The Trans Pacific Partnership Agreement and Pharmaceutical Regulation in Canada and Australia

By Joel Lexchin and Deborah Gleeson
International Journal of Health Services, August 11, 2016

Abstract

The Trans Pacific Partnership Agreement (TPP) is a large regional trade agreement involving 12 countries. It was signed in principle in February 2016 but has not yet been ratified in any of the participating countries. The TPP provisions place a range of constraints on how governments regulate the pharmaceutical sector and set prices for medicines. This article presents a prospective policy analysis of the possible effects of the TPP on these two points in Canada and Australia. Five chapters of relevance to pharmaceutical policy are analyzed: chapters on Technical Barriers to Trade (Chapter 8), Intellectual Property (Chapter 18), Investment (Chapter 9), Dispute Resolution (Chapter 28), and an annex of the chapter on Transparency and Anti-Corruption (Chapter 26, Annex 26-A). The article concludes that the TPP could have profound effects on the criteria these countries use to decide on drug safety and effectiveness, how new drugs are approved (or not) for marketing, post-market surveillance and inspection, the listing of drugs on public formularies, and how individual drugs are priced in the future. Furthermore, the TPP, if ratified and enforced, will reduce future policy flexibility to address the increasing challenge of rising drug prices.

From the Conclusion

The final text of the TPP Agreement holds significant possible risks for pharmaceutical regulation and access to affordable medicines in both Australia and Canada. For Australia, the final provisions related to biologic products in the intellectual property chapter are worryingly ambiguous and unclear. This ambiguity was intended to be constructive, but it may have unintended effects if the United States insists on a certain interpretation, in the event of a dispute, or if the provisions have a chilling effect on future regulatory reform to bring biosimilars to the market more speedily.

Aside from the biologics provisions, there are a number of other provisions in the intellectual property chapter that will lock in existing policy settings and could potentially frustrate future reform efforts to reduce pharmaceutical expenditure in both Australia and Canada. Adopting detailed, prescriptive policy settings negotiated in a fraught political context—largely out of the view of stakeholders and involving bargaining and trade-offs between the objectives of different sectors—does not amount to sensible health or intellectual property policy making, which is attuned to current and future domestic needs.

The TPP’s investment chapter, and in particular its investor-state dispute settlement mechanism, also bring new threats to the affordability of medicines. It is likely that multinational pharmaceutical companies will quickly take advantage of this new avenue, along with the provisions in Chapter 8 on the Technical Barriers to Trade, to contest and frustrate Australia’s and Canada’s pharmaceutical policy making.

It is also worth repeating that the U.S. pharmaceutical industry was not satisfied with the outcome of the TPP negotiations, especially with respect to the provisions on intellectual property rights. As a result, it is likely the industry will be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.

http://joh.sagepub.com/content/early/2016/08/10/0020731416662612.abstract

***

Comment:

By Don McCanne, M.D.

The Trans Pacific Partnership trade agreement (TPP) has raised concerns about giving private sector industries too much control over the public affairs of participating nations. In health care we are particularly concerned about the benefits that the agreement would provide to the pharmaceutical sector at a cost to the citizens of participating nations.

Some have suggested that adopting a single payer system would protect the United States since the government could negotiate as a monopsony to ensure availability and fair pricing of their products. But this article discusses the problems that Canada and Australia could face with ratification of TPP – problems that would not be prevented by their single payer systems.

In a previous post I had mentioned, as a typical concern, that the industry was successful in including in TPP the principle that they would be rewarded with the value that use of their products would provide to patients. Thus the drugs for hepatitis C that reduce morbidity and prolong life should command the high prices that they do simply because the pharmaceutical firms  believe that they should have ownership of the benefit of their products transferred to them regardless of the fact that research, production and distribution costs may be a very small fraction of the prices they wish to command. It takes a lot of gall to support the concept that “I saved your life therefore I own the value of your life.”

Although both leading presidential candidates have stated their opposition to TPP, there is considerable pressure to ratify TPP during the lame duck session – an approach which is supported by President Obama. Also Hillary Clinton, overwhelmingly favored to win the election, has previously supported TPP and likely will not give more than token verbal opposition to ratification, allowing leeway for President Obama to orchestrate the process.

If TPP is ratified, it is likely that the U.S. pharmaceutical industry would “be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.” As this article indicates, that would be harmful to Canada and Australia plus other participating nations, but it would also be harmful to the people of the United States as well, sacrificing our health for the wealth of the drug industry investors.

More generally, just because the presidential candidates of the two major parties have expressed token opposition, we should not relax our efforts to inform the public that the TPP is designed to make the rich much richer at the cost of working families in participating nations.

The Trans Pacific Partnership Agreement and Pharmaceutical Regulation in Canada and Australia

By Joel Lexchin and Deborah Gleeson
International Journal of Health Services, August 11, 2016

Abstract

The Trans Pacific Partnership Agreement (TPP) is a large regional trade agreement involving 12 countries. It was signed in principle in February 2016 but has not yet been ratified in any of the participating countries. The TPP provisions place a range of constraints on how governments regulate the pharmaceutical sector and set prices for medicines. This article presents a prospective policy analysis of the possible effects of the TPP on these two points in Canada and Australia. Five chapters of relevance to pharmaceutical policy are analyzed: chapters on Technical Barriers to Trade (Chapter 8), Intellectual Property (Chapter 18), Investment (Chapter 9), Dispute Resolution (Chapter 28), and an annex of the chapter on Transparency and Anti-Corruption (Chapter 26, Annex 26-A). The article concludes that the TPP could have profound effects on the criteria these countries use to decide on drug safety and effectiveness, how new drugs are approved (or not) for marketing, post-market surveillance and inspection, the listing of drugs on public formularies, and how individual drugs are priced in the future. Furthermore, the TPP, if ratified and enforced, will reduce future policy flexibility to address the increasing challenge of rising drug prices.

From the Conclusion

The final text of the TPP Agreement holds significant possible risks for pharmaceutical regulation and access to affordable medicines in both Australia and Canada. For Australia, the final provisions related to biologic products in the intellectual property chapter are worryingly ambiguous and unclear. This ambiguity was intended to be constructive, but it may have unintended effects if the United States insists on a certain interpretation, in the event of a dispute, or if the provisions have a chilling effect on future regulatory reform to bring biosimilars to the market more speedily.

Aside from the biologics provisions, there are a number of other provisions in the intellectual property chapter that will lock in existing policy settings and could potentially frustrate future reform efforts to reduce pharmaceutical expenditure in both Australia and Canada. Adopting detailed, prescriptive policy settings negotiated in a fraught political context—largely out of the view of stakeholders and involving bargaining and trade-offs between the objectives of different sectors—does not amount to sensible health or intellectual property policy making, which is attuned to current and future domestic needs.

The TPP’s investment chapter, and in particular its investor-state dispute settlement mechanism, also bring new threats to the affordability of medicines. It is likely that multinational pharmaceutical companies will quickly take advantage of this new avenue, along with the provisions in Chapter 8 on the Technical Barriers to Trade, to contest and frustrate Australia’s and Canada’s pharmaceutical policy making.

It is also worth repeating that the U.S. pharmaceutical industry was not satisfied with the outcome of the TPP negotiations, especially with respect to the provisions on intellectual property rights. As a result, it is likely the industry will be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.

http://joh.sagepub.com/content/early/2016/08/10/0020731416662612.abstract

The Trans Pacific Partnership trade agreement (TPP) has raised concerns about giving private sector industries too much control over the public affairs of participating nations. In health care we are particularly concerned about the benefits that the agreement would provide to the pharmaceutical sector at a cost to the citizens of participating nations.

Some have suggested that adopting a single payer system would protect the United States since the government could negotiate as a monopsony to ensure availability and fair pricing of their products. But this article discusses the problems that Canada and Australia could face with ratification of TPP – problems that would not be prevented by their single payer systems.

In a previous post I had mentioned, as a typical concern, that the industry was successful in including in TPP the principle that they would be rewarded with the value that use of their products would provide to patients. Thus the drugs for hepatitis C that reduce morbidity and prolong life should command the high prices that they do simply because the pharmaceutical firms  believe that they should have ownership of the benefit of their products transferred to them regardless of the fact that research, production and distribution costs may be a very small fraction of the prices they wish to command. It takes a lot of gall to support the concept that “I saved your life therefore I own the value of your life.”

Although both leading presidential candidates have stated their opposition to TPP, there is considerable pressure to ratify TPP during the lame duck session – an approach which is supported by President Obama. Also Hillary Clinton, overwhelmingly favored to win the election, has previously supported TPP and likely will not give more than token verbal opposition to ratification, allowing leeway for President Obama to orchestrate the process.

If TPP is ratified, it is likely that the U.S. pharmaceutical industry would “be very aggressive in pushing for the strictest interpretation of the various provisions of the TPP that relate to medications.” As this article indicates, that would be harmful to Canada and Australia plus other participating nations, but it would also be harmful to the people of the United States as well, sacrificing our health for the wealth of the drug industry investors.

More generally, just because the presidential candidates of the two major parties have expressed token opposition, we should not relax our efforts to inform the public that the TPP is designed to make the rich much richer at the cost of working families in participating nations.

Racial and Ethnic Disparities in Mental Health Care for Children and Young Adults: A National Study

By Lyndonna Marrast, David U. Himmelstein, Steffie Woolhandler
International Journal of Health Services, August 12, 2016

Abstract

Psychiatric and behavior problems are common among children and young adults, and many go without care or only receive treatment in carceral settings. We examined racial and ethnic disparities in children’s and young adults’ receipt of mental health and substance abuse care using nationally representative data from the 2006–2012 Medical Expenditure Panel Surveys. Blacks’ and Hispanics’ visit rates (and per capita expenditures) were about half those of non-Hispanic whites for all types and definitions of outpatient mental health services. Disparities were generally larger for young adults than for children. Black and white children had similar psychiatric inpatient and emergency department utilization rates, while Hispanic children had lower hospitalization rates. Multivariate control for mental health impairment, demographics, and insurance status did not attenuate racial/ethnic disparities in outpatient care. We conclude that psychiatric and behavioral problems among minority youth often result in school punishment or incarceration, but rarely mental health care.

From the Discussion

The under-provision of mental health care for minority children contrasts starkly with the high frequency of punitive sanctions that their behaviors elicit. Black children suffer excessive rates of school discipline, such as suspensions and expulsions, starting at preschool ages. Minority teens also have disproportionate contact with the juvenile justice system, with higher arrest rates for nonviolent, low-level offenses such as drug possession and for non-criminal misbehaviors such as truancy and curfew violations. Most relevant to our study, youthful transgressions that might result in referral for treatment among non-minority children more often incur criminal sanctions for minorities. Overall, blacks and Hispanics account for 63% of the children detained in juvenile facilities.

http://joh.sagepub.com/content/early/2016/08/11/0020731416662736.abstract

***

Active Life Expectancy In The Older US Population, 1982–2011: Differences Between Blacks And Whites Persisted

By Vicki A. Freedman and Brenda C. Spillman
Health Affairs, August 2016

Abstract

Understanding long-range trends in longevity and disability is useful for projecting the likely impact of the baby-boom generation on long-term care utilization and spending. We examine changes in active life expectancy in the United States from 1982 to 2011 for white and black adults ages sixty-five and older. For whites, longevity increased, disability was postponed to older ages, the locus of care shifted from nursing facilities to community settings, and the proportion of life at older ages spent without disability increased. In contrast, for blacks, longevity increases were accompanied by smaller postponements in disability, and the percentage of remaining life spent active remained stable and well below that of whites. Older black women were especially disadvantaged in 2011 in terms of the proportion of years expected to be lived without disability. Public health measures directed at older black adults — particularly women — are needed to offset impending pressures on the long-term care delivery system as the result of population aging.

The residential concentration of blacks in the United States is high, and related inequities in neighborhood resources — including access to medical and long-term care — reinforce black-white disparities.

From the Discussion

Older blacks and older whites in the United States have experienced different disability patterns since the early 1980s, as longevity has increased. For older whites, disability has been postponed to older ages, and the proportion of life expected to be lived without disability has increased. However, for older blacks, longevity increases have been accompanied by smaller postponements in disability, and the proportion of remaining life to be spent active has remained stable — about two-thirds at age sixty-five and one-third at age eighty-five. Consequently, the proportion of life expected to be active for older blacks continues to remain well below the proportion for older whites.

Our analysis also suggests that the black-white gaps persisted during the study period in large part because of the lack of progress for older black women in gaining years of active life. This finding is consistent with previous research demonstrating that black women experience a unique disability trajectory in later life that reflects accelerated impairment at older ages. We add to this literature by pointing out that in the aggregate, older black women have not experienced the gains seen for other groups since the early 1980s in either the number of years of active life or the percentage of life expected to be active.

http://content.healthaffairs.org/content/35/8/1351.abstract

***

Comment:

By Don McCanne, M.D.

These two new studies demonstrate that we still have far to go in reducing racial and ethnic disparities as they relate to health and health care.

Particularly shocking is the study that shows that “youthful transgressions that might result in referral for treatment among non-minority children more often incur criminal sanctions for minorities,” especially for young, black males. Behavioral problems in white kids get treated whereas black and Hispanic kids are thrown in jail.

Also, black adults, especially women, are more likely to spend their later years with significant disabilities than are whites. Although the reasons for the differences are not fully elucidated, it is known that “inequities in neighborhood resources — including access to medical and long-term care — reinforce black-white disparities.”

In a message earlier this week we were reminded that one of the most dramatic reductions in disparities occurred very rapidly as a result of government action. That was the compulsory end to segregation in hospitals with the implementation of Medicare. Our government can do so much more than the private sector has been willing to do.

We do not have to wait around for another series of historical events funneling down into a grand political action. We can create that history and that action ourselves. But it does require, yes, action on our part. Citizen inaction crushes social movements.

THE NEXT DEBATE IN HEALTH CARE: Transforming the Ethical Structure of U.S. Health Care

A presentation by Uwe E. Reinhardt and Tsung-Mei Cheng
Altarum Center for Sustainable Health Spending, July 12, 2016

(Excerpts)

The theme of these Altarum symposia has been what can be done to make our health system – especially spending thereon – “sustainable.”

I. “SUSTAINABILITY” IN U.S. HEALTH CARE

“Sustainability” is a much-mouthed word, although few people using the word actually define it. We can think of at least two distinct meanings in the context of health care:

A. Economic sustainability – the ability of the macro-economy to absorb further growth in health spending;

B. Political sustainability – the willingness of families in the upper-income strata to subsidize through taxes or health insurance premiums the health care of families in the lower income strata.

Total health spending is the product of health-care utilization and prices.

Under our system of governance, in which the sympathy of politicians literally can be purchased retail, it has been very difficult to control prices overall, other than in government programs.

Indeed, because prices for identical services or products vary enormously across the U.S., within regions and even within cities, it is hard even to measure what prices actually are in this country. What price is representative?

So the focus of health-care cost containment in the U.S. naturally has been and will continue to be mainly on health-care utilization.

The question then becomes whose ox is likely to be gored in our quest to reduce utilization – that is, who will be asked to do most of the belt tightening in health-care.

That question will be the focus of our presentation.

We shall abandon erstwhile dreams of an egalitarian health-care system and instead develop platforms that will allow policy makers to ration health care by income class, without ever openly saying so or debating that policy. By 2030 at the latest these new platforms are likely to be cemented in place.

II. ETHICAL PERSPECTIVES ON U.S. HEALTH CARE

ALTERNATIVE VIEWS ON THE PROPER DISTRIBUTIVE ETHIC FOR AMERICAN HEALTH CARE:

U.S. Progressives: A PURE SOCIAL GOOD TO BE AVAILABLE TO ALL ON EQUAL TERMS AND TO BE FINANCED BY ABILITY TO PAY

U.S. Conservatives: A PRIVATE CONSUMPTION GOOD WHOSE FINANCING IS PRIMARILY AN INDIVIDUAL RESPONSIBILITY

Although anyone can clearly discern these sharply different views on the distributive social ethic of U.S. health care, Americans are invariably reluctant ever to debate them openly, because that could be divisive.

So we talk about the distributive ethic of our health system in code words where, for example, “freedom of choice” may be just code for “you should make do with whatever financial resources you may have, but you are free to deploy them any way you want.”

To progressives, the very idea of rationing health care by income class is anathema – hence their penchant for a single-payer system that at least tries to be egalitarian.

To conservatives, rationing by income of the timeliness, amenities and quality of health care does not seem anathema, because we routinely apply it to other basic necessities such as food, clothing, housing, education and even the administration of justice. Why should health care be different?

Between these more extreme views on the ethics of health care is the confused, large group of citizens without firm views, at least as long as they are healthy.

Correlated with the views on the distributive ethics of health care are views concerning the degree to which the supply side of the health care market should be allowed to extract the maximum revenue from the rest of society through their pricing policies.

Health policy in the past 40 years basically has been a civil war between the two more extreme views on health care, although, as noted, we have debated it mainly in code words, given our reluctance to confront ethics forthrightly.

On the ground, this civil war has taken the form of a myriad of small legislative skirmishes at the federal and state levels, giving victory sometimes to one side and at other times to the other side.

Overall, however, victory has gone to the conservative side.

III. BUILDING THE PLATFORM FOR RATIONING HEALTH CARE BY INCOME CLASS

So what do we need in the structure of a health system designed to ration health care by income – at least a good bit of it? We need two distinct platforms:

A. we need a platform for varying the quality of the health insurance policy by income class, and

B. we need high cost sharing by patients at point of service, to ration health care utilization when illness strikes.

If you think of it, we have been busily building these two platforms during the past 20 or so years, brick by brick.

A. TIERING INSURANCE PRODUCTS BY INCOME CLASS

Health insurance exchanges – public or private – are the ideal platforms for tiering the quality of health insurance by income class. ObamaCare explicitly acknowledges it with its metal tiers.

The instruments for tiering here are:

* narrowness of the network of providers
* narrowness of the drug-formularies
* limits on services covered
* other features of the benefit package

The often proposed conversion of the egalitarian Medicare program from its defined benefit structure to a defined contribution structure (the premium support model) is one of the bricks for the desired platform.

Likewise, the idea to move Medicaid beneficiaries out of that defined benefit program onto the insurance exchanges can be interpreted in the same way.

Finally, the conversion of employment-based health insurance from defined benefit to defined-contribution plans, coupled with private health insurance exchanges, is another brick in the strategy.

It will finally permit the quality of health-insurance coverage within a company to vary by income level.

B. TIERING HEALTH CARE BY INCOME CLASS AT POINT OF SERVICE

High-deductible health insurance policies are ipso facto an instrument for rationing health care by income class, unless the deductible were closely linked to income.

One does not need a Ph.D. in economics to realize that a low income family confronted with a high deductible will tighten its belt in health care much more than would a high income family confronting the same deductible.

Similarly, under our progressive income-tax structure, the idea of tax-preferred Health Savings Accounts (HSAs) ipso facto makes health care for high income people cheaper than for low income people – an amazing ethical proposition.

IV. U.S. HEALTH CARE CA. 2030

At this time, the gradual transformation of our health-care system into one that allows us to ration health care by income is not yet complete.

Part of the problem is that it is not yet politically correct for politicians or the policy wonks who advise them openly to state that rationing by income class is their goal.

The desired structure therefore has to be developed quietly, and so that the general voting public does not know what is happening to their health system.

Indeed, sometimes the steps toward this goal are marketed to the voting public in classic Orwellian lingo – e.g., “Consumer Directed Health Care” (CDHC) that will “enable consumers [formerly patients] to sit in the driver’s seat in health care to shop around for cost-effective care.”

Absent solid, consumer-friendly information on binding prices and the quality of health care produced by different providers of health care – still typically the norm in the U.S. – CDHC actually has turned out to be a cruel hoax.

For the most part, CDHC has been merely an instrument to ration health care by income.

We came across the following paper that goes along with our thesis on rationing: “Wealthy spending more on health care than poor and middle class, reversing trend”

V. CONCLUDING REMARKS

It is not our place to render a value judgment on the merits of this development. That is a matter of ideology and of ideas of what is a “just society.”

But register our amazement — almost our admiration — at the ease with which one faction of the nation’s elite has been able to further this transition – a development of which the voting public hardly seems aware (except when illness strikes).

It can be doubted that the general populace of other countries – France, Germany, the U.K., Canada – would accept this transition with such astounding equanimity.

It is only of recent that the American public seems to have lost faith in the wisdom and beneficence of the nation’s policy-making elite.

We shall see how far that elite can push rationing health care by income before the American public becomes fully alert to that policy.

In an honest referendum, with full knowledge of what is underfoot, the general voting public probably would not support a move to rationing more and more health care by income.

More likely the voting public would opt for a more egalitarian system, which can explain why it is not yet politically correct for politicians openly to advocate rationing health care by income.

“Americans Overwhelmingly Prefer This Presidential Candidate’s Healthcare Plan, Study Shows”

According to Gallup…the overwhelming favorite was the single-payer plan offered by Bernie Sanders. Overall, 58% of respondents favored the idea, with just 37% opposing it and another 5% having no opinion.

In a separate question, Gallup asked respondents to choose between putting a single-payer system in place versus keeping Obamacare in place,and single-payer won by an even broader margin — 64% to 32%.

http://altarum.org/sites/default/files/uploaded-related-files/12_Reinhardt_Special_ALTARUM%20JULY%202016%20XX%207-18-2016_1.pdf

***

Comment:

By Don McCanne, M.D.

Everyone should master understanding the concept presented here. Should the distributive ethic in health care represent a social good for all or an individual responsibility for each of us?

We are transitioning further into the individual responsibility ethic through the platforms of tiering insurance by income (narrow networks and limited benefits) and tiering health care by income at the point of service (high deductibles, health savings accounts, and consumer-directed health care). Thus we are rationing health care by ability to pay, and that will only increase further as we expand our current health care policies. Too many people will not be receiving the care that they should have.

This slide set was expanded to include some of the narrative so that we can understand better how our current approach to sustainability is political rather than economic – supporting an ethic that preserves the wealth of the wealthy by suppressing redistribution, while making the health care system sustainable by making health care less affordable for the majority.

This presentation by the insightful team of Uwe Reinhardt and Tsung-Mei Cheng should be downloaded and shared with as many other concerned individuals as possible. We need to deliver the egalitarian message that the people of other nations take for granted: we can have health care for everyone in a system that is truly sustainable.

THE NEXT DEBATE IN HEALTH CARE: Transforming the Ethical Structure of U.S. Health Care

A presentation by Uwe E. Reinhardt and Tsung-Mei Cheng
Altarum Center for Sustainable Health Spending, July 12, 2016

(Excerpts)

The theme of these Altarum symposia has been what can be done to make our health system – especially spending thereon – “sustainable.”

I. “SUSTAINABILITY” IN U.S. HEALTH CARE

“Sustainability” is a much-mouthed word, although few people using the word actually define it. We can think of at least two distinct meanings in the context of health care:

A. Economic sustainability – the ability of the macro-economy to absorb further growth in health spending;

B. Political sustainability – the willingness of families in the upper-income strata to subsidize through taxes or health insurance premiums the health care of families in the lower income strata.

Total health spending is the product of health-care utilization and prices.

Under our system of governance, in which the sympathy of politicians literally can be purchased retail, it has been very difficult to control prices overall, other than in government programs.

Indeed, because prices for identical services or products vary enormously across the U.S., within regions and even within cities, it is hard even to measure what prices actually are in this country. What price is representative?

So the focus of health-care cost containment in the U.S. naturally has been and will continue to be mainly on health-care utilization.

The question then becomes whose ox is likely to be gored in our quest to reduce utilization – that is, who will be asked to do most of the belt tightening in health-care.

That question will be the focus of our presentation.

We shall abandon erstwhile dreams of an egalitarian health-care system and instead develop platforms that will allow policy makers to ration health care by income class, without ever openly saying so or debating that policy. By 2030 at the latest these new platforms are likely to be cemented in place.

II. ETHICAL PERSPECTIVES ON U.S. HEALTH CARE

ALTERNATIVE VIEWS ON THE PROPER DISTRIBUTIVE ETHIC FOR AMERICAN HEALTH CARE:

U.S. Progressives: A PURE SOCIAL GOOD TO BE AVAILABLE TO ALL ON EQUAL TERMS AND TO BE FINANCED BY ABILITY TO PAY

U.S. Conservatives: A PRIVATE CONSUMPTION GOOD WHOSE FINANCING IS PRIMARILY AN INDIVIDUAL RESPONSIBILITY

Although anyone can clearly discern these sharply different views on the distributive social ethic of U.S. health care, Americans are invariably reluctant ever to debate them openly, because that could be divisive.

So we talk about the distributive ethic of our health system in code words where, for example, “freedom of choice” may be just code for “you should make do with whatever financial resources you may have, but you are free to deploy them any way you want.”

To progressives, the very idea of rationing health care by income class is anathema – hence their penchant for a single-payer system that at least tries to be egalitarian.

To conservatives, rationing by income of the timeliness, amenities and quality of health care does not seem anathema, because we routinely apply it to other basic necessities such as food, clothing, housing, education and even the administration of justice. Why should health care be different?

Between these more extreme views on the ethics of health care is the confused, large group of citizens without firm views, at least as long as they are healthy.

Correlated with the views on the distributive ethics of health care are views concerning the degree to which the supply side of the health care market should be allowed to extract the maximum revenue from the rest of society through their pricing policies.

Health policy in the past 40 years basically has been a civil war between the two more extreme views on health care, although, as noted, we have debated it mainly in code words, given our reluctance to confront ethics forthrightly.

On the ground, this civil war has taken the form of a myriad of small legislative skirmishes at the federal and state levels, giving victory sometimes to one side and at other times to the other side.

Overall, however, victory has gone to the conservative side.

III. BUILDING THE PLATFORM FOR RATIONING HEALTH CARE BY INCOME CLASS

So what do we need in the structure of a health system designed to ration health care by income – at least a good bit of it? We need two distinct platforms:

A. we need a platform for varying the quality of the health insurance policy by income class, and

B. we need high cost sharing by patients at point of service, to ration health care utilization when illness strikes.

If you think of it, we have been busily building these two platforms during the past 20 or so years, brick by brick.

A. TIERING INSURANCE PRODUCTS BY INCOME CLASS

Health insurance exchanges – public or private – are the ideal platforms for tiering the quality of health insurance by income class. ObamaCare explicitly acknowledges it with its metal tiers.

The instruments for tiering here are:

* narrowness of the network of providers
* narrowness of the drug-formularies
* limits on services covered
* other features of the benefit package

The often proposed conversion of the egalitarian Medicare program from its defined benefit structure to a defined contribution structure (the premium support model) is one of the bricks for the desired platform.

Likewise, the idea to move Medicaid beneficiaries out of that defined benefit program onto the insurance exchanges can be interpreted in the same way.

Finally, the conversion of employment-based health insurance from defined benefit to defined-contribution plans, coupled with private health insurance exchanges, is another brick in the strategy.

It will finally permit the quality of health-insurance coverage within a company to vary by income level.

B. TIERING HEALTH CARE BY INCOME CLASS AT POINT OF SERVICE

High-deductible health insurance policies are ipso facto an instrument for rationing health care by income class, unless the deductible were closely linked to income.

One does not need a Ph.D. in economics to realize that a low income family confronted with a high deductible will tighten its belt in health care much more than would a high income family confronting the same deductible.

Similarly, under our progressive income-tax structure, the idea of tax-preferred Health Savings Accounts (HSAs) ipso facto makes health care for high income people cheaper than for low income people – an amazing ethical proposition.

IV. U.S. HEALTH CARE CA. 2030

At this time, the gradual transformation of our health-care system into one that allows us to ration health care by income is not yet complete.

Part of the problem is that it is not yet politically correct for politicians or the policy wonks who advise them openly to state that rationing by income class is their goal.

The desired structure therefore has to be developed quietly, and so that the general voting public does not know what is happening to their health system.

Indeed, sometimes the steps toward this goal are marketed to the voting public in classic Orwellian lingo – e.g., “Consumer Directed Health Care” (CDHC) that will “enable consumers [formerly patients] to sit in the driver’s seat in health care to shop around for cost-effective care.”

Absent solid, consumer-friendly information on binding prices and the quality of health care produced by different providers of health care – still typically the norm in the U.S. – CDHC actually has turned out to be a cruel hoax.

For the most part, CDHC has been merely an instrument to ration health care by income.

We came across the following paper that goes along with our thesis on rationing: “Wealthy spending more on health care than poor and middle class, reversing trend”

V. CONCLUDING REMARKS

It is not our place to render a value judgment on the merits of this development. That is a matter of ideology and of ideas of what is a “just society.”

But register our amazement — almost our admiration — at the ease with which one faction of the nation’s elite has been able to further this transition – a development of which the voting public hardly seems aware (except when illness strikes).

It can be doubted that the general populace of other countries – France, Germany, the U.K., Canada – would accept this transition with such astounding equanimity.

It is only of recent that the American public seems to have lost faith in the wisdom and beneficence of the nation’s policy-making elite.

We shall see how far that elite can push rationing health care by income before the American public becomes fully alert to that policy.

In an honest referendum, with full knowledge of what is underfoot, the general voting public probably would not support a move to rationing more and more health care by income.

More likely the voting public would opt for a more egalitarian system, which can explain why it is not yet politically correct for politicians openly to advocate rationing health care by income.

“Americans Overwhelmingly Prefer This Presidential Candidate’s Healthcare Plan, Study Shows”

According to Gallup…the overwhelming favorite was the single-payer plan offered by Bernie Sanders. Overall, 58% of respondents favored the idea, with just 37% opposing it and another 5% having no opinion.

In a separate question, Gallup asked respondents to choose between putting a single-payer system in place versus keeping Obamacare in place,and single-payer won by an even broader margin — 64% to 32%.

http://altarum.org/system/assets/drupal/uploaded-related-files/12_Reinhardt_Special_ALTARUM%20JULY%202016%20XX%207-18-2016_1.pdf

Everyone should master understanding the concept presented here. Should the distributive ethic in health care represent a social good for all or an individual responsibility for each of us?

We are transitioning further into the individual responsibility ethic through the platforms of tiering insurance by income (narrow networks and limited benefits) and tiering health care by income at the point of service (high deductibles, health savings accounts, and consumer-directed health care). Thus we are rationing health care by ability to pay, and that will only increase further as we expand our current health care policies. Too many people will not be receiving the care that they should have.

This slide set was expanded to include some of the narrative so that we can understand better how our current approach to sustainability is political rather than economic – supporting an ethic that preserves the wealth of the wealthy by suppressing redistribution, while making the health care system sustainable by making health care less affordable for the majority.

This presentation by the insightful team of Uwe Reinhardt and Tsung-Mei Cheng should be downloaded and shared with as many other concerned individuals as possible. We need to deliver the egalitarian message that the people of other nations take for granted: we can have health care for everyone in a system that is truly sustainable.

1965: The Year That Brought Civil Rights To The Nation’s Hospitals

By Michelle Andrews
Kaiser Health News, August 9, 2016

In his new book, David Barton Smith takes us back to the mid-1960s, when a small band of civil rights activists-cum-government bureaucrats toiled to get the nascent Medicare program up and running. In the process, they profoundly changed the way health care is delivered in this country.

It stands in marked contrast to the political turmoil over health care of recent years.

“In four months they transformed the nation’s hospitals from our most racially and economically segregated institutions to our most integrated,” Smith writes in “The Power to Heal: Civil Rights, Medicare, and the Struggle to Transform America’s Health Care System.”

“In four years they changed patterns of use of health services that had persisted for half a century. The fundamental moral imperative — that those needing medical care should receive it — began for the first time to reflect actual use of services. A profound transformation, now taken for granted, happened almost overnight.”

Michelle Andrews: Over the course of several months, a small group of government workers implemented the Medicare program. From the start, they said that hospitals that discriminated couldn’t participate. How did they manage it?

David Barton Smith: Wilbur Cohen and the people in the Social Security Administration were absolutely masterful in pulling this together in such a short period of time. They knew exactly how to get things done and they paid attention to the details. It’s remarkable that without the computers that we have today or the Internet, they were able to do this all in 11 months. They were just good professionals.

Michelle Andrews: There has been talk at various times about creating “Medicare for All.” Given what you know, what are the odds of that ever happening here?

David Barton Smith: The odds are better now than a few years ago. Because of the ACA, but also because people are beginning to understand some of the limitations of a privately insured system. It’s more complicated, it’s more costly, it’s harder to get good competitive pricing from hospitals or from drug companies. And this idea is something that’s been resisted by the insurance industry. But I get the sense that people are getting a little bit more impatient. Although a lot of Republicans bash Obamacare, I don’t hear a lot of them bashing Medicare. The resistance would be strong, certainly. This is a very interesting year.

http://khn.org/news/1965-the-year-that-brought-civil-rights-to-the-nations-hospitals/

***

Comment:

By Don McCanne, M.D.

The story of using Medicare to rapidly integrate our nation’s hospitals is inspiring. It should give us hope that an Improved Medicare for All could be used to leverage corrections of other health care injustices.

David Barton Smith reminds us that people are beginning to understand some of the limitations of a privately insured system and that they are becoming more impatient. Let’s leverage that.

1965: The Year That Brought Civil Rights To The Nation’s Hospitals

By Michelle Andrews
Kaiser Health News, August 9, 2016

In his new book, David Barton Smith takes us back to the mid-1960s, when a small band of civil rights activists-cum-government bureaucrats toiled to get the nascent Medicare program up and running. In the process, they profoundly changed the way health care is delivered in this country.

It stands in marked contrast to the political turmoil over health care of recent years.

“In four months they transformed the nation’s hospitals from our most racially and economically segregated institutions to our most integrated,” Smith writes in “The Power to Heal: Civil Rights, Medicare, and the Struggle to Transform America’s Health Care System.”

“In four years they changed patterns of use of health services that had persisted for half a century. The fundamental moral imperative — that those needing medical care should receive it — began for the first time to reflect actual use of services. A profound transformation, now taken for granted, happened almost overnight.”

Michelle Andrews: Over the course of several months, a small group of government workers implemented the Medicare program. From the start, they said that hospitals that discriminated couldn’t participate. How did they manage it?

David Barton Smith: Wilbur Cohen and the people in the Social Security Administration were absolutely masterful in pulling this together in such a short period of time. They knew exactly how to get things done and they paid attention to the details. It’s remarkable that without the computers that we have today or the Internet, they were able to do this all in 11 months. They were just good professionals.

Michelle Andrews: There has been talk at various times about creating “Medicare for All.” Given what you know, what are the odds of that ever happening here?

David Barton Smith: The odds are better now than a few years ago. Because of the ACA, but also because people are beginning to understand some of the limitations of a privately insured system. It’s more complicated, it’s more costly, it’s harder to get good competitive pricing from hospitals or from drug companies. And this idea is something that’s been resisted by the insurance industry. But I get the sense that people are getting a little bit more impatient. Although a lot of Republicans bash Obamacare, I don’t hear a lot of them bashing Medicare. The resistance would be strong, certainly. This is a very interesting year.

http://khn.org/news/1965-the-year-that-brought-civil-rights-to-the-nations-hospitals/

The story of using Medicare to rapidly integrate our nation’s hospitals is inspiring. It should give us hope that an Improved Medicare for All could be used to leverage corrections of other health care injustices.

David Barton Smith reminds us that people are beginning to understand some of the limitations of a privately insured system and that they are becoming more impatient. Let’s leverage that.

Could Trump loss spur ACA deal with Clinton?

By Harris Meyer
Modern Healthcare, August 6, 2016

With Donald Trump’s presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.

Their focus is on a possible “grand bargain” that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law’s insurance exchange structure with their own innovative models.

To win GOP backing for measures to stabilize the exchanges, Republicans will seek changes to make ACA coverage more attractive and affordable for younger people, said James Capretta, a conservative health policy expert at the American Enterprise Institute. That includes allowing lower premiums for young people, a wider range of benefit designs and premium subsidies for plans bought outside the exchanges and easing minimum benefit requirements.

Clinton’s best opportunity might be to persuade GOP governors and lawmakers in non-expansion states to accept Medicaid expansion by giving them more leeway on program design.

http://www.modernhealthcare.com/article/20160806/MAGAZINE/308069967

***

Comment:

By Don McCanne, M.D.

Although elections can be unpredictable, this time we can make a couple of predictions that are a near certainty.

Donald Trump will not be able to change his image as a dangerous incompetent before the election, and Hillary Clinton will be elected by default, even though she will remain unpopular.

Gerrymandering as a result of the 2010 Census will remain unchanged in this election, so the Republicans will maintain control of the House of Representatives with Paul Ryan as the Speaker. Although the Tea Party faction will have been diminished in numbers, enough will be reelected such that Ryan will have to include them in legislative negotiations.

Although it is uncertain which party will hold the majority in the Senate, it is clear that each of the two major parties will still have the ability to block most legislation through the filibuster. For the Democrats, that means that they can forget about a Medicare buy-in starting at age 55, and they can forget about a government-administered public option to compete with the private plans. For the Republicans, that means that they can forget about a repeal of the Affordable Care Act, and they can forget about completing privatization of Medicare through premium support.

So for the time being, the Affordable Care Act is here to stay. Both sides will want changes in it, but only modest incremental changes will be possible, and they must satisfy both sides or they will not clear Congress.

Democrats will want expanded enrollment in the ACA exchanges and in Medicaid. Republicans will want less regulation in these programs. For the exchange plans both will want lower premiums to make insurance more affordable, and they may do that by easing the minimum benefit requirements, by allowing more flexible innovations in insurance design, by reducing premiums for young adults, and perhaps even by allowing premium subsidies for plans outside of the exchanges. For Medicaid, through waivers or through new legislation they may allow greater flexibility and further privatization to encourage non-participating states to join in the program to expand Medicaid.

These compromises will further reduce the numbers of uninsured and make health insurance more affordable, but affordable access to actual health care is already a major problem and these measures will make it much worse. Increasing the numbers of individuals who are nominally insured should not be considered a success when the tradeoff is the erection of financial and logistical barriers to essential health care services. Leaving patients sick and broke is not the direction in which we want to be headed.

What are the political prospects for single payer post-election? This January Hillary Clinton said, “I want you to understand why I am fighting so hard for the Affordable Care Act. I don’t want it repealed, I don’t want us to be thrown back into a terrible, terrible national debate. I don’t want us to end up in gridlock… People who have health emergencies can’t wait for us to have a theoretical debate about some better idea that will never, ever come to pass.”

Never, ever. The political barricade is up. It is up to us to break it down.

Could Trump loss spur ACA deal with Clinton?

By Harris Meyer
Modern Healthcare, August 6, 2016

With Donald Trump’s presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.

Their focus is on a possible “grand bargain” that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law’s insurance exchange structure with their own innovative models.

To win GOP backing for measures to stabilize the exchanges, Republicans will seek changes to make ACA coverage more attractive and affordable for younger people, said James Capretta, a conservative health policy expert at the American Enterprise Institute. That includes allowing lower premiums for young people, a wider range of benefit designs and premium subsidies for plans bought outside the exchanges and easing minimum benefit requirements.

Clinton’s best opportunity might be to persuade GOP governors and lawmakers in non-expansion states to accept Medicaid expansion by giving them more leeway on program design.

http://www.modernhealthcare.com/article/20160806/MAGAZINE/308069967

Although elections can be unpredictable, this time we can make a couple of predictions that are a near certainty.

Donald Trump will not be able to change his image as a dangerous incompetent before the election, and Hillary Clinton will be elected by default, even though she will remain unpopular.

Gerrymandering as a result of the 2010 Census will remain unchanged in this election, so the Republicans will maintain control of the House of Representatives with Paul Ryan as the Speaker. Although the Tea Party faction will have been diminished in numbers, enough will be reelected such that Ryan will have to include them in legislative negotiations.

Although it is uncertain which party will hold the majority in the Senate, it is clear that each of the two major parties will still have the ability to block most legislation through the filibuster. For the Democrats, that means that they can forget about a Medicare buy-in starting at age 55, and they can forget about a government-administered public option to compete with the private plans. For the Republicans, that means that they can forget about a repeal of the Affordable Care Act, and they can forget about completing privatization of Medicare through premium support.

So for the time being, the Affordable Care Act is here to stay. Both sides will want changes in it, but only modest incremental changes will be possible, and they must satisfy both sides or they will not clear Congress.

Democrats will want expanded enrollment in the ACA exchanges and in Medicaid. Republicans will want less regulation in these programs. For the exchange plans both will want lower premiums to make insurance more affordable, and they may do that by easing the minimum benefit requirements, by allowing more flexible innovations in insurance design, by reducing premiums for young adults, and perhaps even by allowing premium subsidies for plans outside of the exchanges. For Medicaid, through waivers or through new legislation they may allow greater flexibility and further privatization to encourage non-participating states to join in the program to expand Medicaid.

These compromises will further reduce the numbers of uninsured and make health insurance more affordable, but affordable access to actual health care is already a major problem and these measures will make it much worse. Increasing the numbers of individuals who are nominally insured should not be considered a success when the tradeoff is the erection of financial and logistical barriers to essential health care services. Leaving patients sick and broke is not the direction in which we want to be headed.

What are the political prospects for single payer post-election? This January Hillary Clinton said, “I want you to understand why I am fighting so hard for the Affordable Care Act. I don’t want it repealed, I don’t want us to be thrown back into a terrible, terrible national debate. I don’t want us to end up in gridlock… People who have health emergencies can’t wait for us to have a theoretical debate about some better idea that will never, ever come to pass.”

Never, ever. The political barricade is up. It is up to us to break it down.