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Using Canada's Health System as Model Might Cut U.S. Costs: Study

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Using Canada's Health System as Model Might Cut U.S. Costs: Study

By Steven Reinberg, HealthDay Reporter
U.S. News and World Report, Oct. 30, 2012

TUESDAY, Oct. 30 (HealthDay News) — Since 1980, health care costs in the United States could have been about $2.15 trillion less if Canadian cost-saving measures had been used, according to a new study.

Over the same period, health care spending in the United States grew nearly three times faster than in Canada’s Medicare program, even though Canadian law bans co-payments and deductibles, the City University of New York researchers noted.

“Canada’s Medicare program has been much more successful in controlling costs than the U.S. Medicare program,” said Dr. Steffie Woolhandler, a professor in CUNY’s School of Public Health.

Many factors play into the difference, Woolhandler said.

“Canada’s system is a real single-payer system — our system is single-payer for only a portion of the population,” she said.

This results in higher administrative costs in the United States compared to Canada, Woolhandler said. “In the U.S., administrative costs are about 31 percent of health care costs and it’s about 16 percent in Canada,” she said.

In addition, hospitals in Canada are paid less than in the United States. Also, the Canadian government negotiates drug prices to get the lowest cost, while the U.S. government is prohibited by law from negotiating drug costs for Medicare patients, Woolhandler said.

Medical malpractice costs also are lower in Canada, she noted.

Even though costs are lower in Canada, health outcomes are akin to the those for the United States, Woolhandler said.

“Canadians’ life expectancy is longer than in the United States,” she said. “Access to care is better in Canada.”

In the United States, access to care is limited by costs, Woolhandler said. One criticism of the Canadian system is that people have to wait for care, but Woolhandler says those who have to wait are only a small minority of patients.

Woolhandler, who was a founder of Physicians for a National Health Program, is an advocate for a true single-payer system in the United States.

“The Unites States has serious problems with costs of health care generally and costs of Medicare specifically,” she said. “We need to look at the cost-control methods used in Canada that have worked rather than unproven methods proposed by politicians that are unlikely to work.”

The report was published in the Oct. 29 issue of the journal Archives of Internal Medicine.

For the study, Woolhandler and Dr. David Himmelstein, also a professor in the CUNY School of Public Health, analyzed American and Canadian Medicare spending.

They found, after adjusting for inflation, U.S. Medicare spending rose almost 200 percent from 1980 to 2009; Canada’s rose 73 percent.

Woolhandler noted that some politicians want to replace Medicare with a voucher system that seniors could use to buy health insurance. Others advocate incentives to limit care. Neither option is a proven way of cutting costs, Woolhandler said.

One critic says the analysis by Woolhandler and Himmelstein is “superficial” and doesn’t take into account the differences between the United States and Canada.

“There are a hundred other reasons for the differences, which are difficult to disentangle about how we practice medicine in the U.S.,” said Stuart Altman, a distinguished professor of national health policy at Brandeis University’s Heller School for Social Policy and Management, in Waltham, Mass.

The U.S. medical care system is more expensive to run, he said. For one thing, people in medicine in the United States make more money than in Canada, Altman said.

Altman said there is really no way to bring costs down in the United States.

“We are trying to do that,” he said. “We are trying to rearrange the delivery system to be more efficient, but once we have climbed up that ladder and created this delivery system, it’s very hard to climb back down.”

“The only hope we have is to slow the rate of growth,” Altman said. “There is no way, short of a catastrophe, to walk down that ladder and bring our health care system to look like Canada or anyone else.”

“Health care in other countries is a social service,” he said. “In the United States, it’s big business.”

More information

For more information on U.S. health care costs, visit the Kaiser Family Foundation.

Copyright © 2012 HealthDay. All rights reserved.

http://health.usnews.com/health-news/news/articles/2012/10/30/using-canadas-health-system-as-model-might-cut-us-costs-study

Using Canada’s Health System as Model Might Cut U.S. Costs: Study

By Steven Reinberg, HealthDay Reporter
U.S. News and World Report, Oct. 30, 2012

TUESDAY, Oct. 30 (HealthDay News) — Since 1980, health care costs in the United States could have been about $2.15 trillion less if Canadian cost-saving measures had been used, according to a new study.

Over the same period, health care spending in the United States grew nearly three times faster than in Canada’s Medicare program, even though Canadian law bans co-payments and deductibles, the City University of New York researchers noted.

“Canada’s Medicare program has been much more successful in controlling costs than the U.S. Medicare program,” said Dr. Steffie Woolhandler, a professor in CUNY’s School of Public Health.

Many factors play into the difference, Woolhandler said.

“Canada’s system is a real single-payer system — our system is single-payer for only a portion of the population,” she said.

This results in higher administrative costs in the United States compared to Canada, Woolhandler said. “In the U.S., administrative costs are about 31 percent of health care costs and it’s about 16 percent in Canada,” she said.

In addition, hospitals in Canada are paid less than in the United States. Also, the Canadian government negotiates drug prices to get the lowest cost, while the U.S. government is prohibited by law from negotiating drug costs for Medicare patients, Woolhandler said.

Medical malpractice costs also are lower in Canada, she noted.

Even though costs are lower in Canada, health outcomes are akin to the those for the United States, Woolhandler said.

“Canadians’ life expectancy is longer than in the United States,” she said. “Access to care is better in Canada.”

In the United States, access to care is limited by costs, Woolhandler said. One criticism of the Canadian system is that people have to wait for care, but Woolhandler says those who have to wait are only a small minority of patients.

Woolhandler, who was a founder of Physicians for a National Health Program, is an advocate for a true single-payer system in the United States.

“The Unites States has serious problems with costs of health care generally and costs of Medicare specifically,” she said. “We need to look at the cost-control methods used in Canada that have worked rather than unproven methods proposed by politicians that are unlikely to work.”

The report was published in the Oct. 29 issue of the journal Archives of Internal Medicine.

For the study, Woolhandler and Dr. David Himmelstein, also a professor in the CUNY School of Public Health, analyzed American and Canadian Medicare spending.

They found, after adjusting for inflation, U.S. Medicare spending rose almost 200 percent from 1980 to 2009; Canada’s rose 73 percent.

Woolhandler noted that some politicians want to replace Medicare with a voucher system that seniors could use to buy health insurance. Others advocate incentives to limit care. Neither option is a proven way of cutting costs, Woolhandler said.

One critic says the analysis by Woolhandler and Himmelstein is “superficial” and doesn’t take into account the differences between the United States and Canada.

“There are a hundred other reasons for the differences, which are difficult to disentangle about how we practice medicine in the U.S.,” said Stuart Altman, a distinguished professor of national health policy at Brandeis University’s Heller School for Social Policy and Management, in Waltham, Mass.

The U.S. medical care system is more expensive to run, he said. For one thing, people in medicine in the United States make more money than in Canada, Altman said.

Altman said there is really no way to bring costs down in the United States.

“We are trying to do that,” he said. “We are trying to rearrange the delivery system to be more efficient, but once we have climbed up that ladder and created this delivery system, it’s very hard to climb back down.”

“The only hope we have is to slow the rate of growth,” Altman said. “There is no way, short of a catastrophe, to walk down that ladder and bring our health care system to look like Canada or anyone else.”

“Health care in other countries is a social service,” he said. “In the United States, it’s big business.”

More information

For more information on U.S. health care costs, visit the Kaiser Family Foundation.

Copyright © 2012 HealthDay. All rights reserved.

http://health.usnews.com/health-news/news/articles/2012/10/30/using-canadas-health-system-as-model-might-cut-us-costs-study

What Canada can teach us about fixing Medicare

By Sarah Kliff
The Washington Post, Wonk Blog, Oct. 30, 2012

There are a lot of big differences between health care in the United States and Canada. But when you look at how the two countries provide care for the elderly, it’s actually pretty similar. Both countries run an insurance plan for those over 64 that covers a defined set of benefits.

Canada has managed to provide those benefits, however, for a whole lot less. In this week’s Archives of Internal Medicine, David Himmelstein and Steffie Woolhandler look at the growth of spending on the elderly in the United States and Canada. It finds that, for the over 64 population, both in government programs, Medicare spending has grown significantly faster in the United States than in Canada.

Back in 1980, Medicare spent an average of $1,215 on each beneficiary. In Canada, that number stood at $2,141. The difference largely had to do with the level of benefits: Canadian health insurance covers about 80 percent of seniors’ medical costs, whereas Medicare covers about half. (More than 40 percent of Medicare beneficiaries will spend all assets on out-of-pocket costs during the last five years of life, according to one study.)

Since then, United States per capita spending has grown three times as quickly as it has in Canada. Here’s what that looks like in graph form, using data from the Himmelstein and Woolhandler study:

Per capita health spending growth in the elderly population, 1981-2009

If American health spending on seniors had grown at the Canadian rate, Himmelstein and Woolhander estimate we would have spent $2.1 trillion less on Medicare benefits in the past three decades.

There are certain parts of the Canadian health-care system that would be pretty hard to replicate here in the United States.. One reason Canadian seniors’ coverage costs less is that they’re part of a universal coverage system, where everyone receives government-sponsored insurance. Having everyone in the same purchasing pool makes it easier for the government to negotiate lower rates. This also lowers administrative costs, as all health spending flows through one payer.

Medicare already has a lot of leverage in the United States, with over 50 million members. Getting even more leverage would mean adding more members — in other words, a more nationalized system like Canada’s.

Canada also works under a global budget for its health-care spending: It sets a finite amount that it’s willing to spend on medical care, and figures out how much it will pay doctors within those confines. The United States hasn’t usually been friendly to global budgets — there’s concern about coverage becoming too skimpy — although there is recent movement in this direction. Massachusetts recently became the first state to set a global cap on its health-care spending.

Himmelstein and Woolhandler point out that the Canadian system relies more on primary care doctors, who make up 51 percent of the physician population. In the United States, that number stands at 32 percent. “Primary care–centered health systems are,” they note, “Generally thriftier.”

That’s one change that could, theoretically, happen in the United States. It would, however, likely involve a trade-off, as fewer specialty doctors mean longer wait times to see a specialist. A Commonwealth Fund survey in 2010 found that 59 percent of respondents reported waiting more than four weeks for an appointment with a specialist, more than double the number in the United States.

This isn’t necessarily a trade-off on quality; Canada tends to do pretty well when it comes to international comparisons of health-care outcomes. It would, however, be a big change from how we deliver health care in the United States right now, with much easier access to speciality doctors.

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/30/what-canada-can-teach-us-about-fixing-medicare/

Important: We have the wrong Medicare program

Cost Control in a Parallel Universe: Medicare Spending in the United States and Canada

By David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH
Archives of Internal Medicine, October 29, 2012 (Online First)

As the United States was implementing Medicare in 1966, Canada was phasing in its own Medicare program, which covered all Canadians under provincially administered plans. While these provincial plans varied, all incorporated significant payment reforms—global budgeting of hospitals and stringent capital expenditure controls—and banned copayments and deductibles.

Before the mid-1960s, the 2 nations’ health care financing systems were similar, and health care costs were comparable. Since then, overall US costs have grown more rapidly, but no study has compared spending for the elderly—the populations covered by Medicare in both nations.

Results

US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009 (an inflation-adjusted 198.7% increase). The comparable increase for Canada was 73.0% (from $2141 to $9292). Canada’s higher base-year spending reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in US Medicare.

The Table lists actual US Medicare spending from 1980 through 2009 and projected spending and savings had US costs risen at the lower Canadian rate. Projected savings totaled $154.2 billion in 2009 and $2.156 trillion for 1980 through 2009.

For the 1971-2009 period, US costs rose 374.1% vs 126.3% for Canada, and estimated foregone savings were $2.9024 trillion.

Comment

Medicare spending has grown nearly 3 times faster in the United States than in Canada since 1980. Had US Medicare costs risen at Canadian rates, rather than a deficit of $17.1 billion in 2009, the Medicare Hospital Trust Fund would have realized a $32.3 billion surplus. Savings on Medicare Part B would have been even larger. By 2009, the $2.156 trillion in excess spending attributable to US Medicare’s faster growth was equivalent to more than one-sixth of the national debt.

Several features of Canada’s program help constrain costs. First, the single-payer system has simplified administration, holding administrative costs to 16.7% of overall spending vs 31.0% in the United States. Although US Medicare’s internal overhead costs are low, it remains one among many payers. Hence providers’ administrative costs are inflated by having to deal with a multitude of payers and track eligibility, attribute costs, and bill for individual patients and services.

Second, Canadian hospitals receive prospectively determined global operating budgets, removing incentives to provide unnecessary care while simplifying billing and administration. However, unlike accountable care organization payment schemes in the United States, capital costs are not folded into the global budgets but distributed separately through an explicit health-planning process. Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations. Hence, they cannot expand by overproviding lucrative services, gaming the payment system through upcoding, avoiding unprofitable patients, or cost shifting.

Third, 51% of Canada’s physicians are primary care practitioners vs 32% in the United States. Primary care–centered health systems are generally thriftier. Canada’s outpatient fee schedules are also less technology skewed than in the United States.

Fourth, Canada’s provincial plans have used their concentrated purchasing power to limit drug and device prices.

Finally, litigation and malpractice costs have remained relatively low in Canada.

Life expectancy at age 65 years is longer and has grown faster in Canada than in the United States since 1980 (and 1971), offering reassurance that cost control has not compromised quality. A meta-analysis suggests that clinical outcomes are, if anything, better for Canadians than for insured Americans.

To some, US Medicare’s grim financial health suggests an even grimmer conclusion: it can no longer keep its promise of all needed care for the elderly population. Some would replace it with vouchers that seniors could use to purchase private coverage. Others suggest upending the current payment system by inverting volume-based incentives, offering instead profits to organizations that limit utilization. Yet the efficacy of these drastic solutions remains unproven. Canada’s road-tested cost-containment methods offer an alternative.

http://archinte.jamanetwork.com/article.aspx?articleid=1387588

PNHP Press Release:
https://pnhp.org/news/2012/october/canada’s-health-costs-for-seniors-rising-slowly-points-way-to-medicare-solvency-ar

Comment:

By Don McCanne, MD

This study is particularly important because it compares spending in our Medicare program for beneficiaries 65 and older with Canadian Medicare spending for the same age population during the same decades studied. This apples to apples comparison reveals that there is no contest. Since 1971, we’ve spent almost $3 trillion more than we would have had we used Canada’s payment reforms. The Medicare Hospital Trust Fund would have had a huge surplus by now, and nobody would be claiming that Medicare is “going broke.”

The difference is due to economic policies that really do work. Single payer advocates already know what these are, but for those who need a reminder, they are listed in the Comment in the original article above.

Not only did Canadians more effectively control their health care cost increases, their life expectancy grew more rapidly during the same time period. They benefited more under their cost efficient Medicare model.

We have enough understanding of health policy science to predict that the current proposals to control spending in the United States will either have very little impact, or, much worse, will reduce spending by making health care access even more unaffordable.

Comparing the two Medicare programs, the Canadian system pays about 80 percent of health care costs, whereas our Medicare program pays only about half. Also, Canada has banned copayments and deductibles for physician and hospital services – a mainstay of the perverse, misguided efforts to control health spending in the United States. We can control spending without imposing financial penalties on people accessing health care that we want them to have.

It is time for all of us to express our OUTRAGE! We can no longer accept inaction by our politicians because they fear the political consequences. We have to make them understand that they face dire political consequences if they don’t act. As FDR said, “Make me do it.” It’s time to get in their faces!

Canadian Example Offers a Possible Path to Curbing US Medicare Costs

By Mike Mitka
news@JAMA, Oct. 29, 2012

While Medicare costs continue to rise and Democrats and Republicans promote various plans to curb such spending, 2 researchers suggest politicians look north to Canada for solutions.

In a Research Letter published today in the Archives of Internal Medicine, the authors compare Medicare spending from 1980 through 2009 in the United States and in Canada, which has a similar Medicare program. They found US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009, an inflation-adjusted increase of 198.7%. In Canada, spending per elderly enrollee increased from $2141 to $9292, a 73.0% increase. Canada’s higher initial spending reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs compared with about 50% in US Medicare. Had US Medicare spending grown at the same rate as in Canada, more than $2 trillion (one-sixth of the national debt) would have been saved.

Coauthor Steffie Woolhandler, MD, MPH, School of Urban Public Health at Hunter College, City University of New York, discusses her publication:

“Regardless who wins the election, we will be facing big cuts in the Medicare program, but many seniors don’t have the money to pay for their own health care plans. So we wanted to see what happened in Canada with its senior citizens. In many ways Canada’s plan looks like US Medicare; however, they have been much more successful at cost control than us, and we quantified this.

“In the United States, costs in Medicare have risen 3 times faster than in Canada’s Medicare. There are several reasons for this. Administrative costs are about 31% of overall spending in the United States [including both public and private insurance] and only 16.7% in Canada. If we look at the US Medicare program, the overhead cost is only 2% versus 14% for private insurance, but then the hospitals and doctors have extremely high paperwork costs because they have to work with various insurers, and this spills over into administrative costs in Medicare.

“Canada has health planning with teeth. They make sure facilities are built where they’re needed. There is strict control of building new buildings and buying new equipment: hospitals don’t expand willy-nilly. Canadians pay about 40% less for their medications because the government steps in and makes bulk purchases.

“And when we start talking outcomes, it looks like Canada’s health care system is delivering. Canadians do live 2 years longer than people in the United States. And if measured starting at age 65, Canadians have seen more improvement in their life expectancy than seen in the United States.

“We in the physician community need to take some leadership here and tell the politicians that we need to use these road-tested cost controls, and we cannot accept that people may be denied or will not be able to afford care.”

http://newsatjama.jama.com/2012/10/29/author-insights-canadian-example-offers-a-possible-path-to-curbing-us-medicare-costs/

Government IS good at some things

By Aaron Carroll, M.D.
The Incidental Economist, Oct. 29, 2012

I’ve written about this before, but it’s worth bringing it back to add in some numbers. Let’s recap my prior argument:

“There are plenty of things that government does poorly. Or, at least you can make that argument, and find some support for it out there. For instance, many people believe that government does a terrible job at sparking innovation. I could imagine a debate there. Some think that government does a bad job at providing choice. That’s entirely defensible. Government run systems also allow less room for profit, which can drive out entrepreneurs. Also arguable.

“But what government systems do well is hold down costs. They use central planning. They use their large market power to negotiate for reduced reimbursement (see Part 2). They buy drugs cheaper. They eliminate profit and overhead.

“This is what government does well. It’s why every other country that has more government involvement than ours spends less than we do.”

Part of our problem is that even when we allow the government into the game (i.e. Medicare), we set restrictions that hamper its ability as a government-run insurance plan. For instance, Medicare is – by law – prohibited from considering cost at all when making coverage decisions. So even though Medicare has been better than the private insurance sector at holding down costs. But how much better could it be?

There’s a new paper in Archives of Internal Medicine, “Cost Control in a Parallel Universe: Medicare Spending in the U.S. and Canada“:

“As the U.S. was implementing Medicare in 1966, Canada was phasing in its own Medicare program which covered all Canadians under provincially-administered plans. While these provincial plans varied, all incorporated significant payment reforms – global budgeting of hospitals and stringent capital expenditure controls – and ban copayments and deductibles.

“Before the mid-1960s the two nations’ health care financing systems were similar, and health costs were comparable. Since then overall U.S. costs have grown more rapidly, but no study has compared spending for the elderly – the populations covered by Medicare in both nations.”

So this study simply compared the growth of health care spending of the two programs (Canada Medicare and US Medicare) for people 65 and older from 1971 through 2009. They excluded Medicare Part D, which started in 2006, so that the new program didn’t make the US look worse. What did they find?

In 1980, US spending was $1215 per enrollee versus $2141 in Canada. Since then, US spending has grown by an inflation adjusted 198.7% versus 73% in Canada. Here are some more details:

“Per-elder Medicare hospital spending grew 44.7% in Canada vs. 81.9% in the U.S. Physician spending grew 100.7% in Canada, vs. 274.3% in the U.S. Hospital’s share of total Medicare spending fell from 49.6% to 41.5% in Canada and from 68.4% to 41.5% in the U.S. Spending for other services (e.g. home, hospice and skilled nursing facility care) rose from 3.9% to 23.6% of spending in the U.S. and from 39.7% to 44.3% in Canada.”

Here’s the kicker. If the US Medicare program had grown at the same rate as Canada’s did over this period, we would have saved more than $2.9 trillion. In 2009, the trust fund would still have been running a surplus, instead of a deficit.

I can already hear the protests of rage and bluster. You’ll argue that Canada rations, or that Canada is different, or that you have to wait a year to see the doctor once you discover you’re pregnant. I’ve covered many of these things before. They still miss the point. You know what Canada is better than us in? Keeping costs down. Period. If your main complaint these days is that the health care system, or Medicare specifically, is a entitlement we can’t afford and that we have to cut, you’d think we’d be open to recognizing that this is something other countries do better. They keep costs down. Ignoring that makes no sense.

Aaron E. Carroll, MD, MS is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine. He is also the director of the Center for Health Policy and Professionalism Research.

http://theincidentaleconomist.com/wordpress/government-is-good-at-some-things/

U.S. Bill for Senior Care Higher Than Canada's

By David Pittman, Washington Correspondent, MedPage Today
MedPage Today, Oct. 30, 2012

Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.

Spending per Medicare enrollee rose in the U.S. from $1,215 in 1980 to $9,446 in 2009. In Canada, per capita spending on elderly patients in the country’s national healthcare system grew from $2,141 to $9,292, David Himmelstein, MD, and Steffie Woolhandler, MD, at the School of Urban Public Health at City University of New York, reported online in the Archives of Internal Medicine. Adjusted for inflation, those figures translate to a 198.7% growth rate in the U.S. compared with 73% in Canada.

Canada’s higher base-year spending figure “reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in U.S. Medicare,” they noted.

As U.S. policymakers discuss ways to curb spending in the Medicare program, Himmelstein and Woolhandler looked to Canada to see how our neighbors to the north have managed to rein in costs.

“Before the mid-1960s, the two nations’ healthcare financing systems were similar, and health care costs were comparable,” they wrote in an editor’s correspondence. “Since then, overall U.S. costs have grown more rapidly, but no study has compared spending for the elderly — the populations covered by Medicare in both nations.”

For example, they found spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period. The authors suggested this might be because a higher percentage (51% vs. 32%) of Canadian doctors are primary care physicians who are generally thriftier about spending for tests and procedures.

Himmelstein and Woolhandler obtained spending data from the two countries, but generally focused on 1980 onward because those data were more detailed. They adjusted figures for inflation and government accounting procedures, and ignored Medicare Part D drug spending.

Had U.S. Medicare costs risen at Canadian rates, the U.S. would have saved $154.2 billion in 2009, they noted.

“By 2009, the $2.156 trillion in excess spending attributable to U.S. Medicare’s faster growth was equivalent to more than one-sixth of the national debt,” the authors wrote.

Himmelstein and Woolhandler pointed to several aspects of the Canadian system that helped it contain costs:

* Canada’s single-payer system has simplified administration and associated costs to 16.7% of overall spending compared with 31% in the U.S. American providers must deal with multiple payers and the hassle that comes with them.

* Hospitals in Canada also receive prospectively determined global operating budgets. The method removes incentives to provide unnecessary care and simplifies billing.

* “Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations,” the authors wrote. “Hence, they cannot expand by over-providing lucrative services, gaming the payment system through up-coding, avoiding unprofitable patients, or cost-shifting.”

* Canada’s provincial plans use purchasing power to hold down drug and device prices.

* The country’s malpractice costs have remained relatively low.

Life expectancy grew faster for Canadian elderly too, signaling the country’s cost-containment efforts had little or no impact on quality, the authors wrote. Also, some clinical outcomes suggest care is better in Canada.

Meanwhile, policymakers in the U.S. have offered to provide vouchers to Medicare beneficiaries to limit costs, or to reward providers with payments based on limiting utilization rather than using a fee-for-service system that rewards volume. Neither approach has been proven effective yet, they noted.

“Canada’s road-tested cost-containment methods offer an alternative,” the authors wrote.

****

Action Points

* Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.
* Note that the study found that spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period.

Reviewed by Robert Jasmer, MD; Associate Clinical Professor of Medicine, University of California, San Francisco. The authors did not report any conflicts of interest.

Primary source: Archives of Internal Medicine
Source reference:
Himmelstein, DU, and Woolhandler S “Cost control in a parallel universe: Medicare spending in the United States and Canada” Arch Intern Med 2012; DOI: 10.1001/2013.jamainternmed.272.

http://www.medpagetoday.com/PublicHealthPolicy/Medicare/35644

U.S. Bill for Senior Care Higher Than Canada’s

By David Pittman, Washington Correspondent, MedPage Today
MedPage Today, Oct. 30, 2012

Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.

Spending per Medicare enrollee rose in the U.S. from $1,215 in 1980 to $9,446 in 2009. In Canada, per capita spending on elderly patients in the country’s national healthcare system grew from $2,141 to $9,292, David Himmelstein, MD, and Steffie Woolhandler, MD, at the School of Urban Public Health at City University of New York, reported online in the Archives of Internal Medicine. Adjusted for inflation, those figures translate to a 198.7% growth rate in the U.S. compared with 73% in Canada.

Canada’s higher base-year spending figure “reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in U.S. Medicare,” they noted.

As U.S. policymakers discuss ways to curb spending in the Medicare program, Himmelstein and Woolhandler looked to Canada to see how our neighbors to the north have managed to rein in costs.

“Before the mid-1960s, the two nations’ healthcare financing systems were similar, and health care costs were comparable,” they wrote in an editor’s correspondence. “Since then, overall U.S. costs have grown more rapidly, but no study has compared spending for the elderly — the populations covered by Medicare in both nations.”

For example, they found spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period. The authors suggested this might be because a higher percentage (51% vs. 32%) of Canadian doctors are primary care physicians who are generally thriftier about spending for tests and procedures.

Himmelstein and Woolhandler obtained spending data from the two countries, but generally focused on 1980 onward because those data were more detailed. They adjusted figures for inflation and government accounting procedures, and ignored Medicare Part D drug spending.

Had U.S. Medicare costs risen at Canadian rates, the U.S. would have saved $154.2 billion in 2009, they noted.

“By 2009, the $2.156 trillion in excess spending attributable to U.S. Medicare’s faster growth was equivalent to more than one-sixth of the national debt,” the authors wrote.

Himmelstein and Woolhandler pointed to several aspects of the Canadian system that helped it contain costs:

* Canada’s single-payer system has simplified administration and associated costs to 16.7% of overall spending compared with 31% in the U.S. American providers must deal with multiple payers and the hassle that comes with them.

* Hospitals in Canada also receive prospectively determined global operating budgets. The method removes incentives to provide unnecessary care and simplifies billing.

* “Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations,” the authors wrote. “Hence, they cannot expand by over-providing lucrative services, gaming the payment system through up-coding, avoiding unprofitable patients, or cost-shifting.”

* Canada’s provincial plans use purchasing power to hold down drug and device prices.

* The country’s malpractice costs have remained relatively low.

Life expectancy grew faster for Canadian elderly too, signaling the country’s cost-containment efforts had little or no impact on quality, the authors wrote. Also, some clinical outcomes suggest care is better in Canada.

Meanwhile, policymakers in the U.S. have offered to provide vouchers to Medicare beneficiaries to limit costs, or to reward providers with payments based on limiting utilization rather than using a fee-for-service system that rewards volume. Neither approach has been proven effective yet, they noted.

“Canada’s road-tested cost-containment methods offer an alternative,” the authors wrote.

****

Action Points

* Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.
* Note that the study found that spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period.

Reviewed by Robert Jasmer, MD; Associate Clinical Professor of Medicine, University of California, San Francisco. The authors did not report any conflicts of interest.

Primary source: Archives of Internal Medicine
Source reference:
Himmelstein, DU, and Woolhandler S “Cost control in a parallel universe: Medicare spending in the United States and Canada” Arch Intern Med 2012; DOI: 10.1001/2013.jamainternmed.272.

http://www.medpagetoday.com/PublicHealthPolicy/Medicare/35644

A national plan for the exchanges

U.S. Set to Sponsor Health Insurance

By Robert Pear
The New York Times, October 27, 2012

The Obama administration will soon take on a new role as the sponsor of at least two nationwide health insurance plans to be operated under contract with the federal government and offered to consumers in every state.

These multistate plans were included in President Obama’s health care law as a substitute for a pure government-run health insurance program — the public option sought by many liberal Democrats and reviled by Republicans. Supporters of the national plans say they will increase competition in state health insurance markets, many of which are dominated by a handful of companies.

The national plans will compete directly with other private insurers and may have some significant advantages, including a federal seal of approval. Premiums and benefits for the multistate insurance plans will be negotiated by the United States Office of Personnel Management, the agency that arranges health benefits for federal employees.

John J. O’Brien, the director of health care and insurance at the agency, said the new plans would be offered to individuals and small employers through the insurance exchanges being set up in every state under the 2010 health care law.

Under the Affordable Care Act, at least one of the nationwide plans must be offered by a nonprofit entity. Insurance experts see an obvious candidate for that role: the Government Employees Health Association, a nonprofit group that covers more than 900,000 federal employees, retirees and dependents, making it the second-largest plan for federal workers, after the Blue Cross and Blue Shield program.

Richard G. Miles, the association’s president, expressed interest in offering a multistate plan to the general public through insurance exchanges, but said no decision had been made.

“Our expertise in the Federal Employees Health Benefits Program would be useful in the private marketplace,” Mr. Miles said in an interview. “But we are concerned about the underwriting risk in providing insurance to an unknown group of customers.”

To be eligible to participate in the multistate program, insurers must be licensed in every state. The Government Employees Health Association recently bought a company that has the licenses it would need.

National insurance plans will be subject to regulation by the federal government, state insurance commissioners and state insurance exchanges. That mix could cause confusion for some consumers who have questions or complaints about their coverage.

The federal standards will pre-empt state rules in at least one respect: the national health plans will automatically be eligible to compete against other private insurers in the new exchanges, regardless of whether they have been certified as meeting the standards of those exchanges.

The administration has promised to “work cooperatively with states.” But it is unclear whether the government-sponsored plans will have to comply with all state laws and consumer protection standards; whether they will have to comply with state benefit mandates; and whether they will have to pay state fees and taxes levied on other insurers to finance exchange operations.

Robert E. Moffit, a senior fellow at the conservative Heritage Foundation, said he worried that “the nationwide health plans, operating under terms and conditions set by the federal government, will become the robust public option that liberals always wanted.”

Rules for the new program have been under review by the White House for three months, and officials said they would be issued soon.

http://www.nytimes.com/2012/10/28/health/us-to-sponsor-health-insurance-plans-nationwide.html?hpw

And…

H.R.3590, Patient Protection and Affordable Care Act (P.L.111-148)

SEC. 1323. COMMUNITY HEALTH INSURANCE OPTION.
(b) ESTABLISHMENT OF COMMUNITY HEALTH INSURANCE OPTION.—
(1) ESTABLISHMENT.—The Secretary shall establish a community health insurance option to offer, through the Exchanges established under this title (other than Exchanges in States that elect to opt out as provided for in subsection (a)(3)), health care coverage that provides value, choice, competition, and stability of affordable, high quality coverage throughout the United States.

http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf

Comment:

By Don McCanne, MD

Although the White House has not yet released the rules for federally-sponsored national health plans, we really don’t need those rules to know that this program is not an incremental step towards a single payer national health program.

At this point, consideration is being given to using the Government Employees Health Association as a national plan to be offered to individuals and small businesses through the state insurance exchanges. This plan is one already offered to government employees through the Federal Employees Health Benefits Program (FEHBP) administered by the United States Office of Personnel Management (OPM).

This is still a private plan, even if it is non-profit serving government employees. It is not and never will be a publicly-owned plan such as the traditional Medicare program. Currently it is being proposed for a rather limited market – the state insurance exchanges which will be offering coverage for only the relatively small proportion of our population that qualifies for the exchanges. It will be competing on a private market basis with other private plans within the exchanges. There is concern that it would be exposed to adverse selection – insuring more expensive patients such as those with preexisting disorders, many of whom are currently amongst the ranks of the uninsured. So it may not even be able to compete on an equal basis with the other private plans that have proven themselves quite capable of dodging adverse selection. So it still will be just another cog in our fragmented, dysfunctional system of financing health care.

It will be offered nationally, in some ways meeting the expressed desire of Republicans to offer insurance across state lines. It is unclear if this would satisfy their intent to allow the plans to escape state regulation since it is not yet known how the state and federal governments will share regulatory oversight. This aspect of the national plan could be a step backward.

Thus this national private plan currently offered to government employees will still be nothing more than a private plan in a market of other plans within the state exchanges. The single payer community should not waste its time trying to make this plan something that it is not and never can be. We cannot let up in our advocacy for a bona fide national single payer program – an improved Medicare for all.

Buying medical care is not like buying a car

By Charles V. Allen, M.D.
The Modesto (Calif.) Bee, Oct. 23, 2012

David Brooks (“It’s past time to change Medicare,” Oct. 11) is right when he says Medicare costs are too high now and will get worse unless things change.

But, no, Mr. Brooks, the solution is not in competition, free enterprise and market forces.

Buying medical care is not like buying a car. If we bought cars the way we buy health care, the car salesman would tell us when we needed a car, what kind of car we need and how much it would cost. But we wouldn’t care how much it costs because we aren’t paying for it. The more cars the manufacturer produced and sold, the more money he would lose. And because 20 percent of the customers buy 80 percent of the cars, he would know exactly whom to not sell cars to! Confused? No wonder.

Translation: The patient/customer usually has little control when illness hits, no choice of what must be done (the doctor/hospital decides) or what the cost is, but doesn’t care (insurance is paying).

Insurance companies seek to insure mostly the healthier members, knowing that 20 percent of the public will consume 80 percent of the health dollar. Avoiding that 20 percent is mandatory to remain profitable — and most non-Medicare companies are for-profit.

Medicare was designed to be available to all — healthy or sick — and so was Medicare Advantage but a funny thing happened along the way. Call it what you may — cherry-picking or skimming — but Medicare commercial insurance companies have successfully managed to insure a population healthier and less costly than average, leaving a sicker and more expensive membership for regular Medicare — and the taxpayer.

“In 2012 alone, private (Medicare) insurers are being overpaid $34.1 billion, or $2,526 per Medicare Advantage enrollee. … It’s clear that having Medicare Advantage programs compete with Medicare doesn’t save us money. In fact the opposite is the case,” says one physician economist a report to be published in the International Journal of Health Services. So much for competition, market forces, private enterprise and Medicare vouchers.

The second factor is less appreciated: We have not one but four medical care systems: the uninsured (50 million), Medicaid (50 million), Medicare (50 million) and the commercially insured, mostly for-profit, under 65 (150 million).

Each has its own set of rules, regulations, payment schedules and deficiencies. Reforming one without changing the others is not possible, and a major overhaul in today’s political environment is unthinkable.

Regardless of political belief, there no one, given the chance to redesign our system from scratch, would end up with the mess we now have.

A handful of other countries — all first world, industrial, democratic and yes, capitalistic — nations have achieved four things we have not: coverage of all citizens, costs half to two-thirds our cost, equal or better medical outcomes and a level of public support higher than ours.

How? First is the accepted principle that health care for all is a social obligation as important as public safety and education.

Second, all have a single efficient system with one set of rules and financial process, often a public/private partnership with private, independent providers. Imperfections? Of course, but none like ours.

And some of these countries make cars as well or better than we do — the old fashioned, market-based, free-enterprise way.

Allen is a semi-retired physician in Modesto and regular community column contributor.

http://www.modbee.com/2012/10/23/2426012/sure-medicare-is-imperfect-but.html

PNHP note:  This article was originally published under the title “Medicare is imperfect, but it works for U.S.”

Canada’s health costs for seniors rising slowly, points way to Medicare solvency: Archives of Internal Medicine article

Researchers find the U.S. could have saved more than $2.15 trillion on Medicare since 1980 had it employed cost-saving measures similar to Canada’s

EMBARGOED until Oct. 29, 2012, at 4 p.m. Eastern time
Contact: Mark Almberg, PNHP, (312) 782-6006, cell: (312) 622-0996, mark@pnhp.org

A study published in today’s Archives of Internal Medicine finds that per capita Medicare spending on the elderly has grown nearly three times faster in the United States than in Canada since 1980. (Canada’s program, which covers all Canadians, not just the elderly, is also called Medicare.) Costs grew more slowly in Canada despite a 1984 law banning co-payments and deductibles.

In the first study of its kind, Dr. David U. Himmelstein and Dr. Steffie Woolhandler, professors at the City University of New York’s School of Public Health, analyzed decades of detailed Medicare spending data for persons aged 65 and older in the U.S. and Canada.

After adjusting for inflation, the authors found U.S. Medicare spending per elderly enrollee rose 198.7 percent from 1980 through 2009. In Canada, the comparable figure was 73 percent.

According to the authors, the findings have important implications for the debate on how to save Medicare. “Had U.S. Medicare spending per elderly enrollee increased as slowly as in Canada, the savings from 1980 through 2009 would have totaled $2.156 trillion,” said Himmelstein. “That’s equivalent to more than one-sixth of the U.S. national debt.”

The new findings appear today in the Archives of Internal Medicine, a leading medical journal published by the American Medical Association. The article, which takes the form of a research letter, includes supplementary analyses based on less detailed data showing that the U.S. could have reaped even larger savings – nearly $3 trillion – from 1971 to 2009.

The article cites several reasons for Canada’s better record on cost containment: Less paperwork and administrative bloat throughout their health system (administrative costs account for 16.7 percent of total health spending vs. 31 percent in the U.S.); the use of lump-sum budgets for hospitals; stringent controls on spending for new buildings and expensive new equipment; the use of single-buyer purchasing power to rein in drug and device prices; relatively low litigation and malpractice costs; and an emphasis on primary care.

Woolhandler commented: “In a nutshell, including the elderly in a universal, nonprofit, publicly administered single-payer system has been the key to Canada’s cost control. Although U.S. Medicare is often called a single-payer system, that’s not quite accurate. It’s true that traditional Medicare is relatively efficient – only about 2 percent of its budget goes to administration, according the most recent trustees’ report, versus about 14 percent for privately run Medicare managed-care plans – but Medicare is only one of many health care payers in the United States.

“As a result,” Woolhandler said, “doctors’ and hospitals’ administrative costs are inflated by having to deal with a multitude of payers and by having to track eligibility, attribute costs and bill for individual services. This extra paperwork and bureaucracy is a major contributor to rising costs in the U.S., and these costs spill over into the relatively efficient Medicare program.

“In contrast, Canada’s single-payer system is much more streamlined and lean throughout, with big dividends for clinical care.”

The article cites several studies that show clinical outcomes in Canada are as good if not better than in the U.S.

The article notes that some U.S. politicians advocate replacing traditional Medicare with vouchers that seniors could use to buy private coverage. Still others advocate offering incentives for health providers to limit care. Yet none of these proposals have proven themselves to be effective in containing costs, the authors write.

“Canada’s road-tested cost containment methods offer an alternative,” they say.

In addition to their positions at CUNY, Himmelstein and Woolhandler are visiting professors of medicine at Harvard Medical School and co-founders of Physicians for a National Health Program. PNHP played no role in supporting their research.

**********

“Cost control in a parallel universe: Medicare spending in the U.S. and Canada,” David U. Himmelstein, M.D., Steffie Woolhandler, M.D., M.P.H. Archives of Internal Medicine, online publication date Oct. 29, 2012.

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Physicians for a National Health Program (www.pnhp.org) is an organization of more than 18,000 doctors who advocate for single-payer national health insurance. PNHP had no role in funding the study mentioned above. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 622-0996.

Bipartisan report on costs is leading us astray

Seven Factors Driving Up Your Health Care Costs

By Julie Appleby
PBS NewsHour/Kaiser Health News, October 24, 2012

There is no one villain in the battle against rising health care costs. Currently, the United States spends more on health care services than any other country, exceeding $2.6 trillion, or about 18 percent of gross domestic product. Most years, medical spending rises faster than inflation and the economy as a whole. Many factors — and nearly everyone — contributes to those increases.

Here are seven ways you or your medical providers play a role, based on a recent report from the Bipartisan Policy Center, a think tank in Washington, D.C.

1. We pay our doctors, hospitals and other medical providers in ways that reward doing more, rather than being efficient.

2. We’re growing older, sicker and fatter.

3. We want new drugs, technologies, services and procedures.

4. We get tax breaks on buying health insurance — and the cost to patients of seeking care is often low.

5. We don’t have enough information to make decisions on which medical care is best for us.

6. Our hospitals and other providers are increasingly gaining market share and are better able to demand higher prices.

7. We have supply and demand problems, and legal issues that complicate efforts to slow spending.

http://www.pbs.org/newshour/rundown/2012/10/seven-factors-driving-your-health-care-costs.html

The Bipartisan Policy Center report on which this article was based:

What Is Driving U.S. Health Care Spending?
America’s Unsustainable Health Care Cost Growth
http://bipartisanpolicy.org/system/assets/drupal/BPC%20Health%20Care%20Cost%20Drivers%20Brief%20Sept%202012.pdf

Comment:

By Don McCanne, MD

Julie Appleby is a highly credible health care reporter who has done an excellent job of reporting the views expressed in this report released by the Bipartisan Policy Center, an organization founded by Bob Dole, George Mitchell, Howard Baker and Tom Daschle. As we shall see, when we look at these seven health care cost factors, “bipartisan” has now come to mean a right-wing position between the extreme conservative views held by most of today’s elected Republicans, and a moderate-right view held by the majority of Democrats. This corruption of bipartisanship has had a devastating impact on our efforts to achieve health care justice for all.

Let’s look at each of the seven factors supposedly driving up our health care costs, keeping in mind the fact that other industrialized nations have much more effective health care financing systems which are able to deliver care to everyone at an average of half what we spend. The numbers here refer to each item in the article.

1. It seems that almost everyone in the policy community believes the meme that our health care costs are too high because we pay for care based on fee-for-service – a system that rewards doctors and hospitals for providing a greater volume of more complex health care services and products. The primary flaw in this explanation is that many other nations also use fee-for-service yet are still able to control their total health care costs. The primary defect is not in the way we determine what health care is worth, but in the fundamental dysfunction of our health care financing system.

2. We are getting older, obesity is increasing, and more chronic conditions are diagnosed. However, with minor variations, the same supposed changes are happening in other nations as well, yet without the need to drive health care costs up as rapidly as we do. We still fall short on life expectancy when compared to other nations, so living more years has not been the problem. Obesity is a problem, as it is in other nations, but the answers lie more in public health measures encouraging better nutrition and more exercise, and less on care provided within our health care delivery system, except for preventive programs. Much of the reported increase in chronic disease is related to the emphasis on recording in more detail diagnoses which then permits higher billing for more complex conditions and also provides a basis for greater rewards under pay-for-performance and other so-called quality schemes. Refined diagnoses are possible for example when using much more inclusive laboratory criteria for the defining diabetes or hypercholesterolemia (just a touch of disease), or also by including osteoarthritis as a diagnosis in the elderly – a condition that has always been there but frequently not reported unless it was the primary presenting complaint. Our disease epidemic is more in augmented documentation than it is in exploding pathophysiology.

3. Almost everyone says that our newer expensive technologies and our plethora of expensive new drugs are major reasons for our high health care costs. Guess what. Other nations use the same technology and the same drugs, yet do not spend nearly as much as we do on health care. Some of the new technologies replace older technologies, and the actual costs (not prices) are often not higher. Also the breakthrough drugs of prior decades become the low-cost generics of today. Yes, advances do add to medical spending in all nations, but not nearly to the extent suggested by the policy community and politicians.

4. Many blame the tax benefits provided for employer-sponsored health plans as an incentive to purchase “Cadillac plans” that provide far more coverage than most people need. Yet actually our private plans have been shifting more costs to patients through higher deductibles and other cost sharing, while paring back on benefits and restricting access through measures such as limited provider networks and tiering of products and services. Again, other nations have not adopted these perverse barriers to care to the same extent that we have, yet they still provide care at a much lower level of spending. Contrary to popular lore, patient insensitivity to costs is not the primary reason why our health care spending is so high.

5. The lack of transparency is often blamed for our high costs. If patients only understood better all of their options and were better informed on the potential adverse consequences of their decisions, then they wouldn’t be demanding all of this unnecessary care. Those who make this claim are ignoring the fact that it now has been decades since we recognized that patients must provide their informed consent for health care. Doctors do explain the options and the potential problems of various diagnostic and therapeutic interventions. Paternalistic medicine has been largely replaced by the patients’ need to know. Better information is already resulting in greater value in our health care spending.

6. Consolidation amongst hospitals and physician groups has provided them with greater market leverage that results in higher prices. But where is this occurring? It is the private insurers that have been far less effective in negotiating savings with the providers. If you look up the S&P health care indices, commercial carriers (private insurers) have continued to increase health care spending at intolerable escalating rates, while the Medicare index has demonstrated that public agencies are much more effective than the private sector in keeping the rate increases down to more tolerable levels (bending the cost curve). Administrators of public health care financing programs are able to override the unfair advantage that market consolidation permits.

7. It is often said that our supply-side excesses result in excessive spending. Actually, as far as hospital beds and health care professionals, we do not have excesses when compared to other nations, except perhaps in certain resources such as imaging. We do have a maldistribution of resources, the worst being a disproportion between primary care professionals and specialist
physicians. We need to reinforce our primary care infrastructure and reduce the overemphasis on some, but not all, of the specialized fields. The malpractice problem does need to be addressed through measures such as alternative dispute resolution, but the savings expected by reducing CYA medical management has often been overstated since we will always have low-yield testing, even if the malpractice threat goes away, since those tests potentially can result in important beneficial outcomes, even if less frequent. It’s just that the emphasis will be on protecting the patient rather than on protecting the doctor.

Following is the “Conclusion and Next Steps” from the report of the Bipartisan Policy Center (link above):

“The drivers of health care cost growth are complex and multi-faceted. Just as no single driver is responsible for our high and rising health care costs, no single policy solution will be adequate to meet this challenge. For this reason, the BPC Health Care Cost Containment Initiative plans to produce a comprehensive, bipartisan package of health care cost containment options that, if implemented together, could reduce system-wide health care costs, slow cost growth and improve the efficiency and quality of care in the United States.”

The Bipartisan Policy Center is politically influential and may well be a major player as Congress begins to embark on these right-wing “bipartisan” solutions to health care costs. The primary reason that this framing of the problems is considered right-wing is that it diverts our attention away from the real solutions as it attacks these problems in a way that will perpetuate our perverse, dysfunctional health care financing system – further reinforcing the private insurance industry that has been a major source of our problems, while using the underfunded and therefore inadequate Medicaid program as a safety net.

What we really need is no secret. We need an administratively efficient financing system that will reduce one of the largest sources of excess health care costs in the United States – the administrative waste of the fragmented multi-payer system which is heavily dependent on the inefficient private insurers, and the waste of the administrative burden that this system places on our hospitals and health care professionals. We need a public administration which would improve the allocation of our health care resources through regional planning, including improving and expanding our primary care infrastructure. Our public administrators can also use their power as a beneficent monopsony to get pricing right – improving cost effectiveness while promoting high quality, evidence-based medicine.

Julie Appleby has done a great job in distilling the contents of this Bipartisan Policy Center report. Now it’s our job to provide the proper perspective. She reports. We decide.