House of Representatives, May 4, 2017
Yea: 217
Nay: 213
***
By Don McCanne, M.D.
Fulfilling a rhetorical election promise was more important to conservative members of Congress than is the health care of the American people. After all, how could they face their voters? Yes, how can they?
FOR IMMEDIATE RELEASE, May 4, 2017
Contact: Clare Fauke, PNHP communications specialist, 312-782-6006, clare@pnhp.org
Physicians for a National Health Program (PNHP), a nonprofit research and education organization of 20,000 physicians, medical students and health professionals, responded to today’s House of Representatives’ passage of the American Health Care Act (AHCA).
“This vote shows that House leaders are not only out of ideas on health care, but out of touch with their own constituents,” said Carol Paris, M.D., president of PNHP. “In polls and at town hall meetings, Americans consistently demand Medicare for all, the only plan that is universal, sustainable, and proven to work in every other industrialized nation.”
Dr. Paris urged members of both parties support H.R. 676, the Expanded and Improved Medicare for All Act, which would provide immediate, comprehensive coverage to all Americans and achieve President Trump’s campaign promises of more coverage, better benefits and lower costs. The bill has 108 co-sponsors in the House, 24 of whom have signed on in the past month.
“The Medicare for all train is leaving the station and the majority of Americans are on it,” said Dr. Paris. “Members of Congress need to get on board or get out of the way.”
Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and educational organization of more than 21,000 doctors and health professionals who support a single-payer national health program. It was founded in 1986.
By Gene Marks
The Washington Post, April 28, 2017
My wife is English and one of the biggest surprises she had when moving to this country was healthcare. “I don’t understand why my employer is involved in my healthcare,” she said back then – and still says today. After years of listening to that argument, I’m starting to understand what she means.
I can’t believe I’m saying this. I consider myself a smaller-government, fiscally right-of-center guy. I own a small business. I want lower taxes and less regulations. And yet, after watching and studying and writing about healthcare reform for going on 10 years I think I’m finally to the point of caving in and admitting that maybe, just maybe, a single-payer system would be what’s best for businesses, including businesses like mine.
Every year I speak and work with thousands of business owners and managers and each and every one of them are terrified come summertime when healthcare rates for the next year are announced. Every year – and I mean every year – my clients have suffered with double-digit increases in their healthcare costs. Sure, they are pushing more of these costs down to their employees. But most are still covering a large part of the health insurance offered to their people.
We spend too much time trying to figure out ways to reduce our healthcare insurance – which, to many represents a significant line item on our income statements. This time distracts us from ways to grow our businesses. But we have to do this because we have to offer a healthcare benefit. Our employees expect it. Our competitors are offering theirs. The labor pool is tight. My wife asks “why?” So do I.
We’re at the point where many of my clients – and many who are fiscally right-of-center like me – would seriously consider an individual tax increase and all the risks of a single-payer system just to take this headache away from our businesses so we can focus on…well…our businesses.
https://www.washingtonpost.com…
***
By Don McCanne, M.D.
Placing health financing decisions into the hands of employers for a majority of Americans is a historical fluke and continuing to do so defies logic. A single payer national health program would end this nonsense (not to mention providing affordable, comprehensive health care for everyone).
By Salam Abdus and Steven C. Hill
Health Affairs, May 2017
Abstract
Recent expansions in health insurance coverage have raised concerns about health care providers’ capacity to supply additional services and how that may have affected access to care for people who were already insured. When we examined data for the period 2008–14 from the Medical Expenditure Panel Survey, we found no consistent evidence that increases in the proportions of adults with insurance at the local-area level affected access to care for adults residing in the same areas who already had, and continued to have, insurance. This lack of an apparent relationship held true across eight measures of access, which included receipt of preventive care. It also held true among two adult subpopulations that may have been at greater risk for compromised access: people residing in health care professional shortage areas and Medicaid beneficiaries.
From the Introduction
The ways in which population-level increases in insurance coverage affected people who were already insured during the recent insurance expansions depend on three key factors. The first is providers’ capacity and willingness to offer more visits and supply additional services. If providers had excess capacity, then increased demand could easily be met, but many observers have expressed concern that providers could not supply enough additional services—especially primary care services. Concern about reduced access may be most relevant in medically underserved areas—that is, areas already facing shortages of primary care providers.
The second factor is the extent to which the provider market is segmented by the types of insurance patients carry, if any. Some providers, such as federally qualified health centers, primarily serve patients with public insurance and the uninsured. More generally, providers are less likely to accept Medicaid patients than Medicare and privately insured patients. Thus, people who had Medicaid before the ACA-related Medicaid expansions might have been at greater risk of reduced access, especially because Medicaid enrollment increased 25 percent from 2013 to 2014 in states that expanded eligibility for Medicaid.
The third factor is the effects of ACA provisions intended to increase health care capacity. In particular, the act provided funding for expanding the capacity of federally qualified health centers; training more physicians, mid-level practitioners, and nurses; and encouraging more providers to work in primary care and in underserved areas. It also temporarily increased Medicaid payments for some services supplied by primary care providers. The ACA set its capacity-building activities in motion before the biggest eligibility expansions occurred, whereas Massachusetts did not begin to address provider capacity problems until after its insurance expansion. Thus, the efforts to increase supply built into the ACA had the potential to mitigate negative spillovers such as those seen in Massachusetts. Moreover, many of the ACA provisions were designed to mitigate negative spillovers among the groups most likely to be negatively affected: people in medically underserved areas and Medicaid beneficiaries.
From the Discussion
We found no consistent evidence that increased local-area insurance coverage rates reduced access to care among the continuously insured. This remained true even when we restricted our sample to adults residing in geographic Health Professional Shortage Areas or to adults continuously insured by Medicaid.
Our results are consistent with the possibility that funding in the ACA to increase provider capacity mitigated potential negative spillovers, as intended. While we know of no rigorous evaluations of these provisions, data suggest that capacity did expand. ACA funding was used to add sites of care and other expansions of community health center capacity, which was associated with serving more patients. ACA funding for training might have contributed to growth in the number of midlevel practitioners, who can help meet increased demand for primary care. From 2009 to 2014 the number of employed physician assistants rose 19 percent, and from 2012 to 2014 the number of employed nurse practitioners rose 15 percent. ACA funding to expand capacity began to be disbursed shortly after the act passed, before the major insurance eligibility expansions in 2014.
From the Conclusion
Despite concerns, increasing rates of insurance coverage did not appear to reduce access to care among the continuously insured.
http://content.healthaffairs.org…
***
By Don McCanne, M.D.
One concern about the increases in the numbers of people insured as a result of implementation of the Affordable Care Act was that people already insured might find that their access to care became impaired because the increased demand for care might overload the delivery system. However, measures to increase capacity in the system, such as expansion of community health centers and increased training of health care professionals helped to alleviate that concern. Thus, “increasing rates of insurance coverage did not appear to reduce access to care among the continuously insured.”
Well designed health care reform includes giving attention to system capacity. Central planning along with separate budgeting of capital improvements is designed to ensure that capacity is adequate and equitably distributed. People who are satisfied with their current insurance need not be concerned that expanding coverage to include everyone – as in an improved Medicare for all – would result in impaired access. Not only would access be assured, they would have better coverage than the best of current plans in the private sector.
By Steve Cicala, Ethan M.J. Lieber, and Victoria Marone
National Bureau of Economic Research, April 2017
Abstract
In health insurance markets, an insurer’s Medical Loss Ratio (MLR) is the share of premiums spent on medical claims. As part of the goal of reducing the cost of health care coverage, the Affordable Care Act introduced minimum MLR provisions for all health insurance sold in fully- insured commercial markets as of 2011, thereby explicitly capping insurer profit margins, but not levels. This cap was binding for many insurers, with over $1 billion of rebates paid in the first year of implementation. We model this constraint imposed upon a monopolistic insurer, and derive distortions analogous to those created under cost of service regulation. We test the implications of the model empirically using administrative data from 2005–2013, with insurers persistently above the minimum MLR threshold serving as the control group in a difference-in- difference design. We find that rather than resulting in reduced premiums, claims costs increased nearly one-for-one with distance below the regulatory threshold, 7% in the individual market, and 2% in the group market.
From the Introduction
At its simplest level, this paper observes that our hypothetical insurer with $100 in premium revenue and $79 in claims finds it must bear the full administrative cost of keeping expenditures below $80, but reaps none of the rewards. That is, minimum MLR requirements encourage higher costs, not lower. We draw the direct parallel between MLR regulation and cost of service regulation, and show empirically that the 80/20 rule has, indeed, substantially increased insurers’ medical expenditures. While perhaps obvious ex post, this connection has not been established (nor estimated) to date.
From the Conclusion
This paper connects regulations of actuarial fairness to cost of service regulation, and uses the recently-implemented ‘80/20’ rule in the ACA to estimate the role these forces play in the determination of claims costs and premiums in the market for health insurance. The 80/20 rule requires health insurers in the commercial, fully-insured market to keep the share of their premium revenue spent on medical claims, known as the Medical Loss Ratio (MLR), above a minimum threshold, and to rebate the difference to customers if they fall short of this minimum. We find robust evidence that insurers increased their MLRs to comply with the regulation, and that this increase came largely by increases in claims costs.
We find that insurers in the individual market were most strongly impacted by the 80/20 rule, with affected insurers increasing their claims costs 7% on average and as much as 11% after two years of adjustment. We find that the rule also resulted in higher MLRs and claims costs in the group market, though the regulation was less binding in this segment. We generally find that the magnitude of the increase in claims costs scales with the initial distance from the minimum threshold. These results stand in stark contrast to the original intention of the rule: lower premiums. We do not find that insurers lowered premiums as a means to increase their MLR.
Instead, it is more likely that insurers raised their claims costs from a combination of more comprehensive coverage and reduced cost-containment effort, such as negotiations with providers or claims utilization management practices.
http://www.nber.org…
***
By Don McCanne, M.D.
Physicians for a National Health Program, July 26, 2010
Excerpt from Comment:
An extremely important unintended consequence of fixed medical loss ratios has been mentioned here before, but seems to have escaped the mainstream media, so it is being repeated: Once the MLR rules are established, the primary method by which insurers can increase the services they sell us, while increasing their profits, is by increasing gross revenues, since they are guaranteed a fixed percentage of those revenues. The most effective way to increase gross revenues is to increase the amount of health care services authorized and paid for.
If the insurers change provider incentives to double the amount of health care that is being delivered, they can double their own total revenues, keeping even more as profit because of the smaller marginal administrative costs of paying for more care. This incentive of the insurers to increase total health care spending is the exact opposite of the reform goal of slowing future health care cost increases.
All of this is good business. But that’s the problem. Our elected representatives chose a business model to finance health care when what we desperately need is a service model.
“Medical loss ratio” is a term that needs to be moved into the history books of failed policy concepts. Instead, we need our own public service model – an improved Medicare for everyone.
***
By Don McCanne, M.D.
Paying for health care is a loss for insurers. They get to keep for their administrative costs and profits whatever they do not spend on health care. In crafting the Affordable Care Act our legislators surmised that they could limit the administrative waste and excess profits by requiring that at least 80 percent of premiums be used for health care for individual plans and 85 percent for small group plans – the medical loss ratio. If you were an insurer, think of the opportunity this offers.
In previous messages it was pointed out that the more the insurers pay out in health benefits, the more they can expand their administrative expenses and especially their profits. They get to keep 15 to 20 percent of the premiums.
How do you pay out more in health benefits? Simple. Negotiate higher prices with physicians and hospitals. Maximize benefits covered. Authorize more care; be very conservative with rejecting prior authorization requests. Avoid adjusting claims and avoid claim denials. Do not investigate over-utilization or frank health care fraud. Then have your actuaries calculate the premiums to include 15 to 20 percent over the inflated health care spending. Make that a little bit over 15 to 20 percent which will then have to be refunded but will ensure that the full padded margin is received.
As with so many policy flaws of the Affordable Care Act that we have reported here, there is some disbelief that the insurers would do that. But isn’t that the way markets work? Maximize revenues and profits? There is nothing illegal here.
Today’s report indicates that, guess what, “insurers raised their claims costs from a combination of more comprehensive coverage and reduced cost-containment effort, such as negotiations with providers or claims utilization management practices.” Thus the insurers defeated the MLR rule that was intended to reduce premiums.
From a 2010 Quote of the Day:
“If the insurers change provider incentives to double the amount of health care that is being delivered, they can double their own total revenues, keeping even more as profit because of the smaller marginal administrative costs of paying for more care. This incentive of the insurers to increase total health care spending is the exact opposite of the reform goal of slowing future health care cost increases.
“All of this is good business. But that’s the problem. Our elected representatives chose a business model to finance health care when what we desperately need is a service model.
“‘Medical loss ratio’ is a term that needs to be moved into the history books of failed policy concepts. Instead, we need our own public service model – an improved Medicare for everyone.”
By Casey Quinlan
ThinkProgress, May 1, 2017
Although the Affordable Care Act has expanded health care access for millions of people, unequal access to treatment is still shortening the lives of many Americans. David Ansell, who has worked as a doctor in low-income Chicago communities for nearly four decades, focuses on these health care disparities in his new book, The Death Gap.
ThinkProgress interviewed Ansell on some of the health disparities he documents in his book, as well as possible solutions to these health care inequities.
Half of your book is devoted to issues of economic inequality that contribute to health disparities. Who is your book’s intended audience?
I’m actually aiming the book toward a reading public who might be interested in the question, “Why are things the way they are?” Because I’ve been a doctor in Chicago for over 30 years and have worked in three hospitals on one street. I call it “one street, two worlds” because the lives people live in one neighborhood are so different than the lives people live in another neighborhood, and sometimes they are juxtaposed next to each other.
While I think medical personnel and students will read [the book], it’s really aimed for people to understand how inequality itself leads to people dying early, and that that is an unacceptable proposition from a human rights perspective.
Most of the patients you mentioned in your book were people of color. As white people die at greater numbers, media outlets are taking notice, but does it ever disappoint you that the health issues of people of color appear to get less attention?
On the loop in Chicago, you can live to be 85 years old. Yet my hospital was just three stops away, and that life expectancy plummets to 69. As a problem, it’s not what people are doing, it’s due to the conditions in their neighborhoods. The conditions in black neighborhoods, especially urban black neighborhoods…these are conditions that have led to this neglect for hundreds of years, plus the exploitation and structural racism.
But the income equality, inequality in educational achievement, and other things are impacting white folks in the country as well, and what is underlying this is cumulative disadvantage, and sometimes generational disadvantage. When this disadvantage is concentrated in neighborhoods and families, people die earlier. So people are calling deaths in white people “diseases of despair,” and people are saying “About time you noticed this, because it’s been going on in black communities.”
I think it should bring us all pause and really to begin to bring solutions to neighborhoods that are actually quite straightforward. It’s redistribution of our wealth into investments, into good-paying jobs, free education, and health care for all without co-pays and deductibles. And it will benefit folks in Appalachia and rural California as well as Chicago.
You mention examples of scientific racism, such as the discredited theories about slavery and hypertension, and that researchers rely on so-called racial and ethnic evidence to excuse health disparities. Can you explain how those findings might distract people from acknowledging and doing something about these death gaps?
There is scientific racism because we use race in this country as as a biological category. We need to distinguish race from racism. Racism is a form of structural violence that actually harms people of color and black people in particular, disadvantaging them in so many different ways from economic exclusion, to exclusion from neighborhoods, educational opportunities, and from jobs. And it’s important we distinguish that.
But of course, the medical community has been all too happy to conflate race and racism, and then ascribe biological phenomena that are really results of exploitative conditions to the melanin concentration in skin. And it doesn’t make any sense. Human beings are 99.9 percent alike. That isn’t minimizing that diseases have biological manifestations, but to ascribe a condition to race is inherently racist in my opinion, and it deflects from solving the real problem.
Because if the problem is within the individual, we need to fix the individual. But if the problem is the way we design and structure society, concentrating wealth into the hands of people in certain communities to the exclusion of others, then we need to reorganize the world through taxing and other processes to create opportunities for those who are systematically exploited.
Since you cited research showing that doctors have given different medical workups to patients of color — such as black people getting less angiograms to evaluate chest pain symptoms — I’m wondering what you think the medical establishment should do to reduce racial bias.
One, people’s reaction to black patients is different, and they’ve done tests on bias in nurses and doctors, so we have to acknowledge implicit bias in health care. Two, as a result of implicit bias, differential care is provided, so the way one deals with that is to check in within oneself, to make sure reactions are not out of bias, and to look at data through a race and gender and age lens to identify areas where there is differential care. If there is differential care, if we want to improve it, we have to measure it and put it out in front of quality boards in institutions and design projects to mitigate this.
What is necessary is for health care institutions to look at their performance on quality measures through an equity lens — by race, age, gender, and insurance for example — to ensure that care is being provided equitably to all. The only way to improve is to measure and share the data within the hospital quality structure, up to and including the [hospital’s governing] board.
But the biggest gap on top of all this is that health care institutions supporting minority patients are different than institutions serving white patients, in terms of overarching quality. The health care system we have is almost the opposite of equitable, because those who have more — and this tends to weigh in our society by skin color and gender — have better insurance cards and have better hospitals that tend to be in white communities.
[These hospitals] have higher star ratings by Centers for Medicare and Medicaid Services, and those hospitals serving black and brown people have lower quality. This correlates with mortality rates, so on three different levels, people can get bad care based on race.
One is implicit bias, two is people not looking at quality overall through an equity lens, so you could be providing worse care. We know black people are less likely to receive angiograms, and breast cancer treatment varies. The third part is the structure of the health care system, which allows those who have more to get better insurance cards, and they get their care in better organized hospitals and health systems.
How does the neighborhood of the hospital affect the care patients receive?
Every city has a street like Ogden Avenue in Chicago, where you have great life expectancy gaps. A hospital in a poor community tends to be taking care of more uninsured patients and patients on Medicaid. I worked at Mount Sinai, which dedicated itself to serving Lawndale and poor communities on West Side. Because there were fewer people who could pay the bills, you couldn’t buy equipment or hire a specialist. After 17 years at [Hospital of Cook County] and 10 years at Mount Sinai, not once did a patient that I had who needed a transplant ever get one, and yet there were two trauma centers. There was a transplant center literally down the street.
But it also has to do with how capital is needed to improve care, so if you want to build a new facility or if you need fancy diagnostic equipment, hospitals that serve poor minority communities are under-capitalized, and therefore patients don’t have access to the best technology. As a doctor, I thought all I had to do was show up in a safety net setting and take care of patients. When I got to Rush University Medical Center, a shiny new medical center, I found that it wasn’t enough if the if availability for patients wasn’t there for me.
But when I showed up, what I found was that there wasn’t enough equipment, and the availability of patients wasn’t there for me. It is really an apartheid medical system. We can fix if we want to, but we haven’t yet, and all this debate about health care in DC is missing the point when it comes to equality and equity.
You say you want a single-payer system because there is a lot the ACA can’t achieve, particularly after the Supreme Court allowed states to opt out of Medicaid expansion. Do you think that under the current conditions, with Republicans pushing their own health care bill, we will get to return to a conversation about a single-payer system?
The ACA did some tremendous things, and 20 million people are insured who were uninsured. For every million uninsured, that is 1,000 additional deaths each year, so that means there are 20,000 fewer people dying each year. That is a wonderful thing, but the downside is that people were still left uninsured. And most of all, it propped up a flawed health insurance system that depends on profit-making health insurance companies and pharmaceutical companies that have basically raised rates for people — not only those buying health care on health care marketplaces but for those getting insurance as employees.
Those buying on the marketplaces, most of it is subsidized, but they’re also facing high co-pays and deductibles. And that actually deters people from seeking the care they need, so it is inherently flawed when you use insurance companies. Premiums have have not gone up under the ACA as fast as they were going before, but they’re still going up faster than wages … If you’re poor and uninsured, there is no worse thing than not having a Medicaid card, but the next less worse thing is having a Medicaid card, because one out of three doctors does not take Medicaid. It’s much harder for people with Medicaid to get specialty care and not all doctors take Medicaid plans.
So the ACA was good, but not good enough from a health equity perspective. The best and cheapest way is to take insurance companies out of it, get rid of co-pays under Medicare, and expand it for all.
I think Republican attempts to repeal are getting into the dilemma that the ACA was essentially a Republican conservative idea. Let the free market solve it. What they’re running into is that they can’t solve the problem without throwing 20 million people off of insurance, so they’re going to face opposition from both Republicans and Democrats. But the opportunity now is to do what other developed countries have done and have a single payer system.
How do you think activism is playing a role in forcing people to take notice of these death gaps?
We haven’t gotten rights in this country without being publicly vocal and being part of larger social movements. I gave examples of local things in Chicago, but it’s also true nationally. It’s not enough just to resist. We need to present a vision of what the world should be and get the political power to make it happen, and this will only happen with larger social movements.
This interview has been edited and condensed for clarity.
https://thinkprogress.org…
By Jeremy Ross
CBS Chicago, April 30, 2017
President Donald Trump’s 100th day in office was marked Saturday, and thousand protested nationwide, criticizing the president. Health care critics offered their take on the political environment on Saturday, some describing the first 100 days, as feeling a lot longer.
Protestors chanted at a healthcare rally, “Healthcare is a human right – fight, fight, fight.”
“The number one cause of bankruptcy is America is due to medical bills – fight, fight, fight.”
“We won’t tolerate that people have to die because of lack of health care in one of the richest countries in the world.”
Local health care providers said they are marching against a fragmented for-profit system. They hope to put pressure on lawmakers for both an alternative to Obamacare and Trumpcare.
full article:
http://cbsloc.al/2oVjPsZ
By Beth Sirr
The Billings (Mont.) Gazette, April 30, 2017
Like fire departments, public roads and the military, health care is a basic requirement for the safety and prosperity of any country. We the People form governments to ensure essential services we cannot afford individually.
The problem is, while all other industrialized nations collectively fund health care for their people, we don’t. Instead, we give billions to insurance corporations that provide no care and make money by not paying for it. Taxpayers are left to pay for those they’ve deemed “unprofitable”: seniors, the disabled, the poor. Tragically, out of 11 industrialized nations the U.S. spent 54 percent more on health care per person, but “ranked last overall on measures of health system quality, efficiency, access to care, equity and healthy lives” (Commonwealth Fund, 2016).
Why won’t politicians adopt what is better and costs less like our competitors? Because they care more about corporate insurance donors than We the People? Because they have guaranteed health care at taxpayer expense? Because they are too far removed from the intimacy of caring for the sick? American health care shouldn’t be unaffordable, unequal, wasteful or corrupt.
We all could thrive economically and have the care we need. Here’s how: A bill currently in Congress, Improved Medicare for All, HR 676, would extend coverage to everyone and be financed by equitable taxes, based on ability to pay. No more premiums, copays or deductibles. One payer for all medical bills would save about $500 billion annually in administrative waste and free up time for doctors to provide patient care. After Medicare passed in 1965, it was working nationwide within one year. Please, ask our politicians to do the right thing: Replace ACA with Medicare for All.
Beth Sirr, a family nurse practitioner, resides in Bozeman.
http://billingsgazette.com…
By John Perryman, M.D.
Chicago Tribune, Letters, April 29, 2017
In reviewing recommendations by the Tribune Editorial Board regarding round two of the Affordable Care Act repeal effort, a few thoughts came to mind. The suggestions are themselves reasonable in the context of preserving portions of the current system. However, the forest is being missed for the trees.
The Tribune, and the Republican Party, continue to ignore the options of single-payer, despite increasing public support for this option. A Gallup poll from 2016 showed that 58 percent of U.S. adults favored replacing the ACA with a federally funded system that provides health insurance for all Americans. An Economist/YouGov poll performed this year showed that 60 percent of adults favored expanding Medicare to cover every American. This included support from 46 percent of Republicans surveyed.
As pointed out by Drs. Steffie Woolhandler and David Himmelstein in an article published in the Annals of Internal Medicine, single-payer offers a host of advantages compared to our current system. These include hundreds of billions in savings related to overhead reduction, an improved negotiating position with pharmaceutical companies, and (most important) universal coverage that is not lost with job changes or a withdrawal of insurers from a particular marketplace. Trying to maintain profitability for health insurers while providing full coverage with consumer safeguards is an exercise in futility.
There are some types of business in which typical market-based practices simply do not function well. Commercial for-profit health insurance represents a market failure. This failure, even when mitigated by the ACA, still leads to unnecessary suffering and death among our fellow citizens.
So why do these efforts continue? It is a function of how our political system works. Elected representatives, needing increasing amounts of cash to finance campaigns, rely on powerful corporate donors, such as insurers. These organizations also have the resources to out-lobby groups that are not as focused and lack the same resources.
The president promised universal coverage. Congress needs to represent constituents, not special interests and donors from outside the members’ home districts. Time to deliver.
By Dr. John Perryman
Chicago Tribune, April 29, 2017
In reviewing recommendations by the Tribune Editorial Board regarding round two of the Affordable Care Act repeal effort, a few thoughts came to mind. The suggestions are themselves reasonable in the context of preserving portions of the current system. However, the forest is being missed for the trees.
The Tribune, and the Republican Party, continue to ignore the options of single-payer, despite increasing public support for this option. A Gallup poll from 2016 showed that 58 percent of U.S. adults favored replacing the ACA with a federally funded system that provides health insurance for all Americans. An Economist/YouGov poll performed this year showed that 60 percent of adults favored expanding Medicare to cover every American. This included support from 46 percent of Republicans surveyed.
As pointed out by Drs. Steffie Woolhandler and David Himmelstein in an article published in the Annals of Internal Medicine, single-payer offers a host of advantages compared to our current system. These include hundreds of billions in savings related to overhead reduction, an improved negotiating position with pharmaceutical companies, and (most important) universal coverage that is not lost with job changes or a withdrawal of insurers from a particular marketplace. Trying to maintain profitability for health insurers while providing full coverage with consumer safeguards is an exercise in futility.
There are some types of business in which typical market-based practices simply do not function well. Commercial for-profit health insurance represents a market failure. This failure, even when mitigated by the ACA, still leads to unnecessary suffering and death among our fellow citizens.
So why do these efforts continue? It is a function of how our political system works. Elected representatives, needing increasing amounts of cash to finance campaigns, rely on powerful corporate donors, such as insurers. These organizations also have the resources to out-lobby groups that are not as focused and lack the same resources.
The president promised universal coverage. Congress needs to represent constituents, not special interests and donors from outside the members’ home districts. Time to deliver.
By Gene Marks
Washington Post, On Small Business Blog, April 28, 2017
My wife is English and one of the biggest surprises she had when moving to this country was healthcare. “I don’t understand why my employer is involved in my healthcare,” she said back then–and still says today. After years of listening to that argument, I’m starting to understand what she means.
I can’t believe I’m saying this. I consider myself a smaller-government, fiscally right-of-center guy. I own a small business. I want lower taxes and less regulations. And yet, after watching and studying and writing about healthcare reform for going on 10 years I think I’m finally to the point of caving in and admitting that maybe, just maybe, a single-payer system would be what’s best for businesses, including businesses like mine.
A single-payer system is one in which the government or some quasi-government entity manages the financing and the care is still supplied by the private sector. Of course, if this is anything like what we’ve already seen with the Veterans Administration, then forget about it. There’s no argument that government-run healthcare programs, like the VA and the one in the United Kingdom, are far from perfect. Read the British media and you’ll find regular reports of shoddy service, underpaid doctors, long waiting periods for surgery, out-of-date equipment, huge budget issues and a number of other challenges. Moving to a system like the ones in the U.K., Canada, Sweden or France will likely just replace many of the problems we have in our system with new problems.
But I know from first-hand experience that the system in the U.K. does work. My in-laws have relied on the country’s National Health plan for their basic medical needs. But here’s the twist: they are fortunate enough to be able to afford additional insurance (called BUPA, an acronym for British United Provident Association) so that they could avoid waits and go to better hospitals for their healthcare. In the U.K., those that can afford it can get better care. But everyone is still able to get healthcare, regardless of their income. Is that the best solution? Probably not. But it does seem to work. There is no perfect healthcare solution. Not everyone will be happy.
Which is why I think a single-payer system could be better for businesses here.
Every year I speak and work with thousands of business owners and managers and each and every one of them are terrified come summertime when healthcare rates for the next year are announced. Every year–and I mean every year–my clients have suffered with double-digit increases in their healthcare costs. Sure, they are pushing more of these costs down to their employees. But most are still covering a large part of the health insurance offered to their people. Those that aren’t make up for it by contributing to corporate Health Savings or Healthcare Reimbursement accounts. In addition to the cost of premiums, even companies with as little as five or 10 people wind up paying for the time a manager has to spend internally dealing with the administrative headaches of their health plans.
We spend too much time trying to figure out ways to reduce our healthcare insurance–which, to many represents a significant line item on our income statements. This time distracts us from ways to grow our businesses. But we have to do this because we have to offer a healthcare benefit. Our employees expect it. Our competitors are offering theirs. The labor pool is tight. My wife asks “why?” So do I.
According to the Kaiser Foundation, the typical U.S. company paid about $5,000 per employee for health insurance in 2016, net of employee contributions. So a business owner with 25 full-time employees paid about $125,000 last year. This cost is deductible, but the remainder comes right out of his pocket for this employee benefit. Business owners in the U.K., Canada and other countries with single-payer systems don’t have this cost, or the cost of administration.
No question people who live in these countries pay a lot more in taxes. In the U.K, for example, tax rates range from between 20 to 45 percent and then there’s an additional 12 percent to pay for national health. In the U.S., we have slightly lower individual federal rates but then again we pay local and state taxes. Even though we already pay a Medicare tax, adding another 10 to 12 percent on top of that for a national healthcare system would be burdensome on individuals. But wouldn’t it be a relief for businesses like mine?
“If we choose to have a single-payer system, big government will make a mess of it like they always do,” people say. More than the mess we already have? More than the mess of Obamacare or what Congress is currently proposing? All I see in the eyes of my clients is fear and uncertainty and more dollar signs when the topic of healthcare is brought up.
Everybody has their opinions, but no one really knows the answers to these questions. One thing, however, is for sure: healthcare is a mess, Congress isn’t solving the problem and few business owners I know believe it ever will. We’re at the point where many of my clients –and many who are fiscally right-of-center like me–would seriously consider an individual tax increase and all the risks of a single-payer system just to take this headache away from our businesses so we can focus on…well…our businesses.
Gene Marks owns the Marks Group, a Bala Cynwyd, Pa.-based consulting firm that helps clients with customer relationship management. Marks is an author and a certified public accountant, and he writes regularly for The Post’s On Small Business blog.
By Alan J. Auerbach, Kerwin K. Charles, Courtney C. Coile, William Gale, Dana Goldman, Ronald Lee, Charles M. Lucas, Peter R. Orszag, Louise M. Sheiner, Bryan Tysinger, David N. Weil, Justin Wolfers, and Rebeca Wong
National Bureau of Economic Research, April 2017
(Note: These excerpts from this paper are quite wonkish so you may want to skim down to the Comment, and then return to read this only if you are still interested in the specifics.)
ABSTRACT
Older Americans have experienced dramatic gains in life expectancy in recent decades, but an emerging literature reveals that these gains are accumulating mostly to those at the top of the income distribution. We explore how growing inequality in life expectancy affects lifetime benefits from Social Security, Medicare, and other programs and how this phenomenon interacts with possible program reforms. We first project that life expectancy at age 50 for males in the two highest income quintiles will rise by 7 to 8 years between the 1930 and 1960 birth cohorts, but that the two lowest income quintiles will experience little to no increase over that time period. This divergence in life expectancy will cause the gap between average lifetime program benefits received by men in the highest and lowest quintiles to widen by $130,000 (in $2009) over this period. Finally we simulate the effect of Social Security reforms such as raising the normal retirement age and changing the benefit formula to see whether they mitigate or enhance the reduced progressivity resulting from the widening gap in life expectancy.
From the Introduction
We have several major findings. First, consistent with other recent studies, we confirm that life expectancy at older ages has been rising fastest for the highest socioeconomic groups. For those born in 1930, the gap in life expectancy at age 50 between males in the bottom 20 percent and top 20 percent of lifetime income is 5 years, according to our estimates. For males born 30 years later (in 1960), the projected gap at age 50 between the highest and lowest quintiles widens to almost 13 years, an increase of nearly 8 years. Second, we find that there is a growing gap by lifetime income in projected lifetime benefits from programs such as Social Security and Medicare. For the 1930 cohort, the present value of lifetime benefits at age 50 is roughly equal for those in the highest and lowest quintile of lifetime income, as those at the top receive more from Social Security while those at the bottom receive more from Disability Insurance, Supplemental Security Income, and Medicaid. For the 1960 cohort, by contrast, there is a $130,000 gap in benefits between the highest and lowest quintiles, as those in the top quintile are increasingly likely to receive benefits over longer periods of time, relative to those at the bottom. Finally, we show that a number of commonly-discussed Social Security reforms would make the program more progressive, although their impact on progressivity tends to be small compared to the changes arising due to differential changes in life expectancy.
Policy Reform Simulations
Our final goal is to analyze policy reforms to determine how they would affect the progressivity of government programs and interact with projected changes in life expectancy. The reforms we simulate – five that affect Social Security and one that affects Medicare – were chosen because they are either frequently mentioned in policy discussions or meet objectives with which many stakeholders would agree. Unfortunately, the structure of the FEM (Future Elderly Model) made it impossible to simulate certain reforms, such as raising the Social Security maximum taxable earnings amount. The policy simulations we study include: raising the Social Security EEA (Early Eligibility Age) by 2 years (to age 64), raising the Social Security NRA (Normal Retirement Age) by 3 years (to age 70); reducing the cost-of- living adjustment applied to benefits by 0.2 percent per year; reducing the top PIA factor by one- third (from a 15% to 10% rate); reducing the top PIA factor (Primary Insurance Amount) to 0 above median AIME (Average Indexed Monthly Earnings); and raising the Medicare eligibility age by 2 years (to age 67).
There are two mechanisms by which a policy change may translate into change in
benefits. The first, which can be characterized as the “mechanical effect,” results directly from the policy change, holding behavior constant. For example, if the NRA were raised by 3 years, a worker claiming benefits at age 67 would see the monthly benefit amount fall from 100 percent of the PIA to 80 percent, experiencing a 20 percent reduction in benefits. The second channel, which can be characterized as the “behavioral effect,” results from changes in individual behavior in response to the policy. For example, the individual may claim Social Security later, work longer, or be more likely to claim DI. These responses can be captured by the FEM.
We show results for all reforms on Table 4, reporting only the change in net benefits as a fraction of inclusive wealth for brevity. We begin with the increase in the EEA. At first glance, it might seem that this policy would have little effect on the present value of benefits given the common belief that the actuarial adjustment is roughly actuarially fair. We find that this reform raises net benefits as a share of wealth by 0.1 for males in the lowest quintile under the 1960 mortality regime and by 0.4 for males in the highest quintile. Under our assumptions, the actuarial adjustment for delayed claiming is slightly more than fair, so when individuals are forced to claim later by this policy change, lifetime benefits increase, particularly for high- income individuals who have longer life expectancies. The policy change is thus mildly regressive, although its effects are fairly small.
Raising the NRA has a much bigger effect – we estimate that lifetime Social Security benefits fall by $30,000 (or 25% of the pre-reform value) for the lowest quintile of males in the 1960 mortality regime and by $59,000 (20%) for the highest quintile. The percentage drop need not be the same in the two quintiles because the behavioral response of the two groups to the policy change (captured by the FEM) could differ; also, the same response – say, postponing retirement and claiming by one year – could have a different effect on lifetime benefits because of differences in life expectancy. As low income males experience the larger percentage drop in benefits, this policy might be considered regressive. Yet the policy change reduces benefits as a share of wealth by 4.8 percent for males in the lowest quintile and by 5.2 percent for males in the highest quintile, as the larger dollar loss for high income males ends up being a slightly larger share of their lifetime wealth (as captured by our inclusive wealth measure). Viewed by this metric, the policy change is progressive. Thus, the progressivity of this policy change is somewhat sensitive to the particular measure used.
Reducing the cost-of-living adjustment (COLA) has a modest effect on benefits, reducing them by 0.4 percent of wealth for males in the lowest quintile under the 1960 mortality regime and by 0.6 percent for males in the highest quintile. The larger effect for high income men is due to their longer life expectancy, since the effect of a lower COLA is cumulative over time. Reducing the top PIA factor by one-third has a fairly modest impact of 0.1 percent of wealth for low-income males and 0.3 percent for high-income males; the larger effect on high-income males is expected, since the top PIA factor applies only to earnings past the second bend point of AIME (e.g., at higher earning levels). A related policy with a much bigger impact is reducing the top factor to zero and moving the second bendpoint to the median of AIME. This policy, which would reduce benefits for the top half of earners, is chosen an as example of a substantial benefit cut designed to have a smaller impact on low earners. We find that this policy would reduce benefits as a share of wealth by 1.1 percent for males in the lowest quintile and by 3.4 percent for men in the highest quintile. Finally, we simulate raising the Medicare eligibility age. This policy has a fairly similar effect across quintiles in dollar terms, reducing lifetime Medicare benefits by $8,000 for low-income males in the 1960 mortality regime and by $7,000 for high- income males. Measured as a share of inclusive wealth, there is a loss of 1.4 percent for low- income males and 0.5 percent for high-income males, indicating a regressive policy.
Overall, most of these policy changes would make overall net benefits more progressive. The exceptions are raising the EEA or the Medicare eligibility age, which make benefits less progressive. When compared to the changes in progressivity occurring due to mortality trends, however, the effect of these policies on progressivity is generally fairly small. For example, consider the policy reducing the top PIA factor to zero above median AIME, which is the most progressive of the policies we simulated. Absent any policy change, the gap in lifetime Social Security benefits between males in the highest and lowest income quintiles grows from $103,000 in the 1930 mortality regime to $173,000 in the 1960 mortality regime. Implementing this policy would eliminate 60 percent of the increase, so that the gap under the 1960 regime would be $131,000. This illustrates the scale of the policy reform that would be needed to counteract the changes in progressivity of government benefit programs that we project are occurring due to the widening gap in life expectancy.
From the Discussion
Life expectancy at older ages has been growing steadily in the U.S. over the past several decades. Yet there is growing awareness that these gains are not being shared equally. Our study confirms a substantial increase in the life expectancy gap between those with higher and lower income. For men, we project that the gap in life expectancy at age 50 between males in the highest and lowest quintiles of lifetime income will grow from 5 years for the 1930 cohort to nearly 13 years for the 1960 cohort. Estimates for women (from Committee, 2015) are somewhat less reliable, but show a similar if not larger change over time.
We also assess the effects of the growing gap in life expectancies among older adults on the major entitlement programs. The larger life expectancy gap means that higher-income people will increasingly collect Social Security, Medicare, and other benefits over more years than will lower-income people. We estimate the value of net lifetime benefits for different income groups from Social Security, Disability Insurance, Supplemental Security Income, Medicare, and Medicaid. Our estimates suggest that these net lifetime benefits are becoming significantly less progressive over time because of the disproportionate life expectancy gains among higher-income adults. The changes in life expectancy between the 1930 and 1960 mortality regimes generate an increase in benefits equivalent to an increase of 6.9 percent of wealth (measured at age 50) for men in the highest income quintile, while benefits for men in the lowest income quintile are essentially unchanged. While we caution that one cannot rely too heavily on the specific numbers we estimate, since these are projections that necessarily rely on assumptions and our analysis does not allow us to construct confidence intervals around these projections, our results clearly indicate that lifetime benefits are increasingly accruing to those in the top of the income distribution due to the widening gap in life expectancy.
We then consider how the differential changes in mortality would affect analyses of some possible reforms to major entitlement programs in the face of population aging. For example, many proposals to increase the normal retirement age under Social Security are motivated by the rise in mean life expectancy. The mean, however, masks substantial differences in mortality changes across income groups. We show the impact of that proposal and other possible Social Security and Medicare reforms on lifetime benefits across income groups and in a manner that reflects their different life expectancy trajectories. We find that while there are policy reforms that tend to raise the progressivity of government programs, the effect of these reforms are fairly small when viewed next to the reduction in progressivity that is occurring due to the growing gap in life expectancy. This suggests that policy changes that (alone or in combination) are more progressive than those we simulate here would be needed to undo the effect of the widening longevity gap on the progressivity of government programs.
Social Security, Medicare, and the other programs included in our study face rising expenditures over time, straining the ability of existing revenue sources to fully fund benefit promises at current tax rate. The US is far from unique in this regard – rising longevity, falling birth rates, and slowing economic growth threaten the long-term solvency of entitlement programs in many countries, particularly where financed via a pay-as-you-go mechanism or out of general revenues. Many countries have already implemented reforms to public pension, disability insurance, and other social insurance programs, for example by raising retirement ages or altering benefit formulas in a way that reduces program generosity, and many countries continue to contemplate implementing (further) reforms. As policy makers continue to debate the future of social programs in the United States, they would do well to consider the welfare implications not only of improved longevity, but also the increasing gap in life expectancy by socioeconomic status.
***
By Don McCanne, M.D.
This paper was authored by a team of prominent economists (some names you may recognize) who are members of the National Academies of Sciences’ Committee on the Long-Run Macroeconomic Effects of the Aging U.S. Population. It is an important paper because it demonstrates the disproportionate distribution of Social Security, Medicare, and other public benefits to wealthier individuals by virtue of the fact that they live longer and thus collect benefits for a longer period of time. Since the life expectancy differential is increasing, the inequity of distribution of benefits is also increasing.
This team begins with the basic assumption that entitlement programs, especially Social Security and Medicare, are growing too rapidly and will create an excess burden for the federal budget. In their concluding remarks they note that other nations have raised retirement ages and reduced generosity of benefits. So this analysis seems to aim for that same goal of controlling spending. Thus they direct their consideration to various proposals designed to reduce federal spending for these programs while not giving consideration to increasing revenues to cover the anticipated growth in spending. We’ll get back to this in a moment.
It is widely acknowledged that, over the past several decades, there has been an unacceptable transfer of income and wealth upwards such that the wealthier are becoming much wealthier while the incomes and wealth accumulation of America’s working families have largely stagnated. Public policies, especially tax policies, are now required to correct these inequities.
The authors of this report do understand the inequities and thus describe how the various proposals to reduce spending on entitlements are either regressive or progressive. They conclude, “most of these policy changes would make overall net benefits more progressive. The exceptions are raising the EEA (Early Eligibility Age for Social Security) or the Medicare eligibility age, which make benefits less progressive.”
An interesting observation is that they did not evaluate one of the more important proposals – raising the Social Security maximum taxable earnings amount – simply because the economic model they selected (Future Elderly Model or FEM) made it impossible to do such a simulation. Since this is one of the more important proposals that would improve progressivity, you would think that they might look for or create a model that would take this into consideration, but then this would be counter to their goal of decreasing spending rather than increasing revenues.
In decreasing spending they are concerned about the progressivity of the various proposals since currently the wealthier are favored because of their increased longevity resulting in greater accumulated benefits, thus reductions in spending should apply more to the wealthier individuals. But their concern is about relative progressivity; they still anticipate that reductions would also occur amongst those with lower incomes and wealth, except at a lesser percentage.
The difficulty is that they are addressing the dubious problem as to whether we can afford the increases in entitlement spending, which would require greater revenues, when the problem that they should be addressing is whether or not the benefits are adequate for America’s workforce. Clearly, reducing retirement and health benefits for the workforce is the wrong direction, especially considering the background of wealth moving to the top.
So instead of policies designed to reduce spending, we should be looking at policies designed to ensure adequate retirement and health security. That means protecting and expanding benefits for those with lower incomes (e.g., improving Medicare). Wealthier individuals do not need expanded benefits, but in an egalitarian system it is far easier to provide the same benefits to everyone. To make the system more equitable, revenues from the wealthier individuals with higher incomes should be increased. For those who say that the “economy cannot afford it,” that’s nonsense. Social Security checks are spent, moving that money into the economy, and health care is one of the largest, most robust sectors of the economy, which is supported by the Medicare program. The economy thrives on Social Security and Medicare.
Unfortunately, right now the Trump administration is recommending the opposite. The tax policy recommendations released this week would greatly reduce revenues from those with higher incomes and totally eliminate estate taxes which tax wealth.
The groupthink of this committee is on target to be concerned about the progressivity of entitlement reform, but they have totally missed the boat by suggesting that harmful reductions in benefits for the majority are acceptable merely because the wealthy have a greater percentage reduction. Though that percentage reduction may be greater, the accumulated benefits for the wealthy still remain much greater, and they certainly are not harmed by these reductions, as those with little wealth are. But instead of increasing administrative complexity by selectively reducing benefits for the wealthy, we can offset that inequity by increasing revenues from the wealthy.
We can afford to ensure that absolutely everyone has a decent retirement, including freedom from fear of medical debt though a well financed Medicare program (make that a Medicare program for everyone). Normative economics needs to have a prominent place in groupthink deliberations.