Summary: When CMS tried to enforce a 15-year-old rule that insurers cannot charge providers for electronic payments, a former CMS staffer working for a payment intermediary cajoled and intimidated them to back down. This is quintessential regulatory capture, enabling another layer of massive profit extraction in our fragmented health insurance system.

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The Hidden Fee Costing Doctors Millions Every Year, ProPublica Health Care, August 14, 2023, by Cezary Podkul

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A powerful lobbyist convinced a federal agency that doctors can be forced to pay fees on money that health insurers owe them. Big companies rake in profits while doctors are saddled with yet another cost in a burdensome health care system.

It was a multibillion-dollar strike, so stealthy and precise that the only visible sign was a notice that suddenly vanished from a government website.

In August 2017, a federal agency with sweeping powers over the health care industry posted a notice informing insurance companies that they weren’t allowed to charge physicians a fee when the companies paid the doctors for their work. Six months later, that statement disappeared without explanation.

The vanishing notice was the result of a behind-the-scenes campaign by the insurance industry and its middlemen that has largely escaped public notice — but that has had massive financial consequences that have rippled through the health care universe. The insurers’ invisible victory has tightened the financial vise on doctors and hospitals, nurtured a thriving industry of middlemen and allowed health insurers to do something no other industry does: Take one last cut even as it pays its bills.

Insurers now routinely require doctors to kick back as much as 5% if they want to be paid electronically. Even when physicians ask to be paid by check, doctors say, insurers often resume the electronic payments — and the fees — against their wishes. Despite protests from doctors and hospitals, the insurers and their middlemen refuse to back down.

There are plenty of reasons doctors are furious with the insurance industry. Insurers have slashed their reimbursement rates, cost them patients by excluding them from their provider networks, and forced them to spend extra time seeking pre-authorizations for ever more procedures and battling denials of coverage.

Paying fees to get paid is the final blow for some. “All these additional fees are the reason why you see small practices folding up on a regular basis, or at least contributing to it,” said Dr. Terence Gray, an anesthesiologist in Scarborough, Maine. Some medical clinics told ProPublica they are seeking ways to raise their rates in response to the fees, which would pass the costs on to patients.

“It’s ridiculous,” said Karen Jackson, who until her retirement in March was a veteran senior official at the Centers for Medicare & Medicaid Services, the federal agency that posted, then unposted, the fee notice. Doctors, she said, shouldn’t have to pay fees to get paid.

But that’s precisely what’s happening. Almost 60% of medical practices said they were compelled to pay fees for electronic payment at least some of the time, according to a 2021 survey. And the frequency has increased since then, according to medical clinics. With more than $2 trillion in medical claims being paid electronically each year, these fees likely add up to billions of dollars annually.

Huge sums that could be spent on care are instead being siphoned off to insurers and middlemen. The fees can cost larger medical practices $1 million a year, according to an April poll by the Medical Group Management Association, which represents private medical practices. The figure sometimes runs even higher, according to a 2020 complaint to CMS from a senior executive of AdventHealth, which has 53 hospitals in nine states: “I have to pay $1.8M in expenses that I could use on PPE for our employees, or setting up testing sites, or providing charity care, or covering other community benefits.” Most clinics are smaller, and they estimated annual losses of $100,000 or less. Even that figure is more than enough to cover the salary of a registered nurse.

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Comment:

By Jim Kahn, M.D., M.P.H.

I was stunned to read this. I’m no longer stunned easily about health insurance, having seen and written about so many manipulations, abuses, dysfunctions, inefficiencies, and harms in our horrendously fragmented and profit-oriented insurance non-system.

However, this one caught me off guard in its audaciousness and illogic. Electronic payments from insurers to providers is a no-brainer in our modern computerized world, and has been advocated (including by the Affordable Care Act) as a way to save the system money by eliminating the labor intensiveness of paper-based payments.

And, yet, the insurers found a way to profit. A rule from 2000 prohibited insurers charging doctors fees for electronic payment. So instead, an intermediary business model popped up, performing payment services, including up to 5% in fees for electronic transfer. CMS in 2017 clarified that these entities could not charge the prohibited fees. Yet a former CMS staffer – who helped write the 2017 rule – working for a payment company, cajoled and intimidated CMS into dropping the clarification. You can read the details in the ProPublica article.

Here are the five lessons I take away from this story:

1. This is a perfect example of regulatory capture. CMS is controlled by the private insurers which they are supposed to regulate. We saw it recently in the battle over Medicare Advantage payment levels. Note the specific version in this instance – the revolving door of agency officials becoming industry executives, who then informally lobby their former colleagues.

2. CMS folding to the pressure is likely influenced by inquiries from Congressional offices, though I’m speculating in this instance.

3. There’s a fundamental structural problem: fragmentation of billing and payment creates needless complexity. This creates niches for powerful actors pursuing their own interests. Specifically, it puts power into the hands of insurers and associated businesses they foster (eg payment entities and pharmaceutical benefit managers). The interests of these actors diverge profoundly from the purpose of health insurance – to efficiently and equitably pay for health care.

4. Our system accepts profits over patients. There is no evidence the electronic payment fees are warranted. Money for patient care is shorted.

5. The entire episodes is ironic & corrupt to the extreme. An ACA push for efficiency savings becomes a lever for insurer profit-making.

Our fragmented, profit-driven system does not work for patients … instead serving the interests of corporate executives and shareholders. That’s why we need single payer.

http://healthjusticemonitor.org…

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Summary: The new book “We’ve Got You Covered” offers a laudable prescription for the US: universal free insurance for primary, specialty, and hospital care. However, its vision for basic (“bare bones”) coverage unnecessarily undermines the potential for high quality care for all.

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We’ve Got You Covered: Rebooting American Health Care, Portfolio, 2023, by Liran Einav and Amy Finkelstein

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How can we fix the US health-care system?

Requiring coverage did not get us to universal coverage. We must therefore provide it. Automatically. Only then will we achieve universal coverage. This is why basic coverage must be taxpayer financed. Charging premiums for basic coverage is at odds with providing that coverage automatically.

Any medical care that is included in basic coverage must be completely free to the patient. If not, the lesson is clear: we’ll end up back in the same mess of trying – and not fully succeeding – to come to the aid of patients who cannot afford the required payments for that basic coverage. We’ve described what basic coverage must do – it must be provided automatically, with no patient payments for covered services.

Basic coverage must systematically cover all essential medical care for the critically ill. For all conditions. Basic coverage must also include primary and preventive care for patients who are not yet critically ill.

The big picture is clear. Basic coverage should include primary and preventive care, specialist, outpatient, emergency room, and hospital care. Once we go beyond that high-level description, there will inevitably be a multitude of gray areas. There are many aspects of medical care that can be excluded from basic coverage while still fulfilling our social contract: infertility treatment, dental care, vision care, physiotherapy, various forms of long-term care, and the list goes on and on. These are hard choices, But they are just that – choices.

For the thirty million Americans without formal insurance, basic coverage would be an improvement. It would provide reliable coverage of major medical needs without any costs to the patient – or attempts to collect costs from them. For the seventy million low-income Americans with Medicaid, basic coverage would be similar to the coverage they already have.

For the remaining two-thirds of Americans, basic coverage would likely be worse on many – although not all – dimensions. We suspect that many of them would purchase supplementary insurance. This includes the one hundred fifty million Americans who have private health insurance and the sixty-five million elderly and disabled Americans with Medicare. For them, basic coverage would mean longer wait times, for example – along the lines of what those covered by Medicaid or the Veterans Affairs experience – and less well-apportioned waiting areas and hospital rooms.

The coverage we do have is a universal mess. The only option is to tear down the current “system” and rebuild it from the ground up.

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Comment:

By Don McCanne, M.D.

In their book, “We’ve Got You Covered,” Liran Einav and Amy Finkelstein have provided a very valuable contribution to the dialogue on healthcare reform in the United States. They have described many of the defects in our very expensive yet highly dysfunctional financing system that result in financial hardship for so many while leaving tens of millions without adequate coverage for care.

In their proposal for reform, they do advocate for a few policies that would be essential in a system of healthcare justice for all. They would include absolutely everyone automatically without the necessity of requiring an insurance premium but rather funding the covered system with a progressive income tax. They would eliminate deductibles and co-payments to make healthcare free on access. They would include primary and preventive care for everyone.

In their policy proposals, they do make one profoundly deficient recommendation. They would propose a basic set of benefits for everyone that would be similar to the current coverage under Medicaid, but, for two-thirds of Americans, coverage would be worse than people now receive under private insurance or Medicare. Basically this would be much worse than the proposed single payer Medicare for All model because it would be Medicaid for All (though the authors reject this label because individuals could purchase upgrades in coverage).

What would be wrong with this? Their intent is to make healthcare affordable for everyone by eliminating premiums, deductibles, and copayments, yet most individuals would be faced with the potential for large out-of-pocket costs unless they did buy a major upgrade in coverage, but then they would have to pay for that. This means that the private insurance industry would continue in its role of diverting billions of our healthcare dollars to its own pecuniary interests with the inevitable high costs and consequent impaired outcomes that we are seeing today.

Also, the healthcare delivery system would likely continue to try to avoid providing care to the sector that was structured like the underfunded Medicaid beneficiaries, and would cater to the more affluent sector that was insured with these supplementary plans, creating a two-tiered or multi-tiered delivery system: basement ward with budget drugs for the basic plan and penthouse medical suite with the million dollar miracle drugs for the affluent. Besides, how many physicians would decline to see patients covered only by the basic plan, accepting only patients with comprehensive supplemental coverage, just as they now decline Medicaid patients?

I’d like to go back a few decades and give a different definition of what basic care is. My brother, Monte, and I practiced primary care in South Orange County. (In 1995, the Los Angeles Times published a human interest story on our practice.) We saw routine illnesses, minor trauma, employment physicals, family planning, uncomplicated obstetrics, and other routine problems you would expect, referring more serious problems to the specialists, or to specialized centers. We were paid by private insurance, Medicaid, Medicare, cash, and often not at all, but we basically just provided care as it was needed, even to the undocumented, largely ignoring the payment side of the practice. Primary care with interaction with the rest of the healthcare delivery system is what I would suggest is basic care and is what should be covered by a single payer Medicare for All system. This approach really worked well for our patients. Rather than being care that is stripped down, like the authors suggest, it is just reasonable routine care that we should be giving, rejecting extravagances such as the building of luxurious penthouse medical suites, or the production of new drugs designed to sell for a million dollars.

You might wonder what happened to our practice. Employer sponsored plans converted to managed care and were not interested in including solo practitioners like my brother and me in their panels. MediCal, a very large part of our practice, was privatized and our patients were sent to contracting groups, including our fairly large obstetrical (midwifery) practice. Eventually, Medicare privatization, especially Medicare Advantage plans, also excluded our practice from their panels, though that was about the time we retired. Based on this, I would say that we do not want to look for the insurance industry to provide us with coverage for basic care, as I have defined it.

We just need to reinforce the delivery system, staff it, provide the care that people need, and use public funding to finance the system. We are spending enough now to do that. Truly comprehensive basic care for everyone! Medicare for All!

http://healthjusticemonitor.org…

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Comment:

By Jim Kahn, M.D., M.P.H.

On Tuesday, a Washington DC grand jury handed down four indictments of former President Donald J. Trump for his efforts to overturn the results of the 2020 election. This reflects the investigation led by special prosecutor Jack Smith, guided by the Congressional Jan. 6 hearings. It is a historic moment – holding to account a US president whose conspiratorial actions threatened a pillar of democracy: that the vote should determine the election outcome.

In my view, it is far more than symbolic. Many voters in the general presidential election will be swayed by the evidence of Trump’s malfeasance presented at trial, and by convictions. This will shift votes to the Democratic candidate, likely Joe Biden. Thus, the pursuit of justice may be a deciding factor for who is the next president, and by extension the country’s future.

The implications for single payer are also vast. A Trump presidency would be a large step toward fascism, with dire consequences for progressive political action. Our political challenges in achieving single payer are well-acknowledged. Indeed, many Democratic leaders oppose single payer. But at least in a functioning democracy we have the freedom to work toward change, to translate broad popular support for public funding of universal insurance into legislative action. And thus to transform our health system.

As discussed previously in HJM, I believe that single payer is fundamentally democracy-enhancing. It fosters our highest democratic values– e.g., health, freedom, equality, and community. Our fragmented and profit-oriented system, on the other hand, deepens inequality and causes countless unnecessary deaths.

What a great day indeed when the tenets of democracy are enhanced, increasing the likelihood that the single payer movement can in the future return the favor. It’s the perfect healthy feedback loop.

http://healthjusticemonitor.org…

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Greetings HJM readers – I’m using a different format today.

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#1 – Round-up. Plenty of recent news items exemplify the usual rocky functioning of US health care. Here’s a sampling:

Medicaid: Eligibility assessment post-COVID proceeds apace, with 4 million disenrolled so far, widely variable by state (Texas is highest). CMS has asked some states to pause due to problems with the eligibility redetermination. One company is profits very well with this process. Meantime, the DHHS Inspector General found that prior authorization denial rates are especially high in Medicaid, which is 70% under managed care. So, in summary, it’s harder to stay on Medicaid and on Medicaid harder to get care, and private companies profit in the process.

Medicare: Risk selection of healthier individuals (within diagnosis) by Medicare Advantage plans yields 11% lower medical costs than enrollees in traditional fee-for-service Medicare. Higher diagnostic coding intensity adds 6%. The total cost difference of 17% represents $70 billion per year, or $1500 per MA enrollee. Another estimate comes in at 20%. And artificial intelligence (AI) is being misused to arbitrarily limit care. Meantime, drug companies are suing to stop price negotiations in the Inflation Reduction act. Who profits? MA plans and Pharma, of course.

Patients: Administrative barriers to getting care can be very dangerous and extraordinarily expensive. This brings to life the stats — individuals spend 8 hours per month coordinating health care, and one in four insured patients delay or forego care due to administrative hurdles. Medical debt and bankruptcy are pervasive.

Insurers: Profits galore, billions and billions. Definitively covered in Wendell Potter’s HEALTH CARE un-covered. Largely due to Medicare Advantage and Medicaid managed care (see above).

Hospitals: Dubious hospital billing practices are being challenged, as hospital profits grow. Meantime, many rural hospitals suffer existential threats from low private insurer payment rates.

There’s more … there’s always more; our fragmented and dysfunctional insurance approach can be counted on to generate stories of care denied coupled with profits maximized. But enough for today.

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#2 – Pause for Reflection

Reading a terrific book, The Persuaders: At the Front Lines of the Fight for Hearts, Minds, and Democracy by Anand Giridharadas. For those committed to progressive policy change, it’s revelatory – laying out vividly what persuasive strategies work. I’m contemplating how the insights can bolster single payer advocacy.

I’m also busy this summer with family travel and cataract / glaucoma surgery (luckily, I have very good insurance, and terrific ophthalmologists).

So, HJM posts will slow.

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#3 – Makeover

The HJM website will be reborn later this year in much grander fashion. It will still have all the blog posts, plus some from Don’s prior “quote of the day”, with an advanced search capacity. Plus a glossary and FAQs, as well as visuals and resources for activism. Some short videos too. Stay tuned. If you want to be a “beta tester”, let me know.

Hope you’re having a great summer. – JGK (Dr. Jim Kahn)

http://healthjusticemonitor.org…

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Summary: This week, a profile of challenges facing the UK NHS and an op-ed proposing universal coverage in the US got so many issues right. But they critically missed on pivotal pillars of successful health care financing: adequate funding and comprehensiveness of coverage.

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A National Treasure, Tarnished: Can Britain Fix Its Health Service?, New York Times, July 16, 2023, by Mark Landler

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As it turns 75 this month, the N.H.S., a proud symbol of Britain’s welfare state, is in the deepest crisis of its history: flooded by aging, enfeebled patients; starved of investment in equipment and facilities; and understaffed by doctors and nurses, many of whom are so burned out that they are either joining strikes or leaving for jobs abroad. …

Health care spending rose by an average of less than 2 percent a year from 2010 to 2019, compared with 5.1 percent from 1998 to 2008. Britain spent less a year per person on health care than the wealthiest European Union countries during the decade of austerity, and now has fewer doctors and hospital beds per capita than its European neighbors. Its capital investment lagged the bloc’s average by $41 billion, according to the Health Foundation, which tracks the industry.

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We’re Already Paying for Universal Health Care. Why Don’t We Have It?, New York Times, July 18, 2023, by Liran Einav and Amy Finkelstein

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There is no shortage of proposals for health insurance reform, and they all miss the point. They invariably focus on the nearly 30 million Americans who lack insurance at any given time. But the coverage for the many more Americans who are fortunate enough to have insurance is deeply flawed.

Health insurance is supposed to provide financial protection against the medical costs of poor health. Yet many insured people still face the risk of enormous medical bills for their “covered” care. A team of researchers estimated that as of mid-2020, collections agencies held $140 billion in unpaid medical bills, reflecting care delivered before the Covid-19 pandemic. To put that number in perspective, that’s more than the amount held by collection agencies for all other consumer debt from nonmedical sources combined. As economists who study health insurance, what we found really shocking was our calculation that three-fifths of that debt was incurred by households with health insurance.

What’s more, in any given month, about 11 percent of Americans younger than 65 are uninsured. But more than twice that number — one in four — will be uninsured for at least some time over a two-year period. Many more face the constant danger of losing their coverage. Perversely, health insurance — the very purpose of which is to provide a measure of stability in an uncertain world — is itself highly uncertain. And while the Affordable Care Act substantially reduced the share of Americans who are uninsured at a given time, we found that it did little to reduce the risk of insurance loss among the currently insured.

It’s tempting to think that incremental reforms could address these problems. For example, extend coverage to those who lack formal insurance. Make sure all insurance plans meet some minimum standards. Change the laws so that people don’t face the risk of losing their health insurance coverage when they get sick, when they get well (yes, that can happen) or when they change jobs, give birth or move.

But those incremental reforms won’t work. Over a half-century of such well-intentioned, piecemeal policies has made clear that continuing this approach represents the triumph of hope over experience, to borrow a description of second marriages commonly attributed to Oscar Wilde. …

Coverage needs to be free at the point of care — no co-pays or deductibles — because leaving patients on the hook for large medical costs is contrary to the purpose of insurance. A natural rejoinder is to go for small co-pays — a $5 co-pay for prescription drugs or $20 for a doctor visit — so that patients make more judicious choices about when to see a health care professional. Economists have preached the virtues of this approach for generations.

But it turns out there’s an important practical wrinkle with asking patients to pay even a very small amount for some of their universally covered care: There will always be people who can’t manage even modest co-pays. …

Finally, coverage must be basic because we are bound by the social contract to provide essential medical care, not a high-end experience. Those who can afford and want to can purchase supplemental coverage in a well-functioning market.

Keeping universal coverage basic will keep the cost to the taxpayer down as well. It’s true that as a share of its economy, the United States spends about twice as much on health care as other high-income countries. But in most other wealthy countries, this care is primarily financed by taxes, whereas only about half of U.S. health care spending is financed by taxes. For those of you following the math, half of twice as much is … well, the same amount of taxpayer-financed spending on health care as a share of the economy. In other words, U.S. taxes are already paying for the cost of universal basic coverage. Americans are just not getting it. They could be.

We … were struck — and humbled — to realize that at a high level, the key elements of our proposal are ones that every high-income country (and all but a few Canadian provinces) has embraced: guaranteed basic coverage and the option for people to purchase upgrades.

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Comment:

By Jim Kahn, M.D., M.P.H. and Don McCanne, M.D.

The profile of UK NHS challenges is vivid and compelling in portraying the financial and associated operational and clinical problems plaguing that system. And, buried deep into the article, they do mention, in passing, the reason: “Health care spending rose by an average of less than 2 percent a year from 2010 to 2019, compared with 5.1 percent from 1998 to 2008.”

Let’s be appropriately blunt about this: The Conservative Party (the Tories) are intentionally bleeding the system, since 2010 putting the NHS on austerity footing. See HJM discussion here. Privatization is driving up family financial burdens and increasing mortality.

Thus, the crisis is intentional, policy- and politics-driven. The good news is that there is a good chance that the Tories will pay a steep political price for this evisceration of the popular NHS.

Turning to the US: Wow, Einav and Finkelstein got so much right. The health insurance system is fundamentally broken, unfixable. We need free, universal coverage. Just what we in the single payer movement have been saying for decades. Just what all other wealthy nations do.

But wait, “basic”? What does that mean? The article doesn’t elaborate (their book, to be released later this month, lays out some principles if not a definitive definition …).

We don’t like the sound of it. If “basic” means “access to under-funded and over-stretched providers,” that’s a recipe for a two-tiered system with divergent political interests, like we have for schools. If basic means excluding a subset of medical services, what would we comfortably omit? Not a good solution.

On the other hand, if “basic” means “everything necessary for quality medical care, and no fluff” that could be fine. As long as “medical care” includes inpatient, outpatient, drugs, mental health, dental, vision, medical equipment … everything medically indicated. That’s what other countries do: supplemental insurance is typically just a few percent of total health spending, for example providing access to private hospitals or specialists in a system with excellent public care. Long-term care should be in the “basic” category too.

We think it will be impossible to define “basic” narrowly in a way that is medically sound and doesn’t lead to operational and political fractures. The good news is, we don’t need to be stingy. Analyses of single payer demonstrate that we can provide standardized, comprehensive coverage and still save money for the system and for households.

Our colleague Ed Weisbart put it very well: “Two-tiered systems become as underfunded as the UK’s National Health Service, and outcomes degrade. We’re either all in this together, as a society that looks out for each other, or it’s Game of Thrones for us all.”

http://healthjusticemonitor.org…

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