Reinhardt: Repeal Health Care, Make GOP Cut Costs

By John Greenwald
The Fiscal Times
November 28, 2010

In a freewheeling interview with The Fiscal Times, (Uwe Reinhardt) critiques the new health care reform law — including its lack of cost containment — and recent proposals from the president’s deficit-cutting panel. Never one to mince words, Reinhardt also discusses what he sees as the real culprit behind soaring health care costs, why he doubts a single payer health care system could work in the United States — and where he believes the country’s founding fathers went wrong.

The Fiscal Times (TFT): What would a high-performing national health care system look like?

Uwe Reinhardt (UR): I think the Germans, the Swiss, the Dutch have a perfectly fine approach. It’s not a single-payer system. While I’m a Canadian I am not for [single payer] in the U.S. because we do not have a political system that can handle it responsibly. Canada has a parliamentary system that insulates considerably the public program from lobbying.

TFT: So you favor universal coverage but not a single payer system?

UR: For other countries I do [favor single payer] but we can’t run it. You need a responsible system of governance. Whatever you can say about U.S. governance, you cannot call it responsible. You really couldn’t. I think the founding fathers gave us an impotent government that acts quite irresponsibly. I don’t think parliamentary systems are that bad.

http://www.thefiscaltimes.com/Issues/Health-Care/2010/11/28/GOP-Health-Reform-Repeal.aspx

Single payer advocates frequently are perplexed by Uwe Reinhardt’s positions on health care reform.

He seems to support health care justice. He frequently uses the example of the waitress who is trying her best to support herself and her child, but who is unable to afford health care. By extrapolation, a just society would not let her or her child go without the essential health care services that they might need.

Yet what about single payer? He is a supporter for single payer, but for other countries. In this interview he states that he does not support single payer for the United States. The reason he gives is that “the founding fathers gave us an impotent government that acts quite irresponsibly.”

Right now the British and the Canadians are facing an assault on their public health systems by their conservative governments. In the United States, we are facing an assault on our Medicare program by the conservatives and right-leaning moderates. Although we don’t know how much damage, if any, will be done to the systems, it is highly probable that all three of the systems will survive intact considering the strong public support in each nation.

Does our government act irresponsibly? Wars? Income transfer from the workers to the wealthy? Neglect of poverty and other social inequities? Of course our leaders have been irresponsible, and so have the leaders of all other nations, but only at times. Social Security? Medicare? Our national parks? Most government activities are quite responsible and certainly do not set us apart from other nations.

Although Reinhardt criticizes the new health care reform law for failing to contain costs, he states, “The private sector is the inflationary component of health care, not Medicare or Medicaid.” Can he seriously contend that these government programs are irresponsible and impotent when they continue to outperform the private plans on cost containment? Considering this, how can he support single payer for other nations, yet reject it for the United States?

Government impotence and irresponsibility are not reasons to reject single payer. They are merely an excuse as to why we haven’t enacted it yet. What we need is more responsible people power. Let’s get busy stirring it up.

The Times of India
November 26, 2010

Why have you been pitching for a single payer system for health insurance rather than a system where several private companies compete?

The US model of private health insurers has been proven inefficient and expensive. Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don’t need the cover and keep out people who need it. With many companies, they also need to spend on marketing and advertising. The incentives are all wrong and the transaction costs are very high and you have to give them a high profit. In health, social and private incentives are totally disparate. Competition does not work in healthcare especially in the health insurance market. Several countries like the UK, France and Sweden have a single payer system, differing only in the organisation of healthcare delivery.

Several health insurance companies are setting up business here. Should India be worried?

India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into. Once the companies start making profits, special interests in politics will come into play and it will be difficult to get them out.

http://timesofindia.indiatimes.com/home/opinion/edit-page/The-US-model-of-private-health-insurers-is-inefficient-expensive/articleshow/6989634.cms

Comment: 

By Don McCanne, MD

Nobel laureate Joseph Stiglitz understands single payer. President Obama knows that he does. So why doesn’t…

(No, health care reform shouldn’t be reduced to a mere conundrum.)

Rema Nagarajan interviews Joseph Stiglitz

The Times of India
November 26, 2010

Why have you been pitching for a single payer system for health insurance rather than a system where several private companies compete?

The US model of private health insurers has been proven inefficient and expensive. Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don’t need the cover and keep out people who need it. With many companies, they also need to spend on marketing and advertising. The incentives are all wrong and the transaction costs are very high and you have to give them a high profit. In health, social and private incentives are totally disparate. Competition does not work in healthcare especially in the health insurance market. Several countries like the UK, France and Sweden have a single payer system, differing only in the organisation of healthcare delivery.

Several health insurance companies are setting up business here. Should India be worried?

India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into. Once the companies start making profits, special interests in politics will come into play and it will be difficult to get them out.

http://timesofindia.indiatimes.com/home/opinion/edit-page/The-US-model-of-private-health-insurers-is-inefficient-expensive/articleshow/6989634.cms

Nobel laureate Joseph Stiglitz understands single payer. President Obama knows that he does. So why doesn’t…

(No, health care reform shouldn’t be reduced to a mere conundrum.)

By Ezra Klein
The Washington Post
November 23, 2010

There are a lot of complicated explanations for why American health-care costs so much, but there are also some simple ones. Chief among them is “we pay too much.” And I don’t mean in general. I mean specifically. Mountains of research show that for every piece of care you might name — a drug, a doctor visit, a diagnostic — you’ll pay far more in the United States than in other countries.

(He posts charts demonstrating higher health care prices in the U.S.)

The most positive spin you can give this data is that we’re paying to subsidize innovation for everyone, and though that’s not ideal, it’s better than that innovation not happening. The less positive spin is that we’re just getting ripped off.

For an analytical take — and a good look at the political economy of the problem — read Alec MacGillis’s October article on the subject.

Comment:

By Don McCanne, MD

The basic premise that our prices are higher than those of other nations is certainly correct. Alec MacGillis was precisely on target in the article that you cite.

But the claim that we “subsidize innovation for everyone” needs to be challenged.

Donald Light, in a Health Affairs article last year, wrote, “… a comprehensive data set of all new chemical entities approved between 1982 and 2003 shows that the United States never overtook Europe in research productivity, and that Europe in fact is pulling ahead of U.S. productivity.”

Also the Nobel prizes for C-T scanning and MRIs were shared with British scientists. So we don’t even have an exclusive claim on our budget-busting technology. (In fact, the Beetles financed the British development of C-T scanners.)

And our outrageous pricing has proven that the private insurance industry has failed us miserably in its most important function – negotiating value in health care.

Our pharmaceutical and technological firms do excel in one regard. They know how to manipulate the political process to prevent an effective public role in setting best prices (legitimate costs and fair profits), even though all other nations have done so.

Maybe someday we’ll be smart enough to follow their lead, but, until then, we’ll keep paying dearly for the failures of our electorate to become adequately informed and then to take appropriate action in the polling booth.

Fixing Medicare and providing it for everyone would create a beneficent public monopsony (single purchaser) which would be capable of enforcing value in our health care purchases.

Even Milton Friedman’s mentor, F.A. Hayek, wrote, in The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

Klein article and responses:
http://voices.washingtonpost.com/ezra-klein/2010/11/americans_pay_too_much_for_hea.html

International Federation of Health Plans – Comparative Prices:
http://www.ifhp.com/documents/IFHPPricereportfinal.pdf

Alec MacGillis – The price problem that health-care reform failed to cure:
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/22/AR2010102203394.html

Donald Light – Global Drug Discovery: Europe Is Ahead:
http://content.healthaffairs.org/cgi/content/abstract/28/5/w969

Americans pay too much for health care — in charts

By Ezra Klein
The Washington Post
November 23, 2010

There are a lot of complicated explanations for why American health-care costs so much, but there are also some simple ones. Chief among them is “we pay too much.” And I don’t mean in general. I mean specifically. Mountains of research show that for every piece of care you might name — a drug, a doctor visit, a diagnostic — you’ll pay far more in the United States than in other countries.

(He posts charts demonstrating higher health care prices in the U.S.)

The most positive spin you can give this data is that we’re paying to subsidize innovation for everyone, and though that’s not ideal, it’s better than that innovation not happening. The less positive spin is that we’re just getting ripped off.

For an analytical take — and a good look at the political economy of the problem — read Alec MacGillis’s October article on the subject.

The basic premise that our prices are higher than those of other nations is certainly correct. Alec MacGillis was precisely on target in the article that you cite.

But the claim that we “subsidize innovation for everyone” needs to be challenged.

Donald Light, in a Health Affairs article last year, wrote, “… a comprehensive data set of all new chemical entities approved between 1982 and 2003 shows that the United States never overtook Europe in research productivity, and that Europe in fact is pulling ahead of U.S. productivity.”

Also the Nobel prizes for C-T scanning and MRIs were shared with British scientists. So we don’t even have an exclusive claim on our budget-busting technology. (In fact, the Beetles financed the British development of C-T scanners.)

And our outrageous pricing has proven that the private insurance industry has failed us miserably in its most important function – negotiating value in health care.

Our pharmaceutical and technological firms do excel in one regard. They know how to manipulate the political process to prevent an effective public role in setting best prices (legitimate costs and fair profits), even though all other nations have done so.

Maybe someday we’ll be smart enough to follow their lead, but, until then, we’ll keep paying dearly for the failures of our electorate to become adequately informed and then to take appropriate action in the polling booth.

Fixing Medicare and providing it for everyone would create a beneficent public monopsony (single purchaser) which would be capable of enforcing value in our health care purchases.

Even Milton Friedman’s mentor, F.A. Hayek, wrote, in The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

Klein article and responses:
http://voices.washingtonpost.com/ezra-klein/2010/11/americans_pay_too_much_for_hea.html

International Federation of Health Plans – Comparative Prices:
http://www.ifhp.com/documents/IFHPPricereportfinal.pdf

Alec MacGillis – The price problem that health-care reform failed to cure:
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/22/AR2010102203394.html

Donald Light – Global Drug Discovery: Europe Is Ahead:
http://content.healthaffairs.org/cgi/content/abstract/28/5/w969

Health Care Use and Decision Making Among Lower-Income Families in High-Deductible Health Plans

By Jeffrey T. Kullgren, MD, MPH; Alison A. Galbraith, MD, MPH; Virginia L. Hinrichsen, MS, MPH; Irina Miroshnik, MS; Robert B. Penfold, PhD; Meredith B. Rosenthal, PhD; Bruce E. Landon, MD, MBA; Tracy A. Lieu, MD, MPH

Archives of Internal Medicine
November 22, 2010

From the Introduction:

In early 2009, 23% of all nonelderly adults with private insurance, and nearly 50% of adults who purchased coverage through the nongroup market, were enrolled in an HDHP (high-deductible health plan). Because of their relatively low premiums, HDHPs are also playing a prominent role in expanding insurance coverage. For example, most individuals who have purchased unsubsidized plans through the Commonwealth Connector, the new health insurance exchange in Massachusetts, have selected products like HDHPs that offer low premiums with high levels of cost-sharing.

As enrollment in HDHPs has grown, many analysts have voiced concerns about the impact these plans may have on low-income families. Decades of health services research have demonstrated that higher levels of cost-sharing reduce health care utilization, sometimes with greater adverse consequences for low-income patients.

From the Comment:

We found that lower-income families with at least $500 in annualized out-of-pocket expenditures in an HDHP were more likely than higher-income families to delay or forego health care services owing to cost (57% vs 42%).

Overall, we observed relatively high rates of delayed or foregone care in both income groups, with nearly half of all families having either delayed or foregone care in the last 6 months owing to the cost. These rates were substantially higher than the 20% of the US population reporting either unmet need or delayed care in the previous 12 months in the 2007 Heath Tracking Household Survey.

Beyond the implications for clinicians, our findings have important implications for federal health reform. Reform legislation that establishes an individual health insurance mandate could lead more families to enroll in plans with high levels of cost-sharing, as has been seen following the implementation of coverage mandates in Massachusetts.

http://archinte.ama-assn.org/cgi/content/abstract/170/21/1918

And…

Higher Deductibles, Lower Spending

By Reed Abelson
The New York Times
Prescriptions blog
November 22, 2010

As more families find themselves enrolled in health plans with high deductibles, they are increasingly likely to delay or forgo medical care because of the out-of-pocket cost, a new study shows (the study cited above).

Do you think people are better and more savvy consumers when they share in the cost of their medical care?

Three reader responses:

12. Anonymous BE, Belgium
November 23rd, 2010

NO. Medical care should be free at the point of service. The whole point of health insurance is that no one should be financially worse off because they have health problems. High deductible plans violate this maxim.

Furthermore, people are not in a position to judge what is necessary or not. People listen to what their doctor says, and they do it, unless their lack of insurance coverage makes it a financial problem. Patients are not evaluating the effectiveness of various treatments – that is a job for doctors and scientists, not patients. Patients are not consumers – they are people who are suffering who place themselves in the hands of the medical profession.

13. GoozNews, Washington, DC
November 23rd, 2010

RE: eliminating useful v. non-useful care via higher co-pays. It’s not an open question. The Rand Health Insurance Experiment, the only comprehensive study to date, showed that people were just as like to avoid necessary car as unnecessary care when forced to pay higher co-pays and deductibles. This is also common sense. When the quality of a good, in this case health services, has no relationship to price, and consumers lack accurate and timely information about what constitutes high quality, making rational decisions based on price is virtually impossible. It requires extensive research prior to the point of purchase — highly impractical when it comes to health care, which is usually purchased under the duress of immediate illness. Those who advocate “more skin in the game” as the cure for rising health care costs fail to acknowledge these all-too-human realities, or what an economist might call pervasive marketplace failures.

23. Don McCanne, San Juan Capistrano, CA
November 23rd, 2010

What really matters is our total national health expenditures. We are already spreading the risk by contributing to our public and private insurance pools through taxes and/or premiums. So we should decide whether the financial barriers to care that high-deductible health plans create are worth the projected savings in our total health care spending.

Only one-fifth of us use four-fifths of all health care. For this sector of our population, deductibles are rapidly exceeded and have virtually no impact on total national health care spending. (It is in this sector where most of the Dartmouth variations occur, but that is another topic.)

For the four-fifths of us who are relatively healthy, most of us would not decline clearly appropriate care even if it is below the deductible, providing that we had the ability to pay for it. Only the worried-well, perhaps with a common cold, might use the health care system more than necessary, but that doesn’t apply to most of us.

Although the trip to the doctor is almost always for legitimate reasons, perhaps ten percent of the time the marginal care offered might reasonably be declined, providing it is an informed decision. Studies show that about half of that care is still appropriate, so only five percent of care for healthier patients may be of no more value than receiving reassurance that no care is needed (which actually does have value in itself).

Since the four-fifths of us who are healthy consume only twenty percent of total health care, the five percent of our care that might deemed to be inappropriate constitutes only one percent of our national health expenditures (five percent of twenty percent). That one percent is the equivalent of only two or three months of health care inflation – not worthy of more than a footnote in our national health care budget.

We can control health care costs, but high-deductible health plans are not an effective mechanism. They certainly are not worth the price of denying beneficial care based on individual concerns over affordability.

Every other nation has controlled costs by establishing an effective model of social insurance. Unfortunately the model in the Patient Protection and Affordable care Act falls far short. What would work would be to improve the Medicare program and then include everyone. Several studies have shown that it would be the least expensive method of providing affordable care for absolutely everyone.

http://prescriptions.blogs.nytimes.com/2010/11/22/higher-deductibles-lower-spending/

This study of the impact of high-deductible health plans is unique in that it studied only families with over $500 in annual out-of-pocket medical expenses, thus they are families that do have some interaction with the health care system.

It is no surprise that 57 percent of these lower-income families with high-deductible health plans delayed or had foregone health care. What is less intuitive is that 42 percent of the higher-income families with high-deductible health plans also delayed or had foregone health care. Other studies indicate that about half of that care would have been beneficial, so we really should question the policy of using high-deductible health plans as a method of containing health care costs.

Another important concern is that individuals purchasing plans from the Massachusetts health insurance exchange are choosing high-deductible plans because of the lower premiums. The state exchanges to be established under the Patient Protection and Affordable Care Act will offer low-actuarial value plans as the standard. These plans are high-deductible plans that will likely attract most buyers. Bad policy.

When the evidence so clearly indicts high-deductible plans, why did Congress adopt them wholesale? Simply to accommodate the private insurers in preserving their markets by trying to keep their premiums affordable (which they’re not anyway).

It’s time to dump the private insurers and establish an improved Medicare for all, with first dollar coverage. We can control costs far better with the other single payer tools that would be at our disposal.

(Analysis transmitted by letter from Douglas Elmendorf, Director of the CBO, to Rep. Paul Ryan)
Congressional Budget Office
November 17, 2010

For purposes of this analysis, CBO assumed that all individuals projected to enroll in Medicare would use the proposed voucher. Voucher recipients would probably have to purchase less extensive coverage or pay higher premiums than they would under current law, for two reasons. First, most of the savings for Medicare under the proposal stem from reducing the amounts that the federal government would pay for enrollees on a per capita basis, relative to the projections under current law. Second, future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.

Similarly, reducing federal payments for Medicaid relative to currently projected amounts would probably require states to provide less extensive coverage, or to pay a larger share of the program’s total costs, than would be the case under current law.

For both Medicare and Medicaid, the budgetary effects would become larger over time because federal payments would tend to grow more slowly under the proposal than projected costs per enrollee under current law. Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrollees’ spending for health care and the uncertainty surrounding that spending would increase.

http://www.cbo.gov/ftpdocs/119xx/doc11966/11-17-Rivlin-Ryan_Preliminary_Analysis.pdf

Comment: 

By Don McCanne, MD

Congressman Paul Ryan and former Clinton budget director Alice Rivlin are both members of the Bowles/Simpson deficit commission. They have asked the Congressional Budget Office to analyze their proposal to reduce future federal health care expenditures by converting Medicare to a voucher program for purchasing private health plans, and by converting Medicaid into a block-grant program for the states.

If you read the analysis found at the link above, you would see that the deficits related to future spending in the Medicare and Medicaid programs would be reduced by this proposal. If your only goal is to cut the federal deficit, then the analysis would predict success, but at what cost?

Compared to the current Medicare program, the vouchers would purchase less coverage, or the premiums paid by the beneficiaries would be higher, or both. Merely shifting to private plans alone would result in higher premiums if the benefits were to remain the same as in the traditional Medicare program. Many Medicare beneficiaries are already burdened with excess medical debt, and the voucher proposal would increase the burden by both lowering the federal contribution and increasing the administrative waste characteristic of private plans.

Converting Medicaid into a block grant program uses the same principle as converting defined benefit programs into defined contribution programs. The federal government ends its exposure to the risk of ever-increasing costs by fixing its contribution to the states through a defined block grant. The state then bears the risk for increases in health care costs.

Of course, states are already heavily burdened by the costs of their Medicaid programs. Adding more to that burden further strains state budgets. The states are then put into a position of trying to balance reductions in health services with the greater deficit holes punched into the state budgets. Passing the problem from the federal taxpayer to the state taxpayer accomplishes nothing.

As the CBO analysis states, “Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrollees’ spending for health care and the uncertainty surrounding that spending would increase.”

What is our goal here? Appeasing anti-government budget hawks? Or removing financial barriers so that people can get the health care that they need?

The budget hawks say that we need to make hard choices. So what about the choice of a single payer monopsony – an improved Medicare for all? That would solve the budget deficit problem while enabling everyone to have the care that they need – not really very hard choices. Maybe it would be a hard choice for the hawks to accept a government program that would actually work, but let’s hold them to their demand. If they think an improved Medicare for all is a hard choice, then so be it.