clear regulatory hurdles.

http://online.wsj.com/article/SB10001424052970203707504577011901934288534.html

Healthcare Reform 2.0 – Woolhandler and Himmelstein

Healthcare Reform 2.0

By Steffie Woolhandler, MD, MPH and David Himmelstein, MD
CUNY School of Public Health, Social Research, Fall 2011

So while the American people want an expanded and improved Medicare for All — that is, a single-payer system — corporations dead-set against single-payer reform have come to dictate the agendas of both political parties. Hence, the only way to win national health insurance is to build a popular movement to counter corporate power.

http://www1.cuny.edu/mu/forum/2011/11/09/dr-steffie-woolhandler-and-dr-david-himmelstein-on-their-recent-publication-“healthcare-reform-2-0″-in-the-fall-2011-issue-of-social-research/

Healthcare Reform 2.0 (12 pages):
http://www1.cuny.edu/mu/sph/files/2011/11/783_Woolhandler-Himmelstein_719-730.pdf

This brief primer (9 short pages plus references) on Healthcare Reform 2.0 will provide little new information for those who have followed the research and educational efforts of the leadership of Physicians for a National Health Program. Nevertheless, it should be downloaded to be used as an advocacy piece to explain to others why Healthcare Reform 1.0 (Affordable Care Act) will remain a failure, and why we have to move on to Healthcare Reform 2.0 (expanded and improved Medicare for All). By distributing this, electronically or in hard copy, you can become a part of the popular movement to counter corporate power.

Can Occupy Wall Street Push Us To Single Payer?

By Joanne Boyer
OpEdNews, Nov. 7, 2011

In the mid 1990s, I worked with an individual in Minnesota who fought hard to enact legislation for universal health care. His passion and desire to see health care reform that included coverage for all was as heartfelt as any I’ve ever seen. In what seemed (at the time) like a never ending legislative battle to change a health care system failing its people, I heard him say that he was going to round-up every three-ring binder report that had been done on the need for health care reform in the last year and just dump them all on the legislators’ desks and claim, “We don’t need another report. We need health care for everyone.” For the first time since I heard that, I feel we may be reaching the point of no more reports and binders. Thanks to Occupy Wall Street, I believe real action for single payer may be within our grasp.

Recently, attention has been focused — and rightly so — on the Occupy Wall Street movement as it continues to shine light on the simple reminder that it was Wall Street who caused the 2008 financial collapse. But lurking not far behind is the natural extension in the discussion for “We are the 99 percent.” The cry heard today from the Wall Street patriots in the streets can easily turn from “people, not profits” to “patients, not profits.” There’s little doubt that the continuing debate on health care will take center stage AGAIN during the 2012 presidential campaign. The Affordable Health Care for America Act will be under assault by many for various reasons. Only this time, the Occupy Wall Street Movement may finally empower people to no longer settle for corporate controlled heath insurance solutions.

Perhaps no one draws the parallels between Occupy Wall Street and the need for an Occupy Health Insurers better than Wendell Potter. The former CIGNA executive-turned-whistleblower remains one of the most vigilant and articulate spokespersons to call the health insurance companies what they are: corporations who value profits over the health of the people of our nation. In a recent column Potter points out but one of the horrific practices of the health insurance companies: the selling of “junk” insurance coverage to millions of Americans in 2014. He concludes that article by saying:

“As I write this, the insurance industry and its corporate allies are lobbying the Obama administration to grant limited-benefit plans permanent waivers from that provision. If the White House caves in to their demands, millions of low-wage earners will be forced to buy junk coverage on January 1, 2014. That’s the date all of us will have to buy coverage from a private insurer if we’re not eligible for a public plan like Medicare or Medicaid. If you don’t want to be forced to buy junk, send the White House a message. Now.”

As Senator Bernie Sanders (I-Vt.) always reminds us, the United States remains the only industrialized nation in the world with a for-profit health care system. The need to push the Affordable Health Care Act to do more should remain a primary goal for all of us in 2012. No more three-ring binders”no more studies”no more lobbyists. We need to move to single payer. The Occupy Wall Street movement has unleashed the simple reminder for all of us: We the People have a tremendous amount of power to bring positive change to our financial and social institutions. With Super Committees looking to put Medicare and Medicaid on the cutting block, we simply cannot take our eyes off the real prize: single payer in the United States. To help maintain a focus on this issue, we offer samplings of recent articles or blogs that continue to keep the issue of single payer in the spotlight.

Dave Zweifel, editor emeritus of The Capital Times in Madison, Wisconsin, wrote that the solution to health care is simple: single payer. It’s such an obvious answer staring us all in the face that we have missed the forest through the trees.

This summer, Rochester, Minnesota, physician Mark Liebow, wrote a column for Physicians For A National Health Program urging Minnesota to follow Vermont’s lead and become the second state to pass single payer legislation. With DFL Governor Mark Dayton’s hands tied with a Republican-controlled state house and senate, the task remains a big one. But with the momentum gained from Occupy Wall Street, the old rules may no longer apply.

Health Care-Now is an excellent blog that provides information and resources on what you can do and where activities that promote single payer are planned. Bookmark this wonderful site and keep it handy when you need information on the “who, what, where, when, why and how” of health care reform.

No more reports, no more binders, no more studies. As Jim Wallis, founder of Sojourners Magazine said so eloquently back in 2009:

“So let us have the moral dialogue and debate. Let’s take the best of who we are, the greatest parts of our tradition and use that to lead the way. The misinformation, falsehoods and outright lies that many are now circulating obscure the moral and religious core of this debate: that millions of people are suffering in an inequitable and inefficient health care system, and that too many powerful people are profiting from that broken system in defiance of the common good.”

Occupy the health care for profit industry now in existence? Impossible you say?  After what we’ve witnessed the last few weeks, I’m no longer so sure.

Joanne Boyer is founder and editor of Wisdom Voices Press and www.WisdomVoices.com.

http://www.opednews.com/articles/Can-Occupy-Wall-Street-Pus-by-Joanne-Boyer-111107-498.html

Out-of-pocket medical expenses drive more into poverty

Census Bureau measures more Americans living in poverty

By Michael A. Fletcher
The Washington Post, November 7, 2011

The Census Bureau on Monday released a new, comprehensive poverty measure that painted a more dismal picture of the nation’s economic landscape than the official measure from September.

The report found that 49.1 million Americans — 16 percent of the population — lived in poverty in 2010, which is higher than the 46.2 million Americans found to live in poverty by the official measure released in September.

The new report marked the culmination of a years-long effort by the Census Bureau to come up with a poverty measure that takes into account the huge amounts of money in social services benefits provided to the needy, as well as their expenses for things such as medical care and payroll taxes.

The increased level of poverty revealed by the supplemental measure is at odds with what some poverty experts expected. The increased level of poverty was fueled by the sharply higher levels of poverty among senior citizens found by the alternative measure.

The poverty rate for those 65 and older was 15.9 percent based on the supplemental measure, much higher than the 9 percent rate for the elderly when using the official poverty yardstick.

http://www.washingtonpost.com/business/economy/census-bureau-report-more-americans-living-in-poverty/2011/11/07/gIQAAHm1wM_story.html

And…

The Research SUPPLEMENTAL POVERTY MEASURE: 2010

Current Population Reports
United States Census Bureau, November 2011

The National Academy of Sciences (NAS) established the Panel on Poverty and Family Assistance, which released its report titled Measuring Poverty: A New Approach in the spring of 1995. Based on its assessment of the weaknesses of the current poverty measure, this NAS panel of experts recommended having a measure that better reflects contemporary social and economic realities and government policy.

SPM (Supplemental Poverty Measure) family resources should be defined as the value of cash income from all sources, plus the value of in-kind benefits that are available to buy the basic bundle of goods (FCSU) minus necessary expenses for critical goods and services not included in the thresholds. In-kind benefits include nutritional assistance, subsidized housing, and home energy assistance. Necessary expenses that must be subtracted include income taxes, social security payroll taxes, childcare and other work-related expenses, child support payments to another household, and contributions toward the cost of medical care and health insurance premiums, or medical out-of-pocket (MOOP) costs.

Resource measure:

Official Poverty Measure:  Gross before-tax cash income

Supplemental Poverty Measure:  Sum of cash income, plus in-kind benefits that families can use to meet their FCSU needs, minus taxes (or plus tax credits), minus work expenses, minus out-of-pocket medical expenses

For children, not accounting for the EITC (Earned Income Tax Credit) would result in a poverty rate of 22.4 percent, rather than 18.2 percent. The inclusion of each of the listed in-kind benefits results in lower poverty rates for children. Not subtracting MOOP (medical out-of-pocket expenses) from the income of families with children would have resulted in a poverty rate of 15.4 percent. Findings are similar for the other two age groups shown. For the 65 years and older group, however, WIC (Women, Infants, and Children program) has no statistically significant effect while SPM (Supplemental Poverty Measure) rates increase by about 7.3 percentage points with the subtraction of MOOP from income. Clearly, the subtraction of MOOP has an important effect on SPM rates for this group.

From the Summary

Results showed a higher proportion of several groups were poor using the SPM. These groups were adults aged 18 to 64 and 65 and over, those in married-couple families or with male householders, Whites, Asians, the foreign born, homeowners with mortgages, and those with private health insurance.

Since in-kind benefits help those in extreme poverty, there were lower percentages of individuals with resources below half the SPM threshold for most groups. The effect of benefits received from each program and expenses on taxes and other non-discretionary expenses on SPM rates were examined. It was shown that medical out-of-pocket expenses had an important effect on SPM rates and on the well-being of those 65 years and older, in particular.

http://www.census.gov/prod/2011pubs/p60-241.pdf

Comment: 

By Don McCanne, MD

Many have believed that our poverty rates would not be so dismal if more factors were considered such as the value of social services benefits, thus the supplemental poverty measure was created. The shocking result is that poverty rates are actually greater, especially because of the additional drain on resources of out-of-pocket medical expenses – a measure even worse for those over 65.

PNHP’s version of single payer would provide first dollar coverage, eliminating out-of-pocket expenses such as deductibles, co-payments, and coinsurance. This would not only reduce financial barriers to health care, it would also reduce U.S. poverty levels. This is partly what we mean by “improved” in “an improved Medicare for all.”

Meet The Architect of Vermont's Single-Payer Plan

Harvard's William Hsiao Zigs as Rest of Health Care Zags

By Hoag Levins
The LDI Health Economist, November 1, 2011

PHILADELPHIA — In the mid-1990s, Harvard health economist William Hsiao abandoned the U.S. health system as an area of study to focus his efforts on the health systems of other countries. The switch was motivated by frustration. “I gave up on the United States,” said the 75-year-old China-born scholar who emigrated to this country as a teenager. “I did not do any more work on the U.S. because Washington politics were so driven by ideology, and money played such an important role in policy making, that I really couldn’t contribute to it any more. The research I did just got pushed aside.”

Hsiao, a professor of economics at the Harvard School of Public Health in Boston, subsequently went on to become one of the world’s leading authorities on national health care systems, providing analysis and consulting services to 30 countries in Europe, Africa, Asia and Australia. He played a major role in reorganizing the health care systems in nine of those nations.

‘Incoherent and incongruent system’

Through it all he retained his dim view of America’s health care system and the lobbyists and partisan politics that control its destiny. In a recent interview in Health Affairs magazine he said the U.S. has “put on so many Band-Aids [on health care] that it has become an incoherent and incongruent system that causes much waste, inefficiencies and poor quality health care.”

And so, Hsiao’s history and attitude make it all the more noteworthy that last year, after a 16-year hiatus, he again focused on U.S. health care and became the architect of a new law establishing Vermont as the first state to adopt a “single-payer” health insurance strategy. He recently discussed that experience in a University of Pennsylvania seminar co-sponsored by the Leonard Davis Institute of Health Economics and the Center for Public Health Initiatives.

Vermont and the U.S. face common problems: the uninsured, the underinsured, cost escalation and an uneven quality of care,” he said. “If you’ve read the Commonwealth Fund’s reports, you know the U.S. has some of the best quality care in the world and some of the really not-so-good care. It’s highly uneven. Vermont has the ambition to solve all these problems with a single-payer system.”

Around the world

The single-payer approach is now widely used in other areas of the world including Canada, Great Britain, France, Germany and Switzerland. The model varies widely from country to country but, generally speaking, is a state-run, taxpayer-funded insurance program that standardizes administrative procedures, claims processing and payments across a broad population of patients. That unified system collects all the money, pays all the bills and sets the rates and rules for care.
Called “Green Mountain Care,” the single-payer system outlined in the 203-page Vermont plan that became a 102-page law in May is a public-private hybrid. It envisions a state-organized system of universal coverage for all residents funded by payroll taxes and administered under contract by a large private enterprise, probably an insurance company.

To prepare the plan, Hsiao, who has been a Harvard faculty member for 32 years, led a team that included Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology; Steven Kappel, the head of Vermont’s Policy Integrity organization; and a group of Harvard health policy analysts. Their work was funded by a contract from the Vermont legislature and a grant from the Commonwealth Fund.

When the project began, Hsiao asked the state to define the goals it wanted the plan to achieve. The legislature wrote:

‘Essential health services for all’

“To ensure universal access to and coverage for essential health services for all Vermonters. All Vermonters must have access to comprehensive, quality health care. Systemic barriers must not prevent people from accessing necessary health care. All Vermonters must receive affordable and appropriate health care at the appropriate time in the appropriate setting and health care costs must be contained over time.”

The Harvard professor said Vermont officials also wanted the new plan to establish community-based preventive and primary care centers as the foundation of an overall system that included the state’s 14 hospitals.

Hsiao noted that his international experiences taught him that effective health care policy reform is only possible when there is a certain kind of “opening” in the political fabric. In Vermont, a state where grass-roots community organizations play a larger role in government than in most other states, three things happened to create such an opening.

Growing financial crisis

The first was a rising sense of financial crisis: Vermont currently spends $5 billion annually on health care; those costs now make up 20% of its domestic product and continue to rise. Second, 22% of Vermont’s 625,000 residents are either underinsured or uninsured — a point of great concern in a state known for its politically progressive philosophies. Thirdly, the candidates in the 2010 gubernatorial election harnessed their campaigns to the momentum of the national debate, making Vermont’s health care reform a platform priority second only to jobs.

Hsiao’s team even helped the new governor “sell” the plan to voters and legislators. “You have to frame the issue to capture the public’s imagination and attention so they can resonate with it quickly,” he said. “We used ‘the current system is broken’ because it was a statement that people could all relate to in his or her own way. What we were doing was not economics but rather political economics.”

Using Jonathan Gruber’s microsimulation model, Hsiao’s team analyzed Vermont’s health care economy and identified 16 hurdles that had to be overcome to craft a viable plan. “Then we talked to all the payers; state government, businesses large and small, workers, households,” said Hsiao. “They all told us, ‘I can’t afford another penny for health care. If your proposal requires me to pay more, I’m going to oppose it.’ At the same time, providers were telling us, ‘If you decrease our net income by a penny, we will oppose you.'”

Medicare and Medicaid

Hsiao ultimately recommended a single-payer system because he believed it has the best chance of generating the savings needed to fund the reforms without increasing overall annual health costs. One element was the consolidation of all current Vermont insurance plans, including Medicare and Medicaid, into a single plan. Aside from creating various sorts of efficiencies, this would also eliminate the costs currently paid for the marketing, sales and underwriting expenses of separate insurance companies as well as for the small army of providers’ employees who processed claims.

“In the U.S. today, every insurance plan negotiates separately with providers,” said Hsiao. “On average, a solo practitioner in Vermont has to deal with more than 30 different plans with different rules, rates and payment methods. Physicians on average spend roughly five to eight hours a week dealing with billing and insurance-related work. Their nurse spends half his or her time on this same thing. Close to one administrative clerk has to be hired to do the paperwork. On a larger scale, Massachusetts General Hospital is a major teaching hospital for Harvard Medical School that employs more than 900 clerks to do this work. We ask ‘Is that necessary? Is there a better way that reduces it?'”

Another element of Hsiao’s Vermont plan was to insulate its policy making and management from undue political influence.

‘Divorce politics as much as possible’

“For proponents, the ‘single-payer’ concept usually means the government runs it,” said Hsiao. “We said no. Our p
roposal tried to divorce politics as much as possible by creating an independent board that handles the system’s design, benefit packages, rates and payment methods.”

The plan includes the creation of a “direct negotiations” structure that puts representatives of the payers — businesses, employees and state government — on one side of the table and representatives of the providers — physicians, hospitals, drug companies and consumers — on the other side to work out policies and rates. Hsiao has used this same direct negotiation system in other countries and notes that “even if it’s not implemented that well, it still takes the politics out of the middle, which is particularly important in the U.S. where politics is dominated by powerful and moneyed groups.”

The overall daily administration of the new system would be put out for bid to private contractors. “When Vermont Blue Cross-Blue Shield understood that, their board of directors actually changed its policy to say that it would work with Vermont’s single-payer system,” Hsiao said.

Payment system leverage

Perhaps the most important mechanism for achieving savings and controlling quality across the new system will be its unified reimbursement capabilities. “We’ve learned from experience around the world that if you want to reduce waste and improve quality, the leverage you use is the payment system,” said Hsiao. “And the way to do that is to create the right incentive structures. Think of it like putting a magnet in the right place so that iron particles will automatically be drawn there.”

He notes that when the system is implemented in the next several years there will be winners and losers. “Some — like the uninsured and underinsured — will gain. We recommend that primary physicians also gain in income,” he said. “But there’s no free lunch. Somebody has to pay and some will lose. Private insurance companies, for instance — particularly those outside Vermont. Another group to lose will be employers who do not offer health insurance or offer very shallow insurance. Their costs will go up.” Couples who both have high-income jobs will also pay more, and specialist physicians will see a decline in income.

Hsiao readily admits that no health care model — including single payer — has totally succeeded. “I don’t think any country has solved the problem of controlling health care costs. All the advanced economies as well as middle income countries are trying to find a way to do that. The one that has been able to do that best so far is England, but its centralized system does that in fits and starts. France is also doing a very good job but is decentralized through different states and cities, so they don’t have as tight control as Great Britain.”

Does he think that Vermont’s gambit could ultimately influence other states or even the federal government to explore single-payer systems?

He said the biggest challenge to that would be “opposition from insurance industry, pharmaceutical industry and major medical centers. I believe the [U.S. health care] crisis will continue to deepen, and I will make a prediction that within ten years the American people will be willing to make a big change, like going toward a single-payer system. The question is whether the physicians will agree. If the public, the physicians and hospitals do agree to it, I think the opposition from the insurance industry can be overcome.”

Oregon's Mad as Hell Doctors win national award

By Bill Graves
The Oregonian, Nov. 7, 2011

A group of Oregon physicians who call themselves the Mad as Hell Doctors failed to put a single-payer option on the table in Congress’ debate on health reform two years ago, but they did win a national award recently for trying.

Physicians for a National Health Program awarded the doctors the Dr. Quentin Young Health Activist Award nine days ago during the organization’s national conference in Washington, D.C. The Mad as Hell Doctors won the award for “passionate work and play” in efforts to bring public awareness to problems in the health care system.

The doctors took their name from the 1976 movie “Network,” in which a character rallied the public with the line: “I’m mad as hell, and I’m not going to take it anymore.”

Six Mad as Hell Doctors embarked from Portland two years ago in a motor home on a cross-country campaign for a single-payer  solution to the nation’s health care system, an option that had been dismissed in the unfolding congressional health care debate. A single-payer plan would create one organization, a nonprofit or, more likely, the federal government, to run one health insurance program for the nation, something like Medicare for everyone.

The doctor activists, promoted by Adam Klugman, a Tigard political activist, took their message to about 30 cities before reaching Washington, D.C. They continue to tour, speak and advocate for health care reform.

Doctors involved in the cross-country campaign included: Dr. Eugene Uphoff and Dr. Samuel Metz of Portland; Dr. Paul Hochfeld of Corvallis, Dr. Michael Huntington of Corvallis, Dr. Joseph Eusterman of Wilsonville and Dr. Bob Seward of Forest Grove.

More than 600,000 people in Oregon, most adults, lack health insurance. The state hopes to enlist most of them by 2014 in an Oregon Health Exchange, an insurance marketplace, still under design, where they can shop for government-subsidized coverage.              

http://mobile.oregonlive.com/advorg/db_/contentdetail.htm?contentguid=eh2R3WK2&full=true#display

Out-of-pocket medical expenses drive more into poverty

Census Bureau measures more Americans living in poverty

By Michael A. Fletcher
The Washington Post, November 7, 2011

The Census Bureau on Monday released a new, comprehensive poverty measure that painted a more dismal picture of the nation’s economic landscape than the official measure from September.

The report found that 49.1 million Americans — 16 percent of the population — lived in poverty in 2010, which is higher than the 46.2 million Americans found to live in poverty by the official measure released in September.

The new report marked the culmination of a years-long effort by the Census Bureau to come up with a poverty measure that takes into account the huge amounts of money in social services benefits provided to the needy, as well as their expenses for things such as medical care and payroll taxes.

The increased level of poverty revealed by the supplemental measure is at odds with what some poverty experts expected. The increased level of poverty was fueled by the sharply higher levels of poverty among senior citizens found by the alternative measure.

The poverty rate for those 65 and older was 15.9 percent based on the supplemental measure, much higher than the 9 percent rate for the elderly when using the official poverty yardstick.

http://www.washingtonpost.com/business/economy/census-bureau-report-more-americans-living-in-poverty/2011/11/07/gIQAAHm1wM_story.html

And…

The Research SUPPLEMENTAL POVERTY MEASURE: 2010

Current Population Reports
United States Census Bureau, November 2011

The National Academy of Sciences (NAS) established the Panel on Poverty and Family Assistance, which released its report titled Measuring Poverty: A New Approach in the spring of 1995. Based on its assessment of the weaknesses of the current poverty measure, this NAS panel of experts recommended having a measure that better reflects contemporary social and economic realities and government policy.

SPM (Supplemental Poverty Measure) family resources should be defined as the value of cash income from all sources, plus the value of in-kind benefits that are available to buy the basic bundle of goods (FCSU) minus necessary expenses for critical goods and services not included in the thresholds. In-kind benefits include nutritional assistance, subsidized housing, and home energy assistance. Necessary expenses that must be subtracted include income taxes, social security payroll taxes, childcare and other work-related expenses, child support payments to another household, and contributions toward the cost of medical care and health insurance premiums, or medical out-of-pocket (MOOP) costs.

Resource measure:

Official Poverty Measure:  Gross before-tax cash income

Supplemental Poverty Measure:  Sum of cash income, plus in-kind benefits that families can use to meet their FCSU needs, minus taxes (or plus tax credits), minus work expenses, minus out-of-pocket medical expenses

For children, not accounting for the EITC (Earned Income Tax Credit) would result in a poverty rate of 22.4 percent, rather than 18.2 percent. The inclusion of each of the listed in-kind benefits results in lower poverty rates for children. Not subtracting MOOP (medical out-of-pocket expenses) from the income of families with children would have resulted in a poverty rate of 15.4 percent. Findings are similar for the other two age groups shown. For the 65 years and older group, however, WIC (Women, Infants, and Children program) has no statistically significant effect while SPM (Supplemental Poverty Measure) rates increase by about 7.3 percentage points with the subtraction of MOOP from income. Clearly, the subtraction of MOOP has an important effect on SPM rates for this group.

From the Summary

Results showed a higher proportion of several groups were poor using the SPM. These groups were adults aged 18 to 64 and 65 and over, those in married-couple families or with male householders, Whites, Asians, the foreign born, homeowners with mortgages, and those with private health insurance.

Since in-kind benefits help those in extreme poverty, there were lower percentages of individuals with resources below half the SPM threshold for most groups. The effect of benefits received from each program and expenses on taxes and other non-discretionary expenses on SPM rates were examined. It was shown that medical out-of-pocket expenses had an important effect on SPM rates and on the well-being of those 65 years and older, in particular.

http://www.census.gov/prod/2011pubs/p60-241.pdf

Many have believed that our poverty rates would not be so dismal if more factors were considered such as the value of social services benefits, thus the supplemental poverty measure was created. The shocking result is that poverty rates are actually greater, especially because of the additional drain on resources of out-of-pocket medical expenses – a measure even worse for those over 65.

PNHP’s version of single payer would provide first dollar coverage, eliminating out-of-pocket expenses such as deductibles, co-payments, and coinsurance. This would not only reduce financial barriers to health care, it would also reduce U.S. poverty levels. This is partly what we mean by “improved” in “an improved Medicare for all.”

South Carolina Information

Sign our petition urging Biden and S.C. legislators to support Medicare for All

PNHP South Carolina is urging the entire S.C. Congressional delegation as well as the Biden administration to support the passage and implementation of the single-payer [improved] Medicare for All bills when they are re-introduced in the U.S. House and Senate in 2021.

Sign the Petition!

Contact Information

PNHP Chapter: Health Care for All – South Carolina

Website: www.pnhpsc.org

Media Contacts

David Keely, M.D.
(803) 417-2770
dfkeely3@gmail.com

Dr. David Keely is president of Health Care for All-South Carolina. He is semi-retired as a public health policy educator and physician epidemiologist with Primary Care Medicine and Public Health Synergy, his part-time consulting business. He grew up in Philadelphia and obtained his bachelor’s degree from Swarthmore College and his medical degree from Wake Forest University. He did his family medicine residency at the Medical University of South Carolina (MUSC) and later he did the MPH program at UNC-Chapel Hill School of Public Health. He has practiced family medicine for more than 30 years in multiple settings: in private practice, at a community health center, and as part of a health department. David was the full-time, three-county, public health district director for South Carolina’s Department of Health and Environmental Control for eight years. He also served in the National Health Service Corps for two years along the way.