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After a Hospital Stay, People are More Likely to Go Bankrupt

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After a Hospital Stay, People are More Likely to Go Bankrupt

By Kate Sheridan
Newsweek, March 21, 2018

The effect that unexpected hospital bills have on Americans’ decisions to declare bankruptcy may be overstated, an article published Wednesday in the New England Journal of Medicine claims—but one expert says the new numbers don’t show the whole picture.

Researchers looked at credit reports of more than 500,000 people who were admitted to a hospital in California between 2003 and 2007. About 4 percent of all the bankruptcies that happened between 2002 and 2011 appeared to be related to a hospitalization—even among people who were uninsured, for whom the rate was still only 6 percent.

People did seem more likely to declare bankruptcy after going to a hospital—but not by all that much, the study found. “Rates of medical bankruptcy are much, much lower than we had thought and has been claimed,” Amy Finkelstein, a health economist at the Massachusetts Institute of Technology and one of the authors of the paper, told Newsweek.

That’s not to say medical bankruptcies aren’t happening—four percent is more than zero. But Finkelstein and her colleagues believe focusing on bankruptcy may be missing the forest for one relatively rare tree. “We find that going to a hospital is associated with a 20 percent decline in employment and earnings over the next four years. That’s just extraordinarily high,” she said, referencing another recent paper. “And this is even for people with health insurance.”

That’s because health insurance doesn’t cover some of the consequences of being sick, like missing work—which exist even in places where health insurance coverage is stronger and more widespread. “[Other researchers found] similar adverse effects on earnings and employments in Denmark,” Finkelstein said. “But the big difference is that in Denmark, most of that lost earnings and employment is insured through things like sick pay and disability insurance.”

That helps explain why bankruptcy is still a problem in the United States, even if it’s smaller than we once thought; while the Affordable Care Act may have patched some holes in the social safety net by expanding Medicaid eligibility to cover more people, disability insurance and unemployment insurance is still weak.

“We’ve had a major push for health insurance coverage in the United States, and much of it was predicated on these claims,” Finkelstein said. “And it turns out that that was the wrong problem to be focusing on.”

Dr. David Himmelstein disagrees—in his eyes, Finkelstein and her team’s methods don’t really capture medical bankruptcy. Himmelstein, a professor at Hunter College’s School of Urban Public Health in New York City, published his own estimate in 2009 in the American Journal of Medicine; one of his co-authors on that paper is now-Senator Elizabeth Warren (D-MA). By their estimate, nearly two-thirds of all bankruptcies are due to medical expenses. For that paper, they surveyed people who had filed bankruptcy and asked them if medical problems forced them to file.

The advantage of Finkelstein’s approach—having years of real-life data, linking bankruptcies and hospitalizations that actually happened rather than asking people for a post hoc explanation—is one of its weakness in Himmelstein’s eyes. “The question really is, does illness cause bankruptcy. And they only count you as having been ill if you were hospitalized. But we know that a huge number of people who were ill were not hospitalized,” he said. “To say that our data is wrong is to say people lied.”

He’s also concerned that Finkelstein and her team’s analysis, which looked only at people who had only been hospitalized once in a three year time period, leaves out a group of particularly sick people—and potentially a group that’s at the highest risk of a medical bill-related bankruptcy.

Though they may disagree about the numbers, both Himmelstein and Finkelstein agree on one thing: the problem with high medical bills is not necessarily one that health insurance can solve. Though high deductible plans may strain many Americans’ savings, the majority of hospital bills are already taken care of by insurance. Strengthening social safety net programs might be able to mitigate the financial impact of serious illnesses—something Himmelstein said he’d like to see. “If that’s the result, that would be great,” he said—but he’s skeptical that Finkelstein’s results will really be interpreted as an endorsement of something like a stronger disability insurance program. “I think it’s much more likely that it’s going to be used to scoff at the real problems that people have paying for care.”

Finkelstein, at least, certainly isn’t scoffing. Problems absolutely exist, but “we’re saying, don’t focus on bankruptcy, focus on earnings and employment,” she said. “My hope, as a researcher, is that policy discussions and policy proposals are based on a better understanding of what the actual problems are.”

http://www.newsweek.com…

What’s So Good About Health Care?

By Eric Salk, M.D.
The New York Times, Letters, March 21, 2018

To the Editor:

Re: “Why Is U.S. Health Care So Expensive? Some of the Reasons You’ve Heard Turn Out to Be Myths” (The Upshot, March 13):

It’s true that “analysts are fond of describing the system as wasteful, with too many patients getting too many services.” But those of us on the front lines know that large segments of the population have no real access to quality medical care, and even those with “good insurance” struggle through a maze of barriers and increased costs.

The United States has some of the highest administrative costs in the world because of our fractured, multipayer, profit-based system. Private insurers add zero value but drive up costs through administrative waste and profiteering, and require hospitals and doctors to maintain complex billing and cost-tracking bureaucracies.

While no system is perfect, we have an excellent solution in the form of Medicare. A single-payer plan like H.R. 676, “Medicare for All,” could save an estimated $617 billion a year by slashing administrative waste in the private insurance industry ($504 billion) and bargaining down drug prices ($113 billion), freeing up money for universal coverage without any net increase in health spending.

Dr. Salk is medical director of emergency medicine at the Charlotte Hungerford Hospital.

https://www.nytimes.com…

Getting Sick Can Be Really Expensive, Even for the Insured

Beyond medical costs, a trip to the hospital can mean a permanent reduction in income for many Americans, new research shows.

By Margot Sanger-Katz
New York Times, March 21, 2018

NYT Graph 001

When you get really sick, the medical bills may not be your biggest financial shock.

New research shows that for a substantial fraction of Americans, a trip to the hospital can mean a permanent reduction in income. Some people bounce right back, but many never work as much again. On average, people in their 50s who are admitted to the hospital will experience a 20 percent drop in income that persists for years. Over all, income losses dwarfed the direct costs of medical care.

The pattern and impact are comparable to what happens to workers at a mill when it closes.

The authors of the paper, published in The American Economic Review, were surprised by how often an illness or injury could upend the finances of Americans with health insurance.

“I had sort of  assumed that if they had health insurance, then they had economic protections against health shocks,” said Amy Finkelstein, an economist at M.I.T. and an author of the paper.  “I hadn’t thought about the idea that even with the best gold-plated, fancy health insurance, you could still have a lot of economic risk.”

The researchers focused on hospitalization because it’s one of the easiest ways to pinpoint when a person’s health declines substantially.  They looked at people who had heart attacks, strokes or knee replacements, as well as those who contracted pneumonia or were hit by cars. The only cause of hospitalization they excluded was childbirth.

Hospitalization can cost thousands (or tens of thousands) of dollars, which is why health insurance has been shown in study after study — including a seminal one of Oregon patients in which Ms. Finkelstein was a co-author — to greatly improve the financial security of people who experience illness or injury.

Obamacare brought new insurance coverage to some 20 million Americans, and that coverage has seemed to make them more financially secure. Low-income people in states that expanded Medicaid appear to have fewer medical debts and bills in collections. Fewer of them are avoiding medical care because of the cost.

But the costs of illness are not always limited to medical bills. Being sick can make it hard to work. Though people who had insurance were better protected from hospital bills than people who were uninsured, both groups faced a substantial risk that they would lose income, and a substantially increased chance that they would declare bankruptcy after leaving the hospital.

On average, uninsured people in the study owed the hospital $6,000, compared with only $300 for those with insurance. But the average decline in income for both groups was much larger — an average earnings hit of $11,000 by the third year.  Much of that average — around 60 percent — came from people who never returned to work at all.

NYT Graph 002

Other research supports the notion that serious medical problems are associated with work interruptions. A 2015 survey conducted by The Upshot and the Kaiser Family Foundation found that, among people struggling to pay medical bills, 29 percent said their illness or injury had led to a drop in household income. In general, the United States doesn’t provide much sick leave, disability or wage insurance to protect people from those kinds of costs.

Yolanda Carrero, who got a diagnosis of breast cancer in 2014,  loved her job in the infant room at a day care. She was fortunate to have health insurance from the day care, where she had worked for 14 years, and short-term disability insurance. She thought she’d need only a few weeks off to recover from a mastectomy. But an infection led to two more operations, and she missed three months of work.

Then, when she returned, she couldn’t lift the infants or sit on the floor with them anymore. Her employer supported her, moving her to another assignment and allowing her to scale back to part-time hours, but the shift was a big financial hit. Her adult son was living with her and helped pick up the slack. “I couldn’t even afford the rent,”  said Ms. Carrero, who lives in Holladay, Utah. “That was a rough few years.”

Ms. Carrero, 49, fared better than many people in the study. After a few years, she left the day care and moved to an advertising agency. She says she misses the children, but the new job is less physically taxing and pays more.

The researchers looked at two major sources of data to understand the financial consequences of a big health shock. One was a large government survey of people in their 50s and 60s. That survey followed people over time, and asked them whether they’d been hospitalized, whether they were working, and how much they were earning. The survey produced the results about the specific income changes that came after a hospitalization. (The income drops might be smaller for younger people, who are further from retirement.)

The team also looked at a big California database of everyone over 24 who was admitted to the hospital, data it was able to match with individual credit reports (names were hidden). The credit report data showed that people’s overall spending tended to go down and stay down for years after a hospitalization, suggesting a drop in income. It also showed large increases in the risk of bankruptcy among people who were hospitalized.

Some people who go to the hospital probably end up with disabilities that make it hard or impossible for them to work. Others may just get knocked off their career trajectories if they must leave a job temporarily while recovering from illness. Other research in economics shows that career hitches, like taking a break to have a child or graduating from college during a recession, can have long-term consequences for people’s earnings, just like plant closings. A health shock may follow that pattern.

“It makes me wonder: What exactly does insurance insure against, and is that the thing that we really want it to insure against?” said Benedic Ippolito, a health economist at the American Enterprise Institute, who has studied medical debt.

To the authors, the lesson of the paper is that standard health insurance isn’t enough — policymakers need to think about ways to better protect people against the income risks that accompany illness. In Denmark, for example, similar reductions in income have been found after hospitalizations, but government programs help replace some of the losses, lessening people’s financial burden. Such programs, to expand wage insurance, sick leave or disability insurance, would require new resources from the government or employers.

“We just don’t have as robust of a system that protects people against large changes in their household income,” said Matt Notowidigdo, an economist at Northwestern University, and another co-author of the paper.

In their study of California patients, the researchers found that hospitalized older Americans, who typically earn Social Security income and tend to be retired, didn’t have the same heightened risk of bankruptcy as their younger peers. It was another indication that what we often think about as medical bankruptcy may be more about how sickness affects work than the cost of medical bills.

David Himmelstein, a professor of public health at Hunter College, was the co-author of a much-cited paper estimating that medical problems were responsible for a large proportion of American bankruptcies. (Another co-author was the Harvard Law professor Elizabeth Warren, now a Massachusetts senator.) Dr. Himmelstein said, based on his research and his experience as a physician, that he wasn’t surprised to see how lost work was contributing to the financial travails of the sick. His original paper called not just for health insurance, but also for disability insurance.

“It’s why when we wrote about this we titled our paper ‘illness and injury’ as a cause of bankruptcy, not ‘medical expenses’ as a cause of bankruptcy,” he said.

https://www.nytimes.com…

High US drug prices are not due to other nations’ free riding

Trump blames free riding foreign states for high US drug prices

By Donald W Light, Arthur L Caplan
BMJ, March 16, 2018

Why are drug prices in the US so high? In a recent and long awaited white paper, the US Council of Economic Advisers provides erroneous answers to a problem that is threatening household, state, and national budgets.

The advisers tell the White House and Congress that other affluent countries in the Organisation for Economic Cooperation and Development (OECD) force drug companies to overcharge Americans because “centralized pricing” in these countries sets prices so low that they act as “foreign free riders,” who allegedly fail to pay for the cost of research and development. As explained in The BMJ years ago and updated here, industry leaders, the US trade association for pharmaceuticals, and the commissioner of the FDA made this claim in the early 2000s to redirect widespread anger at high prices. Independent reports and evidence then and now indicate that prices for patented drugs in other affluent countries such as the UK and Canada do pay for research and development. Higher prices in the US simply generate extra profits.

Take for example the UK’s Pharmaceutical Price Regulation Scheme. Even the UK pharmaceutical trade association says it’s an “integrated, holistic agreement” that supports innovative research, economic growth, and industry vitality by letting companies set their prices on new drugs to cover documented costs and fair profits. Unlike the US, the UK policy features transparency, accountability, and fairness. It also supports innovative new companies better. The resulting UK prices are among the lowest in Europe. Prices are 231% higher in the US.

US system failure

Companies charge much more in the US because it has no system for dealing with the fact that about 90% of newly approved drugs add few or no clinical benefits since regulators do not require evidence that they do. Most drug research aims to generate new patents on minor variations in order to charge patent protected prices. Safety evidence is so weak that one in four new drugs results in serious harm.

American laws and practices allow companies to charge any price they like and to keep raising prices on older drugs.

Relentless promotion of the “foreign free rider” claim by industry supported science writers, policy experts, journalists, and lobbyists has nearly every policy maker furious and ready to make other countries pay up. Yet the whole story makes no sense.

The economic advisers urge the White House and Congress to force other countries to raise their prices in order to lower US prices, but companies do not act that way. For example, so called free trade agreements require all trading partners to raise patent trade barriers for prescription drugs that protect high prices. The resulting higher drug prices in other countries have not lowered US prices. They have just made new drugs less affordable to millions of people with treatable conditions.

The economic advisers note that while the US paid $270bn (£195bn; €220bn) for patented drugs in 2016, OECD countries paid more—$316bn. This is hardly a free ride. Most OECD countries also spend more of their healthcare budgets on drugs than does the United States. Trump’s economic advisers fail to report that dollar for dollar, European researchers have developed more first-in-class and global drugs than US researchers.

Trump’s economic advisers should tell the White House, Congress, and Americans that they could and should pay far less than companies currently charge them. Americans are not subsidising research costs for Europe and the OECD. The advisers should recommend requiring that payers first obtain direct evidence that new drugs will benefit patients, and that they are safe. US prices could be much lower if a national value based pricing programme is put in place that provides reasonable profits as well as covering verifiable costs for research, production, and distribution of new drugs that are demonstrably better for patients than the old ones.

http://www.bmj.com…

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Comment:

By Don McCanne, M.D.

In this article, Donald Light and Arthur Caplan help to dispel some of the excuses given for outrageous drug pricing in the United States, especially the myth that our drug prices are higher because of other nations’ free riding on our drug research.

We rely too heavily on the private sector and markets to set drug prices. When the private sector is failing, the government needs to step in. We do not have to nationalize the drug industry, but we need much more effective regulation. If we don’t we’ll soon have new products priced at seven figures; there are already many at six figures. We really can’t afford that.

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We need a system that puts health over profits

Private insurance prevented me from treating my flu patients. We need a system that puts health over profits.

By Mat Kladney, M.D.
Reno (Nev.) Gazette Journal, March 20, 2018

This year’s flu season has been particularly nasty, with more than 4,000 people dying from the virus every week. What’s even worse is that this year’s vaccine was not particularly effective, only preventing flu in about 30 percent those who got a shot. During the past two months, many patients have come to my clinic seeking care for influenza. Fortunately, we can prescribe Oseltamivir (Tamiflu), a treatment for patients who seek care within the first two days of illness. This treatment shortens the length and severity of illness associated with influenza, and also decreases the spread of the virus from person to person, which is absolutely key in preventing further infections.

Because this medication is only effective if given during the first two days of illness, it is crucial that it is given as soon as a diagnosis of influenza is made. This month I diagnosed a patient with influenza and prescribed her Oseltamivir (along with plenty of fluids, handwashing and rest). She went to the pharmacy and was told that her insurance would not pay for her medication without a prior authorization, a fancy term for “your doctor needs to speak with the insurance company in order to have this treatment covered.” By the time I was able to obtain the prior authorization for her treatment, the 48-hour window had passed, rendering the treatment useless.

Prior authorizations are used by insurance companies to reduce costs by guiding physicians towards cheaper options or medications. Such treatments are favored due to business agreements between pharmaceutical and insurance companies. By denying access to Oseltamivir, the insurance company placed countless people at risk of contracting the flu and my patient at risk of complications like pneumonia, respiratory failure and death. Additionally, the insurance company saved about $120, the cost of one course of Oseltamivir.

The prior authorization process is another symptom of our broken health care system, where private insurers decide that profits are more valuable than health. The perverse system gives insurance companies no incentive to promote community health. We must not forget that an insurance company is just that — a company, motivated by shareholder profits and driven by greed rather than health. My patient and her friends, neighbors and family were placed at risk for $120!

What is the solution to this broken system where greed trumps patient health? Adopting a single-payer health care system will take profits out of the equation and return the focus to patient and community health. Countries around the world have proven that such a system is possible by providing high-quality care at a significantly lower cost than what we pay in the U.S. We keep telling ourselves that competition and market forces will drive costs down, but decades of experience have shown this to be untrue for health care. Our health care costs continue to rise because a market-based system prioritizes profits — the opposite of what I want my health care provider thinking about when caring for me.

Bernie Sanders has been advocating for a Medicare-for-all system for years and recently introduced S.1804, The Medicare for All Act of 2017. Like H.R. 676 in the House, it would improve Medicare by covering all medically necessary care, including dental, vision and long-term care, and expand the program to cover everyone in the U.S., regardless of age, income or employment. These bills would develop a single-payer system in the United States and eliminate the waste, complexity and greed of private insurance. Our current health care system is bankrupting our country and costs will continue to rise as long as we have prioritized profit over health.

Dr. Mat Kladney is the chief resident for the Montefiore Medical Center/Albert Einstein School of Medicine primary care and social internal medicine residency program.

http://www.rgj.com…

Impact of prior authorization on patients and physicians

2017 AMA Prior Authorization Physician Survey

Survey conducted December, 2017

Patient Impact

Average wait time for PA responses

Q: In the last week, how long on average did you and your staff need to wait for a prior authorization (PA) decision from health plans?

64% report waiting at least one business day
30% report waiting at least three business days

Care delays associated with PA

Q: For those patients whose treatment requires PA, how often does this process delay access to necessary care?

92% report care delays

Abandoned treatment associated with PA

Q: For those patients whose treatment requires PA, how often do issues related to this process lead to patients abandoning their recommended course of treatment?

78% report that PA can at least sometimes lead to treatment abandonment

Impact of PA on clinical outcomes

Q: For those patients whose treatment requires PA, what is your perception of the overall impact of this process on patient clinical outcomes?

92% report that PA can have a negative impact on patient clinical outcomes

Physician Impact

Physician perspective on PA burdens

Q: How would you describe the burden associated with PA for the physicians and staff in your practice?

84% report high or extremely high burden

Change in PA burden over last five years

Q: How has the burden associated with PA changed over the last five years for the physicians and staff in your practice?

86% report PA burdens have increased over the past five years

Additional PA practice burden findings

Volume: 29.1 average total PAs per physician per week (13.9 prescription, 15.1 medical)

Time: Average of 14.6 hours (approximately two business days) spent each week by the physician/staff to complete this PA workload

Practice resources: 34% of physicians have staff who work exclusively on PA

Repetition: 79% of physicians are sometimes, often or always required to repeat PAs for prescription medications when a patient is stabilized on a treatment regimen for a chronic condition

https://www.ama-assn.org…

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Comment:

By Don McCanne, M.D.

Prior authorization is unique to our dysfunctional health care financing system here in the United States. It is the requirement that permission be obtained from private insurers to provide certain procedures and services or to prescribe certain medications for the patients. What is its purpose?

Our health care system should be designed to benefit patients. So considering that, prior authorization should refine and improve the heath care recommendations of the patients’ health care professionals. Wait a minute. A distant clerk at an insurance company is going to provide better health care advice than a physician or nurse practitioner at the scene? Of course not. So if prior authorization is not designed to benefit the patient, then what is it for?

To understand that, we need to understand what the private insurance company is for. There are basically two functions. One is to pool risk and redistribute funds based on medical need, though for self-insured employers, the insurers may provide only administrative services. And that is the second function of insurers – to sell us administrative services and as much as the market will bear.

Now take another look at prior authorization. As far as redistributing risk pool funds is concerned, if the insurer creates enough onerous administrative barriers then the patients and their professionals suffer administrative fatigue and may abandon the attempt to receive authorization for beneficial health care services. The insurer is then able to keep the funds that were not drawn out of the risk pool. With persistence, sometimes including appeal processes, almost all prior authorization requests are approved indicating that the services requested are almost invariably appropriate. Prior authorization is designed as a barrier to appropriate care – clearly not beneficial but detrimental to patients.

Why does Wall Street pay so much attention to the medical loss ratio of the insurers – the percentage of premiums that are paid out in medical benefits? It is because the lower the ratio, the greater amount of administrative services that have been sold and thus the greater the profits realized. Under the Affordable Care Act, the medical loss ratio is 15 to 20 percent for private insurers, whereas the medical loss ratio for traditional Medicare – a government program – is under 2 percent. Opponents of Medicare for All complain of the inherent bureaucratic waste of the program, but it is not Medicare, it is the private sector insurers that have mastered how to create and capture that waste.

Our policymakers are still fixated on managed care, but their tool of prior authorization provides just one more demonstration on why the private insurers and their managed care excesses have to go. Look again at the numbers in the AMA survey. Those who claim that the managed care burden is diminishing should note that 86 percent of physicians report that the prior authorization burden has increased over the past five years – since the implementation of the Affordable Care Act. That is a burden for both patients and their health care professionals that we need to dump.

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The Economist: Rent seeking in America’s health care system

Which firms profit most from America’s health-care system

The Economist, Schumpeter, March 15, 2018

Every year America spends about $5,000 more per person on health care than other rich countries do. Yet its people are not any healthier. Where does all the money go? One explanation is waste, with patients wolfing down too many pills and administrators churning out red tape. There is also the cost of services that may be popular and legitimate but do nothing to improve medical outcomes.

The most controversial source of excess spending, though, is rent-seeking by health-care firms. This is when companies extract outsize profits relative to the capital they deploy and risks they take. Schumpeter has estimated the scale of gouging across the health-care system. Although it does not explain the vast bulk of America’s overspending, the sums are big by any other standard, with health-care firms making excess profits of $65bn a year. Surprisingly, the worst offenders are not pharmaceutical firms but an army of corporate health-care middlemen.

In crude terms, the health-care labyrinth comprises six layers, each involving the state, mutual organisations and private firms. People and employers pay insurance companies, which pay opaque aggregators known as pharmacy-benefit managers and preferred provider organisers. They in turn pay doctors, hospitals and pharmacies, which in turn pay wholesalers, who pay the manufacturers of equipment and drugs. Some conglomerates span several layers.

To work out who is stiffing whom, Schumpeter has examined the top 200 American listed health-care firms. Excess profits are calculated as those earned above a 10% return on capital (excluding goodwill), a yardstick of the maximum that should be possible in any perfectly competitive industry.

Total excess profits amount to only about 4% of America’s health-care overspending. But this still makes health care the second biggest of the giant rent-seeking industries that have come to dominate parts of the economy. The excess profits of the health-care firms are equivalent to $200 per American per year, compared with $69 for the telecoms and cable TV industry and $25 captured by the airline oligopoly. Only the five big tech “platform” firms, with a figure of $250, are more brazen gougers.

Everyone hates pharmaceutical firms, but their share of health-care rent-seeking is relatively trivial, especially once you include the many midsized and small firms that are investing heavily. Across the economy, average prices received by drug manufacturers have risen by about 5% per year, net of the rebates. But their costs have risen, too. As a result, even for the 15 biggest global drugs firms, returns on capital have halved since the glory days of the late 1990s, and are now barely above the cost of capital.

As the drug industry has come back down to earth, the returns of the 46 middlemen on the list have soared. Fifteen years ago they accounted for a fifth of industry profits; now their share is 41%. Health-insurance companies generate abnormally high returns, but so do the wholesalers, the benefit managers and the pharmacies. In total middlemen capture $126 of excess profits a year per American, or about two-thirds of the whole industry’s excess profits.

The dark view is that pockets of rent-seeking have become endemic in America’s economy. Wherever products are too complex for customers to understand, and where subsidies and complex regulation add to the muddle, huge profits can opaquely be made.

https://www.economist.com…

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The Price of Inequality

By Joseph E. Stiglitz

Our political system has increasingly been working in ways that increase the inequality of outcomes and reduce equality of opportunity. This should not came as a surprise: we have a political system that gives inordinate power to those at the top, and they have used that power not only to limit the extent of redistribution but also to shape the rules on the game in their favor, and to extract from the public what can only be called large “gifts.” Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by trapping a larger share of the wealth that would otherwise have been produced without their effort. Those at the top have learned to suck out money from the rest in ways that the rest are hardly aware of – that is their true innovation.

http://books.wwnorton.com…

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Comment:

By Don McCanne, M.D.

Joseph Stiglitz defines rent seeking as “getting income not as a reward to creating wealth but by trapping a larger share of the wealth that would otherwise have been produced without their effort.” Investopedia defines it as “obtaining economic gain from others without reciprocating any benefits to society through wealth creation.” Rent seeking is an important phenomenon to understand because it has been a major contributor to the injustices of increasing income and wealth inequality, especially in the United States.

The Economist’s Schumpeter column discusses the middlemen in the U.S. health care system – insurance companies, pharmacy benefit managers, preferred provider organizers, etc. – and describes as rent seeking their all-too-prevalent profits in excess of a 10 percent return on capital. Their share has now grown to 41 percent of industry profits. “In total middlemen capture $126 of excess profits a year per American, or about two-thirds of the whole industry’s excess profits.”

Although this egregious spending is particularly offensive, it is still relatively small compared to the wasted expenditures on high prices and profound administrative excesses in our health care system. But these middlemen add to our high health care costs without providing any additional health care services. If we changed to a well designed single payer national health program – an improved Medicare for all – not only would health care finally be priced fairly and administrate waste dramatically reduced, we would also get rid of these rent seeking leeches.

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Inequitable health care is a national scandal

By G. Richard Dundas, M.D.
Bennington (Maine) Banner, Letters, March 19, 2018

To the Editor:

“Equity” and “equal” have the same derivation. In the case of health care, it means that necessary care would be provided to everyone and not be dependent upon income, social status, race, etc. Is our current system of health care equitable? I think not.

In spite of Obamacare, there are still 28 million of us who are uninsured. There are about 1,500 uninsured people in Bennington. If you had to pay out of pocket, had limited income, and got sick, might you hesitate to go to the doctor?

An additional 18 million of us had a gap in coverage at some point during the year (eg. lost coverage when changing to a different job).

Compared to higher income enrollees, lower income enrollees in high deductible plans use very little preventive care.

– 16 percent reported skipping a recommended test or treatment because of cost.

– 33 percent of non-elderly adults reported a problem paying a medical bill.

– 20 percent of adults do not get their prescriptions filled because they don’t have enough money.

It is clear that economically disadvantaged citizens are not served well by our system of care. Health care has become unaffordable for many (there is no equity). For all of us, health care should be a right. We should not be put in a position in which we have to decide whether to buy medicine or buy groceries.

The cost of health care is literally killing us. Uninsured citizens are dying because the cost of care is so high that they avoid seeking care. Another burden is borne by the working poor who don’t qualify for Medicaid and can’t afford to purchase a policy through Vermont Health Connect. The high cost of an insurance policy (ranging from bronze to platinum) is a real barrier to many, even when they receive a subsidy. It now costs nearly $20,000 per year for a commercial family plan with a low deductible. We spend about twice as much on health care as other wealthy nations, yet important outcomes such as life expectancy are worse.

The cost of health care is also killing the nation. About 19 percent of our gross domestic product goes to payment for health care — almost twice as much as other industrialized countries. If we spend that much on health care, there is less left for other important projects such as infrastructure upgrades, housing, education, etc.

Our health care system, which is based on insurance companies’ profiteering, is a failure. Wouldn’t it be better if we were all insured from birth to death? Wouldn’t it be better if coverage were more comprehensive and included dental, vision, hearing aids, long term care, and negotiated prices for prescription drugs? Wouldn’t it be better if there were no deductibles? Wouldn’t it be better if the cost of care were less? A system change to “Improved Medicare for All” is what is needed. Lack of universal health care is a national scandal. In the coming elections, support a candidate who will work for universal single payer health care.

https://www.benningtonbanner.com…

Andy Slavitt gives his candid views on single payer

Perspectives from Former CMS Administrators: The Path Forward

Healthcare Costs Innovation Summit
West Health, February 21, 2018

Joseph Smith, Moderator: At lunch we talked briefly about millennials and their absence of appetite for complexity, and looking for simpler solutions perhaps. And we talked about how health care is wildly complicated, at least the cost structure around it is wildly complicated, and it can frustrate the understanding of many people in the room. And so you were encouraging us to think about single payer systems as something that a larger cohort of the populous might be interested in. Can you expand on that?

Andy Slavitt: Oh, I think if you asked me and probably most of us two years ago whether or not single payer would even be part of the conversation let alone a real possibility, most of us would have been pretty skeptical. And, you know, I think I’m not as skeptical any longer in large part because I think over the last year public opinion has been really influenced by being exposed to the messiness, messiness that many of the experts in this room probably see every day. But it seems to scare the crap out of the public, and it’s not just people on the left, people on the right as well. Things that are more radical and transformational, more radical than we talk about every day – I mean the stuff we’re talking about is not radical compared to some of these things – find favor in public polling. Now we can all say that they don’t understand and all those other things, but I wouldn’t be so quick to write that off. I think there is a sentiment that is not just among young people but among many that this needs to be part of the conversation, and it’s going to be part of the political dialogue, no matter what. So I think it is that moment, where that has entered the lexicon, has arrived and is arriving, and quite frankly this group probably underrepresents the part of the public that’s pushing it.

http://hcidc.org/about

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Comment:

By Don McCanne, M.D.

As Acting Administrator of CMS under President Obama, Andy Slavitt dutifully supported the implementation of the Affordable Care Act. Since he left office he has led the formation of United States of Care – an organization with the mission “to ensure that every single American has access to quality, affordable health care regardless of health status, social need, or income.”

He tried to make the organization non-partisan but a disproportionate number of the board members are conservative and none of them are active proponents of single payer reform. Some of us were concerned that the crucial topic of single payer might be left out of their deliberations. Thus it is reassuring to see what Slavitt’s candid views are in this Q&A before a meeting heavily attended by members of the medical-industrial complex.

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Why is health care spending in the United States so much greater?

Health Care Spending in the United States and Other High-Income Countries

By Irene Papanicolas, Ph.D.; Liana R. Woskie, M.Sc.; Ashish K. Jha, M.D., M.P.H.
JAMA, March 13, 2018

Key Points

Question: Why is health care spending in the United States so much greater than in other high-income countries?

Findings: In 2016, the United States spent nearly twice as much as 10 high-income countries on medical care and performed less well on many population health outcomes. Contrary to some explanations for high spending, social spending and health care utilization in the United States did not differ substantially from other high-income nations. Prices of labor and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending.

Meaning: Efforts targeting utilization alone are unlikely to reduce the growth in health care spending in the United States; a more concerted effort to reduce prices and administrative costs is likely needed.

From the Discussion

The data also suggest that some of the more common explanations about higher health care spending in the United States, such as underinvestment in social programs, the low primary care/specialist mix, the fee-for-service system encouraging high volumes of care, or defensive medicine leading to overutilization, did not appear to be major drivers of the substantially higher US health care spending compared with other high-income countries. Instead, the data suggest that the main driving factors were likely related to prices, including prices of physician and hospital services, pharmaceuticals, and diagnostic tests, which likely also affected access to care. In addition, administrative costs appeared much higher in the United States. These findings indicate that efforts targeting utilization alone are unlikely to reduce the gap in spending between the United States and other high-income countries, and a more concerted effort to reduce prices and administrative costs is likely needed.

https://jamanetwork.com…

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Comment:

By Don McCanne, M.D.

This consequential study confirms, once again, that the most important contributors to our greater health care spending are high prices and wasteful administrative excesses. It also demonstrates again our underperformance when compared with ten other wealthy nations.

This article is particularly helpful because it also analyzes other factors commonly cited as causes of our high spending, demonstrating that, to the contrary, they are not major drivers of higher spending when compared to other nations. This is really important because having this knowledge is essential when designing policies to correct what is actually wrong with our system.

As an example, our fee-for-service financing has been cited as a driver of high volumes of care which has led to policies that are supposedly designed to replace volume with value which in turn has led to the establishment of intrusive solutions such as accountable care organizations. Yet this study shows that fee-for-service is used in many other nations and has not resulted in health care costs as high as ours. In fact, many of the misguided policy solutions being implemented are actually increasing administrative excesses and increasing total health care spending (e.g., all those computers and their vendors don’t come for free).

There are four editorials accompanying this article, each with a predictable theme (that I perhaps exaggerate to make my points). Ezekiel Emanuel seems hesitant to accept the simple truth of the conclusion and continues to advance the tweaking of Obamacare. Katherine Baicker, supported by Amitabh Chandra, pushes studying minutiae in policy science to meticulously craft new policies to address what are really straightforward problems for which simple solutions already exist. Stephen Parente pushes his typically disconnected thoughts on market-based reform, criticizing the authors for not mapping out “all the important factors that drive this issue.” The editorial that stands out is a tribute to Uwe Reinhardt by Editor in Chief Howard Bauchner and Executive Editor Phil Fontanarosa, reminding us of Reinhardt’s regrets that we tolerate such a great social injustice.

The ideal solution to the problems of high prices and administrative excesses is a well designed single payer system. Not only would that meet the problem of high spending head on, it would also correct many of our other problems – ending uninsurance and underinsurance while reducing inequity, maldistribution of resources, impaired access, and some of the other serious flaws in our system.

JAMA has provided free access to this article. It will be a classic, so it should be downloaded as an important resource for crafting and advocating for sound policies based on actual facts rather than ideology, pipe dreams, and wishing upon stars. When others try to ram through their pet solutions, we can hold up this policy cross constructed of facts to ward off the policy vampires. (Okay, too cute. But this detailed ten page paper plus supplementary material will provide an abundance of solid facts which is the best antidote to policy folly.)

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California ‘Select Committee’ report has important lessons for the U.S.

Single-payer bill all but dead this year as California lawmakers craft new health package

By Angels Hart
The Sacramento Bee, March 13, 2018

California Democratic lawmakers are quietly working on a package of up to 20 health care bills that would soften the political blow from the all-but-certain death of a single-payer universal care bill this year.

Senate Bill 562 cleared the Senate last year but stalled in the Assembly when Speaker Anthony Rendon blasted it as “woefully incomplete.” The legislation still lacks a plan to cover its $400 billion price tag, a way to control rising health care costs and a strategy to secure federal waivers needed from the Trump administration.

Rendon has not formally killed the bill, but he told The Sacramento Bee earlier this month that a fresh health care package is in the works – the clearest sign yet that Senate Bill 562 is dead.

Democratic Assemblymen Jim Wood of Healdsburg and Joaquin Arambula of Fresno, who chair a special health committee formed by Rendon last year after the single-payer bill passed the Senate, said Tuesday they are eying legislation this year that seeks to improve quality, expand access and lower rising health care costs.

Both expressed doubt, however, that single-payer bill could move forward this year.

“I would say single-payer is not a reality this year because of the complexity of the steps that we need to go through,” Wood said.

To capture current federal health care funding and use it to fund a state-based single-payer system, California would have to secure numerous federal waivers. Voters would likely have to approve changes to the state Constitution and massive tax increases would be required.

Wood and Arambula declined to say what specific bills they’re planning to introduce, but said they’re considering legislation based on a broad set of recommendations released Tuesday by a trio of health policy experts who produced a report analyzing the committee’s work over the past four months in identifying a path forward on universal care.

Wood said he’d like to focus on a politically and financially obtainable approach to creating a universal health care system.

“I think that our report, our hearings illustrate pretty clearly that you can’t go from concept to execution of a complicated, complex, completely transformative system in a really short amount of time,” Wood said. “If you read our report…you’ll understand a little better why we couldn’t just pass 562 and the next day everybody has health care. It just can’t work that way.”

Assemblywoman Laura Friedman, D-Glendale, said she’s contemplating a bill that would establish a single-payer system in future years — once other benchmarks are met, such as achieving specific cost containment goals and obtaining needed federal waivers.

“I’m looking at legislation we could adopt that sets up a roadmap to single payer, just like we have with (Assembly Bill 32) that gives us a roadmap to reducing greenhouse gas emissions,” Friedman said. “I’m also very interested in what can give people very real relief in the short-term.”

http://www.sacbee.com…

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A Path to Universal Coverage and Unified Health Care Financing in California

By Andrew B. Bindman, MD, Marian Mulkey, M.P.P., M.P.H., and Richard Kronick, Ph.D.
University of California, San Francisco, March 12, 2018

The California State Assembly contracted with the University of California San Francisco in order for the authors of this report to (a) serve as research and subject matter experts to the co-chairs of the Select Committee on Health Care Delivery Systems and Universal Coverage (Select Committee) ; (b) assist in fact-finding for Select Committee hearing preparation; (c) attend Select Committee hearings and summarize the content of the hearings; (d) assist Select Committee in identifying and analyzing the components of a sustainable and affordable universal health care system; and (e) provide a report to Select Committee summarizing the Select Committee’s hearings, including any findings and potential options.

This report reflects the authors’ attempts to explain information that emerged from the six  Select Committee hearings and yo assemble the findings from the hearing into a coherent set of possible recommendations for the California Assembly.

This report describes health coverage and care in California and identifies remaining challenges related to access, coordination, and cost. It presents a range of options to expand coverage, address issues of fragmentation and cost under our current mixed public-private financing system, followed by options and considerations should the state move toward a state-based publicly financed approach. It concludes with a discussion of potential paths forward in the near future and over the longer term.

Conclusion

California has established itself as a leader in using the opportunities created by the Affordable Care Act to increase insurance coverage. Building on that foundation, as discussed during the hearings and summarized in this report, state leaders can take steps now to make coverage more widely available, increasing coverage from its current level of 93% to very close to 100%. Further, state leaders can take steps to reduce financial barriers to care for people who are insured. Something close to universal coverage can be achieved even with continuation of the current fragmented system in which Medicare, Medi-Cal, employer-sponsored insurance and the individual market continue to be the main channels through which Californians obtain coverage.

Testimony during the hearings also suggested a number of options for mitigating the deleterious effects of fragmentation and reducing the rate of growth of health spending within the context of a fragmented financing system. This report has summarized many of those suggestions and provided an assessment of the some of their major advantages and disadvantages.

Many people who testified during the hearings also voiced the opinion that the surest way to achieve universal coverage and the most likely way to substantially improve equity, quality and efficiency would be to implement a system of unified public financing. Under such a system, all Californians would have health insurance coverage by virtue of living in the state, and the separate coverage systems of Medicare, Medi-Cal, employer sponsored insurance and the individual market would be eliminated.

However, testimony also made clear that there are substantial legal, political and technical obstacles to implementing such a system. Substantial changes in federal law and federal waivers would be required to transform Medicare, Medi-Cal and the funds used for premium tax credits for Covered California enrollees into a system of unified public financing, and to allow the federal government to transfer funds to California in lieu of continuing to pay for Medicare, the federal portion of Medi-Cal and premium tax credits. In addition, the state would need to raise new revenue to replace most of the money currently spent by employers and employees for employer-sponsored insurance.

While there are obvious shortcomings in the design and implementation of the Medicare program, the Medi-Cal program, employer-sponsored insurance, and Covered California, 93% of Californians currently have insurance through one of these channels. Transitioning the vast majority of Californians into a new system of coverage, which does not have an established track record in the state, involves uncertainty and some risk. Policymakers have a responsibility to educate the public about the benefits and risks of various options to provide health care coverage and to incorporate the public’s values and priorities into their decision-making.

Short-term changes to increase coverage and improve equity, quality, and efficiency make sense given uncertain prospects and a multi-year timeline for achieving unified public financing. This is particularly true if short term changes are pursued in ways that facilitate rather than impede a potential future transition to unified public financing. Short-term efforts to expand coverage, improve access, reduce fragmentation, and improve transparency, coupled with development of a longer-term path toward unified public financing, would help secure a future in which all Californians have access to the health care they need and deserve.

http://healthcare.assembly.ca.gov…

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Comment:

By Don McCanne, M.D.

Those following the latest single payer effort in California know that SB 562 passed the Senate but has been held back in the Assembly, substituting in its place a series of hearings by the Select Committee on Health Care Delivery Systems and Universal Coverage to be followed by a report of its findings. That report has now been released.

It was known from the beginning that this was not an effort to advance SB 562, the stalled single payer bill, but rather it was an elaborate effort to build support for incremental measures that would build on our current system. The report does make such recommendations. Statements from the legislators involved have made it clear that the process for SB 562 would be too complex to move forward with the legislation at this time. They say that they will now introduce a package of bills in support of some of the incremental steps proposed in the Select Committee report.

The report did not remain silent on “a unified, publicly financed approach that assures coverage for all state residents; pools funds for health coverage across Medicare, Medi-Cal and other major financing sources and dramatically reduces or eliminates variations in eligibility, benefits and payments” (what we would refer to as single payer). Much to its credit it did discuss some of the many considerations that would have to be addressed to achieve such a goal. They explain why the barriers are formidable as far as enacting single payer legislation in this session of the state legislature.

That said, they do discuss in general terms a roadmap to achieve unified public financing in California. They suggest establishing a planning commission tasked with resolving design features, overseeing analyses of options for financing, recommending a management plan, educating the public regarding the proposed changes, assist in the drafting of state legislation and ballot propositions necessary to implement recommendations, and then assist state policymakers in drafting needed federal statutory changes, developing federal waiver requests, and negotiating with the federal executive branch and Congress. They say that at a minimum this would require a multi-year process.

How many times do we have to start the multi-year process all over again?

It looks like California will move forward with patching ACA, even though that is the most expensive model of reform and falls far short of our goals. So the lesson is, don’t depend on California to lead the way, at least anytime soon. Medicare did not start in one state. A bona fide single payer Medicare for all will not either. California has shown us once again that we need to get on with enacting a national single payer program – an improved Medicare for all.

SB 562 may be dead this year, but the dream of single payer is alive and well.

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Michigan Medicine selling queue jumping to the wealthy

Exclusive U-M medical plan buys you 'better' care, special access

By David Jesse
Detroit Free Press, March 9, 2018

Michigan Medicine — the health system owned by the University of Michigan — is drawing fire from its own staff over a plan to offer personalized service, reduced waiting times and preferential access to physicians for a hefty yearly fee.

The plan, part of the growing nationwide movement known as concierge care, is drawing protests from U-M doctors who are concerned it strays from the institution’s public mission. The program is currently enrolling patients.

“Victors Care purports to offer ‘better’ health care to those with enough money to pay a large access fee,” says a letter sent to the health system’s administration by 200 doctors and staff. “The University of Michigan is a public institution and our commitment is to serve the public, not a private few. We do not feel this is the role of a state university and are unable to justify this to the patients and families we serve.”

The program works like this, according to the Victors Care website: People interested in the program pay a yearly fee — $2,700 now, going up to $3,600 after July 1. In exchange, the program promises shorter waits in waiting rooms, more face time with doctors, 24-hour access to a doctor via e-mail and the doctor’s cell phone number, and “assistance” with scheduling tests and other specialty appointments.

“We urge Michigan Medicine leadership to focus on increasing access for all of our patients,” the letter from the Michigan Medicine staff says. “We need greater efforts to improve infrastructure, space, and clinic support for all. We are eager to promote and strengthen primary care services at the University of Michigan, but we feel strongly this should be done for all patients, not based on their ability to pay.”

Susan Goold, professor of internal medicine and health management and policy, said she believes there are ethical questions that must be addressed.

“Does this make it harder for people who don’t pay for Victors Care to see their doctor or get in to get a test they need done?” she told the Free Press. “That’s an issue of fairness for a public university. It’s not just because it’s supported by public dollars, but our mission — we serve the public.”

https://www.freep.com…

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Comment:

By Don McCanne, M.D.

Should wealthy patients have a right to buy their way to the front of a queue?

Or instead should we ask if we’ve optimized our health care resources to ensure appropriate capacity and queue management to prevent excessive queues for everyone? Rather than devoting resources to cater to the wealthy by allowing them to bypass problems in the system, wouldn’t it be better to use our resources to resolve those problems and improve the system for everyone?

The wealthy have a much greater political voice than the rest of us. If the health care system treats the wealthy the same as the rest of us, then if the system is not performing well they would be motivated to advocate for reform. If the system performs well for them but worse for everyone else, they may not be sensitive to the issues and thus not as motivated to advocate for improvement.

Then there is the matter of fairness. At the DMV, or at the post office, or at the checkout line of the supermarket, usually there is some effort to manage the queues (DMV appointments, quick check line, etc.), but we would still be offended if the wealthy were moved into the front of the line. In health care, which should be a fundamental right for all, we should be even more sensitive about queue jumping.

There is debate as to whether Americans are less egalitarian than citizens of other nations, but, regardless, we still do have some sense of fairness. Except for medical problems of great urgency, queue jumping is never fair, and we should not institutionalize it.

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