PNHP

Mass. Medicaid chief: Single payer may be better than ‘devil-may-be’ market

Mass. Medicaid chief: Single payer may be better than ‘devil-may-be’ market

By Kyle Cheney / State House News Service
Boston Herald, Feb. 20, 2011

A senior Patrick administration health care official said Friday that a single payer system may work more effectively and efficiently than Massachusetts’s existing insurance market, a high-profile endorsement that raised eyebrows at a legislative hearing.

“I like the market, but the more and more I stay in it, the more and more I think that maybe a single payer would be better,” said Terry Dougherty, director of MassHealth – the state-run Medicaid plan that insures nearly 1.3 million Massachusetts residents – when lawmakers asked for his “personal view” on a single payer system.

Dougherty’s comment, made during a budget hearing at the Boston Public Library, prompted his boss, Secretary of Health and Human Services JudyAnn Bigby, to interject: “That’s his personal opinion.”

Dougherty noted that MassHealth, by far the largest program in state government, spends just 1.5 percent of its $10-billion-a-year budget on administrative costs – compared to about 9.5 percent by the private market, according to studies by the state Division of Health Care Finance and Policy. That figure won plaudits from several lawmakers on the panel, including some who have supported implementing a statewide single payer system.

After his remarks, Dougherty told the News Service that he’s learned to appreciate “elements of single payer” during his 30 years in health care.

“It’s got to be better than this devil-may-be marketplace,” he said. “We don’t build big buildings. We don’t have high salaries. We don’t have a lot of marketing, which makes, to some extent, some of the things that we do easier and less costly than some things that happen in the marketplace. Overall, my point is, we have individuals who work in state government in MassHealth … who are just as smart, just as tactile, just as creative as people who work in the private sector, but they work for a lot less money.”

A single payer system would replace the state’s patchwork of nonprofit and private insurers with a single, public insurer through which all health care dollars would flow to hospitals, doctors and other health care providers. Supporters say it would eliminate administrative waste and ensure that all residents receive adequate coverage.

But while supporters point to single payer models used by other countries and tout the idea as a cost saver, critics warn the system would result in government bureaucrats deciding what services to cover and how to pay for them, would reduce the quality of care and would disrupt relationships between doctors and patients.

Hundreds of thousands of Massachusetts residents have endorsed the approach. In fact voters in 14 House districts –including five that backed Scott Brown for U.S. Senate – voted overwhelmingly last year to support a non-binding ballot question that asked, “Shall the state representative from this district be instructed to support legislation that would establish health care as a human right regardless of age, state of health or employment status, by creating a single payer health insurance system like Medicare that is comprehensive, cost effective, and publicly provided to all residents of Massachusetts?”

A similar question passed in 10 other House districts in 2008.

Although last session 50 members of the Legislature supported a single payer model, the issue has lacked support from the upper echelons of the Legislature and the Patrick administration.

A single payer plan would scrap Massachusetts’s landmark health care system, which relies on the private insurance marketplace, and that backers have credited with helping insure about 98 percent of the population. Backers of the existing structure, while acknowledging that health care costs have continued to climb, note that the state has covered about 430,000 residents since the inception of health care reform in 2006. Individuals are required to purchase health insurance, and low-income residents without access to health care through their employers may obtain partially or fully-subsidized care through the state’s Connector Authority, an exchange that pairs consumers with private plans, or through MassHealth.

This session, only 32 members signed on to the single payer proposal, although the sponsors include several high-ranking lawmakers: Rep. Stephen Kulik, vice chair of the Ways and Means Committee; Rep. Martha Walz, assistant vice chair of the Ways and Means Committee; Reps. Ellen Story and Byron Rushing, members of Speaker Robert DeLeo’s upper leadership team; and eight House committee chairs. The bill’s lead sponsors are Rep. Jason Lewis (D-Winchester) and Sen. James Eldridge (D-Acton). Last session’s lead sponsor, Rep. Matthew Patrick (D-Falmouth) was ousted at the polls by Republican David Vieira.

Benjamin Day, executive director of Mass Care, a single payer advocacy group, noted that only six of the lawmakers in the 14 House districts whose voters endorsed single payer health care signed onto the bill. He asserted that many members of state government’s health care hierarchy support single payer health care but keep it to themselves.

“Everyone is making political considerations, tactical considerations,” he said.

Day said supporters of a single payer system are eyeing Vermont, which recently elected a Democratic governor who ran on a platform that included a single payer system.

“If Vermont passes it, that will be such an incredible boon,” he said.

Day noted that Vermont has hired key players in Massachusetts’ own landmark health reform efforts, including Jonathan Gruber, a member of the Massachusetts Connector Authority board and Anya Rader Wallack, a health care consultant who previously headed the Massachusetts Medicaid Policy Institute.

Proposals to advance a single payer system have fallen in and out of favor for decades. Before he became Senate president in 2003, Robert Travaglini was the lead sponsor of a proposal to create a task force charged with recommending ways to implement single payer health care in Massachusetts, although he later endorsed the current system, which Gov. Mitt Romney signed into law in 2006.

http://news.bostonherald.com/news/politics/view/20110220medicaid_chief_single_payer_may_be_better_than_devil-may-be_market/

Study: Research costs much lower than drug companies claim

Net Median Costs per Drug $13 to $204 million, not $1.3 billion

Press Release, Feb 21, 2011

Pharmaceutical companies continue to claim that high research and development (R&D) costs make it necessary for them to charge high prices and retain long ownership of patents to recoup costs. But a new study co-authored by UVic health economist Rebecca Warburton and Donald W. Light of the University of Medicine and Dentistry of New Jersey demonstrates that high R&D estimates have been constructed by industry-supported economists to support the companies’ claims.

The widely accepted figure promoted by industry-supported economists is US$1.3 billion to discover and develop a new drug.  This estimate, however, was done on a costly subsample and then generalized to all drugs, inflating the estimate for the average new drug by about 7 fold.

TAXPAYERS CONTRIBUTIONS

The $1.3 billion estimate also does not include the substantial contributions by taxpayers through R&D-related tax write-offs. Taxpayers indirectly pay for about 39 percent of company R&D, a substantial reductions in a company’s net costs.

The industry-based figure also includes a large sum inserted for the cost of discovery, even though no one has solid figures on what those costs are. The cost of discovery can range from serendipity to 30 years of frustrating research to find a key compound. Light and Warburton conclude that cost estimates can only be done for development and not basic research.

Light and Warburton also found that independent evidence showed the $1.3 billion estimate was based on trials much larger than reported by the FDA (US Food and Drug Administration) and the National Institutes of Health. The estimate was also based on trials lasting longer than the lengths that companies reported under audit. Finally, the percent of trials that failed was higher than independent sources showed, which multiplies the costs of trials that succeed.

FOREGONE PROFITS AS “COSTS”

Half the $1.3 billion estimate is not real costs but a high estimate of profits that companies would have made if they had not developed drugs but just put their money in bonds or equities. Industry-supported economists used an estimate of those profits more than twice the return on capital conventionally used and counted this high estimate as a “cost of R&D.” “Estimated profits get converted to ‘costs’, and then companies press to get that money back as well as a good return on it,” explained Light. “This amounts to charging high prices to get profits on profits.”

Light and Warburton used the median cost because a few very expensive drugs skew the average and result in a misleading figure. They corrected for inflated numbers and multipliers. The median net corporate R&D cost per new drug was only $59.4 million, plus the unknown cost of discovery, which varies 30 fold.  This estimate is in line with audited figures submitted by companies. “We found that the net median corporate costs varied greatly, from $13 million to $204 million, depending on the kind of drug,” Light said.

GOVERNMENT PROTECTED PRICES NOT WARRANTED

“The European Parliament is increasing market protections that will delay generic competition and extend monopoly prices,” Warburton said. “Lobbyists have persuaded European leaders that companies need more time to recover billions in research costs, when R&D costs are really a fraction of the $1.3 billion average claimed.”

PRACTICAL IMPLICATIONS

This study strengthens the view that drugs companies do not need prices as high as they are to recover R&D costs, and their corporate risks are much lower than claimed. Most of their R&D products are scores of drugs with few proven advantages over existing drugs that can command higher, government-protected prices. Gross profits are spent more for marketing than research in order to maximize the number of patients taking these drugs. A large number of clinical trials are conducted for marketing and signing up lead clinicians. These form elements of The Risk Proliferation Syndrome described in a new book, The Risks of Prescription Drugs.  The result is millions of patients exposed to adverse side effects with few offsetting benefits.  Prescription drugs are now the 4th leading cause of death and result in about 2 million hospitalizations a year. They have also become a major cause of auto and trucking accidents.

The article, “Demythologizing the high costs of pharmaceutical research,” has been printed in BioSocieties, an interdisciplinary journal for the social studies of life sciences. It is available at http://www.palgravejournals.com/biosoc/journal/vaop/ncurrent/index.html, or by clicking here.

Media contacts:
Donald W. Light  at (609) 216-0071 or dlight@princeton.edu or Rebecca Warburton (Public Administration) at 250-885-8469 or rnwarbur@uvic.ca

Massachusetts' Medicaid director comments on single payer

Medicaid chief: Single payer may be better than ‘devil-may-be’ market

By Kyle Cheney
Boston Herald
February 20, 2011

A senior Patrick administration health care official said Friday that a single payer system may work more effectively and efficiently than Massachusetts’s existing insurance market, a high-profile endorsement that raised eyebrows at a legislative hearing.

“I like the market, but the more and more I stay in it, the more and more I think that maybe a single payer would be better,” said Terry Dougherty, director of MassHealth – the state-run Medicaid plan that insures nearly 1.3 million Massachusetts residents – when lawmakers asked for his “personal view” on a single payer system.

Dougherty noted that MassHealth, by far the largest program in state government, spends just 1.5 percent of its $10-billion-a-year budget on administrative costs – compared to about 9.5 percent by the private market, according to studies by the state Division of Health Care Finance and Policy. That figure won plaudits from several lawmakers on the panel, including some who have supported implementing a statewide single payer system.

After his remarks, Dougherty told the News Service that he’s learned to appreciate “elements of single payer” during his 30 years in health care.

“It’s got to be better than this devil-may-be marketplace,” he said. “We don’t build big buildings. We don’t have high salaries. We don’t have a lot of marketing, which makes, to some extent, some of the things that we do easier and less costly than some things that happen in the marketplace. Overall, my point is, we have individuals who work in state government in MassHealth … who are just as smart, just as tactile, just as creative as people who work in the private sector, but they work for a lot less money.”

http://news.bostonherald.com/news/politics/view/20110220medicaid_chief_single_payer_may_be_better_than_devil-may-be_market/

Comment: 

By Don McCanne, MD

It is no surprise that so many individuals are suggesting that we may be heading toward a single payer system. It is becoming more obvious that the federal reform effort and the Massachusetts plan on which it was based have proven to be the most expensive model of reform while falling short on the goals of universality, efficiency and equity, as was predicted by those of us at PNHP and others. But these words from Terry Dougherty, director of the Medicaid program for Massachusetts, are of paramount significance since he has first hand experience with one of the cornerstones of reform – expansion of the Medicaid program.

When someone who really knows what we’re actually doing within this expensive, dysfunctional model of reform says that single payer has “got to be better,” we should listen. Listen, and then act.

Massachusetts’ Medicaid director comments on single payer

Medicaid chief: Single payer may be better than ‘devil-may-be’ market

By Kyle Cheney
Boston Herald
February 20, 2011

A senior Patrick administration health care official said Friday that a single payer system may work more effectively and efficiently than Massachusetts’s existing insurance market, a high-profile endorsement that raised eyebrows at a legislative hearing.

“I like the market, but the more and more I stay in it, the more and more I think that maybe a single payer would be better,” said Terry Dougherty, director of MassHealth – the state-run Medicaid plan that insures nearly 1.3 million Massachusetts residents – when lawmakers asked for his “personal view” on a single payer system.

Dougherty noted that MassHealth, by far the largest program in state government, spends just 1.5 percent of its $10-billion-a-year budget on administrative costs – compared to about 9.5 percent by the private market, according to studies by the state Division of Health Care Finance and Policy. That figure won plaudits from several lawmakers on the panel, including some who have supported implementing a statewide single payer system.

After his remarks, Dougherty told the News Service that he’s learned to appreciate “elements of single payer” during his 30 years in health care.

“It’s got to be better than this devil-may-be marketplace,” he said. “We don’t build big buildings. We don’t have high salaries. We don’t have a lot of marketing, which makes, to some extent, some of the things that we do easier and less costly than some things that happen in the marketplace. Overall, my point is, we have individuals who work in state government in MassHealth … who are just as smart, just as tactile, just as creative as people who work in the private sector, but they work for a lot less money.”

http://news.bostonherald.com/news/politics/view/20110220medicaid_chief_single_payer_may_be_better_than_devil-may-be_market/

It is no surprise that so many individuals are suggesting that we may be heading toward a single payer system. It is becoming more obvious that the federal reform effort and the Massachusetts plan on which it was based have proven to be the most expensive model of reform while falling short on the goals of universality, efficiency and equity, as was predicted by those of us at PNHP and others. But these words from Terry Dougherty, director of the Medicaid program for Massachusetts, are of paramount significance since he has first hand experience with one of the cornerstones of reform – expansion of the Medicaid program.

When someone who really knows what we’re actually doing within this expensive, dysfunctional model of reform says that single payer has “got to be better,” we should listen. Listen, and then act.

Proposed Overture to the General Assembly of the Presbyterian Church (USA)

Recommendation

The Presbytery of Mid-Kentucky respectfully overtures the 220th General Assembly (2012) to instruct Mission Responsibility Through Investment (MRTI) to report to the General Assembly Mission Council on the corporate practices of Cigna, Aetna, Humana, WellPoint, United Health Care health insurance companies – in particular as such practices compare with and relate to previous General Assembly actions relative to health care.  The General Assembly Mission Council is authorized and encouraged to act on this information, and, as it deems appropriate, implement divestment procedures as well as encourage individual Presbyterians and congregations to divest of holdings in the said companies; and, in view of the urgency of the ongoing health care crisis, to take action within six months of the adoption of this recommendation; and to report to the 221st General Assembly (2014) on divestment actions.
 
Rationale

WHEREAS The Presbyterian Church (USA) has consistently called for fundamental reform of United States healthcare systems and in 2008 “endorse[d] in principle the provision of single-payer universal health care reform…as the program that best responds to the moral imperative of the gospel”; (a)         

WHEREAS The Presbyterian Church (USA) and its predecessors has long concerned itself with national health care policy, seeking to promote healthier individuals in a healthier society.  “For over 60 years, Presbyterian Church (USA) General Assemblies have been calling for reform of the U.S. health system, urging the establishment of a national medical plan that will ensure health coverage for all persons residing in the United States.” – 2009 Communication of the PC(USA) Washington Office;

WHEREAS The Presbyterian Church (USA), in its healthcare policy statements, has repeatedly pointed to issues of quality, equity and accessibility; (b)

WHEREAS these statements are based on several crucial theological points; and implicit in these is the conviction that health care is a human right – a conviction that is voiced in the Universal Declaration of Human Rights, in the International Covenant on Economic, Social and Cultural Rights, and in the World Religious Summit meeting in Winnipeg, Manitoba in June, 2010;(c)

WHEREAS such statements, including the 2008 General Assembly endorsement of a single-payer policy, are meant to inform and guide its total mission, and are meant to be reflected in the actions and pronouncements of the constituent parts of the Presbyterian Church;

WHEREAS one instrument for implementation of its mission is church investment policy with the corresponding option to divest from those companies that actively oppose its mission goals; (d)

WHEREAS violation of a basic human right, such as the right to health care,  is one of several criteria by which corporate behavior may be evaluated; [See MRTI priority issues work plan and historical involvements relative to both health care and human rights at its web page – http://gamc.pcusa.org/ministries/mrti/]

WHEREAS since the primary mission of for-profit insurance companies is to make a profit for their investors and since they are not themselves providers, by definition they decrease rather than increase access to health care;

AND WHEREAS for-profit health insurance companies consciously and deliberately oppose the above health care principles and policy goals of the PCUSA in order to fulfill their for-profit mission; (e)

AND WHEREAS the actions of for-profit health insurance companies have brought untold suffering and hardship in both the private and public spheres and have obstructed the development of healthier individuals in a healthier society; (f) 

AND WHEREAS health care reform legislation enacted by the U.S. Congress in 2010 only strengthens the decision-making role of for-profit health insurance companies in matters affecting individuals’ access to health care; (g)
AND WHEREAS the Presbyterian Church has no obligation to support such companies through investment but, to the contrary, has a moral obligation to withdraw financially from them to the extent that they are detrimental to the goal of equal access to health care;
AND WHEREAS for-profit health insurance companies produce no product for the public good but instead increase exposure to the financial ruin of individuals and the society as a whole;

Therefore: [see above recommendation]

FOOTNOTES/BACKGROND ATTACHMENTS

(a) Full text of the 2008 General Assembly resolution:
That the General Assembly:  1. Endorse in principle the provision of single-payer universal health care reform in which health care services are privately provided and publicly financed.  2. Direct the General Assembly Council, through appropriate offices including the National Health Ministries, the Washington Office, and the Presbyterian Health, Education and Welfare Association (PHEWA) to advocate for, educate about, and otherwise pursue the goal of obtaining legislation that enacts single-payer, universal national health insurance as the program that best responds to the moral imperative of the gospel: monitoring progress toward this goal and reporting back to the next two General Assemblies (2010 and 2012).  3. Direct the Stated Clerk of the General Assembly to send a copy of this resolution to the appropriate committee chairs of the U.S. Congress and to the Washington and United Nations offices of the PC(USA).  4. Direct that $25,000 from the Mission budget of the PC(USA) be sent to the PACT Network of PHEWA for the purpose of holding ten regional, one-day seminars supporting single payer universal health care reform, moneys to be allocated on a first-come, first-served basis. 
 

(b) Accessibility: “We believe that all people possess inherit worth as children of God, and that God’s promise extends to all.  Health coverage must be available to all persons living in the United States, regardless of income, race or ethnicity, geography, age, gender, employment status or health status” – G.A. Minutes, 1994, p.574 and 2002, p.634;  Equity:  “Because the right to acquire adequate health care springs out of our worth as living human beings, rather than out of any particular merit or achievement belonging to some but not to others, adequate health care should be defined equally for all people.” – G.A. Minutes, 1976, pp. 203-207;  Responsible Financing: “Since society has an interest in the health of its people, those individuals and organizations who can pay should help to finance the care of those individuals and families who cannot pay.  While concerns for the costs of health care are appropriate, these concerns must continually be balanced against the objectives of adequate, quality care for all.  The sacrifice of access and quality at the shrine of cost containment is too high a price to pay and should not be tolerated.” – G.A. Minutes, 1991, p. 817 and 1988, p. 525.

In August, 2009, the Stated Clerk of the General Assembly, responding to #3 (above), wrote: “Jesus Christ, who has reconciled us to God, healed all kinds of sickness (Mt. 4:23) as a sign of God’s rule.  Isaiah speaks God’s word to say ‘No more shall there be … “an infant that lives but a few days, or an old person who does not live out a lifetime”(Isa. 65:20a).  We, as Reformed Christians, witness to Jesus Christ in word, but also in deed.  As followers of our Great Physician Jesus, we have a moral imperative to work to assure that everyone has full access to health care. … The U.S. spends nearly twice as much per capita than any other coun
try on health care, but we rank poorly in the thirty-seven categories of health status measured by the World Health Organization.  The rise in childhood obesity, asthma, diabetes, and other chronic diseases indicates that the overall health status of people of this country is declining.  We are warned by the prophets not to heal the wounds of God’s people lightly; yet in 2006 the aggregate profits of the health insurance companies in the United States were $68 billion.  During that same year more than 15,000 families were forced into bankruptcy because of medical expenses. … Our federal government already operates efficiently and with low overhead the health delivery programs of Medicare and Medicaid; and yet at the same time insurance companies spend nearly one-third of every premium dollar on marketing and other administrative costs and in fact, several such companies spend less than 60 percent of premium dollars they receive on health services.  The American College of Physicians, the nation’s second largest physician group, has endorsed a single-payer healthcare system.  Only a single-payer system of national health care coverage (privately provided; publicly financed; not socialized medicine) can save what is estimated to be $350 billion wasted annually on medical bureaucracy and redirect those funds to expanded coverage.”

In support of the above resolution at the 2008 General Assembly, our denominations Advisory Council on Social Witness Policy stated: “Commissioners may wish to reflect on whether the highest ever numbers of uninsured Americans (not including undocumented immigrants) and the data on increasing life expectancy among Americans confirm the need for a forthright new advocacy by the church.”

(c) From The Universal Declaration of Human Rights, Article 25: (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (2) Motherhood and childhood are entitled to special care and assistance.  All children, whether born in or out of wedlock, shall enjoy and same social protection.” From the Covenant on Economic, Social and Cultural Rights, Article 12: “The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attain able standard of physical and mental health.” From the report of the World Religious Summit (June, 2010): “All countries must to their part…and put in place poverty reduction policies that ensure everyone has access to basic rights such as nutritious food, safe water, health care, education and economic opportunity.”

(d) “The Presbyterian Church (USA) believes that church investment is more that a practical question. It is also ‘an instrument of mission and includes theological, social and economic considerations.’ This belief flows from our understanding of the stewardship of God’s resources entrusted to the church.  Thus, ‘we confess that the Lord is really the acknowledged Master of our entire life – moral, physical and material.’” – MRTI, A Christian Call to Faith-Based Investing

(e) For-profit health insurance companies opposition to health care as a human right:           
Vis-à-vis patients:

  1. By company policies and positions designed to support shareholder profits and exorbitant salaries of management personnel through denying coverage or denying funding of the treatment of patients, and by providing financial incentives to their employees to do so.

Vis-à-vis providers and patients:

  1. By interfering in the doctor-patient relationship and preventing providers from treating patients on the basis of their informed clinical judgment through denial of treatment as well as the application of financial penalty and censure for “excessive-treatment.”
  2. By constant upward pressure on patient premiums, deductibles and co-pays while applying downward pressure on provider reimbursement. (See Secretary Sebellius’ February, 2010 report, “Insurance Companies Prosper, Families Suffer – Our Broken Health Insurance System”.)

Vis-à-vis legislation:

  1. By spending hundreds of millions of patient and taxpayer generated dollars to lobby in Washington and in state capitals, effectively buying unrepresentative power and influence to thwart efforts toward making affordable, comprehensive access for all a reality.
  2. By donating directly and indirectly additional hundreds of millions of patient premium and taxpayer generated dollars to the election campaigns of candidates of both political parties in order to assure that legislators support maintenance of their power. 
  3. By undermining democratic processes through the infusion of billions of dollars into the deliberative process at every turn to override the well-documented majorities of citizens, physicians and nurses that prefer an improved “Medicare for all” solution to our health care crisis.

Vis-à-vis insurance company employees and investors:

  1. By putting them in the morally and ethically untenable position of making the viability of their employment and investment dependent on subordinating the health care of millions to the profit-making of a few.

Vis-à-vis employers and their employees:

  1. By making them less competitive in the global market place by the addition of exorbitant employee health care costs (that also discourage entrepreneurial initiatives on their part).
  2. By being forced to reduce coverage for employees and their families in order to remain competitive in the domestic market as well.
  3. By reducing the motivation to bring on new hires even when it would be advantageous to do so because of associated health care costs.

(f) Untold suffering:

  1. In the form of tens of thousands of deaths annually due to lack of accessibility to adequate health care.
  2. In the form of workers inability to change jobs or move to jobs in other locations due to lack of portability of coverage.
  3. In the form of pressure to understaff hospitals due to the instability of hospital revenue from for-profit insurance payments and forced early discharges, making those institutions themselves an increased threat to the health of patients from medical mistakes, increased infection rates and unmet patient needs.
  4. In the form of lack of quality in overall health system performance. According to the World Health Organization the U.S. is ranked #37 in the world. In WHO’s 2000 report, the U.S. ranked 30th in preventable deaths before age five – a terrible testimony to how poor the quality of our health system is.
  5. In the form of driving patients, both insured and uninsured, into bankruptcy and poverty due to health care costs.
  6. In the form of fear, demoralization and distraction in the hearts and minds of millions of Americans due to financial ruin if they become injured or ill; suffering from untreated preventable diseases; suffering from diseases diagnosed too late; needless premature death and disability with all its pernicious effects on not just individuals but families, communities and our entire population.

(g) Recently passed health care reform legislation:

Until the 1990’s the U.S. health insurance market was dominated by non-profit companies with essentially charitable missions.  From 1990-2005 the industry underwent major consolidation and the near-eliminating of not-for-profits.  This trend will continue under the Affordable Care Act.  No other country has for-profit health insurance compani
es like the U.S.  The only way for these companies to make a profit for their shareholders is to find ways not to pay for the care of the sick.  This is the basic flaw in for-profit health insurance. Nor do they further medical research or innovation.  They add no social value to justify their profits and the negative effects they inflict on the entire medical system.

Legislative committees approve copays for Medi-Cal

Calif. Assembly, Senate Budget Committees Pass Spending Plans

California Healthline
February 22, 2011

On Friday, California’s Assembly Committee on Budget and Senate Budget and Fiscal Review Committee passed nearly identical state budget plans.

Changes to Medi-Cal

Both budget committees approved a plan to establish mandatory copayments for Medi-Cal beneficiaries, which would reduce state spending by about $584 million, according to a Senate analysis.

The plan calls for copays of:
$3 and $5 for some prescription drugs;
$5 for physician and dentist visits;
$50 for emergency department visits; and
A maximum of $200 for hospital stays.

The plan also calls for the state to reduce Medi-Cal payments to health care providers by the amount of the copays.

Health care providers have expressed concern that they will face higher costs if Medi-Cal beneficiaries are unable to afford the higher copays.

http://www.sacbee.com/2011/02/20/3416369/browns-countdown-day-42-medi-cal.html

Comment: 

By Don McCanne, MD

Although California has been at the bottom of the states in Medicaid payment rates, the state legislative committees recently passed another 10 percent cut in those rates. Now they have also approved legislation to reduce rates further by the amount of these copayments, amounts that will surely be absorbed by the providers since the Medicaid population lives in poverty or near-poverty and will not be able to pay these copayments. That’s understandable when you consider that the federal poverty level for 2011 is an annual income of $10,890 for an individual.

Yet the Patient Protection and Affordable Care Act will greatly expand the Medicaid population. The losses faced in the Medi-Cal program cannot be made up by an increase in volume. The additional load displaces privately insured patients, and the losses to the providers increase. The physicians who refuse to see Medi-Cal patients thrive, whereas those overloaded with Medi-Cal patients are threatened with insolvency. Let me emphasize that, based on my own personal experience, this is no exaggeration.

As a welfare program representing a population without an adequate political voice, Medicaid will always be underfunded. Simple common decency dictates that we should eliminate this program and replace it and the rest of the dysfunctional financing system with an improved Medicare for all program that serves everyone well.

Economist confirms need for single-payer system

By Peter Hirschfeld
Times Argus (Barre-Montpelier, Vt.), Feb. 19, 2011

MONTPELIER — Three weeks after unveiling a draft version of his single-payer health care proposal, Harvard economist William Hsiao returned to the Legislature Friday to submit a final copy that reaches exactly the same conclusion.

Hsiao’s draft report drew comments and criticisms from nearly 200 people. Their input did little to change the final recommendations, in which Hsiao says Vermont should use a payroll tax to fund a single-payer system that provides basic health care benefits to every resident of the state.

“Vermonters as well as people outside Vermont have sent us more than 170 comments. It kept us busy and sleepless for a couple weeks but we really benefited from these comments,” Hsiao told the House Committee on Health Care Friday afternoon. “Let me come to the bottom line: Our conclusions and recommendations did not change.”

Hsiao, commissioned by the Legislature to produce the $300,000 report, said many of the comments voiced skepticism over the financial savings he projects in the single-payer framework. Hsiao says the state would save $580 million in the first year of implementation, largely as a result of administrative efficiencies that result from the elimination of multiple insurance plans. He proposes plowing $400 million of those savings into improvements in health care infrastructure.

Hsiao assured lawmakers that the savings forecast in his nearly 200-page report are conservative.

“Our approach was to underestimate savings but also to overstate costs. Our basic premise is we do not want to mislead the Vermont Legislature and governor to do something that’s highly risky,” Hsiao said. “So if things did not work out so perfectly, you still have a margin there, and you would not face a fiscal crisis.”

For proponents of a single-payer system, Hsiao’s findings cement their commitment to pursuing a reform path that leads to publicly financed, universal care.

“Even after asking people to criticize the report in every way possible, his final recommendation doesn’t have a change in direction,” said Rep. Mike Fisher, a Lincoln Democrat.

But the path toward single-payer remains fraught with political land mines. Large businesses, including IBM, have already voiced their distaste to any health-care system that imposes a mandatory payroll tax on employers. Opposition has been particularly strong from self-insured companies, whose health plans are protected by federal law from influence by state regulations.

Hsiao proposes overcoming federal restrictions on self-insured companies by assessing a payroll tax on those employers regardless of whether their employees enroll in the state-offered benefits.

“So it’s up to employers and workers, who may not want to have double insurance,” Hsiao said.

Critics say the strategy uses the state’s broad taxing authority to strong-arm companies into submission.

Hsiao proposed the payroll tax. But the Legislature and Gov. Peter Shumlin, who began work last week on a health care bill that lays the foundation for a single-payer system in three to six years, have opted to disregard the issue of funding altogether. For now at least, lawmakers and Shumlin say the state needs to focus on cost-containment and health-care design, leaving issues of how to pay for it for later down the road.

Rep. George Till, a Jericho Democrat and practicing obstetrician, said Friday that it will be difficult to move the debate forward without broaching the issue of funding early on. Till said his concerns were confirmed by Hsiao, who on Friday said that health care delivery and health care financing need to go hand in hand.

“I don’t see how the business community buys in without knowing the financing mechanism and the financing amounts,” Till said. “And I don’t understand how the provider community buys in without knowing what they’re going to get paid.”

Rep. Mark Larson said financing the system will be an important conversation, but one that must wait until the state has a better handle on precisely how the new health care system will operate.

Larson said the biggest obstacle to health care reform is people’s fear of change, a sentiment echoed Friday by Hsiao.

“I think there’s a level of distrust and fear out there that this won’t work,” Larson said.

Larson though said the status quo — health-care expenditures are expected to rise by more than $1.2 billion over the next three years — will be far more devastating to businesses and health care providers than anything proposed in the Hsiao report.

Hsiao: Single-payer savings are conservative

By Anne Galloway
Vtdigger.com, Feb. 19, 2011

Harvard economist William Hsiao told lawmakers a month ago that if they adopted a single payer style health care plan, Vermonters could save $500 million in the first year of implementation (2015).

Since then, questions have been raised about that target figure. Fletcher Allen Health Care, in comments to Hsiao, said the professor overestimated the savings that could materialize from a single-payer system.

In a 15-page rebuttal to the Hsiao plan, hospital administrators took issue with Hsiao’s assertions that Vermont residents could save that much money through a system that would be designed to curtail administrative costs, waste, duplicative services, fraud and abuse. Officials pointed to statewide statistics regarding Vermont’s hospitalization and diagnostic testing rates, which they said are lower than those of neighboring states.

“Getting these numbers right is not about resting on our laurels or pretending that we cannot further reduce unnecessary services,” officials wrote. “It does speak directly, though, to what kind of savings can be further squeezed out of an already high-performing system.”

Hsiao’s report estimates that Vermont medical providers could reduce administrative costs by 6.5 percent under a streamlined billing system. Under that scenario, Fletcher Allen would be expected to save $29 million — a figure officials say is out of the question. They said it would be possible to save $5.3 million in estimated administrative costs. The hospital spends $35 million on billing and insurance related expenses per year, according to the written comments. (Fletcher Allen’s total revenues in 2009 were $875 million.)

Hsiao didn’t waver, however, in his assessment of the potential savings a single payer system could generate. The Harvard professor’s team ran the numbers again for his final report, which was submitted to the Legislature on Friday, and the projected 2015 savings came in at $580 million.

Hsiao said he received as many comments about an overestimation of the savings as he did complaints about underestimating the totals. In all, 170 Vermonters commented on the draft report, which was submitted to the Legislature in January.

“We didn’t do such a bad job,” Hsiao said. “We came out in the middle.”

If anything, Hsiao said, the totals his team calculated are conservative.

“We don’t want to mislead the Legislature and the governor to do something highly risky,” Hsiao said. “We erred on the side of conservatism. We overstated the cost so if things don’t work out you have a margin (of error). The worst thing we can do is be too optimistic so you’re left in a deficit position. It’s not my intention to put you in that position.”

Dr. Jonathon Gruber, a health care economist from MIT, supported Hsiao’s conclusions in a presentation to the House Health Care Committee Friday afternoon.

“Bill’s been conservative, but appropriately so,” Gruber said. “It’s better to get it right than overreach and see it collapse.”

Hsiao said his team included in its estimate labor savings based on an all-claims payment system in which doctors and nurses would no longer need to satisfy billing requirements for insurers.

In the final report, Hsiao said he fleshed out a few details, but his broadest conclusion didn’t change: In order for the state to save money and provide better health care outcomes for all Vermonters, it needs to adopt a universal health care system with a uniform payment mechanism.

“The system is broken,” Hsiao said. “It’s broken in a systemic way. Different parts don’t come together in a synchronization. It will only get worse, not better.”

Hsiao recommends investing $350 million of the $580 million in estimated savings into programs to support primary care doctors and an extension of “essential” medical benefits to uninsured or underinsured Vermonters.

In 2016, the single payer system is projected to save $770 million. By 2019, Hsiao estimates it will reduce health care spending by $1.1 billion.

The Department of Banking, Insurance, Securities and Health Care Administration says the state will spend $5.9 billion on health care in fiscal year 2012. By 2015, that number is expected to climb an additional $1.6 billion.

Employers would reap substantial savings, according to the Hsiao report, if the essential benefit package is offered by the state. (A comprehensive package, which would include nursing home care, would result in substantial increases in overall medical expenditures.)

Per employee spending on health care would drop by $200 in 2015 and $550 in 2019, according to the report. The total estimated savings for 2015 would be $80 million for businesses; in 2019, companies would save about $220 million on health care costs, according to Hsiao’s report.

Instead of paying premiums for workers, employers would contribute to the cost of health care through a payroll tax, under the Hsiao plan. The tax would be 12.5 percent in 2015 and 11.6 percent in 2019, including a 3 percent contribution from employees. If the system doesn’t change, employers and workers will pay out the equivalent of a 13.4 percent payroll tax in 2015 and 13.7 percent in 2019 via premiums.

The estimates, Hsiao said, depend on how effectively and quickly the system changes. “We cannot predict the future,” Hsiao said. “There is always some uncertainty.”

One of those uncertainties is whether the courts will overturn, or the Congress will repeal the Affordable Care Act which was enacted last year. The report says that when the law is fully implemented, Vermont will be eligible to receive $400 million. Both Gruber and Hsiao said this federal funding would pay for coverage of half of the state’s 47,500 uninsured residents. If the federal money doesn’t come through, it will be harder for the state to implement single payer because the payroll tax would have to be several percentage points higher, Gruber said.

Hsiao and Gruber both cautioned that the independent board that manages the payment system for providers must consist solely of members from the two sets of stakeholders that are naturally at “loggerheads” – businesses and providers.

“The United States has relied on politicians to make these decisions and they have not been able to control costs because powerful interests can influence politicians,” Hsiao said.

Other countries, he said, have established direct negotiating processes between the parties that pay and the parties that are compensated. “That brings about a better balance,” Hsiao said. “And it allows the system to maintain stability. That’s our motive and reasoning for recommending an independent board.”

If the single payer system is financed through a payroll tax, Hsiao said the Legislature should control the rate.

Rep. Mark Larson, chair of the House Health Care Committee, asked Hsiao if the health care delivery system can be reformed without addressing the payment system for providers.

Hsiao let the word “no” hang in the air before he elaborated. “That’s pie in the sky thinking,” Hsiao said.

“I would ask the people who propose this, what leverage will you use to change the health care delivery system?” Hsiao said. “You have to assume the current health care delivery system is in some kind of equilibrium. How will you be able to disturb it other than just arbitrarily say I’m going to pass a law, I’m going to force you to do it. You won’t be able to do that. Not in the United States, not even in China, an autocratic country which is trying to do that and failing miserably by now.

“The question is what leverage do you use?” Hsiao said. “The leverage you use is the payment syst
em. You change the incentive structure, then the delivery system will move. The payment system is like a magnet. The delivery system is like many iron particles when you change that magnet to a different position the iron particles will move. But to do that — to change the payment system — you have to change the financing. To be effective in changing delivery system you have to remove the current situation where providers can play games with the insurance such as cost shifting.”

http://vtdigger.org/2011/02/19/hsiao-single-payer-savings-are-conservative/

Health care consultant sticks with single-payer

By Nancy Remsen
The Burlington Free Press, Feb. 19, 2011
 
MONTPELIER, Vt. – The consultants who urged Vermont to move to a single-payer health-care system received 170 comments — complimenting, questioning and criticizing their draft report — but nothing persuaded the researchers to revise their basic recommendation, they told lawmakers Friday.
 
“It kept us busy and sleepless for a couple of weeks, but we really benefited from these comments,” William Hsiao, a Harvard University professor of economics and lead author of the report analyzing three health reform designs, told the House Health Care Committee. His team had double-checked its calculations and models, Hsiao said. “Our conclusion and recommendation didn’t change.”
 
Hsiao and three other principal authors came to the Statehouse to deliver their final report and field questions from two panels of lawmakers charged with writing a bill that would move the state toward ensuring all Vermonters had medical coverage, simplify the current claims chaos and curb mushrooming medical costs.
 
Gov. Peter Shumlin presented the Legislature with his plan to achieve a single-payer health system last week. It was based on the preliminary recommendations from Hsiao and his team.
 
The consultants haven’t been the only ones peppered with questions and comments in the month since Hsiao outlined the single-payer plan. Lawmakers have received plenty of feedback, and they had dozens of questions for the panel.
 
One of the top issues: How reliable is the estimate of $580 million savings from making the switch to a single-payer claims system? About $400 million of the savings would cover the cost of extending standard medical coverage to all Vermonters plus pay for investments in primary care and update some community hospitals.
 
Hsiao joked his team felt they were being “punched on both cheeks” on the question of the accuracy of the savings. Some people complained the researchers underestimated the savings, while others said they overestimated.
 
He cited, for example, Fletcher Allen Health Care, which submitted its own analysis of the savings it might experience as a result of processing fewer medical claims. Fletcher Allen argued Hsiao overestimated the medical center’s savings.
 
Hsiao countered, “They used a much narrower analysis of how a single-payer system would affect them.” He said the state’s largest medical center underestimated its savings by assuming Medicare and Medicaid claims wouldn’t be processed through a new, single claims pipeline — but they would. And Fletcher Allen calculated only clerical savings, he said, not savings for doctors and nurses who would spend less time on insurance paperwork.
 
Jonathan Gruber, economic professor at Massachusetts Institute of Technology and a co-author of the report, suggested Hsiao was almost too conservative in his assumptions about savings.
 
Hsiao explained, “Our approach was to try to underestimate the savings and overestimate the cost. We didn’t want to mislead the Legislature and governor into doing something risky.”
 
Deb Richter, a Vermont primary-care physician and long-time advocate for a single-payer system, is one of those who believe the state would save more. Still, she said after the presentation that she agreed with Hsiao: “It is better to underestimate than overestimate.”
 
Sen. Kevin Mullin, R-Rutland, asked the researchers whether creating a single-payer system that guaranteed coverage to all residents would make Vermont a magnet. “We keep hearing it isn’t an issue, but not to my satisfaction,” he said.
 
Gruber noted that under the federal Affordable Care Act, other states would have universal coverage, too. He added that studies of the impact of generous welfare benefits on migration have shown “it doesn’t seem to matter.”
 
Nicolas Rockler, an economist with Vermont-based Kavet, Rockler and Associates and another researcher, added, “The unemployed aren’t very mobile.”
 
Mullin also asked about the impact of the reform on medical professionals. He said some doctors told him if the state moved to a single-payer system, they would leave. He noted the state already has shortages among some medical professionals, especially in rural areas.
 
Hsiao said he received a telephone call from someone identifying herself as a doctor who said she knew a dozen physicians who would move to Vermont if it made the switch. He added that the plan called for using about $50 million of the $580 million in savings to recruit and retain primary-care physicians.
 
Rep. George Till, D-Jericho, asked Hsiao to address the concerns of employers who self-insure.
 
The House Health Care Committee had received a letter recently from John O’Kane, government programs manager at IBM Corp., arguing it should be allowed to continue to offer its own insurance plan.
 
Hsiao told lawmakers that self-insured plans could continue to operate but noted, “It would be up to employers and workers whether they wanted double insurance.” Vermont’s IBM employees and their families all would be eligible for the state’s standard coverage and would be paying for it, Hsiao said.
 
O’Kane, in a telephone interview, said IBM would object to paying for coverage the company didn’t want.
 
Speaking after his presentation, Hsiao said he was surprised at IBM’s opposition, given that the company faces similar circumstances for its employees in many countries. “They can still offer a uniform package,” he said, by providing supplementary coverage to Vermont’s standard plan.
 
“I understand rising health-care costs have been straining IBM,” Hsiao said, noting he met with their representatives in Vermont. “I’m surprised IBM wouldn’t consider this, because this would lower their costs for workers and their families.”
 
Armed with more information in the 200-page final report from the Hsiao team and with the Shumlin administration’s 80-page bill, House Health Care Committee Chairman Mark Larson, D-Burlington, said his committee would proceed with its review of the state’s next steps.
 
“The first question,” Larson said, “is whether there is enough evidence to believe a reformed system would be better.” He posed that question to the panel.
 
Gruber responded, “We aren’t in such a great place now. With no change, we know where we are headed — which is not sustainable.”
 
http://www.burlingtonfreepress.com/article/20110219/NEWS03/110218018/Health-care-consultant-sticks-with-single-payer

Legislative committees approve copays for Medi-Cal

Calif. Assembly, Senate Budget Committees Pass Spending Plans

California Healthline
February 22, 2011

On Friday, California’s Assembly Committee on Budget and Senate Budget and Fiscal Review Committee passed nearly identical state budget plans.

Changes to Medi-Cal

Both budget committees approved a plan to establish mandatory copayments for Medi-Cal beneficiaries, which would reduce state spending by about $584 million, according to a Senate analysis.

The plan calls for copays of:
$3 and $5 for some prescription drugs;
$5 for physician and dentist visits;
$50 for emergency department visits; and
A maximum of $200 for hospital stays.

The plan also calls for the state to reduce Medi-Cal payments to health care providers by the amount of the copays.

Health care providers have expressed concern that they will face higher costs if Medi-Cal beneficiaries are unable to afford the higher copays.

http://www.sacbee.com/2011/02/20/3416369/browns-countdown-day-42-medi-cal.html

Although California has been at the bottom of the states in Medicaid payment rates, the state legislative committees recently passed another 10 percent cut in those rates. Now they have also approved legislation to reduce rates further by the amount of these copayments, amounts that will surely be absorbed by the providers since the Medicaid population lives in poverty or near-poverty and will not be able to pay these copayments. That’s understandable when you consider that the federal poverty level for 2011 is an annual income of $10,890 for an individual.

Yet the Patient Protection and Affordable Care Act will greatly expand the Medicaid population. The losses faced in the Medi-Cal program cannot be made up by an increase in volume. The additional load displaces privately insured patients, and the losses to the providers increase. The physicians who refuse to see Medi-Cal patients thrive, whereas those overloaded with Medi-Cal patients are threatened with insolvency. Let me emphasize that, based on my own personal experience, this is no exaggeration.

As a welfare program representing a population without an adequate political voice, Medicaid will always be underfunded. Simple common decency dictates that we should eliminate this program and replace it and the rest of the dysfunctional financing system with an improved Medicare for all program that serves everyone well.

Krauthammer backs into single payer

Krauthammer on health care, trains, Mideast

By Susan Taylor Martin
St. Petersburg Times
February 20, 2011

Susan Martin: Besides being a commentator, you are a medical doctor who criticized health care reform as a “2,000-page bill that will generate tens of thousands of pages of regulations.” Isn’t that a great argument for the simplicity of Canadian-style universal health care?

Charles Krauthammer: It is. But it seems to me there are two choices. We have the best medical care in world but it is the most expensive and we waste a lot. What you need to do is reduce the complexity and inefficiency. If we can’t get it right, we’re eventually going to a single-payer system. At least it doesn’t have this incredible, absurd complexity of ObamaCare. It’s the worst of the worst. It has the complexity of our (present) system and doesn’t give the universal coverage of single payer.

http://www.tampabay.com/news/perspective/article1152425.ece

Comment: 

By Don McCanne, MD

Charles Krauthammer may be a conservative columnist, but he is very bright, having been awarded a Pulitzer Prize, and, as a Harvard-trained physician, he can speak knowledgeably about our health care system. His conclusions? Our health care system is the most expensive and wastes a lot due to its complexity and inefficiency, while Obamacare has brought us this incredible, absurd, worst-of-the-worst complexity which would not only be reduced by single payer, but single payer would also provide us with universal coverage.

We hear it over and over again from informed individuals: Since costs are out of control and too many individuals will remain uninsured or under-insured, a single payer system may be inevitable. But there has been a shift. We used to hear this from informed liberals, but now we hear it primarily from informed conservatives (with a few notable exceptions such as Bernie Sanders).

It’s not that we don’t understand the efficiency and effectiveness of single payer; we clearly do. The opposition has been primarily from those who, on an ideological basis, oppose any role of government in health care, other than as a safety net for the indigent. But even their icon of liberty, Friedrich Hayek, stated in his classic, The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

The logic for single payer is there, and there is no longer any reason to perpetuate the ideological divide. The conservatives need to revisit Friedrich Hayek, and the liberals need to review again the tenets of social justice, perhaps beginning with Article 25 of The Universal Declaration of Human Rights. Once we get our respective camps in order, we should find that we have a common meeting ground.

“The Road to Serfdom” by F.A. Hayek:
http://www.press.uchicago.edu/ucp/books/book/chicago/R/bo4138549.html

“The Universal Declaration of Human Rights”
http://www.un.org/en/documents/udhr/index.shtml