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CBO: Medicare's demonstration projects fail to demonstrate cost savings

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CBO: Medicare's demonstration projects fail to demonstrate cost savings

Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment

Congressional Budget Office
January 2012

In the past two decades, CMS has conducted two broad categories of demonstrations aimed at enhancing the quality of health care and improving the efficiency of health care delivery in Medicare’s fee-for-service program.

* Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly.

* Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees.

Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare.

The results of those Medicare demonstrations suggest that substantial changes to payment and delivery systems will probably be necessary for programs involving disease management and care coordination or value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients.

http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf

Comment: 

By Don McCanne, MD

Recognizing the need to slow the increase in health care spending, much hope has been placed on disease management, care coordination, and value-based payments such as pay-for-performance. Medicare has authorized numerous demonstration projects to prove that these programs are effective. They aren’t.

The results of these demonstrations have shown that they have not reduced spending because the costs of the interventions were not offset by the savings, and frequently the costs were greater, resulting in a net loss.

The one exception in the report – bundled payments – doesn’t really belong in this list anyway. The demonstration study negotiated a single fee for coronary bypass surgeries, covering both the hospitals and the in-hospital treating physicians. The negotiated fee was about 10 percent less than the itemized fees had been previously. Thus the savings for Medicare was about 10 percent for these bypass surgeries. There was no attempt to determine if this reduction resulted in efforts to recover the difference from other patients or payers, which makes it difficult to know whether or not bundling actually reduced total health care costs.

On the other hand, imagine a system in which all payments are negotiated, as with a single payer system. Hospitals negotiate an annual global budget. That budget includes their costs of services, such as coronary bypass surgeries, without the need to itemize each single item for the services, nor the need to bundle payments in some sort of pretense that global costs are reduced. The hospital already has incentives to improve efficiencies to stay within budget.

Likewise, physicians collectively negotiate their payments, whether fee-for-service, capitation, or salary, as appropriate to their clinical circumstances. Payments are adequate to ensure a very comfortable net income.

Other nations have proven that negotiated, administered payment is effective in obtaining greater value for health care spending. We’ve now proven that intrusion of market-model games players such as outside disease managers, or pay-for-performance administrators, have failed to improve value. So we should go with a system that really does work – a single payer national health program.

CBO: Medicare’s demonstration projects fail to demonstrate cost savings

Lessons from Medicare’s Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment

Congressional Budget Office
January 2012

In the past two decades, CMS has conducted two broad categories of demonstrations aimed at enhancing the quality of health care and improving the efficiency of health care delivery in Medicare’s fee-for-service program.

* Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly.

* Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees.

Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare.

The results of those Medicare demonstrations suggest that substantial changes to payment and delivery systems will probably be necessary for programs involving disease management and care coordination or value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients.

http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf

Comment: 

By Don McCanne, MD

Recognizing the need to slow the increase in health care spending, much hope has been placed on disease management, care coordination, and value-based payments such as pay-for-performance. Medicare has authorized numerous demonstration projects to prove that these programs are effective. They aren’t.

The results of these demonstrations have shown that they have not reduced spending because the costs of the interventions were not offset by the savings, and frequently the costs were greater, resulting in a net loss.

The one exception in the report – bundled payments – doesn’t really belong in this list anyway. The demonstration study negotiated a single fee for coronary bypass surgeries, covering both the hospitals and the in-hospital treating physicians. The negotiated fee was about 10 percent less than the itemized fees had been previously. Thus the savings for Medicare was about 10 percent for these bypass surgeries. There was no attempt to determine if this reduction resulted in efforts to recover the difference from other patients or payers, which makes it difficult to know whether or not bundling actually reduced total health care costs.

On the other hand, imagine a system in which all payments are negotiated, as with a single payer system. Hospitals negotiate an annual global budget. That budget includes their costs of services, such as coronary bypass surgeries, without the need to itemize each single item for the services, nor the need to bundle payments in some sort of pretense that global costs are reduced. The hospital already has incentives to improve efficiencies to stay within budget.

Likewise, physicians collectively negotiate their payments, whether fee-for-service, capitation, or salary, as appropriate to their clinical circumstances. Payments are adequate to ensure a very comfortable net income.

Other nations have proven that negotiated, administered payment is effective in obtaining greater value for health care spending. We’ve now proven that intrusion of market-model games players such as outside disease managers, or pay-for-performance administrators, have failed to improve value. So we should go with a system that really does work – a single payer national health program.

Single Payer System Continues to Draw Interest in Oregon

A grassroots campaign is forming to build public support for a ballot measure in 2013

By Amanda Waldroupe
The Lund Report, Jan. 19, 2012

Healthcare advocates, medical professionals, and legislators are developing a state-wide grassroots campaign to start educating the public about a single payer health system to provide universal coverage for everyone.

“It’s really the only way that we can assure affordable, high quality healthcare for all,” said Rep. Mike Dembrow (D-Portland), who introduced such legislation during the 2011 session which received a courtesy hearing in the House Healthcare Committee, but never came up for a vote.

Dembrow doesn’t plan on introducing a similar bill when the Legislature meets next month. Legislators can only introduce two bills each, and a single payer bill wouldn’t get any further than another public hearing. “There’s not that much value in having another public hearing,” he said.

But Dembrow does intend on reintroducing such legislation during the 2013 session, and anticipates that bill will be referred to the voters for approval. “If it involves funding, it will inevitably go to the ballot,” he said.

Meanwhile, advocates continue to support and discuss how a single payer system would work in Oregon because of their strong belief that it’s the best way to reform healthcare, lower costs, and ensure that all citizens receive adequate health care.

“Single payer is always going to be a topic when people talk about making healthcare better,” said Dr. Sam Metz, an anesthesiologist who belongs to an advocacy group known as Mad as Hell Doctors. “Nothing has happened to change the crisis that is before us that is American healthcare. The Affordable Care Act will change very little. It has consumed political capital, and allowed people to think we’ve solved the problem.”

Metz thinks Oregon might be in a better position than other states to implement a single payer system. He points to large employers such as Intel and Nike that are self-insured, as well as Providence Health System and Kaiser Permanente which cover their employees with the insurance offered by them — all versions of single payer. Medicaid, Medicare, and healthcare for veterans are also variations of single payer. “So many people are already half way there,” Metz said.

But major obstacles continue to loom. “The current system has a lot of momentum.” according to Larry Steward, a retired professor at Portland State University. “A lot of people believe in it. There’s a whole lot of money involved in it, and a lot of institutions and private industry. There’s a whole infrastructure. All of that needs to be overcome to create a better system.

Private insurance companies are one of the greatest obstacles to creating a single payer system. “If we go to a single payer, they go out of business,” Metz said. It is thus highly unlikely that insurance companies would support legislation or any effort that would “lure the insurance industry to its destruction.”

The complexity of the insurance and healthcare system also make it difficult to educate consumers. “It is going to be a real struggle,” Dembrow agreed. But public education and getting people to “start agitating” will go a long way, he said, to helping people understand that “there are other models out there.”

Recently, Mt. Hood Community College hosted a forum on single payer and the topic was also discussed at a conference held by an organization known as We Can Do Better.

http://www.thelundreport.org/resource/single_payer_system_continues_to_draw_interest_in_oregon

Vermont Moving Forward With Its Own Flavor Of Health Reform

By Jessica Marcy
Kaiser Health News, Jan. 19, 2012

Vermont lawmakers are taking steps to move the state toward a publicly-financed insurance program and craft a state health exchange, which is required by the 2010 federal health law and which state officials hope to use as the groundwork for their eventual move to a unique single-payer system.

Gov. Peter Shumlin’s administration this week offered a bill to the legislature that lays out a plan for building the exchange, a type of marketplace for individuals and small groups to buy health insurance. The proposal would combine the small group and individual health insurance markets, would bar the sale of health insurance to individuals and small employers outside of the exchange and would define a small employer to be 100 employees or fewer instead of 50, which had been under consideration. The bill also seeks to clarify how the state should integrate Medicaid, the state-federal health program for the poor and disabled, into the exchange.

Under the new system, an independent five-member panel called the Green Mountain Board will also be in charge of reviewing hospital budgets and defining final Certificate of Need as well as making health insurance rate decisions. That board is also working on a transition to a single-payer health system.

Shumlin, a Democrat, put Vermont on a path to single-payer health care last spring by signing a bill, known as Act 48, which seeks to create a new publicly funded and run health program called Green Mountain Care to replace the traditional insurance programs currently offered in the state.

“Act 48 really set up the roadmap for moving forward with single-payer. One stop along the way is the federal insurance exchange,” said Robin Lunge, the state’s director of health care reform. She said the exchange will provide an infrastructure to help reduce administrative health costs and can “be reused as a platform for moving forward with single payer.”

The federal health care overhaul law requires all states to create an exchange by 2014 and provides funds to help; otherwise, states may opt to let the feds set up an exchange for them. Vermont plans to use the federal funds to create an exchange but has already filed a waiver so that it can pursue the single payer system and not have to run two duplicative programs in the future.

Deb Richter, head of Vermont for Single Payer, stressed that the ultimate goal is to create a single-payer system, saying, “I look at this as we want to strengthen the exchange so that as many people can get broad coverage that’s affordable in the meantime.”

Vermont has several other key decisions to make, including how to pay for a single-payer health system. The state has held four public meetings in recent months, where people offered their financing recommendations, and is looking at how other countries, particularly Switzerland and Germany, finance their health systems, Lunge said.

In recent years, nearly a dozen states have introduced some type of single payer type legislation, according to Physicians for a National Health Program, but Vermont has been the only state to get this far.

For instance, California advocates saw their push to pass single payer legislation delayed Tuesday when the Senate Appropriations Committee postponed a vote after legislative analysis showed the state-funded program could cost the state general fund $200 billion a year, according to the Los Angeles Times. [PNHP note: On this point, Dr. William Skeen of PNHP California makes the following comment: In reality, it costs $200 billion to pay for health care in California, and under single payer that cost would be paid by the state. What is left out makes all the difference — that the state would capture all the current funding streams of health care in California, giving it enough money to pay the $200 billion. And of course, once in place, the cost controls inherent in single payer (global budgeting, negotiated rates, etc.) would solve California’s budget crisis.]

Despite the setback, William Skeen, executive director of Physicians for a National Health Program in California, said, “I think that what’s happening in Vermont really energizes what’s happening in California.”

http://capsules.kaiserhealthnews.org/index.php/2012/01/vermont-moving-forward-on-its-own-flavor-of-health-reform/

Folding Medicare into Vermont's single payer system

Act 48 Integration Report: Green Mountain Care

Submitted by Robin J. Lunge, Director of Health Care Reform
Department of Vermont Health Access and the
Department of Banking, Insurance, Securities, and Health Care Administration
January 17, 2012

Act 48 creates Green Mountain Care, which is a publicly financed health care program delivering affordable, high-quality health care coverage to all residents of Vermont. Section 8 of No. 48 of the acts of 2011 (Act 48) calls for a report consisting of a series of studies to inform the development of Green Mountain Care.

The administrative integration of many payers will begin in the Exchange. For example, individuals eligible for Medicaid may use a web-based portal designed for the Exchange to enroll in Medicaid. The Exchange will also integrate the small group and association markets and could additionally integrate the individual market as well. Municipal employees are currently in the small group market, so their coverage would also be integrated in the Exchange.

The three payers who may not be able to be integrated into the Exchange are Medicare, state employees, and school employees.

Medicare

Medicare is a federal program, paid for with all federal funds and administered entirely by the federal government. 33 V.S.A. 1824 provides that the agency of human services shall collect information to determine if an individual is eligible for Medicare in order to ensure that federal funds are utilized before state funds. Act 48 specifically provides that Green Mountain Care will not alter anyone’s Medicare benefits under Medicare. If an individual is enrolled in Medicare, he or she need not apply for or enroll in Green Mountain Care if he or she does not wish to. Act 48 allows the individual the choice to have Green Mountain Care as a secondary insurance, but does not require it. The cost of these provisions will be looked at as part of the financing study due in January 2013.

http://hcr.vermont.gov/sites/hcr/files/GreenMountainCareStudiesIntegration.pdf

And…

Medicare Waiver Demonstration Application

Center for Medicare & Medicaid Services

CMS conducts Medicare-waiver-only demonstrations to test innovations that have been shown to be successful in improving access and quality and/or lowering health care costs. These demonstrations may involve new benefits, fee-for-service or Medicare Advantage payment methodologies, and/or risk sharing arrangements that are not currently permitted under Medicare statute.

https://www.cms.gov/DemoProjectsEvalRpts/downloads/FESC_Medicare_Waiver_Demo.pdf

For more about Medicare waivers:
Legal Information Institute
http://www.law.cornell.edu/uscode/42/1395b-1.html

And…

Converting Successful Medicare Demonstrations into National Programs (an excellent description of the limitations of the process using the example of P4P):
http://www.rti.org/pubs/rtipress/mitchell/BK-0002-1103-Ch11.pdf

Comment: 

By Don McCanne, MD

As states attempt to set up single payer programs, one problem that comes up is how do you move federal funds from programs such as Medicare into the state single payer system? The simple answer is, you don’t, at least not without getting Congress to enact transformative legislation.

Many have suggested that all you need is a “Medicare waiver.” But the Medicare waiver process is limited to small demonstrations primarily of payment innovations that are budget neutral or less, and that do not reduce benefits. They do not allow changes in the fundamentals of the Medicare program. The populations covered remain the same.

Vermont dropped “single payer” from the title of their legislation. One of the reasons is that Medicare will have to remain a separate program, even though they are making efforts to allow Green Mountain Care to serve as an additional Medigap plan, and to allow for some administrative integration within the insurance exchange.

Vermont should certainly move forward with its process, since beneficial tweaks are better than nothing at all. But the real message is that Vermont, and all of us, could have so much more if we enacted a national single payer health program.

We should not wait to see how well the state efforts and the implementation of the Affordable Care Act will work. We already know. Costs will be higher. Millions will remain uninsured. Underinsurance will be the new standard. Hardship and suffering will increase.

States should try to improve their programs while they are waiting for national reform. But it’s our job to see that they don’t have to wait any longer than they have to. We must act now.

Folding Medicare into Vermont’s single payer system

Act 48 Integration Report: Green Mountain Care

Submitted by Robin J. Lunge, Director of Health Care Reform
Department of Vermont Health Access and the
Department of Banking, Insurance, Securities, and Health Care Administration
January 17, 2012

Act 48 creates Green Mountain Care, which is a publicly financed health care program delivering affordable, high-quality health care coverage to all residents of Vermont. Section 8 of No. 48 of the acts of 2011 (Act 48) calls for a report consisting of a series of studies to inform the development of Green Mountain Care.

The administrative integration of many payers will begin in the Exchange. For example, individuals eligible for Medicaid may use a web-based portal designed for the Exchange to enroll in Medicaid. The Exchange will also integrate the small group and association markets and could additionally integrate the individual market as well. Municipal employees are currently in the small group market, so their coverage would also be integrated in the Exchange.

The three payers who may not be able to be integrated into the Exchange are Medicare, state employees, and school employees.

Medicare

Medicare is a federal program, paid for with all federal funds and administered entirely by the federal government. 33 V.S.A. 1824 provides that the agency of human services shall collect information to determine if an individual is eligible for Medicare in order to ensure that federal funds are utilized before state funds. Act 48 specifically provides that Green Mountain Care will not alter anyone’s Medicare benefits under Medicare. If an individual is enrolled in Medicare, he or she need not apply for or enroll in Green Mountain Care if he or she does not wish to. Act 48 allows the individual the choice to have Green Mountain Care as a secondary insurance, but does not require it. The cost of these provisions will be looked at as part of the financing study due in January 2013.

http://hcr.vermont.gov/sites/hcr/files/GreenMountainCareStudiesIntegration.pdf

And…

Medicare Waiver Demonstration Application

Center for Medicare & Medicaid Services

CMS conducts Medicare-waiver-only demonstrations to test innovations that have been shown to be successful in improving access and quality and/or lowering health care costs. These demonstrations may involve new benefits, fee-for-service or Medicare Advantage payment methodologies, and/or risk sharing arrangements that are not currently permitted under Medicare statute.

https://www.cms.gov/DemoProjectsEvalRpts/downloads/FESC_Medicare_Waiver_Demo.pdf

For more about Medicare waivers:
Legal Information Institute
http://www.law.cornell.edu/uscode/42/1395b-1.html

And…

Converting Successful Medicare Demonstrations into National Programs (an excellent description of the limitations of the process using the example of P4P):
http://www.rti.org/pubs/rtipress/mitchell/BK-0002-1103-Ch11.pdf

Comment: 

By Don McCanne, MD

As states attempt to set up single payer programs, one problem that comes up is how do you move federal funds from programs such as Medicare into the state single payer system? The simple answer is, you don’t, at least not without getting Congress to enact transformative legislation.

Many have suggested that all you need is a “Medicare waiver.” But the Medicare waiver process is limited to small demonstrations primarily of payment innovations that are budget neutral or less, and that do not reduce benefits. They do not allow changes in the fundamentals of the Medicare program. The populations covered remain the same.

Vermont dropped “single payer” from the title of their legislation. One of the reasons is that Medicare will have to remain a separate program, even though they are making efforts to allow Green Mountain Care to serve as an additional Medigap plan, and to allow for some administrative integration within the insurance exchange.

Vermont should certainly move forward with its process, since beneficial tweaks are better than nothing at all. But the real message is that Vermont, and all of us, could have so much more if we enacted a national single payer health program.

We should not wait to see how well the state efforts and the implementation of the Affordable Care Act will work. We already know. Costs will be higher. Millions will remain uninsured. Underinsurance will be the new standard. Hardship and suffering will increase.

States should try to improve their programs while they are waiting for national reform. But it’s our job to see that they don’t have to wait any longer than they have to. We must act now.

Single-payer health care will increase choice

By Susan Leigh Deppe, M.D.
Vtdigger.org, Jan. 15, 2012

Opponents of Vermont’s new single-payer health law are fear-mongering about the supposed consequences of lack of “robust choice” in the health insurance marketplace. What they ignore is that health care doesn’t work like other “products.” It is better seen as a public good, like electricity. A publicly financed, single-payer system will actually give us more choice.

Right now, employers have little choice of affordable options that offer good coverage. Many cannot afford to offer it at all.

Employees have no choice as to which policy or policies their employer offers.

Uninsured people have no choice. They often suffer without care until they are desperately ill, or it is too late.

People with high deductible, catastrophic coverage have no choice. These policies are becoming increasingly common. Insurers love them because they are very profitable. Families may have to pay for the first $5,000 to $10,000 of care per family or per individual every year, plus unaffordable premiums, leaving them functionally uninsured.

People who have “good” insurance have little choice. They often have to fight insurance companies to get care and medicines. They pay more to see “out-of-network” practitioners.

Doctors and hospitals have no choice. Managed care requires them to waste hours on administrative games of “Mother, may I?” or leave patients untreated.

The federal Patient Protection and Affordable Care Act mandates health insurance exchanges. (It was written by the insurance industry.) The State of Vermont has to follow the law, and hopes to get waivers in a few years.

We’ve tried the “marketplace” health insurance model for 50 years in America. It gave us increasing consolidation in the industry, fewer people covered, more high-deductible plans, massive corporate profits, exorbitant executive salaries, overwhelming administrative burdens, and thousands of tragic denials of necessary care. More than 45,000 Americans per year die due to lack of health insurance, and millions suffer. This is morally wrong. Health manpower shortages are made worse because clinicians must spend so much time fighting for payment. No wonder virtually all other industrialized countries use single-payer variants!

Under Vermont’s single payer plan, we will have more choice.

A massive decrease in paperwork will leave practitioners more time to enjoy seeing patients. This should increase access, especially in primary care and psychiatry. (Several hundred new doctors have already said they would choose to come to Vermont if we get single-payer.)

Patients will choose to get care wherever they want, not where their insurance company tells them to go.

Employers will have a fighting chance to compete internationally because they will probably pay less under the new system than they pay for premiums now, and costs will be controlled better with everyone covered. Studies show that the more insurance companies there are in a system, the higher the costs. Multinationals like IBM and Unilever have been quite content to do business in countries with single-payer systems.

All of us — employers, clinicians, hospitals, and citizens — have input into the Green Mountain Care Board, which is designing the new system. The board answers to us — the people of Vermont — not to shareholders or executives. Board members listen, and are actively seeking our input.

Opponents of Vermont’s new law say that businesses are paralyzed by the uncertainty about costs. But not doing single-payer will be much more costly. Dr. Hsiao, an internationally-recognized health system economist, tells us that single payer can be done in Vermont, and businesses will pay less than under the present system.

Best of all, EVERYONE will be covered. Patients will be able to focus on getting better, rather than on the financial stress of being ill.

The purpose of health care, after all, is caring for people.

Dr. Susan Leigh Deppe is a psychiatrist with a practice in Colchester, Vt.

http://vtdigger.org/2012/01/15/deppe-single-payer-health-care-will-increase-choice/

Physicians investing in for-profit technology

After urologists got machine, cancer treatments soared

By Jay Hancock
The Baltimore Sun, January 17, 2012

Four years ago, doctors at Chesapeake Urology Associates started ordering the most expensive kind of prostate-cancer therapy for many more of their patients.

Before 2007, the large, multi-office practice was prescribing the treatment, known as intensity modulated radiation therapy, for 12 percent of its prostate-cancer patients covered by Medicare, according to data compiled by a Georgetown University researcher. But starting in mid-2007, Chesapeake Urology’s referral rate for IMRT more than tripled, rising to 43 percent of the Medicare cases.

What could have caused such a sharp change?

It couldn’t have been because IMRT, which costs about $40,000 per treatment, was new. Maryland hospitals had been offering it for years.

It couldn’t have been because IMRT was better.

“No randomized clinical trials show that prostate cancer patients receiving IMRT live longer or experience fewer long-term side effects than those getting the alternatives” of radiation-seed therapy or surgery, said Dr. James Mohler, a urologist at Roswell Park Cancer Institute in Buffalo, N.Y., and chairman of the national committee that sets standards for prostate-cancer care.

Chesapeake Urology tripled its percentage of prescriptions for IMRT after the practice acquired its own IMRT machine in 2007. The more patients the Baltimore-area urologists referred for that expensive therapy alternative, the more revenue and profits they would generate.

“They’re steering patients to IMRT because that’s where they make their money,” said Jean Mitchell, a professor and health care economist at Georgetown who’s working on a national study about IMRT referrals. “They’re making a ton of money out of this. There’s no question about it. At the expense of the taxpayers” who finance Medicare.

http://www.baltimoresun.com/health/bs-bz-hancock-chesapeake-urology-20120114,0,670418.column

Comment: 

By Don McCanne, MD

Technology that improves patient outcomes and reduces costs is great. Technology that increases costs, produces undesirable side effects, and provides no evidence of extended life expectancy is… well… not so great, except for meeting the financial goals of the entrepreneurial owners of the technology. And when the owners of the technology are the same trusted physicians who are prescribing it, that’s reprehensible.

Theoretically a government-funded and government-administered health care financing program would have the power to prevent these abuses. Yet this diversion of radiation treatment fees to the referring physicians is occurring within the Medicare program. So simply expanding Medicare to everyone alone is not enough to fix our dysfunctional financing system.

A properly designed single payer national health program would do far more than simply remove private insurers from the system. In this instance the need for the radiation equipment would be determined by medical science confirming the value of the intervention. The decision to purchase the equipment would be made through regional planning based on need. The payment for the equipment would be through separate budgeting of capital improvements. The ownership would be public or non-profit and would have no investors to draw off profits.

Physicians would be paid appropriately for their professional services as urologists and radiation oncologists, but they would not receive extra dividends based on their insight as to the potential lucrative benefits of personally investing in the equipment.

So about that Medicare for all. We speak of an improved Medicare for all, but the improvements would have to be monumental.

Next civil rights frontier? It surely has to be health care

By Jessica Schorr Saxe, M.D.
The Charlotte Observer, Jan. 14, 2012

“Of all the forms of inequality, injustice in health care is the most shocking and inhumane.”
–Martin Luther King, 1966

In the exam room, the patient recounted her complicated illness. When she described symptoms related to her surgery, I suggested she see her surgeon.

She had spoken calmly until this point, but now tears came to her eyes. When she lost her job because of her illness, she lost her insurance and could no longer see any of her trusted physicians. Then followed months without needed care. Hers was just one of the sad money-related stories I hear daily.

Injustice we still tolerate

On Martin Luther King Day, it is easy to congratulate ourselves on our progress in moving beyond segregated schools, lunch counters and drinking fountains. The hard question is this: what injustices do we still accept that should, in fact, be intolerable?

Surely Dr. King would find the next civil rights frontier in health care, with nearly 50 million uninsured, almost 45,000 deaths annually due to lack of insurance, and more than half of all personal bankruptcies linked to illness and medical bills.

While the Affordable Care Act will bring improvements, such as decreasing the ranks of the uninsured, supporting community health centers, and investing in prevention, it leaves many gaps. At least 23 million people will still be uninsured in 2019. Tens of millions will be underinsured, one serious illness away from financial ruin. Most people who suffer medical bankruptcy had private insurance before getting sick. And medical bankruptcy is a cruel double whammy. Already beset with pain, anxiety and fear – due to serious illness – families find themselves financially devastated.

This doesn’t happen in other industrialized countries, which have high-quality health systems that cover everyone.

The U.S. spent $7,960 per person for health care in 2010. Most developed countries spent less than half that amount and yet have better health outcomes and, in many cases, similar or better access to technical advances, such as hip replacements, bone marrow transplants, and MRIs.

How is this possible? As a nation, we waste about $350 billion in unnecessary paperwork and bureaucracy, thanks to our fragmented system of financing care through multiple insurers. And, although all countries are suffering from health care inflation, our rise in costs is far higher.

What to do? We should move to an Improved Medicare for All system, in which we share the cost of covering everyone, as we do for other valued services such as education, police, and the fire department.

How could we afford it? Our current public expenditures for health care that don’t cover everyone are already greater than the total expenditures of countries that do.

First, we would save by cutting out the insurance company middlemen. Second, we would negotiate lower prices for medications and supplies. Finally, by abolishing private insurance premiums and substituting revenues from taxes based on ability to pay (a mixture of taxes on payroll, personal, and unearned income as well as stock and bond transactions), we would easily cover the uninsured.

Concerned that this is socialized medicine? Not at all. The U.S. has a high-performing socialized medicine system in the Veterans Administration, which owns hospitals and employs doctors and enjoys high patient satisfaction. Improved Medicare for All is not socialized medicine. The bills would be paid by one source, but medical practices and non-profit hospitals would continue to be independent.

Worried about the solvency of Medicare? Medicare actually operates economically, with administrative costs well under half those of private plans and with better cost control. In addition, Medicare has been considerably less inflationary. If billions of dollars were freed up in administrative costs nationally, that could go a long way toward comprehensive (not minimal) coverage for all, as well as fair (and not constantly threatened) payment for doctors and hospitals.

What are those expenses? Insurance companies incur them for designing plans, marketing, and deciding who is – or often isn’t – eligible. Hospitals and providers also have excessive costs. While medical practices in Ontario spent $22, 205 per physician annually interacting with Canada’s single payer agency, American practices spent $82,975 per physician dealing with health plans.

Use health care dollars to help

Consider the possible savings. This money could be used for actually providing health care.

My dream is to take care of patients and not have the specter of financial issues an unwelcome presence at every visit. I dream that there will be no tears in my office due to the unaffordability of needed care. And I dream that my time – and our health care dollars – will be spent helping people, not mired in bureaucracy.

Do you want to pay a real tribute to Martin Luther King? Be bold and visionary as he was. Fight “the most shocking and inhumane” injustice – and support Improved Medicare for All.

Jessica Schorr Saxe is a Charlotte physician and a board member of the Health Care for All NC.

http://www.charlotteobserver.com/2012/01/14/2925694/next-civil-rights-frontier-it.html

In Dire Health

By Arnold Relman
The American Prospect, Jan. 13, 2012

Most people assume that insurance is an essential part of the health-care system. Some think it should be provided through public programs like Medicare, while others prefer to see it purchased from private insurance companies, but the majority believe that insurance is needed to help pay the unpredictable and often catastrophic expenses of medical care. That is why so much public policy focuses on extending coverage to as many people as possible and controlling its cost. I think this emphasis on insurance is mistaken. We would have a much better and more affordable health-care system if the reimbursement of medical expenses through public or private insurance plans was replaced by tax-supported universal access to comprehensive care, without bills for specific services and without insurance plans to pay those bills.

Insurance is not simply a mechanism for spreading financial risks and paying for medical care. Because it usually tries to limit payments to providers, insurance often is an intrusive third party in the doctor-patient relationship and, particularly with private insurance, restricts the freedom of doctors and patients to select the services, specialists, and facilities they want to use. At the same time, insurance coverage tends to encourage the “moral hazard” of overuse of elective services, by reducing patients’ awareness of costs and limiting their out-of-pocket expenditures. Furthermore, all insurance plans have administrative expenses, and most private plans take profits that add to the cost of their premiums. The billing and collecting operations that are an integral part of any insured health system are a major expense for doctors and hospitals as well. Billing and collecting through insurance also offer abundant opportunities for fraud and abuse, which skim off as much as 5 percent to 10 percent of the total expenditure on health care.

For-profit insurance companies, which control most of the private market, are the greatest problem. They have a direct conflict of interest with their customers, because a plan’s net income is increased by avoiding coverage of patients with serious illnesses (who, of course, are most in need of insurance), restricting access to services, and limiting coverage of expensive medical conditions. Provisions in the new Affordable Care Act, which take effect in 2014, will prevent private insurers from denying or dropping coverage because of illness, but the act will also put many more people into for-profit insurance plans, which will still be permitted to raise premiums. According to the Centers for Medicare and Medicaid Services, the business costs and profits of these plans currently take more than $150 billion from their premiums before paying for medical services and are projected to increase more rapidly than national expenditures on health care. Additionally, the private insurance industry adds costs to doctors and hospitals that must spend tens of billions in billing and collecting from multiple plans, each with its own rules and regulations.

Apologists for the for-profit insurance industry claim that its high overhead costs are justified by greater control of providers’ charges, the provision of preventive services, and the promotion of the quality of medical care. No credible evidence supports these claims. The rapid turnover of membership in private plans makes continuity of oversight by insurers nearly impossible and limits the effectiveness of preventive and quality-promoting programs. Despite insurers’ efforts to control costs in the private sector, they continue to rise more rapidly than in public programs.

The private insurers’ “managed care” plans did stabilize the costs of care in the private sector for a few years in the mid-1990s by limiting patients’ choices of physicians and hospitals, monitoring physicians’ recommendations of expensive procedures, and reducing elective hospitalizations. However, a backlash from patients and physicians forced the plans to change these tactics, which were seen as an intrusion into the practice of medicine. By the end of the decade, private health costs had resumed their rapid rise. Private for-profit health insurance has now grown into a huge industry that exerts a powerful self-serving influence on national health policy.

Public insurance through Medicare also has its problems. Although its overhead costs (less than 5 percent of expenditures) are much lower than those of private insurance (about 15 percent to 25 percent of expenditures), it also encourages overuse of elective services. Medicare also struggles with constantly rising expenditures. According to the Congressional Budget Office, the program’s costs will almost double over the next decade. The increase has caused a federal budget crisis requiring urgent efforts at cost control. Payments to hospitals are being cut, and more medical costs are being shifted to Medicare beneficiaries. Provisions in the Affordable Care Act authorize trials of new forms of payment and new organizations of physicians and hospitals to receive these payments (accountable-care organizations). The administration of these trials, though, will require so much new bureaucracy that their number will be severely limited—even if Republican opposition in Congress doesn’t block their implementation. Most experts think that without major reforms, Medicare’s rising costs will not be sustainable much longer, but there is little agreement on what reforms will rescue the program or whether any of the proposed cost–saving measures will succeed.

There is, however, a practical alternative to health insurance and the fee-for-service system with which it is usually associated: a not-for-profit system in which a public single payer provides universal access to comprehensive private care delivered by primary-care physicians cooperating with medical specialists in group-practice arrangements. Like health systems based on insurance, this system would not require that patients have much “skin in the game” and therefore might pose a moral hazard that would lead to overuse of elective services. However, unlike insurance-based systems, physicians would be paid by salary rather than fee-for-service, so it would give physicians no financial incentive to recommend unnecessary procedures. Each group’s management would determine and pay salaries, under federal regulations that would cap the fraction of the group’s budget allocated to salaries but would allow management to determine individual compensation. Furthermore, in this insurance-free system, primary-care physicians trained to avoid unneeded care would counsel patients.

Successful examples already exist of systems that are based on a single payer and group practice centered on primary care. They are self-insured, not-for-profit staff-model HMOs such as Kaiser Foundation health plans, Geisinger Health Plan, and the plan designed by and for the New York hotel and restaurant workers’ union. In self-insured plans, there is no third-party insurer to pay the charges; these plans assume the insurance risk of providing their members with the medical care for which they contract. These plans support a multispecialty group practice that provides a specified range of comprehensive medical services. Their members usually choose a primary-care physician in the group who directs their treatment and refers them to specialist colleagues and other personnel in the group as needed. Some plans have no bills for individual services; others charge small token fees for each visit. Evidence shows that plans like these deliver quality, cost-effective care.

The recently reorganized Veterans Affairs medical-care system, once viewed unfavorably, now is often cited as another example of a single-payer system that provides comprehensive care by teams of salaried physicians and other health professionals, without insurance reimbursement. The federal gover
nment funds the program, but its patients contribute modest payment for some services.

In the system I envision, there would be no bills, although there might be small token fees at the point of service to discourage overuse for trivial complaints. Regulated private accountable-care organizations of salaried physicians that delivered the treatment would be responsible for staying within budgetary limits set by the agency that paid them on a per-capita basis. Physician groups would be nonprofit; low-cost public reinsurance would compensate them for any losses due to caring for extremely sick patients. Net income could not be used to enhance salaries or make capital improvements but could be applied to upgrading patient services. Physician groups could be expected to pay hospital costs, or hospitals could be separately paid by the single payer, but all hospital charges would be regulated.

Congress would not have a separate health-care system. Everyone, including legislators and government officials, would be in the system and would pay their share of the progressive, designated health-care tax that supported the program. This would, among other things, prevent legislative underfunding. People would be free to choose their primary-care physician and physician group and could change doctors and group membership as they wished. They would also be free to pay for any medical services they might choose outside the publicly funded program.

The envisioned system would be much less expensive than the hodgepodge we now have, because the profits and overhead costs of private insurance would be gone. Without bills, there would be little or no fraud and abuse and less administrative hassle. Without fee-for-service, physicians would have no incentives for unnecessary elective services. And with medical care based on nonprofit groups of cooperating specialists centered on primary-care physicians, there would be good reason to expect services to be efficient and of high quality.

Given what we know about the added costs of private insurance and given informed estimates of the costs of fraudulent billing and of unnecessary and duplicated services, a conservative guess of the total savings from eliminating these problems might be one-third or more of the entire cost of medical care. In any case, these savings would amount to many hundreds of billions—far more than enough to pay for the cost of providing good care for everyone. A reformed system based on group practice could also reduce the cost of defensive medicine (procedures done in response to concerns about malpractice liability). This would probably add a substantial amount to the projected savings. The federal government would have ultimate control over rising costs, because it would set the rate of the designated, progressive tax that funded the entire system and would thereby determine how much could be spent on health care each year. At the beginning of reform, the health tax would presumably collect an amount close to the current total cost of health care. Subsequent tax rates would reflect the new system’s needs and its savings.

Converting the present system to the one I have proposed would require a sea change in public opinion and government policy and would also need the support of most of the medical profession. To say the least, it would be a long and difficult process that would be bitterly opposed by the private insurance industry and its friends and by all those who fear a “government takeover” and cling to the groundless belief that the free market can best govern the health-care system. Nevertheless, there are reasons I believe this transformation has at least a chance of becoming reality.

First, physicians are flocking to join group practices in great numbers, and this could be the beginning of a major national reorganization of medical care. About 200,000 physicians (approximately 25 percent to 30 percent of all those in practice) are now employed by multispecialty groups owned by physicians or by hospitals, and this number is increasing by about 10 percent annually. Most of these groups pay their physicians at least a partial salary—only a few pay full salaries. The majority, though, still receive payment from insurance plans on a fee-for-service basis.

A rapidly growing fraction of practicing physicians are beginning to see the advantages to themselves and their patients of organized group practice with partial or full salaries. At the same time, the traditional conservatism of doctors seems to be changing. If this trend continues—and I believe it is being accelerated by the increasing number of women in medicine, who tend to favor group practice and health-care reform—we may see physicians and many medical societies urging basic reforms that would include a single-payer system. Women will soon represent half of all practicing physicians, and their attitudes will influence the profession, patients, and the general public. Legislators, now largely responsive to the financial inducements of lobbyists and vested interests, might begin to appreciate that they need votes even more than money and might become more receptive to proposals for reform that their constituents widely support.

The private health-insurance industry would be a formidable opponent of the reforms I propose, and its position would be supported by those who worry about the many thousands of jobs that might be lost if this industry were to disappear. However, a huge compensating gain in jobs could result from the expansion of employment in businesses that would no longer have to pay the ever-increasing costs of their employees’ health insurance. Because health benefits were originally given to employees in lieu of salary increases, employers should be expected to share their savings with their employees in the form of increased wages to help them pay their health-care tax. However, if the new system reduced health-care costs and controlled their rate of rise as much as expected, both employers and employees would benefit.

Private insurers would not be appeased by these developments but might be satisfied if the industry’s investors were compensated for their equity interests. Some of the health-care-tax receipts could be used for this purpose over a period of time, perhaps by issuing government bonds to investors in exchange for stock in the private insurance companies.

The phasing-out of private insurance could also be accomplished through competition from a government program. Medicare coverage could be offered to those under age 65 as an alternative to private insurance in decade-by-decade steps. This would allow time for physicians to develop their group-practice arrangements and for the government to carry out trials of capitated payment to groups (that is, payment on a per-capita basis for comprehensive care). To control costs, capitated payments would ultimately have to replace Medicare’s current fee-for-service arrangement, and this would mean a change in the way most Medicare beneficiaries receive their care. Instead of being subsidized by government to obtain health care on a fee-for-service basis, beneficiaries would be expected to select a group practice in a system that would meet all their medical needs at a cost no more—and probably less—than they would pay for Medicare coverage. Opponents of reform would nevertheless claim this abandons entitlements for the elderly, so it would take a lot of public education—and the medical profession’s reassurance—to convince Medicare beneficiaries that they would be much better off in the new system.

Experiments at the state level could facilitate national conversion to a single-payer system. Vermont recently passed legislation to establish such a system and is working toward reorganizing the delivery of medical care. As economic pressures for reform continue to grow, other states may follow. The Hawaii Legislature is considering a universal health system, and Massachusetts is looking at replacing fee-for-service wit
h some form of global payment. The success of state experiments like these would embolden the federal government to act on a national level.

I do not underestimate the complexity of the changes I am proposing. The odds against it are daunting. Congress might not even begin to debate major reform until the health system is near collapse. But what seems clear is that the best—possibly the only—hope for achieving universal, affordable care lies in the eventual elimination of private insurance and fee-for-service payment and in the creation of a tax-supported system based on group practice. Although this proposal makes good medical, social, and economic sense, its ultimate fate will be decided in the political arena. It cannot become a reality without an informed and aroused public bolstered by the medical profession’s strong support for the reform.

http://prospect.org/article/dire-health