Scott Walker, Marco Rubio Propose ‘Plans’ to Replace Obamacare

By Jonathan Chait
New York Magazine, August 18, 2015

Today, Scott Walker and Marco Rubio have published plans — really, not so much plans as skeletal descriptions of planlike concepts — to replace Obamacare. Appealing to the general election requires them to promise something to compensate the victims of repeal. How will they fund that something? This is the basic problem that for decades has prevented Republicans from offering a health-care plan. Rubio and Walker show that they still have no answer.

The main reason people lacked insurance before Obamacare is that they did not have enough money to afford it. Some of those uninsured people had unusually high health costs. Some of them had unusually low incomes. Boiled down, Obamacare transferred resources from people who are rich and healthy to people who are poor and sick, so the poor and sick people can afford insurance.

Walker and Rubio are fairly clear about their plans for regulating the insurance market. They want to go back to the pre-Obamacare, deregulated system. They’d eliminate the requirements that insurance plans cover essential benefits, and let them charge higher prices to sicker customers. That’s good for people who have very limited medical needs (as long as they never obtain a serious medical condition, or have a family with somebody with a serious medical condition). It’s bad for people who have, or ever will have, higher medical needs.

Both Walker and Rubio promise to take care of people with preexisting conditions by creating separate “high-risk pools.” That is a special kind of insurance market for people with expensive medical conditions. As you may have guessed, insurance for people with expensive medical needs is, well, expensive. Making that insurance affordable therefore requires lots of subsidies from the government. Where would Walker and Rubio get the money for that? They don’t say.

Both Walker and Rubio propose to cut funding for Medicaid, but this doesn’t create much room to subsidize coverage, since Medicaid is already much cheaper than Medicare or private insurance. Republicans are willing to cut Medicaid because they’re generally willing to cut programs that focus on the very poor, but there’s not much blood to be drawn from this stone.

It is tempting to treat the lack of specifics in the Republican health-care plans as a problem of details to be filled it. But it is not a side problem. It is the entire problem. They will not finance real insurance for the people who have gotten it under Obamacare, nor will they face up to the actual costs they’re willing to impose on people. The party is doctrinally opposed to every available method to make insurance available to people who can’t afford it. They have spent six years promising to come up with an alternative plan, and they haven’t done it, because they can’t.

http://nymag.com/daily/intelligencer/2015/08/walker-rubio-obamacare-replacement-plans.html#jumpLink

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Comment:

By Don McCanne, MD

Much has been written this week about the proposals of presidential candidates Gov. Scott Walker and Sen. Marco Rubio for replacing the Affordable Care Act (ACA or Obamacare) once it is repealed. Most articles discuss the few specifics of their proposals that they have provided, but Jonathan Chait’s stands out because he describes the underlying fundamental flaw common to all conservative proposals for reform: for everyone to have affordable access to health care, there must be a large transfer from the healthy to the sick and from the wealthy to those with lower incomes, and the conservative proposals fall far short on the size and direction of the transfers that are needed.

Chait exits the topic leaving ACA in place, but there is more to be said. Although ACA actually did expand the necessary transfers, it still falls short of what is needed, plus too many inequities are perpetuated. Patches to ACA would still leave in place the fundamentally flawed infrastructure, and the Republican replacements are even more fundamentally flawed because they would worsen the financial barriers to care, especially by failing to include adequate transfers in their models.

A much more efficient and equitable method of achieving the necessary transfers would be to enact a single payer national health program. If the Republicans really do want a better replacement for Obamacare, maybe they should seriously consider single payer.

Bernie Sanders repeats flawed claim about U.S. health care spending compared to other countries

By Will Cabaniss
PolitiFact, August 16, 2015

Democratic presidential candidate Bernie Sanders is on a campaign for “Medicare for all” — or at least something like it.

Sanders, an independent senator from Vermont who identifies as a socialist, told NBC’s Meet the Press moderator Chuck Todd to look at how much the country spends compared to the rest of the world as a reason for a single-payer system.

“We spend almost twice as much per capita on health care as do the people of any other country,” Sanders said.

It’s a striking claim, and one we heard from Sanders six years ago.

We rated the claim False then, and it’s still wrong now.

We looked at data from the Organization for Economic Cooperation and Development (OECD), widely cited by experts as an authoritative source for this information.

In 2007, the United States led the world in health care spending at $7,167 per capita, according to the OECD. Norway and Switzerland followed at $4,579 and $4,568, respectively.

The United States maintained its spending lead in the years that followed. But Sanders puts the difference too strongly when he says U.S. spending is “almost twice” per capita of “any other country.”

According to the OECD’s most recent data, U.S. spending grew to $8,713 per capita in 2013. Switzerland and Norway came in second and third at $6,325 and $5,862 per capita, respectively.

Had Sanders fine-tuned his talking point by claiming that the United States spends twice as much per capita as the average developed country, his statement would been accurate. Average per capita spending is less than $3,500 across the 32 countries listed in the OECD database. That’s 40 percent of what the United States spends per person.

Our ruling

Sanders said that “we spend almost twice as much per capita on health care as do the people of any other country.”

The United States spends more on health care per capita than other countries, but not always twice as much. Sanders’ comment suggests the United States outpaces all other countries more than it actually does. European countries with extensive social service networks aren’t so far behind the United States. 

We rate his statement False.

http://www.politifact.com/truth-o-meter/statements/2015/aug/16/bernie-s/bernie-sanders-repeats-flawed-claim-about-us-healt/

OECD Health Statistics 2015: http://www.oecd.org/els/health-systems/health-data.htm

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Comment:

By Don McCanne, MD

Sen. Bernie Sanders told NBC’s Chuck Todd, “We spend almost twice as much per capita on health care as do the people of any other country.” You’ve probably heard, or thought you heard, similar statements from others, including some of the PNHP leadership. But this specific statement is technically incorrect.

Sanders did include the important specification that he was referring to “per capita” spending, but by specifying that our per capita spending was almost twice that of any other country, that would place the second highest spending country at slightly over half of our spending. That is not correct.

What he likely intended to say was, “We spend almost twice as much per capita on health care as the average of developed nations,” or, “… industrialized nations,” or, “… wealthy nations,” or, more specifically, “… as the average of all OECD nations.” PolitiFact indicates that such a statement would have been accurate.

Yet this statement still isn’t quite accurate. In 2013, the latest year for which we have full data, the United States spent $8713 per capita, whereas the OECD average was $3453 per capita. That is not “almost twice” the OECD average, but rather the United States is spending over TWO AND A HALF TIMES AS MUCH PER CAPITA as the average per capita spending of OECD nations (2.52 times as much).

PolitiFact rules, “Sanders’ comment suggests the United States outpaces all other countries (in spending) more than it actually does.” In fact, the United States outpaces the average per capita spending of other developed nations by even more than what Sanders intended to say.

Remember, THE UNITED STATES SPENDS TWO AND A HALF TIMES AS MUCH PER CAPITA ON HEALTH CARE AS THE AVERAGE PER CAPITA SPENDING OF ALL OECD NATIONS.

California’s Plan To Absorb Medically Fragile Children Into Managed Care Proves Controversial

By Barbara Feder Ostrov and Anna Gorman
Kaiser Health News, August 17, 2015

When Kausha King’s son Christian was born with cerebral palsy, along with a seizure disorder and lung disease, doctors told her he would not live past the age of three. Today, Christian is 18, and although he cannot walk or speak, he is happy and thriving, King says.

King credits much of her son’s progress to a little-known state program known as California Children’s Services (CCS), which pays for specialized medical care for children with severe illnesses or birth defects.

Beginning next year, state officials essentially want to fold the $2 billion program, which serves an estimated 180,000 children younger than 21, into its vast system of Medi-Cal managed care.

But families like King’s, along with children’s advocates and pediatric medical centers, are strenuously opposed. They say Medi-Cal managed care hasn’t worked well for vulnerable populations and is particularly risky for fragile kids whose lives depend on access to highly specialized care.

“It feels like our children are going to be dumped in to this system that doesn’t even seem to be working for healthier children,” said King, who lives in Concord, Calif. and works as a liaison for families of children with special needs. “Children like Christian require a different level of support than your average child.”

At issue are two separate programs whose beneficiaries overlap. About 90 percent of children served by CCS also qualify for Medi-Cal, the public insurance program for low-income Californians. Medi-Cal covers their general medical care, while CCS covers services related to specific conditions such as spina bifida, cancer, cystic fibrosis and sickle cell disease.

CCS pays a fee for each service provided, whereas Medi-Cal increasingly is switching to a managed care approach, in which medical services are coordinated and covered under a single health plan for a fixed monthly payment.

Many parents and consumer advocates are skeptical. Similar transitions of elderly, disabled and child populations from traditional fee-for-service Medi-Cal into managed care programs have proved controversial.

These critics point to a scathing report from the California State Auditor in June, which found that the state could not assure that its Medi-Cal managed care networks were adequate and that thousands of calls to an ombudsman’s office went unanswered every month. They also refer to a lawsuit pending in Los Angeles, alleging disabled people were denied crucial medications, tests and treatment by Medi-Cal managed care plans.

(Ann-Louise Kuhns, president and CEO of the California Children’s Hospital Association) said the state’s proposal threatens children’s access to the pediatric specialists who are most familiar with them and their rare diseases.

“These (managed care) plans typically don’t have these specialty providers in their networks,” she said.

http://khn.org/news/californias-plan-to-absorb-medically-fragile-children-into-managed-care-proves-controversial/

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Comment:

By Don McCanne, MD

The origins of California Children’s Services (CCS) (formerly Crippled Children’s Services) date back almost a century (1927). It has been a phenomenal program ensuring care for these children with special needs. Now the state wants to transfer these children into Medi-Cal managed care programs (Medicaid). Ouch!

CCS is part of the traditional culture of California health care. Children’s hospitals, academic institutions, specialists and sub-specialists are readily available to meet the needs of these unfortunate children, simply because it’s always been that way. Well, really more than that, because that is what they do. But no thought is ever given to turning these children away.

In contrast, Medi-Cal has been chronically underfunded and has one of the lowest payment rates in the nation. Many providers refuse to accept Medi-Cal patients (and they are “providers” when they let money issues trump their professional obligation to care for the infirm). Now it is even worse in that the Medi-Cal managed care organizations limit patient access to their own contracted networks. Experience to date suggests that these networks are inadequate for basic, primary care services, and access to more specialized services is much worse. 

California Department of Health Care Services director Jennifer Kent said that this is not about saving money, but rather that children can benefit by being managed in a system where the whole child is treated by one plan. But when the decision was made to transfer Medi-Cal patients to managed care programs it was about saving money, according to state announcements at that time.

CCS was all about getting the care that these children needed when they needed it. Medi-Cal managed care is about keeping patients away from “excessive” specialized care by coordinating their care through overworked primary care professionals who do not have the time nor expertise to meet many of the needs of these children with their complex disorders.

This should not to be construed as a statement condemning integrated health care. Just the opposite. Under a single payer system, our entire health care delivery system can be considered to be a single integrated system. Primary care provides an entry into a system in which the most appropriate care can be arranged – the best of integrated health care.

It was a wise move when the precursor of CCS was established early in the last century. It was a wise moved when they abandoned the label, “crippled.” It was a wise move when they perpetuated the program instead of folding it into California’s overworked and underfunded Medi-Cal program. But is was a terrible move when, for cost-saving reasons, they transferred Medi-Cal patients into managed care plans. Moving CCS patients into the same program is nothing short of tragic.

We need a single payer system so that we can get the bureaucrats and their private third party payers out of our way as we medically manage health care based on patient needs, rather than us managing health care dollars. Yes, we need public administrators to manage distribution of the funds, but we need to be free to advocate for our patients in a system designed to ensure access, not to prevent it.

The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment

By Amy Finkelstein, Nathaniel Hendren & Erzo F.P. Luttmer
National Bureau of Economic Research, Working Paper 21308, June 2015

Abstract

We develop a set of frameworks for valuing Medicaid and apply them to welfare analysis of the Oregon Health Insurance Experiment, a Medicaid expansion for low-income, uninsured adults that occurred via random assignment. Our baseline estimates of Medicaid’s welfare benefit to recipients per dollar of government spending range from about $0.2 to $0.4, depending on the framework, with at least two-fifths – and as much as four-fifths – of the value of Medicaid coming from a transfer component, as opposed to its ability to move resources across states of the world. In addition, we estimate that Medicaid generates a substantial transfer, of about $0.6 per dollar of government spending, to the providers of implicit insurance for the low-income uninsured. The economic incidence of these transfers is critical for assessing the social value of providing Medicaid to low-income adults relative to alternative redistributive policies.

http://www.nber.org/papers/w21308

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Valuing Medicaid

By Harold Pollack, Bill Gardner & Timothy Jost
The American Prospect, July 26, 2015

How Valuable Is Medicaid?

An important recent paper by Amy Finkelstein, Nathaniel Hendren, and Erzo Luttmer, “The Value of Medicaid,” tries to determine how much it is worth, but in a narrow way whose baseline assumptions understate the value of the program. The authors use data from the Oregon Health Insurance Experiment. The experiment worked like this: Oregon had more poor and uninsured people than they could insure under Medicaid. So they held a lottery for who could apply for Medicaid coverage. Finkelstein and her colleagues realized that this lottery was in effect an experiment that would allow them to study the impact of Medicaid coverage on the previously uninsured.  Following a reasonable — but contestable — economic methodology, Finkelstein and colleagues estimated an equivalent dollar-value to the improved health observed among lottery winners. The authors then explored what happened to a dollar that was spent on providing Medicaid: Who actually benefited and by how much? And would recipients have been willing to pay for their Medicaid benefits if they had to?

The study’s major findings, widely reported in The Wall Street Journal, Vox, Forbes, and many other media outlets, can be summarized as follows:

1. Uninsured people who get Medicaid only gained from 20 to 40 cents in value from each dollar spent by the government.
2. A principal reason why the benefit of getting insured was so small is that when uninsured people received care, they typically paid only 20 cents on the dollar for those services. Safety-net providers, state or local government, friends, relatives, or someone else absorbed the remaining costs. When a recipient became insured, Medicaid paid some of these costs at the rate of about 60 cents per dollar.
3. Because a large fraction of Medicaid expenditures financed care that recipients would have received anyway (for example, by leaving bad debt at hospitals), it is unclear whether recipients themselves would have been willing to pay the full costs of Medicaid.

While the Oregon Health Insurance Experiment was a well-designed study, too few of the study participants experienced serious medical conditions to investigate how Medicaid affected their health or quality of life. In addition, the experiment — and thus Finkelstein, Hendren, and Luttmer’s study — did not examine how Medicaid affected recipients’ families or the health-care institutions that care for low-income uninsured patients. Medicaid’s long-term benefits as an investment in infants and children were also beyond the scope of the Oregon experiment.

But perhaps the most important limitation of the study stems from an assumption that many readers would be unlikely to notice. Finkelstein and her colleagues placed a very low value — $25,000 — on a year of additional life for Medicaid beneficiaries. The typical threshold used in health services research is much larger, in recent studies far above $100,000 per additional year of (healthy) life. Yet because the median income of the Oregon study participants was about one-fourth of the median income in the United States, the researchers chose to value an additional life-year at about one-fourth of the usual threshold. This assumption powerfully frames everything that follows in this analysis. After all, if you start out by assuming that Medicaid beneficiaries’ lives are worth very little, you will find that it is not worth spending much money to prolong them.

Although Finkelstein, Hendren, and Luttmer’s baseline assumptions are methodologically defensible, they have radical implications that are rarely so bluntly applied in other domains of health-policy research. Choices about how to financially value the health of poor people relative to the health of others are inevitably both politically and morally freighted. It strains credulity, for example, to imagine American policymakers using this low a value for life when analyzing mammography, prostate cancer treatment, or implantable cardiac defibrillators for seniors.

The authors are careful not to make any normative statements based on these findings, but others such as Michael Cannon, Tyler Cowen, and John Graham have done so. They make two arguments: First, Medicaid is an inefficient way to benefit the poor. If a Medicaid dollar results in only 20 cents in benefit to a previously uninsured person, wouldn’t it be more efficient to simply give that person a dollar? And, second, Medicaid is actually a subsidy for people other than those it ostensibly helps.

We see matters rather differently. Economists have long understood that poor people would prefer cash to subsidized health insurance (especially if they can still get health care for free). So why does every developed country, including the United States, subsidize health insurance for the poor? Part of the reason is that those countries have broader moral and public-health criteria for thinking about health insurance and poor people’s lives. Universal health care expresses a commitment to the well-being of fellow citizens. Everyone should have access to a decent minimum of care; caring for others in distress is a primary expression of human solidarity.

http://prospect.org/article/valuing-medicaid

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Quotes from conservatives cited above:

Michael Cannon: “The (Finkelstein et al) trio found that Medicaid enrollees receive very little benefit from each dollar spent on Medicaid.”

Tyler Cowan:  “An implication of this is that the poor would be better off getting direct cash transfers.”

John Graham:  “Only 20 to 40 cents of Medicaid spending actually goes towards patients’ welfare.” 

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Comment:

By Don McCanne, MD

This NBER study by Amy Finkelstein and her colleagues on the value of Medicaid is important in that it is being used by conservatives to discredit Medicaid, giving fodder to opponents of this program. For that reason, it is important to understand the limitations of the narrow assumptions used in the study, and that is why the article by Harold Pollack and his colleagues is so important.

The Finkelstein article is challenging for the non-economist, but one assumption stands out as a basis for countering the claims of the conservatives who would use this to diminish support for Medicaid. That assumption in this study is that a year of life is worth about $25,000 for Medicaid beneficiaries when most studies assign a value closer to $125,000 per quality-adjusted life year ($100,000 to $150,000). When private insurance extends life by a year it is worth about five times what that same year of life would be worth for a low-income Medicaid beneficiary, so this study seems to assume. According to Pollack, et al., “… if you start out by assuming that Medicaid beneficiaries’ lives are worth very little, you will find that it is not worth spending much money to prolong them.”

Another bizarre line of reasoning is that much of the Medicaid money does not benefit the patient because it goes to physicians, hospitals, and Medicaid managed care organizations. The assumption seems to be that if the patient was not covered by Medicaid, the care would be provided anyway on a charity basis. Thus the patient does not receive any benefit from Medicaid because charity care and care under Medicaid are supposedly the same (not true), whereas the physicians and hospitals would benefit by receiving Medicaid income for what would otherwise be charity care. Would these conservatives seriously contend that private insurance provides little value for patients since the money goes to the physicians, hospitals and insurers and not to the patient? Of course not. Private insurance funds are used to purchase health care, providing considerable value for the patient. So how can they say that Medicaid funds are simply diverted to the health care delivery system, providing little value for the patient?

This is yet one more study to come out of the Oregon Health Insurance Experiment. The raw data in these studies are valid but the assumptions made and the interpretations extrapolated from them are being used to make claims such as, “Medicaid enrollees receive very little benefit from each dollar spent on Medicaid.” Medicaid saves lives, reduces suffering, and prevents financial hardship. That has real value.

Next Steps for the Affordable Care Act

By Linda J. Blumberg, John Holahan
Urban Institute, August 12, 2015

While the ACA has already had some very important successes, simply put, there has never been enough funding, given how ambitious the goals of the law were—for example, substantially reducing the number of uninsured, ending discrimination against those with health conditions, and controlling health care costs.

Every effort was made to keep the costs of the law under a trillion dollars over 10 years, which amounted to about 0.7 percent of GDP. This amount was simply not adequate, given the problems the nation faced in the health care sector. In order to allow the ACA to meet and exceed its long-term objectives, additional investments should be made to improve affordable access to care and bolster administrative capacity.

Affordability concerns

Under the ACA, significant strides have been made in increasing the affordability of coverage and reducing the number of uninsured by 15 million people. This was done in an environment with surprisingly moderate premiums in the private nongroup insurance market and prohibitions on discrimination against those with health problems. However, despite these achievements, affordability remains the most often stated reason for remaining uninsured.

• As it now stands, premium and cost-sharing subsidies are not generous enough to make coverage affordable for large numbers of low-income Americans.
• Low-income families are often unable to obtain subsidized coverage if one worker in the family receives an offer of affordable single coverage through an employer.
• Following the Supreme Court decision in 2012, which essentially left Medicaid expansion up to individual states, 21 states still have not expanded eligibility for that program. That leaves a significant gap between those Medicaid eligible prior to the ACA and those eligible for federal subsidies through the marketplaces.

Administrative concerns

In addition to these affordability issues, the significant reforms in the ACA require serious attention to administration. Much of the need for administrative effort is a consequence of building a system around competing private insurers. This requires a complex and flexible IT apparatus, continuing strategies and structures for broad-based education, outreach and enrollment assistance, and effective approaches for oversight and enforcement of insurance regulation.

• Experience with IT systems has been decidedly mixed, with some state marketplaces working effectively, some moving to the federal HealthCare.gov system, and some moving to well-functioning systems developed for other states. But the most promising systems, including HealthCare.gov, require more funding than they have thus far received.
• Education, outreach, and enrollment assistance needs are not diminishing, although the current funding approach appears to treat it that way.
• Regulatory oversight and enforcement resources have yet to be allocated sufficiently.

Our solutions

All of these issues can only be addressed with additional funding, and the amount that is needed is trivial as a share of the economy. We propose the following:

• Make reductions in the premiums and cost-sharing (deductibles, co-payments, coinsurance) that low-income people pay to purchase coverage through the nongroup marketplaces.
• Make it possible for families to receive financial assistance for the purchase of marketplace coverage even if a family member has an affordable offer of single coverage through an employer.
• Make it an option for states to expand Medicaid to those at or below only 100 percent of the federal poverty level to induce more states to step forward.
• Make permanent a significant federal contribution to administrative costs. This includes IT systems, but also the human support that is needed, like call centers and a permanent cadre of personnel to help individuals get enrolled both during open enrollment and during special enrollment periods. Plus, make a federal investment in ensuring appropriate oversight and enforcement of insurance regulations.

How much these solutions cost

We estimate that our proposed reforms could be done for about 0.2-0.24 percent of GDP. There are many ways to pay for this, including applying rebates used in the Medicaid program to certain Medicare enrollees as well, increasing cigarette and alcohol taxes, and replacing the “Cadillac tax” with a cap on the exclusion of employer contributions to health insurance.

The changes that we propose are not trivial. We recognize that they are not politically feasible in the near term, but we also believe that what is politically feasible at this moment will not do the job that is necessary to make the ACA solve all the problems it is intended to address.

The ACA marks a large step forward for the US health care system, but no country solves its health care problems with one piece of legislation. There is more to do, and doing it is achievable with additional investments that are extremely small relative to our economy and our total level of health care spending.

http://www.urban.org/urban-wire/next-steps-aca

Full report (60 pages): http://www.urban.org/research/publication/after-king-v-burwell-next-steps-affordable-care-act/view/full_report

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Comment:

By Don McCanne, MD

This report is ideal for those who say that we should forget single payer and instead move forward with fixing what we have – the Affordable Care Act. The authors list some of the more obvious problems and provide suggested solutions. Although their contribution to the reform dialogue is commendable, there are two major problems with their approach.

The most important concern is that their recommendations are limited to deficiencies in ACA, but ACA was merely a series of patches to our highly dysfunctional, inequitable, inadequate, overpriced system uniquely characterized by profound administrative inefficiencies. The fundamentally flawed system would remain intact. Though the ACA patches were beneficial, they did not begin to address the profusion of other problems in our system.

The authors are merely proposing patches to the patches. We will still be left with millions without insurance, millions who are underinsured, profound administrative waste, and little means to control our high health care costs. In fact, the authors recommend increasing our spending on health care – additional spending that is appropriate only if you accept the fact that we reject the comprehensive reform that we really need.

The other problem is political. They acknowledge that their proposals “are not politically feasible in the near term.” But isn’t that what people say about single payer? Is single payer really that much less feasible than patches to the patches? Look at the current political campaigns. One of the most outspoken advocates of single payer Medicare for all is filling stadiums with passionate supporters of his messages. Yet other candidates who advocate for repeal of Obamacare and reducing our spending on Medicare and Medicaid are drawing ridicule from those outside of their narrow camp.

If we are going to work on changing political feasibility, wouldn’t it be far better to join the rising tide in support of replacing bad policy with good policy through single payer, instead of merely trying to patch the bad policies of our highly dysfunctional post-ACA non-system?