The story behind the Obama Administration’s most enduring—and most contested—legacy: Reforming American health care

By Barack Obama
The New Yorker, October 26, 2020, Published November 2, 2020

When I think back to those early conversations, it’s hard to deny my overconfidence. I was convinced that the logic of health-care reform was so obvious that even in the face of well-organized opposition I could rally the American people’s support.

As for the political hazards that Axe and Rahm worried about, the recession virtually guaranteed that my poll numbers were going to take a hit anyway. Being timid wouldn’t change that reality. Even if it did, passing up a chance to help millions of people just because it might hurt my reëlection prospects—well, that was exactly the kind of myopic, self-preserving behavior I’d vowed to reject.

The question was whether we could get it done. Any major health-care bill meant rejiggering a sixth of the American economy. Legislation of this scope was guaranteed to involve hundreds of pages of endlessly fussed-over amendments and regulations.

There was also the question of how to pay for the changes. To cover more people, I argued, America didn’t need to spend more money on health care; we just needed to use that money more wisely.

In other words, both the politics and the substance of health care were mind-numbingly complicated. I was going to have to explain to the American people, including those with high-quality health insurance, why and how reform could work. For this reason, I thought we’d use as open and transparent a process as possible.

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Among many progressives, the need to replace private insurance and for-profit health care with a single-payer system like Canada’s was an article of faith. Had we been starting from scratch, I would have agreed with them; the evidence from other countries showed that a single, national system—basically, Medicare for All—was a cost-effective way to deliver health care. But neither Massachusetts nor the United States was starting from scratch. Teddy, who despite his reputation as a wide-eyed liberal was ever practical, understood that trying to dismantle the existing system and replace it with an entirely new one would be both a nonstarter politically and hugely disruptive to the economy. Instead, he’d embraced the Romney proposal and helped the Governor line up the Democratic votes in the state legislature required to get it passed into law.

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The slow march toward health-care reform consumed much of the summer. As the legislation lumbered through Congress, we looked for any opportunity to help keep the process on track. The good news was that the key Democratic chairs—especially Baucus and Waxman—were working hard to craft bills that they could pass out of their respective committees before the traditional August recess. The bad news was that the more everyone dug into the details of reform, the more differences in substance and strategy emerged—not just between Democrats and Republicans but between House and Senate Democrats, between the White House and congressional Democrats, and even between members of my own team.

Politically and emotionally, I would have found it a lot more satisfying to just go after the drug and insurance companies and see if we could beat them into submission. They were wildly unpopular with voters, and for good reason. But, as a practical matter, it was hard to argue with Baucus’s more conciliatory approach. We had no way to get to sixty votes in the Senate for a major health-care bill without at least the tacit agreement of the big industry players.

By the end of June, they’d hashed out a deal, securing hundreds of billions of dollars in givebacks and broader drug discounts for seniors using Medicare. Just as important, they’d gotten a commitment from the hospitals, insurers, and drug companies to support—or at least not oppose—the emerging bill.

It was a big hurdle to clear, a case of politics as the art of the possible. But for some of the more liberal Democrats in the House, where no one had to worry about a filibuster, and among progressive advocacy groups that were still hoping to lay the groundwork for a single-payer health-care system, our compromises smacked of capitulation, a deal with the devil. More than a few constituents wrote in to ask whether I’d gone over to the dark side.

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A preliminary report by the Congressional Budget Office, the independent, professionally staffed operation charged with scoring the cost of all federal legislation, priced the initial House version of the health-care bill at an eye-popping one trillion dollars. Although the C.B.O. score would eventually come down as the bill was revised and clarified, the headlines gave opponents a handy stick with which to beat us over the head. Democrats from swing districts were now running scared, convinced that pushing forward with the bill amounted to a suicide mission. Republicans abandoned all pretense of wanting to negotiate, with members of Congress regularly echoing the Tea Party’s claim that I wanted to put Grandma to sleep.

The only upside to all this was that it helped me cure Max Baucus of his obsession with trying to placate Chuck Grassley. In a last-stab Oval Office meeting with the two of them in early September, I listened patiently as Grassley ticked off five new reasons that he still had problems with the latest version of the bill.

“Let me ask you a question, Chuck,” I said finally. “If Max took every one of your latest suggestions, could you support the bill?”

“Well . . .”

“Are there any changes—any at all—that would get us your vote?”

There was an awkward silence before Grassley looked up and met my gaze. “I guess not, Mr. President.”

I guess not.

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To overcome the possibility of a filibuster, Harry couldn’t afford to lose a single member of his sixty-person caucus. And, as had been true with the Recovery Act, this fact gave each one of those members enormous leverage to demand changes to the bill, regardless of how parochial or ill-considered their requests might be.

This wouldn’t be a situation conducive to high-minded policy considerations, which was just fine with Harry, who could maneuver, cut deals, and apply pressure like nobody else. For the next six weeks, as the consolidated bill was introduced on the Senate floor and lengthy debates commenced on procedural matters, the only action that really mattered took place behind closed doors in Harry’s office, where he met with the holdouts one by one to find out what it would take to get them to yes. Some wanted funding for well-intentioned but marginally useful pet projects. Several of the Senate’s most liberal members, who liked to rail against the outsized profits of Big Pharma and private insurers, suddenly had no problem at all with the outsized profits of medical-device manufacturers with facilities in their home states and were pushing Harry to scale back a proposed tax on the industry.

Whatever it took, Harry was game. Sometimes too game. Occasionally, he’d dig his heels in on some deal he wanted to cut, and I’d have to intervene with a call.

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For us, the slog through the Senate was a P.R. nightmare. Each time Harry’s bill was altered to mollify another senator, reporters cranked out a new round of stories about “backroom deals.” And things got markedly worse when Harry decided, with my blessing, to strip the bill of something called the “public option.”

From the very start of the health-care debate, policy wonks on the left had pushed us to modify the Massachusetts model by giving consumers the choice to buy coverage on the online “exchange,” not just from the likes of Aetna and Blue Cross Blue Shield but also from a newly formed insurer owned and operated by the government. Unsurprisingly, insurance companies had balked at the idea of a public option, arguing that they would not be able to compete against a government insurance plan that could operate without the pressures of making a profit. Of course, for public-option proponents, that was exactly the point. By highlighting the cost-effectiveness of government insurance and exposing the bloated waste and immorality of the private-insurance market, they hoped the public option would pave the way for a single-payer system.

It was a clever idea, and one with enough traction that Nancy Pelosi had included it in the House bill. But, on the Senate side, we were nowhere close to having sixty votes for a public option. There was a watered-down version in the Senate Health and Education Committee bill, requiring any government-run insurer to charge the same rates as private insurers, but, of course, that would have defeated the whole purpose of a public option. My team and I thought a possible compromise might involve offering a public option only in those parts of the country where there were too few insurers to provide real competition and a public entity could help drive down premium prices over all. But even that was too much for the more conservative members of the Democratic caucus to swallow, including Joe Lieberman, of Connecticut, who announced shortly before Thanksgiving that under no circumstances would he vote for a package containing a public option.

When word got out that the public option had been removed from the Senate bill, activists on the left went ballistic.

I found the whole brouhaha exasperating. “What is it about sixty votes these folks don’t understand?” I groused to my staff. “Should I tell the thirty million people who can’t get covered that they’re going to have to wait another ten years because we can’t get them a public option?”

It wasn’t just that criticism from friends always stung the most. The carping carried immediate political consequences for Democrats. It confused our base (which, generally speaking, had no idea what the hell a public option was) and divided our caucus.

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Olympia Snowe braved a blizzard to stop by the Oval and tell us in person that she’d be voting no. But it didn’t matter. On Christmas Eve, after twenty-four days of debate, with Washington blanketed in snow and the streets all but empty, the Senate passed its health-care bill, titled the Patient Protection and Affordable Care Act—the A.C.A.—with exactly sixty votes.

We weren’t docked yet—not even close, it would turn out—but thanks to my team, thanks to Nancy, Harry, and a whole bunch of congressional Democrats who’d taken tough votes, we finally had land within our sights.

This piece is adapted from “A Promised Land,” which was published on November 17th by Crown.

https://www.newyorker.com…

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Comment:

By Don McCanne, M.D.

Perhaps it’s the order of things? First we define optimal health policy, and then we enact and implement it. Or do we?

It is certainly logical to specify policy in advance and then design legislation to meet those goals. Include everyone by making it universal. Make the system more affordable and more efficient by eliminating administrative waste and introducing administered pricing through negotiation. Make participation affordable for each individual by funding the system with equitable, progressive taxes. Improve access through central planning and separate allocation of capital improvements. Also improve access by eliminating financial barriers to care and eliminating restrictive provider networks. Ensure portability of care by placing the entire health care delivery system in a single, universal financing system. Of course, that model is a single payer improved Medicare for All program that has been well described by Physicians for a National Health Program and by others.

Then you follow the rule that you don’t compromise on any policy before you sit down at the negotiating tables. But what really happens? President Obama abandoned single payer because we were not “starting from scratch.” But that is not a valid reason. The original Medicare program did not start from scratch (even though it was limited to a specific sector of our population – a policy compromise).

Obama writes that Ted Kennedy, a long-time advocate of a universal health care system, supported Massachusetts Governor Romney’s more limited reform proposal because “trying to dismantle the existing system and replace it with an entirely new one would be both a nonstarter politically and hugely disruptive to the economy.” But disrupting a health care economy that is not working and replacing it with one that would is precisely what we should want to do. But then, there is the politics.

Policy we can get right, but it is the politics that screws things up. If, at the beginning, you modify policies in order to fix the politics, you will end up with a mediocre result, or worse. On the other hand, if you begin with perfect policies, the politics often will result in serious damage to the policy product, but it does not necessarily have to. Some of the programs of the New Deal and the Great Society were passed without having to make major political compromises that would have impaired much of their effectiveness.

So where do we stand now? Donald Trump’s “beautiful” health program likely never existed and anyway has been eliminated from consideration by his loss in the election. Bernie Sanders single payer Medicare for All proposal would certainly have begun the process with policy first, but he lost the nomination to Joe Biden who has stated up front that he will not support Medicare for All.

So what is Biden recommending? Basically tweaks to the current highly dysfunctional system. He does not propose meeting any of the policies listed above, thus violating the rule that you should begin with uncompromised policies. He does have one proposal previously supported by others and that is the public option. But Obama explains that the political barriers erected by the private insurance industry were too great to get it approved as part of the Affordable Care Act. So Biden is beginning with grossly inadequate policy proposals that are so weak that several of them may be able to clear the political process, except the public option (which is undesirable for other reasons).

Basically Biden is modifying policy to comply with the politics. He has it backwards. We need to start with solid policy proposals and then modify the politics to accomplish the goals. Admittedly that is not easy, but it is possible. If you begin with inadequate policy proposals, it is impossible to achieve the goals.

If we want efficient, affordable, equitable, comprehensive health care for all, then we are going to have to change the politics. The election is over, but now is when the real politics begin. Get with it.

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By Tal Gross, Timothy Layton & Daniel Prinz
National Bureau of Economic Research, October 2020

Abstract

Some consumers lack the cash needed to pay for medical care. As a result, they either delay care until they can pay for it or they forgo the care altogether. To test for such a possibility, we study the distribution of monthly Social Security checks among Medicare Part D enrollees. When Social Security checks are distributed, prescription fills increase by 6-12 percent. In that sense, drug consumption of low-income Medicare recipients is “liquidity sensitive.” We then study recipients who transition onto a program that eliminates copayments. When those recipients do not face copayments, their drug consumption becomes less liquidity sensitive. That finding implies that, beyond risk protection, generous insurance also provides recipients with the ability to consume healthcare when they need it rather than when they have cash. Further, we find that recipients whose drug consumption is most liquidity sensitive exhibit price elasticities of demand that are twice the size of the average elasticity, suggesting that more-generous insurance causes recipients both to re-time prescription filling and also to start filling prescriptions that they otherwise would not fill. We present a stylized model that uses this finding to call into question the conventional interpretation of demand-response to price as solely inefficient moral hazard.

From the Introduction

There exists broad agreement among economists that health insurance ought to involve some form of cost sharing: copayments, coinsurance rates, or deductibles. Theory suggests that cost sharing can limit moral hazard (Zeckhauser, 1970), and empirical evidence confirms that cost sharing reduces spending (Manning et al., 1987; Aron-Dine et al., 2013; Shigeoka, 2014; Brot-Goldberg et al., 2017). Indeed, motivated by that evidence, high-deductible health insurance plans have become increasingly common in the United States.

Those cost-sharing mechanisms may introduce a particular challenge for low-income consumers. A large literature suggests that many low-income households wait to consume until their income arrives. Olafsson and Pagel (2018), for instance, find that low-income consumers purchase 70 percent more goods on days when they receive their paychecks. That finding is consistent with many other studies: consumption responds to both predictable and unanticipated changes in income. One might call such a pattern “liquidity sensitivity:” consumers often delay many of their purchases until their income arrives.

From the Conclusion

The results above suggest that Medicare Part D recipients delay the purchase of prescription drugs until their Social Security checks arrive. We estimate a 10–12-percent increase in prescription fills among low-income recipients facing subsidized copayments on the day that their checks arrive. Even among the general Part-D population that receives no subsidies, prescription fills increase by roughly 6 percent on Social Security paydays.

Those increases in prescription fills upon payday diminish when recipients’ copayments are reduced. In addition, we use the transition to lower copayments to estimate a price-elasticity of demand. Recipients who tend to fill their prescriptions on their Social Security paydays exhibit a much higher elasticity of demand.

The results thus suggest that discussions over cost-sharing mechanisms need to go beyond the traditional trade-off between moral hazard and risk protection. Some low-income consumers exhibit healthcare consumption that is “liquidity sensitive,” and so cost sharing leads to additional complications for them.

More generally, this paper emphasizes an additional benefit of full insurance. Full insurance not only reduces the uncertainty faced by consumers. It also allows low-income recipients’ consumption to be less sensitive to their liquidity. Liquidity sensitivity may be even more of an issue for other populations beyond Medicare recipients. For instance, consider adults who lack stable employment and thus face volatile incomes. That population does not have to wait a few weeks for a Social Security check—they may wait months for work. For them, full insurance allows the smoothing of healthcare consumption between employed and unemployed states. But for any population, the timeliness of healthcare consumption can have medical consequences. And so making healthcare consumption less liquidity sensitive ought to be a worthwhile policy goal.

https://www.nber.org…

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Comment:

By Don McCanne, M.D.

This emphasis on consumerism in health care – making patients sensitive to the costs of health care by requiring out-of-pocket payment of deductibles, copayments, or coinsurance – is based on the concept that it is a “moral hazard” to use insurance to pay health care costs in full when that “hazard” can be avoided by requiring patients to pay a portion of the costs out-of-pocket so then they will accept only the care that they really need and are willing to pay for.

This study shows that low-income patients will delay or avoid care – in this case prescription drugs – when they do not have the funds needed for cost-sharing, though they will often obtain that care once they receive their Social Security checks. This suggests that we should redefine “moral hazard.” Rather than defining it as health care that might be declined if patients had to pay for it, we should define moral hazard as a barrier – a hazard – that policy wonks erect that is designed to save costs by preventing patients from receiving care that they should have since it was recommended by their physicians. That’s not a moral compromise; that’s a moral failure.

So now the policy community is dishing out policies based on “liquidity sensitivity.” Liquidity sensitivity comes into play when out-of-pocket health care costs exceed an individual’s discretionary income – an event much more likely to occur with lower-income individuals – though larger deductibles can also exceed the discretionary income of middle-income individuals.

Most individuals who support health care reform support reform that is equitable – fair for everyone. It would be far more equitable to eliminate cost-sharing and thus avoid liquidity sensitivity for those without higher incomes, while, at the same time, fund the entire health care system with equitable, progressive taxes. Now that’s fair.

Consumer-directed health care, moral hazard, liquidity sensitivity – let’s dump those in the trash bin of health policy concepts representing moral failure. Regular readers already know that we can fix this with a well designed, single payer, improved Medicare for All. Let’s do it!

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Willis Towers Watson, November 16, 2020

Individual coverage health reimbursement arrangements (ICHRAs), a new employer-sponsored health care benefit program for active employees that became available this year, are drawing the attention of U.S. employers, particularly wholesale and retail employers and those in education and the public sector. This is according to new research by Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.

An IRS rule issued in 2019 opened the door for employers to begin offering ICHRAs this year. With an ICHRA, employees choose where their medical benefit dollars are spent by purchasing individual insurance coverage and then receiving a reimbursement through an employer-sponsored health reimbursement arrangement. The survey found growing interest in this new benefit as a way for employers to keep their costs fixed by giving employees the opportunity to manage their own health care benefit choices and spend.

According to the Willis Towers Watson 2020 Health Care Delivery Survey, about one in six employers (15%) is planning to offer or considering offering ICHRAs to at least some portion of its employees in 2022 or later. The survey results showed similar levels of interest regardless of employer size, with 20% of large employers planning to offer or considering offering ICHRAs to at least some portion of their active employees. In a further sign of support for ICHRAs, a forthcoming Willis Towers Watson survey of chief financial officers found one-third are considering ICHRAs for some portion of their active employees.

“Not surprisingly, relatively few employers adopted ICHRAs this year, as the pandemic diverted much of their attention to other critical benefit matters,” said John Barkett, senior director of policy affairs, Benefits Delivery and Administration, Willis Towers Watson. “However, we expect to see interest grow as companies learn more about ICHRAs and the market for individual health plans continues to grow more robust each year. ICHRAs may be a preferred option for companies considering offering health care benefits through a defined contribution approach personalized to each employee.”

The survey found nearly one in three (29%) public sector and education employers and almost a quarter (22%) of wholesale and retail employers are planning to offer or considering offering ICHRAs in 2022 or later. These sectors may be among the early adopters of this new benefit option, which affords employers greater ability to control costs and provides employees with more health benefit options than their employers offer today.

“ICHRAs may align well with employers rethinking their overall approach to benefits, especially in certain industries that have struggled with the challenge of providing competitive benefits that meet the diverse needs of their workforces under ever-increasing budget pressures. And as more employers adopt the ICHRA approach, employees could find relief from the burden of having to change plans whenever they change jobs,” said Barkett.

https://www.willistowerswatson.com…

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The Demise of the Defined-Benefit Plan

Investopedia, November 16, 2020

Key Takeaways

• Once common, defined-benefit plans in the private sector are rare and have been replaced by defined-contribution plans, such as a 401(k).
• Companies choose defined-contribution plans instead because they are less expensive and complex to manage than pension plans.
• The shift to defined-contribution plans has placed the burden of saving and investing for retirement on employees.

https://www.investopedia.com…

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Comment:

By Don McCanne, M.D.

That swooshing sound is that of our income and wealth rapidly shifting up to the top of the wealth ladder. It takes many forms, but one that has snuck in there is the demise of the defined benefit retirement plan – those plans that guaranteed a reasonable income throughout the retirement years. They have been replaced by defined contribution plans such as 401(k) plans, IRAs, or no plans at all. These plans shift much of the responsibility for funding retirement to the individual employees. Most of these plans do not have enough funds for a secure retirement, and if they are converted to an annuity to cover the full years of retirement, the amounts are almost never enough to live on, even with a Social Security check.

Switching from defined benefit to defined contribution has greatly reduced the employers’ costs of pension plans, but at a significant cost to their employees. The employers’ contributions are fixed whereas the employees must find ways to cover the higher balances of their retirement costs, including costs they may face merely because they live to their full life expectancy or beyond.

The defined contribution approach has worked so well for employers that they are now planning to expand that concept to individual coverage health reimbursement arrangements (ICHRAs). Under this scheme, courtesy of the Trump administration, the employers no longer contribute their full share of the costs of the employees’ health benefits (defined benefit), but, instead, they contribute a fixed defined contribution to the health reimbursement arrangement which is then used by the employee to purchase a plan from the private health insurance market. As if the employees’ current contributions weren’t already a financial burden, the amounts they would have to contribute for full service health plans would be much greater and would increase more rapidly since health care inflation would be passed on to the employees. They could purchase less expensive plans with spartan benefits, but then they would face financial hardship in the event of medical need, defeating the purpose of insurance.

(Incidentally, economists contend that the employers’ portion of the payment for health benefits is actually paid by the employees in the form of forgone wage increases. This reduction to a smaller defined contribution would give the employers the opportunity to prove this by providing the balance to employees in the form of wage increases. Don’t hold your breath waiting for it.)

This Willis Towers Watson report indicates that ICHRAs will be here in 2022. One-fifth of large employers intend to introduce them, and one-third of chief financial officers are considering them. Just as we saw the demise of employer-sponsored defined benefit retirement plans, we will soon see the demise of generous, defined benefit, employer-sponsored health plans, perhaps except for a modest 401(k)-type token defined contribution to the plans.

One of the strategies of the Affordable Care Act was to protect and perpetuate employer-sponsored health plans, but they are now on their way out. Do we really have to wait until tens of millions more face financial ruin because of the ever-increasing personal responsibility for health care costs? Is that swooshing sound going to be enough to placate us? Likely the bankruptcy attorneys may find it soothing.

By refusing to enact and implement single payer Medicare for All, who are we protecting? Those guys at the top who would have to pay more taxes, even though not enough to be able to feel the difference? It seems we should be protecting those who would be exposed to financial hardship should they need health care. Potentially, that’s most of us. The system is working for some, but it needs to work for all of us. We need to tell those at the top to take their defined contributions and shove them. Congress, working with the IRS, can let them and the rest of us know how much we really need.

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GAO, November 2020

What GAO Found

Enrollment in private health insurance plans in the individual (coverage sold directly to individuals), small group (coverage offered by small employers), and large group (coverage offered by large employers) markets has historically been highly concentrated among a small number of issuers. GAO found that this pattern continued in 2017 and 2018. For example:

• For each market in 2018, at least 43 states (including the District of Columbia) were highly concentrated.
• Overall individual and small group markets have become more concentrated in recent years. The national median market share of the top three issuers increased by approximately 8 and 5 percentage points, respectively, from 2015 through 2018. With these increases, the median concentration was at least 94 percent in both markets in 2018.

GAO found similar patterns of high concentration across the 39 states in 2018 that used federal infrastructure to operate individual market exchanges— marketplaces where consumers can compare and select among insurance plans sold by participating issuers—established in 2014 by the Patient Protection and Affordable Care Act (PPACA) and known as federally facilitated exchanges. From 2015 through 2018, states that were already highly concentrated became even more concentrated, often because the number of issuers decreased or the existing issuers accrued the entirety of the market share within a state. In 2017 and 2018 all 39 states were highly concentrated.

https://www.gao.gov…

Full report (59 pages):
https://www.gao.gov…

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GAO: Private health coverage remains concentrated among largest insurers

American Hospital Association, November 13, 2020

Enrollment in private health insurance plans remained concentrated among a small number of issuers in 2017 and 2018, according to a report released today by the Government Accountability Office. The three largest issuers continued to hold 80% or more of the large group, small group and individual market in at least 43 states, with 10 states seeing an increase in concentration in the individual and small group markets since 2011, GAO found. The Affordable Care Act requires GAO to report on changes in the concentration of enrollment among issuers in overall individual, small group and large group markets, and individual and small group exchanges.

“The GAO’s findings underscore concerns expressed by hospitals and health systems: highly concentrated insurance markets reduce patient choice, endanger patient care and increase their costs,” said Molly Smith, AHA’s vice president for coverage and state issues. “This allows health plans to adopt policies that benefit them financially and not patients. Such lack of competition encourages plans to pull a bait-and-switch on patients: delaying and denying medically necessary care that patients paid for through their premiums and changing coverage rules mid-year.”

https://www.aha.org…

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Fact Check: Does Joe Biden Want To Eliminate Private Health Insurance?

By Jocelyn Grzeszczak
Newsweek, October 23, 2020

“We have 180 million people out there that have great private health care, far more than we’re talking about with Obamacare,” Trump said. “Joe Biden is going to terminate all of those policies.”

Biden immediately shot down Trump’s claim, asserting that the reason he secured the Democratic Party’s nomination was because “I support private insurance.”

“Not one single person with private insurance would lose their insurance under my plan, nor did they under Obamacare,” Biden said. “They did not lose their insurance, unless they chose they wanted to go to something else.”

https://www.newsweek.com…

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Comment:

By Don McCanne, M.D.

In rejecting Medicare for All, President-elect Joe Biden says, “I support private insurance.” This GAO report is just one more factor that should make us question his wisdom on this topic.

The private insurance market is heavily concentrated and that concentration has increased with the implementation of the Affordable Care Act. As a representative of the American Hospital Association states, “highly concentrated insurance markets reduce patient choice, endanger patient care and increase their costs.” Further, “This allows health plans to adopt policies that benefit them financially and not patients. Such lack of competition encourages plans to pull a bait-and-switch on patients: delaying and denying medically necessary care that patients paid for through their premiums.”

Of course, single payer improved Medicare for All would ultimately concentrate health care financing into one single payer, but the difference would be that it would be our own payer, owned by the people, while returning to us the free choice that we want, the choice of health care professionals and hospitals that the private insurers take away from us.

The American Hospital Association understands the evil of concentrated health insurance markets, but they don’t seem to have much to say about the increasing market concentration of the hospital industry which we see has increased hospital prices.

Under single payer Medicare for All hospitals would be placed on global budgets, just like we do for fire departments. For those in the hospital industry who express concerns over global budgeting, maybe we should offer to nationalize the hospitals, creating our own national health service.

Regardless, we do have to get rid of the private insurance industry because they are out of control, and that harms too many of us.

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By Christina Zhao
Newsweek, November 10, 2020

Senator Bernie Sanders of Vermont, a possible Labor secretary candidate in President-elect Joe Biden’s administration, on Tuesday said public support for the Green New Deal and Medicare for All was won at the polls.

Sanders—who ran off the promise of universal health care and policies to combat climate change in the 2020 Democratic race—has insisted that widespread public support for the policies championed by progressives were apparent through the results of the presidential race.

“112 co-sponsors of Medicare for All were on the ballot. All of them won. 98 co-sponsors of the Green New Deal were on the ballot. Only 1 lost,” the senator tweeted. “Supporting Medicare for All and the Green New Deal is not just good public policy. It is also good politics.”

https://www.newsweek.com…

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Comment:

By Don McCanne, M.D.

Those who contend that Medicare for All caused a poor showing in the election are going to have to explain this one. All 112 co-sponsors of the Medicare for All Act of 2019 who were on the ballot won re-election!

Although many polls show support for Medicare for All, the one taken on election day is the one that really counts.

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By Michael K. Gusmano, Miriam Laugesen, Victor G. Rodwin, and Lawrence D. Brown
Health Affairs, November 2020

Abstract

Although the US has the highest health care prices in the world, the specific mechanisms commonly used by other countries to set and update prices are often overlooked, with a tendency to favor strategies such as reducing the use of fee-for-service reimbursement. Comparing policies in three high-income countries (France, Germany, and Japan), we describe how payers and physicians engage in structured fee negotiations and standardize prices in systems where fee-for-service is the main model of outpatient physician reimbursement. The parties involved, the frequency of fee schedule updates, and the scope of the negotiations vary, but all three countries attempt to balance the interests of payers with those of physician associations. Instead of looking for policy importation, this analysis demonstrates the benefits of structuring negotiations and standardizing fee-for-service payments independent of any specific reform proposal, such as single-payer reform and public insurance buy-ins.

From the Introduction

The rising costs of US health care make affordability—for consumers, employers, and governments—an elusive goal. Studies show that these expenditures are higher in the US than other countries not because the volume of service is higher but because prices are higher. One reason for the higher prices in the US is that private insurers typically do not have sufficient market leverage to control them, and there are dramatic price variations in the private market. Medicare has done better at controlling prices than private insurers have, but Medicare is limited by Congress in the degree to which it can negotiate prices.

In most countries with universal health insurance, physicians are paid on a fee-for-service basis, yet prices there are lower than in the US. As Miriam Laugesen and Sherry Glied explain, “Higher fees, rather than higher practice costs, volumes, or tuition expenses, are the main driver of higher US spending.”

Representatives of systems with universal health insurance explain that their health systems reflect an enduring commitment to solidarity. Their position reflects the insistence that health care is a human right and a continuing affirmation of redistribution and reciprocity as a central element of social justice.

In this article we explore how three countries—France, Germany, and Japan—appear to achieve economic sustainability in a fee-for-service system. We then identify the institutional processes that influence the prices of physician services in universal health insurance systems. These countries have all attempted to contain rising health care costs by negotiating prices with physician associations and adapting fee-for-service to the evolution of health care provision.

In the US, in contrast, insurance regulation is less developed and has suffered from a lack of national uniformity. Because there is no universal health insurance, public programs including Medicare and Medicaid address the gaps in coverage.

Summary of the approaches

The three countries we examined all negotiate fees in the context of expenditure constraints, but they have contrasting institutional processes to address health care prices and volumes. France has negotiated prices aggressively but has few controls over the volume of care. Germany controls service volume indirectly by imposing budget caps on sickness funds and physician associations and putting them in charge of enforcing volume controls.

Japan’s approach is more centralized, with a complex set of conditions that govern how and where health care services can be provided. These conditions are specified in the same document that lists the negotiated fees for each service. The aim is to constrain volume by limiting the volume of services billable for each item and by limiting the number and types of hospitals, clinics, and physicians that are allowed to provide particular services.

Although France and Germany hold physician fees at lower levels than in the US, both countries pay specialists more than primary care physicians. These fee schedules reflect a bias for more technical or procedural services over services such as office visits in primary care. In contrast, Japan, uniquely, pays private office–based generalist physicians, represented by the Japan Medical Association, more than academic hospital–based specialists.

From the Discussion

The health systems we studied focus on controlling prices in the context of fee-for-service medical practice and national expenditure constraints that do not result in withholding health care from the population. The use of fee-for-service physician payment does create problems, but marking fee-for-service as the major cause of high health care spending in the US is problematic, especially as countries with lower prices and expenditures use fee-for-service systems. France, Germany, and Japan limit the incomes of physicians by standardizing and adjusting the fees they are paid while using a variety of approaches to limit the volume of services provided.

The diversity of payment arrangements in the US acts as a constraint on unified approaches while also creating growing pressure to change and standardize fees. Although some Democratic leaders in Congress emphasize the buying power and leverage of a single-payer health care system to contain prices, extending Medicare to all legal residents would introduce challenges in negotiating prices with hospitals, pharmaceutical manufacturers, and physicians within the context of US institutions. Perhaps the most important implication of our study is that regardless of whether either fundamental changes such as Medicare for All or incremental expansion of the Affordable Care Act are proposed, both would oblige policy makers to think hard about how to set prices and oversee service volume.

Although France, Germany, and Japan vary in their approaches to regulating prices and service volume, all three rely on centralized fee negotiations. This general approach is evident in some Democratic health reform proposals, some of which have proposed empowering the secretary of health and human services to create a national fee schedule for payers and providers within a public option or Medicare for All design.

The experiences of these countries suggest that changes in physician reimbursement policy need not presuppose widespread changes to coverage and vice versa. Both become more interdependent when governments are committed to providing universal and affordable health insurance coverage. Health care pricing is an important pillar supporting and upholding universal coverage. Even without universal coverage, the US can and should regulate how much discretion providers of health care services have in setting their own prices. Standardization of prices can reduce treatment and administrative costs alike.

Americans should work within their institutional framework to allow for greater standardization of prices based on negotiation. Such an approach would be a shift away from the current system, in which payment negotiations lack transparency. The absence of arrangements similar to those in the three countries we have studied leaves payers fragmented and gives providers too much control over their own prices.

The purpose of international comparisons for policy learning is not to transplant or import foreign systems into domestic institutions. The US lacks a solidaristic vision—the population is distributed across separately regulated private insurance plans, and programs designed for different groups remove a shared identification, balkanizing the system of health care. Our approach to understanding physician payment policy across nations acknowledges the absence of solidarity in the United States. Price negotiations must reflect the history and distinct characteristics of each country.

Cross-national comparisons, however, offer perspective on the challenges that Americans confront and the ways in which experience abroad might be adapted to the specificities of other national institutions. The ways and means by which France, Germany, and Japan are “getting the price right” should not be ignored by US policy makers concerned with universal health insurance or with the incremental extension of affordable health insurance coverage.

https://www.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

Health care spending is highest in the United States, and a major reason for this is our very high prices. The private insurance industry in the United States has not been particularly effective in controlling prices, and our government has largely limited its control of prices to public programs such as Medicare and Medicaid, though, even there, the government has refused to control Medicare drug prices. The authors use the examples of the universal programs in France, Germany and Japan to show how governments can get the price right.

The authors contend that we do not have to enact a Medicare for All system to control prices. But when you look at our fragmented health care financing system and the free rein that the private sector is allowed – especially the private insurers – it does not take too much imagination to see that trying to implement fee controls across the entire system would be much like herding cats. The fact that the crisis has been with us for many decades without any real progress being made in price controls, outside of Medicare and Medicaid, demonstrates that these cats are not very herdable.

Essentially all other nations have been effective in controlling spending through control of prices, and we could be too, but it sure would be a lot easier if we had a well designed, single payer, improved Medicare for All. That way we would be standardizing prices in a system based on solidarity.

Why solidarity? The current political turmoil should provide us with enough evidence that we sure could use an infusion of a whole lot more solidarity. Just our lack of solidarity in managing the COVID-19 pandemic is causing suffering, economic hardship, and loss of lives, simply because we have prioritized political squabbles over solidarity. Let’s give solidarity a try – for our health.

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Healio, November 10, 2020

POINT by Benjamin Sommers, M.D., Ph.D.

Yes.

A public option can improve health care affordability with continued private insurance and better access to quality providers, but only if the design is set up in a way that provides more financial protection upfront. You could also push private insurers to do this, but a public option is a better vehicle to make sure the cost-sharing terms are affordable for patients.

Many individuals who are currently insured in the marketplace have high deductibles — up to several thousand dollars in some cases. This leaves many people paying out of pocket for their care unless they get critically sick.

If the public option aggressively negotiates payment rates to providers, it will bring down the overall costs, as is the case with Medicare and Medicaid. There is a trade-off because it could possibly limit the number of providers but, on the other hand, it would save the whole system money.

There are a lot of varieties of public options. The one from the Biden campaign is for patients not in Medicaid expansion states. This would help patients who are too rich for Medicaid but too poor for the marketplace. Those people — and there are a lot of them — have fallen through the cracks.

This could also help patients in places where there is limited competition, which leads to higher premiums. Creating more competition brings down the costs.

However, there isn’t a magic number when, once hit, suddenly everyone is able to afford care and be covered. Every step taken squeezes people out. The only way to get everyone insured is through a single-payer system but, even then, it has to be more generous than the current Medicare plan. That being said, there doesn’t seem to be the political will or leverage to implement that.

The Medicare component of the public option is popular, but it also has substantial cost-sharing; about 20% in most cases. That’s why there are supplemental plans.

The U.S. Congress — Democrats and Republicans alike — gives away benefits with a value that substantially exceeds what the users pay. Each beneficiary on average receives $310,000 more in benefits than they pay. The unpaid bills — $37 trillion at last count — have been kicked down the road to future generations in the form of bigger federal deficits. The Galen Institute reports that Medicare’s annual deficits are responsible for one-third of U.S. federal debt.

Yet, Medicare’s enormous scale confers genuine administrative and purchasing efficiencies. Medicare spends up to seven times less than private insurers on administrative costs. It also pays hospitals 40% less and providers 2 to 3.5 times less than private insurers pay for the same services. Some contend that providers merely shift Medicare and Medicaid’s unpaid charges to private insurers, but that charge has been refuted. Rather, it is plausible that these payments appropriately help to squeeze out the one-third of health care expenditures that many experts view as sheer waste.

Americans generally like both private insurance and Medicare but universally hate their costs. “Medicare for All” eliminates private insurers and increases taxpayers’ burden. The public option keeps private insurers and controls health care costs.

Benjamin Sommers, MD, PhD, is the Huntley Quelch professor of health care economics at Harvard University T.H. Chan School of Public Health.

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COUNTER by David Himmelstein, M.D.

No.

A public option insurer that doesn’t try to dodge unprofitable enrollees like traditional Medicare does would be saddled with more than its share of sick, expensive patients and would become a de facto high-cost, high-risk pool. Although a public option really can’t achieve universal coverage, a single-payer system, usually referred to as Medicare for All, can.

CMS’s decades-long efforts to level the playing field have not worked against private insurers, which breaks their promises of fair competition. Insurance companies have also used their political muscle to sustain and increase their competitive advantage over traditional Medicare. The result is that a public plan and the taxpayers absorb the losses while private insurers skim off profits. This imbalance is so big that private plans can outcompete a public plan despite squandering vast sums on overhead costs, CEO salaries and shareholder profits.

The bottom line is that a public option is a more expensive way to do this than a single-payer system.

Private insurers currently take in $252 billion more than they pay out per year, which is equivalent to 12% of their premiums. A single-payer system with overhead costs comparable to Medicare’s could save about $220 billion of that money. A public option would save far less, or possibly nothing, if much of the new public coverage is channeled through Medicare Advantage plans, whose overhead, at 13.7%, is even higher than the average commercial insurer.

A single-payer system would put private insurance companies out of business. Drug companies and medical suppliers would also stand to lose billions because they would face a buyer that could actually drive down costs.

The excess overhead inherent to multipayer systems imposes a hidden surcharge on the fees that doctors and hospitals must charge all patients — not just those covered by private insurance. All told, a public option reform would sacrifice about $350 billion annually of single payer’s potential savings on providers’ overhead costs, over and above the $220 billion in savings it could sacrifice annually on insurers’ overhead.

Finally, a public option would undermine the rational health planning that is key to the long-term savings under single payer. Each dollar that a hospital invests in new buildings or equipment increases its operating costs by 20 to 25 cents in every subsequent year. At present, hospitals that garner profits have the capital to expand money-making services and buy high-tech gadgets, whether they’re needed or not, while neglecting vital but unprofitable services.

I’m not sure what innovation people think is going to be stifled with a single-payer system. In fact, Medicare has been much more innovative than private insurers. Most scientific innovation has come from the NIH and other countries. The CT scan, for example, came from Great Britain. Most of the money drug companies and insurance make goes to their shareholders; an astonishingly low amount goes to innovation. We’d be much better taking the money from those profits and amping up funding to the NIH.

Because a public option would leave the current dysfunctional payment approach in place, it would sacrifice most of the savings available via single-payer reform. I’m not opposed to having a public option because it would give more people insurance, but I just think it’s a bad way to provide insurance in this country. The bottom line is that a public option would either cost much more or deliver much less than single payer.

David U. Himmelstein, MD, is a professor of health policy at City University of New York School of Public Health at Hunter College.

https://www.healio.com…

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Comment:

By Don McCanne, M.D.

This is one of those situations where it is better to answer the question they should have asked rather than the one that they actually asked.

A Medicare-like public option that benefits from government-administered pricing and that is subsidized by the government obviously would bring down costs for patients who are enrolled in the program when compared to private commercial plans that are not government subsidized. But what about all of the other patients who are not enrolled in the public option? Some have suggested that competition from a public option might cause private plans to reduce their premiums, but they would do so by reducing their own costs through benefit reductions, increases in patient cost-sharing, and perhaps moving to more restrictive provider panels, shifting more costs to the patients, so any net cost reduction would be negligible.

Compare adding a public option to our current expensive, administratively complex, highly dysfunctional health care financing system to replacing the system with a well designed single payer system – an improved Medicare for All. Not only would everyone be covered with a high-performance system, the average costs for patients, except for the very wealthy, would be less than the average costs we are paying now simply because the entire system would be funded through equitable, progressive taxes – that’s on top of the sharp reductions in profound administrative waste and the efficiency of public purchasing.

As David Himmelstein explains, the bottom line is that we would have a superior system that would be affordable for each of us if we enacted and implemented a single payer system. Even Benjamin Sommers says, “The only way to get everyone insured is through a single-payer system,” and “Medicare’s enormous scale confers genuine administrative and purchasing efficiencies.” It’s nice to see that these experts appear to agree even if the question superficially seemed to bring them to opposite yes or no conclusions.

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