PNHP

Co-ops reflect the callous deception of Congress

Co-ops reflect the callous deception of Congress

CO-OP (Consumer Operated and Oriented Plan) Health Plans under the Affordable Care Act

PNHP, Quote of the Day, July 18, 2011

From the comment by Don McCanne:

The proposed rule has now been released for the establishment of CO-OPs under the Affordable Care Act. The CO-OPs are private, nonprofit organizations that sell insurance, like HMOs and PPOs, under the same rules as the other private insurers. The most important difference is that a CO-OP is controlled by a board of directors that is elected by the individuals enrolled in the CO-OP.

These are new organizations, and, as such, require a new infusion of capital to meet the reserve requirements for future claims. These are the same requirements that have been established by the states for other private insurers already competing in the marketplace.

Private, for-profit insurers have the capability of establishing start-up costs and solvency reserves by selling shares of stock. Since the CO-OPs are nonprofit, they don’t have this resource to tap. Recognizing this, the Affordable Care Act included provisions for government loans for start-up costs and other loans for solvency (reserve funds for future claims). It is important to understand that these are not grants but are loans that must be repaid, with interest, within five years for start-up loans and fifteen years for solvency loans.

Think about that. The CO-OPs are required to compete with the private insurers under the same terms, while having the additional requirement of paying back these loans. Since their only revenue source is premiums for the insurance they are selling, these loan costs that their competitors don’t have will have to be recovered through higher premiums. Under these terms, how could they possibly compete with the private insurers?

There are many other issues. How long would it take to establish a critical threshold of enrolling enough members to create a viable entity? Since it is likely that the CO-OPs would be subject to adverse selection (enrolling a larger share of patients with greater health care needs), there would be further upward pressure on their premiums (death spiral) since current risk adjustment tools do not recover the full excess losses (as if health care is a “loss”).

It’s too bad. CO-OPs should have offered us the opportunity to establish altruistic health care organizations. Instead, the politicians bent over backwards not only to keep the government out of these programs, but also to protect the private insurers’ marketplace by being sure that the CO-OPs were not allowed a fair playing field by saddling them with insurmountable debt.

We needed a seat at the table.

https://www.pnhp.org/news/2011/july/co-op-consumer-operated-and-oriented-plan-health-plans-under-the-affordable-care-act

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Health Insurance Startup Collapses In Iowa

By Clay Masters, Iowa Public Radio
NPR/Kaiser Health News, January 14, 2015

CoOportunity Health has failed. The Affordable Care Act set aside funding for health care co-ops, to enable the organizations to compete in places where there aren’t many insurers. CoOportunity Health was the second largest co-op in the country in terms of membership, and one of the largest in terms of the federal funding it received.

But then CoOportunity hit a kind of perfect storm, says Peter Damiano, director of the University of Iowa’s public policy center. First, the co-op had to pay a lot more medical bills than those in charge expected.

“CoOportunity Health’s pool of people was larger than expected, was sicker than expected,” Damiano says. “So their risk became much greater than the funds that were available,”

When the Obama administration in late 2013 allowed people to keep the insurance plan they already had, many customers happy with Wellmark stayed put. Damiano says this meant many of the customers who flocked to CoOportunity tended to be… people with expensive health problems who’d had trouble paying for insurance before, in the market Wellmark dominated.

“It was always going to be a challenging market to try to reach,” says Damiano, “and on top of that, the whole idea of co-ops was relatively new and experimental. But it was to try to create competition, on that private sector approach,” says Damiano.

According to Nick Gerhart, Iowa’s insurance commissioner… the co-op thought it was going to get more federal money. “On December 16 around 4 o’clock we were informed they weren’t going to get any further funding,” he says. “Nothing was pulled — it just wasn’t extended further.”

“Ours was the second largest in the country, so you’ve got to look at it that way.” Gerhart says. “If the second largest can’t make it, how viable are the other ones? I don’t know. But at the end of the day they didn’t have enough capital to support 120,000 members.”

http://kaiserhealthnews.org/news/health-insurance-startup-collapses-in-iowa/

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Comment:

By Don McCanne, MD

Those of us who watched closely as the health care reform process unfolded were outraged by many of the decisions made by the members of Congress. As single payer supporters we were denied a seat at the table. Regardless, we still tried to inform the process but we were routinely ignored. “What you guys want is just not politically feasible.”

Look what I wrote July 18, 2011: “It’s too bad. CO-OPs should have offered us the opportunity to establish altruistic health care organizations. Instead, the politicians bent over backwards not only to keep the government out of these programs, but also to protect the private insurers’ marketplace by being sure that the CO-OPs were not allowed a fair playing field by saddling them with insurmountable debt.”

Now look at what happened to CoOportunity – the second largest co-op in the country. Not only did they enroll patients with greater health care needs, as we predicted, but the government loans were inadequate to maintain its viability. The success in enrolling large numbers of members accelerated the demise of this co-op, but what about the others? With the premiums they receive, how will they be able to pay for the health care services of a higher risk population plus service their loans at the same time – loans that competing private insurers do not have to face?

It isn’t that we didn’t know how to design a proper health care financing program. We clearly did – single payer. What is tragic is that the Affordable Care Act was designed to take special care of the private insurance industry while supposedly showing some vague, deceptive semblance of improving access and affordability for the patients served, though caring for patients was certainly a lower priority than catering to the private insurers.

With 30 million people being left uninsured, and with the establishment of a new insurance standard of unaffordable under-insurance, our members of Congress sure did a crappy job – not just crappy but far worse – it was callous and inhumane.

The Affordable Care Act in 2015 — where do we stand?

By Louis Balizet, M.D.
Health News Colorado, Jan. 12, 2015

The beginning of the new year seems a logical time to review the Affordable Care Act and to speculate on its future. In 2014, we saw the start of the exchanges and Medicaid expansion, the end of Vermont’s attempt to expand coverage beyond the ACA, and continued legal challenges aimed at killing the ACA piecemeal. What do all these portend for 2015?

Approximately 6 million previously uninsured Americans obtained health insurance coverage last year through federal and state exchanges, with the federal exchange accounting for most of the sign-ups.

Exchange performance for 2015 policies is smoother overall than last year’s chaotic debut, but it is unclear at the present time how many more people will be enrolled. Early returns suggest the increase will be modest.

Colorado’s exchange is beset by the recent mass exodus of upper-echelon management and concerns about financial viability when federal support expires at the end of this year. Nationwide, most policies sold in 2014 were of low actuarial value (bronze or silver), exposing policyholders to out-of-pocket expenses up to $6,000 apiece.

Most would agree, however, that being underinsured is preferable to being uninsured. Medicaid expansion provided coverage for an additional 4 million, a figure that could have been 2 million higher were it not for the opt-out opportunity handed Republican governors by the Roberts Court in 2012.

Pennsylvania elected to expand Medicaid for 2015, using an attenuated version; 100,000 have signed up so far. Arkansas may rescind its 2014 Medicaid expansion, withdrawing coverage from over 200,000 people. Arizona’s planned 2015 expansion is being held up by Republican legislators’ legal maneuvers.

The most populous states to refuse Medicaid expansion, Texas and Florida, remain obdurate. Thus, it is unlikely that significantly more people will be covered by Medicaid in 2015 than were in 2014.

While states largely concentrated in the old Confederacy took every opportunity to shield its citizens from the perceived evils of the ACA by declining Medicaid expansion and state exchanges, liberal Vermont headed in the opposite direction.

Reflecting a decade of preparation by single-payer advocates and led by unabashedly pro-single payer Gov. Peter Shumlin, Vermont attempted to fashion universal coverage for its residents through Green Mountain Care. This government-run enterprise aimed at replacing private insurance with comprehensive (platinum-level plus) tax-supported benefits.

Last month, however, Shumlin pulled the plug on the project, citing unacceptably high levels of taxation that would have been needed to fund benefits. The Vermont attempt to provide universal coverage was doomed to failure, however, because it was nowhere near a single-payer system.

Green Mountain Care would have had to co-exist with large private employer plans, Medicare, Tricare, the V.A.; it could not solve the conundrum of how to cover Vermonters working out-of-state and out-of-staters working in Vermont.

Vermont therefore could not avail itself of economies available only with national single-payer universal health care: single-source purchasing of pharmaceuticals, global budgeting for hospitals, and reduction of system administrative overhead from insurance company levels (20 percent) to Medicare levels (2 percent). Absent these savings, taxes required for financing far exceed insurance premiums avoided.

The Affordable Care Act faces an existential threat this year that dwarfs challenges it has faced so far. It is looking down the barrel of a gun held by the Supreme Court thanks to a critical ambiguity in the hastily written 2010 bill.

Opponents to the ACA argued in King v. Burwell that language in the bill, and resultant Act, restrict insurance subsidies to those policies purchased through the state exchanges only, eliminating subsidies for policies purchased, as most were, through the federal exchange.

The Fourth Circuit Court disagreed, much to the temporary relief of ACA supporters, but the Roberts Court in November agreed to hear the plaintiffs’ appeal of the Fourth Circuit Court’s decision. If the Supreme Court throws out subsidies in the federal exchange (used by 36 states), millions would likely exit the insurance market on very short notice

Quite apart from the widespread suffering this would cause, the resultant actuarial nightmare could cause the ACA to collapse, taking smaller, newer and more vulnerable insurance companies with it.

No one really knows what the elimination of subsidies in the federal exchanges would mean, but references to Armageddon are popular.

If the Affordable Care Act survives King v. Burwell, it will probably cover a few more million this year, assuming a slight increase in Medicaid expansion and modest improvement in the function of the exchanges. This would leave at least 35 million Americans without health care coverage, a figure that is unlikely to change much in future years.

Will this be acceptable to our country?

If not, or if the ACA is crippled in June by the Roberts Court, where do we go from here?

The Vermont debacle instructs us, not that single-payer universal health care is impossible, but rather that it has to be done on a national rather than on a state-by-state basis.

We might want to take another look at Medicare for all. It would be immune from legal assault, given its reliance on taxes rather than a complicated cobbled-together mixture of mandates, insurance premiums and subsidies. If it performs anywhere near as well as Canada’s Medicare (its name for single payer universal health care), it could gradually reduce health care spending as a percentage of GNP toward sustainable (12 to 13 percent) levels, while improving overall health outcomes by eliminating financial barriers to health care.

Political opposition to Medicare for all would appear to be insurmountable now, with anti-government fervor ascendant in Washington and health care industry profits and clout increasing relentlessly.

The Affordable Care Act at one time seemed to be single-payer advocates’ worst night nightmare – not enough to cover everyone, but enough to defuse interest in fundamental reform. If it stalls out or blows up, however, the ACA might prompt a look at alternatives, of which there is only one.

Louis Balizet, M.D., is a recently retired oncologist from Pueblo. He’s a member of the advocacy group, Physicians for a National Health Program, and a leader of Health Care for All Colorado. This article is a slightly revised version of the original.

Opinions expressed in Health News Colorado represent the views of the individual authors.

http://www.healthnewscolorado.org/2015/01/12/opinion-the-affordable-care-act-in-2015-where-do-we-stand/

Gottfried, Perkins say time is right for single-payer health care

By Matthew D’Onofrio
The Legislative Gazette (Albany, N.Y.), Jan. 13, 2015

For two decades, Assemblyman Richard Gottfried, D-Manhattan, has been calling on his fellow lawmakers to pass legislation that would provide universal health care for all New Yorkers.

To cap off a series of statewide hearings that began in November, the Assembly Health Committee — chaired by Gottfried — held a hearing on the Health Care Act on Tuesday in Albany where doctors, health care advocates, union leaders, and clergy discussed the need for a health care system that simplifies the billing system for treatment.

“New Yorkers deserve better,” said Gottfried, the bill’s sponsor. “We deserve to be able to go to the doctor when we need to, without worrying about if we can afford it. We deserve not to worry when we get a medical bill or an insurance statement we can’t figure out. We deserve health coverage for all of us, at a price based on our abilities to pay, not what the market will bear.”

Gottfried says the Health Act would save billions of dollars yearly by eliminating unnecessary insurance company overhead and administrative costs that doctors incur when dealing with insurance companies including premiums, deductibles, co-pays, restricted provider networks and out-of-network charges. New Yorkers would have the independence to choose their doctors and other providers based on ability to pay. The program will be fully accountable, eliminating the ‘local share’ of Medicaid.

“Your health is your wealth,” shouted Perkins, the Senate sponsor, to the dozens of supporters who filled the Well of the Legislative Office Building. “Your health is your wealth,” the supporters responded.

Leaders of various organizations such as the New York State AFL-CIO, New York State Nurses Association, the New York State Academy of Family Physicians, 1199SEIU United Healthcare Workers East, New York State United Teachers and Citizen Action of New York were present.

“Passing single-payer health care would be an essential step in ensuring that every New Yorker, regardless of his or her income level, has access to affordable and quality health care, while saving tax payers millions,” said Sen. Gustavo Rivera, who was at the rally. “It’s common sense.”

www.legislativegazette.com/Articles-Top-Stories-c-2015-01-13-90454.113122-Gottfried-Perkins-say-time-is-right-for-singlepayer-health-care.html

Health insurance paperwork wastes $375 billion

By Dan Mangan
CNBC.com, Jan. 13, 2015

And you thought your bills were out of control.

The United States health-care system wastes an estimated $375 billion annually in billing and insurance-related paperwork that could be saved if the nation moved from a “multipayer” health coverage system to a “single-payer” system run by the government, a new study says.

That dollar figure, tied to getting people, insurance companies and governments to pay for health-care services provided, equals almost 15 percent of total national health-care spending.

“We all sort of suspected there was quite a big number, but when we came down to the actual figure it was certainly revealing,” said Aliya Jiwani, health policy researcher and lead author of the report, which was published by the journal BMC Health Services Research.

Jiwani said that while “the administrative costs have been an issue” in the health-care world for years, “the fixes that have been put in place have only aggravated the issue.”

In fact, the paper notes that “administrative costs as a percentage of total care health care spending more than doubled from 1980 to 2010.”

The authors of the paper write that the savings from eliminating trillions of dollars in administrative waste over the years “could cover all of the uninsured” people currently in the U.S. if a single-payer system were adopted. They estimate the cost of covering all of the roughly 40 million Americans still lacking health insurance would be equal to just about half of the $375 billion in projected savings.

The balance of those savings, they write, could “upgrade coverage for the tens of millions who are under-insured.”

While the paper identified a very big number of wasted dollars, it remains a big question of whether that could lead to a single-payer system anytime soon.

Full, much longer story: http://www.cnbc.com/id/102330504#

Controlling prices – Government administration, or private sector kneecapping?

High Health-Care Prices: More Talk Than Action

By Drew Altman
The Wall Street Journal, January 12, 2015

People in the U.S. go to the doctor less frequently and have much shorter hospital stays than people in other countries that spend far less per capita on health care. But health services are consistently more expensive here than in comparably wealthy countries.

Price is the major factor that distinguishes the cost of our system from those in other developed nations. The sticker shock of some medical services and drugs is also the dimension of the health-cost problem most visible to the public. So it’s interesting that most efforts in this country to address health-care costs don’t focus on price much at all. Instead, they focus on reforming the delivery of health care and provider reimbursement to reduce the volume of health care Americans use and to weed out unnecessary procedures and hospitals days.

To be sure, high medical prices are talked about a lot. One reason there is more talk than action is the anti-government environment, which would inhibit regulatory action to constrain prices. Taking on price also means taking on health care’s powerful industry interests. More effective competition between providers would help reduce prices, but the health-care industry appears to be consolidating more than competing, as is the health insurance industry.

It would be a mistake to make price the only focus of a cost-reduction strategy. But it’s striking that while price is such an important reason our system appears to cost so much more than others, efforts to reduce the high prices of medical care are not a meaningful part of current cost-reduction efforts.

Drew Altman is president and chief executive officer of the Kaiser Family Foundation.

http://blogs.wsj.com/washwire/2015/01/12/high-health-care-prices-more-talk-than-action/

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U.S. hedge fund plans to take on big pharma over patents

Reuters, January 7, 2015

U.S. hedge fund manager Kyle Bass, who won fame for predicting the subprime mortgage crisis in 2008, plans to take on some of the world’s biggest drug producers by challenging the patents of their top brands, he said on Wednesday.

Bass, the founder of Dallas-based Hayman Capital Management, L.P., said some drug firms were hanging onto patents in questionable ways and he planned to take around 15 firms into a so called Inter Partes Review (IPR) process created by the America Invents Act. in 2012.

“We are going to challenge and invalidate patents through the IPR process … (and) we are not going to settle,” Bass said in a presentation in Oslo, Norway’s capital.

“The companies that are expanding patents by simply changing the dosage or the way they are packaging something are going to get knee capped,” he said.

Bass said the firms he planned to challenge had a combined market capitalisation of $450 billion and if he succeeded that could halve, benefitting his investments and reducing medicine prices in the United States.

“This is going to lower drug prices for Medicare and for everyone,” he said.

Bass did not name any targets and also declined to elaborate on how he planned to make a financial gain from the challenges. He also declined to give details on his investment position.

http://www.reuters.com/article/2015/01/07/pharmaceuticals-haymancapital-idUSL3N0UM42O20150107

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Comment:

By Don McCanne, MD

Health care prices are much higher in the United States than in other nations. The difference seems to be that other nations rely much more on government administration of pricing whereas we depend more on the marketplace, especially on the private insurance industry that has a relatively weak negotiating power over our medical-industrial complex, worsened by ongoing consolidation within the industry.

That is not to say that the government does not play any role. The administered pricing of our Medicare program has been more effective than the private insurers in slowing the increases in the costs of health care. The private insurers have slowed the increase in insurance premiums but at the terrible cost of transferring risk and payment responsibilities to patients.

That said, government administered health care pricing in the United States is still too weak. We even prohibit the government from negotiating drug prices in the Medicare Part D program. Drug pricing is not only obscene, it is criminal, or at least it should be a crime when companies can price their drugs at tens of thousands of dollars only because our dysfunctional market will bear those prices.

Since we have not allowed our government to take a more active role, we should ask if the private sector can be capable of providing greater value. Up to this point it has not been so, as is verified by the fact that we have far higher prices than other nations.

But suppose the private sector did move in using their unique tools to control markets. Consider the approach of hedge fund manager Kyle Bass. He is famous for creating large fortunes by betting against the market with tools such as credit default swaps in the subprime mortgage crisis and credit default swaps on government bonds in Greece.

Based on this Reuters article, apparently now Bass wants to bet against drug firms that seem to be abusing the patent laws to drive up drug prices. He is quoted as saying that these companies are “going to get kneecapped.” Wow! When he is finished, he says, “This is going to lower drug prices for Medicare and for everyone.” Although he has not revealed his strategy, it does not take too much imagination to come to the conclusion that he may well use credit default swaps to make another fortune once he is effective in disabusing the industry of their belief that these innovative patents are valid.

Which is better? Is it better to allow the private sector to use innovations such as credit default swaps to bring about fairer pricing of drugs, even though considerable funds are redirected upwards, further increasing income and wealth inequality? Or is it better to have government administered pricing wherein there is no opportunity to create new fortunes by using Wall Street tools to divert health care dollars to the wealthy? If for no other reason, you would think that government administered pricing should be preferred simply because it is more effective.

Since we do not seem to be inclined on relying on our government to serve our needs, maybe we should think more about private sector opportunities. For starters, someone might want to secure a patent on kneecap replacements. Our friends on Wall Street would no doubt recognize the investment potential, and the venture capitalists would be lined up at your door.

A New Study Shows Why Obamacare Should Have Been Single-Payer

By Sarah Kollmorgen
The New Republic, January 12, 2015

Last summer, with Obamacare’s initial troubles fading from view, The New Republic’s Brian Beutler noted that certain problems with the healthcare overhaul won’t ever go away because they’re inherent to its architecture.

Needless to say, this is a much more complex system than single payer. But it was the system Democrats settled upon, in part because it was theoretically less disruptive to existing insurance systems than other reforms, and in part because they mistakenly took Republicans at their word that it was the kind of universal health care system they would support. Massive industry opposition to single payer played a big role, too.

The main problem, Beutler wrote, was that you have to re-enroll every year—and there’s no guarantee that you can keep your plan, that rates won’t go up, or that the government subsidy won’t go down. But a new study by a group of physicians and health-policy researchers in BMC Health Services Research highlights another problem with our complex healthcare system. 

In 2012, billing and insurance-related administrative costs—bureaucratic paperwork and red tape, essentially—cost the U.S. economy around $471 billion, and 80 percent of that was due to inefficiencies in our multi-payer system.

“That’s how much administrative waste is embedded in our fragmented, dysfunctional system of paying for care,” said Aliya Jiwani, the lead author of the study, in a press release. Dr. James G. Kahn, one of the study’s authors, said this is the first study to analyze the BIR costs across the entire U.S. health care system.

Their solution? A single-payer system akin to the Medicare program or Canada’s national healthcare. The study found that the $375 billion saved annually with a single-payer system could be used to cover all of the nation’s uninsured and upgrade coverage for millions of under-insured citizens.

http://www.newrepublic.com/article/120750/study-single-payer-healthcare-would-save-us-375-billion

Charlotte speaker touts single-payer health plan

By Karen Garloch
Charlotte (N.C.) Observer, Jan. 12, 2015

As a past president of Physicians for a National Health Program, Dr. Oliver Fein thinks a single-payer health system for the United States would be superior to the Affordable Care Act, which he calls “a great leap sideways.”

“The problem is that the ACA fundamentally isn’t going to address some of the major challenges that face our health care system,” said Fein, a professor of clinical medicine and public health at the Weill Cornell Medical College in New York.

Fein will outline his ideas in Charlotte on Jan. 20 with a free talk – “Health Care Reform: ACA vs. Single Payer?” – for Health Care Justice North Carolina. The program is from 6 to 7:30 p.m. at Selwyn Avenue Presbyterian Church, 2929 Selwyn Ave. (Register by emailing HCJusticeNC@gmail.com.)

The first problem with the ACA is access, Fein said. While other industrialized countries provide health care for all citizens, the 2010 U.S. law doesn’t guarantee universal coverage. Some 30 million people will remain uninsured after full implementation.

The other problem is “under-insurance.” Many who are insured through the ACA choose plans with low premiums. And those plans usually have high deductibles, co-pays and coinsurance. That can lead families to avoid using their insurance. If they do get sick, they may face out-of-pocket costs they can’t afford.

The third problem is cost. The ACA aims to hold down premiums by mandating most people to buy insurance, thus spreading the risk among both the healthy and the sick. But if penalties aren’t great enough to convince “young invincibles” to buy, the strategy won’t work.

Under single-payer, everybody gets care without confusing out-of-pocket expenses. And it saves money by reducing administrative costs.

Fein cited a comparison of Toronto General Hospital in single-payer Canada with Massachusetts General in Boston. “They have virtually three or four people dealing with billing up in Toronto,” Fein said, “and over 300 at the Mass General dealing with the multiple insurance companies.”

About 30 percent of the U.S. health care dollar is spent on administration, Fein said. That could be “cut in half” for a savings of $400 billion-$500 billion. “That money could be used to guarantee coverage without increasing the overall cost to the health care system.”

But is single-payer attainable in a country where many are wary of government control?

Probably not soon, he acknowledged. But over the next decade, he predicted the advantages will become clear.

http://www.charlotteobserver.com/2015/01/12/5442216/charlotte-speaker-touts-single.html#storylink=cpy

Single payer’s time will come

By Ellen Oxfeld
Rutland (Vt.) Herald, Jan. 1, 2015

Gov. Peter Shumlin’s decision to suspend moving forward on the financing package for single payer in the coming legislative session does not mean that the dream of health care as a public good in Vermont is dead.

At his press conference announcing his decision not to pursue single-payer financing in 2015, the governor stated that “now is not the right time.” But he also made clear that Vermonters must not abandon the goal of universal publicly financed health care stated in Act 48.

Opinions differ on whether the governor was correct in his judgment that this was not the “right time.” While the consensus is that such a plan would never have passed the Legislature now, and it would have had to be tweaked anyway to prevent it from going into deficit in the fourth year, the irony is that its $2.6 billion price tag is less than we Vermonters are already paying in premiums and out of pockets.

Furthermore, the plan the governor described had many excellent features, as it left the vast majority of Vermonters paying less for health care than they do now, and it had a high degree of coverage (a 94 percent AV) meaning that out-of-pocket costs would be minimal.

But if passing an entire single-payer financing package in one fell swoop is indeed too heavy a lift for our legislators at this time, we should remember that there are still ways to follow through on Act 48. Many other countries have implemented health care as a public good in stages. Even our own Medicare program in the United States began as a program only for hospital care.

We should also remember that this governor is not a latecomer to the idea of a publicly financed health care system for all. As early as 1996, he co-sponsored a single-payer bill (the lead sponsor was Sen. Cheryl Rivers) in the Senate. As Senate president pro tempore, he spoke at public events throughout 2009, including at a small business event at the State House that April. He asserted that single payer was the only way forward, and he continued to advance the cause throughout that year. He eventually contacted professor William Hsiao in December 2009 and asked him to testify in the following legislative session, which he did.

As the governor and many legislators and certainly many people in Vermont still hold the goals of Act 48 dear, there is no reason we should take the position that single payer is dead. What is important now is that we think of ways to get to the goal — health care as a public good for all Vermonters rather than merely a market commodity for all Vermonters — even if it takes more time and is done in stages.

In thinking of advancing the goals of Act 48, we need to understand that proposals which tinker with the present private insurance-based system are different from proposals that create health care as a shared universal public good. But any proposal that makes a sector of health care both universal and public represents progress. And when a sector of care is publicly financed and universal, it will not only provide a service to all Vermonters, but also create the best opportunity for cost control. Only when funds are pooled for a sector of care can prices be kept in line.

Vermonters who favor the idea of health care as a common good — because it is more just, and also more efficient — must continue working to change what is politically possible, so that we ultimately get the publicly financed health care system Vermonters so desperately need. But, let’s remember that in making his announcement in December, the governor did not say, “single payer is dead.” What he did say was, “A fairer and more rational and more sustainable way to pay for health care is worth fighting for. Our time will come.”

Ellen Oxfeld is a resident of Middlebury.

http://www.rutlandherald.com/article/20150111/OPINION06/701119951/1018/OPINION

Abandon Medicaid and go with single payer instead

By Jerome P. Helman, M.D.
Los Angeles Times, Letters, Jan. 11, 2015

California’s budget is again in peril due to uncontrolled healthcare expenses. Medicaid (California’s Medi-Cal) has always been underfunded and poorly run. Should we continue a healthcare system that is fiscally unsound and a public embarrassment or discard it in favor of transparency, efficiency and affordability? (“California’s soaring healthcare costs bode ill for the budget,” Jan. 8)

Single-payer would fit the bill: Mandate price controls on insurance, drugs and medical supplies while mobilizing nationally to cover everyone, not only those on Medicaid. We cannot have fiscal stability locally without a fiscally sound healthcare system.

Dr. Jerome P. Helman resides in Venice, Calif.

http://www.latimes.com/opinion/readersreact/la-le-0111-sunday-healthcare-20150111-story.htmll

$375 billion wasted on billing and health insurance-related paperwork annually: study

FOR IMMEDIATE RELEASE, January 12, 2015
Contact: Mark Almberg, PNHP communications director, 312-782-6006, mark@pnhp.org

Medical billing paperwork and insurance-related red tape cost the U.S. economy approximately $471 billion in 2012, 80 percent of which is waste due to the inefficiency of the nation’s complex, multi-payer way of financing care, a group of researchers say.

The researchers – physicians and health policy researchers with ties to the University of California, San Francisco, the City University of New York School of Public Health, and Harvard Medical School – note that a simplified, single-payer system of financing health care similar to Canada’s or the U.S. Medicare program could result in savings of approximately $375 billion annually, or more than $1 trillion over three years.

Such savings could be used to cover everyone who is currently uninsured and to upgrade coverage for the tens of millions of Americans who now have inadequate policies with no increase in national health spending, they say.

The four-member research team reports its findings in the peer-reviewed journal BMC Health Services Research. Their article was published in final form this week.

Aliya Jiwani, the article’s lead author, said, “Our team reviewed and combined all existing studies of the costs of billing and insurance-related administrative tasks across multiple health care sectors.

“Using a standard definition of ‘billing and insurance-related costs,’ or what we call BIR, we found that physician practices spent about $70 billion in 2012 on bureaucratic paperwork. Hospitals spent an estimated $74 billion on BIR, and other institutions, such as nursing homes, home health care agencies, prescription drug and medical supply companies, spent an estimated $94 billion on these money-chasing tasks.

She continued: “Private insurers spent $198 billion on BIR, whereas public insurers, e.g. Medicare and other government-sponsored programs, spent $35 billion on such activities.

“Most significant,” Jiwani said, “is our finding that were the U.S. to adopt a simplified health care financing system – either along the lines of Canada’s system or our Medicare program – 80 percent of those itemized expenditures would disappear. That’s how much administrative waste is embedded in our fragmented, dysfunctional system of paying for care.”

Jiwani, who obtained her master’s degree from Yale and is currently pursuing doctoral studies in public health at George Washington University, said that necessary administrative tasks such as patient scheduling and writing chart notes were excluded from the BIR totals.

Senior author Dr. James G. Kahn, who teaches and conducts health economics research at the Philip R. Lee Institute for Health Policy Studies at UC San Francisco, said that the study is the first scientific article to provide a comprehensive portrayal of the costs of BIR in the U.S. health care system.

“Synthesizing costing data on BIR costs from existing studies, using a uniform yardstick for defining BIR, and comparing those results with costs in simplified insurance systems in other countries, we see the true magnitude of administrative bloat in U.S. health care,” he said.

Kahn continued: “Money spent on such unnecessary bureaucratic tasks is money that could and should be spent on patient care.

“The potential savings of adopting a single-payer system is striking: at least $375 billion annually,” he said. “Such a system would enjoy powerful economies of scale, sharply reduce the burdens of claims processing, and obviate the need for marketing, advertising and underwriting expenses. Our nation’s patients, our physicians, and the U.S. economy all stand to gain from such a shift.”

The two other team members, Dr. David U. Himmelstein and Dr. Steffie Woolhandler, are practicing internists who teach and conduct health services research at CUNY’s School of Public Health at Hunter College and who lecture in medicine at Harvard Medical School. They are co-founders of Physicians for a National Health Program.

Billing and insurance-related administrative costs in United States’ health care: synthesis of micro-costing evidence. Aliya Jiwani, M.P.H., David U. Himmelstein, M.D., Steffie Woolhandler, M.D., M.P.H., James G. Kahn, M.D. BMC Health Services Research, 2014, 14:556  doi:10.1186/s12913-014-0556-7.

A PDF of the full article is available at the two hyperlinks above or here:
http://www.biomedcentral.com/content/pdf/s12913-014-0556-7.pdf

*****
Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 19,000 doctors who support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.

$375 billion wasted on billing and insurance paperwork

Billing and insurance-related administrative costs in United States’ health care: synthesis of micro-costing evidence

By Aliya Jiwani, David Himmelstein, Steffie Woolhandler and James G Kahn
BMC Health Services Research, Online November 13, 2014

Abstract

Background: The United States’ multiple-payer health care system requires substantial effort and costs for administration, with billing and insurance-related (BIR) activities comprising a large but incompletely characterized proportion. A number of studies have quantified BIR costs for specific health care sectors, using micro-costing techniques. However, variation in the types of payers, providers, and BIR activities across studies complicates estimation of system-wide costs. Using a consistent and comprehensive definition of BIR (including both public and private payers, all providers, and all types of BIR activities), we synthesized and updated available micro-costing evidence in order to estimate total and added BIR costs for the U.S. health care system in 2012.

Methods: We reviewed BIR micro-costing studies across healthcare sectors. For physician practices, hospitals, and insurers, we estimated the % BIR using existing research and publicly reported data, re-calculated to a standard and comprehensive definition of BIR where necessary. We found no data on % BIR in other health services or supplies settings, so extrapolated from known sectors. We calculated total BIR costs in each sector as the product of 2012 U.S. national health expenditures and the percentage of revenue used for BIR. We estimated “added” BIR costs by comparing total BIR costs in each sector to those observed in existing, simplified financing systems (Canada’s single payer system for providers, and U.S. Medicare for insurers). Due to uncertainty in inputs, we performed sensitivity analyses.

Results: BIR costs in the U.S. health care system totaled approximately $471 ($330 – $597) billion in 2012. This includes $70 ($54 – $76) billion in physician practices, $74 ($58 – $94) billion in hospitals, an estimated $94 ($47 – $141) billion in settings providing other health services and supplies, $198 ($154 – $233) billion in private insurers, and $35 ($17 – $52) billion in public insurers. Compared to simplified financing, $375 ($254 – $507) billion, or 80%, represents the added BIR costs of the current multi-payer system.

Conclusions: A simplified financing system in the U.S. could result in cost savings exceeding $350 billion annually, nearly 15% of health care spending.

From the Discussion

Eliminating added BIR costs of $375 billion per year (14.7% of US health care spending) would provide resources to extend and improve insurance coverage, within current expenditure levels. Since uninsured individuals have utilization of about 50% of insured individuals, the current 15% uninsured could be covered with roughly half of the $375 billion. Remaining savings could be applied to improved coverage for those already insured.

http://www.biomedcentral.com/content/pdf/s12913-014-0556-7.pdf

PNHP release:  $375 billion wasted on billing and health insurance-related paperwork annually: study
https://www.pnhp.org/news/2015/january/375-billion-wasted-on-billing-and-health-insurance-related-paperwork-annually-stud

Comment:

By Don McCanne, M.D.

Previous studies have demonstrated the waste of billing and insurance-related functions in health care in United States. This study refines and unifies the estimates of these costs and shows how much could be recovered if we were to switch to a simplified financing system such as Canada’s single payer system for providers, and U.S. Medicare for insurers. The $375 billion recovered would be enough to cover the uninsured and bring the coverage for the underinsured up to standard.

The PDF of the full study is available through open access at the biomedcentral link above. It should be filed under landmark articles in every health policy library.

Woolhandler and Himmelstein on what happened in Vt. and what now

What Happened in Vermont: Implications of the Pullback from Single Payer

By Steffie Woolhandler, M.D., M.P.H., and David U. Himmelstein, M.D.
Jan. 10, 2015

Gov. Peter Shumlin’s Dec. 17, 2014, announcement that he would not press forward with Vermont’s Green Mountain Care (GMC) reform arose from political calculus rather than fiscal necessity. GMC had veered away from a true single payer design over the past three years, forfeiting some potential cost savings. Yet even the diluted plan on the table before Shumlin’s announcement would probably have lowered total health spending in Vermont, while covering all of the state’s uninsured.

Background

Decades of exemplary grassroots organizing (and strong labor union support) in Vermont put single payer on the agenda. During Shumlin’s 2010 gubernatorial campaign, he promised to implement a single payer reform, which was a factor in the Progressive Party’s decision not to field a candidate. But the details of Shumlin’s plan weren’t fleshed out during the campaign.
 
After his victory, Shumlin and the legislature commissioned economist William Hsiao to study options for health reform in Vermont, including single payer. Rejecting a fully public single-payer plan, Hsiao instead proposed a “public-private hybrid” model and projected $580 million in savings, including large administrative cost savings, in the program’s first year.

Spurred by Hsiao’s positive projections, in 2011 the legislature passed a health reform law that laid out plans for implementing the Affordable Care Act in the short term, and called for a later transition to a single payer GMC plan. But while the law gave a detailed prescription for implementing the ACA (including construction of an exchange whose final cost was about $250 million), the sections on single payer were vague, and punted decisions on critical issues to the GMC Board to be appointed by the governor. That board would determine whether critical services like long-term care would be covered; the amount of copayments; how hospitals and doctors would be paid; and whether capital funds would be folded into operating budgets or allocated through separate capital grant (the sine qua non of effective health planning). Critically, the bill included no plan for funding the single payer program.

An early signal of trouble was Shumlin’s appointment of Anya Rader Wallack to chair the new GMC board. Wallack had deep ties to the private insurance industry, having held key positions (including the presidency) at the Blue Cross Blue Shield of Massachusetts Foundation. That foundation played a central role in designing and pushing for Massachusetts’ 2006 Romneycare reform, and subsequently issued a series of glowing evaluations of Romneycare that helped buttress the case for replicating its structure in the ACA.

From the outset, Shumlin’s team embraced an Accountable Care Organization payment strategy that would enroll most Vermonters in large hospital-based, HMO-like organizations that would be overseen by a “designated entity” – presumably Blue Cross. To-date, ACOs have shown little or no overall cost savings, have increased administrative costs, and have driven hospitals to merge and gobble up physician practices. The consolidation of ownership triggered by ACO incentives has raised concern that regionally dominant ACOs will use their market power to drive up costs. In Vermont, Dartmouth Hitchcock and the University of Vermont’s Fletcher Allen system dominate the market, and have initiated a for-profit, joint venture ACO.
 
The design for GMC incorporated several other features that increased the administrative complexity, and hence administrative costs of the proposed reform. The plan never envisioned including all Vermonters in a single plan, instead retaining multiple payers. Hence, hospitals, physicians’ offices, and nursing homes would still have had to contend with multiple payers, forcing them to maintain the complex cost-tracking and billing apparatus that drives up providers’ administrative costs. It proposed continuing to pay hospitals and other institutional providers on a per-patient basis, rather than through global budgets, similarly perpetuating the expensive billing apparatus that siphons funds from care. And hospitals would have continued to rely on surpluses from day-to-day operations as their main source of capital funds for modernization and expansion. This undermines health planning and raises bureaucratic costs by forcing hospital administrators to undertake the additional work needed to identify and pursue profit opportunities.

Some of this complexity was forced on Vermont by federal statutes that may preclude folding Medicare and the military’s Tricare program into a state single payer plan, and restrict states’ ability to outlaw private employer-provided coverage that duplicates the public plan. But the decisions to abandon lump-sum hospital payment, and separate grants for capital came from the governor and his advisers.

The End Game of Vermont’s Reform

Vermont’s November 2014 gubernatorial election had very low voter turnout, a circumstance that generally favors the right. Gov. Shumlin – who had hedged on health reform during the campaign – eked out a narrow plurality, leaving the state legislature to decide between him and the Republican candidate and greatly weakening Shumlin’s position. A month later, while awaiting the legislature’s decision (they elected him to a third term on January 9), Shumlin announced his pullback from reform.

Shortly thereafter, he released the detailed cost projections which he said had convinced him not to go ahead. The report by his staff estimated zero administrative savings from its proposed plan. It also projected zero savings on drugs and medical devices, tacitly acknowledging that GMC wouldn’t use bargaining clout to rein in prices, and ignoring the fact that Quebec, its neighbor to the North, has gotten big discounts.

The Shumlin administration’s cost estimates also incorporated an old (too high) estimate of the number of uninsured Vermonters, inflating the projected increase in utilization and cost. Finally, it assumed that doctors would expand their work hours (and incomes) to care for the newly insured, rather than maintaining their current work hours by seeing their other patients a little less frequently – as happened with the implementation of single payer coverage in Quebec.

But even the administration’s inflated cost estimates indicate that universal coverage under its quasi-single payer plan would cost somewhat less overall than the current system. The voluminous report includes detailed tabulations of new costs to the state treasury under the proposed reform. But the report scrupulously avoids providing any figures for the impact of reform on the total cost of health care (public and private) in the state. Economist Gerald Friedman has estimated these overall impacts using the report’s data, previous estimates of health expenditures in Vermont, and CMS figures on Medicare spending and expected health care inflation under the ACA. He estimates that even the diluted reform proposed by the governor’s team would cut overall health spending in Vermont by about $500 million annually.

So why did Gov. Shumlin declare the reform unaffordable? Many have noted that the $2.5 billion in new state expenditures required under the reform would nearly double the state’s previous budget. But these numbers are meaningless absent an accounting of the savings Vermont households would realize by avoiding private insurance premiums and out-of-pocket costs. As detailed above, these savings would more than offset the new taxes.

But although the total costs of care would have fallen even under the GMC plan, some – mostly higher-income, healthy Vermonters whose taxes would go up the most – would have paid more. Although the GMC tax plan was far from progressive, it was far less regressive than the current pattern of health care funding in the state. The GMC Board estimated that most of the 340,214 families earning less than $150,000 annually would have gained, while most of the 24,102 families above that income level would have lost. Overall, employers’ costs would have risen by $109 million – with many small businesses experiencing cost increases, a political sore point.

Conclusion

It’s a misnomer to label Vermont’s Green Mountain Care plan “single payer.” It was hemmed in by federal restrictions that precluded including 100 percent of Vermonters in one plan, and its designers further compromised on features needed to maximize administrative savings and bargaining clout with drug firms, and improve health planning.

But even the watered-down plan that emerged could have covered the uninsured, improved coverage for many who currently face high out-of-pocket costs, and actually reduced total health spending in the state – albeit far less than under a true single payer plan. A true single payer plan would have made covering long-term care affordable, and allowed the elimination of all copayments and deductibles.

Vermont’s experience holds important lessons for single payer advocates.

1. Effective grassroots organizing makes a difference. It got real health care reform on the political radar screen in Vermont, and can get it back on the radar there and elsewhere. Indeed, single payer forces in Vermont are already rallying to reverse Shumlin’s decision. The virtues, value, and simplicity of a single payer approach have broad popular appeal.

2. Federal restrictions impose significant compromises on state-level single payer plans. For this, as well as other reasons, organizing for single-payer state plans and organizing for national legislation are not competing strategies, but complementary ones. The ultimate goal for both is a single, inclusive program for the entire nation.

3. As single payer work advances, we need to anticipate that corporate opposition will mobilize – often behind the scenes. The only effective antidote is continued grassroots mobilization. Delayed implementation and punting key decision to the future opens the door for corporate influence and smear campaigns.

4. Beware of “experts” with a track record unsympathetic to single payer. Economic projections are always based on assumptions, which are often highly political.

5. Even when we don’t get the whole pie, demanding it often yields a significant piece. Although a major single payer effort was stymied in Vermont, it achieved substantial progress. It’s no accident that Vermont’s uninsurance rate has come down to 3 percent; that virtually all children in that state are covered; that its Medicaid program is among the best; that its hospitals have come under tighter fiscal regulation; and that single payer remains in the limelight there. Even as he backed off from single payer for now, the governor promised to press for future health reform.

Dr. Steffie Woolhandler and Dr. David U. Himmelstein are internists, professors at the City University of New York’s School of Public Health at Hunter College, and lecturers at Harvard Medical School. They co-founded Physicians for a National Health Program.

https://www.pnhp.org/news/2015/january/what-happened-in-vermont-implications-of-the-pullback-from-single-payer

Comment:

By Don McCanne, M.D.

The special weekend release of this commentary is designed for widespread distribution to help bring together members of the single payer community, not only within PNHP but also including all individuals and organizations that have been and will continue to be dedicated to the cause of health care justice for all.

The value of this commentary by Steffie Woolhandler and David Himmelstein is that it provides a general perspective on what actually did happen, and leaves us with a positive sendoff on the path forward.

Their description of the events that actually took place allows us to dismiss the tangle of minutiae that has not only been disruptive within the single payer camp but has also allowed the conservatives and libertarians to falsely label the single payer concept as an abject failure. Much more importantly, this commentary provides lessons that can help reunite all of us, on both the state and national levels, in our common quest for single payer reform.

Please share the commentary or the link to it with your single payer colleagues and organizations.

Onward together!