Medicaid Block Grants and Federalism; Lessons From Canada

Benjamin D. Sommers, M.D., Ph.D.; C. David Naylor, M.D., D.Phil.
JAMA, April 25, 2017

Republican leaders are proposing a fundamental reform in Medicaid financing—a shift to block grants. Instead of a matching subsidy and federal oversight, block grants would give states an annual lump sum with minimal conditions attached.

Block granting for social and health programs has been used with varying levels of success in welfare reform and in a modified version for the Children’s Health Insurance Program (CHIP), which provides federal matching funds up to a specified cap. But for such a large state-federal health insurance program, perhaps the most useful precedent is Canada, which made a similar shift to block grants several decades ago.

Canada’s Block Grant Experience

Canada’s health insurance system has been a joint federal-provincial initiative since the 1950s. Individual provinces enacted single-payer systems for hospital care and medical services between 1947 and 1962. The federal government implemented a 50% subsidy to support provinces’ universal coverage policies for hospital care in 1957 and extended this approach to physician services in 1968.

Costs of hospital and physician services escalated steadily across Canada in the 1970s. By that time, most provinces had extended public insurance to prescription drugs for low-income and elderly residents, partial coverage for home care and long-term care, and a mix of other services. Facing low economic growth and rising deficits, the federal government first capped the growth rate in its share of spending and then retreated from a match rate altogether. By 1977, block grants had been implemented. In doing so, the federal government agreed to give provinces an increased share of income tax revenues from their residents. Since then, 2 central issues in the current US debate—restraining the federal cost of Medicaid and giving states more control—have played out in Canada.

The primary long-term effects have been a downsizing of federal spending on health care and increasing strain on provincial budgets. The federal government reduced its spending in 2 ways. First, ending the 50% match uncoupled federal commitments from growth in health care spending; more specifically, the government capped the annual growth rate for the grants starting in 1986, sometimes freezing the growth rate entirely and other times setting it at 2% to 3% below per capita GDP growth. Second, one-time cuts to the block grants were made, amounting to 5% in 1982-1983, followed by a 30% reduction in health and social block grants in the mid-1990s. Overall, the proportion of provincial health spending derived from federal transfers declined from approximately 30% in the late 1970s to less than 15% by the mid-1990s.

Pushback from the provinces has resulted in some gains in recent decades. Once the economy recovered in the late 1990s, several short-term increases in the block grants were negotiated with earmarks for elements such as primary care reform, improved home care, and reduction of surgical waiting lists. In 2004, the Liberal federal government committed to a sizable increase in the annual growth rate to 6%. A Conservative government took office in 2006 and initially sustained that rate, but later announced that the annual growth rate would decrease in 2017 to either 3% or the per capita GDP growth rate, whichever was higher. When the Liberal party regained power in late 2015, it adopted the same position, albeit softened by modest one-time earmarks for home care and mental health.

Lessons for the United States

Block granting of social programs is not inherently good or bad. Rather, it is a policy associated with specific economic and political trade-offs. Increased local control and predictability for the federal budget come at the risk of increased cost-shifting to states or provinces. That, indeed, is the Canadian experience. Once block funding was initiated in 1977, health care funding became a line item in the federal budget that could be arbitrarily cut or capped for fiscal or political reasons, as opposed to a level of spending pegged to the needs and health care use of the population. Importantly, these cuts occurred under both conservative and liberal federal governments. The federal share of provincial spending today remains substantially lower than in the 1970s.

There is little evidence that the alleged advantages of block grants have materialized in Canada. Advocates argue that with greater flexibility and proper incentives, states can reduce costs by improving the efficiency of care. In Canada, however, the provinces’ primary means of coping with budget pressures under block grants has been to reduce funding to hospitals and bargain harder with provincial medical associations. Ironically, then, if this scenario plays out in the United States, it would exacerbate one of the chief Republican criticisms of Medicaid—that it pays clinicians such low rates that they have reduced incentives to care for low-income patients. In Canada, the effect of low payment rates to clinicians on care of low-income patients is blunted because federal and provincial legislation has effectively banned private insurance for publicly insured services; hospitals and clinicians accordingly have no choice but to participate. The situation is far more precarious in Medicaid precisely because the US market is segmented with multiple private payers. Facing steep payment cuts, many US physicians and hospitals would likely stop providing care for Medicaid patients entirely. Another likely scenario in the United States is that a block grant system would simply lead many states to restrict eligibility for Medicaid, leaving millions of low-income adults and children newly uninsured.

In conclusion, the Canadian experience suggests that a block grant policy for Medicaid is most likely to succeed in only one aspect—reducing federal spending on the program. It would do so by shifting costs to states and forcing untenable trade-offs that would limit access to care for low-income US residents. Although Canada has often been seen as a panacea for US liberals desiring a single-payer approach to health insurance, perhaps the most useful lesson from north of the border for the current policy debate is a demonstration of how a conservative policy model—block grants—may be a risk not worth taking.

http://jamanetwork.com…

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Comment:

By Don McCanne, M.D.

Republicans intend to change the financing of Medicaid to giving states an annual lump sum – block grants. The primary purpose is to reduce the federal contribution to state Medicaid programs, placing more of the burden on the states – a problem for residents of states with high poverty levels or with stingy governors and legislators.

Today’s message explains the experience with block grants in Canada wherein the supposed advantages of block grants failed to materialize, and each province has ended up bearing more of the costs. The United States would be wise to avoid that same outcome with our Medicaid program.

There is another lesson for single payer advocates. Block grants were used in Canada to shift costs from the federal government to each provincial single payer system. Having a single payer system in place is not enough. Continual vigilance and citizen action is essential. We cannot allow our government to be controlled by people who do not believe in government.

This one unbelievably expensive Iowa patient makes the case for single-payer healthcare

By Michael Hiltzik
Los Angeles Times, April 24, 2017

Back in mid-2016, Iowa customers of Wellmark Blue Cross Blue Shield, the dominant company in the state’s individual insurance market, got a shock: Premium increases of 38% to 43% were in store for many of them for this year.

Three weeks ago they got a bigger shock: Wellmark was pulling out of Iowa’s individual market entirely, leaving the state with one company selling individual policies. Wellmark placed some of the blame on congressional Republicans’ failure to come up with a coherent repeal plan for the Affordable Care Act, leaving plans for 2018 in legislative limbo. With Wellmark’s departure, Iowa’s individual market may be down to a single insurer next year.

But Iowa has another problem that appears to be unique for a state its size: one single state resident whose care costs $1 million a month. That’s enough to all but destroy an individual insurance market that comprises about 30,000 customers. Indeed, that one patient’s care, according to Wellmark, was responsible for 10 percentage points of the 43% premium increase this year.

The important aspect of the Iowa case is what it tells us about the importance of spreading risk in the healthcare market, and the limitations of the Republican nostrum of segregating seriously ill patients into high-risk pools. The idea is to keep their costs from driving up everyone else’s premiums.

The case also points directly to the benefits of a single-payer healthcare system. “The idea of single-payer is that there’s just one risk pool,” says Steffie Woolhandler, a New York physician who is co-founder of Physicians for a National Health Program, the nation’s leading advocacy group for single-payer healthcare. “That’s what makes the care of very high-cost patients affordable.”

High-risk pools and reinsurance funds tend to be hopelessly underfunded. This was the case in most of the 35 states with high-risk pools prior to the Affordable Care Act, including California. Without sufficient public funding to cover all their high-cost residents adequately, most imposed waiting lists for coverage, time limits on eligibility, and premiums so high that many patients couldn’t afford them at all. The proposals for high-risk pools coming from congressional Republicans are similarly stingy.

“What high-risk pool could tolerate a patient costing a million dollars a month?” asks Woolhandler. “It would have to be a huge pool.”

The only fair and effective way to manage such patients, especially the few with truly stratospheric medical costs, is to make them part of a nationwide pool. A risk pool on that scale would represent the functional equivalent of single-payer healthcare. And that’s leaving aside some of the other virtues single-payer advocates cite, including the ability to negotiate prices on pharmaceuticals with the bargaining power of the entire country, and the virtual elimination of insurance company and provider billing office overhead.

The healthcare cost crisis is spreading nationwide, which makes it a national problem demanding a national — meaning a federal — solution.

http://www.latimes.com…

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Comment:

By Don McCanne, M.D.

Perhaps the most fundamental principle of health insurance is to pool risk – the high costs of the few are distributed amongst all participants in the pool. Since health care has become so expensive, distributing costs has made each person’s share – the insurance premium – unaffordable for many.

The Republican proposal to establish high-risk pools is simply a proposal to break up the existing pools into larger pools of the healthy which would then make their insurance premiums more affordable, and small pools of individuals with higher medical costs – the high-risk pools. But these high costs spread amongst fewer individuals would require exorbitant premiums that only the wealthiest individuals could afford, if even them (covering a-million-dollar-a-month patients?).

So how do you pay for the care for individuals in the high risk pools? Well, we have experience with that in the form of state-level high-risk pools and the answer is that you don’t pay for them. These pools were tremendously underfunded, so much so that the states covered only about one-tenth of the otherwise-eligible high-risk population, and those who were covered had very spartan benefits leaving them exposed to much of the costs.

Would the Republicans get serious with their high-risk proposal and fund it adequately? The House Republican Study Committee proposed $50 billion seed money for the states with contributions to the state pools of $2.5 billion per year for ten years. For perspective, the care for the 20 percent of individuals who use 80 percent of our national health care – all of the high-risk individuals in the nation – costs about $2830 billion (national health expenditures for 2017: $3,539 billion), indicating the enormity of the high-risk problem. Of course, many high-risk patients are already covered in other risk pools – Medicare, Medicaid, the VA, employer-sponsored plans, etc. – but the residual who are covered by non-group plans is about 7 percent of the total, and 8o percent of that would be about $200 billion per year – almost 100 times what the Republicans propose. Basically, they are unwilling to fund the high-risk pools they tout.

The larger the risk pool, the greater and more assured is the dilution of risk. Of course, a national single payer system would use a single universal risk pool. As Michael Hiltzik says, it is a “a national problem demanding a national — meaning a federal — solution.” One risk pool for all.

California’s Golden Healthcare Opportunity

By Paul Y. Song, M.D.
The Huffington Post, April 24, 2017

The Affordable Care Act (ACA) commonly known as Obamacare expanded healthcare coverage to approximately 4.6 million Californians and cut the uninsured rate in the Golden state from 16% in 2013 to 8.6% in 2016.

Despite over 60 attempts by Republicans under President Obama to repeal the ACA, and one recently botched effort under President Trump, the overall threat of a radically weakened ACA remains, placing the healthcare of millions of Californians at constant risk. It also leaves California in a constant state of financial uncertainty with regard to its aggressive Medicaid expansion.

Yet, event without any GOP repeal, 2.9 million Californians remain uninsured, of which a third are undocumented, 75% are from communities of color, and approximately 250,000 are kids.

Because most of the ACA was largely written by the private insurance and pharmaceutical industries, the ACA had no provisions to regulate health insurance premiums or rising prescription drug costs. As a result insurance premiums have increased roughly 200% in the past 10 years in California and a recent Kaiser Family Foundation study shows that the number of insured Americans that have trouble affording their premiums has increased from 27 to 37 percent since 2015, while the number of folks who have trouble with their deductibles has increased from 34 to 43 percent.

Meanwhile, one in 10 seniors cannot afford their prescriptions and one-third of all insured Americans delay seeking care because they cannot afford their co-pays and deductibles, while medical illness remains the number one cause of bankruptcies.

To date, Covered California has one of the most limited exchanges in the country in terms of having 75% of all their plans with very narrow networks (patients have access to 25% or less of physicians in a defined area). And premiums for 2017 jumped an average of 13.2%, three times the increase within the past two years.

Healthcare benefits remain a major source of labor negotiation strife as workers are being forced to contribute more towards their own healthcare while companies are handcuffed by skyrocketing premiums, which leave less money for capital improvements and their own R&D.

And, California has a $150 Billion unfunded retiree healthcare liability that has never been addressed.

California’s fragmented multi-payer system takes upwards of 20 cents of every healthcare dollar away from actual patient care to spend towards administrative costs often used to deny care, marketing, overheard, and executive compensation. A 2005 study by the Lewin Group revealed that a “single payer” system rather than multiple insurers to oversee funding of a private healthcare delivery system would save California a minimum of $20 Billion in the first year alone in administrative savings. At the same time it would expand coverage to care for everyone without requiring massive new taxes or spending.

A 2016 study from the UCLA Center for Health Policy Research revealed that 71% of all healthcare expenditure in California in 2016 was paid for by taxpayers. Coupled with the previously mentioned administrative waste, Californians are essentially paying for universal healthcare, just not getting it.

So what is California to do?

The fact is that our legislators can no longer turn a blind eye while California remains hostage to a federal government run by a heartless majority who recklessly controls the purse strings in favor of tax cuts for the 1% while refusing to view healthcare as a right. As the 6th largest economy, California needs to think boldly and look at what all major industrialized nations do.

The answer has been there all along.

California Senate Bill 562, authored by Senators Ricardo Lara and Toni Atkins calls for a California Single Payer program. While some specifics still need to be worked out especially with regard to obtaining a federal waiver to incorporate Medicare, Medicaid, and S-Chip funds, it is clear that any such program already faces tremendous opposition from corporatist legislators.

In order to get a healthcare program for the people, it must come from an unprecedented groundswell by the people. We must hold our elected officials publicly accountable and demand what we are already paying for and readily deserve. The ACA pointed our state and nation in the right direction, but the time for real universal healthcare is now and the opportunity to do so is golden and now!

Paul Y. Song, M.D. is Co-Chair of the Campaign for a Healthy California and Board Member of Physicians for a National Health Program.

http://www.huffingtonpost.com…

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Comment:

By Don McCanne, M.D.

Paul Song’s article is particularly helpful in understanding the health care reform challenge before us in that it describes one of the most successful programs in the nation – California’s – while noting the gross inadequacies of reform limited by our current federal laws and regulations. The best we have – a meticulous implementation of the Affordable Care Act – still leaves us far too short of judicious reform.

As co-chair of the Campaign for a Healthy California, Song supports the latest effort to enact a single payer system in California – Senate Bill 562 – while acknowledging that difficulties remain in attempting to incorporate Medicare, Medicaid and S-CHIP funds into the state program. But he also acknowledges that the federal government is now under the control of politicians who do not support guaranteeing essential health care services for all.

So what is California to do? Move forward with health care reform on both fronts. Advance the state single payer agenda behind SB 562, taking it as far forward as the federal politicians and courts will allow. But even more important is to join with other states to  change the federal political agenda so that everyone in the nation can have affordable  health care, and then even Californians will not be limited by federal restrictions.

Whatever it is, if it is for the good of patients, be there and do it, but always keep in mind that this is for everybody, so don’t leave anyone behind.

Catastrophic Health Expenditure Risk Among Uninsured Trauma Patients in the United States

By Scott, John W. M.D., M.P.H.; Raykar, Nakul P. M.D., M.P.H.; Rose, John A. M.D., M.P.H.; Tsai, Thomas C. M.D., M.P.H.; Zogg, Cheryl K. M.S.P.H., M.H.S.; Haider, Adil H. M.D., M.P.H.; Salim, Ali M.D.; Meara, John G. M.D., D.M.D., M.B.A.; Shrime, Mark G. M.D., M.P.H., Ph.D.
Annals of Surgery, April 7, 2017

Abstract

Objective: To characterize the economic hardship for uninsured patients admitted for trauma using catastrophic health expenditure (CHE) risk.

Background: Medical debts are the greatest cause of bankruptcies in the United States. Injuries are often unpredictable, expensive to treat, and disproportionally affect uninsured patients. Current measures of economic hardship are insufficient and exclude those at greatest risk.

Methods: We performed a retrospective review, using data from the 2007-2011 Nationwide Inpatient Samples of all uninsured nonelderly adults (18-64 yrs) admitted with primary diagnoses of trauma. We used US Census data to estimate annual postsubsistence income and inhospital charges for trauma-related admission. Our primary outcome measure was catastrophic health expenditure risk, defined as any charges >=40% of annual postsubsistence income.

Results: Our sample represented 579,683 admissions for uninsured nonelderly adults over the 5-year study period. Median estimated annual income was $40,867. Median inpatient charges were $27,420. Overall, 70.8% of patients were at risk for CHE. The risk of CHE was similar across most demographic subgroups. The greatest risk, however, was concentrated among patients from low-income communities (77.5% among patients in the lowest community income quartile) and among patients with severe injuries (81.8% among those with ISS >= 16).

Conclusions: Over 7 in 10 uninsured patients admitted for trauma are at risk of catastrophic health expenditures. This analysis is the first application of CHE to a US trauma population and will be an important measure to evaluate the effectiveness of health care and coverage strategies to improve financial risk protection.

http://journals.lww.com…

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Uninsured with traumatic injuries may be cured into destitution

By Ronnie Cohen
Reuters, April 20, 2017

When a badly injured patient rolls into the emergency room, Dr. John Scott doesn’t ask to see proof of insurance. Instead, he immediately begins treatment.

Hospital care frequently saves patients from gunshots, stab wounds, crushing car accidents and other traumatic injuries. But Scott found in a new study that 7 out of 10 adult uninsured trauma patients suffer another debilitating injury: financial catastrophe.

“We’re getting better at trauma, and they’re going home financially ruined,” Scott said in a phone interview.

“There’s nobody we turn away for emergency trauma care. We don’t check people’s insurance status. We don’t check their wallet,” he said. “If everybody is deserving of world-class trauma care, everybody is deserving of protection from financial catastrophe from that care.”

Dr. David Himmelstein, a professor at the City University of New York’s Hunter College School of Public Health, described the study as “quite sophisticated.” It “paints an extraordinarily disturbing picture of America’s vulnerability,” he said in an email.

“This study shows that someone who is in a car accident, or is mugged, or experiences sudden trauma for some other reason, risks being driven to financial ruin,” he added.

“In essence, unless you’re Bill Gates, you could be at risk of financial catastrophe if you fall seriously ill,” said Himmelstein, who was not involved with the study.

http://www.reuters.com…

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Comment:

By Don McCanne, M.D.

We hear often of healthy individuals remaining uninsured because of the very high cost of health insurance, but it is a risk that they are willing to take because they have very few health care needs…though they hope nothing really bad happens. Well, bad things do happen, and this study confirms that 70 percent of those who lost the bet face destitution.

The intent leading up to health care reform was that everyone would be covered. But, as the Affordable Care Act was crafted, it became obvious that the design in putting together various public and private programs was not seamless, and could never be. Thus it was accepted that millions would remain uninsured (28.5 million under 65 as of Sep 2016 – KFF), unless we were to do single payer or something like that, but, of course, that wasn’t feasible, so they said.

More patches could be added to the system but only at higher marginal costs, requiring a major expansion of our wasteful administrative burden, and yet it would still fall short. The deficiencies of the Republican proposals have been exposed by their own rhetoric – that it’s about “access” (but not about actually financing insurance or health care). Their proposals would only increase the numbers of uninsured.

Today’s report shows that relying on current good health and hoping for the best in the future is not a satisfactory approach. As study coauthor Dr. John Rose indicates, absolutely everyone is entitled to our world-class trauma care, and yet they are not entitled to protection from financial catastrophe from that care. We have to change that.

It has become obvious that a single payer national health program is the only feasible approach for the United States that would not only guarantee access to care but would also finance it for everyone. The patchwork models just don’t work, and are too expensive anyway.

By Malena Marvin
Medium, April 17, 2017

If you haven’t had a chronic illness while self-employed, the term “single payer” might not mean much to you. Let me explain what it means to me. Grab a cup of coffee and put your feet up, this is going to take a few minutes.

https://medium.com…

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Comment:

By Don McCanne, M.D.

Believe me. Take a few minutes (9 to be precise), and read this (at link above). Then send it to others and strongly recommend that they read it, and then have them send it on to yet others who might also care. This needs to go viral. You will not find a better description of why we need a single payer system. (Caution: she uses all caps near the end of her story.)

Substantial Physician Turnover And Beneficiary ‘Churn’ In A Large Medicare Pioneer ACO

By John Hsu, Christine Vogeli, Mary Price, Richard Brand, Michael E. Chernew, Namita Mohta, Sreekanth K. Chaguturu, Eric Weil and Timothy G. Ferris
Health Affairs, April 2017

Abstract

Alternative payment models, such as accountable care organizations (ACOs), attempt to stimulate improvements in care delivery by better alignment of payer and provider incentives. However, limited attention has been paid to the physicians who actually deliver the care. In a large Medicare Pioneer ACO, we found that the number of beneficiaries per physician was low (median of seventy beneficiaries per physician, or less than 5 percent of a typical panel). We also found substantial physician turnover: More than half of physicians either joined (41 percent) or left (18 percent) the ACO during the 2012–14 contract period studied. When physicians left the ACO, most of their attributed beneficiaries also left the ACO. Conversely, about half of the growth in the beneficiary population was because of new physicians affiliating with the ACO; the remainder joined after switching physicians. These findings may help explain the muted financial impact ACOs have had overall, and they raise the possibility of future gaming on the part of ACOs to artificially control spending. Policy refinements include coordinated and standardized risk-sharing parameters across payers to prevent any dilution of the payment incentives or confusion from a cacophony of incentives across payers.

From the Introduction

Recently, the Centers for Medicare and Medicaid Services (CMS) announced intentions to move half of all Medicare payments away from traditional fee-for-service reimbursement by 2018 and toward alternative payment models, such as those exemplified by the accountable care organization (ACO) program.

Using a combination of organizational and Medicare data, we examined the distribution of beneficiaries in a Pioneer ACO across affiliated physicians, the magnitude of physician changes from year to year, and the impact of physician changes on an aligned beneficiary population.

From the Discussion

There are two important findings. First, not all physicians had attributed beneficiaries, and those who did had relatively few ACO beneficiaries, on average. This limited ACO penetration at the physician level could mitigate the ACO’s potential to achieve its financial targets, at least for any effects mediated through physician behavior. With the small numbers, it is not surprising that the distribution of high-spending beneficiaries also is skewed such that a few physicians appeared to have the sickest beneficiaries, while many appeared to have mostly beneficiaries with modest spending.

Second, we found evidence of substantial changes in the affiliation status of physicians with respect to this large Pioneer ACO, which were associated with changes in numbers of beneficiaries aligned and could affect the predicted spending for the ACO beneficiary population. New physician affiliations accounted for only half of the growth in the ACO beneficiary population over time. In short, the physician changes appeared to affect the composition of the ACO beneficiary population, which could have important implications for the ACO program’s overall financial impact.

With higher physician reimbursement and explicit CMS goals associated with alternative payment models, it is likely that the impetus will only increase for physicians to join ACOs. ACOs’ ability to deliberately select participating physicians year to year, however, creates a relatively simple mechanism to “game” the risk pool. For example, in our sample, dropping the twenty-two primary care physicians (top 5 percent) with the most high-spending beneficiaries (spending more than $81,000) would reduce the mean Medicare ACO spending per beneficiary by 17 percent.

The presence of this mechanism and the ease of its use, especially compared to the more difficult task of redesigning care, could result in an undesirable but powerful temptation for ACOs, particularly those facing financial constraints or pressing financial motivations. Indeed, the push to increase ACO incentives now that the program is in its fifth year could exacerbate this concern.

From the Conclusion

As the pace and magnitude of reform grow, we might expect that the potential impact on physicians’ behavior could increase but that the amount of organizational change also could accelerate, thus creating the potential for mischief.

http://content.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

Under the MACRA replacement for the flawed SGR method of determining Medicare payments, CMS is moving forward with shifting the delivery system into alternative payment models, the predominant model being the accountable care organization (ACO). This study of one of the premier ACOs in the nation (Partners HealthCare) should make us question whether such a shift is wise policy.

Briefly, this study shows that there is considerable instability in the professional relationships of physicians and patients due to considerable churning in both professional employment and patient enrollment in ACOs. Also, ACO patients are a small percentage of the physicians’ patient populations and thus provide little motivation for the delivery model improvements that some in the policy community say would be inevitable in the drive to higher quality and lower costs that the ACO model supposedly promotes. Further, as this article explains, the ACO organizational change creates “the potential for mischief.” Flags should go up.

When we want to save money, improve quality and improve the physician/patient relationship, this does not seem to be the right model to pursue. In contrast, changing to a well designed single payer system improves efficiency while establishing long term professional relationships. The policy community should be working on that model instead – an improved Medicare for all.

Medical Debt Malpractice

United States Public Interest Research Group (U.S. PIRG), April 11, 2017

Millions of Americans are contacted by debt collectors every year over debt related to medical expenses.

Medical debt collectors often employ aggressive tactics and attempt to collect debt from the wrong customers – putting consumers’ credit records at risk. Medical debt accounts for more than half of all collection items that appear on consumer credit reports. A review of 17,701 medical debt collection complaints submitted to the Consumer Financial Protection Bureau (CFPB) shows that problems with medical debt collection are widespread and harm Americans across the country.

Complaints submitted to the CFPB suggest that many consumers contacted about medical debt should not have been contacted in the first place, and that many contacts involve aggressive or inappropriate tactics.

* Nearly two-thirds (63%) of complaints about medical debt collection assert either that the debt was never owed in the first place, it was already paid or discharged in bankruptcy, or it was not verified as the consumer’s debt.

* Many complaints document inappropriate and aggressive tactics including frequent or repeated calls, calls harassing friends and family, threats of legal action, or the use of abusive language.

Medical debt collection affects a broad swath of the population and subjects millions of consumers to undue stress and financial harm. State and federal policymakers should work to protect consumers from unfair treatment by medical debt collectors.

Federal policymakers should also defend the CFPB against attempts to eliminate or cripple it, and should continue to ensure the CFPB has the resources, independence and tools at its disposal to effectively protect consumers from all kinds of predatory financial behavior.

http://www.uspirgedfund.org…

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Medical Debt: You May Not Owe It

By Ann Carrns
The New York Times, April 12, 2017

Nearly two-thirds of people who complained to federal regulators about medical debt collectors said they did not owe the money, a new report found.

The report, by the advocacy group United States Public Interest Research Group — better known as U.S. PIRG — and the Frontier Group, a left-leaning think tank, examined more than 17,000 publicly available complaints about medical debt collection filed with the Consumer Financial Protection Bureau over more than three years.

Chi Chi Wu, a lawyer with the National Consumer Law Center, said the findings in part reflected the complexity of the health care payments system, which often involves insurers that may pay all or part of the cost of care. Consumers may not understand the details of how their health insurance works, and may think that it covers more than it actually does. Co-payments and deductibles — the amount that you pay before insurance does — can often trip people up.

“The medical and health care billing process is just really confusing and complicated,” Ms. Wu said.

https://www.nytimes.com…

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Comment:

By Don McCanne, M.D.

The United States is unique in having a massive amount of personal medical debt when we are spending twice the amount per person on health care than the average of other wealthy nations in which medical debt is much less common. What is wrong here?

The primary defect is in the way we finance health care – especially depending on private sector intermediaries (the insurance industry) that create innovative methods of financing health care that work very well for their own industry but work poorly for patients with health care needs. This flawed system has created greater opportunities for the debt collection industry which, again, serves its own industry well but also works very poorly for patients.

Regular readers know that a well designed single payer system would eliminate much of this waste and grief. What is difficult to understand is why we have failed to enact an improved Medicare for all program before now. It is long past due.

How Healthcare Became Big Business and How You Can Take It Back

By Elisabeth Rosenthal
Penguin Random House, April 2017

From the Introduction

Everyone knows the healthcare system is in disarray. We’ve grown numb to huge bills. We regard high prices as an inescapable American burden.

The current market for healthcare just doesn’t deliver. It is deeply, perhaps fatally, flawed. Even market economists themselves don’t believe in it anymore.

All the harrowing tales in this book occurred despite the 2010 passage and the 2014 enactment of the Patient Protection and Affordable Care Act (the ACA, also known as “Obamacare”). The ACA is not a failure, as some still assert, but the “affordable” in its name was an overreach to win over votes and public opinion.

Each market has certain rules that are determined by the conditions, incentives, and regulations under which it operates. Currently, we buy and sell medical encounters and accoutrements like commodities, but how do participants in the marketplace make purchasing choices? Prices are often unknowing and unpredictable; there’s little robust competition for our business; we have scant information on quality to guide our decisions; and very often we lack the power ourselves to even choose.

The rules governing the delivery of health care in the United States have grown out of the market’s design. The type of healthcare we get these days is exactly what the market’s financial incentives demand. Some have to get wise to them, and be smarter, far more active participants in this ugly, rough-and-tumble world. More important, we have to change the rules of the game, with different incentives and new types of regulation.

The economist Adam Smith spoke of an “invisible hand” with respect to income distribution. But in American healthcare, there’s a different type of invisible hand at work: it’s on the till.

http://www.penguinrandomhouse.com…

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Why an Open Market Won’t Repair American Health Care; A Review of Elisabeth Rosenthal’s “An American Sickness”

By Jacob S. Hacker
The New York Times, April 4, 2017

It was March 2012, and the Affordable Care Act (a.k.a. Obamacare) was before the Supreme Court. Justice Antonin Scalia zeroed in on its controversial requirement that all Americans purchase health insurance. Yes, everybody needs health care, Scalia conceded, but everybody needs food too. If the government could make people buy insurance, why couldn’t it “make people buy broccoli”?

The Affordable Care Act survived, of course — though not before a fractured court made the expansion of Medicaid optional, leaving millions of poorer Americans without its promised benefits. But the question Justice Scalia asked remains at the heart of a debate that has only intensified since: Why is health care different? Why does it create so much more anxiety and expense, heartache and hardship, than does buying broccoli — or cars or computers or the countless other things Americans routinely purchase each day?

For those leading the charge to roll back the 2010 law, the question has a one-word answer: government.

Where Rosenthal’s account falls short is in explaining why this deeply broken system persists. Early on, Rosenthal seems to side with Speaker Ryan and Senator Paul, describing “the very idea of health insurance” as “in some ways the original sin that catalyzed the evolution of today’s medical-industrial complex.” But, as Rosenthal (too briefly) discusses, countries where people are much better insured don’t have anything like our self-dealing, upside-down incentives and outrageous costs. Somehow, despite largely keeping citizens’ skin out of the game, other rich democracies manage to have much lower costs per person — as well as greater utilization of physician and hospital services and better basic health measures.

The difference between the United States and other countries isn’t the role of insurance; it’s the role of government. More specifically, it’s the way in which those who benefit from America’s dysfunctional market have mobilized to use government to protect their earnings and profits. In every country where people have access to sophisticated medical care, they must rely heavily on the clinical expertise of providers and the financial protections of insurance, which, in turn, creates the opportunity for runaway costs. But in every other rich country, the government not only provides coverage to all citizens; it also provides strong counterpressure to those who seek to use their inherent market power to raise prices or deliver lucrative but unnecessary services — typically in the form of hard limits on how much health care providers can charge.

In the United States, such counterpressure has been headed off again and again. The industry and its elected allies have happily supported giveaways to the medical sector. But anything more, they insist, will kill the market. Although this claim is in conflict with the evidence, it is consistent with the goal of maximum rewards to (and donations from) the industry.

Without a clear view of the political economy of health care, it’s easy to see the problem as Justice Scalia did. If we could just start treating health care like broccoli, the market would solve the problem. But as Rosenthal’s important book makes clear, the health care market really is different. Speaking of her Times series in 2014, Rosenthal told an interviewer her goal was to “start a very loud conversation” that will be “difficult politically to ignore.” We need such a conversation — not just about how the market fails, but about how we can change the political realities that stand in the way of fixing it.

https://mobile.nytimes.com…

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Comment:

By Don McCanne, M.D.

In her book, “An American Sickness,” Elisabeth Rosenthal has provided an excellent description of the dysfunction of the business model of health care delivery in the marketplace. On this basis alone it is an invaluable resource for every health policy library – home or institutional.

Rosenthal makes a valiant effort to describe what we can do about it, but she does so apparently under the assumption that we are going to have to live with this system for the indefinite future. Her recommendations largely require a very aggressive stance in dealing with the health care delivery system, especially with the business transactions. A limitation of this approach is that it requires not only access to the system by virtue of good insurance coverage or personal wealth, but it also requires a personality capable of rough-and-tumble negotiations. Most people would not really qualify and thus would not be effective in taking on the medical-industrial complex. She also quite appropriately recommends more aggressive regulation, though, except for the quite modest reforms of ACA, that has not been forthcoming in the environment of political polarization that has dominated the scene in the past few decades.

However this “sickness” is unique in the United States, so hope springs from observing how other nations have made their systems work. I am going to yield to Yale political science professor Jacob Hacker, who also reviewed her book, to provide us with a description of what accounts for other nations’ success, but in one word, it is government.

Rosenthal mentions single payer, but is far too timid here, suggesting, at most, allowing individuals over 55 to purchase Medicare. It is true that single payer reform alone would not correct all of the sins of capitalizing on unfettered market opportunities for excess revenues, but changing the milieu from the market business model to the public patient service model would go a long way toward realigning incentives of the providers. It would be a refreshing environmental change to concentrate on how the health care needs of the patients can best be served instead of wasting time trying to figure out how to pull in more big bucks.