PNHP

Medicare For All Would Improve Hospital Financing

Medicare For All Would Improve Hospital Financing

By Christopher Cai and James Kahn, M.D., M.P.H.
Health Affairs, December 9, 2019

Would Hospitals Close Under Medicare For All?

Hospitals account for more than one trillion dollars of health expenditures annually, and analysts have raised concerns that a shift to single payer, or Medicare for All, might adversely affect hospital care. A common narrative has emerged in the popular press and in medical journals, suggesting that Medicare for All would decrease reimbursements and force hospitals, particularly rural hospitals, to cut back on much needed services or even close altogether. These concerns have received increased attention with Elizabeth Warren’s recently released financial proposal for Medicare for All. Understandably, these points have raised concern about the feasibility of Medicare for All. But is this narrative evidence based?

For background, two current bills, H.R.1384 and S.1129, would implement a single-payer, Medicare for All reform. Those bills would cover all US residents for a comprehensive range of benefits, with a government-run insurer replacing private insurance as well as Medicaid and Medicare. Proponents of such reform project that administrative savings would offset the increased costs of expanding and improving coverage.

These bills would change the way we pay for hospital care but not in the way that has been popularly portrayed. Let’s review the status quo. Currently, private insurers pay 1.4 times the average hospital’s operating costs, while Medicaid pays 0.868 and Medicare 0.881 times operating costs. Not surprisingly, hospitals try to preferentially recruit privately insured patients and worry about subsisting on Medicare-level payments. As one prominent hospital administrator told me, “If Medicare for all were passed, we would have to close our doors in a month.” Some also suggest that Medicare reimbursement rates would encourage hospitals to shift to higher-margin, procedure-intensive care, undercutting the projected savings of a single-payer reform and further skewing our health care system away from cognitive and preventive care.

Medicare For All Proposals For Hospital Financing

These projections assume that hospitals will continue to be paid on a per-patient basis under single payer, with reimbursement rates plummeting to Medicare levels. However, Elizabeth Warren’s financing proposal keeps per-patient billing but raises reimbursements to 110 percent of Medicare levels, which would approximate operating costs of hospitals.

Congressional bills go further. The House bill would abandon per-patient payments and instead fund hospitals through “global budgets.” (The Senate version also calls for global budgets for hospitals but suggests that some elements of Medicare’s current payment approach might persist.) Under global budgeting, hospitals would receive an annual lump sum, distributed in monthly installments, similar to how US fire departments or hospitals in Canada are financed. Under this system, hospitals would receive extra funding in the case of unexpected deficits and would not keep surpluses for themselves. At present, surpluses (or the expectation of future surpluses available to pay back loans or bonds) is the main source of funding for hospital upgrades or expansion.

Per-Patient Billing Leads To Wasteful Spending

Currently, hospitals have incentives to invest their surpluses in capital projects that will maximize future profits/surpluses, for example, operating rooms or other facilities serving mostly privately insured orthopedic patients. Reflecting those incentives, the number of knee and hip replacements at small rural hospitals increased 42 percent between 2008 and 2013. Yet, such capital investments may not fit communities’ most urgent needs or be appropriate at all: Thirty-day mortality for elective surgeries in small rural hospitals can be twice as high as in other hospitals, likely due to low patient volume .

The race to expand lucrative services has led to a self-reinforcing cycle of rising hospital costs. As recently as 2000, Medicare level reimbursements were sufficient to cover hospital operating expenses but since then a wasteful cycle has emerged. Rising costs—driven, in part, by hospitals’ investments in expensive development projects—have increased incentives to court privately insured patients, leading to increased costs and an even greater need to court the privately insured

Our current financing system incentivizes hospitals to engage in other wasteful behaviors. To handle bills from multiple payers, hospitals have created massive administrative apparatuses for billing: Currently, administrative costs consume 25.3 percent of total US hospital expenditures, roughly double that of Scotland or Canada, which operate under single-payer global budget systems. Hospitals have attempted to become more profitable primarily by increasing prices, investing in technology, or taking fewer publicly insured patients, rather than becoming more efficient or cutting expenses. Roughly a quarter of US health care spending is wasteful, with inefficient administration the greatest contributor, but no incremental interventions have been proven to substantially reduce administrative inefficiency. Global budgeting would address these inefficiencies by streamlining payment, leading to $150 billion in annual savings.

Hospitals deserve an appropriate amount of funds to meet the growing needs of their communities. But the current system is geared to maximizing profits rather than serving the public health. In San Francisco, for example, a dozen hospital systems compete for privately insured obstetric patients, yet nearly half of rural nearby counties lack an obstetrics service altogether. Since 2010, 160 rural hospitals across the nation have closed, and the rate is accelerating. Some rural hospital closures are driven by low volume, and in such cases, closure of inpatient services might be reasonable. However, many jeopardized rural hospitals serve a high volume of patients, yet still face financial challenges because fewer rural patients have the private insurance that brings high payment rates.

Hospitals would still grow under a global budget payment strategy; the single payer would fund new capital investments through grants, similar to the federal government’s Hill Burton grants that fueled hospital expansion in the post-World War II era. But grants would go to hospitals in need, instead of funding new hospital atriums or luxurious nonclinical projects. Safety-net hospitals would see an increase in operating budgets because payment would be adjusted to meet hospital needs, not determined by the patients’ payer mix.

A Better Hospital Financing System

Given the magnitude of this proposed reform, it’s understandable some are concerned that Medicare for All would be too disruptive. Yet, patients and doctors would experience little, if any disruption. Our current system limits choice through high deductibles, tiered hospitals, and unaffordable prices. Under single payer, patients could choose any doctor and hospital, everyone would be insured, and bureaucratic burdens would be greatly diminished. Furthermore, under global budgeting, payment levels would be monitored and adjusted over time by a panel of health care experts.

Any bill proposing to reform US hospital financing needs to be thoroughly critiqued and evaluated. Yet, the current dialogue does not accurately reflect the actually proposed single-payer plans. Senator Warren’s plan covers operating costs of hospitals by preserving per-patient payments and increasing reimbursements to 110 percent of Medicare levels. Both congressional bills go a step further via global budgeting, which would better match funding to need and streamline the bureaucracy necessitated by the current hospital payment approach. Under these bills, needed hospitals, particularly rural and safety net, could thrive, and unnecessary hospitals would close. That is a more just financing system, one that would reward judicious hospital stewardship and care for the underserved, rather than court privately insured patients.

Authors’ Notes

The authors would like to thank David Himmelstein, MD; Christine Cassel, MD; and Stephanie Woolhandler, MD, MPH, for their feedback on prior drafts. Christopher Cai is a student board member of Physicians for a National Health Program.

https://www.healthaffairs.org…

It’s irrefutable, health insurance saves lives

Health Insurance and Mortality: Experimental Evidence from Taxpayer Outreach; NBER Working Paper No. 26533

By Jacob Goldin, Ithai Z. Lurie, and Janet McCubbin
National Bureau of Economic Research, December 2019

Abstract

We evaluate a randomized pilot study in which the IRS sent informational letters to 3.9 million taxpayers who paid a tax penalty for lacking health insurance coverage under the Affordable Care Act. Drawing on administrative data, we study the effect of the intervention on taxpayers’ subsequent health insurance enrollment and mortality. We find the intervention led to increased coverage in the two years following treatment and that this additional coverage reduced mortality among middle-aged adults over the same time period. Our results provide the first experimental evidence that health insurance reduces mortality.

From the Conclusion

Drawing on a randomized pilot intervention, we examined the effect of outreach about tax incentives to enroll in health insurance coverage among taxpayers who had previously paid a penalty for lacking coverage. We found positive effects of the intervention on subsequent enrollment decisions, particularly for taxpayers who were uninsured in the year prior to intervention. We also found that the intervention reduced mortality among middle-aged adults in the subsequent two years, which we attribute to the additional coverage the intervention induced. Our findings thus provide strong empirical support, and the first experimental evidence, for the hypothesis that health insurance coverage reduces mortality.

https://www.nber.org…

Comment:

By Don McCanne, M.D.

Health insurance saves lives. Yet our current national policies are projected to leave about ten percent of our population uninsured over the next decade. People will die prematurely merely because they are uninsured.

Although this study showed that tax penalties were effective in increasing coverage and reducing mortality, they certainly did not result in universal coverage, and, besides, the penalties have been eliminated anyway.

Perpetuating our current financing system while adding a public option for purchase will not result in everyone being covered, and the most recent Republican proposal would actually increase the number of uninsured.

Premature deaths due to lack of insurance are preventable. Changing to the single payer model of Medicare for All would automatically include everyone, regardless of personal income or wealth since the financing is totally separated from the coverage. Equitable progressive taxes would make the system affordable for all of us. Considering not only the reduction in deaths but also the reduction in physical suffering and financial hardship, we really can’t afford not to do it.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Would a Medicare buy-in plan work for Alaskans?

By Jennifer Perkins, M.D.
Anchorage Daily News, December 8, 2019

Health care is the central issue for the elections of 2020. The strain of high costs and unpredictability to families and business has people demanding for change. But what that change looks like is much less clear and the definitions confusing.

In the recent debates, a Medicare buy-in plan comes out the winner, with a recent FOX News poll showing 68% were in support. Single-payer, or “Improved Medicare for All,” infused energy and enthusiasm during the last election cycle and persist, with almost half of Americans in favor of a national health program. The sticking point between a single-payer and a public option is the argument that people don’t want to give up their private plans. When asked what they like about their insurance, they often answer that their claim was covered and their copay reasonable, at least once the deductible was met. Does this humble expectation come from experience with plans that declined payment for expensive care, denied coverage, or had unaffordable out-of-pocket costs? Isn’t this why we have insurance, to pay for care when we need it? I wonder if the real question is whether a single-payer system will really provide comparable care. The health of our families feels too important to gamble with. Are we willing to continue to suffer the abuses of a profit-driven system because we fear to lose what we have despite evidence that single-payer systems can provide high quality care at lower cost?

A public option sounds like a reasonable middle ground, but fails to address the deeply entrenched problems with our current system that drive cost and put us one medical catastrophe from bankruptcy. The complexity of the medical industry will remain intact, failing to deliver savings. Insurers are experts at covering only the healthiest of us. The public plan will become a repository for the sickest, and through the crippling cost, will likely become inferior coverage. Health disparities will continue to grow, and we will continue to funnel money into excessive profits and overhead that could be used to provide good care for everyone. And even if such a plan provided some relief nationally, how would it affect Alaskans?

Alaskans are tough, resilient and fiercely independent. We must be in this rugged, vast land. Yet we trust in the systems that support us to survive here. If we roll a snowmachine or break a leg skiing in the backcountry, we expect and receive excellent trauma care—but at what expense, and who’s paying for it? We should not have to worry about this. Of all the states, we have perhaps the most to gain from a single-payer system. Alaskans who rely on Medicare know the difficulty of finding a provider. How will simply adding a buy-in option help if no clinics will see you? Under a single-payer system, everyone would have access to all providers who take insurance because there is no other option. Prices would be negotiated fairly for you without additional cost to you.

We are getting squeezed aggressively by the health care industry through direct health costs, wage stagnation and the large, growing burden on local government that siphons money from schools and infrastructure. We are at a turning point and need to demand change that will truly address the underlying problem of our profit-driven system. A single-payer insurance plan will reduce cost and help focus our collective energy on improving health care for all Alaskans. Join me in demanding from our representatives the plan we deserve.

Dr. Jennifer Perkins is a practicing family practitioner in Anchorage. She graduated from University of Wisconsin School of Medicine & Public Health in 2014 and has been in practice for four years.

https://www.adn.com…

National Health Care Spending; But what’s the real story?

National Health Care Spending In 2018: Growth Driven By Accelerations In Medicare And Private Insurance Spending

By Micah Hartman, Anne B. Martin, Joseph Benson, Aaron Catlin – CMS Office of the Actuary
Health Affairs, December 5, 2019

Abstract

US health care spending increased 4.6 percent to reach $3.6 trillion in 2018, a faster growth rate than the rate of 4.2 percent in 2017 but the same rate as in 2016. The share of the economy devoted to health care spending declined to 17.7 percent in 2018, compared to 17.9 percent in 2017. The 0.4-percentage-point acceleration in overall growth in 2018 was driven by faster growth in both private health insurance and Medicare, which were influenced by the reinstatement of the health insurance tax. For personal health care spending (which accounted for 84 percent of national health care spending), growth in 2018 remained unchanged from 2017 at 4.1 percent. The total number of uninsured people increased by 1.0 million for the second year in a row, to reach 30.7 million in 2018.

Conclusion

Health care spending increased 4.6 percent in 2018, a faster rate than in 2017 but a lower growth rate than that of the overall economy, which increased 5.4 percent in 2018. For health care, the relative stability in spending growth since the insurance expansions in 2014 and 2015 reflects continued low growth in medical prices, which is influenced by both low economywide price growth and negative excess medical price inflation, as well as relative stability in health insurance enrollment.

The slight acceleration in health care spending growth in 2018 reflected faster growth in non–personal health care spending, particularly in the net cost of health insurance. Price growth was faster for health insurance because of the impact of the reinstated health insurance tax, which had been suspended in 2017. Personal health care spending grew at the same rate in 2018 as in 2017, as slower growth in the use and intensity of services was offset by faster growth in prices for most health care services.

Except for the slight uptick that was driven primarily by the one-time impact of the reinstated health insurance tax, growth in 2018 was relatively stable. Still, changes may be on the horizon. In 2019 that tax was suspended and Medicaid coverage was expanded in five additional states, while at the same time the individual mandate penalty was effectively repealed. In addition, the results of the upcoming comprehensive revision of the National Health Expenditure Accounts will be reflected in the release of next year’s health spending report detailing trends through 2019.

https://www.healthaffairs.org…

National Health Expenditure Data, NHE Fact Sheet

CMS.gov

Historical NHE, 2018

  • NHE grew 4.6% to $3.6 trillion in 2018, or $11,172 per person, and accounted for 17.7% of Gross Domestic Product (GDP).
  • Medicare spending grew 6.4% to $750.2 billion in 2018, or 21 percent of total NHE.
  • Medicaid spending grew 3.0% to $597.4 billion in 2018, or 16 percent of total NHE.
  • Private health insurance spending grew 5.8% to $1,243.0 billion in 2018, or 34 percent of total NHE.
  • Out of pocket spending grew 2.8% to $375.6 billion in 2018, or 10 percent of total NHE.
  • Hospital expenditures grew 4.5% to $1,191.8 billion in 2018, slower than the 4.7% growth in 2017.
  • Physician and clinical services expenditures grew 4.1% to $725.6 billion in 2018, a slower growth than the 4.7% in 2017.
  • Prescription drug spending increased 2.5% to $335.0 billion in 2018, faster than the 1.4% growth in 2017.

Projected NHE, 2018-2027

  • Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year for 2018-27 and to reach nearly $6.0 trillion by 2027.
  • Health spending is projected to grow 0.8 percentage point faster than Gross Domestic Product (GDP) per year over the 2018-27 period; as a result, the health share of GDP is expected to rise from 17.9 percent in 2017 to 19.4 percent by 2027.
  • Key economic and demographic factors fundamental to the health sector are anticipated to be the major drivers during 2018-27.
  • Prices for health care goods and services are projected to grow somewhat faster over 2018-27 (2.5 percent compared to 1.1 percent for 2014-17).
  • As a result of comparatively higher projected enrollment growth, average annual spending growth in Medicare (7.4 percent) is expected to exceed that of Medicaid (5.5 percent) and private health insurance (4.8 percent).
  • The Medicare enrollment impacts are the key reason the share of health care spending sponsored by federal, state, and local governments is expected to increase by 2 percentage points over the projection period, reaching 47 percent by 2027.
  • The insured share of the population is expected to remain stable at around 90 percent throughout 2018-27.

https://www.cms.gov…

Comment:

By Don McCanne, M.D.

So, as of 2018, we are spending $3.6 trillion on health care in the United States or 17.7% of our Gross Domestic Product – an average of $11,172 per person. With a 2018 median household income of $63,179, it is no wonder that the typical family is having difficulty paying for their proportionate share of our national health expenditures. And the media tell us that the polls show that most people want to keep the health plans that they have. Isn’t there a disconnect here somewhere?

Although this annual report is primarily about health care spending, there is another statistic about which we should be concerned. The total number of uninsured increased by one million for the second year in a row, reaching 30.7 million in 2018. Further, the CMS Office of the Actuary predicts that 10% of the population will remain uninsured throughout the next decade.

In spite of the highest spending of all nations, we are doing a terrible job of allocating our health care dollars. Innumerable studies and the experience of other nations have shown that we could achieve optimal efficiency and equity for our health care spending merely by enacting and implementing a single payer model of an improved Medicare that covered everyone. Instead, the political momentum points to more of our same dysfunctional financing system, maybe with the insignificant tweak of adding a public option.

The media coverage?

  • NYT: “Health Spending Grew Modestly”
  • Reuters: “Health Spending Recovers”
  • CNN: “Household Spending On Health Care Tops $! Trillion In 2018”
  • Axios: “Spending Goes Up As Prices, Insurance Costs Soar”
  • WSJ: “Faster Growth In Spending Due To ACA Tax”
  • AP: “Prescription Drug Prices Down Slightly”
  • WP: “Retail Drug Prices Declined”
  • Modern Healthcare: “Spending Up 4.6% As Prices Increased”
  • The Hill: “U.S. Spent $1 Trillion On Hospitals”
  • KHN: “We Spend HOW MUCH On Health Care?”

Well, the media are doing their job in covering this story in that they have selected numbers and phrases from the report indicating what happened to health care spending in 2018. But, with this and other stories, they really do need to step back and look at the whole picture. By heavily reporting on the prevailing views of the politicians and policy community, they are reinforcing the inertia that permeates the reform movement today. They say people should be able to keep what they now have (even if they are terribly uninformed on where their $11,000 per person is going). But would people really want to keep paying their share of the hundreds of billions of dollars in wasteful administrative services and exorbitantly excessive prices if they really knew where the money was going? While at the same time losing their choices of physicians and hospitals and risking financial hardship due to out-of-pocket spending required should they need to access health care? Is is really better to pay for profound but hidden administrative waste, than it is to pay a lesser amount in equitable taxes – fair taxes? Surely the revulsion towards the “tax” word can’t be so great that people would elect to spend more and get less just to avoid it. Or is it?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Declining life expectancy in the United States

Life Expectancy and Mortality Rates in the United States, 1959-2017

By Steven H. Woolf, MD, MPH; Heidi Schoomaker, MAEd
JAMA, November 26, 2019

Abstract

Importance: US life expectancy has not kept pace with that of other wealthy countries and is now decreasing.

Objective: To examine vital statistics and review the history of changes in US life expectancy and increasing mortality rates; and to identify potential contributing factors, drawing insights from current literature and an analysis of state-level trends.

Evidence: Life expectancy data for 1959-2016 and cause-specific mortality rates for 1999-2017 were obtained from the US Mortality Database and CDC WONDER, respectively. The analysis focused on midlife deaths (ages 25-64 years), stratified by sex, race/ethnicity, socioeconomic status, and geography (including the 50 states). Published research from January 1990 through August 2019 that examined relevant mortality trends and potential contributory factors was examined.

Findings: Between 1959 and 2016, US life expectancy increased from 69.9 years to 78.9 years but declined for 3 consecutive years after 2014. The recent decrease in US life expectancy culminated a period of increasing cause-specific mortality among adults aged 25 to 64 years that began in the 1990s, ultimately producing an increase in all-cause mortality that began in 2010. During 2010-2017, midlife all-cause mortality rates increased from 328.5 deaths/100 000 to 348.2 deaths/100 000. By 2014, midlife mortality was increasing across all racial groups, caused by drug overdoses, alcohol abuse, suicides, and a diverse list of organ system diseases. The largest relative increases in midlife mortality rates occurred in New England (New Hampshire, 23.3%; Maine, 20.7%; Vermont, 19.9%) and the Ohio Valley (West Virginia, 23.0%; Ohio, 21.6%; Indiana, 14.8%; Kentucky, 14.7%). The increase in midlife mortality during 2010-2017 was associated with an estimated 33 307 excess US deaths, 32.8% of which occurred in 4 Ohio Valley states.

Conclusions and Relevance: US life expectancy increased for most of the past 60 years, but the rate of increase slowed over time and life expectancy decreased after 2014. A major contributor has been an increase in mortality from specific causes (eg, drug overdoses, suicides, organ system diseases) among young and middle-aged adults of all racial groups, with an onset as early as the 1990s and with the largest relative increases occurring in the Ohio Valley and New England. The implications for public health and the economy are substantial, making it vital to understand the underlying causes.

From the Introduction

Life expectancy at birth, a common measure of a population’s health, has decreased in the United States for 3 consecutive years. This has attracted recent public attention, but the core problem is not new—it has been building since the 1980s. Although life expectancy in developed countries has increased for much of the past century, US life expectancy began to lose pace with other countries in the 1980s and, by 1998, had declined to a level below the average life expectancy among Organisation for Economic Cooperation and Development countries. While life expectancy in these countries has continued to increase, US life expectancy stopped increasing in 2010 and has been decreasing since 2014. Despite excessive spending on health care, vastly exceeding that of other countries, the United States has a long-standing health disadvantage relative to other high-income countries that extends beyond life expectancy to include higher rates of disease and cause-specific mortality rates.

From the Discussion

Potential Explanations

The increase in midlife mortality after 1999 was greatly influenced by the increase in fatal drug overdoses.

However, the increase in opioid-related deaths is only part of a more complicated phenomenon and does not fully explain the increase in midlife mortality rates from other causes, such as alcoholic liver disease or suicides (85.2% of which involve firearms or other nonpoisoning methods).

The National Research Council examined the US health disadvantage in detail and identified 9 domains in which the United States had poorer health outcomes than other high-income countries: these included not only drug-related deaths but also adverse birth outcomes, injuries and homicides, adolescent pregnancy and sexually transmitted infections, HIV and AIDS, obesity and diabetes, heart disease, chronic lung disease, and disability.

Tobacco Use and Obesity

Although tobacco use in the United States has decreased, higher smoking rates in prior decades could have produced delayed effects on current tobacco-related mortality and life expectancy patterns, especially among older adults.

The obesity epidemic, a known contributor to the US health disadvantage, could potentially explain an increase in midlife mortality rates for diseases linked to obesity, such as hypertensive heart disease and renal failure.

However, neither smoking nor obesity can fully explain current mortality patterns, such as those among younger adults and increasing mortality from conditions without known causal links to these risk factors.

Deficiencies in Health Care

Deficiencies in the health care system could potentially explain increased mortality from some conditions. Although the US health care system excels on certain measures, countries with higher life expectancy outperform the United States in providing universal access to health care, removing costs as a barrier to care, care coordination, and amenable mortality. In a difficult economy that imposes greater costs on patients, adults in midlife may have greater financial barriers to care than children and older adults, who benefit from the Children’s Health Insurance Program and Medicare coverage, respectively. Although poor access or deficiencies in quality could introduce mortality risks among patients with existing behavioral health needs or chronic diseases, these factors would not account for the underlying precipitants (eg, suicidality, obesity), which originate outside the clinic. Physicians contributed to the overprescription of opioids, and iatrogenic factors could potentially explain increases in midlife mortality from other causes, but empirical evidence is limited. Nor would systemic deficiencies in the health care system explain why midlife death rates increased for some chronic diseases while decreasing greatly for others (eg, ischemic heart disease, cancer, and HIV infection).

Psychological Distress

Despair has been invoked as a potential cause for the increase in deaths related to drugs, alcohol, and suicide (referred to by some as “deaths of despair”).31,37,66,101 Some studies suggest that psychological distress, anxiety, and depression have increased in the United States, especially among adolescents and young adults.

Socioeconomic Conditions

Three lines of evidence suggest a potential association between mortality trends and economic conditions, the first being timing. The US health disadvantage and increase in midlife mortality began in the 1980s and 1990s, a period marked by a major transformation in the nation’s economy, substantial job losses in manufacturing and other sectors, contraction of the middle class, wage stagnation, and reduced intergenerational mobility. Income inequality widened, surpassing levels in other countries, concurrent with the deepening US health disadvantage. The second line of evidence concerns affected populations: those most vulnerable to the new economy (eg, adults with limited education, women) experienced the largest increases in death rates. The third line of evidence is geographic: increases in death rates were concentrated in areas with a history of economic challenges, such as rural US areas and the industrial Midwest, and were lowest in the Pacific division and populous states with more robust economies (eg, Texas, New York). One theory for the larger life expectancy gains in metropolitan areas is an increase in the population with college degrees.

Socioeconomic pressures and unstable employment could explain some of the observed increases in mortality spanning multiple causes of death. Financial hardship and insecurity limit access to health care and the social determinants of health (eg, education, food, housing, transportation) and increase the risk of chronic stress, disease, disability, pessimism, and pain.

Policy Considerations

Evidence-based strategies to improve population health seem warranted, such as policies to promote education, increase household income, invest in communities, and expand access to health care, affordable housing, and transportation. The increase in mortality from substance abuse, suicides, and organ system diseases argues for strengthening of behavioral health services and the capacity of health systems to manage chronic diseases.

https://jamanetwork.com…

Comment:

By Don McCanne, M.D.

The United States is an outlier amongst wealthy nations in that increase in life expectancy has not kept pace with the other nations and has actually declined for three consecutive years after 2014. Maybe our great nation is not so great after all.

The factors are complex, indicating the need to resist simple explanations such as those that “blame the victim.” But that certainly does not mean that we should walk away from potential remedies.

One obvious factor is the deficiencies in health care in what is the most expensive health care system on earth but one which is locked in mediocrity primarily because of our failure to implement public policies that would provide the nation with much better health care utilization and outcomes.

The authors conclude that we need strategies to improve population health such as policies to promote education, increase household income, invest in communities, and expand access to health care, affordable housing, and transportation, including the strengthening of behavioral health services and the capacity of health systems to manage chronic diseases.

For those who say that these policies should be initiated and implemented in the private sector, they will have to explain why the private sector is failing us and what they can do to get us back on track to improving population health.

But the old rule is that when the private sector fails us, we need to turn to the government – our democratically-elected government. In recent decades, the neoliberals have aligned themselves with the conservatives in conspiring to keep much of the control in the private sector with disproportionate benefit to the plutocrats over the people.

Education, income inequity, community investment, affordable housing, transportation, and especially health care are all arenas that cry out for public policy solutions. We will not see these improvements until we get past blaming the victims, which is ironic since we’re our own victims – a direct result of our citizen inaction.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Many low-income workers fare poorly under the Affordable Care Act

Beyond The Firewall: Pathways To Affordable Health Coverage For Low-Income Workers

By Tara Straw
Health Affairs Blog, December 3, 2019

The Affordable Care Act (ACA) extended health coverage to more than 20 million people and strengthened consumer protections for millions more, but it didn’t dramatically change employer-sponsored coverage, the primary source of private health insurance. Employer coverage often works well, allowing many people to enroll in comprehensive health benefits using employer contributions that make premiums affordable. But compared to middle and upper-income employees, low-income workers are often offered less robust coverage, get less employer help with their premiums, and must pay a greater share of their income toward health care costs. Among workers with job-based coverage, those with income below 200 percent of the poverty line spend 14 percent of their income on premiums and out-of-pocket costs, on average. That’s far more than people between 200 and 400 percent of poverty, who spend 7.9 percent of their income, and people over 400 percent of poverty, who spend only 4.5 percent.

Some low-income workers are actually worse off with an offer of employer-sponsored coverage than without one because it locks them out of premium tax credit (PTC) eligibility in the ACA’s health insurance Marketplaces, a prohibition known as the “firewall.”

Under the ACA, the worker’s share of the employee-only premium must not exceed 9.86 percent of family income (in 2019), irrespective of the cost of family coverage, and the plan must cover at least 60 percent of expected medical costs. When an employer’s coverage offer meets that low federal bar, the ACA’s firewall provision makes low-income workers and their family members ineligible to receive a PTC for Marketplace coverage. However, employer coverage that meets the ACA standard may be more expensive and less comprehensive than Marketplace coverage. For example, under the ACA standard, a worker making $18,000 (about 150 percent of poverty) could pay up to nearly $1,800 toward premiums for single coverage in an employer plan. But if allowed to purchase a benchmark Marketplace plan, the worker’s expected contribution, net of the PTC, would be less than $750 (4.15 percent of income in 2019).

Out-of-pocket costs for low-income workers also can be much higher in a typical employer plan than in the Marketplace, after accounting for income-based cost-sharing reductions. To enable more low-income workers to purchase affordable coverage, policymakers should consider eliminating, modifying, or working around the firewall, as well as more far-reaching changes.

Eliminating The Firewall

Fixing The “Family Glitch”

Raising the Bar for Employer-Sponsored Coverage

  • Requiring Employers to Pay a Higher Share
  • Boosting the Value of Group Plans

Helping Workers Navigate The Options

Modifying The Employer Mandate

These options are discussed in greater detail in a Center on Budget and Policy Priorities policy analysis.

https://www.healthaffairs.org…

“Trapped by the Firewall: Policy Changes Are Needed to Improve Health Coverage for Low-Income Workers”

By Tara Straw
Center on Budget and Policy Priorities

For a more comprehensive report on this topic (highly recommended):

https://www.cbpp.org…

Comment:

By Don McCanne, M.D.

When the policy community was designing the Affordable Care Act, you would think that they would have paid particular attention to the design of health care coverage for low-income workers and their families. In fact, the system does not work very well for far too many of them.

Tara Straw describes some flawed design features and then suggests several possibilities to improve coverage. Most of the recommendations have tradeoffs. More importantly, in the overall picture, they are only minor tweaks to our highly dysfunctional health care financing system. Yesterday’s Quote of the Day on the public option listed major structural problems with our health care financing system, none of which would be corrected by a public option, nor would they be corrected by merely tweaking the Affordable Care Act.

Many of the politicians and members of the media are now parroting the meme that people who want their private plans should be able to keep them. That means keeping the horrendous injustices built into our highly flawed health care financing system.

For a reminder of what those flaws are that would persist unless we enacted and implemented a single payer model of an improved Medicare for all, use the following link:

https://pnhp.org…

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Is A Single Payer Health Care System Politically Feasible For The U.S.?

Panel discussion featuring Drs. Steffie Woolhandler and William Hsiao

December 4, 2019

Even among those who agree that a single payer health care system in this country would be more efficient and cost effective, there’s another debate.

Is it politically feasible?

Following our look at single-payer health care through the lens of Nova Scotia earlier this week, we discussed that issue with three health care coverage experts.

The following guests joined WBUR’s Morning Edition host Bob Oakes:

  • William Hsiao, a professor of economics and health policy at Harvard and a leading global expert in universal health insurance
  • Steffie Woolhandler, a practicing primary care physician and professor of public health and health policy at Hunter College
  • John McDonough, a professor of public health practice at Harvard and a key adviser on President Obama’s Affordable Care Act

https://www.wbur.org…

The public option won’t fix our system

Why the Less Disruptive Health Care Option Could Be Plenty Disruptive

By Margot Sanger-Katz
The New York Times, December 3, 2019

The single-payer health plans proposed by Senators Bernie Sanders and Elizabeth Warren are often assailed as being too disruptive. A government plan for everyone, the argument goes, would mean that tens of millions of Americans would have to give up health insurance they like.

Democratic presidential candidates with more moderate brands have their own proposal: a “public option” that would preserve the current private insurance market, while giving people the opportunity to choose government insurance.

A public option would be less disruptive than a plan that instantly eliminated private insurance. But a public option that is inexpensive and attractive could shake up the private market and also wind up erasing some current insurance arrangements. Conversely, a public option that is expensive and unattractive might not do much good at all.

A public option would cover a smaller population at first, and might have to negotiate with hospitals for good deals, just as other insurance companies do. In those circumstances, several economists said, the public option might look a lot like existing insurance: pretty expensive, and covering a limited set of doctors and hospitals.

“What would happen?” said Sherry Glied, the dean of the N.Y.U. Wagner Graduate School of Public Service, and a former health official in the Obama administration. “Almost nothing.” Ms. Glied said that the public nature of the plan, alone, would not do much to distinguish it from private offerings.

Many of the candidates have been vague on key details, like whether the public-option plan would pay health care providers Medicare prices or some other price. They have also been unclear about whether the government itself would offer the public option, or whether it would allow private carriers to operate it.

NYT Reader Comment:

By Don McCanne, M.D.

The worst feature of the public option is that it leaves in place our highly dysfunctional, fragmented system of financing health care which is largely responsible for our very high health care costs through profound administrative waste and inappropriately high pricing.

Merely adding a public option will not repair these fundamental defects in our financing system but would only add one more player to the egregiously wasteful administrative burden.

Switching to a single payer model of Medicare for All would recover hundreds of billions of dollars in administrative waste while also increasing savings through publicly administered pricing (e.g., lowering excessive drug prices).

Also, public financing of the universal risk pool through equitable progressive taxes would finally make health care affordable for each of us. Plus it returns choice to the patients of physicians and hospitals instead of the choice of restrictive health plans.

Tinkering with a public option totally fails to address the actual monumental problems with our health care financing that are causing us so much grief.

https://www.nytimes.com…

Comment:

By Don McCanne, M.D.

Before we decide whether or not a public option health insurance choice is a good idea, we should define the problems with our current system of financing health care that need to be addressed.

  • Our system is outrageously expensive, at twice the average per capita costs of other nations
  • Our administratively complex, dysfunctional multipayer system of financing health care wastes about $500 billion per year which would be recoverable under a single payer model
  • The combination of insurance premiums, deductibles and other cost sharing creates financial hardships and makes health care truly unaffordable for too many individuals and families
  • The very high costs of health care now exceed the ability of even middle-income families to meet their proportionate share of costs of plans in which they may be enrolled, at the same time that income and wealth inequality have left too many unable to meet the costs of basic needs – a problem that requires equitable funding (progressive taxes)
  • Even with basic guaranteed benefits, too many plans leave out coverage for important essential health care services and products
  • Pharmaceuticals remain outrageously priced, often impairing access to essential medications
  • Most plans use restricted provider networks, limiting choice of physicians and hospitals, while assessing penalties for out-of-network care
  • Changing eligibility for various insurance programs based on employment or income or residence or age is disruptive to health care

A well designed single payer model of Medicare for All would correct all of these serious deficiencies in our current health care financing system. Which of these defects would a public option correct? None of them!

So what defect in our financing system would a public option correct? Primarily it would provide one more choice in the market of individual private plans, which didn’t seem to be a problem that was looking for a solution, especially when the optimal solution would provide a single, comprehensive plan for everyone.

The media tell us that polls say that we would rather have the choice of keeping what we have or choosing a Medicare-like option (which is not at all like Medicare) instead of everyone being forced into a single, government-run Medicare for All program. But how many of the respondents are taking into consideration the current health financing deficiencies listed above when they answer the questions posed? Almost none.

Let’s write the poll question they should ask: Would you prefer to continue our current system characterized by (list all of the defects above) with the option of being able to buy another similar individual insurance plan except that it is run by the government, or would you prefer to have automatic comprehensive coverage for life paid for with taxes that you can afford? Oops, lost them one-third of the way through that list. It’s complicated, but the public is being trained to respond with the meme, “I’d rather have the right to choose Medicare if I want it,” not realizing that it’s Faux Medicare they are choosing.

Education. Coalitions. Education. Grassroots efforts. Education. Education.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

China to step in on drug prices

China to use drug bulk-buy program to close price gap

By Roxanne Liu and Brenda Goh
Physician’s Weekly, Reuters, November 30, 2019

China will use its national drug bulk-buy scheme to lower the price of drugs currently sold at higher prices compared with other markets, it said in an official statement.

The move could force international drugmakers to further cut prices and enable copycat medicines to replace imported off-patent brands at faster pace.

Many branded versions of drugs are currently more expensive in China than in other major markets. They could now be subjected to a centralized procurement program where manufacturers will have to go through a bidding process to get the right to supply drugs to public hospitals, the National Health Commission said in a document published on late Friday.

The bulk-buy program, which currently covers 25 types of medicines, allows no more than three successful bidders access to China’s public hospitals, where most Chinese people buy their drugs.

The program caused the price of some drugs to plunge more than 90% when it was introduced last year in some cities, state news agency Xinhua said.

In the first round of nationwide implement of the program, in September, multinationals including Sanofi and Eli Lilly managed to cut some prices low enough to levels close to those offered by local generic makers.

Beijing will strengthen its monitoring of overseas drug market and collect global prices for imported medicines, Friday’s guideline said.

The government is leveraging its large patient population to push non-domestic drugs companies to cut prices to their lowest level globally.

Most foreign drugmakers offered Beijing the lowest prices globally in a recent round of negotiations in order to get some of their new products included in national insurance program, a move that will help them gain access to more patients in less-affluent cities, officials said on Thursday.

https://www.physiciansweekly.com…

Comment:

By Don McCanne, M.D.

When the marketplace fails the people, and the government has remedies that could correct the deficiencies in the markets to benefit the people, then the government should step in. Outrageous pricing of drugs and of the services of the pharmacy benefit managers is a prime example of market failure.

Right now there is a debate in Congress over taking the feeble step of importing drugs into the United States from Canada in order to take advantage of their generally lower drug prices. The population in California is greater than that of all of Canada. How is it logical that Canada should be a major supplier of drugs throughout the United States? Wouldn’t that be as illogical as sending all drugs to California, having them repriced and then redistributed throughout the United States? Neither well functioning markets nor well functioning public agencies would promote such a ridiculous scheme.

China has a drug pricing problem to which the pharmaceutical firms have not been adequately responsive. Their marketplace is not working for drugs. So what do they propose? They intend to use bulk purchasing through its public agencies. In response, some firms are already lowering their prices to a level that will allow them to bypass the bidding process. The inevitable result is that market prices will be more fair for the buyer and yet still high enough to ensure enough profits to maintain the viability of the pharmaceutical firms.

So what did we do in the United States? Congress specifically prohibited Medicare from negotiating appropriate prices for drugs in the Medicare Part D drug program. They left it to the market through our highly dysfunctional private insurance industry in the form of pharmacy benefit managers – a classic failure of market dynamics.

We can fix this. In fact, a well designed single payer model of Medicare for All would do precisely that – fair prices in a system that is equitably funded so that everyone can receive the medications that they should have.

China seems to recognize the important role that their own government can play in ensuring fair but not excessive compensation for the pharmaceutical industry. Why can’t our government do the same?

I can remember the great pride I had three-quarters of a century ago when standing before the American flag while the national anthem played, and that pride has not left me yet. But if the anti-government forces become much stronger the painful thought arises that it might become more appropriate to reverently kneel before the flag with profound respect for what this nation could be. But let’s not get to the point where protest replaces pride. After all, the nation belongs to all of us, not just the plutocrats.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Robert Reich explains the real deal with Medicare for All

The Real Deal with Medicare for All

By Robert Reich
November 19, 2019

Republicans and even some Democrats are out to scare you about Medicare for All. They say it’s going to dismantle health care as we know it and it will cost way too much.

Rubbish.

If you’re a typical American, you’re already paying far more for health insurance than people in any other advanced country.

And you’re not getting your money’s worth.

https://robertreich.org…

Comment:

By Don McCanne, M.D.

It is rumored that some of you had difficult conversations during Thanksgiving dinner yesterday. Although there are certainly many sources for polarized conversations extant today, from our perspective one of the most important is the declining support for the single payer Medicare for All proposal. Failure to move forward with that model of reform will result in greater financial hardship, physical suffering and even death.

In a five minute video, Robert Reich explains in very clear terms why that model of Medicare for All is an imperative. The link also includes a transcript of the video, though the video itself communicates the message more effectively. The video should be shared with those who are confused or even flat out wrong about Medicare for All and also shared with others who are struggling to educate the general population on the topic. Health reform activists should find this to be a great vehicle for spreading the gospel on health care justice for all.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Hospital executives are beginning to think ‘single payer’

Bucking industry line, some hospital chiefs see benefits of Medicare for All

By Priyanka Dayal McCluskey
Boston Globe, November 26, 2019

When Senator Elizabeth Warren released her detailed Medicare for All plan this month, a coalition of insurers, hospitals, and pharmaceutical companies denounced it as an unaffordable government takeover that would force Americans to pay more and wait longer for medical care.

But Dr. Eric W. Dickson thought it was the best health care plan he had seen all year.

Dickson, who runs UMass Memorial Health Care, a large Central Massachusetts hospital system, said a national single-payer program could remedy many of the problems in American health care, including the lack of affordable coverage for millions of people, the wide variation in hospital prices, and the administrative burden that is exhausting physicians.

“Medicare for All could definitely address those three things,” said Dickson, whose affinity for single-payer care scored him a Twitter shout-out from Warren. “We have to look at this as an option.”

Dickson’s position on the issue — one central to the 2020 Democratic presidential race — may seem blasphemous for a hospital chief. But he and several other hospital executives and physicians see the debate differently than the lobbying groups to which they pay dues, reflecting a stark divide in the industry.

Kim Hollon, chief executive of Signature Healthcare, the parent company of Brockton Hospital, said a national health care program could ease the administrative workload of the current system, which includes numerous private insurance plans that each have their own rules and requirements for providers.

A single-payer system also could help level the vastly different prices that competing hospitals charge for the same services, Hollon said.

“We’d be fine,” Hollon said. “I’d love to have an equal playing field where we just compete for doing a good job effectively and efficiently.”

Similarly, Kate Walsh, chief executive of Boston Medical Center, said the reimbursement rates in Warren’s proposal would be “wonderful” for her safety-net hospital, which treats a large share of low-income patients on Medicaid.

Tufts Medical Center’s chief executive, Dr. Michael Apkon, spent several years running a hospital in Canada’s national health system and has called the quality of care in Canada “every bit as good as what I’ve experienced here.”

Apkon said he supports a public option — a government-run plan that would compete with private insurance plans — to help make health care more affordable and accessible for Americans.

“If we desire a single-payer system, I think the path to that is a public option that would allow government to set a minimum set of benefits,” Apkon recently told reporters.

Dr. Maryanne C. Bombaugh, president of the 25,000-member Massachusetts Medical Society, said single-payer should be among the options considered for achieving universal health coverage.

“We’re very open to anything that would improve the health of our patients,” Bombaugh said.

Andrew Dreyfus, chief executive of Blue Cross Blue Shield of Massachusetts, said: “It’s a grave mistake for the health care industry to criticize Medicare for All proposals. Instead, we should offer our own views on how to improve the American health care system.”

https://www.bostonglobe.com…

Comment:

By Don McCanne, M.D.

It is encouraging to see hospital executives acknowledging that a single payer system may be the way we need to go to improve the health care system. Someday…

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

William Hsiao has wise words for us on paying for health care

“There’s a Fear Factor, a Fear of Change.”

William Hsiao knows more about single payer systems than pretty much any other American. What does he think about ‘Medicare for All’?

By Maura Reynolds
POLITICO, November 25, 2019

Plenty of Americans have opinions about single-payer health systems like “Medicare for All,” and some have even studied them closely. But vanishingly few individuals in the world have actually built one from scratch.

One who has is William Hsiao.

A health care economist now retired from Harvard University, Hsiao designed a national health care system for Taiwan in the 1990s, and helped manage that country’s transition from American-style employer-based insurance to a national single-payer system. He has also designed single-payer reform programs for Cyprus, Colombia and China. And not too long ago, after Vermont voted in 2011 to enact a statewide single-payer system, he worked on what would have been called Green Mountain Care, a project that eventually collapsed because of concerns over financing.

This all gives Hsiao a nearly unique vantage point on the current U.S. debate over Medicare for All. And while he’s a fan of single-payer health care, which he thinks leads both to better health and greater efficiency, he’s a pessimist about its chances to take root in the United States.

The reason? It’s not the economics. It’s the politics.

Given the public’s attachment to doctors and concerns about their own health, Hsiao says there’s a powerful “fear factor” associated with any major change — one easy for opponents to exploit, and hard to overcome. Fans of Medicare for All haven’t yet grappled with the heavy lift of educating the public enough to overcome people’s attachment to the status quo, and the powerful forces that can fan their anxieties.

Opponents of change “have done it before,” he says. “They were very effective in using keywords. The American Medical Association used the words ‘socialized medicine.’ People don’t know what that is. Most Americans do not like ‘socialized’ anything. But if you told most Americans that public schools are ‘socialized education,’ they would be really surprised. Fortunately, we had public schools set up before any powerful interest groups were formed.”

Hsiao was born in China, came to live in the United States when he was 12, and eventually became an insurance actuary. In the late 1960s and early 1970s, he worked for the Social Security Administration, eventually becoming the deputy chief actuary. In that position, Hsiao worked to implement not only the program’s retirement benefits but also the then-new Medicare and Medicaid health care programs for the elderly and disabled. Hsiao says that work convinced him of the value of social insurance and that government has a critical role in providing safety net programs for its citizens.

In recent years, Hsiao, now 83, has consulted with Sen. Bernie Sanders on his Medicare for All plan, and also supports Sen. Elizabeth Warren’s version. But his reality-check prediction is that it will take two more election cycles, at least, before the political groundwork for Medicare for All will be laid.

With powerful lobbies like insurers, hospitals and drug companies dug in against such plans, he points to two other forces that will need to play key roles: big employers, which he sees as nearing an inflection point where they will insist on a better system; and doctors, who are increasingly being paid as salaried employees, which is changing their views of private insurance. “When the United States has a majority of its doctors being on salary, I predict American doctors will come out and support Medicare for All,” Hsiao said.

Hsiao spoke to Politico senior editor Maura Reynolds from his office in Cambridge, Mass., about what the challenges are, why he believes the change needs to happen, and how we might actually pay for it.

This transcript has been edited for length and clarity.

Reynolds: What’s the most important thing that you think proponents of Medicare for All don’t understand about single-payer systems?

Hsiao: The most important thing is that there’s a fear factor, a fear of change. There is a group of people who are opposing Medicare for All, and that includes the private insurance industry, pharmaceutical companies and, of course, some doctors and hospitals. They fear their income may be affected. So, for the common people, the fear is that they don’t understand how it would impact their health care, as well as their health insurance. And for the vested interest groups, they are in fear of their income and revenues.

Reynolds: Aren’t those fears justified?

Hsiao: I think they’re totally unjustified, but there’s a history to it. The last time the United States talked about universal health insurance was under President Truman. Subsequently, President Clinton also tried to propose a plan. And each time, the vested interest groups put on a very effective and powerful campaign to block it by offering common people a great deal of misinformation. In the late 1940s, the American Medical Association led the fight and called universal health insurance “socialized” medicine. And the Clinton plan, there were TV ads that said it would make medical care and claim filing much more complicated. Both of them, those kinds of public campaigns, of course, are untrue.

Reynolds: Is there a case that proponents of single payer should be making to the public that they aren’t making now?

Hsiao: I would actually show film clips from countries that have Medicare for All, like Canada, Taiwan, Germany and other countries. Taiwan educated people first that everyone would be covered by the same health insurance, a comprehensive plan, much better than what most of the people had then. That’s what I think persuaded people.

Reynolds: Many Americans say that they prefer market-based solutions as a lever for public policy, and those can be easier political lifts.

Hsiao: Markets have a serious failure in health care. That’s been proven empirically in the United States and throughout the world. I’ll describe the fundamental failure. You and I, common people, we have a symptom, a headache, a fever. We have pain. We go to a physician for diagnosis and treatment. That’s not like buying a pair of shoes or buying a shirt where the buyer and seller pretty much have an equal position. We go to physicians seeking their expertise. Even if you watch TV ads for drugs, the drug advertisers say, “Talk to your doctor.” That’s because even in their advertisement, they know you would not understand all of the possible effects of that drug.

So the physician holds a superior position in the marketplace. That’s proven. As a result, physicians can charge you any price, particularly if you are in surgery. If you operate on people’s vital organs, like brain, heart, eyes, and even orthopedics — people are willing to go bankrupt to go see a doctor if they need, let’s say, heart surgery. In medicine, actually, there is an opposite effect [from the way the market usually works]: People believe that doctors who charge higher fees must be better. That’s because they don’t understand medicine. So they figure if you can charge higher fees, you must be a better doctor. Those are market failures.

I’ll give you another example. A few decades ago, American doctors who were trying to do the right thing for their patients, for exactly the same service, would charge the poor nothing. If you were rich, they would charge you, let’s say, $8,000 for an operation. If the doctor thinks you are an average earner, he might charge you only $4,000. At the time, this was praised as doctors performing a social service. But that also tells you what kind of market power doctors have over patients. Can you imagine you go to a car dealer; you want to buy a Chevrolet. The Chevrolet dealer sees you as an average citizen and tells you, “That’s $25,000.” For rich people, “That’s $50,000.” You would say, “Wow. There’s something wrong with this market.”

Reynolds: How do you explain the health care industry’s resistance to current measures to increase transparency in pricing?

Hsiao: That’s very unique to the United States. United States has many insurance companies. The insurance companies negotiate with, let’s say, hospitals for the price, for a discount from their list price. By the way, their list price is not based on any facts of the cost; It’s a price that hospitals would like to charge. There’s no cost study to support that price. So if you are an insurance company, you say, “I can bring 50,000 patients to your hospital.” The hospital may give you an 80 percent discount from the list price. If you are representing a company that employs 200 employees and their families, they say, I’ll give you only a 25 percent discount. If you are an insurance company representing only two employees, I may not give you any discount. That’s why the hospitals don’t want to publish their price, because they may have five to 10 different prices, depending on which insurance company negotiates with them and how many insured people they can bring to their hospital.

Reynolds: What’s a better way of setting prices for that hospital?

Hsiao: I would set the price based on the actual cost of the hospital and give them a small margin of profit, so they can have some flexibility to improve and to expand. That’s how Medicare sets its prices.

Reynolds: Right, but many players in health care say Medicare pays far too little — and that if a Medicare for All system were to force doctors and hospitals to accept Medicare prices for everything they do, they’d go out of business. Do you think that’s a fair argument?

Hsiao: No, that’s misinformation. In the United States, in the same community, hospitals have different costs partly because they’re managed differently. Some hospitals are managed well and some hospitals are not managed that well. This was studied three decades ago: In Boston, for example, for a normal baby delivery, the cost and charges could vary three times between hospitals. That’s one other piece of evidence that the market doesn’t work: that in the same community, the price could be varying that much. So those opponents who claim they’re going to lose money, they may be high-cost hospitals. They may be poorly managed or they may be too small to operate. They should have gone out of existence a long time ago.

Reynolds: But hospital closures aren’t a minor problem. There’s real concern about rural hospitals being the first to close, right?

Hsiao: Yes, you should see them differently. Rural hospitals serve a social purpose. But that’s a special category.

Reynolds: One issue any reform faces is that health costs in the U.S. are just far higher than other countries. Why is that?

Hsiao: Efficiency, duplication, very high salaries for some people. Our surgeons, particularly surgeons dealing with vital organs, are making half a million dollars or more every year. Meanwhile, your family doctors and pediatricians are only making $200,000 each year.

Reynolds: And in other countries, is there less disparity between the different levels of—?

Hsiao: Specialties. Yes, there may be a 50 percent differential. Here, we have a differential of 2.5 or 3 times. That’s how the market works. When you’re dealing with people’s vital organs, with people in fear of their lives, you can charge them much higher.

Reynolds: One of the big arguments in the presidential campaign right now is about how the country would actually pay for a universal system. There’s a lot of discussion over whether taxes would increase, particularly for the middle class. There’s less discussion about whether we should retain an employer-based system, and whether employers should contribute. You’ve recently written that the growth of the gig economy, of less formal forms of employment, is also creating problems for the employer-based model. What’s your recommendation for a better financing system for the United States?

Hsiao: I would base the financing of health care on income because, in an advanced economy, some people’s incomes are from lots of things — rent, dividends, interest and capital gains — not just wages. So the first principle is to tax people based on their income. But I support what Senator Warren has proposed, a tax on financial transactions. You add on only a little bit on each financial transaction, [but] you can generate tremendous amounts of income.

Under Senator Sanders’ proposal, and I worked on the cost of it, you can save close to $800 billion a year — $800 billion a year — from inefficiency, from fraud and abuse of claims, and from duplication of services and also, from using your buying power to bargain with pharmaceutical companies for a reasonable price. That $800 billion has to be used partly to pay for the uninsured people and the underinsured people. Even then, every American, on average, could save $1,000 every year. Those are the numbers.

Now, if you tax rich people more, or like Senator Warren proposes, then, of course, rich people would not save [money]. But 90 percent or more of Americans will find they actually can save money from Medicare for All. That point has not been made strongly at all by the proponents of Medicare for All.

Reynolds: You’ve been around these issues for a long time. Do you think that we’re actually at a moment now in the United States where the American public is ready for this kind of sweeping health care change? Or do you think that we’re not there yet?

Hsiao: My honest answer, even though I know that this is recorded, is that I don’t think we are there yet.

Reynolds: Why is that?

Hsiao: We’re not there yet because the common, average American is not educated yet and there is a lot of misinformation being directed at them. And you haven’t even seen the insurance industry and pharmaceutical industry come out yet with really well-organized campaigns against it. The private insurance industry’s annual revenue is $1.3 trillion. The pharmaceutical industry’s annual income is $400 billion.

They only have to use one-thousandth of 1 percent of their revenue to fight [this]. They can elect the key decision-makers in Congress, [the Senate and the House of Representatives], because they can mobilize literally a billion dollars. And those powerful, wealthy, well-organized, vested interest groups have not come out openly yet. That’s the reality of American money, politics.

Reynolds: And you think when those monied interest groups do start fighting, that they will swamp this new interest in Medicare for All?

Hsiao: Yes. Look at what happened with Clinton’s plan. [It was] only the insurance companies who came out in an organized way for the Clinton plan, and the Clinton plan couldn’t even get a hearing before the U.S. Congress. No committee in the U.S. Congress held a hearing about what Clinton proposed. Of course, Hillary Clinton overplanned the Clinton plan. She planned out every detail; she left no decision for congressmen and senators. But still, not even one hearing. However, I do think two elections from now, the United States may see Medicare for All.

Reynolds: Why two elections?

Hsiao: To make a big change like this, you need to educate the public. You need to sharpen the issues and sharpen the key points. Right now, there’s a lot of confusion in the public’s mind and even among the political candidates.

Reynolds: But it sounds like you feel that economically, there really isn’t any question that either single-payer or a public option is the right answer for the United States. The question in your mind is the politics.

Hsiao: I think that most people who specialize in this field, the majority at least, think that single payer is the right solution because it’s much more efficient. You create a unified electronic record that can improve the quality of care and also give patients much better information about their history and their treatments.

I see changes in America. American employers find health insurance, the costs are rising faster than they can afford. As a result, because of the costs of health insurance for their employees, they can’t give them raises. Meanwhile, their employees demand higher cash wages, as well as to keep their health insurance. That can’t last that long.

Reynolds: So do you think that the employers hold the key to solving this problem?

Hsiao: They do. They are silent right now. But if you look at three powerful, big companies — Amazon, JPMorgan, Berkshire Hathaway — they have united together trying to form a health company, trying to innovate to do something. That tells you these corporations find this burden something they cannot continue to afford. That’s one change.

Another change is American doctors are supporting Medicare for All in larger numbers. American doctors today, 47 percent of them are salaried now. They are not in private practice. The doctors who oppose Medicare for All, the older doctors who are in private practice, they like the autonomy of their own office and they also do not want any interference from any semi-government agency. But the salaried doctors today find that the paperwork imposed on them by insurance companies is so horrendous that they cannot really devote enough time to the patients. They are in support of Medicare for All. When the United States has a majority of its doctors being on salary, I predict American doctors will come out and support Medicare for All. The American Medical Association, the American Hospital Association will not be able to say, “We are against it,” like they did before.

Reynolds: Doctors hold the blame for scuttling a national health care system after World War II, but you think that they hold the key to solving that problem when the next generation of physicians is in the majority?

Hsiao: Yes, and that majority is going to emerge in the next five years. Look at the figures. Already 47 percent of American practicing doctors are salaried. And every year that number increases by 1 or 2 percentage points.

https://www.politico.com…

Comment:

By Don McCanne, M.D.

William Hsiao certainly understands the issues, and so we need to listen to him when we try to understand why Americans have not yet met the political threshold required to move Congress to enact the moral imperative of the single payer model of an improved Medicare for All.

Hsiao tells us, “We’re not there yet because the common, average American is not educated yet and there is a lot of misinformation being directed at them.”

Many believe they understand the issues, but when you hear them say that they want the right to keep their private insurance rather than be forced into a government program, it is highly likely that they do not understand the vast superiority of single payer Medicare for All. The fact that simple sound bites can cause too many of them to reject Medicare for All demonstrates that Hsiao is correct; they are not yet adequately educated on the topic.

The rules are still the same. When the policy is right, but the politics are wrong, change the politics. Coalitions. Grass roots organizing. Education. Education. Education.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.