PNHP

David Himmelstein's testimony

David Himmelstein's testimony

Ways to Reduce the Cost of Health Insurance for Employers, Employees and their Families

Health, Employment, Labor, and Pensions Subcommittee Hearing
United States House of Representatives
Committee on Education and Labor
April 23, 2009

Testimony of David U. Himmelstein, M.D.

Mr. Chairman, members of the Committee. My name is David Himmelstein. I am a primary care doctor in Cambridge, Massachusetts and Associate Professor of Medicine at Harvard. I also serve as National Spokesperson for Physicians for a National Health Program. Our 15,000 physician members support non-profit, single payer national health insurance because of overwhelming evidence that lesser reforms will fail.

Health reform must address the cost crisis for insured as well as uninsured Americans. My research group found that illness and medical bills caused about half of all personal bankruptcies in 2001, and even more than that in 2007. Strikingly, three quarters of the medically bankrupt were insured. But their coverage was too skimpy to protect them from financial collapse.

A single payer reform would make care affordable through vast savings on bureaucracy and profits. As my colleagues and I have shown in research published in the New England Journal of Medicine, administration consumes 31% of health spending in the U.S., nearly double what Canada spends. In other words, if we cut our bureaucratic costs to Canadian levels, we’d save nearly $400 billion annually — more than enough to cover the uninsured and to eliminate copayments and deductibles for all Americans. By simplifying its payment system Canada has cut insurance overhead to 1% of premiums — one twentieth of Aetna’s overhead – and eliminated mounds of expensive paperwork for doctors and hospitals. In fact, while cutting insurance overhead could save us $131 billion annually, our insurers waste much more than that because of the useless paperwork they inflict on doctors and hospitals.

A Canadian hospital gets paid like a fire department does in the U.S. It negotiates a global budget with the single insurance plan in its province, and gets one check each month that covers virtually all costs. They don’t have to bill for each bandaid and aspirin tablet. At my hospital, we know our budget on January 1, but we collect it piecemeal in fights with hundreds of insurers over thousands of bills each day. The result is that hundreds of people work for Mass General’s billing department, while Toronto General employs only a handful — mostly to send bills to Americans who wander across the border. Altogether, U.S. hospitals could save about $120 billion annually on bureaucracy under a single payer system.

And doctors in the U.S. waste about $95 billion each year fighting with insurance companies and filling out useless paperwork.

Unfortunately, these massive potential savings on bureaucracy can only be achieved through a single payer reform. A health reform plan that includes a public plan option might realize some savings on insurance overhead. However, as long as multiple private plans coexist with the public plan, hospitals and doctors would have to maintain their costly billing and internal cost tracking apparatus. Indeed, my colleagues and I estimate that even if half of all privately insured Americans switched to a public plan with overhead at Medicare’s level, the administrative savings would amount to only 9% of the savings under single payer.

While administrative savings from a reform that includes a Medicare-like public plan option are modest, at least they’re real. In contrast, other widely touted cost control measures are completely illusory. A raft of studies shows that prevention saves lives, but usually costs money. The recently-completed Medicare demonstration project found no cost savings from chronic disease management programs. And the claim that computers will save money is based on pure conjecture. Indeed, in a study of 3000 U.S. hospitals that my colleagues and I have recently completed, the most computerized hospitals had, if anything, slightly higher costs.

My home state of Massachusetts recent experience with health reform illustrates the dangers of believing overly optimistic cost control claims. Before its passage, the reform’s backers made many of the same claims for savings that we’re hearing today in Washington. Prevention, disease management, computers, and a health insurance exchange were supposed to make reform affordable. Instead, costs have skyrocketed, rising 23% between 2005 and 2007, and the insurance exchange adds 4% for its own administrative costs on top of the already high overhead charged by private insurers. As a result, one in five Massachusetts residents went without care last year because they couldn’t afford it. Hundreds of thousands remain uninsured, and the state has drained money from safety net hospitals and clinics to kept the reform afloat.

In sum, a single payer reform would make universal, comprehensive coverage affordable by diverting hundreds of billions of dollars from bureaucracy to patient care. Lesser reforms — even those that include a public plan option — cannot realize such savings. While reforms that maintain a major role for private insurers may be politically attractive, they are economically and medically nonsensical.

http://edlabor.house.gov/documents/111/pdf/testimony/20090423DavidHimmelsteinTestimony.pdf

Hearing:
http://edlabor.house.gov/hearings/2009/04/ways-to-reduce-the-cost-of-hea.shtml

Comment:

By Don McCanne, MD

The definitive legislation on health care reform that will be supported by the Democratic leadership in Congress has not yet been written. This important testimony by PNHP’s David Himmelstein confirms that single payer reform is still in play, in spite of dismissive comments by many of those involved.

Instead of sitting back and observing the process, it is imperative that we intensify our efforts to deliver the single payer message. The physical and financial health of the people of our nation depend on it.

WellPoint Makes Three Million Calls

By Jacob Goldstein
WSJ’s blog
April 20, 2009

How would you respond if a computer called you and asked the following question?

“Would you be willing to get involved to make your voice heard so that we can improve our nation’s health care system?”

If the computer was calling you on behalf of WellPoint, the big insurer that runs Blue Cross and Blue Shield programs in 14 states, would your answer be any different?

The question was part of an automated phone survey WellPoint conducted last week in what looks like a step into the national debate over health reform. The questions (online here) ask members how much they know about what’s happening with health reform and whether they want to learn more.

The company placed three million automated calls. Of those, 142,000 connected and 66,000 people told the computer on the other end of the line that they’d be interested in learning more, WellPoint spokeswoman Cheryl Leamon told the Health Blog.

Insurers sometimes enlist interested beneficiaries to help sway public opinion. “If there are members who are interested in supporting our position and being participants in the health care policy debate we want to make sure that they are able to participate,” Leamon said.

The health insurance industry’s main trade group, AHIP, has taken a few clear positions on health reform thus far — promising to insure all comers if there’s a mandate requiring everyone to buy insurance, and opposing a proposed public insurance plan that would compete with private plans.

Wellpoint’s Health Action Network scheme is at http://www.healthactionnetwork.com/keycontact.aspx

Join the fight for single-payer

Letters
Berkshire Eagle
Tuesday, April 21

Dr. Susanne King (Eagle, op-ed, April 4) has again hit the nail on the head in asking citizens to support Sen. Bernie Sanders’ bill and Rep. John Conyer’s bill to truly reform health care by doing away with the current dysfunctional system of private health insurance plans and replacing it with an expanded and improved Medicare for All.

“The public plan option” now being discussed in Congress would not control costs as only 16 percent of the roughly $400 billion annually achieved by a single payer would be realized and would do nothing to streamline the administrative tasks (and costs) of hospitals, physicians’ offices, and nursing homes. They would still contend with multiple payers, and hence still need the complex cost tracking and billing apparatus that drives administrative costs.

In addition, a quarter century of experience with public/private competition in the Medicare program demonstrates that the private plans will not allow a level playing field. Despite strict regulation, private insurers have successfully cherry-picked healthier seniors and exploited regional health spending differences to their advantage. They have progressively undermined the public plan, which started as the single payer for seniors.

A public plan as one option will not lead toward single-payer, but toward the segregation of patients, with profitable ones in private plans and unprofitable ones in the public plan.

For these and other reasons, Berkshire Masscare and Physicians for a National Health Plan are asking people in the Berkshires to come out to support Single Payer Medicare for All during a nationally coordinated effort to achieve true equity in health care. There will be demonstrations in Wash D.C., major cities and elsewhere. Come to Park Square in Pittsfield on Friday from 5-6 p.m. to let the deciders know how you feel.

MICHAEL KAPLAN, M.D.
Lee

http://www.berkshireeagle.com/ci_12189179

Propaganda And Prejudice Distort The Health Reform Debate

by Merton Bernstein
Health Affairs blog
April 22nd, 2009

Science does not permit ideology to foreclose inquiry; it requires facing facts and following where they and logic lead. Hence many cheered when President Barack Obama announced that science is back, that predisposition will no longer be permitted to trump reality. Everyone knew he was talking about stem cell research.

Who could have guessed that the Obama administration and key congressional players would exclude single-payer/Medicare-for-all programs from consideration even though that means ignoring the cost savings of hundreds of billions of dollars in private plans’ nonbenefit costs? Further, administration health experts advertise their focus on avoiding incentives for unnecessary treatment, but pay no mind to the expensive distortions that follow from physicians’ ownership interests in high-cost equipment and services. Odd that the scientific method does not apply to medical care where science should govern.

Snubbing And Chiding Single-Payer Advocates

Until the day before the Health Care Summit, no advocate of single-payer/Medicare-for-all had been invited to rub shoulders at the White House conference with the hordes of insurance and drug manufacturer officials and lobbyists, right-wing think-tank pundits, major employers and their organizations, and hospital executives — all deeply implicated in the design, execution, and defense of the current dysfunctional medical care insurance nonsystem — the supposed object of “reform.” An 11th hour invitation came only after a threatened demonstration by doctors, nurses, and medical students who back a single-payer proposal sponsored by 94 members of the U.S. House of Representatives. Even the legendarily unbiased Congressional Budget Office had shortly before issued two large studies of medical care, totaling about 400 pages, containing only a few cursory paragraphs about single payer/Medicare-for-all.

The president opened and closed the one-day summit with his usual splendidly composed summary of hurdles to providing medical care to all and curbing costs. He had sharp words only for “bleeding-heart liberals,” chiding them for inattention to costs although they repeatedly stress the huge savings single-payer/Medicare-for-all could deliver. It is his experts who persistently ignore those cost savings while pursuing possibly desirable but unproven methods of reducing costs. So, for example, claims are made for vast savings by health information technology (IT), such as computerization of patient records, which might reduce medical errors if a uniform nationwide system becomes operational — years hence. Similarly, it is unproven that paying health care providers based on outcomes would be feasible; with hundreds of millions of billings, assessing the efficacy of each treatment seems impossible — and impossibly costly.

Savings From Medicare-For-All

Medicare-for-all would save hundreds of billions every year. Private insurers expend enormous sums for insurer commissions, advertising, Wall-Street-scale executive compensation, and profits. In contrast, Medicare spends little or nothing on these unnecessary, unproductive activities. Health care providers and private plans struggle with thousands of different billing schedules. As the New York Times reported: “The average provider — doctors or hospitals — has between 5 and 100 reimbursement rates for the same procedure. . . . A hospital chain may have 150 rates for the same procedure.”

In contrast, Medicare districts employ only one. That helps explain why Medicare’s nonbenefit expenditures require only 4 percent of benefit outlays while private plans expend far more — on the order of 20% for publicly traded companies and as much as 31% of premium for some. We are talking real money. A recent McKinsey Quarterly article found that medical care insurer billing consumes more than $300 billion a year, costing 15 percent or more of medical outlays. Medicare-for-all would make do on a sliver of that. (Harvard Medical School economist Rashi Fein tells the story of a former colleague working at a Montreal hospital, where three people processed bills there, primarily for traveling Americans. Later he worked at Chicago’s Michael Reese Hospital, where the billing facility, jammed with clerks at computers, stretched a football field’s length in two directions.)

Understand that Medicare uses private insurers to administer its program and pays private providers to deliver care; patients select their providers, a choice many private plans limit. Medicare confines its payments to a fee schedule it promulgates after receiving the advice of the Medical Payment Advisory Commission (MedPAC), which comprises a variety of practitioners and others. That price constraint reduces costs. But the big savings come from simplified billing/payment procedures.

In addition, Medicare delivers its benefits at lower cost than means-tested programs like Medicaid and the Children’s Health Insurance Program (CHIP). Absorbing all such programs (and there are many) into Medicare would save tens of billions more and speed up providing care.

Opponents dismiss Medicare-for-all as a “one-size-fits-all” formula. Well, who among us knows how to estimate when we or a family member will need medical care? Who among us can gauge when a heart attack may strike or a drunken driver will cross the median? In this world full of uncertainty, we all share the same need for assured medical care — that’s the size Medicare-for-all fits.

The Effects Of Conflicts Of Interest

Studies repeatedly show that medical care providers with ownership interests in labs and high-cost devices like computed tomography (CT) scan and magnetic resonance imaging (MRI) machines prescribe those services far more than those who do not own any. Medical societies should ban such conflicts of interest; if they don’t, Medicare, which attempts to curb them, should forbid them completely. That would save billions and confine providers to their proper role: treatment based on medical grounds uninfluenced by profit.

So why do the Obama medical care gurus, Senator Baucus and Senator Grassley, and the Congressional Budget Office exclude Medicare-for-all, although it would save far more than any rival plan? In large measure, that results from the propaganda war on single-payer. President Obama says that it would be impractical to try to substitute Medicare for “legacy” private plans because so many are “accustomed to” them. But “accustomed to” simply does not describe plans that are melting down, disappearing, and becoming constantly more unaffordable.

Further, Medicare does not charge higher rates for pre-existing conditions or for elderly and female patients as private plans do, thereby encouraging employers to discriminate in employment. Moreover, with everyone covered for all needed medical care, the greater part of malpractice compensation — medical repair — would be met without the delay and expenses of medical malpractice disputes and litigation.

Yet the Obama, Baucus, Grassley, CBO, and other playlists exclude consideration of Medicare-for-all. With rising discomfort with the price tag of recovery programs, those desiring comprehensive health care cannot afford to disregard a program with such enormous savings. If Medicare-for-all gets “on the table” before the Senate Finance and House Ways and Means committees, the CBO must report its vast savings and its greater efficiency and effectiveness compared with more expensive alternatives. Only by censorship — only by treating Medicare-for-all as nonexistent — can lesser alternatives be discussed with a straight face.

And censorship is not compatible with science.

Medicare for All: Now is the Time

Single payer gets us the health care we need

by Leonard Rodberg
Portland Observer
April 1, 2009

President Barack Obama has said repeatedly that he wants “ideas that work.” In spite of this, leading Democrats are working hard on plans for health care reform that will fail.

These plans, pushed by Sen. Max Baucus and others, seek to extend coverage to everyone by mandating the purchase of private insurance, with perhaps an option to buy into a public plan. They would ease this purchase through an “insurance exchange,” while subsidizing premiums for those with low incomes.

Advocates of such plans readily acknowledge some of the key problems the country faces: the large number of uninsured, now approaching 50 million; the high cost of health insurance, with the average annual premium for an employer-purchased family policy now above $12,500, fully one-fourth of the median family income; and the continuing rise in the cost of health care itself, at two to three times the rate of inflation.

Yet their proposed solution – a multi-payer mix of private and public plans – won’t get us the health care we need.

Here’s why: Mandates cannot possibly assure that everyone is covered. A recent report by the Congressional Budget Office shows that no existing government mandate, whether to purchase auto insurance, pay income taxes or immunize children, achieves more than 85 percent success.

In Massachusetts, where a state mandate supposedly delivers “universal” health care, many thousands remain uninsured. And more than a third of those with insurance are avoiding treatment because of the cost. Insurance co-pays, deductibles, and limits on coverage still keep them from the care they need.

Multi-payer financing systems involve high marketing and administrative costs. These wasteful expenditures presently consume nearly one-third of every U.S. health care dollar. Baucus’ plan would do nothing to cure this problem, and would likely worsen it because of its added complexity. In fact, advocates of this approach acknowledge it will cost us additional tens of billions more than what we spend now.

Multi-payer systems are unable to control costs. The only way to assure cost containment is to adopt a unified financing mechanism that has the leverage to negotiate lower prices (with the pharmaceutical companies, for example) and provide the necessary budgeting and planning tools needed to save money over the long haul.

Some Democrats tout the cost-saving potential of better medical information technology and better management of chronic illness. But the Congressional Budget Office finds that these measures are as likely to increase costs as to reduce them.

Others point to the Federal Employees Health Benefit Program as a model, but this program is merely a menu of private insurance plans. Federal employees who get sick enough to use their plans face huge co-pays in even the best plan, often leaving them owing thousands of dollars to doctors and hospitals.

Moreover, such incremental reforms would do nothing to help the growing number of Americans who are underinsured. Recent studies show that 40 percent or more of us, including those with insurance, are having difficulties paying our medical bills.

Yet most leading Democrats would have us cling to our failing private health insurance system. “You can keep what you have” is the mantra, ignoring that “what we have” is continually deteriorating or, in the current economic downturn, even disappearing.

The bottom line: these piecemeal health proposals don’t really reform the system; they just add to it. They will not work. As long as our nation continues to rely on a private multi-payer insurance system, universal coverage will be unachievable and costs will remain uncontrollable.

In contrast, a unified plan modeled on our successful experience with Medicare would effectively address our problems, including containing costs. It would automatically enroll everyone. Patients would go to the doctor or hospital of their choice. The administrative cost savings of a single-payer system would amount to over $350 billion annually, enough to cover all the uninsured and to eliminate all co-pays and deductibles. Everyone would be guaranteed the same high-quality care. Polls show that such an approach – an improved and expanded Medicare-for-All – has majority support, including among physicians. But Sen. Baucus and others dismiss such talk, saying the time’s not right.

President Obama should insist that single payer be on the table. Our nation deserves nothing less.

Leonard Rodberg is chairman of urban studies at Queens College, City University of New York, and research director of the N.Y. Metro chapter of Physicians for a National Health Program.

Cost control, universal care impossible without single-payer health system: Harvard physician

Policy expert challenges effectiveness of lesser reforms at House panel

EMBARGOED UNTIL:
April 23, 2009, 11 a.m. EDT

Contact:
David Himmelstein, M.D.
Mark Almberg, PNHP, (312) 782-6006, cell: (312) 622-0996, mark@pnhp.org

With President Obama and congressional leaders vowing to pass a health reform bill by the end of the year, a prominent Harvard-based health policy analyst warned a House subcommittee Thursday that the leading incremental models for reform, including those patterned after the Massachusetts plan, are incapable of containing skyrocketing health care costs or providing quality, affordable care to all.

Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School and a primary care doctor at Cambridge Hospital in Cambridge, Mass., told the House Subcommittee on Health, Employment, Labor and Pensions that only a major overhaul of the existing system, one which replaces the wasteful, for-profit, private insurance industry with a publicly financed, single-payer program similar to Medicare, can rein in costs while guaranteeing universal, comprehensive coverage.

“A single-payer reform would make care affordable through vast savings on bureaucracy and profits,” Himmelstein said in his statement. “As my colleagues and I have shown in research published in the New England Journal of Medicine, administration consumes 31 percent of health spending in the U.S., nearly double what Canada spends. In other words, if we cut our bureaucratic costs to Canadian levels, we’d save nearly $400 billion annually – more than enough to cover the uninsured and to eliminate co-payments and deductibles for all Americans.”

A national health insurance program would slash the enormous paperwork burden on hospitals, doctors and patients, Himmelstein said, resulting in hundreds of billions in savings that could be redirected to patient care.

Half-measures like those proposed by the Obama administration and key lawmakers like Senators Max Baucus (D-Mont.) and Edward Kennedy (D-Mass.), many of which mirror aspects of the Massachusetts reform of 2006, can’t match the savings of a streamlined, publicly financed system, he said.

Even if a “public plan option” emerges as part of the House and Senate reform bills, Himmelstein said, it won’t be sufficient to challenge the inefficiencies and wastefulness of a multi-payer system: “A health reform plan that includes a public plan option might realize some savings on insurance overhead. However, as long as multiple private plans coexist with the public plan, hospitals and doctors would have to maintain their costly billing and internal cost tracking apparatus. Indeed, my colleagues and I estimate that even if half of all privately insured Americans switched to a public plan with overhead at Medicare’s level, the administrative savings would amount to only 9 percent of the savings under single payer.”

Citing his direct experience with the Massachusetts plan, which is facing critical financial problems, Himmelstein commented: “Prevention, disease management, computers and a health insurance exchange were supposed to make reform affordable. Instead, costs have skyrocketed, rising 23 percent between 2005 and 2007, and the insurance exchange adds 4 percent for its own administrative costs on top of the already high overhead charged by private insurers. As a result, 1 in 5 Massachusetts residents went without care last year because they couldn’t afford it. Hundreds of thousands remain uninsured, and the state has drained money from safety-net hospitals and clinics to keep the reform afloat.”

While the conventional wisdom in Washington is that single-payer national health insurance is “not feasible” and therefore “off the table,” public opinion polls have shown solid majorities continue to support such an approach. In a survey published by the Annals of Internal Medicine a year ago, 59 percent of U.S. physicians said they favored government action to establish a national health insurance program, a 10-percentage-point leap from only five years prior.

In addition to their pioneering research on the high administrative costs in U.S. health care, Himmelstein and his colleagues have also published other groundbreaking studies, including one that shows medical bills contribute to half of all personal bankruptcies in the United States and another that shows how taxes already pay for more than 60 percent of U.S. health spending.

A co-founder and national spokesperson for Physicians for a National Health Program, Himmelstein regularly writes and speaks about health policy issues before a diverse national audience.

The title of Thursday’s hearing before the Health, Employment, Labor and Pensions Subcommittee of the House Education and Labor Committee is “Ways to Reduce the Cost of Health Insurance for Employers, Employees and their Families.” The hearing will begin at 10:30 a.m. EDT in Room 2175 of the Rayburn House Office Building in Washington. According to congressional staff, it will be viewable online at http://edlabor.house.gov/

The full text of Dr. David Himmelstein’s April 23 statement to the House subcommittee can be found here: https://pnhp.org/news/2009/april/testimony_of_david_u.php

Watch the hearing online: http://edlabor.house.gov/hearings/help/

Physicians for a National Health Program (www.pnhp.org), a membership organization of over 16,000 physicians, supports a single-payer national health insurance program. PNHP is headquartered in Chicago and has chapters across the United States.

David Himmelstein’s testimony

Ways to Reduce the Cost of Health Insurance for Employers, Employees and their Families

Health, Employment, Labor, and Pensions Subcommittee Hearing
United States House of Representatives
Committee on Education and Labor
April 23, 2009

Testimony of David U. Himmelstein, M.D.

Mr. Chairman, members of the Committee. My name is David Himmelstein. I am a primary care doctor in Cambridge, Massachusetts and Associate Professor of Medicine at Harvard. I also serve as National Spokesperson for Physicians for a National Health Program. Our 15,000 physician members support non-profit, single payer national health insurance because of overwhelming evidence that lesser reforms will fail.

Health reform must address the cost crisis for insured as well as uninsured Americans. My research group found that illness and medical bills caused about half of all personal bankruptcies in 2001, and even more than that in 2007. Strikingly, three quarters of the medically bankrupt were insured. But their coverage was too skimpy to protect them from financial collapse.

A single payer reform would make care affordable through vast savings on bureaucracy and profits. As my colleagues and I have shown in research published in the New England Journal of Medicine, administration consumes 31% of health spending in the U.S., nearly double what Canada spends. In other words, if we cut our bureaucratic costs to Canadian levels, we’d save nearly $400 billion annually — more than enough to cover the uninsured and to eliminate copayments and deductibles for all Americans. By simplifying its payment system Canada has cut insurance overhead to 1% of premiums — one twentieth of Aetna’s overhead – and eliminated mounds of expensive paperwork for doctors and hospitals. In fact, while cutting insurance overhead could save us $131 billion annually, our insurers waste much more than that because of the useless paperwork they inflict on doctors and hospitals.

A Canadian hospital gets paid like a fire department does in the U.S. It negotiates a global budget with the single insurance plan in its province, and gets one check each month that covers virtually all costs. They don’t have to bill for each bandaid and aspirin tablet. At my hospital, we know our budget on January 1, but we collect it piecemeal in fights with hundreds of insurers over thousands of bills each day. The result is that hundreds of people work for Mass General’s billing department, while Toronto General employs only a handful — mostly to send bills to Americans who wander across the border. Altogether, U.S. hospitals could save about $120 billion annually on bureaucracy under a single payer system.

And doctors in the U.S. waste about $95 billion each year fighting with insurance companies and filling out useless paperwork.

Unfortunately, these massive potential savings on bureaucracy can only be achieved through a single payer reform. A health reform plan that includes a public plan option might realize some savings on insurance overhead. However, as long as multiple private plans coexist with the public plan, hospitals and doctors would have to maintain their costly billing and internal cost tracking apparatus. Indeed, my colleagues and I estimate that even if half of all privately insured Americans switched to a public plan with overhead at Medicare’s level, the administrative savings would amount to only 9% of the savings under single payer.

While administrative savings from a reform that includes a Medicare-like public plan option are modest, at least they’re real. In contrast, other widely touted cost control measures are completely illusory. A raft of studies shows that prevention saves lives, but usually costs money. The recently-completed Medicare demonstration project found no cost savings from chronic disease management programs. And the claim that computers will save money is based on pure conjecture. Indeed, in a study of 3000 U.S. hospitals that my colleagues and I have recently completed, the most computerized hospitals had, if anything, slightly higher costs.

My home state of Massachusetts recent experience with health reform illustrates the dangers of believing overly optimistic cost control claims. Before its passage, the reform’s backers made many of the same claims for savings that we’re hearing today in Washington. Prevention, disease management, computers, and a health insurance exchange were supposed to make reform affordable. Instead, costs have skyrocketed, rising 23% between 2005 and 2007, and the insurance exchange adds 4% for its own administrative costs on top of the already high overhead charged by private insurers. As a result, one in five Massachusetts residents went without care last year because they couldn’t afford it. Hundreds of thousands remain uninsured, and the state has drained money from safety net hospitals and clinics to kept the reform afloat.

In sum, a single payer reform would make universal, comprehensive coverage affordable by diverting hundreds of billions of dollars from bureaucracy to patient care. Lesser reforms — even those that include a public plan option — cannot realize such savings. While reforms that maintain a major role for private insurers may be politically attractive, they are economically and medically nonsensical.

http://edlabor.house.gov/documents/111/pdf/testimony/20090423DavidHimmelsteinTestimony.pdf

Hearing:
http://edlabor.house.gov/hearings/2009/04/ways-to-reduce-the-cost-of-hea.shtml

Comment:

By Don McCanne, MD

The definitive legislation on health care reform that will be supported by the Democratic leadership in Congress has not yet been written. This important testimony by PNHP’s David Himmelstein confirms that single payer reform is still in play, in spite of dismissive comments by many of those involved.

Instead of sitting back and observing the process, it is imperative that we intensify our efforts to deliver the single payer message. The physical and financial health of the people of our nation depend on it.

Reinhardt's Ways and Means testimony on insurance market reforms

Health Reform in the 21st Century: Insurance Market Reforms

Statement of Uwe E. Reinhardt, Ph.D.
House Committee on Ways and Means
April 22, 2009
A much mouthed mantra in our debate on health policy is that “we all want the same thing in health care, but merely quibble over the means to get there.” Nothing could be further from the truth. That debate has been and continues to be a tenacious ideological fight over the social ethic that ought to govern American health care; but we camouflage it as a technical debate strictly over means.
My plea before this Committee and to the Congress is that any health reform proposal put before the American people be preceded with a preamble that clearly articulates the social goals our health system is supposed to pursue and the social ethic it is to observe. Policy makers in other nations routinely do so and accept the constraints that this preamble imposes on their design of health reform. It would be helpful to have a clearly articulated statement on the social ethics for American health care as well.
http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7672

In a comparatively brief statement, Uwe Reinhardt explained to the members of the House Ways and Means Committee the principles and rationale of social insurance. His statement should be downloaded as a valuable resource for supporting some of the important policies for reform, and for refuting those policies that perpetuate inequities and injustices and may cause even further harm.
Single payer supporters, like me, will be disappointed that he does not dismiss a role for private insurers. But at the same time, we should recognize that he is not talking about America’s private health plans as we know them. Although we will continue to advocate for a pure, publicly administered and publicly financed single payer system, it does not mean that we should remain silent as wrong-headed policies are adopted in the crafting of reform. We should complain loudly and clearly when the principles of social insurance are violated, and then add on why the single payer model would be superior.
Download Professor Reinhardt’s statement now while you have access to the link.

Reinhardt's Ways and Means testimony on insurance market reforms

Health Reform in the 21st Century: Insurance Market Reforms

Statement of Uwe E. Reinhardt, Ph.D.
House Committee on Ways and Means
April 22, 2009

A much mouthed mantra in our debate on health policy is that “we all want the same thing in health care, but merely quibble over the means to get there.” Nothing could be further from the truth. That debate has been and continues to be a tenacious ideological fight over the social ethic that ought to govern American health care; but we camouflage it as a technical debate strictly over means.

My plea before this Committee and to the Congress is that any health reform proposal put before the American people be preceded with a preamble that clearly articulates the social goals our health system is supposed to pursue and the social ethic it is to observe. Policy makers in other nations routinely do so and accept the constraints that this preamble imposes on their design of health reform. It would be helpful to have a clearly articulated statement on the social ethics for American health care as well.

http://waysandmeans.house.gov/hearings.asp?formmode=view&id=7672

Comment:

By Don McCanne, MD

In a comparatively brief statement, Uwe Reinhardt explained to the members of the House Ways and Means Committee the principles and rationale of social insurance. His statement should be downloaded as a valuable resource for supporting some of the important policies for reform, and for refuting those policies that perpetuate inequities and injustices and may cause even further harm.

Single payer supporters, like me, will be disappointed that he does not dismiss a role for private insurers. But at the same time, we should recognize that he is not talking about America’s private health plans as we know them. Although we will continue to advocate for a pure, publicly administered and publicly financed single payer system, it does not mean that we should remain silent as wrong-headed policies are adopted in the crafting of reform. We should complain loudly and clearly when the principles of social insurance are violated, and then add on why the single payer model would be superior.

Download Professor Reinhardt’s statement now while you have access to the link.

Healthcare Lifeboats

David U. Himmelstein, MD and Steffie Woolhandler, M.D., M.P.H.
The Nation
April 27, 2009

With health reform in Massachusetts sailing through choppy waters, Governor Deval Patrick is trying to keep it afloat by throwing away the lifeboats — public hospitals and clinics.

Massachusetts’ 2006 health reform has proven far more expensive than anticipated — costing the state $1.3 billion this year according to the state’s report to its bondholders. Yet hundreds of thousands in the state remain uncovered, and the number of uninsured patients showing up at hospitals and clinics has fallen by only one-third. Moreover, according to recent surveys at least 1 in 7 state residents (including many with insurance) cannot afford care, and those directly affected by the reform are more likely to say it has hurt than helped them.

High costs and inadequate coverage are in the DNA of the Massachusetts plan. Private insurers drafted the blueprint for the reform legislation, cementing their dominant role. As a result it forfeited the savings on bureaucracy that a single payer plan could realize – $7.8 billion annually in Massachusetts alone. Instead, reform actually increased bureaucratic costs — the new insurance exchange (similar to that touted by President Obama and Senator Baucus) has added an additional 4% to private insurers’ already high overhead. Promised savings through prevention, care management and computerization (also mainstays of Obama’s plan) haven’t materialized. As a result, much of the new coverage came with unaffordable out-of-pocket costs. And the program’s cost overruns drained state funding for care of those who remain uninsured.

Now comes a recession, drying up jobs and private coverage, along with the tax revenues needed to subsidize coverage for the newly uninsured. Facing a yawning budget deficit and desperate to stay the course on the 2006 reform plan, Gov. Patrick has slashed funding to safety net providers such as Cambridge Health Alliance (CHA) and Boston Medical Center (BMC) (ne Cambridge City and Boston City Hospitals). (Disclosure: we practice at CHA, and also teach at Massachusetts General Hospital).

At CHA — a Harvard affiliate which operates three public hospitals, 21 community clinics, and more psychiatric beds than all of Boston’s big teaching hospitals combined – the cuts will shutter one hospital, 6 community clinics, the area’s only inpatient detox unit, and nearly half of the psychiatric wards. Even before these closures, suicidal patients often spent days in ERs waiting for a bed.

These cuts follow a national pattern of responding to fiscal crises by defunding hospitals that care for the poor. Chicago’s Cook County health system recently suffered massive cuts, including half of its outpatient clinic doctors. Hundreds of patients were evicted from the public long term care facility and school-based clinics were closed. Now, women with abnormal pap smears can’t get appointments for follow-up, and mammograms are no longer available.

In Los Angeles, the only hospital serving a huge area of the central city shut its doors; LA’s surviving public hospitals and clinics face a $750 million shortfall.

In Detroit (which, along with Philadelphia has already lost its only public hospital) private ones are fleeing the inner city for greener (as in money) pastures in the suburbs. That city once had 42 hospitals, now it’s down to 4.

Atlanta’s public hospital came within a hairsbreadth of closing, and faces huge deficits ahead; a proposal to force low income patients to pay 70% of their hospital bills was floated in January. New Orleans’ Charity Hospital — virtually the only provider for a wide swath of Louisiana’s poor for 250 years – has yet to reopen after Hurricane Katrina, and the public hospital in Galveston (which provided specialized care to indigent patients from all over Texas) stopped accepting the uninsured in the wake of Hurricane Ike. New York’s public hospital system has been whittled away for years, and a new round of budget cuts is on the horizon.

While safety net hospitals are withering, private ones have thrived. Hospitals nationwide showed record profits in 2007 — the most recent year for which data are available. In Massachusetts, Gov. Patrick’s deficit reduction plan will barely touch Massachusetts General (which ran a surplus of $354 million that year), or Brigham and Women’s, which racked up gains of $48 million in the second quarter of 2008 alone.

Safety net providers aren’t in trouble because they’re inefficient. In fact, Medicare data shows that in caring for comparable patients CHA is about 20% cheaper than Boston’s big teaching hospitals, while scoring as high on quality measures. And the same is true in other cities, where endangered public hospitals consistently cost less than their prosperous private counterparts.

Public hospitals are in the red because they provide vital care that other hospitals won’t because the market mitigates against it. CHA cares for one-third of the uninsured chronically mentally ill in Massachusetts — a group whose complex care brings low payments. While CHA does relatively little elective (read “profitable”) surgery, it delivers more emergency and primary (read “money losing”) care than famous Boston hospitals like Massachusetts General, Brigham and Women’s or Beth Israel Deaconess.

The pernicious market signals in medical care don’t reflect consumer preferences or invisible hands; they arise largely from government policy. Taxpayers foot the bill for at least 60% of hospital expenses – at both public and private institutions. Indeed, the average American with private insurance draws a government subsidy more than twice that received by the uninsured. In Massachusetts, little known provisions of the reform bill cut payments for primary and mental health care, while boosting fees for already lucrative specialty care and already overbuilt hi-tech facilities. Today, Blue Cross pays Mass General $838 for a chest CT scan, but safety net BMC only $418. Like an auto industry hooked on high margin SUVs, a medical system freighted with a surplus of high tech hospitals and a deficit of appropriate technology like primary care is unsustainable.

A sustainable alternative requires health planning based on needs rather than profitability, as well as jettisoning private insurers and their bloated bureaucracy. Unfortunately, Governor Patrick seems disinclined to face down powerful and prosperous insurers and hospitals. With health costs threatening to swamp reform, his only other option is to throw overboard the institutions that care for the poor.

Patrick’s dilemma should serve as warning: the Massachusetts model for reform rests on impeccable political logic, but is economic nonsense.

Single-payer health care plan isn't socialism

Saul Friedman
Gray Matters
Newsday
April 17, 2009

I was surprised during a recent conference for care- givers when several professionals, who should have known better, asked me if a “single-payer” health insurance system is “socialized medicine.”

The quick answer: No.

But the question suggests the specter of socialism that haunts efforts to bail out American financial institutions may be used to cast doubt on one of the possible solutions to the health care crisis: Medicare for All.

Webster’s online dictionary defines socialism as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.”

Britain’s socialized health care system is government-run. Doctors, nurses and other personnel work for the country’s National Health Service, which also owns the hospitals and other facilities. Other nations have similar systems, but no one has seriously proposed such a system here.

Newsweek suggested Medicare and its expansion (Part D) to cover prescription drugs smacked of socialism. But it’s nothing of the sort. Medicare itself, while publicly financed, uses private contractors to administer the benefits, and the doctors, labs and other facilities are private businesses. Part D uses private insurance companies and drug manufacturers.

In the United States, there are a few pockets of socialism, such as the Department of Veterans Affairs health system, in which doctors and others are employed by the VA, which owns its hospitals.

Physicians for a National Health Plan, a nonprofit research and education organization that supports the single-payer system, states on its Web site: “Single-payer is a term used to describe a type of financing system. It refers to one entity acting as administrator, or ‘payer.’ In the case of health care . . . a government-run organization – would collect all health care fees, and pay out all health care costs.” The group believes the program could be financed by a 7 percent employer payroll tax, relieving companies from having to pay for employee health insurance, plus a 2 percent tax for employees, and other taxes. More than 90 percent of Americans would pay less for health care.

The U.S. system now consists of thousands of health insurance organizations, HMOs, PPOs, their billing agencies and paper pushers who administer and pay the health care bills (after expenses and profits) for those who buy or have health coverage. That’s why the U.S. spends more on health care per capita than any other nation, and administrative costs are more than 15 percent of each dollar spent on care.

In contrast, Medicare is America’s single-payer system for more than 40 million older or disabled Americans, providing hospital and outpatient care, with administrative costs of about 2 percent.

Advocates of a single-payer system seek “Medicare for All” as the simplest, most straightforward and least costly solution to providing health care to the 47 million uninsured while relieving American business of the burdens of paying for employee health insurance.

The most prominent single-payer proposal, H.R. 676, called the “U.S. National Health Care Act,” is subtitled the “Expanded and Improved Medicare for All Act.”(View it online at http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.676:) As proposed by Rep. John Conyers (D-Mich.), it would provide comprehensive medical benefits under a single-payer, probably an agency like the current Center for Medicare and Medicaid Services, which administers Medicare.

But while the benefits would be publicly financed, the health care providers would, for the most part, be private. Indeed, profit-making medical practices, laboratories, hospitals and other institutions would continue. They would simply bill the single-payer agency, as they do now with Medicare.

The Congressional Research Service says Conyers’ bill, which has dozens of co-sponsors, would cover and provide free “all medically necessary care, such as primary care and prevention, prescription drugs, emergency care and mental health services.”

It also would eliminate the need, the spending and the administrative costs for myriad federal and state health programs such as Medicaid and the State Children’s Health Insurance Program. The act also “provides for the eventual integration of the health programs” of the VA and Indian Health Services. And it could replace Medicaid to cover long-term nursing care. The act is opposed by the insurance lobby as well as most free-market Republicans, because it would be government-run and prohibit insurance companies from selling health insurance that duplicates the law’s benefits.

It is supported by most labor unions and thousands of health professionals, including Dr. Quentin Young, the Rev. Martin Luther King’s physician when he lived in Chicago and Obama’s longtime friend. But Young, an organizer of the physicians group, is disappointed that Obama, once an advocate of single-payer, has changed his position and had not even invited Young to the White House meeting on health care.

We’ll talk soon about Obama’s alternative to single payer.

http://www.newsday.com/news/health/ny-bzsaul1812648142apr17,0,721971.column

Testimony of David U. Himmelstein, M.D. before the HELP Subcommittee

The following text contains the testimony of Dr. David Himmelstein at a hearing on “Ways to Reduce the Cost of Health Insurance for Employers, Employees and their Families” organized by Health, Employment, Labor and Pensions Subcommittee of the House Committee on Education and Labor on April 23 in Washington.

April 23, 2009

Mr. Chairman, members of the Committee. My name is David Himmelstein. I am a primary care doctor in Cambridge, Massachusetts, and associate professor of medicine at Harvard. I also serve as national spokesperson for Physicians for a National Health Program. Our 16,000 physician members support nonprofit, single-payer national health insurance because of overwhelming evidence that lesser reforms will fail.

Health reform must address the cost crisis for insured as well as uninsured Americans. My research group found that illness and medical bills contributed to about half of all personal bankruptcies in 2001, and even more than that in 2007. Strikingly, three-quarters of the medically bankrupt were insured. But their coverage was too skimpy to protect them from financial collapse.

A single-payer reform would make care affordable through vast savings on bureaucracy and profits. As my colleagues and I have shown in research published in the New England Journal of Medicine, administration consumes 31 percent of health spending in the United States, nearly double what Canada spends. In other words, if we cut our bureaucratic costs to Canadian levels, we’d save nearly $400 billion annually — more than enough to cover the uninsured and to eliminate co-payments and deductibles for all Americans.

By simplifying its payment system, Canada has cut insurance overhead to 1 percent of premiums — one-twentieth of Aetna’s overhead — and eliminated mounds of expensive paperwork for doctors and hospitals. In fact, while cutting insurance overhead could save us $131 billion annually, our insurers waste much more than that because of the useless paperwork they inflict on doctors and hospitals.

A Canadian hospital gets paid like a fire department does in the U.S. It negotiates a global budget with the single insurance plan in its province, and gets one check each month that covers virtually all costs. They don’t have to bill for each Band-Aid and aspirin tablet. At my hospital, we know our budget on January 1, but we collect it piecemeal in fights with hundreds of insurers over thousands of bills each day. The result is that hundreds of people work for Mass General’s billing department, while Toronto General employs only a handful — mostly to send bills to Americans who wander across the border. Altogether, U.S. hospitals could save about $120 billion annually on bureaucracy under a single payer system.

And doctors in the U.S. waste about $95 billion each year fighting with insurance companies and filling out useless paperwork.

Significantly, these massive potential savings on bureaucracy can only be achieved through a single payer reform. A health reform plan that includes a “public plan option” might realize some savings on insurance overhead. However, as long as multiple private plans coexist with the public plan, hospitals and doctors would have to maintain their costly billing and internal cost tracking apparatus. Indeed, my colleagues and I estimate that even if half of all privately insured Americans switched to a public plan with overhead at Medicare’s level, the administrative savings would amount to only 9 percent of the savings under single payer.

While administrative savings from a reform that includes a Medicare-like public plan option are modest, at least they’re real. In contrast, other widely touted cost control measures are completely illusory. A raft of studies shows that prevention saves lives, but usually costs money. The recently completed Medicare demonstration project found no cost savings from chronic disease management programs. And the claim that computers will save money is based on pure conjecture. Indeed, in a study of 3,000 U.S. hospitals that my colleagues and I have recently completed, the most computerized hospitals had, if anything, slightly higher costs.

My home state of Massachusetts recent experience with health reform illustrates the dangers of believing overly optimistic cost control claims. Before its passage, the reform’s backers made many of the same claims for savings that we’re hearing today in Washington. Prevention, disease management, computers, and a health insurance exchange were supposed to make reform affordable. Instead, costs have skyrocketed, rising 23 percent between 2005 and 2007, and the insurance exchange adds 4 percent for its own administrative costs on top of the already high overhead charged by private insurers. As a result, 1 in 5 Massachusetts residents went without care last year because they couldn’t afford it. Hundreds of thousands remain uninsured, and the state has drained money from safety-net hospitals and clinics to keep the reform afloat.

In sum, a single-payer reform would make universal, comprehensive coverage affordable by diverting hundreds of billions of dollars from bureaucracy to patient care. Lesser reforms — even those that include a public plan option — cannot realize such savings. While reforms that maintain a major role for private insurers may seem politically expedient, they are economically and medically nonsensical.