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How the High Cost of Medical Care Is Affecting Americans

By Elisabeth Rosenthal
The New York Times, December 18, 2014

The Times designed a questionnaire with CBS News and conducted a national poll this month.

Americans are eager for relief.

There seems to be widespread agreement that medical prices are burdensome for American patients, and new solutions are needed. But will the answer be a market-based approach involving greater price transparency? More regulation, focusing on price? A government-sponsored single-payer health system, like that in Canada? Or allowing younger people to join Medicare, the popular health insurance program for seniors? Many readers surprised me by saying they could not wait to turn 65. As one reader from Texas said: “I bought medicine in Mexico for 23 years before I became eligible for the promised land of Medicare.”

NYTimes/CBS Poll

Would you favor or oppose a government-administered health insurance plan — something like the Medicare coverage that people 65 and older get — that would compete with private health insurance plans? 

59%  Favor
34%  Oppose
 8%  No opinion

Would you favor or oppose a single-payer health care system, in which all Americans would get their health insurance from one government plan that is financed by taxes?

43%  Favor
50%  Oppose
 7%  No opinion

http://www.nytimes.com/interactive/2014/12/18/health/cost-of-health-care-poll.html

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Comment:

By Don McCanne, MD

During the health care reform debate there was considerable support for a “public option” – providing individuals an option of choosing a Medicare-like program, administered by the government, that would compete with the private health plans. During the legislative process it received much publicity, but it was eventually eliminated from consideration under pressure from the insurance industry that did not want any competition from the government. A vote on a single payer proposal also was promised by the Democratic leadership in the House, but eventually the opportunity for that vote was traded away in politics as usual.

We still hear calls for a public option that many contend would address the high costs of health care, though few seem to understand that it would hardly have any impact on costs since it would be only one more player in our dysfunctional multi-payer financing system. But we also hear calls for a single payer system – an improved Medicare for all – that actually would slow spending while meeting other important goals such as universality and equity.

How are these messages resonating with the public? The competitive public option concept is supported  by 59% of those polled, whereas the single payer concept is supported by only 43%, with 50% opposed.

Although some might dispute this polling based on the phrasing of the questions or whatever, to me these results seem to suggest a much more serious problem. Instead of the national debate that we should be having – single payer versus our fragmented multi-payer system – the debate is being shifted to our private insurance-dominated multi-payer system versus a multi-payer system with a public option – a Medicare-like program that you can purchase in place of private insurance.

What does that shift in the debate do? Well, first of all, it ensures that single payer will continue to be left off of the table as we move forward. Second, it allows the insurers to exercise damage control by ensuring, through their ownership of Congress, that the public option would be prohibited from gaining an “unfair” competitive advantage against the private insurers. During the reform debate the insurance lobby was successful in selling the concept that the public option had to be removed from the control of government and have restrictions placed on it that would make it worse than the private plans. Just opening that door was still too much for the insurers, and so the concept was tabled. But when it comes back up again, the insurers want to have that debate rather than the single payer debate, and they are ready for it.

Another concern about the public option debate is that the concept is being deliberately conflated with the premium support concept as a means of ensuring that there is strong public support for improving health care value through competition – competition of private health plans, that is. The government would provide support for the insurance premiums through virtual vouchers that would provide an option to purchase various plans through the public exchanges. Thus the insurance industry gets precisely what it wants with the debate being limited to how much damage can be done to the free-standing public option, public in name only, to be sure that it does not unfairly compete with the private insurers (inadequate funding of reserves, prohibition of “advertising,” increasing adverse selection through the requirement of being the safety-net insurer, requirement to maximize cost sharing, requirement of using ultra-narrow networks, etc.).

Maybe some of this is a stretch, but we really have to be concerned when the perception of the public at large is that we don’t want a single payer system but we do want a government plan that competes with private insurers. The issues are complex. We have a lot of work to do to educate the nation on the true facts behind reform options. As far as messaging is concerned, right now the single payer opponents can dismiss our model with just one word: competition. Now just try to find one word or phrase that explains why single payer is vastly superior to private plans competing in the marketplace.

Governor says: ‘Now is not the time for single payer financing plan’

Times Argus, December 17, 2014

Gov. Peter Shumlin is backing away from a commitment to pass a single payer health care financing plan in Vermont in 2015. He just made the announcement at a press conference in Montpelier.

http://www.timesargus.com/article/20141217/THISJUSTIN/141219995

Comment:

By Don McCanne, MD

Gov. Shumlin has provided a very valuable lesson for all of us. He did almost everything possible on a state level to try to establish a single payer system within Vermont. He has established the fact that, beyond all doubt, a bona fide single payer system is impossible to enact and implement on a state level without comprehensive enabling federal legislation.

We can be thankful to Gov. Shumlin for his valiant efforts. He has shown us that it is imperative that we continue with our efforts toward a goal of enactment of federal single payer legislation.

Those of us working on the state level still have very important work to do. We need to continue our education efforts on a local, statewide, and national basis. We will not have single payer until the people understand it and elect a Congress that will bring it to us.

There are other important health care measures that can provide some improvements in our dysfunctional health care system, and we should support those. But we cannot be fooled into thinking that these are incremental steps on the path to single payer. Our health financing infrastructure must be replaced with a single payer system. Mere patches, such as we see with the Affordable Care Act, fall far, far short of what we need, and will only perpetuate health care injustices.

We have plenty of dedicated people who will continue with efforts to provide the beneficial patches to our system, and we should support their work. But, above all, we need to regroup and intensify our efforts to educate the nation on the imperative of a federal solution. That must be our first and foremost priority. Nobody should become discouraged and start thinking of leaving our ranks. We need to get busy and recruit more soldiers for our cause, beginning today. We are fighting for the health of the nation.

Many Obamacare Plans Set Out-Of-Pocket Spending Limits Below The Cap

By Michelle Andrews
Kaiser Health News, December 12, 2014

Seventy-four percent of 2015 silver level plans’ out-of-pocket spending caps are below the $6,600 spending limit allowed for individual plans and $13,200 maximum for family plans, according to Avalere, a consulting firm. The average out-of-pocket maximum for 2015 individual silver plans will be $5,853, says Caroline Pearson, a vice president at Avalere. Silver was the most popular plan type this year, selected by about two-thirds of enrollees.

After a policyholder reaches the out-of-pocket spending limit during the year, the insurer pays all the bills, unless, for example, they involve doctors and hospitals not in the health plan’s network.

The vast majority of other plans also feature lower limits on out-of-pocket spending—which includes deductibles, copayments and co-insurance, but not premiums. Seventy-one percent of bronze plan spending limits were below the allowed maximum (with an average spending limit for single coverage of $6,381), as were 94 percent of gold plans (average limit, $4,458) and 98 percent of platinum plans (average limit, $2,145).

The tradeoff for lower out-of-pocket spending maximums may be a higher deductible, says Pearson. The average deductible for silver plans will increase 7 percent in 2015, to $2,658. Other metal-level average plan deductibles are increasing as well.

Higher deductibles are likely helping keep premiums low, and low premiums are what consumers are looking for, Pearson says.

Kaiser Health News: http://kaiserhealthnews.org/news/many-obamacare-plans-set-out-of-pocket-spending-limits-below-the-cap/

Avalere: http://avalere.com/expertise/managed-care/insights/avalere-analysis-consumers-should-look-at-maximum-out-of-pocket-limits-dedu

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Comment:

By Don McCanne, MD

This Avalere report reminds us that, at a given actuarial value of a health plan (average percent of the health care costs covered by the plan), there is a reciprocal relationship between the maximum out-of-pocket spending for which the insured is responsible and the deductible that must be met before the plan begins paying for health care.

Ignoring other variables, such as waiving the deductibles for certain preventive services, let’s look at the 2015 average deductibles and average maximum out-of-pocket spending (MOOP) for the four metal tiers representing different levels of actuarial values (AV) in the insurance exchanges. The numbers are for individual plans that must be capped at a MOOP of $6,600 or less.

• The bronze plans (AV 60%) have an average deductible of $5,249 with an average MOOP of $6,381.
• The silver plans (AV 70%) have an average deductible of $2,658 with an average MOOP of $5,853.
• The gold plans (AV 80%) have an average deductible of $1,080 with an average MOOP of $4,458.
• The platinum plans (AV 90%) have an average deductible of $189 with an average MOOP of $2,145.

It is obvious that, in these examples, as AVs increase, both the deductibles decrease and the MOOPs decrease. The higher the AV value, the more complete is the coverage. But then why are both adjusted? Why didn’t the actuaries set the MOOP for each plan at the statutory maximum ($6,600) and simply adjust the deductibles? That way the higher the premium paid, the lower the deductible would be.

If you look at the platinum plan (90% AV) the average deductible is only $189. With the essential health benefits and the networks remaining the same, in order to push the AV up to 90%, the actuaries had to reduce the maximum out-of-pocket to an average $2,145. For the gold plans, in order to have a product with a standard $1000 deductible ($1,080 with 2015 adjustment), the actuaries also had to lower the MOOP to meet the 80% AV.

The bronze plans, with the lowest AV (60%), had to push their MOOP up to close to the statutory maximum – $6,381, just below $6,600 – but then that required an average deductible of a whopping $5,249 – quite a blow for the low-income individuals and the young invincibles who would be attracted to the low premiums of these plans.

The silver plans, which about two-thirds of exchange purchasers select, have a more balanced deductible and MOOP. So why didn’t they push the MOOP up to the maximum ($6,600) so that they could offer a more reasonable deductible? For one reason, having greater cost sensitivity through higher deductibles advances the consumer-directed approaches of those ideologues who place more importance on the theory of moral hazard than they do on patients getting the care that they need.

Another reason is that, since about 80% of the population uses only about 20% of health care, most insurance plan enrollees would never meet their deductible. With the silver plan deductible of $2,658, insurers would be paying for almost no care for about four-fifths of their enrollees (except preventive services – a very small part of our health care services). The extra that would have to be paid by the insurers for having a modestly lower MOOP would apply to only about one-fifth of their enrollees, most of whom would far exceed their deductibles anyway.

Left out of this are considerations of the consequences of obtaining care out-of-network, even if inadvertent, and of being required to pay retail prices for services that are later determined to not be covered benefits.

Seems like a pretty good deal for the insurers. Isn’t it our turn to get a good deal? We would have to get rid of the insurers first.

Two Theologies Have Blocked Medicare-For-All

By Theodore Marmor and Kip Sullivan
Health Affairs Blog, December 11, 2014

In the 50 years since Medicare was enacted, Congress has never seriously considered extending Medicare to all Americans, nor even lowering Medicare’s eligibility age below 65. This pattern persisted even during those periods when national health insurance was at the top of the national agenda. This is not what the original advocates of Medicare anticipated when Medicare was enacted in 1965. They saw Medicare as the cornerstone of a national system of health insurance that would eventually cover all Americans.

Two Myths that Undercut Medicare-for-All: Managed Care and Competition

In the paper we presented at the Yale conference (Yale Law School, November 6 & 7) , we reviewed short- and long-term factors affecting the debate about Medicare over its lifetime, and then turned to a discussion of two long-term factors: the rise of what came to be called the managed care movement, and the resurgence of a longstanding campaign promoting the idea that competition can right the wrongs of American medicine.

The managed care movement helped marginalize support for Medicare’s expansion primarily through its influence on the proponents of national health insurance. It did so by persuading many potential proponents of Medicare expansion to pursue a different reform strategy.  Insurance companies practicing managed care, the rhetoric claimed, were more efficient than Medicare.  Managed care kept Medicare-for-all off the congressional agenda primarily by inducing potential proponents of Medicare expansion to support managed care rather the expansion of the traditional Medicare program.

The rise of the pro-competition movement constituted another significant impediment to Medicare expansion. It did so by strengthening the belief that market competition among private health insurance firms could be invigorated, largely by eliminating tax subsidies for insurance and shifting more costs onto patients, and that vigorous competition would make the health care sector much more efficient than Medicare could ever be. But because this movement appealed primarily to conservatives who did not support universal coverage in the first place, its impact on the debate about Medicare’s expansion, although powerful, was less direct.

To sum up, the pro-competition movement contributed to keeping the expansion of Medicare off the national agenda by keeping national health insurance off the national agenda throughout most of Medicare’s 50 years. And the managed care movement contributed by persuading liberals to endorse managed care proposals, not the expansion of Medicare, during those infrequent periods when universal coverage was at the top of the national agenda.

Why have the Managed Care and Competition Movements been Politically Successful?

The answer, in our view, is two-fold. First, both movements acquired immense economic power compared with supporters of Medicare expansion. Second, both movements clothed their diagnoses of and solutions to the health care crisis in rhetoric that induces listeners to overlook unproven assumptions that underlie those diagnoses and solutions. This permitted both movements to present their solutions in idealized, oversimplified forms, and to compare their idealized forms to real-world Medicare. Over the years both movements have developed cultures which resist acknowledging the discrepancy between their assumptions and the evidence.

In the first few months of 1970, Paul Ellwood and representatives of the Nixon administration agreed to promote an unproven diagnosis of the health care crisis and an unproven solution. The unproven diagnosis was overuse of the health care system induced by the fee-for-service method of paying doctors. The unproven solution was a new form of insurance company they called the “health maintenance organization” (HMO).

Ellwood and Nixon administration officials made the deliberate decision to refrain from describing how HMOs were supposed to achieve the powers attributed to them. As assistant HEW secretary Lewis Butler put it, “Let’s specify what we want it to do…. Let’s describe the thing by what we want it to do, not how it’s formed.”

This convention – describing an entity that will supposedly alleviate the health care crisis according to what “we want it to do” – was quickly adopted by Democrats. The convention encouraged, and to some degree forced, HMO advocates to explain their support for the concept in highly abstract terms. It also encouraged the use of opinion and wishful thinking as substitutes for evidence and scientific discourse.

The tendency to adopt abstract concepts defined only by the aspirations of their proponents, to give these abstract concepts labels designed to influence rather than illuminate, and to ignore or downplay evidence contradicting claims made for these concepts has persisted within the managed care movement ever since. These habits of thought can be seen in the movement’s support for other managed care proposals, including “pay-for-performance” and “accountable care organizations.”

The pro-competition movement has exhibited similar traits – a tendency not to examine fundamental assumptions and to gloss over evidence contradicting them. Like the managed care movement, the pro-competition movement rests its diagnosis on the unproven assumption that financial incentives are the single greatest cause of health care inflation. Unlike the managed care movement, which sees physician incentives as paramount, the pro-competition movement claims patient financial incentives are the fundamental cause of high medical costs. Like the managed care movement, the pro-competition movement bases its solution on unproven assumptions, the most important of which is that patients can shop for medical care just as they do for food and other commodities.

The willingness of the two movements to compare real-world Medicare with their idealized proposals has contributed significantly to their ability to keep the expansion of Medicare off the table. It has also contributed significantly to their inability to address the problems that bedevil the American health care system – a chronically unacceptable rate of uninsured, barriers to care even for the insured, and rising costs.

http://healthaffairs.org/blog/2014/12/11/two-theologies-have-blocked-medicare-for-all/

Comment:

By Don McCanne, MD

The dream of expanding Medicare to cover all of us has failed to materialize in a large part because of the nation’s obsession with marketplace concepts of health care financing. On the supply side, health care providers are responding to financial incentives that maximize their revenue. On the demand side, patient-consumers are responding to financial incentives that minimize their out-of-pocket spending. In both instances, health care access is compromised – in managed care by erecting structural barriers to care (“managing” the care), and in competition by erecting financial barriers to care (buying competitively-priced plans with lower premiums that have higher deductibles and other cost sharing).

Where did this obsession come from? Gilens and Page have shown that the very wealthy and large business interests have control over major legislation. These interests benefit from marketplace approaches to health care through investments in for-profit insurance companies and in health care delivery organizations, including for-profit hospitals. In contrast, their tax burden in publicly-financed health programs is greater when taxes are progressive. Also many other important government programs are financed through progressive taxes, so the moneyed interests benefit by privatizing government functions to the maximum extent possible.

These interests, along with ideologues, have made a meme of the concept that private markets are always more efficient than massive government bureaucracies, when the evidence is almost always to the contrary. Unfortunately, much of the media have accepted this meme as a given. Since everyone “knows,” based on a lifetime of exposure to these memes, that the private sector can always do it better, they are quite willing to support private solutions to problems such as the financing of health care.

Whenever proposals such as expanding Medicare come up, the insurance industry pulls the puppet strings in Congress, and the public is reminded how well UnitedHealth and the other for-profit insurers are doing in creating private products that have lower out-of-pocket costs than Medicare (not mentioning that they are doing that with one-third of the overpayments they receive while keeping the other two thirds for profits and to pay for the excessive administrative services that they are selling us – a bad deal for taxpayers).

So those who support the intrusive managed care organizations and who support shifting more costs directly to patients under the false banner of marketplace competition (see Kenneth Arrow) have been effective in suppressing any serious consideration of improving Medicare and expanding it to cover everyone. As long as the public continues to buy their meme, there is little likelihood of change.

We need to continue to inform the public on the legitimate findings of health policy science (national health programs that include everyone while providing higher quality at a lower cost), but that is a daunting task considering how difficult it is to communicate complex policies to a population blunted by unfounded memes.