PNHP

Weighing the Evidence for Single-Payer

Weighing the Evidence for Single-Payer

By Ann Settgast, M.D., and Elizabeth Frost, M.D.
Minnesota Medicine, Nov. 2009

As physicians, we are troubled by the direction of federal health care reform. Whether via a public health insurance option or an insurance mandate, the proposals on the table build on the structure of our broken system—the most costly, fragmented, and bureaucratic in the world.

President Barack Obama acknowledged in his national address this summer that a single-payer system is the only way to cover all Americans. We agree, and we encourage him to re-embrace this solution to the health care crisis.

Conventional wisdom leads us to believe there are only two culprits responsible for skyrocketing health care costs—doctors and patients. Doctors order too many unnecessary tests, and patients demand too much care. We acknowledge that overtreatment of patients guided by improper incentives must be addressed. The issue of patients overusing care also must be confronted. However, the problem of overuse is minuscule compared with the consequences of underuse. In its most extreme form, underuse of health care contributes to more than 45,000 deaths in the United States annually, as revealed in a study by Wilper et al. in the American Journal of Public Health. But blaming doctors and blaming patients ignores the elephant in the room: private insurance.

Our unique multipayer financing structure based on private health insurance produces enormous waste. Of every health care dollar spent in the United States, 31 cents is spent on administration (more than double that of other industrialized nations). So we are wary of proposals that seek to simply expand private insurance and in so doing provide a bailout for this industry. Such expansion may decrease our embarrassing numbers of uninsured, but it will not solve our problems. Private insurance has been likened to an umbrella that melts in the rain. Consider the disturbing fact that 62 percent of all personal bankruptcies are related to medical bills. More astonishing is the fact that 77 percent of Americans who go bankrupt because of medical bills had insurance when they became ill. Because it is a business, private insurance has, at its core, the bottom line. The only way to succeed is to selectively recruit healthy patients or to deny coverage to patients when they become sick. As professionals who strive to make sick people well, we find this model for our system illogical and fatally flawed.

Elimination of U.S.-style private insurance has been a prerequisite to achieving universal health care coverage in every other industrialized nation. We ask, “What if the rest of the world is right?” Only under single-payer can we eliminate the administrative costs associated with billing hundreds of payers and the sizeable overhead of the private insurance industry. These overhead dollars are spent marketing, underwriting, lobbying, and fighting claims—none of which makes our patients healthier. Elimination of this administrative waste would save more than $400 billion annually.

As physicians, we are obligated to use evidence-based medicine. The reform debate must be held to the same standard. Ample evidence, including studies by the Congressional Budget Office and the Government Accountability Office, shows single-payer can assure universal coverage while saving money. For those who say competition among insurers is needed to keep costs down, we say the experiment must end. It has been tried. It has failed. For those who ask whether something is better than nothing (ie, implementation of a public option), we again look at the evidence. A number of states have tried to patch their systems with piecemeal reforms over the past two decades. None has produced universal coverage while controlling costs.

For those who suggest we would lose choice under a single-payer system, we ask, choice of what? Choice of insurance plan—yes. Choice of doctor and hospital—no. A high-quality system is not one in which our patients choose their insurance plan but one in which they choose their doctor. Single-payer is the only reform option that actually expands choice. Bringing private insurance or a public option to more Americans retains limited provider networks and restricted choice.

For those who say single-payer is socialized medicine and worry that government bureaucrats will suddenly begin making health care decisions, they need to remember that single-payer is publicly financed but privately delivered. Medical decisions should be made by patients and doctors.

Given the magnitude of these difficult economic times, including a projected $1.8 trillion federal deficit for 2009 and rising unemployment, it is high time to reconsider the most fiscally conservative and financially sustainable option for reform—a single-payer system.

Ann Settgast and Elizabeth Frost are primary care physicians practicing in the Twin Cities. They co-chair the Minnesota chapter of Physicians for a National Health Program.

Mercer – Employers hold line on costs?

In a tough year, employers hold the line on health benefit cost increases

Mercer
November 18, 2009

* Employers hold cost growth to 5.5 percent in 2009, the lowest increase in a decade

* Growth in use of wellness or health management programs accelerates as large employers look to hold down cost without cost-shifting

* Small employers added consumer-directed health plans in 2009, helping to push up enrollment in these high-deductible plans to 9 percent of all covered employees

However, benefit cost growth outpaced inflation in 2009 by a widening margin.

The ongoing workforce health management (or “wellness”) movement gained considerable momentum in 2009, as offerings of virtually every type of health management program – from health risk assessments to disease management programs to behavior modification programs – rose significantly. While not conclusive, survey results suggest these programs are having an impact: Medical plan cost increases in 2009 were about two percentage points lower, on average, among employers with extensive health management programs than among those employers offering limited or no health management programs. And nearly three-fourths of employers that have measured the return on their investment in health management programs say they are satisfied with the year-over-year savings, lower utilization rates or improved health risks.  However, only about a third of all large employers have formally measured ROI.
 
“A lot more employers were willing to place their bet on health management in 2009,” said Linda Havlin, a worldwide partner and Mercer’s global health and benefits intellectual capital leader. “But they will want to see continual gains. Measuring health management ROI is inherently challenging and continues to evolve.”

Small employers held down cost increases by sharply raising deductibles for in-network PPO services. Consistent with past years, employers kept premium contributions relatively stable, choosing to keep the cost of coverage affordable while shifting the burden to those who use health services.

While growth in CDHP offerings in 2009 was evident only among small employers, the plans are still more common among larger employers: CDHPs are offered by 20 percent of employers with 500 or more employees, and 43 percent of those with 20,000 or more employees.

http://www.mercer.com/summary.htm?idContent=1364345

Comment:

By Don McCanne, MD

In their just released 2009 report on employer-sponsored health benefit programs Mercer seems to be celebrating the fact that this year employers have held the line on benefit cost increases. Is their optimism warranted?

Overall, the cost growth for 2009 is 5.5 percent, the lowest increase in a decade. However that increase outpaced inflation by a widening margin. The gap means that health care continues to consume an increasing percentage of wages, whether paid by the employee directly or through forgone wage increases.

Mercer cites two mechanisms for slowing cost increases: 1) small employers simply shifted more costs to the employees by raising deductibles, and 2) larger employers expanded their wellness and health management programs.

Since high deductible plans have lower premiums, small employers were able to avoid the full increases in health care costs, but their employees were further burdened by greater out-of-pocket expenses. Many large employers already offer high deductible plans and have been benefiting from this cost shift to the employee. Although Mercer frames this as being beneficial since it slows the increase in employers’ costs, it is detrimental for their employees since it expands the incidence of underinsurance.

Mercer suggests that wellness programs may have been the primary reason for the slowing of costs for large employers, but is that a valid conclusion? Most wellness interventions would demonstrate benefits in the out-lying years, but the early impact would be negligible on changing the need for health care services. Although many employers express satisfaction with these programs, most of them have not made any effort to measure the actual impact.

There is a far more logical explanation for the two percentage point advantage that they report in their health care costs. The health insurance underwriting cycle is a pattern of repeated larger gains and smaller gains that are due in part to periods of aggressive marketing by the insurers to gain greater market share. In those aggressive years, lower returns are the trade off. Once market share is established, premiums are pushed up to provide greater profit margins.

Insurers and plan administrators have found a new niche in wellness services. They are heavily marketing these products now and so are expected to be in the trough of the underwriting cycle. Once the market for these products stabilizes, we can expect the cycle to move into a peak, catching employers off guard when their health benefit program costs sharply increase in spite of having instituted these wellness programs. It is likely that the response of the employers will be to change their benefit designs which inevitably will result in even more underinsurance.

The point is that health care costs are continuing to increase at intolerable rates and that the purported slowing noted in this report is merely an artifact of the underwriting cycle combined with an expansion of underinsurance.

In an improved Medicare for all program underinsurance and underwriting cycles wouldn’t even exist, but Congress is insisting that we build on our current dysfunctional financing system, in spite of its perversities. How smart is that?

Conyers Derides White House Strategy on Health Care

By KATHARINE Q. SEELYE
Prescriptions Blog
New York Times
November 19, 2009

Representative John Conyers Jr., Democrat of Michigan and the second-most senior member of the House, today ripped into President Obama and Rahm Emanuel, the White House chief of staff, accusing them of “bowing down” to “nutty right-wing” proposals just to get a health care bill passed.

“I’m getting tired of saving Obama’s can in the White House,” Mr. Conyers, one of the most liberal members of the House and chairman of the Judiciary Committee, said in a radio interview on “The Bill Press Show.”

“I mean, he only won by five votes in the House, and this bill wasn’t anything to write home about,” Mr. Conyers said of the health care legislation that the House passed on Nov. 7. “The public option is only available — which is the only way you manage cost and give some competition to 1,300 other health insurance companies — the only way he could have got that through is that progressives held their nose and voted for the plan anyway.”

Mr. Conyers also complained that the idea of a single-payer system had been “taken off the table from the beginning.”

Asked if the president had shown enough leadership on health care, Mr. Conyers said, “Of course not, of course not.”

“You know,” he added, “holding hands out, and beer on Friday nights in the White House, and bowing down to every nutty right-wing proposal about health care, and saying on occasion that public options aren’t all that important, is doing a disservice to the Barack Obama that I first met, who was an ardent single-payer enthusiast himself.”

In the interview, Mr. Press said Democrats were saying that they feared the president would “just sign anything.”

Mr. Conyers agreed, saying “that’s essentially what Rahm Emanuel has said,” adding that he was tired of his approach of “give us anything and we will declare victory.”

“But look,” Mr. Conyers concluded, “the bill doesn’t go into effect for three years. Many of the people that we are trying to help will be dead by then.”

When the interview was over, Mr. Press said to his audience, “He’s in rare form this morning.”

http://prescriptions.blogs.nytimes.com/2009/11/19/conyers-derides-white-house-health-care-strategy/

Mercer – Employers hold line on costs?

In a tough year, employers hold the line on health benefit cost increases

Mercer
November 18, 2009
* Employers hold cost growth to 5.5 percent in 2009, the lowest increase in a decade
* Growth in use of wellness or health management programs accelerates as large employers look to hold down cost without cost-shifting
* Small employers added consumer-directed health plans in 2009, helping to push up enrollment in these high-deductible plans to 9 percent of all covered employees
However, benefit cost growth outpaced inflation in 2009 by a widening margin.
The ongoing workforce health management (or “wellness”) movement gained considerable momentum in 2009, as offerings of virtually every type of health management program – from health risk assessments to disease management programs to behavior modification programs – rose significantly. While not conclusive, survey results suggest these programs are having an impact: Medical plan cost increases in 2009 were about two percentage points lower, on average, among employers with extensive health management programs than among those employers offering limited or no health management programs. And nearly three-fourths of employers that have measured the return on their investment in health management programs say they are satisfied with the year-over-year savings, lower utilization rates or improved health risks. However, only about a third of all large employers have formally measured ROI.
“A lot more employers were willing to place their bet on health management in 2009,” said Linda Havlin, a worldwide partner and Mercer’s global health and benefits intellectual capital leader. “But they will want to see continual gains. Measuring health management ROI is inherently challenging and continues to evolve.”
Small employers held down cost increases by sharply raising deductibles for in-network PPO services. Consistent with past years, employers kept premium contributions relatively stable, choosing to keep the cost of coverage affordable while shifting the burden to those who use health services.
While growth in CDHP offerings in 2009 was evident only among small employers, the plans are still more common among larger employers: CDHPs are offered by 20 percent of employers with 500 or more employees, and 43 percent of those with 20,000 or more employees.
http://www.mercer.com/summary.htm?idContent=1364345

In their just released 2009 report on employer-sponsored health benefit programs Mercer seems to be celebrating the fact that this year employers have held the line on benefit cost increases. Is their optimism warranted?
Overall, the cost growth for 2009 is 5.5 percent, the lowest increase in a decade. However that increase outpaced inflation by a widening margin. The gap means that health care continues to consume an increasing percentage of wages, whether paid by the employee directly or through forgone wage increases.
Mercer cites two mechanisms for slowing cost increases: 1) small employers simply shifted more costs to the employees by raising deductibles, and 2) larger employers expanded their wellness and health management programs.
Since high deductible plans have lower premiums, small employers were able to avoid the full increases in health care costs, but their employees were further burdened by greater out-of-pocket expenses. Many large employers already offer high deductible plans and have been benefiting from this cost shift to the employee. Although Mercer frames this as being beneficial since it slows the increase in employers’ costs, it is detrimental for their employees since it expands the incidence of underinsurance.
Mercer suggests that wellness programs may have been the primary reason for the slowing of costs for large employers, but is that a valid conclusion? Most wellness interventions would demonstrate benefits in the out-lying years, but the early impact would be negligible on changing the need for health care services. Although many employers express satisfaction with these programs, most of them have not made any effort to measure the actual impact.
There is a far more logical explanation for the two percentage point advantage that they report in their health care costs. The health insurance underwriting cycle is a pattern of repeated larger gains and smaller gains that are due in part to periods of aggressive marketing by the insurers to gain greater market share. In those aggressive years, lower returns are the trade off. Once market share is established, premiums are pushed up to provide greater profit margins.
Insurers and plan administrators have found a new niche in wellness services. They are heavily marketing these products now and so are expected to be in the trough of the underwriting cycle. Once the market for these products stabilizes, we can expect the cycle to move into a peak, catching employers off guard when their health benefit program costs sharply increase in spite of having instituted these wellness programs. It is likely that the response of the employers will be to change their benefit designs which inevitably will result in even more underinsurance.
The point is that health care costs are continuing to increase at intolerable rates and that the purported slowing noted in this report is merely an artifact of the underwriting cycle combined with an expansion of underinsurance.
In an improved Medicare for all program underinsurance and underwriting cycles wouldn’t even exist, but Congress is insisting that we build on our current dysfunctional financing system, in spite of its perversities. How smart is that?

If Mass. Small Businesses Want a Better Health Care Deal, They Should Back Single-Payer Health Care

By Jason Pramas
OMB Editorial
Open Media Boston
Nov. 15, 2009

It was strange to read today’s Boston Globe article about the response of some Massachusetts small businesses to the premium increases that the health insurance companies are proposing for next year. Though the average increase for small businesses will be 10 percent – an already ridiculously high figure – some of these businesses will see their premiums go up by much more than that. Especially clients of Blue Cross/Blue Shield – some of whom will see their premiums go up by nearly 50 percent. To progressives, it is hardly shocking news that health insurance companies are much like cats. In that the answer to the eternal question “why do cats lick themselves?” is more than passingly similar to the answer to the question “why do health insurance raise their premiums every year?” … because they can. At the moment, the MA Division of Insurance does not appear inclined to use its regulatory powers against health insurers that are gouging the public at every turn. So although Gov. Deval Patrick has asked the Division of Insurance to hold informational hearings on the small business premium increases, they probably won’t amount to much of anything in the way of reform. My concern here is not for small business owners, although I’m not unsympathetic to small businesses. I’m far more concerned about their employees – many of whom do not get health care benefits as it is. Except through the Mass. Health Connector system that forces all but the poorest individuals to buy iffy health care plans from the very same health insurers that are allowed to continue reaping huge profits even as the ranks of the jobless skyrocket. For those employees of small businesses that do get health care benefits through their employer, they will often be pushed from semi-decent private health care plans to worse plans in the Connector system.

This begs the question, “why do small businesses in Massachusetts continue to refuse to back single-payer health care at the national level?” Physicians for a National Health Program and other advocates have long pointed out that with an employer tax contribution of 7 percent of wages together with an employee contribution of 2 percent of wages that the federal government could run a program that would cover every single U.S. resident from cradle-to-grave – and provide top-flight medical, dental and vision coverage to all. For small businesses that provide health care benefits, such a plan would generally cost less than what they currently pay out to health insurers. For small businesses that don’t provide health care benefits, it would allow them to cover their employees for much less than existing plans cost. And for their employees, annual out-of-pocket costs would be much more reasonable then they are now.

Instead of supporting this logical solution to their health care cost woes, the small businesses quoted in the Globe piece mostly point fingers at the always rising fees charged to insurers by hospitals and doctors. Typically, they ignore the fact that health costs are going up for reasons that have much more to do with the existence of a private health care market then anything else. For example, with a national public health care system there would be no need for huge advertising budgets for hospitals, doctors groups, or insurers. Extra layers of bureaucracy currently needed for health care providers just to deal with health insurers can be eliminated. Chronic conditions will be better treated by front-line medical providers – reducing the need for people to rely on expensive critical care after years of having to neglect their health to save money. There would be less need for redundant expensive diagnostic equipment to be purchased by every hospital and clinic. Most importantly, doctors, hospitals and drug companies would be forced to negotiate reasonable rates with the national health care system – which would probably go very far towards keeping costs down.

So given all that, it makes even less sense that small business owners don’t start agitating along with other constituencies to demand a real universal national health plan rather than watch their health costs continue to go up until they cut the relatively meager benefits some of their workers currently enjoy.

I think it would behoove small business organizations to think hard about this issue. Because, even as I write, a really bad national plan that leaves giant insurance companies firmly in the drivers seat of American health are policy has been pushed through the House of Representatives and is on its way to the Senate for a vote – where it very well may get shot down. If it gets passed, it’s bad, because then all Americans will be forced to participate in a larger version of the Massachusetts experiment in a fake “universal” health care plan that seems to be just a way to force more people into buying inadequate private insurance. If it doesn’t get passed, that’s probably the better outcome. Although not really, because Americans will still lack a national health care system, and it will be another long wait before political momentum for reform builds up again. The entry of the small business sector into the debate on the side of single-payer health care – which is not even on the table nationwide – could be a real game-changer. Such a move would benefit working people in a big way. But it would also benefit the small business owners. Which would be an acceptable outcome from the perspective of this publication.

[Then we’d want to get small businesses to agree to stronger labor legislation. Though that fight would likely have to wait for another day.]

Jason Pramas is Editor/Publisher of Open Media Boston

Kaiser Issue Brief: Access to Abortion Coverage and Health Reform

Kaiser Family Foundation
Wednesday, November 18, 2009

A new issue brief from the Kaiser Family Foundation examines health reform and access to coverage for abortion services, a subject that has become one of the most discussed elements of the reform debate. The paper explains current law regarding abortion coverage, discusses the treatment of coverage for abortion services under the major health reform bills under consideration in Congress, and explores the possible impact of the House-passed legislation on public and private coverage for abortion services.

Under the House bill, 94% of the 12.4 million uninsured women of reproductive age have incomes that would likely qualify them for federal assistance in obtaining health coverage through Medicaid or the new health insurance exchange, and thus would likely be affected by the abortion coverage provisions. The brief breaks down these estimates state-by state, and also provides background on abortion in the U.S. and coverage of abortion services under current law and practice.

http://www.kff.org/healthreform/8021.cfm

Leading economists' advice to President Obama on controlling costs

Letter to President Barack Obama urging four elements be included in health reform legislation to control costs

By Alan M. Garber, Victor R. Fuchs, Kenneth J, Arrow

November 17, 2009

President Barack Obama
The White House
Washington, DC 20500
 
Dear Mr. President,

As the full Senate prepares to debate comprehensive health reform legislation, we write as economists to stress the potential benefits of health reform for our nation’s fiscal health, and the importance of those features of the bill that can help keep health care costs under control. Four elements of the legislation are critical: (1) deficit neutrality, (2) an excise tax on high-cost insurance plans, (3) an independent Medicare commission, and (4) delivery system reforms.

Including these four elements in the reform legislation – as the Senate Finance Committee bill does and as we hope the bill brought to the Senate floor will do – will reduce long-term deficits, improve the quality of care, and put the nation on a firm fiscal footing. It will help transform the health care system from delivering too much care, to a system that consistently delivers higher-quality, high-value care. The projected increases in federal budget deficits, along with concerns about the value of the health care that Americans receive, make it particularly important to enact fiscally responsible and quality-improving health reform now.

In developing our analysis and recommendation, we received input and suggestions from Administration officials, including the Office of Management and Budget and others, as well as from economists who disagree with the Administration’s views.

The four key measures are:

* Deficit neutrality

Fiscally responsible health reform requires budget neutrality or deficit reduction over the coming years. The Congressional Budget Office (CBO) must project that the bill be at least deficit neutral over the 10-year budget window, and deficit reducing thereafter. Covering tens of millions of currently uninsured people will increase spending, but the draft health reform legislation contains offsetting savings sufficient to cover those costs and the seeds of further reforms that will lower the growth of spending. Deficit neutrality over the first decade means that, even during the start-up period, the legislation will not add to our deficits. After the first decade, the legislation should reduce deficits.

* Excise tax on high-cost insurance plans

The Senate Finance Committee’s bill includes an excise tax on high-cost health insurance plans. Like any tax, the excise tax will raise federal revenues, but it has additional advantages for the health care system that are essential. The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committee’s proposal suggests that the excise tax on high-cost insurance plans would increase workers’ take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers.

* Medicare Commission

Rising Medicare expenditures pose one of the most difficult fiscal challenges facing the federal government. Medicare is technically complex and the benefits it underwrites are of critical importance to tens of millions of seniors and Americans with disabilities. We believe that a commission of medical experts should be empowered to suggest changes in Medicare to improve the quality and value of services. In particular, such a commission should be charged with developing and suggesting to Congress plans to extend the solvency of the Medicare program and improve the quality of care delivered to Medicare beneficiaries. Creating such a commission will make sure that reforming the health care system does not end with this legislation, but continues in future decades, with new efforts to improve quality and contain costs.

* Delivery system reforms

Successful reform should improve the care that individual patients receive by rewarding health care professionals for providing better care, not just more care. Studies have shown that hundreds of billions of dollars are spent on care that does nothing to improve health outcomes. This is largely a consequence of the distorted incentives associated with paying for volume rather than quality. Health care reform must take steps to change the way providers care for patients, to reward care that is better coordinated and meets the needs of each patient. In particular, the legislation should include additional funding for research into what tests and treatments work and which ones do not. It must also provide incentives for physicians and hospitals to focus on quality, such as bundled payments and accountable care organizations, as well as penalties for unnecessary re-admissions and health-facility acquired infections. Aggressive pilot projects should be rapidly introduced and evaluated, with the best strategies adopted quickly throughout the health care system.

As economists, we believe that it is important to enact health reform, and it is essential that health reform include these four features that will lower health care costs and help reduce deficits over the long term. Reform legislation that embodies these four elements can go a long way toward delivering better health care, and better value, to Americans.

Sincerely,

Dr. Henry Aaron, The Brookings Institution
Dr. Kenneth Arrow, Stanford University, Nobel Laureate in Economics
Dr. Alan Auerbach, University of California, Berkeley
Dr. Katherine Baicker, Harvard University
Dr. Alan Blinder, Princeton University
Dr. David Cutler, Harvard University
Dr. Angus Deaton, Princeton University
Dr. J. Bradford DeLong, University of California, Berkeley
Dr. Peter Diamond, Massachusetts Institute of Technology
Dr. Victor Fuchs, Stanford University
Dr. Alan Garber, Stanford University
Dr. Jonathan Gruber, Massachusetts Institute of Technology
Dr. Mark McClellan, The Brookings Institution
Dr. Daniel McFadden, University of California, Berkeley, Nobel Laureate in Economics
Dr. David Meltzer, University of Chicago
Dr. Joseph Newhouse, Harvard University
Dr. Uwe Reinhardt, Princeton University
Dr. Robert Reischauer, The Urban Institute
Dr. Alice Rivlin, The Brookings Institution
Dr. Meredith Rosenthal, Harvard University
Dr. John Shoven, Stanford University
Dr. Jonathan Skinner, Dartmouth College
Dr. Laura D’Andrea Tyson, University of California, Berkeley

Letter:
http://iis-db.stanford.edu/pubs/22739/Economist_Letter_to_the_President.pdf

The source of the letter:
http://healthpolicy.stanford.edu/publications/letter_to_president_barack_obama_urging_four_elements_be_included_in_health_reform_legislation_to_control_costs/

OECD Tax Database (Table 0.1):
http://www.oecd.org/document/60/0,2340,en_2649_34533_1942460_1_1_1_1,00.html

Bundled payments and ACOs:
https://pnhp.org/news/2009/november/rand-and-br-on-savings-through-bundled-payments

Comme
nt:

By Don McCanne, MD

For socially conscious health care reform advocates, the primary goal of reform is to see that every individual receives the health care that he or she needs, But what has really driven the reform process has been the concern over the very high costs of health care that have challenged individuals, employers and the stewards of our government health programs.

In this late phase of the reform process many have expressed doubts over the adequacy of the various policies in the reform proposal that allegedly are designed to control health care costs well into the future. In response, twenty-three of the nation’s most distinguished economists have signed on to this letter addressed to President Obama expressing support for four elements that they believe are of critical importance and should be included in the reform legislation. Let’s look closer at these four elements.

* Deficit neutrality

The economists call for budget neutrality initially, to be followed by deficit reduction. Of course they are referring only to the federal government budget and not to private sector spending. The great risk of limiting consideration to public spending is that, in the absence of effectively controlling actual health care costs, the government budget can be controlled only by shifting the costs to the private sector. Individuals and businesses certainly do not want to see an increase in their health care spending, especially while the government is reducing its spending in the later phase, that of deficit reduction.

Isolating health care spending for budget neutrality while continuing with deficits in other government programs (war, financial institution bailouts, interest on the debt, expanding our prison population, etc.) does not seem just. Appropriate use of debt is fundamental to any business, and there is no reason that reasonable debt should not be a part of the government’s management of its financial obligations to health care.

That said, our total government debt is the result of prior devious efforts to reduce revenues (i.e., taxes) in order to force the reduction in funding of government programs. With inadequate revenues and with exploding debt, deficit hawks in Congress can be relied upon to underfund crucial programs such as health care, but theirs is a pathological process since they only look at spending and refuse to consider revenues.

Those who argue that taxes collected for government health care spending remove money from the economy are flat out wrong. Health care is one of the most important and beneficial components of our economy, constituting over 17 percent of our GDP (Gross Domestic Product). Those taxes are moved back into our economy.

Those who scream that we are being taxed to death need another dose of reality. The average total tax revenues of OECD nations (Organization for Economic Cooperation and Development) was 35.9 percent of GDP in 2006. For the United States, the total tax revenue was 28.0 percent of GDP, placing us near the bottom of OECD nations. (OECD Tax Database – link above)

Suppose we increased our tax revenues to the average of OECD nations, which would still be far, far short of those nations with more highly socialized systems. At 7.9 percent (35.9 average minus 28.0 U.S.) of our GDP of about $13.8 trillion, that would increase government revenues by about $1.1 trillion in a single year, ten times the amount they are considering for health care reform. Our entire federal spending is under $3 trillion. We could eliminate entirely the deficits and provide surpluses while keeping tax revenues at well below the OECD average, if only the deficit hawks would look at the revenue side of the ledger.

* Excise tax on high-cost insurance plans

Why would any health insurance plans have very high premiums? One reason is that insurers use medical underwriting to assess high premiums for individuals with preexisting disorders. It would be unfair to tax those premiums for an individual with other burdens, but with adequate regulatory reform medical underwriting should be eliminated anyway.

The more common reason for high premiums is that the plan covers other services and products such as dental care, eye care, maternity benefits, mental health services, and pharmaceuticals. Applying an excise tax to these premiums would result in eliminating such benefits from the plans and shifting these expenses to the individual in the form of greater out-of-pocket spending. The proposals under consideration place a cap on out-of-pocket expenses for covered services, but that cap is unaffordable for many, and these expenses would not apply to the cap. Thus they would impose an even greater financial burden.

Since the excise tax would discourage access to these important health care services, it should be rejected as the flawed policy concept that it is.

* Medicare Commission

Although the Medicare Commission purportedly would be to improve quality and value, its primary purpose would be to limit spending within the Medicare program. Medicare has already served as a leader in innovations to reduce health care spending, with the private insurance industry following. In fact, many providers believe that Medicare has been too aggressive, often resulting in lower reimbursement rates than in the private sector. Granting the Commission more power to use newer innovations to further reduce spending will inevitably increase the animosity held towards Medicare by the providers. A decline in willingness to accept Medicare beneficiaries could further impair access.

This is not to say that the concept of a commission is a bad idea. If the commission worked with the entire health care delivery system in applying potentially beneficial innovations, higher quality and greater value are possible. If the commission became too aggressive, the push-back by providers and their patients would moderate their excesses.

If the power of the Medicare Commission were limited only to Medicare, then there is a potential that cost-cutting aggressiveness might threaten to convert Medicare into a quasi-welfare program not unlike Medicaid, a transformation that would not please our Medicare beneficiaries. It is more likely that the Commission simply would be enmeshed in studies of relatively ineffectual measures that would have little net impact on costs.

We would need a universal Medicare for all program for the Commission to have a real impact that would be both beneficial and cost saving.

* Delivery system reforms

These economists recommend that we reward health professionals for providing better care. The problem is that we don’t know how to do that. They recommend funding research into what tests and treatments work and which ones do not, as if that isn’t what research has been all about anyway. Maybe it would be helpful to directly compare expensive patent drugs to generics, but the overall spending impact will be modest since this year’s patented drugs are next year’s generics.

They also recommend bundled payments, accountable care organizations, plus penalties for re-admissions, hospital acquired infections and other PACs (potentially avoidable costs). In my message two days ago I already discussed the reasons why these measures cannot be relied upon to reduce health care costs (Bundled payments and ACOs – link above).

Is this really the best that these noted economists can come up with? They have made the same mistake as the politicians. Their perception of reform is to build on our existing dysfunctional financing system (an egregiously flawed concept that you would think our leading economists would understand).

If we had an improved Medicare for all we could have 1) deficit neutrality through global budgeting, 2) rational tax policies that are equitable, 3) public administration using the guidance of commissions as appropriate, and 4) our own beneficent monopsony t
hat can realign incentives to promote the delivery system reform that we need. And, oh yes, every single person would be included. It doesn’t take an economist to understand that.

Leading economists’ advice to President Obama on controlling costs

Letter to President Barack Obama urging four elements be included in health reform legislation to control costs

By Alan M. Garber, Victor R. Fuchs, Kenneth J, Arrow

November 17, 2009

President Barack Obama
The White House
Washington, DC 20500
 
Dear Mr. President,

As the full Senate prepares to debate comprehensive health reform legislation, we write as economists to stress the potential benefits of health reform for our nation’s fiscal health, and the importance of those features of the bill that can help keep health care costs under control. Four elements of the legislation are critical: (1) deficit neutrality, (2) an excise tax on high-cost insurance plans, (3) an independent Medicare commission, and (4) delivery system reforms.

Including these four elements in the reform legislation – as the Senate Finance Committee bill does and as we hope the bill brought to the Senate floor will do – will reduce long-term deficits, improve the quality of care, and put the nation on a firm fiscal footing. It will help transform the health care system from delivering too much care, to a system that consistently delivers higher-quality, high-value care. The projected increases in federal budget deficits, along with concerns about the value of the health care that Americans receive, make it particularly important to enact fiscally responsible and quality-improving health reform now.

In developing our analysis and recommendation, we received input and suggestions from Administration officials, including the Office of Management and Budget and others, as well as from economists who disagree with the Administration’s views.

The four key measures are:

* Deficit neutrality

Fiscally responsible health reform requires budget neutrality or deficit reduction over the coming years. The Congressional Budget Office (CBO) must project that the bill be at least deficit neutral over the 10-year budget window, and deficit reducing thereafter. Covering tens of millions of currently uninsured people will increase spending, but the draft health reform legislation contains offsetting savings sufficient to cover those costs and the seeds of further reforms that will lower the growth of spending. Deficit neutrality over the first decade means that, even during the start-up period, the legislation will not add to our deficits. After the first decade, the legislation should reduce deficits.

* Excise tax on high-cost insurance plans

The Senate Finance Committee’s bill includes an excise tax on high-cost health insurance plans. Like any tax, the excise tax will raise federal revenues, but it has additional advantages for the health care system that are essential. The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committee’s proposal suggests that the excise tax on high-cost insurance plans would increase workers’ take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers.

* Medicare Commission

Rising Medicare expenditures pose one of the most difficult fiscal challenges facing the federal government. Medicare is technically complex and the benefits it underwrites are of critical importance to tens of millions of seniors and Americans with disabilities. We believe that a commission of medical experts should be empowered to suggest changes in Medicare to improve the quality and value of services. In particular, such a commission should be charged with developing and suggesting to Congress plans to extend the solvency of the Medicare program and improve the quality of care delivered to Medicare beneficiaries. Creating such a commission will make sure that reforming the health care system does not end with this legislation, but continues in future decades, with new efforts to improve quality and contain costs.

* Delivery system reforms

Successful reform should improve the care that individual patients receive by rewarding health care professionals for providing better care, not just more care. Studies have shown that hundreds of billions of dollars are spent on care that does nothing to improve health outcomes. This is largely a consequence of the distorted incentives associated with paying for volume rather than quality. Health care reform must take steps to change the way providers care for patients, to reward care that is better coordinated and meets the needs of each patient. In particular, the legislation should include additional funding for research into what tests and treatments work and which ones do not. It must also provide incentives for physicians and hospitals to focus on quality, such as bundled payments and accountable care organizations, as well as penalties for unnecessary re-admissions and health-facility acquired infections. Aggressive pilot projects should be rapidly introduced and evaluated, with the best strategies adopted quickly throughout the health care system.

As economists, we believe that it is important to enact health reform, and it is essential that health reform include these four features that will lower health care costs and help reduce deficits over the long term. Reform legislation that embodies these four elements can go a long way toward delivering better health care, and better value, to Americans.

Sincerely,

Dr. Henry Aaron, The Brookings Institution
Dr. Kenneth Arrow, Stanford University, Nobel Laureate in Economics
Dr. Alan Auerbach, University of California, Berkeley
Dr. Katherine Baicker, Harvard University
Dr. Alan Blinder, Princeton University
Dr. David Cutler, Harvard University
Dr. Angus Deaton, Princeton University
Dr. J. Bradford DeLong, University of California, Berkeley
Dr. Peter Diamond, Massachusetts Institute of Technology
Dr. Victor Fuchs, Stanford University
Dr. Alan Garber, Stanford University
Dr. Jonathan Gruber, Massachusetts Institute of Technology
Dr. Mark McClellan, The Brookings Institution
Dr. Daniel McFadden, University of California, Berkeley, Nobel Laureate in Economics
Dr. David Meltzer, University of Chicago
Dr. Joseph Newhouse, Harvard University
Dr. Uwe Reinhardt, Princeton University
Dr. Robert Reischauer, The Urban Institute
Dr. Alice Rivlin, The Brookings Institution
Dr. Meredith Rosenthal, Harvard University
Dr. John Shoven, Stanford University
Dr. Jonathan Skinner, Dartmouth College
Dr. Laura D’Andrea Tyson, University of California, Berkeley

Letter:
http://iis-db.stanford.edu/pubs/22739/Economist_Letter_to_the_President.pdf

The source of the letter:
http://healthpolicy.stanford.edu/publications/letter_to_president_barack_obama_urging_four_elements_be_included_in_health_reform_legislation_to_control_costs/

OECD Tax Database (Table 0.1):
http://www.oecd.org/document/60/0,2340,en_2649_34533_1942460_1_1_1_1,00.html

Bundled payments and ACOs:
https://www.pnhp.org/news/2009/november/rand-and-br-on-savings-through-bundled-payments

Comment:

By Don McCanne, MD

For socially conscious health care reform advocates, the primary goal of reform is to see that every individual receives the health care that he or she needs, But what has really driven the reform process has been the concern over the very high costs of health care that have challenged individuals, employers and the stewards of our government health programs.

In this late phase of the reform process many have expressed doubts over the adequacy of the various policies in the reform proposal that allegedly are designed to control health care costs well into the future. In response, twenty-three of the nation’s most distinguished economists have signed on to this letter addressed to President Obama expressing support for four elements that they believe are of critical importance and should be included in the reform legislation. Let’s look closer at these four elements.

* Deficit neutrality

The economists call for budget neutrality initially, to be followed by deficit reduction. Of course they are referring only to the federal government budget and not to private sector spending. The great risk of limiting consideration to public spending is that, in the absence of effectively controlling actual health care costs, the government budget can be controlled only by shifting the costs to the private sector. Individuals and businesses certainly do not want to see an increase in their health care spending, especially while the government is reducing its spending in the later phase, that of deficit reduction.

Isolating health care spending for budget neutrality while continuing with deficits in other government programs (war, financial institution bailouts, interest on the debt, expanding our prison population, etc.) does not seem just. Appropriate use of debt is fundamental to any business, and there is no reason that reasonable debt should not be a part of the government’s management of its financial obligations to health care.

That said, our total government debt is the result of prior devious efforts to reduce revenues (i.e., taxes) in order to force the reduction in funding of government programs. With inadequate revenues and with exploding debt, deficit hawks in Congress can be relied upon to underfund crucial programs such as health care, but theirs is a pathological process since they only look at spending and refuse to consider revenues.

Those who argue that taxes collected for government health care spending remove money from the economy are flat out wrong. Health care is one of the most important and beneficial components of our economy, constituting over 17 percent of our GDP (Gross Domestic Product). Those taxes are moved back into our economy.

Those who scream that we are being taxed to death need another dose of reality. The average total tax revenues of OECD nations (Organization for Economic Cooperation and Development) was 35.9 percent of GDP in 2006. For the United States, the total tax revenue was 28.0 percent of GDP, placing us near the bottom of OECD nations. (OECD Tax Database – link above)

Suppose we increased our tax revenues to the average of OECD nations, which would still be far, far short of those nations with more highly socialized systems. At 7.9 percent (35.9 average minus 28.0 U.S.) of our GDP of about $13.8 trillion, that would increase government revenues by about $1.1 trillion in a single year, ten times the amount they are considering for health care reform. Our entire federal spending is under $3 trillion. We could eliminate entirely the deficits and provide surpluses while keeping tax revenues at well below the OECD average, if only the deficit hawks would look at the revenue side of the ledger.

* Excise tax on high-cost insurance plans

Why would any health insurance plans have very high premiums? One reason is that insurers use medical underwriting to assess high premiums for individuals with preexisting disorders. It would be unfair to tax those premiums for an individual with other burdens, but with adequate regulatory reform medical underwriting should be eliminated anyway.

The more common reason for high premiums is that the plan covers other services and products such as dental care, eye care, maternity benefits, mental health services, and pharmaceuticals. Applying an excise tax to these premiums would result in eliminating such benefits from the plans and shifting these expenses to the individual in the form of greater out-of-pocket spending. The proposals under consideration place a cap on out-of-pocket expenses for covered services, but that cap is unaffordable for many, and these expenses would not apply to the cap. Thus they would impose an even greater financial burden.

Since the excise tax would discourage access to these important health care services, it should be rejected as the flawed policy concept that it is.

* Medicare Commission

Although the Medicare Commission purportedly would be to improve quality and value, its primary purpose would be to limit spending within the Medicare program. Medicare has already served as a leader in innovations to reduce health care spending, with the private insurance industry following. In fact, many providers believe that Medicare has been too aggressive, often resulting in lower reimbursement rates than in the private sector. Granting the Commission more power to use newer innovations to further reduce spending will inevitably increase the animosity held towards Medicare by the providers. A decline in willingness to accept Medicare beneficiaries could further impair access.

This is not to say that the concept of a commission is a bad idea. If the commission worked with the entire health care delivery system in applying potentially beneficial innovations, higher quality and greater value are possible. If the commission became too aggressive, the push-back by providers and their patients would moderate their excesses.

If the power of the Medicare Commission were limited only to Medicare, then there is a potential that cost-cutting aggressiveness might threaten to convert Medicare into a quasi-welfare program not unlike Medicaid, a transformation that would not please our Medicare beneficiaries. It is more likely that the Commission simply would be enmeshed in studies of relatively ineffectual measures that would have little net impact on costs.

We would need a universal Medicare for all program for the Commission to have a real impact that would be both beneficial and cost saving.

* Delivery system reforms

These economists recommend that we reward health professionals for providing better care. The problem is that we don’t know how to do that. They recommend funding research into what tests and treatments work and which ones do not, as if that isn’t what research has been all about anyway. Maybe it would be helpful to directly compare expensive patent drugs to generics, but the overall spending impact will be modest since this year’s patented drugs are next year’s generics.

They also recommend bundled payments, accountable care organizations, plus penalties for re-admissions, hospital acquired infections and other PACs (potentially avoidable costs). In my message two days ago I already discussed the reasons why these measures cannot be relied upon to reduce health care costs (Bundled payments and ACOs – link above).

Is this really the best that these noted economists can come up with? They have made the same mistake as the politicians. Their perception of reform is to build on our existing dysfunctional financing system (an egregiously flawed concept that you would think our leading economists would understand).

If we had an improved Medicare for all we could have 1) deficit neutrality through global budgeting, 2) rational tax policies that are equitable, 3) public administration using the guidance of commissions as appropriate, and 4) our own beneficent monopsony that can realign incentives to promote the delivery system reform that we need. And, oh yes, every single person would be included. It doesn’t take an economist to understand that.

Leading economists' advice to President Obama on controlling costs

Letter to President Barack Obama urging four elements be included in health reform legislation to control costs

By Alan M. Garber, Victor R. Fuchs, Kenneth J, Arrow
November 17, 2009
President Barack Obama
The White House
Washington, DC 20500
Dear Mr. President,
As the full Senate prepares to debate comprehensive health reform legislation, we write as economists to stress the potential benefits of health reform for our nation’s fiscal health, and the importance of those features of the bill that can help keep health care costs under control. Four elements of the legislation are critical: (1) deficit neutrality, (2) an excise tax on high-cost insurance plans, (3) an independent Medicare commission, and (4) delivery system reforms.
Including these four elements in the reform legislation – as the Senate Finance Committee bill does and as we hope the bill brought to the Senate floor will do – will reduce long-term deficits, improve the quality of care, and put the nation on a firm fiscal footing. It will help transform the health care system from delivering too much care, to a system that consistently delivers higher-quality, high-value care. The projected increases in federal budget deficits, along with concerns about the value of the health care that Americans receive, make it particularly important to enact fiscally responsible and quality-improving health reform now.
In developing our analysis and recommendation, we received input and suggestions from Administration officials, including the Office of Management and Budget and others, as well as from economists who disagree with the Administration’s views.
The four key measures are:
* Deficit neutrality
Fiscally responsible health reform requires budget neutrality or deficit reduction over the coming years. The Congressional Budget Office (CBO) must project that the bill be at least deficit neutral over the 10-year budget window, and deficit reducing thereafter. Covering tens of millions of currently uninsured people will increase spending, but the draft health reform legislation contains offsetting savings sufficient to cover those costs and the seeds of further reforms that will lower the growth of spending. Deficit neutrality over the first decade means that, even during the start-up period, the legislation will not add to our deficits. After the first decade, the legislation should reduce deficits.
* Excise tax on high-cost insurance plans
The Senate Finance Committee’s bill includes an excise tax on high-cost health insurance plans. Like any tax, the excise tax will raise federal revenues, but it has additional advantages for the health care system that are essential. The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committee’s proposal suggests that the excise tax on high-cost insurance plans would increase workers’ take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers.
* Medicare Commission
Rising Medicare expenditures pose one of the most difficult fiscal challenges facing the federal government. Medicare is technically complex and the benefits it underwrites are of critical importance to tens of millions of seniors and Americans with disabilities. We believe that a commission of medical experts should be empowered to suggest changes in Medicare to improve the quality and value of services. In particular, such a commission should be charged with developing and suggesting to Congress plans to extend the solvency of the Medicare program and improve the quality of care delivered to Medicare beneficiaries. Creating such a commission will make sure that reforming the health care system does not end with this legislation, but continues in future decades, with new efforts to improve quality and contain costs.
* Delivery system reforms
Successful reform should improve the care that individual patients receive by rewarding health care professionals for providing better care, not just more care. Studies have shown that hundreds of billions of dollars are spent on care that does nothing to improve health outcomes. This is largely a consequence of the distorted incentives associated with paying for volume rather than quality. Health care reform must take steps to change the way providers care for patients, to reward care that is better coordinated and meets the needs of each patient. In particular, the legislation should include additional funding for research into what tests and treatments work and which ones do not. It must also provide incentives for physicians and hospitals to focus on quality, such as bundled payments and accountable care organizations, as well as penalties for unnecessary re-admissions and health-facility acquired infections. Aggressive pilot projects should be rapidly introduced and evaluated, with the best strategies adopted quickly throughout the health care system.
As economists, we believe that it is important to enact health reform, and it is essential that health reform include these four features that will lower health care costs and help reduce deficits over the long term. Reform legislation that embodies these four elements can go a long way toward delivering better health care, and better value, to Americans.
Sincerely,
Dr. Henry Aaron, The Brookings Institution
Dr. Kenneth Arrow, Stanford University, Nobel Laureate in Economics
Dr. Alan Auerbach, University of California, Berkeley
Dr. Katherine Baicker, Harvard University
Dr. Alan Blinder, Princeton University
Dr. David Cutler, Harvard University
Dr. Angus Deaton, Princeton University
Dr. J. Bradford DeLong, University of California, Berkeley
Dr. Peter Diamond, Massachusetts Institute of Technology
Dr. Victor Fuchs, Stanford University
Dr. Alan Garber, Stanford University
Dr. Jonathan Gruber, Massachusetts Institute of Technology
Dr. Mark McClellan, The Brookings Institution
Dr. Daniel McFadden, University of California, Berkeley, Nobel Laureate in Economics
Dr. David Meltzer, University of Chicago
Dr. Joseph Newhouse, Harvard University
Dr. Uwe Reinhardt, Princeton University
Dr. Robert Reischauer, The Urban Institute
Dr. Alice Rivlin, The Brookings Institution
Dr. Meredith Rosenthal, Harvard University
Dr. John Shoven, Stanford University
Dr. Jonathan Skinner, Dartmouth College
Dr. Laura D’Andrea Tyson, University of California, Berkeley
Letter:
http://iis-db.stanford.edu/pubs/22739/Economist_Letter_to_the_President.pdf
The source of the letter:
http://bit.ly/13omUB
OECD Tax Database (Table 0.1):
http://www.oecd.org/document/60/0,2340,en_2649_34533_1942460_1_1_1_1,00.html
Bundled payments and ACOs:
https://pnhp.org/news/2009/november/rand-and-br-on-savings-through-bundled-payments

For socially conscious health care reform advocates, the primary goal of reform is to see that every individual receives the health care that he or she needs, But what has really driven the reform process has been the concern over the very high costs of health care that have challenged individuals, employers and the stewards of our government health programs.
In this late phase of the reform process many have expressed doubts over the adequacy of the various policies in the reform proposal that allegedly are designed to control health care costs well into the future. In response, twenty-three of the nation’s most distinguished economists have signed on to this letter addressed to President Obama expressing support for four elements that they believe are of critical importance and should be included in the reform legislation. Let’s look closer at these four elements.
* Deficit neutrality
The economists call for budget neutrality initially, to be followed by deficit reduction. Of course they are referring only to the federal government budget and not to private sector spending. The great risk of limiting consideration to public spending is that, in the absence of effectively controlling actual health care costs, the government budget can be controlled only by shifting the costs to the private sector. Individuals and businesses certainly do not want to see an increase in their health care spending, especially while the government is reducing its spending in the later phase, that of deficit reduction.
Isolating health care spending for budget neutrality while continuing with deficits in other government programs (war, financial institution bailouts, interest on the debt, expanding our prison population, etc.) does not seem just. Appropriate use of debt is fundamental to any business, and there is no reason that reasonable debt should not be a part of the government’s management of its financial obligations to health care.
That said, our total government debt is the result of prior devious efforts to reduce revenues (i.e., taxes) in order to force the reduction in funding of government programs. With inadequate revenues and with exploding debt, deficit hawks in Congress can be relied upon to underfund crucial programs such as health care, but theirs is a pathological process since they only look at spending and refuse to consider revenues.
Those who argue that taxes collected for government health care spending remove money from the economy are flat out wrong. Health care is one of the most important and beneficial components of our economy, constituting over 17 percent of our GDP (Gross Domestic Product). Those taxes are moved back into our economy.
Those who scream that we are being taxed to death need another dose of reality. The average total tax revenues of OECD nations (Organization for Economic Cooperation and Development) was 35.9 percent of GDP in 2006. For the United States, the total tax revenue was 28.0 percent of GDP, placing us near the bottom of OECD nations. (OECD Tax Database – link above)
Suppose we increased our tax revenues to the average of OECD nations, which would still be far, far short of those nations with more highly socialized systems. At 7.9 percent (35.9 average minus 28.0 U.S.) of our GDP of about $13.8 trillion, that would increase government revenues by about $1.1 trillion in a single year, ten times the amount they are considering for health care reform. Our entire federal spending is under $3 trillion. We could eliminate entirely the deficits and provide surpluses while keeping tax revenues at well below the OECD average, if only the deficit hawks would look at the revenue side of the ledger.
* Excise tax on high-cost insurance plans
Why would any health insurance plans have very high premiums? One reason is that insurers use medical underwriting to assess high premiums for individuals with preexisting disorders. It would be unfair to tax those premiums for an individual with other burdens, but with adequate regulatory reform medical underwriting should be eliminated anyway.
The more common reason for high premiums is that the plan covers other services and products such as dental care, eye care, maternity benefits, mental health services, and pharmaceuticals. Applying an excise tax to these premiums would result in eliminating such benefits from the plans and shifting these expenses to the individual in the form of greater out-of-pocket spending. The proposals under consideration place a cap on out-of-pocket expenses for covered services, but that cap is unaffordable for many, and these expenses would not apply to the cap. Thus they would impose an even greater financial burden.
Since the excise tax would discourage access to these important health care services, it should be rejected as the flawed policy concept that it is.
* Medicare Commission
Although the Medicare Commission purportedly would be to improve quality and value, its primary purpose would be to limit spending within the Medicare program. Medicare has already served as a leader in innovations to reduce health care spending, with the private insurance industry following. In fact, many providers believe that Medicare has been too aggressive, often resulting in lower reimbursement rates than in the private sector. Granting the Commission more power to use newer innovations to further reduce spending will inevitably increase the animosity held towards Medicare by the providers. A decline in willingness to accept Medicare beneficiaries could further impair access.
This is not to say that the concept of a commission is a bad idea. If the commission worked with the entire health care delivery system in applying potentially beneficial innovations, higher quality and greater value are possible. If the commission became too aggressive, the push-back by providers and their patients would moderate their excesses.
If the power of the Medicare Commission were limited only to Medicare, then there is a potential that cost-cutting aggressiveness might threaten to convert Medicare into a quasi-welfare program not unlike Medicaid, a transformation that would not please our Medicare beneficiaries. It is more likely that the Commission simply would be enmeshed in studies of relatively ineffectual measures that would have little net impact on costs.
We would need a universal Medicare for all program for the Commission to have a real impact that would be both beneficial and cost saving.
* Delivery system reforms
These economists recommend that we reward health professionals for providing better care. The problem is that we don’t know how to do that. They recommend funding research into what tests and treatments work and which ones do not, as if that isn’t what research has been all about anyway. Maybe it would be helpful to directly compare expensive patent drugs to generics, but the overall spending impact will be modest since this year’s patented drugs are next year’s generics.
They also recommend bundled payments, accountable care organizations, plus penalties for re-admissions, hospital acquired infections and other PACs (potentially avoidable costs). In my message two days ago I already discussed the reasons why these measures cannot be relied upon to reduce health care costs (Bundled payments and ACOs – link above).
Is this really the best that these noted economists can come up with? They have made the same mistake as the politicians. Their perception of reform is to build on our existing dysfunctional financing system (an egregiously flawed concept that you would think our leading economists would understand).
If we had an improved Medicare for all we could have 1) deficit neutrality through global budgeting, 2) rational tax policies that are equitable, 3) public administration using the guidance of commissions as appropriate, and 4) our own beneficent monopsony that can realign incentives to promote the delivery system reform that we need. And, oh yes, every single person would be included. It doesn’t take an economist to understand that.

Massachusetts physicians say reform in their state is no model for the nation

Nearly 200 sign ad urging single-payer health care reform

FOR IMMEDIATE RELEASE      
Nov. 17, 2009

Contact:
Rachel Nardin, M.D.
Steffie Woolhandler, M.D., M.P.H.
Mark Almberg, Physicians for a National Health Program, (312) 782-6006, mark@pnhp.org

In a half-page advertisement appearing in Wednesday’s (tomorrow’s) Boston Globe, 196 Massachusetts physicians and physicians-in-training call the state’s 2006 health reform plan “bad medicine” and warn against adopting the state’s plan nationwide. The health bill recently passed by the U.S. House of Representatives is closely modeled after the Massachusetts reform.

According to the U.S. Census Bureau, the Massachusetts reform has left hundreds of thousands uninsured. The doctors’ ad, which takes the form of a letter to their patients, warns that the state’s plan is already failing. Health costs have escalated rapidly since the reform’s implementation. According to the Boston Globe, the state’s largest insurer will hit small businesses with average premium increases of 15 percent to 18 percent as of January 1.

As an alternative to Massachusetts-style reform, the letter proposes a single-payer health care plan – Medicare for All. Such reform would cover everyone and control costs through massive savings on bureaucracy as well as improved health planning.

“Physician voices have been conspicuously absent from the national debate on health care reform,” said Dr. Rachel Nardin, a neurologist at Harvard Medical School and one of the letter’s lead signers. “This letter is a chance to let our patients know that the current plans for reform will fail to control costs or to give American families real access to the health care they need.”

Another lead signer of the letter, Dr. Steffie Woolhandler, a primary care doctor who is a professor of medicine at Harvard, noted, “This reform has left many of my patients worse off than before. Co-payments and deductibles are sky high and premiums are unaffordable. A middle-class woman who’s 56 is forced to lay out at least $4,800 for a policy so skimpy that it pays nothing until she has paid another $2,000 in deductibles. Meanwhile, the state has drained funds from safety net hospitals and clinics to fund the reform, threatening the survival of the institutions that care for the hundreds of thousands who remain uninsured.”

*******

A PDF of the ad with its 196 signers can be found here:
https://pnhp.org/docs/2009/Mass-Ad-Boston-Globe.pdf

The full text of the original letter can be found here: www.pnhp.org/ma

For detailed price quotes on insurance available under the Massachusetts reform, see http://tinyurl.com/nv9vqb

*******

Physicians for a National Health Program (www.pnhp.org) is an organization of 17,000 doctors who advocate for single-payer national health insurance. To contact a physician-spokesperson near you, visit www.pnhp.org/stateactions or call (312) 782-6006.