Auditors: feds failed to rein in billions in over-billing by Medicare Advantage

By Fred Schulte
The Center for Public Integrity, May 9, 2016

Private Medicare Advantage plans treating the elderly have over-billed the government by billions of dollars, but rarely been forced to repay the money or face other consequences for their actions, according to a new Congressional audit.

In a sharply critical report made public Monday, the Government Accountability Office called for “fundamental improvements” to curb overbilling by the health plans, which are paid more than $160 billion annually.

GAO took aim at Medicare’s primary tactic for recouping overcharges, a secretive, and lengthy, audit process called Risk Adjustment Data Validation, or RADV. Unlike many other anti-fraud programs, RADV has cost the government way more than it has returned to the treasury.

The GAO said that the Centers for Medicare and Medicaid Services, an arm of the Department of Health and Human Services, has spent about $117 million on these audits, but so far has recouped just $14 million.

The GAO launched its audit in October 2014 in the wake of the Center for Public Integrity’s “Medicare Advantage Money Grab” series.

The Center’s investigation traced the overpayments to abuse of a billing formula called a risk score, which pays higher rates for sicker patients and less for people in good health. Since 2004, however, the risk score formula has largely operated as an honor system, despite criticism that many health plans have overstated how sick some patients are to boost their revenues. That practice is known in medical circles as “upcoding.”

Medicare officials have quietly conducted these audits since 2008. But they have never imposed stiff financial penalties even as evidence built up that billing errors were deeply rooted and wasting tax dollars at an alarming clip.

GAO in its report noted that CMS has failed to target health plans with “known improper payment risk,” thus allowing the worst performers to escape the net.

GAO reviewers said that CMS is stepping up the RADV audits, but added that much more needs to be done. GAO noted that officials expect the upcoming audits to recover $370 million, but that’s just three percent of the total estimated annual overpayment.

https://www.publicintegrity.org/2016/05/09/19660/auditors-feds-failed-rein-billions-over-billing-medicare-advantage

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Report to the Chairman, Committee on Ways and Means, House of Representatives

Medicare Advantage: Fundamental Improvements Needed in CMS’s Effort to Recover Substantial Amounts of Improper Payments

Government Accountability Office, April 2016

Conclusions

Limitations in CMS’s processes for selecting contracts for audit, in the timeliness of CMS’s audit and appeal processes, and in the agency’s plans for using MA RACs to assist in identifying improper payments hinder the accomplishment of its contract-level RADV audit goals: to conduct annual contract-level audits and recover improper payments. These limitations are also inconsistent with federal internal control standards and established project management principles. Our analyses of these processes and plans suggest that CMS will likely recover a small portion of the billions of dollars in MA improper payments that occur every year. Shortcomings in CMS’s MA contract selection methodology may result in audits that are not focused on the contracts most likely to be disproportionately responsible for improper payments. Furthermore, CMS’s RADV time frames are so long that they may hamper the agency’s efforts to conduct audits annually, collect extrapolated payments efficiently, and use audit results to inform future RADV contract selection. By CMS’s own estimates, conducting annual contract-level audits would potentially allow CMS to recover hundreds of millions of dollars more in improper payments each year. Agency officials have expressed concerns about the intensive agency resources required to conduct contract-level RADV audits. To address the resource requirements of conducting contract-level audits, CMS intends to leverage the MA RACs for this purpose; however, the agency has not outlined how it plans to incorporate RACs into the contract-level RADV audits and is in the early stages of soliciting industry comment regarding how to do so.

http://www.gao.gov/assets/680/676441.pdf

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Medicare Advantage 2016 Spotlight: Enrollment Market Update

By Gretchen Jacobson, Giselle Casillas, Anthony Damico, Tricia Neuman and Marsha Gold
Kaiser Family Foundation, May 11, 2016

The number and share of Medicare beneficiaries enrolled in Medicare Advantage has steadily climbed over the past decade, and this trend in enrollment growth is continuing in 2016. The growth in enrollment has occurred despite reductions in payments to plans enacted by the Affordable Care Act of 2010 (ACA).

Almost one in three people on Medicare (31% or 17.6 million beneficiaries) is enrolled in a Medicare Advantage plan in 2016.

http://kff.org/medicare/issue-brief/medicare-advantage-2016-spotlight-enrollment-market-update/

Today’s message provides yet one more example of CMS’s complicity in the privatization of Medicare. What does that mean and why does it matter?

Medicare Advantage (MA) plans are private health insurance plans that Medicare enrollees can select in place of the traditional Medicare program. The purpose was ideologically driven – to get the government out of Medicare.

Congress originally established the private plan option through the Medicare + Choice program. They believed the promise of the private insurers that they could provide higher quality care at a lower cost. That failed and insurers withdrew simply because it costs considerably more to finance health care through private insurers than through our public Medicare program. Congress went back to the drawing boards and established the Medicare Advantage program in which the private insurers were paid about fourteen percent more than the public program was paying for comparable patients.

Thus the private MA plans were able to attract patients by offering them supplemental benefits and lower out-of-pocket cost sharing. They also successfully marketed to a healthier, lower cost population – being paid more while spending less. To counter this “favorable selection,” risk adjustment was introduced in which the insurers would be paid more if they enrolled sicker patients. The insurers quickly learned how to upcode to qualify for payments greater than the health status of their enrollees warranted.

When Congress created the Affordable Care Act it was recognized that the overpayments needed to be pared back, especially since the insurers were rewarding themselves with favorable selection and upcoding. Thus ACA required that the overpayments be reduced gradually, and that process has now been completed.

But what happened? Each year CMS has found offsets to the required payment reductions – offsets that were generous enough to actually result in increased payments in each year that reductions should have occurred.

And what about the upcoding that was used to qualify for unearned risk adjustments? The Government Accountability Office (GAO) has shown that CMS has failed to recapture the overpayments even though the problem was well recognized and theoretically a process was in place to do so. After pressure from the GAO and from the investigative reporting of The Center for Public Integrity, CMS is going to step up its efforts at recovery. However, these renewed efforts are expected to recover only about three percent of the overpayments. The insurers get to keep their illicit overpayments, with the complicity of CMS.

Kaiser (KFF) has just released a report showing that the nefarious plot to transfer patients to the private MA plans is working. Enrollment has steadily climbed over the past decade. If Congress and CMS can keep up this subterfuge then very soon Congress can begin to reduce funding for the traditional Medicare program which will cause more providers to drop out. That will then create a public demand for the overpaid private MA plans. Congress can then enact their premium support (voucher) program for private Medicare Advantage plans, and then follow through by emasculating the traditional program (“drown it in a bathtub”).

Once everyone is in a privatized Medicare voucher program, Congress can ratchet down the value of the voucher. This will complete their goal of bringing us consumer-directed health care – placing patients in charge of controlling health care costs through price sensitivity necessitated by high deductibles and other cost sharing, whether or not they have health savings accounts. This, of course, will lead to financial hardship and forgone health care.

If you think that our government would never do this to us, keep in mind that the process is well underway. Today Speaker Paul “Premium Support” Ryan met with likely presidential-nominee Donald Trump to set the agenda for our nation’s future.

Hillary Clinton Takes a Step to the Left on Health Care

By Alan Rappeport and Margot Sanger-Katz
The New York Times, May 10, 2016

Mrs. Clinton is moving to the left on health care and this week took a significant step in her opponent’s direction, suggesting she would like to give people the option to buy into Medicare.

“I’m also in favor of what’s called the public option, so that people can buy into Medicare at a certain age,” Mrs. Clinton said on Monday at a campaign event in Virginia.

Mrs. Clinton’s suggestion was that perhaps younger Americans, “people 55 or 50 and up,” could voluntarily pay to join the program.

Mr. Sanders calls his single-payer health care plan “Medicare for all.” What Mrs. Clinton proposed was a sort of Medicare for more.

http://www.nytimes.com/2016/05/11/us/politics/hillary-clinton-health-care-public-option.html

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Comment:

By Don McCanne, M.D.

Hillary Clinton is once again bringing back the proposal to allow for people under 65 to have the option of purchasing coverage under Medicare – the so-called public option. We have written much about this in the past, but since her comments have renewed enthusiasm amongst single-payer advocates for a Medicare buy-in, let’s discuss it one more time.

First of all, without additional coverage such as Medigap plans, the traditional Medicare program leaves individuals potentially exposed to significant costs. It does not even have a catastrophic cap on coverage. Would an individual opting for a Medicare buy-in need to also purchase a Medigap plan? Or would a special Medicare plan be offered that included those benefits?

How would the premium for a Medicare buy-in be determined? Would it be based on the current Medicare risk pool that includes the elderly with all of their chronic disorders and end-of-life care, plus the high costs of Medicare beneficiaries with long term disabilities or end stage renal disease? That alone would price the Medicare buy-in out of the market. Would a separate risk pool be established – one that likely would be subject to adverse selection?

The public option was included in the House version of the Affordable Care Act (Affordable Health Care for America Act), but when these issues were faced it did not end up resembling Medicare. It became simply another plan similar to private plans but with even greater restrictions in order to prevent the insurers from having to face “unfair competition” from the public plan. In the Senate version, which was the version that eventually became law, Sen. Lieberman was successful in having the public option stripped out of the bill. But had it been left in, it would have been an unsatisfactory program. Think of how Congress set up the co-ops to fail, again simply to protect the private insurers from competition. The lessons of the co-ops provide lessons for the public option.

Also Congress is a force to reckon with. Medicare needs many improvements, but instead Congress continues to nurture the private Medicare Advantage (MA) plans while neglecting the traditional Medicare program. The Medicare improvements in the Affordable Care Act (ACA) were negligible compared to the need. It is difficult to see Congress enacting a Medicare public option that has better benefits and lower costs than the private MA plans – certainly not as long as the private insurance industry holds sway over Congress.

Further, the public option fails to capture most of the efficiencies and savings of the single payer model. The public option would be only one more player in our wasteful, administratively-complex, fragmented system of financing care. Even the current Medicare program, as large as it is, is unable to revise the fragmented financing infrastructure that permeates the rest of the health care system and is responsible for so much of our waste. Adding the public option to the individual insurance market could not have more than a negligible impact.

Okay, let’s fantasize and pretend that we have a Congress and administration that really wants to enact a Medicare buy-in. Let’s pretend that they improve the benefits, though that would cause an increase in the premiums. Let’s pretend that they could put together a package that would compete with private plans, though that would result in greater administrative costs than we already have with Medicare. Let’s pretend that they would offer the same premium subsidies and tax credits that are currently offered for private plans in the exchanges. You would still have a relatively small impact on the market since most individuals would still be covered through employer-sponsored plans, Medicare, Medicaid, the VA, and other programs.

Let’s suppose that employers finally decide to eliminate their plans. At present, it appears that they would likely refer their employees to private insurance exchanges, which do not happen to be eligible for the credits and subsidies and likely would remain that way unless the government were to take over the private exchanges. Can you imagine the public response to the government nationalizing private exchanges?

If you read the Physicians’ Proposal again, you would find that most of the advantages of a single payer system will not have been enacted even with a well designed Medicare public option.

No, a Medicare buy-in or public option is not a step towards single payer. It would be merely another player in our dysfunctional system. Worse, it would further postpone enactment of the reform that we really need merely because we would be thinking that we’ve done something when we really haven’t.

Sorry, but we have to change that chant from “Public Option” to “Medicare for All, not just some.”

Hillary Clinton Takes a Step to the Left on Health Care

By Alan Rappeport and Margot Sanger-Katz
The New York Times, May 10, 2016

Mrs. Clinton is moving to the left on health care and this week took a significant step in her opponent’s direction, suggesting she would like to give people the option to buy into Medicare.

“I’m also in favor of what’s called the public option, so that people can buy into Medicare at a certain age,” Mrs. Clinton said on Monday at a campaign event in Virginia.

Mrs. Clinton’s suggestion was that perhaps younger Americans, “people 55 or 50 and up,” could voluntarily pay to join the program.

Mr. Sanders calls his single-payer health care plan “Medicare for all.” What Mrs. Clinton proposed was a sort of Medicare for more.

http://www.nytimes.com/2016/05/11/us/politics/hillary-clinton-health-care-public-option.html

Hillary Clinton is once again bringing back the proposal to allow for people under 65 to have the option of purchasing coverage under Medicare – the so-called public option. We have written much about this in the past, but since her comments have renewed enthusiasm amongst single-payer advocates for a Medicare buy-in, let’s discuss it one more time.

First of all, without additional coverage such as Medigap plans, the traditional Medicare program leaves individuals potentially exposed to significant costs. It does not even have a catastrophic cap on coverage. Would an individual opting for a Medicare buy-in need to also purchase a Medigap plan? Or would a special Medicare plan be offered that included those benefits?

How would the premium for a Medicare buy-in be determined? Would it be based on the current Medicare risk pool that includes the elderly with all of their chronic disorders and end-of-life care, plus the high costs of Medicare beneficiaries with long term disabilities or end stage renal disease? That alone would price the Medicare buy-in out of the market. Would a separate risk pool be established – one that likely would be subject to adverse selection?

The public option was included in the House version of the Affordable Care Act (Affordable Health Care for America Act), but when these issues were faced it did not end up resembling Medicare. It became simply another plan similar to private plans but with even greater restrictions in order to prevent the insurers from having to face “unfair competition” from the public plan. In the Senate version, which was the version that eventually became law, Sen. Lieberman was successful in having the public option stripped out of the bill. But had it been left in, it would have been an unsatisfactory program. Think of how Congress set up the co-ops to fail, again simply to protect the private insurers from competition. The lessons of the co-ops provide lessons for the public option.

Also Congress is a force to reckon with. Medicare needs many improvements, but instead Congress continues to nurture the private Medicare Advantage (MA) plans while neglecting the traditional Medicare program. The Medicare improvements in the Affordable Care Act (ACA) were negligible compared to the need. It is difficult to see Congress enacting a Medicare public option that has better benefits and lower costs than the private MA plans – certainly not as long as the private insurance industry holds sway over Congress.

Further, the public option fails to capture most of the efficiencies and savings of the single payer model. The public option would be only one more player in our wasteful, administratively-complex, fragmented system of financing care. Even the current Medicare program, as large as it is, is unable to revise the fragmented financing infrastructure that permeates the rest of the health care system and is responsible for so much of our waste. Adding the public option to the individual insurance market could not have more than a negligible impact.

Okay, let’s fantasize and pretend that we have a Congress and administration that really wants to enact a Medicare buy-in. Let’s pretend that they improve the benefits, though that would cause an increase in the premiums. Let’s pretend that they could put together a package that would compete with private plans, though that would result in greater administrative costs than we already have with Medicare. Let’s pretend that they would offer the same premium subsidies and tax credits that are currently offered for private plans in the exchanges. You would still have a relatively small impact on the market since most individuals would still be covered through employer-sponsored plans, Medicare, Medicaid, the VA, and other programs.

Let’s suppose that employers finally decide to eliminate their plans. At present, it appears that they would likely refer their employees to private insurance exchanges, which do not happen to be eligible for the credits and subsidies and likely would remain that way unless the government were to take over the private exchanges. Can you imagine the public response to the government nationalizing private exchanges?

If you read the Physicians’ Proposal again, you would find that most of the advantages of a single payer system will not have been enacted even with a well designed Medicare public option.

No, a Medicare buy-in or public option is not a step towards single payer. It would be merely another player in our dysfunctional system. Worse, it would further postpone enactment of the reform that we really need merely because we would be thinking that we’ve done something when we really haven’t.

Sorry, but we have to change that chant from “Public Option” to “Medicare for All, not just some.”

The Sanders Single-Payer Health Care Plan: The Effect on National Health Expenditures and Federal and Private Spending

By John Holahan, Matthew Buettgens, Lisa Clemans-Cope, Melissa M. Favreault, Linda J. Blumberg, Slyabonga Ndwandwa
Urban Institute, May 9, 2016

Abstract

Presidential candidate Bernie Sanders proposed a single-payer system to replace all current health coverage. His system would cover all medically necessary care, including long-term care, without cost-sharing. We estimate that the approach would decrease the uninsured by 28.3 million people in 2017. National health expenditures would increase by $6.6 trillion between 2017 and 2026, while federal expenditures would increase by $32.0 trillion over that period. Sanders’s revenue proposals, intended to finance all health and nonhealth spending he proposed, would raise $15.3 trillion from 2017 to 2026—thus, the proposed taxes are much too low to fully finance his health plan.

http://www.urban.org/research/publication/sanders-single-payer-health-care-plan-effect-national-health-expenditures-and-federal-and-private-spending

Urban Institute Board of Trustees:
http://www.urban.org/about/board-of-directors

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An Analysis of Senator Bernie Sanders’s Tax and Transfer Proposals

By Gordon B. Mermin, Leonard E. Burman, Frank Sammartino
Tax Policy Center, May 9, 2016

Abstract

Presidential candidate Bernie Sanders proposes significant tax increases that would raise $15.3 trillion over the next decade. All income groups would pay more tax, but most would come from high-income households, particularly those with very high incomes. Sanders would also implement new government benefits—notably government-financed single-payer health care, long-term services and supports, college, and family leave benefits—and expand Social Security benefits. TPC finds the new government benefits would more than offset new taxes for 95% of households but the combined tax and transfer plan would increase federal budget deficits by more than $18 trillion over the next decade.

http://www.taxpolicycenter.org/publications/analysis-senator-bernie-sanderss-tax-and-transfer-proposals

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The Urban Institute’s Attack On Single Payer: Ridiculous Assumptions Yield Ridiculous Estimates

By David Himmelstein and Steffie Woolhandler
The Huffington Post, May 9, 2016

The Urban Institute and the Tax Policy Center today released analyses of the costs of Sen. Bernie Sanders’ domestic policy proposals, including single-payer national health insurance. They claim that Sanders’ proposals would raise the federal deficit by $18 trillion over the next decade.

We won’t address all of the issues covered in these analyses, just single-payer Medicare for all. To put it bluntly, the estimates (which were prepared by John Holahan and colleagues) are ridiculous. They project outlandish increases in the utilization of medical care, ignore vast savings under single-payer reform, and ignore the extensive and well-documented experience with single-payer systems in other nations – which all spend far less per person on health care than we do.

The authors’ anti-single-payer bias is also evident from their incredible claims that physicians’ incomes would be squeezed (which contradicts their own estimates positing a sharp rise in spending on physician services), and that patients would suffer huge disruptions, despite the fact that the implementation of single-payer systems elsewhere, as well as the start-up of Medicare, were disruption-free.

We outline below some of the most glaring errors in the Holahan analysis (which served as the basis for Tax Policy Center’s estimates) regarding health care spending under the Sanders plan.

1. Administrative savings, Part 1: Holahan assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 9.5 percent. They base this 6 percent estimate on figures for Medicare’s current overhead, which include 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, even this 3 percent figure is probably too high, since Sanders’ plan would simplify hospital payment by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments. Hence a more realistic estimate would assume that insurance overhead would drop to Canada’s level of about 1.8 percent. Cutting insurance overhead to 2 percent (rather than the 6 percent that Holahan projects) would save an additional $1.7 trillion over the next 10 years.

2. Administrative savings, Part 2: Holahan completely ignores the huge savings on hospital administration and doctors’ billing 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 even Kenneth Thorpe (a former Clinton administration official who has criticized Sanders’ plan, although his recent estimates of savings are far lower than those he made prior to the current presidential campaign).

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 $2.57 trillion over 10 years. Additional savings of more than $1.5 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 Holahan analysis underestimates administrative savings by about $6 trillion over 10 years.

3. Drug costs: Holahan projects that a single-payer plan would have to pay 50 percent higher drug costs than those paid at present by Medicaid. Moreover, their estimate assumes that the U.S. would continue to pay much higher prices for drugs than other nations, despite the fact that a U.S. single-payer system would have much greater negotiating leverage with drug companies than other national health insurance schemes.

Reducing drug prices to the levels currently paid by European nations would save at least $1.1 trillion more than Holahan posits over 10 years.

4. Utilization of care: Holahan projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase they foresee 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 Holahan’s 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 roughly $1.6 trillion increase in total payments to doctors over 10 years, Holahan says in his discussion that “Physician incomes would be squeezed by the new payment rates.”

5. Holahan’s argument that the Sanders plan would cause a huge disruption of health care: This argument mirrors scare tactics used by Medicare’s opponents in 1963. Back then, there were claims that doctors would boycott Medicare, and Wall Street Journal headlines warned of a “Patient Pileup,” as “flocks of Medicare beneficiaries … suddenly clog the nation’s 7,200 hospitals.” Nothing like that ever happened, nor did it happen when Taiwan implemented single payer more recently. And there’s no reason to think it would happen here.

Moreover, surveys show that most doctors would welcome national health insurance, and thousands of doctors have recently issued a call (and detailed proposal) for single-payer reform in the American Journal of Public Health.

In summary, Holahan 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.

Rather than increasing national health spending, as Holahan claims, Sanders’ plan (and the plan proposed by Physicians for a National Health Program) would almost certainly decrease total health spending over the next 10 years.

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

http://www.huffingtonpost.com/david-himmelstein/the-urban-institutes-attack-on-single-payer-ridiculous-assumptions-yield-ridiculous-estimates_b_9876640.html

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Comment:

By Don McCanne, M.D.

The health policy literature is rich with studies, reports and data confirming the that single payer health care financing is much more effective in ensuring universal coverage at lower costs than is our current fragmented, dysfunctional system of financing health care. Yet there has been a recent surge of interest in analyzing the single payer model, directly attributed to Sen. Bernie Sanders’ advocacy for it during his presidential campaign. These reports from the Urban Institute and the Tax Policy Center are the latest which question the well documented fact that single payer would reduce per capita spending.

What is going on here? These two organizations are highly reputable and have produced many studies that are quite credible. Yet the nation’s two leading researchers in single payer, Steffie Woolhandler and David Himmelstein, with their impeccable integrity, have shown that the researchers producing the critical reports have used incorrect assumptions in their analyses. This is not a matter of conflicting opinions, but rather a matter of the factual basis behind the assumptions. Yet the media ignore the facts and distribute only the compromised results from these otherwise reputable individuals and institutions that challenge the savings that would be accrued through the single payer model.

Why would John Holahan and his colleagues at the Urban Institute do this, at this time? Perhaps the composition of the Board of Trustees might give us a clue (link above). Most of them are members of “the establishment”, many of them have served in President Clinton’s administration (as did another critic – Kenneth Thorpe), and some are conservatives opposed to single payer. (The Tax Policy Center is a joint project of the Urban Institute and the Brookings Institution.) The timing of this report suggests that it is more than coincidental that it would be used to help defeat the only current challenger to Hillary Clinton’s quest for the Democratic presidential nomination.

But why would respected researchers agree to such a blatantly political use of their work product? If you check their credentials, they are all deeply involved in health policy research that is designed to improve the function of our health care system, particularly its financing. That is, they are avowed incrementalists. Single payer would displace much of the work they have done with private insurance markets, Medicare, Medicaid, safety-net institutions and other aspects of our dysfunctional system. They are likely not well informed on single payer policy science since that has not been on their radar. This is not questioning the integrity of these researchers but merely an observation as to how they could come up with invalid conclusions. Their minds are simply pre-programmed to produce the results they get.

Hillary Clinton has declared that she will not consider single payer. When the policy community should be making efforts to convince her to support a superior model of reform they are instead discrediting that model in order to support her and Obamacare – the most expensive model of reform and one that fails to accomplish our goals of universality, efficiency and equity. Sadly, that reflects poorly on the policy community.

PNHP is a single issue organization supporting research and education on single payer reform. PNHP does not support nor oppose any political candidates.

The Sanders Single-Payer Health Care Plan: The Effect on National Health Expenditures and Federal and Private Spending

By John Holahan, Matthew Buettgens, Lisa Clemans-Cope, Melissa M. Favreault, Linda J. Blumberg, Slyabonga Ndwandwa
Urban Institute, May 9, 2016

Abstract

Presidential candidate Bernie Sanders proposed a single-payer system to replace all current health coverage. His system would cover all medically necessary care, including long-term care, without cost-sharing. We estimate that the approach would decrease the uninsured by 28.3 million people in 2017. National health expenditures would increase by $6.6 trillion between 2017 and 2026, while federal expenditures would increase by $32.0 trillion over that period. Sanders’s revenue proposals, intended to finance all health and nonhealth spending he proposed, would raise $15.3 trillion from 2017 to 2026—thus, the proposed taxes are much too low to fully finance his health plan.

http://www.urban.org/research/publication/sanders-single-payer-health-care-plan-effect-national-health-expenditures-and-federal-and-private-spending

Urban Institute Board of Trustees:
http://www.urban.org/about/board-of-directors

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An Analysis of Senator Bernie Sanders’s Tax and Transfer Proposals

By Gordon B. Mermin, Leonard E. Burman, Frank Sammartino
Tax Policy Center, May 9, 2016

Abstract

Presidential candidate Bernie Sanders proposes significant tax increases that would raise $15.3 trillion over the next decade. All income groups would pay more tax, but most would come from high-income households, particularly those with very high incomes. Sanders would also implement new government benefits—notably government-financed single-payer health care, long-term services and supports, college, and family leave benefits—and expand Social Security benefits. TPC finds the new government benefits would more than offset new taxes for 95% of households but the combined tax and transfer plan would increase federal budget deficits by more than $18 trillion over the next decade.

http://www.taxpolicycenter.org/publications/analysis-senator-bernie-sanderss-tax-and-transfer-proposals

***

The Urban Institute’s Attack On Single Payer: Ridiculous Assumptions Yield Ridiculous Estimates

By David Himmelstein and Steffie Woolhandler
The Huffington Post, May 9, 2016

The Urban Institute and the Tax Policy Center today released analyses of the costs of Sen. Bernie Sanders’ domestic policy proposals, including single-payer national health insurance. They claim that Sanders’ proposals would raise the federal deficit by $18 trillion over the next decade.

We won’t address all of the issues covered in these analyses, just single-payer Medicare for all. To put it bluntly, the estimates (which were prepared by John Holahan and colleagues) are ridiculous. They project outlandish increases in the utilization of medical care, ignore vast savings under single-payer reform, and ignore the extensive and well-documented experience with single-payer systems in other nations – which all spend far less per person on health care than we do.

The authors’ anti-single-payer bias is also evident from their incredible claims that physicians’ incomes would be squeezed (which contradicts their own estimates positing a sharp rise in spending on physician services), and that patients would suffer huge disruptions, despite the fact that the implementation of single-payer systems elsewhere, as well as the start-up of Medicare, were disruption-free.

We outline below some of the most glaring errors in the Holahan analysis (which served as the basis for Tax Policy Center’s estimates) regarding health care spending under the Sanders plan.

1. Administrative savings, Part 1: Holahan assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 9.5 percent. They base this 6 percent estimate on figures for Medicare’s current overhead, which include 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, even this 3 percent figure is probably too high, since Sanders’ plan would simplify hospital payment by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments. Hence a more realistic estimate would assume that insurance overhead would drop to Canada’s level of about 1.8 percent. Cutting insurance overhead to 2 percent (rather than the 6 percent that Holahan projects) would save an additional $1.7 trillion over the next 10 years.

2. Administrative savings, Part 2: Holahan completely ignores the huge savings on hospital administration and doctors’ billing 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 even Kenneth Thorpe (a former Clinton administration official who has criticized Sanders’ plan, although his recent estimates of savings are far lower than those he made prior to the current presidential campaign).

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 $2.57 trillion over 10 years. Additional savings of more than $1.5 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 Holahan analysis underestimates administrative savings by about $6 trillion over 10 years.

3. Drug costs: Holahan projects that a single-payer plan would have to pay 50 percent higher drug costs than those paid at present by Medicaid. Moreover, their estimate assumes that the U.S. would continue to pay much higher prices for drugs than other nations, despite the fact that a U.S. single-payer system would have much greater negotiating leverage with drug companies than other national health insurance schemes.

Reducing drug prices to the levels currently paid by European nations would save at least $1.1 trillion more than Holahan posits over 10 years.

4. Utilization of care: Holahan projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase they foresee 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 Holahan’s 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 roughly $1.6 trillion increase in total payments to doctors over 10 years, Holahan says in his discussion that “Physician incomes would be squeezed by the new payment rates.”

5. Holahan’s argument that the Sanders plan would cause a huge disruption of health care: This argument mirrors scare tactics used by Medicare’s opponents in 1963. Back then, there were claims that doctors would boycott Medicare, and Wall Street Journal headlines warned of a “Patient Pileup,” as “flocks of Medicare beneficiaries … suddenly clog the nation’s 7,200 hospitals.” Nothing like that ever happened, nor did it happen when Taiwan implemented single payer more recently. And there’s no reason to think it would happen here.

Moreover, surveys show that most doctors would welcome national health insurance, and thousands of doctors have recently issued a call (and detailed proposal) for single-payer reform in the American Journal of Public Health.

In summary, Holahan 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.

Rather than increasing national health spending, as Holahan claims, Sanders’ plan (and the plan proposed by Physicians for a National Health Program) would almost certainly decrease total health spending over the next 10 years.

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

http://www.huffingtonpost.com/david-himmelstein/the-urban-institutes-attack-on-single-payer-ridiculous-assumptions-yield-ridiculous-estimates_b_9876640.html

The health policy literature is rich with studies, reports and data confirming the that single payer health care financing is much more effective in ensuring universal coverage at lower costs than is our current fragmented, dysfunctional system of financing health care. Yet there has been a recent surge of interest in analyzing the single payer model, directly attributed to Sen. Bernie Sanders’ advocacy for it during his presidential campaign. These reports from the Urban Institute and the Tax Policy Center are the latest which question the well documented fact that single payer would reduce per capita spending.

What is going on here? These two organizations are highly reputable and have produced many studies that are quite credible. Yet the nation’s two leading researchers in single payer, Steffie Woolhandler and David Himmelstein, with their impeccable integrity, have shown that the researchers producing the critical reports have used incorrect assumptions in their analyses. This is not a matter of conflicting opinions, but rather a matter of the factual basis behind the assumptions. Yet the media ignore the facts and distribute only the compromised results from these otherwise reputable individuals and institutions that challenge the savings that would be accrued through the single payer model.

Why would John Holahan and his colleagues at the Urban Institute do this, at this time? Perhaps the composition of the Board of Trustees might give us a clue (link above). Most of them are members of “the establishment”, many of them have served in President Clinton’s administration (as did another critic – Kenneth Thorpe), and some are conservatives opposed to single payer. (The Tax Policy Center is a joint project of the Urban Institute and the Brookings Institution.) The timing of this report suggests that it is more than coincidental that it would be used to help defeat the only current challenger to Hillary Clinton’s quest for the Democratic presidential nomination.

But why would respected researchers agree to such a blatantly political use of their work product? If you check their credentials, they are all deeply involved in health policy research that is designed to improve the function of our health care system, particularly its financing. That is, they are avowed incrementalists. Single payer would displace much of the work they have done with private insurance markets, Medicare, Medicaid, safety-net institutions and other aspects of our dysfunctional system. They are likely not well informed on single payer policy science since that has not been on their radar. This is not questioning the integrity of these researchers but merely an observation as to how they could come up with invalid conclusions. Their minds are simply pre-programmed to produce the results they get.

Hillary Clinton has declared that she will not consider single payer. When the policy community should be making efforts to convince her to support a superior model of reform they are instead discrediting that model in order to support her and Obamacare – the most expensive model of reform and one that fails to accomplish our goals of universality, efficiency and equity. Sadly, that reflects poorly on the policy community.

PNHP is a single issue organization supporting research and education on single payer reform. PNHP does not support nor oppose any political candidates.

Maybe we are to blame in part for rising cancer drug prices

By Mark V. Pauly, PhD
Philly.com, May 9, 2016

The prices of oral cancer drugs are rising. This will come as no surprise to anyone who has cancer or who knows someone who has it.

Why did these prices increase at this pace?  My visceral reaction, which I suspect is the same as yours, is to rail against “corporate greed,” something we have seen on display for even old drugs to a spectacular extent lately.

But here is my guess. The combination of rising consumer income (even with the recession) and the spread of drug insurance meant that the maximum amount consumers or their insurers were willing to pay for these effective drugs for desperate situations grew. It was growth in demand or consumer value that persuaded drug firms to develop drugs that would be profitable if introduced at higher prices.

If we consumers want to do something about rising prices for cancer drugs, we need (according to the hard-hearted economist) to do what happens when prices for gas, or steak, or designer ties is rising — we need to walk away from them. A tepid demand response will itself temper prices as well as total spending, and perhaps offer a cautionary lesson for future health care price increases.

http://www.philly.com/philly/blogs/health-cents/Maybe-we-are-to-blame-in-part-for-rising-cancer-drug-prices.html

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S&P Healthcare Claims Index Monthly Report

Key 2015 Takeaways:

The December 2015 S&P Healthcare Claims Indices (the Indices) describe commercial healthcare costs that rose 50% more rapidly in 2015 than in 2014 – 6.50% vs. 4.33%.

Drug costs played a role by significantly increasing for the second straight year – rising 15.83% in 2015 (up from 12.58% in 2014 and 2.73% in 2013).

http://us.spindices.com/index-family/healthcare-claims/all

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Comment:

By Don McCanne, M.D.

Drug prices are out of control. Wharton School’s Mark V. Pauly, PhD, of “moral hazard” fame, suggests that we, as consumers, can do something about it. We simply walk away from the high-priced drugs we need and then the markets will take care of the prices.

That might satisfy “the hard-hearted economist,” but there are other economic tools that can be used to achieve our objective: ensuring that everyone receives all essential health care services and products. Predominant amongst the alternative methods of health care financing would be single payer Medicare for all.

A publicly-financed system with government administered pricing and first dollar coverage is much more effective than markets in ensuring both appropriate pricing and access. Using the market tool of walking away eliminates access. That might be fine for designer ties, but it isn’t for health care.