PNHP

Large firms offering HSAs is not enough

Large firms offering HSAs is not enough

High-Deductible Health Plan Enrollment Increased From 2006 To 2016, Employer-Funded Accounts Grew In Largest Firms

By G. Edward Miller, Jessica P. Vistnes, Frederick Rohde, and Patricia S. Keenan
Health Affairs, August 2018

Abstract

Over the past decade, employers have increasingly turned to high-deductible health plans (HDHPs) to limit health insurance premium growth. We used data from private-sector establishments for 2006 and 2016 from the Medical Expenditure Panel Survey–Insurance Component to examine trends in HDHP enrollment and heterogeneity in HDHPs by firm size. We studied insurance plan offerings along the following dimensions: whether employers fund accounts to help defray employees’ out-of-pocket health care spending, the availability of non-HDHP plan choices, and single and family deductible levels. We extend the literature by examining these characteristics by detailed firm-size categories and by including all plans with deductibles that met or exceeded Internal Revenue Service thresholds to be qualified for health savings accounts. We found that in 2016, 78.0 percent of HDHP enrollees in the smallest firms (those with fewer than 25 employees) lacked an employer-funded account, compared to 35.2 percent in the largest firms (those with 1,000 or more employees). Overall, HDHP enrollees in the largest firms had significant advantages relative to workers in smaller firms along all of the dimensions examined.

From the Discussion

Similar to previous studies, we found a rapid rise—in this case, from 2006 to 2016—in the proportion of private-sector enrollees in insurance plans with deductibles that met or exceeded IRS thresholds for HSA-qualified plans. Because the thresholds are indexed by the Consumer Price Index for All Urban Consumers, increasing enrollment in high-deductible health plans indicates that deductibles rose faster than general inflation and that household budgets were exposed to potentially higher out-of-pocket health care spending. Employer contributions to HSAs and HRAs can be used to defray some of these costs, but the share of HDHP enrollees with employer-funded accounts increased only among those in the largest firms (those with 1,000 or more employees) over this time period.

Other studies have identified lower health care utilization, even among plans with employer contributions to a savings account, and higher financial burdens for HDHP enrollees compared to enrollees in non-HDHP plans. Our results suggest that these effects may be larger for workers in small firms, who are more likely to have higher deductible levels and lack employer contributions to help pay for out-of-pocket expenses, compared to workers in larger firms.

https://www.healthaffairs.org…

***

Comment:

By Don McCanne, M.D.

In order to control the cost of employer-sponsored health insurance, employers have increasingly turned to high-deductible health plans. This makes the up-front, high out-of-pocket costs unaffordable for many employees. To get around this hurdle, some employers will also help fund health savings accounts (HSAs) or health reimbursement arrangements (HRAs) to defray some of the upfront costs. How well is this working?

Large employers with over 1,000 employees will more often contribute to these accounts, but, even there, 35 percent of the employees of these large firms do not have an employer-funded account. Even worse, 78 percent of enrollees in high-deductible plans offered by firms with less than 25 employees lack an employer-funded account. Many of these employees without employer-funded accounts do not have the financial capability of funding those accounts on their own.

The literature is clear on the impact of high-deductible health plans on employees who do not have pre-funded HSAs. The financial barriers frequently prevent them from receiving health services that they should have, and when services are unavoidable, financial hardship often ensues. Neither of these are good outcomes. Yet the Trump administration is currently encouraging Congress to expand the use of HSAs.

We should not celebrate the fact that the majority of large employers do contribute to their employees’ HSAs, because all they have done is to dig the hole less deep. We need to get rid of private high-deductible health plans and replace them with an improved Medicare that provides first dollar coverage for everyone. We can control health care costs through much more patient-friendly policies that make health care affordable and accessible for all of us.

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Health care costs matter and single-payer would help

By Ray Bellamy, M.D.
Tallahassee Democrat, August 7, 2018

Health care is too expensive. We can nearly all agree on that. But the public knows its importance as well as its expense.

Efforts by the Trump administration to wound Obamacare with availability of policies aimed at the non-sick, labeled by some as “junk policies,” have not yet destroyed the ACA. And voters rank health care as a high priority.

So how do we make health care more affordable? Technological advances are expected to keep costs rising inexorably. Recent embrace of Medicare for All by the public and many Democrats has encountered strong pushback from entrenched interests.

A recent analysis from the George Mason University Mercatus Center, a known Koch-funded economics outpost, predicted some $2 trillion in savings over a decade if the nation shifted to a single payer system to replace our current $3.5 trillion a year hodgepodge of both public and private payers.

How can this be? Everyone covered with comprehensive health insurance and costs of the system reduced? The key is the simplicity of single payer, with its massive reduction in overhead, along with elimination of corporate profit.

All who interface with the health care mess we now utilize will recognize the waste at every level when a potpourri of partial coverage options and different panels of providers, approved medications, and duration of treatment — along with the varying co-pays, deductibles and associated administrative costs — are encountered. How much simpler to swipe a card with every citizen covered equally, an estimated $400 billion a year in reduced overhead.

Then imagine the additional benefits of lowered auto and homeowners insurance, workers compensation and personal injury costs if everyone is covered comprehensively. Add in the additional hundreds of billions a year in savings if Congress would back off their ban against negotiation for lower drug prices like the VA and other countries operate.

Those are the big savings of a Medicare for All system, but don’t stop counting other advantages: much of our ability to track effectiveness of treatments comes from access to Medicare records. We need ready information on what works for all ages of our citizens, as well as early alerts regarding disease outbreaks.

Health care should be available for all, as should ready information on the health of our population. Contrary to the objections of the ideologues and special interests, an estimated 95 percent of Americans would have lower health care costs under Medicare for All than they have now.

We can do this. We can provide comprehensive high quality care to all or our citizens, beginning at birth. And with less cost in our nation’s $3.5 trillion annual expenditure. The secret is in our wasted overhead, our administrative expense and corporate profit, which we can eliminate.

Dr. Ray Bellamy is a retired longtime Tallahassee physician and member of Physicians for a National Health Program.

https://www.tallahassee.com…

Growing trend for bankruptcy for seniors

Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society

By Deborah Thorne, Pamela Foohey, Robert M. Lawless & Katherine Porter
SSRN, August 5, 2018

Abstract

The social safety net for older Americans has been shrinking for the past couple decades. The risks associated with aging, reduced income, and increased healthcare costs, have been off-loaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher. Using data from the Consumer Bankruptcy Project, we find more than a two-fold increase in the rate at which older Americans (age 65 and over) file for bankruptcy and an almost five-fold increase in the percentage of older persons in the U.S. bankruptcy system. The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect. In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of healthcare, as they try to deal with reductions to their social safety net. As a result of these increased financial burdens, the median senior bankruptcy filer enters bankruptcy with negative wealth of $17,390 as compared to more than $250,000 for their non-bankrupt peers. For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy.

From the Introduction

The social safety net for older Americans has been shrinking for the past couple decades. The risks associated with aging, reduced income, and increased healthcare costs, have been off-loaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher. Using data from the Consumer Bankruptcy Project, we find more than a two-fold increase in the rate at which older Americans (age 65 and over) file for bankruptcy and an almost five-fold increase in the percentage of older persons in the U.S. bankruptcy system. The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect. In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of healthcare, as they try to deal with reductions to their social safety net. As a result of these increased financial burdens, the median senior bankruptcy filer enters bankruptcy with negative wealth of $17,390 as compared to more than $250,000 for their non-bankrupt peers. For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy.

National concern for the well-being of older Americans soon declined, beginning in the early-1980s, especially as the cost of funding their social safety net strained state and federal budgets. This financial tension and emerging ideological shifts promoted an intergenerational war. Conservatives, free market advocates, and media promoted the image of older Americans as “a threat to economic viability,” as thieves of our children’s futures, and as “responsible for the nation’s economic problems.” In just a few decades, norms of privatized citizenship and individual responsibility upstaged the ideal of America’s social welfare system. Financial risks were shunted off onto individuals, regardless of age. Many older Americans suffered greatly because of this movement toward “private responsibility,” with their Social Security, retirement, and healthcare, among other protections, coming under attack.

Since the early-1990s, scholars on the Consumer Bankruptcy Project (CBP) have collected data on the age of bankruptcy filers. These data are used to determine the percent of older Americans within the U.S. population who file bankruptcy, and the percent of older filers within the bankrupt population. Comparing CBP data between 1991 and now shows significant increases in both categories. The changes are so great that the broader trend of an aging U.S. population can explain only a small proportion of what is happening in the bankruptcy courts. Older Americans’ reported reasons for filing strongly suggest that they are experiencing the fallout from our current individualized risk society and the corresponding shrinkage of their social safety net.

From the Results

Within the Bankrupt Population

One in seven bankruptcy filers is of retirement age, 65 years or over. This is nearly a five-fold increase over just two and a half decades. This is a notable demographic shift.

Within the oldest cohort, those age 75 and over, there has been a near ten-fold increase since 1991. In 1991, this group constituted only 0.3 percent of filers, as compared to 3.3 percent now.

The overall trend is clear. Bankruptcy filers in the youngest cohorts (18-24, 25-34, and 35-44) now comprise a much smaller segment of the bankrupt population than they did twenty-five years ago. During that same period, there has been a marked increase in the percent of filers among the older cohorts (55-64, 65-74, and 75 and above), those people who are approaching or are in their retirement years.

Older Americans’ Reasons for Bankruptcy—Evidence of a Risk Shift

Regardless of age, leading data suggest that income problems and medical costs top the list of events that push households into bankruptcy.

Data from the current CBP suggest that financial struggles, namely a decline in income, was a leading reason for older Americans’ bankruptcies—almost seven out of ten respondents (69.1 percent) reported that they “very much” or “somewhat” agreed that this was the reason for their bankruptcy.

Another respondent’s comment describes an additional financial risk that can be especially consequential for retirees—the popular defined-contribution plans, like 401(k)s, that individuals are left to manage on their own.

Just over seven out of ten respondents (71.6 percent) either “very much” or “somewhat” agreed that they filed because of the stress of dealing with debt collectors.

Medical expenses also were a catalyst for bankruptcy for more than six out of ten (62.2 percent) respondents.

Additionally, 40 percent of respondents reported that they “very much” or “somewhat” agree that missing work for medical reasons was a reason for their bankruptcies.

Finally, respondents were asked to list the single most important thing that they or their family members were unable to afford in the year before their bankruptcies. Over half of older filers (52 percent) who responded indicated that the single most important thing they had to go forego was related to medical care—surgeries, doctor visits, prescriptions, dental care, and health/supplemental insurance. These responses continue to suggest that their health care coverage is inadequate.

From the Discussion

The most effective solution to older Americans’ increasing financial plight is a social safety net that obviates the need to take out debts that result in financial crises. In prior decades, Americans collectively decided that we have a responsibility to our older citizens to absorb the financial risks they face. But it appears that we have since abandoned that commitment. We can do better. Historically, we have.

At the core, the lessons of prior decades show that aid to older citizens must originate with our government. Community and charitable organizations, while having the best of intentions, are inadequate. Comprehensive policies led by our government will ensure financial stability for all elderly citizens. We appear to be in the midst of an old-fashioned game of tug-of-war. On the one hand, many Americans believe that providing a strong social safety net for our older citizens, a net that reduces their individual financial risks, is part of our collective responsibility. On the other hand, there are those who insist on policies that continue to unravel that safety net, leaving older Americans to fend for themselves.

Conclusion

How we manage the time called retirement, the span between when we stop working and when we die, is a social issue affecting the lives of tens of millions. America has come almost full circle in its attitudes toward its older citizens—from sending them to the poorhouse when they became a financial burden, to ameliorating their economic risks with pensions, a responsive social security program, and healthcare, and now to transferring financial risks to them that can drive them to financial collapse.

Absent significant policy changes that reassume the risks of aging and effectively insure the financial stability of older Americans, our data suggest that the trend of an aging bankruptcy population will continue. In 2015, almost 15 percent of the U.S. population was 65 and over. By 2050, almost a quarter of Americans, 88 million, will be over 65 (U.S. Census 2016). If current bankruptcy trends among seniors continue, our bankruptcy courts will be flooded with financially broken retirees. For older Americans, bankruptcy is too little too late. By the time they file, their wealth has vanished, and they simply do not have the enough years to get back on their feet. Our data expose the severity of the continuing financial decline of older Americans. Now that we can see the magnitude of the coming storm of broke elderly, it is time to renew our commitment to supporting our citizens as they age.

https://papers.ssrn.com…

***

Comment:

By Don McCanne, M.D.

The social safety net for older Americans built up during the last century is now showing alarming trends toward shifting greater financial risk to this population. In the past two and a half decades there has been a five-fold increase in the rate of bankruptcy filings for individuals over 65.

There are multiple factors including the loss of income, the deterioration in retirement plans, and the inability to accumulate wealth before retirement, but the inadequacy of health care coverage also has been a significant factor. The authors state, “respondents were asked to list the single most important thing that they or their family members were unable to afford in the year before their bankruptcies. Over half of older filers (52 percent) who responded indicated that the single most important thing they had to go forego was related to medical care—surgeries, doctor visits, prescriptions, dental care, and health/supplemental insurance.”

The authors conclude, “Absent significant policy changes that reassume the risks of aging and effectively insure the financial stability of older Americans, our data suggest that the trend of an aging bankruptcy population will continue… Now that we can see the magnitude of the coming storm of broke elderly, it is time to renew our commitment to supporting our citizens as they age,” and “At the core, the lessons of prior decades show that aid to older citizens must originate with our government.”

As an aside, one of the co-authors of this report, UC Irvine Professor Katherine Porter, is taking her academic credentials into the political arena by running for Congress in California’s 45th District, hoping to join Senator Elizabeth Warren and others in efforts to counter the attack on our social safety net.

Katherine Porter, Professor of Law, University of California, Irvine School of Law:
https://www.law.uci.edu…

Katie Porter for Congress:
https://katieporter.com

PNHP does not endorse candidates for pubic office. This statement on Katie Porter’s candidacy is appropriately included in the Quote of the Day since it shows her bias on the topic of today’s report (for full disclosure, a bias which Quote of the Day editor Don McCanne happens to share).

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Improved Medicare for All means something. Don’t dilute it!

By Kay Tillow
Daily Kos, August 6, 2018

On July 13, 2018, in an article1 on Vox, Tim Higginbotham and Chris Middleman of the Democratic Socialists of America’s (DSA) Medicare for All campaign condemned Paul Krugman, Adam Green, the Center for American Progress, and Andy Slavitt for their efforts to co-opt and water down the “Medicare for All” slogan into meaningless vague principles and inadequate programs. They are absolutely right!

Higginbotham and Middleman’s analysis of those who seek to use and abuse the growing popularity of “Medicare for All” while abandoning the struggle for a real national single payer program is excellent. The door-to-door grass roots proposal of the DSA is compelling with its plan to reach into the heart of every community.

But there is a problem embedded in Higginbotham and Middleman’s core principles that threatens to destroy all of their good work and do damage to the robust and growing single payer movement. Their five core demands which they assert “dovetail with the Sanders and Ellison bills” are inadequate to give us a viable single payer system. Why are Higginbotham and Middleman moving the goal posts? Their core demands are good—but too sparse to support the reform they say they seek. And the Sanders Senate bill S 18042 and the Ellison House bill, HR 6763 are worlds apart.

Do Higginbotham and Middleman really want to leave long term care out of Medicare for All? Their principles do not include it. That would abandon this vital care to the state Medicaid programs that require impoverishment prior to entering a nursing home. Leaving long term care to state Medicaid programs assures wide variations from state to state as some states will provide the sparsest of care. Medicaid has means-testing for eligibility, and that will worsen economic inequality as families must spend a lifetime of assets for final care. This will worsen the wealth gap because nothing is left to be passed on to families. Long term care isn’t included in Higginbotham and Middleman’s core demands even though it is a part of HR 676. It is a necessity and should be included. All necessary care for everyone means something. Don’t dilute it. The Senate bill S 1804 also excludes long term care.

Do Higginbotham and Middleman really want to allow the investor-owned, for-profit hospitals and nursing homes to continue to gouge patients with their higher costs and higher mortality rates? In their article they call for the elimination of the profit motive, but their core principles are silent on this vital issue. Does not removing the profiteers merit inclusion? HR 676 transforms the investor-owned, for-profit hospitals, nursing homes, and other institutions. S. 1804, the Senate bill, does not. Shouldn’t ending the profits in health care be a core demand? 

Check out the research.

“It has been shown that patients cared for at private for-profit hospitals have higher risk-adjusted mortality rates than those cared for at private not-for-profit hospitals4.”

And

“Private for-profit hospitals result in higher payments for care than private not-for-profit hospitals. Evidence strongly supports a policy of not-for-profit health care delivery at the hospital level5.”

Removing the for-profit hospitals and nursing homes must be a core demand. As Dr. Andy Coates puts it,

“
it’s appalling that one person’s illness would be an opportunity for another to make money. The care of human beings should not be a commodity.6

The United States spends over twice as much on health care, per capita, as the average of other industrialized countries that provide universal health care. So reaching our goal does not require spending more, but instead saving by removing the insurance companies and eliminating the waste caused by profits. Improved Medicare for All, a national single payer system, requires administrative savings to free funds to improve care for all and expand it to everyone. Yet Higginbotham and Middleman leave out of their core principles the vital global budgeting of hospitals and nursing homes and the separation of construction from operating costs. These are essential to assure the savings to make single payer financially viable. Is this not a core principle?

“Without global budgets, the national system has little power to constrain long-term cost growth7.”

In January of 1989 the Physicians’ Proposal for a National Health Program was published in the New England Journal of Medicine. Through updates in 2003 in the Journal of the American Medical Association8 and in 2016 in the American Journal of Public Health9, the plan of Physicians for a National Health Program (PNHP) has continued as the evidence-based single payer proposal uniting a national single payer movement.

In 2003, with the assistance of the Physicians for a National Health Program, Congressman John Conyers, Jr. of Michigan put this plan into legislative form and introduced it into the House of Representatives. Conyers introduced this bill, HR 676, into every Congress since that time, and it has been the sound legislation, Expanded and Improved Medicare for All, that now has 123 cosponsors.

When Rep. John Conyers resigned, Rep. Keith Ellison took over the lead sponsorship of HR 676. He, too, will be leaving the Congress to run for attorney general for the state of Minnesota. Nothing is more important than that the new chief sponsor, whoever that may be, be willing to maintain HR 676 as the model plan, based on the PNHP proposal, that when enacted will bring us the universal care we need.

Some have suggested that the model single payer bill, HR 676, needs to be rewritten to conform to the flawed senate bill S. 1804. That would be a disastrous setback for the single payer movement. S. 1804 excludes long term care. S. 1804 maintains private, for-profit hospitals and nursing homes. S. 1804 includes some copayments for drugs. S. 1804 has no global budgeting of hospitals. S. 1804 adopts in Section 611 (b) a “value based payment” system that has been proven to discriminate10 against physicians who care for those with low incomes. S. 1804 has a public option11 and a Medicare buy-in12 that will become barriers to achieving single payer. S. 1804 needs to be improved to come up to the standards of HR 676.

As every trade unionist knows, a compromise placed on the bargaining table at the beginning of negotiations becomes a ceiling above which it is not possible to go. If the ceiling is below viability of the new system, the plan fails before it gets off the ground. It is vital to set the standards high. A watered down, puny reform cannot inspire a nation to fight for it. We need a bold and beautiful plan.

So applaud Higginbotham and Middleman’s grass roots campaign. Join in the knocking on doors. 

Build and energize across the country. But don’t dilute the single payer principles. Improved Medicare for All means something!

Kay Tillow is a leader of Kentuckians for Single Payer Health Care and the All Unions Committee for Single Payer Health Care–HR 676.

Endnotes

1. https://www.vox.com…

2. https://www.congress.gov…

3. https://www.congress.gov…

4. http://www.cmaj.ca…

5. http://www.cmaj.ca…

6. https://www.pnhp.org…

7. https://www.pnhp.org/MedicareForAll

8. https://www.pnhp.org…

9. https://www.pnhp.org/beyondaca 

10. https://www.pnhp.org…

11. https://www.pnhp.org…

12. https://www.pnhp.org…

Libertarian rationale for single payer

Single payer sympathy?

By John Cochrane
The Grumpy Economist, July 29, 2018

A July 30 2018 Op-Ed in the Wall Street Journal, titled “The tax and spend health care solution”:

Why is paying for health care such a mess in America? Why is it so hard to fix? Cross-subsidies are the original sin. The government wants to subsidize health care for poor people, chronically sick people, and people who have money but choose to spend less of it on health care than officials find sufficient. These are worthy goals, easily achieved in a completely free-market system by raising taxes and then subsidizing health care or insurance, at market prices, for people the government wishes to help.

But lawmakers do not want to be seen taxing and spending, so they hide transfers in cross-subsidies. They require emergency rooms to treat everyone who comes along, and then hospitals must overcharge everybody else. Medicare and Medicaid do not pay the full amount their services cost. Hospitals then overcharge private insurance and the few remaining cash customers.

Overcharging paying customers and providing free care in an emergency room is economically equivalent to a tax on emergency-room services that funds subsidies for others. But the effective tax and expenditure of a forced cross-subsidy do not show up on the federal budget.

Over the long term, cross-subsidies are far more inefficient than forthright taxing and spending. If the hospital is going to overcharge private insurance and paying customers to cross-subsidize the poor, the uninsured, Medicare, Medicaid and, increasingly, victims of limited exchange policies, then the hospital must be protected from competition. If competitors can come in and offer services to the paying customers, the scheme unravels.

No competition means no pressure to innovate for better service and lower costs.

As usual, I (John Cochrane) have to wait 30 days to post the whole thing. It synthesizes some of my earlier blog posts on how cross subsidies are worse than straightforward, on budget, taxing and spending.

Let me here admit to one of the implications of this view. Single payer might not be so bad — it might not be as bad as the current Medicare, Medicaid, Obamacare, VA, etc. mess.

But before you quote that, let’s be careful to define what we mean by “single payer,” which has become a mantra and litmus test on the left. There is a huge difference between “there is a single payer that everyone can use,” and “there is a single payer that everyone must use.”

Most on the left promise the former and mean the latter. Not only is there some sort of single easy to access health care and insurance scheme for poor or unfortunate people, but you and I are forbidden to escape it, to have private doctors, private hospitals, or private insurance outside the scheme. Doctors are forbidden to have private cash paying customers. That truly is a nightmare, and it will mean the allocation of good medical care by connections and bribes.

But a single provider or payer that anyone in trouble can use, supported by taxes, not cross-subsidized by restrictions on your and my health care — not underpaying in a private system and forcing that system to overcharge others — while allowing a vibrant completely competitive free market in private health care on top of that, is not such a terrible idea, and follows from my Op-Ed. A single bureaucracy that hands out vouchers, pays full market costs, or pays partially but allows doctors to charge whatever they want on top of that would work. A VA like system of public hospitals and clinics would work too.  Like public schools, or public restrooms, you can use them, but you don’t have to; you’re free to spend your money on better options if you like, and people are free to start businesses to serve you. And no cross-subisides.

Whether we restrict provision with income and other tests, and thus introduce another marginal disincentive to work, or give everyone access and count on most working people to choose a better product, I leave for another day. It would always be an inefficient bureaucratic problem, but it might not be the nightmare of anti-competitive inefficiency of the current system.

The free market describes well how your and my health care and insurance should work. It does not offer nearly so clear advice on how the government should manage the finances and bureaucracy that provide subsidies (if we want to provide them). There are always tradeoffs, generosity vs. moral hazard and disincentives. Economics is crucial to understanding those tradeoffs, of course, but the answer will always be a muddy middle of tradeoffs. I have offered that taxing and spending — on budget and appropriated — to provide those subsidies may be better than the current mandated cross subsidies. We already have a “single payer” — the federal government. The argument that a single point of entry, a single payer, or a single provider, may be more rational and cost effective than the current system for the purpose of providing subsidized care is not as crazy as it sounds — if it allows a free market for the majority of Americans who own cars, houses, TVs and cell phones and can pay for better services in that free market.

“Single payer” also usually means “single price-setter.” It means a gargantuan Federal bureaucracy that will somehow produce health care cost savings by simply decreeing that doctors and hospitals be paid less. Good luck with that.

Both left and right forget that “negotiation” means only you pay less and somebody else pays more. We can’t all pay less by negotiation. Price controls mean rationing. Period. This is the heart of current “single payer” proposals, and they are doomed.

My “single payer” is just that, a “payer,” operating in a completely free market.

Still, when a politician endorses “single payer,” ask “does that mean we all can use a single payer? Or does that mean we all must use a single payer?”

John H. Cochrane is a Senior Fellow of the Hoover Institution at Stanford, an adjunct scholar of the Cato Institute, and formerly a professor at the University of Chicago Booth School of Business.

https://johnhcochrane.blogspot.com…

***

Comment:

By Don McCanne, M.D.

The single payer policy community certainly would dispute that there are two types of single payer – one that allows individuals to opt out and one that mandates participation. In a well designed single payer system there is only one payer for everyone. That does not mean that there are not other systems that allow individuals to opt out of the public program, but those multi-payer systems should not be labeled single payer.

Nevertheless, the comments of conservative economist John Cochrane are interesting. He recognizes that there are enough sound economic policies in a single payer system that it “might not be as bad as the current Medicare, Medicaid, Obamacare, VA, etc. mess.” On that we can agree. However our ideological differences leave us far apart. Cochrane’s insistence that the market must still play a prominent role calls for design features that prevent realization of the single payer goals of true universality, equity, affordability, and universal access.

Many of his comments warrant a response which we won’t bother with now, except one that stands out and that is his statement that a single payer system that does not allow other options is one in which, “you and I are forbidden to escape it, to have private doctors, private hospitals, or private insurance outside the scheme.” Of course, the single payer system supported by Physicians for a National Health Program does allow free choice of private doctors and hospitals. Following is the comment that I submitted in response to his blog:

Under a single payer that everyone must use you are forbidden to have private doctors and private hospitals? But look at the traditional Medicare program. Patients have free choice of their physicians and hospitals. They also can elect to enroll in the private Medicare Advantage (MA) plans, but then they lose their their health care choices by being restricted to provider networks. Not only that, but “MA insurer revenues are 30 percent higher than their healthcare spending,” demonstrating the surplus that the private insurers are receiving from the taxpayers (NBER No. 23090) – a cross subsidy of sorts, but benefiting the insurer rather than the patients.

Of course, single payer advocates also support tax and spend, but we want our tax funds to be used wisely. Providing excess public funding to private insurers while they take away health care choices from patients is not a wise use of our tax dollars. It would be far better to improve the traditional Medicare program and then cover everyone with it, and then let the health care delivery system compete on the basis of service, access, and quality.

***

A Libertarian’s Case Against Free Markets in Health Care

By Roman Zamishka
The Health Care Blog, August 2, 2018

This presumably arbitrary nature of prices should be the first thing about the US healthcare market that catches the attention of any student of economics. Prices for the same procedure vary greatly between hospitals on opposite sides of the street and even then appear to have no basis in reality. Further investigation reveals many other features of the healthcare market that economics teaches us will increase transaction costs and the misallocation of resources. The prices we discussed are generally not paid by the patient, but by a third party insurer. Often the patient isn’t even able to select the insurer but is assigned one by his or her employer. What the patient thinks of the insurer’s ability as a steward of his or her premiums is irrelevant. Further, contracts between providers or pharmacies and the insurer completely hide the true price from the patient’s view. In addition, anti-competitive certificate of need laws limit competition between providers and expensive regulations compel providers to merge to compete in a nuclear arms race with the insurers, although the real victim is the patient’s wallet over which the providers and insurers fight their proxy wars. The best way to explain the US healthcare system is if you took every economic best practice and then did the opposite.

Academics and physicians from places like Boston and San Francisco often argue that this situation is proof that free market healthcare has failed in America and that the only solution is to implement a nationalized single-payer model.

(Zamishka here provides a discussion of Kenneth Arrow’s “Uncertainty and the Welfare Economics of Medical Care,“ and then discusses how markets do not work in the various institutions and disciplines of medicine.)

The broader problem that I see is that much of the health insurance market is already nationalized through Medicaid, Medicare and the VA. The reality is that it is politically impossible to reverse from this position. If we then add to this list emergency medicine, perinatal healthcare, child healthcare, genetic diseases, mental health and chronic disease management, all of which I earnestly believe have a legitimate case to be nationalized, then what are we left with for free market shopping? Surgeries and generic drugs? At that point, you might as well nationalize the rest just to simplify things and remove any regulatory asymmetries. I hate to say it, but it’s not clear to me as a conservative that single payer (or at least universal coverage + optional private supplemental insurance) isn’t the right solution.

Roman Zamishka is a healthcare policy student at NYU focused on comparative analysis of healthcare systems.

http://thehealthcareblog.com…

***

Comment:

By Don McCanne, M.D.

These articles express the views of two libertarians who recognize the benefits of the single payer model of health care financing, though both would maintain a role for private insurance.

The Cochrane article is reproduced in its entirety. The Zamishka article is quite long and so only brief excerpts are provided. However it might be worth wile to save the link for reading the full article this weekend. He presents a case that we should consider using when discussing single payer with libertarians or conservatives who truly do care and would like to see our health care financing system function better for all of us.

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

Can a New Generation of Med Students Help Push Medicare for All?

There's growing activist energy among current and recent med students—and they're eager to help lead the campaign for equitable legislation.

By Natalie Shure
Pacific Standard, August 2, 2018

Upon finding out what residency programs they’d been matched with this spring, some 310 fourth-year medical students have taken the #MatchDayPledge, a social media campaign that invites the next crop of first-year residents to snap selfies alongside a signed commitment to fight for “improved Medicare for All.” The initiative was sponsored by Students for a National Health Program, or SNaHP—a single-payer advocacy organization with 1,400 members and chapters in over 60 medical schools—whose annual conference in New Orleans this March culminated in a demonstration on the steps of city hall, where they demanded an equitable health-care system financed by a single, public insurance pool.

Such actions may not command outsized attention relative to the overall Medicare-for-All campaign, which grew considerably after Bernie Sanders’ 2016 primary run and counts among its supporters groups like National Nurses United, the AFL-CIO, the Democratic Socialists of America, and several national Democratic figures, including Congressman Keith Ellison and Senator Elizabeth Warren. But the heightened participation of medical students within the movement signals an apparent shift in the way that some future physicians interpret their public duties as they step into their new roles. As the Affordable Care Act teeters after a stormy few years of legal onslaught, volatile exchange markets, skyrocketing premiums, shrinking coverage options, and just-missed repeal efforts, young doctors stand to be a key bloc influencing the direction of American health-care reform, which voters cite as a top concern for 2018 mid-terms.

In recent years, left-of-center political activism among medical students has grabbed headlines across the country, including die-ins staged by the racial health justice group White Coats for Black Lives, and student-led ACA sign-up drives and gun-control demonstrations. If SNaHP’s recent growth (the group’s numbers are up 50 percent since 2016) is any indication, today’s students are poised to find themselves on the front lines of a protracted political battle over the future of a profit-driven health-care system that many of them intend to dismantle and fix from within.

It hasn’t always been this way: Medical school curricula can be notoriously divorced from the broader social and political context that shapes the lives of students’ future patients. Instructors often maintain an expressly apolitical posture toward political issues, and practicing physicians are encouraged to do the same; as Dr. Thomas S. Huddle put it in the journal Academic Medicine in 2011, “Advocacy on behalf of societal goals, even those goals as unexceptionable as the betterment of human health, is inevitably political. … Official efforts on behalf of advocacy will undermine university aspirations to objectivity and neutrality.” As I reported this story, a few dozen current and former medical students told me they’d received only minimal exposure in classrooms to material about health-care financing in general, let alone about single-payer specifically.

Augie Lindmark, a third-year at the University of Minnesota and a SNaHP board member, tells me that, as for most students, his introduction to these ideas was extracurricular. It wasn’t until attending a talk by Dr. Steffie Woolhandler, the co-founder of PNHP (Physicians for a National Health Program, of which SNaHP is the student arm), that he came to appreciate fully the dire state of health-care financing in the United States.

“To this day, I remember this one chart,” Lindmark recalls of a lecture slide. “The growth of [health-care system] administration, 3000 percent; growth of doctors, 100 percent.” For Lindmark, Woolhandler’s critique of administrative costs painted a picture of a health-care system that was at best incoherent and wasteful, and at worst unbearably cruel, preventing millions of patients from finding necessary care while funneling billions toward a byzantine administrative regime that denies claims based on technicalities, processes documentation for eligibility, and decodes complicated billing systems that differ from patient to patient. The political content, Landmark says, “was a complete 180 from the curriculum I’d gotten in school.”

Illness, Lindmark came to realize, results from the dynamics of capitalism as much as from germs or lifestyle. He was maddened by the lack of political content in his coursework, and at SNaHP, he found like-minded students convinced that they are witnessing real momentum toward the biggest health-care policy shift in American history. “These are people who are very excited, very disenchanted with the system as it is, and want to work under something else,” Lindmark says. “I think students are at the front lines of leading that push.”

This confrontational posture places these left-leaning students at odds with many of their historical predecessors, who have often prioritized professional and financial interests over reforming health-care financing. During the administration of President Harry Truman, the American Medical Association famously beat back a once-popular proposal for national health insurance by launching what was then the biggest lobbying campaign in American history. The AMA smeared the public plan as “socialized medicine,” and the organization’s successful campaign against Truman helped entrench the private, employer-based system that we’re still stuck with today. Just over a decade later, the AMA allied with industry representatives to try to defeat Medicare and Medicaid—only to pivot, enthusiastically, once it became clear just how conciliatory legislators intended to be in carving out lucrative roles for the private sector. While the AMA (and physicians more broadly) have been more supportive of reforms in the decades since, their endorsements have largely come with caveats to protect their autonomy and, above all, their salaries. This year, SNaHP led an effort within the AMA’s student wing to encourage the group to endorse Medicare for All.

It isn’t terribly hard to figure out why many U.S. physicians would resist transformative health financing reform, even if Medicare did end up being more of a cash cow than their propaganda in the 1960s had warned. For many decades, doctors were among the parties who derived the greatest advantages from commodified health care. The structural shortcomings of a piecemeal, for-profit system leave insurers unable to negotiate prices effectively, resulting in staggering medical cost inflation that has tended to benefit physicians. By covering all Americans in one unified insurance pool, single-payer systems—like those envisioned in bills sponsored by Sanders and Ellison—would leverage federal bargaining power to drive down reimbursements paid to providers. In peer countries that employ similar health-care cost controls, doctors earn some 40 percent less than their American counterparts—and, as Elizabeth Rosenthal notes in her book An American Sickness: How Healthcare Became Big Business and How You Can Take It Back, while most Americans have struggled to make do amid lackluster job prospects since 2009, doctors’ pay has risen steadily. And, given that the average U.S. medical student graduates with $170,000 in debt, there are strong incentives to protect the status quo even before becoming a part of it.

But there is evidence that this self-interest among doctors is changing too. Polls show that 56 percent of American doctors now support a single-payer health system, up from 42 percent in 2008. That shift may partly reflect the recent erosion of the traditional advantages that doctors long held within the system. Rampant industry consolidation has left more than 50 percent of doctors working for larger corporate entities, rather than owning their own practice, and physicians can expect to spend over twice the amount of time on the complicated administrative work our system demands than they’re able to spend with patients. And, of course, doctors see firsthand the harm that inadequate insurance coverage has done to their patients: Tens of thousands of Americans die each year because they don’t have insurance, even after the reforms of Obamacare.

“I’m banging my head against the wall every day just trying to get my patients the care they need in this broken system,” explains Dr. Richard Bruno, a family physician who co-founded SNaHP as a med student in 2011. The failures of that system can have grave effects on doctors themselves, among whom suicide rates are on the rise. Their anguish, many argue, is ascribable to the very system harming so many of their patients: “Doctors are just trying to survive day to day … they’re victims of the system too,” Bruno says.

Bruno is heartened by SNaHP’s growth: “I’ve never seen a more active group in all the orgs I work with…While they’re learning how to stop disease, they’re spreading their passion for health justice; it’s beautiful, really,” he says. Students do have a historic track record in helping to advance progressive movements: They can have the advantage of being able to shape institutions as they move through them, establishing new political norms from the get-go that stretch the boundaries of currently acceptable discourse within the profession. And given the AMA’s politically decisive role in knocking down a single-payer plan during Truman’s presidency, and the group’s critical roles in the health-care system overall, doctor buy-in will be essential to achieve Medicare for All. While the organization endorsed the ACA in 2009, it still maintains an official stance against single-payer—a decades-long position that Lindmark says SNaHP is pushing them to reject this summer.

Now that the message is taking hold among more and more students, Bruno says the next step is gaining electoral power. He’s running for the Maryland State House on a Medicare-for-All platform, and making his case directly to the people who he hopes will be his future constituents. “We’re knocking on doors every day,” he says. “They tell me their stories about scraping together $400 a month just to pay premiums before they get any care at all. They see the need for something better.”

https://psmag.com…

Himmelstein and Woolhandler critique the Mercatus analysis of single payer costs

The Mercatus Center's Estimate of the Costs of a National Single-Payer Healthcare System: Ideology Masquerading as Health Economics

By David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, August 2, 2018

The Mercatus Center’s estimate of the cost of implementing Sen. Bernie Sanders’ Medicare for All Act (M4A) projects outlandish increases in the utilization of medical care, ignores vast savings under single-payer reform, and fails to even mention the extensive and well-documented evidence on single-payer systems in other nations – which all spend far less per person on health care than we do. But despite adopting a raft of faulty assumptions that inflate the estimated cost of implementing single payer, the Mercatus Center’s report concludes that universal first dollar coverage under Sen. Sanders’ bill would actually decrease the nation’s total health expenditures, saving the average American about $6,000 over ten years.

We outline below some of the most glaring errors in the Mercatus Center analysis of Medicare for All, which was led by Charles Blahous.

1. Administrative savings, Part 1: Blahous assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 13 percent in private insurance. Although overhead in Canada’s single payer system is only 1.8%, Blahous justifies his 6 percent estimate by citing Medicare’s current overhead, which includes the extraordinarily high overhead costs of private Medicare HMOs run by UnitedHealthcare and other insurance firms. However, Sen. Sanders’ proposal would exclude these for-profit insurers, and instead build on the traditional Medicare program, whose overhead is less than 3 percent. Moreover, by simplifying hospital payments by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments, a well-designed single-payer program could fully reduce overhead to Canada’s level of about 1.8 percent. Cutting insurance overhead to less than 2 percent (rather than the 6 percent that Blahous projects) would save approximately $2.9 trillion more than Blahous estimates over a 10 year period.

2. Administrative savings, Part 2: Blahous seems unaware of the extensive literature documenting the huge administrative burden – and resulting costs – borne by U.S. doctors and hospitals, and the savings that would be realized under a streamlined single-payer system. Every serious analyst of single-payer reform has acknowledged these savings, including the Congressional Budget Office, the Government Accountability Office, the Lewin Group (a consulting firm owned by UnitedHealth Group), and Prof. Kenneth Thorpe.

These provider savings on paperwork would, in fact, be much larger than the savings on insurance overhead. At present, U.S. hospitals spend one-quarter of their total budgets on billing and administration, more than twice as much as hospitals spend in single payer systems like Canada’s or Scotland’s. Similarly, U.S. physicians, who must bill hundreds of different insurance plans with varying payment and coverage rules, spend two to three times as much as our Canadian colleagues on billing.

Overall, these administrative savings for doctors and hospitals would amount to about $3.4 trillion over 10 years. Additional savings of almost $2.0 trillion from streamlined billing and administration would accrue to nursing homes, home care agencies, ambulance companies, drug stores, and other health care providers.

In total, the Blahous analysis underestimates administrative savings by about $8.3 trillion over 10 years.

3. Drug costs: Blahous projects that the only drug savings achievable through a single-payer plan would come from switching patients from brand name drugs to generics. He assumes that the prices of drugs – both generics and brand name drugs – could not be lowered through the price negotiations called for in Sen. Sander’s bill. Blahous claims that the savings achievable through negotiations cannot be estimated, ignoring the price reductions of about 40-50% that have been achieved by the VA and by many other nations that use the methods called for in the Sanders legislation.

Reducing drug prices to the levels currently paid by European nations would save at least $1.7 trillion more than Blahous posits over 10 years.

4. Utilization of care: Blahous projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase he foresees for specific services like doctor visits or hospital care. However, it is clear that the medical care system does not have the capacity to provide the huge surge in care that he posits.

For instance Blahous’ figures for the increase in acute care suggest that Sanders’ plan would result in more than 100 million additional doctor visits and several million more hospitalizations each year. But there just aren’t enough doctors and hospital beds to deliver that much care. Doctors are already working 53 hours per week, and experience from past reforms tells us that they won’t increase their hours, nor will they see many more patients per hour.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada. Doctors and hospitals can adjust care to meet increasing demand, as happens every year during flu season.

Moreover, no surge materialized when Medicare was implemented and millions of previously uninsured seniors got coverage. Between 1964 (before Medicare) and 1966 (the year when Medicare was fully functioning) there was absolutely no increase in the total number of doctor visit in the U.S.; Americans averaged 4.3 visits per person in 1964 and 4.3 visits per person in 1966. Instead, the number of visits by poor seniors went up, while the number of visits by healthy and wealthy patients went down slightly. The same thing happened in hospitals. There were no waiting lists, just a reduction in the utilization of unneeded elective care by wealthier patients, and the delivery of more care to sick people who needed it.

Bizarrely, despite projecting a $2.213 trillion increase in total payments to providers over 10 years, Blahous claims that the program would lead to massive financial losses for doctors and hospitals (top of page 19).

5. Long Term Care: The original version of Blahous’ report estimated that the Sanders bill would increase expenditures for long term care by $1.849 trillion over 10 years. He was apparently unaware that the Sanders bill would not immediately implement major changes in the long term care financing system. When informed of this error he deleted this section of the report, and recalculated his figures.

In summary, Blahous grossly underestimates the administrative savings under single payer; projects increases in the number of doctor visits and hospitalizations that far exceed the capacity of doctors and hospitals to provide this added care; and posits that our country would continue to pay much more for drugs and medical equipment than people in every other nation with national health insurance. He thus overestimates national health expenditures by about $10 trillion over 10 years.

Blahous also neglects to mention that massive savings would accrue to businesses, households, and state and local governments that would no longer be saddled with health insurance premiums or out-of-pocket costs. These savings would more than compensate for the increased federal government expenditures. The Sanders bill would, in reality, shift spending from private to public sources, and from state and local governments to the federal government. Over 10 years, our nation would surely pay less overall under Sen. Sanders bill than under current arrangements.

Moreover, despite overestimating new costs and underestimating savings Blahous admits that Sanders’ program would cover all of the uninsured, and upgrade coverage for the vast majority of Americans who currently have private insurance or Medicare, while decreasing total health expenditures by $2 trillion over ten years.

Blahous’ biased, anti-single payer estimate inadvertently bolsters the evidence that a single payer reform would greatly increase the efficiency and fairness of the U.S. health care system.

Drs. Himmelstein and Woolhandler are distinguished professors of health policy at the City University of New York at Hunter College and lecturers in medicine at Harvard Medical School. The opinions expressed do not necessarily reflect those institutions’.

https://www.pnhp.org…

***

Comment:

By Don McCanne, M.D.

Res ipsa loquitur.

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

Dr. Paul Song on ‘Rising Up With Sonali’

PNHP national board member Dr. Paul Song appeared on “Rising Up With Sonali” on Free Speech TV and Pacifica radio stations on August 2, 2018. He discussed a recent study from the Koch-funded Mercatus Center that concluded Sen. Bernie Sanders’ Medicare for All Act would reduce overall health spending while covering all Americans.

The Mercatus Center’s Estimate of the Costs of a National Single-Payer Healthcare System: Ideology Masquerading as Health Economics

By David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, August 2, 2018

The Mercatus Center’s estimate of the cost of implementing Sen. Bernie Sanders’ Medicare for All Act (M4A) projects outlandish increases in the utilization of medical care, ignores vast savings under single-payer reform, and fails to even mention the extensive and well-documented evidence on single-payer systems in other nations – which all spend far less per person on health care than we do. But despite adopting a raft of faulty assumptions that inflate the estimated cost of implementing single payer, the Mercatus Center’s report concludes that universal first dollar coverage under Sen. Sanders’ bill would actually decrease the nation’s total health expenditures, saving the average American about $6,000 over ten years.

We outline below some of the most glaring errors in the Mercatus Center analysis of Medicare for All, which was led by Charles Blahous.

1. Administrative savings, Part 1: Blahous assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 13 percent in private insurance. Although overhead in Canada’s single payer system is only 1.8%, Blahous justifies his 6 percent estimate by citing Medicare’s current overhead, which includes the extraordinarily high overhead costs of private Medicare HMOs run by UnitedHealthcare and other insurance firms. However, Sen. Sanders’ proposal would exclude these for-profit insurers, and instead build on the traditional Medicare program, whose overhead is less than 3 percent. Moreover, by simplifying hospital payments by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments, a well-designed single-payer program could fully reduce overhead to Canada’s level of about 1.8 percent. Cutting insurance overhead to less than 2 percent (rather than the 6 percent that Blahous projects) would save approximately $2.9 trillion more than Blahous estimates over a 10 year period.

2. Administrative savings, Part 2: Blahous seems unaware of the extensive literature documenting the huge administrative burden – and resulting costs – borne by U.S. doctors and hospitals, and the savings that would be realized under a streamlined single-payer system. Every serious analyst of single-payer reform has acknowledged these savings, including the Congressional Budget Office, the Government Accountability Office, the Lewin Group (a consulting firm owned by UnitedHealth Group), and Prof. Kenneth Thorpe.

These provider savings on paperwork would, in fact, be much larger than the savings on insurance overhead. At present, U.S. hospitals spend one-quarter of their total budgets on billing and administration, more than twice as much as hospitals spend in single payer systems like Canada’s or Scotland’s. Similarly, U.S. physicians, who must bill hundreds of different insurance plans with varying payment and coverage rules, spend two to three times as much as our Canadian colleagues on billing.

Overall, these administrative savings for doctors and hospitals would amount to about $3.4 trillion over 10 years. Additional savings of almost $2.0 trillion from streamlined billing and administration would accrue to nursing homes, home care agencies, ambulance companies, drug stores, and other health care providers.

In total, the Blahous analysis underestimates administrative savings by about $8.3 trillion over 10 years.

3. Drug costs: Blahous projects that the only drug savings achievable through a single-payer plan would come from switching patients from brand name drugs to generics. He assumes that the prices of drugs – both generics and brand name drugs – could not be lowered through the price negotiations called for in Sen. Sander’s bill. Blahous claims that the savings achievable through negotiations cannot be estimated, ignoring the price reductions of about 40-50% that have been achieved by the VA and by many other nations that use the methods called for in the Sanders legislation.

Reducing drug prices to the levels currently paid by European nations would save at least $1.7 trillion more than Blahous posits over 10 years.

4. Utilization of care: Blahous projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase he foresees for specific services like doctor visits or hospital care. However, it is clear that the medical care system does not have the capacity to provide the huge surge in care that he posits.

For instance Blahous’ figures for the increase in acute care suggest that Sanders’ plan would result in more than 100 million additional doctor visits and several million more hospitalizations each year. But there just aren’t enough doctors and hospital beds to deliver that much care. Doctors are already working 53 hours per week, and experience from past reforms tells us that they won’t increase their hours, nor will they see many more patients per hour.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada. Doctors and hospitals can adjust care to meet increasing demand, as happens every year during flu season.

Moreover, no surge materialized when Medicare was implemented and millions of previously uninsured seniors got coverage. Between 1964 (before Medicare) and 1966 (the year when Medicare was fully functioning) there was absolutely no increase in the total number of doctor visit in the U.S.; Americans averaged 4.3 visits per person in 1964 and 4.3 visits per person in 1966. Instead, the number of visits by poor seniors went up, while the number of visits by healthy and wealthy patients went down slightly. The same thing happened in hospitals. There were no waiting lists, just a reduction in the utilization of unneeded elective care by wealthier patients, and the delivery of more care to sick people who needed it.

Bizarrely, despite projecting a $2.213 trillion increase in total payments to providers over 10 years, Blahous claims that the program would lead to massive financial losses for doctors and hospitals (top of page 19).

5. Long Term Care: The original version of Blahous’ report estimated that the Sanders bill would increase expenditures for long term care by $1.849 trillion over 10 years. He was apparently unaware that the Sanders bill would not immediately implement major changes in the long term care financing system. When informed of this error he deleted this section of the report, and recalculated his figures.

In summary, Blahous grossly underestimates the administrative savings under single payer; projects increases in the number of doctor visits and hospitalizations that far exceed the capacity of doctors and hospitals to provide this added care; and posits that our country would continue to pay much more for drugs and medical equipment than people in every other nation with national health insurance. His thus overestimates national health expenditures by about $10 trillion over 10 years.

Blahous also neglects to mention that massive savings would accrue to businesses, households, and state and local governments that would no longer be saddled with health insurance premiums or out-of-pocket costs. These savings would more than compensate for the increased federal government expenditures. The Sanders bill would, in reality, shift spending from private to public sources, and from state and local governments to the federal government. Over 10 years, our nation would surely pay less overall under Sen. Sanders bill than under current arrangements.

Moreover, despite overestimating new costs and underestimating savings Blahous admits that Sanders’ program would cover all of the uninsured, and upgrade coverage for the vast majority of Americans who currently have private insurance or Medicare, while decreasing total health expenditures by $2 trillion over ten years.

Blahous’ biased, anti-single payer estimate inadvertently bolsters the evidence that a single payer reform would greatly increase the efficiency and fairness of the U.S. health care system. 

Drs. Himmelstein and Woolhandler are distinguished professors of health policy at the City University of New York at Hunter College and lecturers in medicine at Harvard Medical School. The opinions expressed do not necessarily reflect those institutions’.

QOTD Addendum: RAND study of the New York Health Act

Distributed as Quote of the Day on August 1, 2018

This morning the RAND study on the single payer New York Health Act was sent out primarily to demonstrate another study showing that the single payer model is effective for ensuring that everyone is covered while containing health care costs. However, a critique of the RAND analysis was not distributed, even though there are some significant deficiencies in the study.

One of the most important policies that characterizes a well designed single payer system is the recovery of a tremendous amount of administrative waste. Many of the studies minimize the amount of waste that exists and that can be recovered, in spite of the abundance of evidence published in the academic policy literature. This is crucial because that concept is often omitted from reports in the lay literature, and so the public is not well informed on this exceedingly important feature of the single payer model. In your single payer advocacy, always be sure that the magnitude of the recoverable administrative waste is not omitted from the discussions.

David Himmelstein and Steffie Woolhandler, distinguished professors of health policy at the City University of New York at Hunter College and co-founders of PNHP, have provided the following brief critique of the RAND study. In it they show that the benefit of single payer is far greater that that reported by the RAND authors, especially regarding the administrative savings.

***

Comments on the Rand Estimates of the Costs of the New York Health Act

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

1) The projected net changes in utilization given supply constraints are in the ballpark, although the portrayal of the supply constraints as implying waits is unduly negative. Supply constraints limited utilization increases with the implementation of Medicare and the ACA, yet there was no perceptible increase in waits for care. Rather, there was probably a reduction in unnecessary care for the previously well insured.

2) The estimate of reductions in drug prices is too low given the experience in other nations. In particular, the assumption that prices of drugs delivered in physicians’ offices would be reduced by a smaller percentage than other drug prices seems unjustified.

3) The estimates of administrative savings are absurdly low.

a) The assumption that health plan administrative overhead would only be reduced to 6% is completely unjustified. FFS Medicare’s administrative overhead is under 3%, while Canada’s single payer programs averaged overhead of 1.6% in 2017 – a total of $2.7 billion (Canadian). (Canada’s overhead costs are lower, at least in part, because it pays hospitals global budgets rather than FFS, as Medicare does. It seems likely that the NYH act would also globally budget hospitals, and hence achieve savings comparable to those in Canada). As the Rand authors note, the overhead rates for Medicare as a whole (7%), and for Medicaid (7%) are inflated because they include the extremely high overhead of managed care plans in those programs.

Rand claims that health plan administrative costs would be driven up by the need to verify residency, deal with out-of-state services, and track Medicaid and Medicare eligibility in order to draw down federal matching funds. The Canadian provincial programs perform the first two of these functions. Tracking Medicaid eligibility should take trivial resources – essentially just verifying income, which can largely be gleaned from income tax and Social Security records. The Social Security Administration should be able to provide information on Medicare eligibility at virtually no cost to the state.

In sum, there is no justification for the claim that it would cost $16.6 billion to administer coverage for 20 million New Yorkers – $830 per person, more than 8-fold higher than Canada’s cost. A more reasonable estimate would be 2%, or at most 3%.

b) It is hard to decipher exactly how the Rand authors estimated provider administrative savings. In Table 4.1 they indicate that at present, administrative costs account for 13% of physician and clinical service expenditures, 12% of hospital expenditures in New York and 10% of other service expenditures. They then estimate that provider administrative spending could be reduced by 13%, i.e. equivalent to a savings of less than 2% of total revenues.

While they list several references to support this estimate (and provide some further description in footnote 16 on page 33), it is unclear how they arrived at these figures, which are at odds with the actual findings of several of the references they cite. For instance, the Blanchfield paper they cite estimated that “excess” administrative costs in physician practices accounted for 11.9% of total net revenues, or about $50,250 per physician. The Himmelstein, Campbell and Woolhandler paper that they cite, found that administrative costs consumed about 26.9% of physicians’ revenues and  24.3% of hospital revenues, while these costs were 16.1% and 12.9% respectively in Canada. (Himmelstein et al’s more recent analysis of hospital administrative costs in 8 nations, which appeared in Health Affairs in 2014 reached virtually identical conclusions regarding hospital administrative costs and savings.) Both the Jiwani study and the Pozen and Cutler papers reached virtually identical conclusions as the Himmelstein, Campbell, Woolhandler study regarding administrative savings under single payer. The Mora et al study they cite concluded that physicians’ administrative costs totaled about $83,000 per physician in the US vs. about $27,000 per doctor in Canada, far larger savings than Rand assumes.

They reference Rand hospital data, which apparently relies on the same data source as the Himmelstein analyses of hospital administrative costs (which have undergone extensive peer review), but provide no information on how they derived administrative cost estimates from these data, and as far as we can tell their methods have neither been published nor peer reviewed. They cite their analysis of hospital administrative costs in Maryland’s all-payer system, which is irrelevant to an analysis of single payer, then use this paper as a “low estimate” in order to justify excluding a high estimate from a study that is clearly relevant.

In sum, according to the documentation in the report, it appears that the Rand authors  have made an error in interpreting previous studies’ figures for administrative costs and savings for providers under single payer. These studies generally estimate that administrative SAVINGS under single payer would amount to 12%-13% of providers’ TOTAL REVENUES. The Rand authors appear to have mistakenly concluded that these figures are estimates of the total costs of administration (rather than potential savings), and have then assumed that 12% of administrative costs (rather than 12% of total revenues) would be saved. As a result they estimate that providers’ would achieve administrative savings of about 1% of total revenues, rather than about 12% – a very large difference.

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The Next Generation of Doctors Is Pushing for Universal Healthcare

The student caucus of the American Medical Association got the organization to agree to reconsider its decades-long opposition to single-payer healthcare.

By Shefali Luthra
Tonic, August 1 2018

When the American Medical Association—one of the nation’s most powerful healthcare groups—met in Chicago this June, its medical student caucus seized an opportunity for change.

Though they had tried for years to advance a resolution calling on the organization to drop its decades-long opposition to single-payer healthcare, this was the first time it got a full hearing. The debate grew heated—older physicians warned their pay would decrease, calling younger advocates naive to single-payer’s consequences. But this time, by the meeting’s end, the AMA’s older members had agreed to at least study the possibility of changing its stance.

“We believe healthcare is a human right, maybe more so than past generations,” says Brad Zehr, a 29-year-old pathology resident at Ohio State University, who was part of the debate. “There’s a generational shift happening, where we see universal healthcare as a requirement.”

The ins and outs of the AMA’s policy making may sound like inside baseball. But this year’s youth uprising at the nexus of the medical establishment speaks to a cultural shift in the medical profession, and one with big political implications.

Amid Republican attacks on the Affordable Care Act, an increasing number of Democrats—ranging from candidates to established Congress members—are putting forth proposals that would vastly increase the government’s role in running the health system. These include single-payer, Medicare-for-all, or an option for anyone to buy in to the Medicare program. At least 70 House Democrats have signed on to the new “Medicare-for-all” caucus.

Organized medicine, and previous generations of doctors, had for the most part staunchly opposed to any such plan. The AMA has thwarted public health insurance proposals since the 1930s and long been considered one of the policy’s most powerful opponents.

But the battle lines are shifting as younger doctors flip their views, a change that will likely assume greater significance as the next generation of physicians takes on leadership roles. The AMA did not make anyone available for comment.

Many younger physicians are “accepting of single-payer,” says Christian Pean, 30, a third-year orthopedic surgery resident at New York University.

In prior generations, “intelligent, motivated, quantitative” students pursued medicine, both for the income and because of the workplace independence—running practices with minimal government interference, says Steven Schroeder, 79, a longtime medical professor at the University of California-San Francisco.

In his 50 years of teaching, students’ attitudes have changed: “The ‘Oh, keep government out of my work’ feeling is not as strong as it was with maybe older cohorts,” Schroeder says. “Students come in saying, ‘We want to make a difference through social justice. That’s why we’re here.’”

Though “single-payer” healthcare was long dismissed as a left-wing pipe dream, polling suggests a slim majority of Americans now support the idea—though it is not clear people know what the term means.

A full single-payer system means everyone gets coverage from the same insurance plan, usually sponsored by the government. Medicare-for-all, a phrase that gained currency with the presidential campaign of Senator Bernie Sanders of Vermont, means everyone gets Medicare, but, depending on the proposal, it may or may not allow private insurers to offer Medicare as well. (Sanders’ plan, which eliminates deductibles and expands benefits, would get rid of private insurers.)

Meanwhile, lots of countries achieve universal healthcare—everyone is covered somehow—but the method can vary. For example, France requires all citizens to purchase coverage, which is sold through nonprofits. In Germany, most people get insurance from a government-run “public option,” while others purchase private plans. In England, healthcare is provided through the tax-funded National Health System.

American skeptics often use the phrase “socialized medicine” pejoratively to describe all of these models.

“Few really understand what you mean when you say single-payer,” says Frank Opelka, the medical director of quality and health policy for the American College of Surgeons, which opposes such a policy. “What they mean is, ‘I don’t think the current system is working.’”

But the willingness to explore previously unthinkable ideas is evident in young doctors’ ranks.

Recent surveys through LinkedIn, recruiting firm Merritt Hawkins and trade publication NEJM Catalyst indicate growing support. In the March NEJM survey, 61 percent of 607 respondents said single-payer would make it easier to deliver cost-effective, quality healthcare.

Delving further, that survey data shows support is stronger among younger physicians, says Namita Mohta, a hospitalist at Brigham and Women’s Hospital and clinical editor at NEJM Catalyst.

But it’s unclear whether these findings reflect young doctors’ feelings about the policy or whether they are tapping in to broader frustrations with the American health system.

Much like the general public, doctors often use terms like single-payer, Medicare-for-all, and universal healthcare interchangeably.

“Our younger generation is less afraid to come out and say we want universal healthcare,” says Anna Yap, 26, an emergency medicine resident at UCLA, who served as a medical student delegate to the AMA until this past June. “But how? It’s different in what forms we see.”

Younger doctors also pointed to growing concern about how best to keep patients healthy. They cited research that broadly suggests having health insurance tracks with better health outcomes.

“Medical students, I would say, are very interested in public health and improving social determinants of health—one of them being access to health insurance,” says Jerome Jeevarajan, 26, a neurology resident at the University of Texas-Houston, referring to non-medical factors that improve health, such as food or housing.

Some of the shift in opinion has to do with the changing realities of medical practice. Doctors now are more likely to end up working for large health systems or hospitals, rather than starting individual practices. Combined with the increasing complexity of billing private insurance, many said, that means contracting with the government may feel like less of an intrusion.

The debate is, at this point, still theoretical. Republicans—who control all branches of the federal government—sharply oppose single-payer. Meanwhile, single-state efforts in California, Colorado, and New York have fallen flat.

Also, doctors represent only one part of the sprawling healthcare industrial complex. Other healthcare interests—including private insurance, the drug industry, and hospital trade groups—have been slower to warm to catch phrases like single-payer or universal healthcare, all of which would likely mean a drop in income.

But increasingly physicians seem to be switching sides in the debate, and young physicians want to be part of the discussion.

“There’s tremendous potential
to be at the table if single-payer becomes a significant part of the political discourse, and create a system that is more equitable,” Pean says.

https://tonic.vice.com…

RAND analysis of the New York Health Act – a single payer proposal

RAND Corporation Study Confirms: New York Health Act "Could Expand Coverage While Reducing Total Health Spending"

Richard N. Gottfried, New York Assembly District 75
Chair, Assembly Health Committee

Gustavo Rivera, New York Senate District 33
Ranking Member, Senate Health Committee

August 1, 2018

State Senator Gustavo Rivera and Assembly Health Committee Chair Richard Gottfried, sponsors of the New York Health Act in the New York State Legislature, welcomed the findings of a study of the bill by the highly-regarded, independent, non-profit RAND Corporation. The study confirms that New York Health would reduce total health care costs, while increasing spending on actual care rather than administration and insurance company profit; provide full health coverage to every New Yorker; save substantial money for almost all New Yorkers; and generate a net increase in employment due to increases in disposable income. 

In December 2017, the New York State Health Foundation commissioned the RAND Corporation to assess the savings, costs, and feasibility of the New York Health Act. Using conservative estimates, the RAND study establishes that New Yorkers would use more health care services under the new single-payer plan than under the current system, even as total health care spending would be slightly lower in 2022 growing to a savings of $15 billion annually by 2031 due to administrative efficiencies. 

The study highlights that the majority of New Yorkers would pay less under the New York Health Plan – New Yorkers in the bottom 90% of household incomes would save an average of $2,800 per person annually – thanks to an equitable distribution of taxation based on the ability to pay. In addition, premiums, deductibles, copays, out-of-pocket payments, and out-of-network charges would be eliminated.

“This is an important validation of the New York Health Act by one of the most prestigious analytical firms in the country,” said Assembly Health Committee Chair Gottfried.  “RAND shows we can make sure every New Yorker gets the care they need and does not suffer financially to get it; save billions of dollars a year by cutting administrative costs, insurance company profit, and outrageous drug prices; and pay for it all more fairly.  Even though RAND thinks the net savings back in the pockets of New Yorkers will be less than I think we’d actually get, this is still a terrific deal for New York.  The study also shows it’s feasible to include long term care – home health care and nursing homes – in the bill.

“The RAND study makes it clear that the New York Health Act is not only feasible, but the most fiscally responsible option for our State”, said State Senator Gustavo Rivera, Ranking Member of State Senate Health Committee. “While we estimate that the benefits to New York State will be greater than those outlined in the study, we all agree that the implementation of the New York Health Act translates into more savings and jobs, while expanding critical health care coverage and access for all New Yorkers regardless of their wealth. I will continue to work with Assembly Member Gottfried and the many advocate organizations that support the bill as we stand up for what is right and work to implement an efficient and universal healthcare system in New York State.”

http://nyassembly.gov…

***

Estimating the Effects of a Single-Payer Proposal in New York State

By Jodi L. Liu, Chapin White, Sarah A. Nowak, Asa Wilks, Jamie Ryan, Christine Eibner
RAND, Research Brief, August 1, 2018

Key Findings

1. The New York Health Act could expand insurance coverage in New York without increasing overall health spending, if administrative costs are reduced and growth in provider payment rates is restrained.

2. Health care would be financed by taxes rather than by premiums and patient out-of-pocket payments. Substantial new taxes would be required.

3. Depending on how progressive new tax rates are, health care payments would decrease among most residents and would increase among the highest-income residents.

RAND Research Brief (6 pages):
https://www.rand.org…

RAND Full Research Report (125 pages):
https://www.rand.org…

RAND News Release:
https://www.rand.org…

***

Comment:

By Don McCanne, M.D.

This RAND study provides us with yet one more credible analysis that shows that single payer is a valid concept demonstrating that we can expand coverage to include everyone while controlling health care spending. This report should be particularly useful for health care reform advocates since it not only discusses single payer issues in general, but it also discusses the single payer concept as applied to one state, in this case New York.

Temporary political hurdles for New York include a Democrat in the state Senate who has shifted control to the Republicans by caucusing with them, and a CMS administrator in the Trump administration who has indicated that she will not cooperate with the waiver processes that would enable implementation of a single payer system at the state level.

Politics can change. It will be interesting to watch how New York does. But we must not let up on our efforts to enact a national single payer improved Medicare for all since our goal must remain one of achieving health care justice for all. If New York can get there first, then great for them. But let’s try to get the job done nationally as soon as possible so the states won’t have to act individually.

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