By Christopher Cai, Jackson Runte, Isabel Ostrer, Kacey Berry, Ninez Ponce, Michael Rodriguez, Stefano Bertozzi, Justin S. White, James G. Kahn
PLOS Medicine, January 15, 2020

Abstract

Background: The United States is the only high-income nation without universal, government-funded or -mandated health insurance employing a unified payment system. The US multi-payer system leaves residents uninsured or underinsured, despite overall healthcare costs far above other nations. Single-payer (often referred to as Medicare for All), a proposed policy solution since 1990, is receiving renewed press attention and popular support. Our review seeks to assess the projected cost impact of a single-payer approach.

Methods and findings: We conducted our literature search between June 1 and December 31, 2018, without start date restriction for included studies. We surveyed an expert panel and searched PubMed, Google, Google Scholar, and preexisting lists for formal economic studies of the projected costs of single-payer plans for the US or for individual states. Reviewer pairs extracted data on methods and findings using a template. We quantified changes in total costs standardized to percentage of contemporaneous healthcare spending. Additionally, we quantified cost changes by subtype, such as costs due to increased healthcare utilization and savings due to simplified payment administration, lower drug costs, and other factors. We further examined how modeling assumptions affected results. Our search yielded economic analyses of the cost of 22 single-payer plans over the past 30 years. Exclusions were due to inadequate technical data or assuming a substantial ongoing role for private insurers. We found that 19 (86%) of the analyses predicted net savings (median net result was a savings of 3.46% of total costs) in the first year of program operation and 20 (91%) predicted savings over several years; anticipated growth rates would result in long-term net savings for all plans. The largest source of savings was simplified payment administration (median 8.8%), and the best predictors of net savings were the magnitude of utilization increase, and savings on administration and drug costs (R2 of 0.035, 0.43, and 0.62, respectively). Only drug cost savings remained significant in multivariate analysis. Included studies were heterogeneous in methods, which precluded us from conducting a formal meta-analysis.

Conclusions: In this systematic review, we found a high degree of analytic consensus for the fiscal feasibility of a single-payer approach in the US. Actual costs will depend on plan features and implementation. Future research should refine estimates of the effects of coverage expansion on utilization, evaluate provider administrative costs in varied existing single-payer systems, analyze implementation options, and evaluate US-based single-payer programs, as available.

What do these findings mean?

• There is near-consensus in these analyses that single-payer would reduce health expenditures while providing high-quality insurance to all US residents.
• To achieve net savings, single-payer plans rely on simplified billing and negotiated drug price reductions, as well as global budgets to control spending growth over time.

https://doi.org… OR https://journals.plos.org…

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Single Payer Systems Likely to Save Money in U.S., Analysis Finds; Lower administrative and drug costs would be main drivers of cost savings

The University of California, San Francisco (UCSF), January 15, 2020

A single payer healthcare system would save money over time, likely even during the first year of operation, according to nearly two dozen analyses of national and statewide single payer proposals made over the past 30 years.

The study, published Wednesday, Jan. 15, 2020, in PLOS Medicine, comes as California Gov. Gavin Newsom has created a state commission to find ways to achieve universal coverage, possibly through a single payer system, and as the Democratic presidential candidates are debating “Medicare for All” proposals on the national stage.

The US spends more on healthcare than any other country, yet is one of only a few developed nations that does not provide universal coverage. Under proposed single payer bills, such as “Medicare for All”, a unified public financing system would replace private insurance, similar to the healthcare system in Canada and many other wealthy nations.

To estimate what would happen if the United States adopted a single payer system, researchers from UCSF, UCLA and UC Berkeley examined 22 economic analyses by government, business and academic organizations of national and state-level single payer plans, including proposals made in Massachusetts, California, Maryland, Vermont, Minnesota, Pennsylvania, New York and Oregon.

These analyses were used by policy makers to evaluate the proposals, estimating savings the plans would create through simplified billing and lower drug costs while also taking into account increases in health spending that would arise as newly insured people sought healthcare.

The researchers found that 19 of the 22 models predicted net savings in the first year after implementation, averaging 3.5 percent of total healthcare spending.

The researchers were able to estimate longer-term savings by using cost projections made in 10 of the models, which looked as far as 11 years into the future. These studies assumed that savings would grow over time, as the increases in healthcare utilization by the newly insured leveled off, and the global budgets adopted by single payer systems helped to constrain costs. By the tenth year, all modeled single payer systems would save money, even those that projected costs would initially increase.

“Even though they start with different single designs and modeling assumptions, the vast majority of these studies all come to the same conclusion,” said James G. Kahn, MD, MPH, a professor in the UCSF Department of Epidemiology and Biostatistics, and a member of the Philip R. Lee Health Policy Institute. “This suggests that fears that a single-payer system would increase costs are likely misplaced.”

Savings from simplified payment administration and reductions in drug prices and other efficiencies ranged from 3 to 27 percent, with the largest savings found in plans that lowered drug costs.

Higher initial costs were associated with plans that had low co-pays or none at all, offered rich benefits, or that did not expect savings from lower drug and medical equipment costs.

The models were created by analysts from different political perspectives, and they provided a range of cost estimates in the first year of operation, from 7 percent higher to 15 percent lower.

The researchers found that the economic models that were supported by left-leaning funders or that were done by academics found slightly larger net savings. But analyses supported by more conservative funders or performed outside of academia still predicted single payer systems would yield savings.

“This means that across the political spectrum, there is near consensus among these economists that a single-payer system would save money,” said Christopher Cai, a third-year medical student at UCSF and the study’s first author. “Replacing private insurance with a public system is essential to achieving these savings.”

Authors: Christopher Cai, Jackson Runte, Isabel Ostrer, Kacey Berry, Justin White, PhD, and James G. Kahn, MD, MPH, of the UCSF School of Medicine; Ninez Ponce, PhD, MPP, of the UCLA Fielding School of Public Health; Michael Rodriguez, MD, MPH, of the David Geffen School of Medicine at UCLA; Stefano Bertozzi, MD, PhD, of the UC Berkley School of Public Health.

https://www.ucsf.edu…

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Comment:

By Don McCanne, M.D.

What does the literature on modeling of single payer financing of health care tell us? As this systematic review confirms, “There is near-consensus in these analyses that single-payer would reduce health expenditures while providing high-quality insurance to all US residents.”

All models that qualified for the study would reduce health care spending after the transitional startup, and most of them would reduce spending even during the startup interval. Clearly the single payer model would work for all of us, and it would be more affordable than if we maintained the deficient status quo.

PLOS Medicine is an Open Access publication and thus there is no paywall for downloading this 18 page report. You should do so and share it widely so that other academics and activists can use it to refute the false claim that we cannot afford single payer Medicare for All. We can, and we must.

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

The Canadian system, also called Medicare, guarantees coverage to every resident north of the U.S. border.

By Caitlin Kelly
The American Prospect, January 8, 2020

Canadian health care is publicly funded and privately delivered, approximately the same vision that single-payer enthusiasts have for the American system. It even shares the same name as our largest government-run insurance provider: Medicare. But contrary to persistent American partisan mythmaking, no government officials sit in doctors’ offices or haunt hospital hallways with a checklist of all the services they’ll question and deny. They don’t dictate hands-on care. Canadians face little government interference or oversight of their health care, although, for historical reasons, their doctors retain much more power than patients.

The familiar and dreaded words “co-pay,” “deductible,” “pre-existing condition,” and “out of network” are meaningless here, in English or French, Canada’s two official languages. Patients don’t waste time chasing pre-authorizations or fighting medical bills, while physicians save thousands of administrative hours.

As Americans’ life expectancy is dropping and maternal mortality is ranked shockingly high among other wealthy nations, Canadian health outcomes fare better; Canadian women live two more years than their American counterparts, men three.

But the system is far from perfect. Outpatient care, like physical and occupational therapy or prescription medicine, is paid for out of pocket. In some places, there’s no mandate to use electronic records, so patient information can be difficult to access. And medical care of impoverished and remote First Nation and Inuit communities is openly acknowledged as abysmal.

Canada provides coverage for about 35 million, one-tenth the population of the United States. But how they’ve set up their health care system, and how it evolved over the decades, is instructive, especially given the robust debate during the presidential primary about overhauling our current system. It can inform how U.S. policymakers—and Canadians, for that matter—approach cost control, physician payment, and services for vulnerable communities. Rather than scaring Americans with well-structured narratives about the alleged horrors of Canadian Medicare, we could take the opportunity to learn from it.

A Difference in Bedrock Philosophies

A fundamental conceptual difference also divides how Canadians and Americans view their relationship to using government-financed or -run services. Classic American insistence on the bedrock values of individualism, self-reliance, and shunning government aid as a sign of moral failure differs radically from that of Canadians, who are more committed politically and economically to health care equity as a collective good. Consistently receiving free health care and heavily subsidized university and college tuition fees means that Canadians of all ages and income levels experience firsthand a consistent, quantifiable return on their tax dollars.

“One thing I wish Americans would understand is that ‘who’s going to pay?’ is actually a distraction,” says Dr. Danielle Martin, executive vice president and chief medical executive of Women’s College Hospital in Toronto. “It’s ‘how will you organize delivery of it?’ Payment is just the first step on a worthy and interesting journey. The conflation of single-payer and wait times is false. We have wait times because of a million other issues, like we can’t get physicians to work in rural areas.”

Could This Work in the U.S.?

“The Canadian system is good, but underfunded,” says Steffie Woolhandler. “The American system is shitty but over-funded.”

https://prospect.org…

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Comment:

By Don McCanne, M.D.

Our goal is to establish a single payer model of a dramatically improved version of our Medicare program that would ensure affordable, accessible, high quality health care for everyone in our nation. The model that is closest to that vision is the Canadian Medicare program – a series of provincial single payer programs. It is not the same system as what we propose.

It is helpful for us to understand the Canadian system since it has many beneficial features that would help us improve equity and access in our own system. Also it has some deficiencies, and it is important to understand those so that we can avoid them.

The excerpts from The American Prospect article by Caitlin Kelly give you an inkling of what the Canadian system is all about. This fairly long article should be read in its entirety for a few reasons:

• People need to understand that we are not transporting the Canadian health financing infrastructure to the United States; rather we are building a new, better-than-Canadian Medicare for All.
• When people reject single payer Medicare for All because of certain undesirable features of the Canadian system, it is important to understand what those features are and how we would guard against them in the United States.
• When people say that we cannot afford Medicare for All it is important to understand and explain to them how we are already paying enough to fund a better-than-Canadian system, but we need to redirect the spending of the $600 billion in recoverable administrative waste that characterizes our dysfunctional multi-payer system.
• The most common complaint about the Canadian system is the excessive queues for some non-urgent services. People need to understand that our Medicare for All would have enough funding to ensure adequate capacity in the system through central planning and budgeting of capital improvements, not to mention including adequate funding to improve queue management.
• Perhaps the most important lesson from Canada: “Classic American insistence on the bedrock values of individualism, self-reliance, and shunning government aid as a sign of moral failure differs radically from that of Canadians, who are more committed politically and economically to health care equity as a collective good. Consistently receiving free health care and heavily subsidized university and college tuition fees means that Canadians of all ages and income levels experience firsthand a consistent, quantifiable return on their tax dollars.”

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By Maria Castellucci
Modern Healthcare, January 10, 2020

The experimental Next Generation Accountable Care Organization model didn’t save Medicare money during the first two performance years, according to an analysis released Friday from the agency.

Rather than reducing Medicare spending, the Next Generation ACO model, which is now in its fifth and final year, added $93.9 million to net Medicare spending during 2016 and 2017, the first two years of the program, the analysis found. The study, which was conducted by researchers at the University of Chicago and commissioned by the CMS, said the increase wasn’t statistically significant although at first glance it appears to be a blow for supporters of the model who claimed its been saving Medicare money.

But the results from the study are more complicated, according to David Muhlestein, chief research officer at Leavitt Partners. Medicare can save at most about 1% on spending for beneficiaries in the program because that’s how much they take from the ACOs at the beginning of performance years. The fact that the program was a wash for the agency in the first two years doesn’t make a huge difference because the bar for saving is so low, he said.

“Is the program ever going to solve our cost issues in Medicare? No. It’s all pretty minor,” he said.

The Next Generation ACO model is an experimental project from the CMS Center for Medicare and Medicaid Innovation that forces organizations to take on substantial downside risk.

According to the study, Medicare was unable to achieve savings during the first two years of the program—2016 and 2017—because they had to pay out more in savings than they recouped. In fact, before accounting for the payouts CMS had to make, the model actually decreased Medicare spending by $123.18 million during the first two years.

The CMS hasn’t announced if it will make the project a permanent part of the Medicare program, although the changes made to the Medicare Shared Savings Program in late 2018 resemble somewhat the Next Generation model because ACOs are forced to take on higher levels of downside risk the longer they are in the program.

https://www.modernhealthcare.com…

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Next Generation Accountable Care Organization Model Evaluation

NORC at the University of Chicago, January 2020

After accounting for shared-savings payouts, the net impact of the NGACO model on Medicare spending cumulatively across PY1 and PY2 was a statistically insignificant $54.40 PBPY increase (+0.42 percent), totaling $92.99 million.

No impact on quality-of-care measures.

https://innovation.cms.gov…

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Participants continue to drop out of Medicare ACO program

By Maria Castellucci
Modern Healthcare, January 10, 2020

Just 53 new accountable care organizations joined the Medicare Shared Savings program for the Jan. 1 start date, which is significantly less new entrants compared to previous years.

There are now 517 ACOs in the Medicare program versus in 2018 when there were 561 ACOs. The drop in new participants follows a recent trend from six months ago when only 66 new ACOs joined.

The National Association of ACOs blames the changes to the Medicare ACO program for the recent drops in participation. In late 2018, the CMS finalized an overhaul of the program that requires ACOs to take on downside financial risk sooner after years where most organizations were risk averse.

The growth of ACOs in risk-sharing tracks this year likely shows that the participants who decided to stay in the program are serious about taking on down-side risk, which is ultimately a good thing for the program, said David Muhlestein, chief research officer at Leavitt Partners. There were likely ACOs in the program that didn’t belong there because they had no intention of moving to downside risk. By forcing ACOs to take on risk eventually, the CMS is likely getting a stronger pool of participants ready and willing to do so.

https://www.modernhealthcare.com…

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Comment:

By Don McCanne, M.D.

For the past decade the public and private policy community has been insisting that the way to control our very high health care spending has been to make the actual providers of health care accountable for both the costs and quality of the care they provide. Thus the establishment of the accountable care organizations (ACOs).

CMS and its advisers have been insisting that the success of the ACO model is dependent on the ACOs taking a substantial downside risk; that is, a substantial proportion of the financial risks of caring for these patients must be transferred from the insurer (Medicare) to the providers of care (the ACOs). Although they talk about transferring substantial risk, in these Next Generation models it is still a relatively small amount, but it is quite visible since it represents primarily the profit margins of the providers. A modest increase in bearing the costs of risk can result in significant losses for the providers.

Although they are lauding these organizations that are taking downside risk, it is no surprise that the number of organizations participating is now declining. Since the original Medicare Shared Savings Program is being leveraged into downside risk it should not be a surprise if participation declines throughout the program. So far the policy community is insisting that we continue with this (failed) experiment. They are dismissive of the ACOs that are leaving the program but express the hope that “a stronger pool of participants” is ready and willing to take the dive into this (foolish) venture.

What is sad is that CMS and much of the policy community have remained opposed to a model that is vastly more effective in reducing wasteful spending – the single payer model of an improved Medicare for All – as they insist that we continue with this failed experiment with ACOs.

Enough. Whether it’s due to their ideology or something else, those in control are not changing. We need to replace them with legislative and administrative public stewards who do care about the people of our nation and will thus enact and implement a program that will ensure that we all will have our health care needs met – a single payer improved Medicare for All – not after a decade or two of playing around with adding the additional, wasteful administrative complexity of a public option version of Medicare for All, but right now!

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

By Adam Gaffney, David H. Bor, David U. Himmelstein, Steffie Woolhandler, and Danny McCormick
Health Affairs, January 2020

Abstract

High out-of-pocket drug spending worsens adherence and outcomes, especially for patients who are poor, chronically ill, or members of minority groups. The Veterans Health Administration (VHA) system provides drugs at minimal cost, which could reduce cost-related medication nonadherence. Using data for 2013–17 from the National Health Interview Survey, we evaluated the association of VHA coverage with such nonadherence. Although people with VHA coverage were older and in worse health and had lower incomes than those with other coverage, VHA patients had lower rates of cost-related medication nonadherence: 6.1 percent versus 10.9 percent for non-VHA patients, an adjusted 5.9-percentage-point difference. VHA coverage was associated with especially large reductions in nonadherence among people with chronic illnesses and with reduced racial/ethnic and socioeconomic disparities in nonadherence. The VHA pharmacy benefit is a model for reform to address the crisis in prescription drug affordability.

From the Discussion

VHA coverage was associated with less cost-related medication nonadherence relative to other coverage, especially for people with chronic conditions, and was also associated with smaller racial/ethnic and income-based disparities in such nonadherence.

The rising prices of prescription drugs have spawned myriad reform proposals. However, although manufacturers’ pricing affects the costs paid by insurers (and the uninsured), insurers’ decisions regarding benefit design largely determine out-of-pocket spending for people with coverage. Except for Medicaid, most insurers impose substantial drug cost sharing. In many private insurance plans, out-of-pocket medication expenses can total thousands of dollars annually, especially for patients requiring “specialty drugs” such as cancer chemotherapy or biologics. Some plans even put low-price generics (for example, metformin) into high drug tiers that carry large copays. People with Medicare Part D coverage face a $415 deductible and 25 percent coinsurance for prescription drugs until they reach a “catastrophic coverage” threshold of $5,100, at which point limited out-of-pocket spending is still required. Consequently, seniors with hepatitis C face about $5,000 in out-of-pocket spending, on average, for the direct-acting antiviral ledipasvir-sofosbuvir—far higher than the $33 charge for a three-month course in the VHA. Similarly, seniors with COPD have out-of-pocket spending for inhalers that exceeds $1,600 per year, also many times higher than the costs for veterans, who may pay multiple $11 monthly copays. Hence, our findings of lower rates of cost-related medication nonadherence among VHA enrollees is not surprising.

Despite the VHA’s relatively generous coverage, its drug spending may be lower than that of private insurers because it pays much lower prices. As do health systems in several nations, the VHA uses a unified national formulary and a mix of government regulation and bargaining with manufacturers to purchase drugs at prices lower than those paid by the US private sector and similar to prices in Australia.

As previous researchers have done,10 we identified lower income as a risk factor for cost-related medication nonadherence. We observed higher rates of cost-related nonadherence among poor versus nonpoor VHA enrollees, presumably because even small copays may reduce adherence (the VHA exempts some but not all low-income people from copays). Similarly, when Oregon imposed small copays on Medicaid enrollees in 2003, prescription drug use fell 17 percent. The extreme price-sensitivity of low-income patients underscores the potential benefits of first-dollar prescription drug coverage, as implemented in Wales.

“Drugs don’t work,” Surgeon General C. Everett Koop once remarked, “in patients who don’t take them.” Eliminating out-of-pocket spending is one of the few interventions proven to increase medication adherence. Our findings suggest that drug coverage modeled on the VHA approach, which is often cited as a model for controlling drug prices, could also improve adherence and population health and reduce health disparities.

https://www.healthaffairs.org…

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Physicians for a National Health Program, January 6, 2020

Patients with Veterans’ health coverage less likely than other insured Americans to skip medications because of cost: Harvard Study

National study finds that Veterans Health Administration (VA) enrollees, especially those with chronic illnesses, have fewer problems paying for medications. Findings support VA pharmacy benefit as a model to make drugs universally affordable

“We face a crisis in drug affordability,” noted senior author Dr. Danny McCormick, associate professor of medicine at Harvard Medical School and a primary care physician. “High copays and deductibles are forcing patients to skip their medications — even for serious illnesses like heart disease or lung disease — putting their health, and even their life at risk. The VA shows that there is a better way.”

“Our findings have important implications for the debate about the affordability of health reform,” noted Dr. Steffie Woolhandler, distinguished professor at the City University of New York’s Hunter College and lecturer (formerly professor) in Medicine at Harvard Medical School. “Both the House and Senate Medicare-for-All bills would borrow tools from the VA to cut drug costs, including price negotiations and a formulary. These steps could allow all Americans to afford their medications without burdensome copayments or deductibles,” she added.

Dr. Adam Gaffney, a pulmonary and critical care physician at Harvard Medical School, noted that while a VA-like drug benefit model could save money, it could also improve patients’ health. “Today, we have better drugs — more ways to help our patients — than ever before. But these drugs offer no help to patients who can’t afford to take them. By reforming how we pay for prescription medications, we can improve health outcomes, while bringing our drug spending in line with that of other rich nations.”

https://pnhp.org…

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Comment:

By Don McCanne, M.D.

The Veterans Health Administration – a government program – makes prescription drugs more available at a lower total cost, thereby increasing medication adherence, resulting in an improvement in health outcomes. That is in sharp contrast to the private sector wherein medication adherence is reduced because of higher prices which results in poorer health outcomes.

The single payer model of an improved Medicare for All – a proposed government health care financing program – would make prescription drugs more accessible at a lower cost, much like the VA does, with an overall improvement in health outcomes.

No contest. So why do so many claim that we want to protect access to the private sector plans that are serving us so poorly (even if many do not realize how much better off they would be under an improved Medicare for All)? Could it be saturation with the false memes of private sector ideology? Can educating the public on the facts overcome this? We should step up our efforts and see what happens.

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

One policy proposal has defined this Democratic race. It’s time to move on.

By Michelle Cottle
The New York Times, January 8, 2020

With strong support among the Democratic Party’s base, “Medicare for all” has emerged as a test of progressive bona fides in the race for the Democratic presidential nomination.

It has also emerged as something of a political morass into which the candidates keep stumbling.

The American health care system is, no doubt, deeply flawed, and health care was a hot topic in the 2018 midterm elections. But Medicare for all has dominated the Democratic race for too long, serving neither the candidates nor the electorate well.

A plan to blow up that system and throw 149 million people off their private insurance, while embraced by progressives, is viewed more skeptically by moderates and swing voters.

One could argue that it has already proved problematic for Senator Elizabeth Warren, who has been one of Medicare for all’s top champions in this race, along with Senator Bernie Sanders, who has been touting the idea nationally since his 2016 presidential run. Under pressure to explain how she would pay for her proposal, in November Ms. Warren released a detailed accounting of where the estimated $20.5 trillion that her plan would cost over 10 years would come from.

Her financing plan drew heavy fire as misguided and unrealistic, including from some of her Democratic competitors.

Many observers have noted that the Democratic debates — especially the first ones, which felt like a rolling seminar on medical insurance policy — have devoted a disproportionate amount of time to the candidates slashing at each other over who has the political courage — or naïveté — to go big on health care.

It is miring the Democrats in an unnecessary fight over a policy proposal that is divisive and that would require a political miracle to achieve without a progressive takeover of the Senate. And even then, it would most likely be difficult — remember how hard it was to pass Obamacare even with Democrats controlling both chambers?

With the Iowa caucuses less than a month away, Democrats need to move beyond the Medicare for all fixation. Enough time has been spent bickering over the particulars of an electorally risky proposal that is unlikely to come to pass, no matter who wins the White House.

Michelle Cottle is a member of the editorial board.

https://www.nytimes.com…

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Comment (NYT Pick):

By Don McCanne, M.D.

An article published this week in the Annals of Internal Medicine confirms that over $600 billion in health care administrative costs is excessive under our uniquely inefficient system of financing health care. Those funds could be recovered by switching to a single payer model of Medicare for All. But they would not be recovered by merely adding a Medicare for All public option.

It is this $600 billion in savings that makes it possible to fill in the costs for the currently uninsured and those with excessive deductibles and other out-of-pocket costs such as surprise medical bills. Also switching from insurance premiums and out-of-pocket costs to equitable taxes would make health care affordable for each of us based on ability to pay, plus guarantee each of us coverage for life.

Maintaining our fragmented system of private plans and various public programs would forgo this $600 billion savings. Those who say that we should be allowed to choose between private plans and a public option have to realize that we each would be paying an average of $1,900 extra for wasteful administrative services that we don’t even want.

This is not just a question of ideological preferences for private insurance versus an improved Medicare program. It’s a matter of pocketbook economics.

https://www.nytimes.com…

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Additional Comment:

By Don McCanne, M.D.

Of course, it is not just a matter of pocketbook economics. Much more importantly it is a matter of reducing personal financial hardship, physical suffering and even death.

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

By Heather Long
The Washington Post, January 7, 2020

America’s sky-high health-care costs are so far above what people pay in other countries that they are the equivalent of a hefty tax, Princeton University economists Anne Case and Angus Deaton say. They are surprised Americans aren’t revolting against these taxes.

“A few people are getting very rich at the expense of the rest of us,” Case said at a conference in San Diego on Saturday. The U.S. health-care system is “like a tribute to a foreign power, but we’re doing it to ourselves.”

The U.S. health-care system is the most expensive in the world, costing about $1 trillion more per year than the next-most-expensive system — Switzerland’s. That means U.S. households pay an extra $8,000 per year, compared with what Swiss families pay. Case and Deaton view this extra cost as a “poll tax,” meaning it is levied on every individual regardless of their ability to pay. (Most Americans think of a poll tax as money people once had to pay to register to vote, but “polle” was an archaic German word for “head.” The idea behind a poll tax is that it falls on every head.)

Despite paying $8,000 more a year than anyone else, American families do not have better health outcomes, the economists argue. Life expectancy in the United States is lower than in Europe.

“We can brag we have the most expensive health care. We can also now brag that it delivers the worst health of any rich country,” Case said.

Case and Deaton, a Nobel Prize winner in economics, made the critical remarks about U.S. health care during a talk at the American Economic Association’s annual meeting, where thousands of economists gather to discuss the health of the U.S. economy and their latest research on what’s working and what’s not.

As calls grow among the 2020 presidential candidates to overhaul America’s health-care system, Case and Deaton have been careful not to endorse a particular policy.

“It’s the waste that we would really like to see disappear,” Deaton said.

After looking at other health systems around the world that deliver better health outcomes, the academics say it’s clear that two things need to happen in the United States: Everyone needs to be in the health system (via insurance or a government-run system like Medicare-for-all), and there must be cost controls, including price caps on drugs and government decisions not to cover some procedures.

https://www.washingtonpost.com…

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Deaths of Despair and the Future of Capitalism

American Economic Association, Annual Meeting, January 3-5, 2020

Selected quotes from slides:

Anne Case

It is not inequality per se, but that the US system is grossly unfair

Unfair process generates despair for some, and huge rents for others, generating inequality

Roots of despair: Labor market decline for workers without a bachelor’s degree; Effects of which have been magnified through lass of community, marriage, meaning, status

Things that held life together and gave life meaning have badly eroded: Attachment to the labor market; A job with prospects; Marriage; Attachment to one’s children; Church affiliation; Community

Why has the decline of working class jobs hit the US so hard? Start from the most extreme: opioids; Move on to less extreme, but still bad, healthcare industry; Corporate behavior more generally; Upward (unfair) redistribution from poorer to richer

Destruction of white working class: Transfer of power from labor to capital; Labor weakened by decline of unions, globalization and automation; Instead of cushioning the impact, as was done in Europe, politics and corporations worked together to take advantage of labor; None more so than in healthcare industry

American Healthcare Industry: Healthcare is most expensive in the world, while delivering the worst health in rich world; While American healthcare is not so good at promoting health, it is very good at promoting financial well being of providers; Life expectancy is now falling, while money is redistributed upwards; Government, instead of stopping this, licenses the upward redistribution of income; Perfect example of how rent-seeking generates inequality: Enriching a few; At the expense of the many; jobs contracted out, wages held down, states forced to cut education and infrastructure budgets to pay their share of Medicaid; Family health insurance policy in 2018 cost $20,000: outsource for low skills; Profits and executive salaries in the health care sector soar

Multiple forces holding wages down for working class people: Loss of unions; Non-compete clauses; Many (most) people with employer provided health insurance don’t understand that health insurance is invisibly coming out of their wages – really messes up labor markets; Businesses contracting out lower skilled jobs in part to avoid paying for health care (no hope of climbing the ladder through hard work); Globalization and technical change are happening in all wealthy countries, but policy choices distribute gains differently

What is to be done? Different kinds of education? Rein in the cost of the health care industry? Find a way for labor to regain a voice at the table while the pie is being cut?

Robert Putnam

America today has reached historic levels of: Economic inequality; Political polarization; Social isolation; Cultural individualism

Conclusions: Today’s problems, including deaths of despair, are part of a longer, wider syndrome – a shift from an I-society to a we-society and back to an I-society; no simple causal story; Since problems are braided together, policy solutions to any single problem without addressing others may be unstable – for example, Obamacare; Americans faced the same interconnected challenges in the Gilded Age/Progressive Era, therefore seeks lessons from that UPSWING (How America came together a century ago and how WE can do it again)

Angus Deaton

Health care is so different here from what it is elsewhere. The Swiss (system) is the second most expensive in the world. They consume 12 percent of GDP. That 6 percent of GDP, which is the difference (from our 18 percent), actually matches quite well our estimates of waste. Six percent waste in health care is 50 percent more than we spend on our entire military. We were very careful not to endorse any one of the plans that are being debated, especially on the Democratic side, and partly because they’re talking about the wrong thing. They’re talking about coverage, and for the left in America, the lack of coverage has always been a problem. Obamacare did quite a lot about coverage, but it did nothing at all about costs. It’s costs that are killing us, not the lack of coverage.

Video with slides:
https://www.aeaweb.org…

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Comment:

By Don McCanne, M.D.

It seems obvious that with our great wealth and high spending on health care we should be able to distribute health care equitably so that we all get the health care that we need. But as Anne Case, Angus Deaton and Robert Putnam show us, health care injustice is just one problem in a background of fundamental societal flaws that were predominant in the Gilded Age, diminished in the post World War II era, and have returned with a vengeance. Major features include income and wealth inequality with a rise and decline in simple fairness, the decline and then rise in political polarization, the problem of social isolation (Bowling Alone), and the I-society of the Gilded Age (I, me, mine) shifting to the WE-society mid-century (we, us, our), and now back to the I-society.

Admittedly, it is difficult to reform health care financing without considering other reforms that will promote the upswing that we need. Though Deaton and Case do not endorse a particular model of health financing reform, they do note that the system must be both universal and costs must be controlled. Putnam notes that America needs to come together as a WE-society.

Of course, the single payer model of an improved Medicare for All does this more effectively, considering the upswing that we need. As an egalitarian system it would help promote the WE-society. Funding the system through progressive taxes would reduce economic inequality. With broad support amongst society, political polarization would diminish. With the nation joining together, social isolation would also diminish. And as far as reducing waste in the system, the greatest impact that we could have would be through recovering the $600 billion per year that is wasted on administrative excesses, a far greater amount than could be recovered through any other efficiencies, though other beneficial changes certainly would be welcome as well.

Let’s recover that $600,000,000,000 in administrative waste and use it to make health care accessible and affordable for all of us.

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