PNHP

High price of health care

High price of health care

Trade agreement could be a bad deal for medicine

By Anna Zelivianskaia, M4
Chicago Medicine, February 2016

In the middle of a busy emergency room, a resident tells me, “I just found out how much a brand-name proton pump inhibitor costs – a 400 percent markup from generic and a few pills cost over $200!” Unfortunately, this is nothing new. And, in my opinion, the problem will only worsen under what’s known as the Trans-Pacific Partnership (TPP) trade agreement. The TPP was negotiated between the United States and 11 Pacific Rim countries, and now awaits congressional approval. Based on the final text, which was released in November 2015, the TPP will negatively impact public health in the signatory countries, including the U.S.

Harmful provisions in the TPP would loosen patent requirements, prolong pharmaceutical monopolies, and tighten intellectual property regulations. Longer brand-name monopolies translate into limited generic usage. This is particularly worrisome for developing countries with less access to generics drugs.

According to Public Citizen’s Global Trade Watch, “The TPP would set the parameters” for future efforts by national and state legislatures to reduce the cost of medicines, protect public health and the nation’s fiscal health. Just one critical example: The TPP’s limits on future policy could shut down high-profile reform efforts, first and foremost, for Medicare Part D price negotiation.

Impact on biologic medicines

The most controversial TPP medicine-related provision concerns biotech drugs, or biologics – medical products derived from living organisms, Public Citizen states on its website. “Biologics include many new cancer treatments, now averaging around $190,000 per person per year. Most health systems cannot pay such prices without compromising other health care priorities. In the TPP, the pharmaceutical industry achieved its goal that every TPP country must provide new exclusivity periods for biologics.”

Provisions like these are particularly dangerous in a time when the face of poverty is changing and health care is becoming less affordable. Médecins sans Frontières (MSF) translated as “Doctors Without Borders,” relies mostly on generic drugs to treat many diseases – 80 percent of antiretroviral medicines used by the organization are generics.

In its early years, MSF worked mostly in low-income developing countries. However, poverty now exists and grows in countries with greater overall wealth. MSF today works in over 30 countries with incomes that are categorized as “middle” or “high” by the World Bank. Millions of people will be considered poor in TPP-participating countries once their country reaches middle- or high-income status.

For countries participating in the TPP, patent laws would be relaxed; it would be possible to patent a newer version of an existing medicine even though it has no new therapeutic benefit. The TPP would also extend current patent terms, which are usually 20 years, by five years if the company faces loosely defined “regulatory delays” during the patent process. In certain cases, individual governments can make medicines more affordable in their countries through price controls or reimbursement policies, but the TPP would also restrict the participating countries’ ability to alleviate health care costs using these techniques.

According to an MSF spokesman, “Data exclusivity blocks competing firms from using previously generated clinical trial data to gain approval for generic versions of these drugs and vaccines. If pharmaceutical companies have their way, the TPP will block generic producers of biologics from entering the market for at least 12 years.”

The argument for such regulations is that pharmaceutical companies need time to recoup costs lost during the development process; profit promotes innovation. However, the Federal Trade Commission found no evidence to support this and concluded that no years of exclusivity were necessary to promote innovation in biologic drugs. These regulations limit access to life-saving medications for the most underserved patients.

The TPP was negotiated using “fast-track” authority, which means that the final agreement is subject to a straight up-or-down vote by Congress, with little opportunity for debate or amendment. Most trade negotiations require this “fast-track” approach because other countries are unlikely to participate in negotiations if the final deal could have substantial changes or stall during the approval process.

As health care professionals, we have a responsibility to advocate on behalf of our patients. I believe that our efforts across the world will be severely limited if there are restrictions on affordable medications. And because of these threats to public health, I have written to Congress and President Obama to let them know I oppose the TPP.

Anna Zelivianskaia is a fourth-year medical student at the University of Illinois at Chicago.

http://www.cmsdocs.org/news-publications/chicago-medicine-magazine/2016-issues/February2016.pdf

It’s all about the risk pool

Don’t Let The Talking Points Fool You: It’s All About The Risk Pool

By Linda Blumberg and John Holahan
Health Affairs Blog, March 15, 2016

Most people are healthy most of the time, and as a consequence, health care expenditures are heavily concentrated in a small share of the population: about 50 percent of the health care spending in a given year by those below age 65 is attributable to just 5 percent of the nonelderly population. The lowest spending half of the population accounts for only about 3.5 percent of health care spending in a year.

Deciding how much of total health care expenditures should be shared across the population and how to share it is the fundamental conundrum of health care policy. There is more risk pooling the larger the share of health expenditures included in the insurance as covered expenses (i.e., the fewer benefits excluded and the lower the out-of-pocket cost requirements), the larger the number of both the healthy and the sick insured, and the lower the variation in premiums across different enrollees. Sharing the costs of the sick across the broader population (a.k.a., risk pooling) increases costs for the healthy to the benefit of those with health problems; this creates more financial losers than winners at a point in time, since there are many more healthy people than sick in a given year. Segmenting risk pools has the opposite effect, savings for the currently healthy while increasing costs for those with health problems.

The health policies of the two political parties and their presidential candidates differentiate themselves clearly along the lines of pooling philosophies: the Democrats generally advocate broad-based pooling of health care risk and the Republicans generally advocate more individual responsibility and are willing to accept much greater segmentation of health care risk. These positions have dramatically different implications for individuals when they experience significant health problems, and they also have very different implications for low- and middle-income populations as compared to those with high incomes. As a consequence, each health care policy proposal should be evaluated as to its ramifications for risk pooling.

Left unchecked, people who perceive themselves healthy will tend, if they are pursuing their own near-term financial self-interests, to separate themselves from sick people—either by avoiding health insurance entirely, purchasing insurance products sold predominantly to other healthy people, or purchasing insurance products offering limited benefits that likely are not attractive to those requiring significant medical care. Those supporting public policies that allow or encourage this type of separating of health care risks often argue that they are placing greater personal responsibility on each individual, who will in turn make better decisions about the use of medical services. However, the burden of that increased responsibility falls most heavily on those with health problems, since it places larger financial costs on those with medical care needs at the time those needs arise, reducing costs for individuals while they are healthy.

Depending upon the extent of the risk segmentation created, these policies can effectively deny care to those that need it. Those who are well off financially can finance a considerable amount of necessary care out-of-pocket; a low- or middle-income individual experiencing a health crisis cannot. Thus, policies that separate risks will not only harm the sick, they will decrease access to care most heavily for the non-wealthy with health problems. Therefore, the amount of risk pooling versus risk segmentation is a fundamental choice.

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The degree of risk sharing under current law varies by the insurance market. Public insurance (e.g., Medicare, Medicaid) represents the most pooling of risk. All beneficiaries are eligible for the same health insurance benefits, and the cost of providing those benefits is largely financed by broad-based revenue sources (e.g., income or payroll taxes), completely separating enrollee health status from financing of the programs’ benefits. Public programs that include deductibles, co-insurance, or co-payments or limit covered benefits reduce the sharing of risk to some extent, as these provisions increase financial burdens directly with medical care use.

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Risk pooling approaches promote broad access to affordable medical care regardless of income or health status, while the risk segmenting approaches do not and would in fact reduce access relative to current law. Advocates of the latter generally employ terms such as individual responsibility, skin in the game, consumer choice, and market competition, but make no mistake about it: it is all about the risk pool.

http://healthaffairs.org/blog/2016/03/15/dont-let-the-talking-points-fool-you-its-all-about-the-risk-pool/

Risk pooling is the most fundamental concept in health care financing. Funds are paid into a common pool to cover the health care needs of those insured by the pool. Although that is a simple, basic concept, this article explains the complexities of risk pooling, with special attention to policies that promote greater risk pooling and policies that decrease pooling, separating the risks. The consequences are immense.

The politicians are discussing various concepts of health care reform ranging from incremental changes to the Affordable Care Act (ACA), to various concepts of replacing ACA, to establishing a single payer national health program. The most important differences between these models are in how they pool risk. The least effective are the ACA replacement proposals, and the most effective is a universal single payer system (an improved Medicare for all).

Even though it is easy to explain risk pooling, it is important to be able to respond to each proposal for reform with a precise explanation of how that proposal impacts risk pooling. The reason is that it’s all about the risk pool. A well designed universal risk pool ensures that health care will be affordable for each of us whenever we need it.

The full article by Linda Blumberg and John Holahan should be downloaded, studied, and saved as a reference to be used in health policy advocacy. We won’t get risk pooling right until we have everybody in, nobody out! (Thanks, Quentin.)

Don’t be fooled — a single-payer system is feasible

By John Benzinger, M.D.
Santa Fe New Mexican, March 19, 2016

The truth is that an improved, Medicare-for-all, single-payer system would cut costs drastically and provide coverage for everybody. Virtually every other developed country has an affordable universal system that proves the point.

It should be no surprise that our fragmented health care financing system, with dozens of insurance companies involved, is simply very inefficient and wasteful. Each insurance company has its own departments for enrollment, exclusions, referral, approvals, billing, sales and marketing. This massive duplication of effort is added to the cost of these for-profit businesses that often pay huge salaries to their CEOs and exclude as many payouts to patients as possible to maximize profit for its shareholders.

At issue is that single-payer threatens the multimillion-dollar paychecks of insurance companies and their CEOs, and the outrageous profits of drug and medical device companies and medical entrepreneurs. Under single-payer, private health insurance companies are gone and the system can negotiate for lower drug and medical device costs.

The Affordable Care Act (“Obamacare”) did expand coverage and eliminate exclusions for pre-existing conditions; however, 25 million people are still uninsured and costs are spiraling. This is no surprise, since it left wasteful private insurance companies, Big Pharma and a profiteering system in place.

Republicans have vehemently opposed Obamacare from Day One while irresponsibly offering no alternative option of their own. The “plan” under the GOP’s effort to stumble back to the old status quo seems to be, “Don’t get sick!”

Only single-payer national health insurance can squeeze the bureaucratic waste out of health care and use the savings to give patients the care they need — affordable, high-quality and comprehensive care with no waits.

People are waking up to see that corporate greed is hurting Americans. We have a broken for-profit health care system. Quality is mediocre, and as I mentioned, more than 25 million Americans are still uninsured. Medicare, Medicaid and hospitals are under threat of new cuts. Meanwhile, the nation’s for-profit health industry nets billions in profits, and CEOs take home tens of millions in pay.

A single-payer, Medicare-for-all system would cut costs dramatically by streamlining health care paperwork and making health care affordable. Savings would be enough to provide coverage for everyone, without any additional spending. The concept is popular with the American people and enjoys the support of most doctors.

Consult Physicians for a National Health Program (pnhp.org) and learn how you can help bring about a real universal health care system. Add your voice to the growing chorus, and tell our leaders to stand up for the health of the American people rather than the wealth of our richest firms.

John Benziger, M.D., is a recently retired physician who grew up, went to college and studied medicine in New Mexico.

http://www.santafenewmexican.com/opinion/my_view/reader-view-don-t-be-fooled-a-single-payer-system/article_2ba98798-cd20-5b71-a865-e41703631063.html

Universal Health Care Study Open for Researchers to Bid

After several months of delay, the Oregon Health Authority has released an RFP for the study of single payer and other universal healthcare financing systems. With a November deadline for a report to the Legislature, researchers could have a steep deadline.

By Chris Gray
The Lund Report (Portland, Ore.), March 18, 2016

The Oregon Health Authority has finally released a request for proposal to analyze the financing of healthcare in Oregon and provide for a possible state-based universal healthcare system, such as single payer.

Researchers interested in bidding on the project have until April 14. On April 29, the state expects to award the contract, for which the Legislature budgeted $300,000 last July.

The health economists will have a tight timeline to complete the study; a report is intended to be filed with the healthcare committees in November so the Legislature could take action in February.

Dr. Sam Metz, an anesthesiologist and healthcare activist with Physicians for a National Health Program, worries the project will be rushed, since he had believed the study could take 12 to 18 months in order to do a thorough job.

“A complete study, however late, is better than an incomplete study on time,” Metz said. If he’s wrong about the needed timeline, he’s hopeful the state allows the results to be delayed until later in 2017.

The Oregon Health Authority is about four months late in releasing the proposal, a situation that made healthcare activists speculate that the state was balking at touching a study that could prove the value of single-payer healthcare, but the movement’s champion, Sen. Michael Dembrow, D-Portland, ensured The Lund Report that was not the case.

Dembrow said the delays came because of Director Lynn Saxton has been in the process of overhauling the state agency, which resulted in less than adequate staffing the past few months.

“OHA acknowledges the unwanted delay in releasing the RFP. In the winter of 2015, the office leading this important work experienced unexpected staffing constraints due to turnover, which impacted the writing of the RFP. The result was a delay in issuing the RFP by several months. We do apologize, but we do intend to report to the Legislature on the completed project in November,” legislative coordinator Sarah Lochner wrote in an email to the office of Rep. Barbara Smith Warner, D-Portland.

The contract calls for researchers to look specifically at four healthcare concepts: single payer, where the government would provide a program for everyone through taxes; a commercial insurance product for all with the essential health benefits of the Affordable Care Act; adding a public option and basic health plan insurance products to the federal exchange for Oregon; and the default, the current system under the Affordable Care Act.

The researchers must look at both costs and savings. They’ll also have to identify a funding mechanism for the first option, a missing component that has stalled a single-payer system in Oregon.

This could be particularly tricky in Oregon since the state has long rejected a sales tax, and additional payroll or income taxes would come on top of the state’s already very high personal income taxes. But Metz said an economist had already sent an idea to Health Care for All Oregon that would provide adequate funding by relying on a capital gains tax.

Besides a complete overhaul, the study could show the path to smaller improvements, such as opening up a public option or coordinated care to more people, which might be accomplished with waivers from the federal government.

“If everything goes well in the procurement from now on the contractor will have five months to complete a very complicated task,” said Rep. Mitch Greenlick, D-Portland. “I will be delighted if anything useful comes out of the study.”

https://www.thelundreport.org/content/universal-health-care-study-open-researchers-bid

Should poor-performing hospitals be expelled from exchange plans?

California Insurance Marketplace Wants To Kick Out Poor-Performing Hospitals

By Chad Terhune
California Healthline, March 18, 2016

California’s insurance exchange is threatening to cut hospitals from its networks for poor performance or high costs, a novel proposal that is drawing heavy fire from medical providers and insurers.

The goal is to boost the overall quality of patient care and make coverage more affordable, said Peter Lee, executive director of the Covered California exchange.

“The first few years were about getting people in the door for coverage,” said Lee, a key figure in the roll-out of the federal health law. “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality. We don’t want to throw anyone out, but we don’t want to pay for bad quality care either.”

It appears to be the first proposal of its kind in the country. The exchange’s five-member board is slated to vote on it next month. If approved, insurers would need to identify hospital “outliers” on cost and quality starting in 2018. Medical groups and doctors would be rated after that.

Providers who don’t measure up stand to lose insured patients and suffer a black eye that could sully their reputations with employers and other big customers.

By 2019, health plans would be expected to expel poor performers from their exchange networks.

The idea has already sparked fierce opposition. Doctors and hospitals accuse the exchange of overstepping its authority and failing to spell out the specific measures they would be judged on.

Health insurers, normally at odds with providers, have joined them in the fight. The insurers are balking at the prospect of disclosing their negotiated rates with providers. Health plans have long resisted efforts that would let competitors or the public see the deals they make with doctors and hospitals.

But scrutinizing the negotiated rates would help the exchange identify high-cost providers and allow policyholders with high deductibles to see the differences in price before undergoing a surgery or imaging test.

Lee said it’s time for the exchange to move beyond enrollment and flex its market power on behalf of its 1.5 million members. He said insurers haven’t been tough enough on hospitals and doctors.

“California is definitely ahead of the pack when it comes to taking an active purchasing role, and exclusion is a pretty big threat,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. “There may be a dominant hospital system that’s charging through the nose, but without them you don’t have an adequate network. It will be interesting to see how Covered California threads that needle.”

A study last year found that 75 percent of Covered California plans had narrow physician networks, with more restricted choices than all but three other states.

“I don’t know of anyone even close to trying this,” said Dan Polsky, the study’s author and executive director of the Leonard Davis Institute of Health Economics at the University of Pennsylvania. “I applaud Covered California for being bold to improve quality and reduce costs, but I worry about the implementation.”

Polsky said measuring quality can be complicated, and steps must be taken to ensure hospitals and doctors aren’t penalized for treating sicker patients or serving lower-income areas. Most quality-boosting efforts use financial bonuses and penalties rather than exclusion.

Under the Covered California plan, hospitals would be judged on a wide range of performance and safety measures, from rates of readmission and hospital-acquired infections to adverse drug events. The exchange said it will draw on existing measures already tracked by Medicare and other groups, and it will work with hospitals, consumer advocates and other experts over the next 18 months to finalize the details.

California physicians warn that the exchange’s proposal could further reduce networks that are already too thin for patients.

Charles Bacchi, chief executive of the California Association of Health Plans, predicted that Covered California’s idea will backfire, discouraging hospitals and doctors from participating in the exchange and driving up premiums as a result.

“It’s the right goal but the wrong approach,” Bacchi said. “Covered California is proposing a top-down, arbitrary measurement system that carries a big stick. This can make it difficult for health plans and providers to work together constructively.”

http://californiahealthline.org/news/california-insurance-marketplace-wants-to-kick-out-poor-performing-hospitals/

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Comment:

By Don McCanne, M.D.

California has been an “active purchaser” of health plans for its ACA exchange – Covered California. To help keep insurance premiums down, it has contracted with plans that have amongst the narrowest provider networks in the nation. Now they want to measure quality and costs and expel providers, beginning with the hospitals, that rank poorly on these measurements. What could be wrong with this?

Choosing physicians and hospitals is much more involved than merely exercising personal preferences. Impaired accessibility, instability, lack of continuity with changing contracts, lack of integration of services, surprise out-of-network billings, and the like are just a few of the reasons that narrow networks are disadvantageous for patients, and, after all, shouldn’t the system be designed primarily to take care of patients?

The purported reason for active purchasing is to obtain higher quality at lower cost. But we don’t even know how to measure quality beyond token star-type ratings. Outcomes are much more dependent on socioeconomic factors than they are on the quality of the delivery services. So then is cost alone an adequate reason to pursue active purchasing? The traditional Medicare program is far more effective at controlling costs than are the private sector health plans, including those offered through the exchanges. So forget quality and cost as determinants of optimal provider networks.

Dedicated physicians and hospitals who care for some of the sickest and most deprived patients do not score as high on quality measures simply because the measurements are more focused toward the carriage trade. What an injustice it would be for the poor and sick if we expelled their physicians and hospitals merely because they failed the tests of some naive policy wonk from behind the scenes.

Patients should have free choice of their physicians and hospitals in a system that is affordable for all. We could have that by changing to a single payer national health program – an improved Medicare for all.

A few words on the single-payer medical system

By Kenneth Zapp
Business in Savannah (Ga.), March 14, 2016

U.S. Sen. Bernie Sanders advocates a medical system known as “single payer.” Though not well known by most Americans, it is favored by a majority of people who consider themselves Democrats.

While our society would benefit from an honest discussion of alternative funding mechanisms for medical services, this seems impossible given our current environment of partisan bickering and wildly inaccurate statements from political pundits.

Freedom of the press has morphed into license to say whatever serves one’s political goals.

As an economist, my responsibility is to provide verifiable information that may be useful in understanding why so many Americans favor this system whose reputation has suffered almost irreparably from misleading attacks.

First, the single-payer system is what economists call a monopsony. Investopedia defines monopsony as a market structure that’s similar to a monopoly except that a large buyer, not seller, controls a large portion of the market and drives prices down. The government, or an organization funded by the government, is the primary buyer of health services and as such forces all suppliers to lower their prices in order to be paid.

A simple example is found in Canada. There a single organization purchases all pharmaceuticals for their citizens. This purchasing power enables Canadians to consume the same products we use for 30 to 50 percent less than we pay.

It is important to understand this system refers only to the funding mechanism. As we will see, the single-payer funding system can function with private suppliers as happens in several countries or with public or government suppliers as is the case in Great Britain. But single payer does not require or suggest that government is supplying medical services.

While many countries use a form of the single-payer system, Canada is often cited as a useful example for us to understand how it works. There, each province provides a health insurance plan for all residents. Within provinces, citizens may go to any private physician or hospital for medical services. The provincial funding agency pays all bills stemming from these services.

The system in Canada saves money compared to our American mixture of private insurance and government funding in two essential ways. First, using their buying power, the provincial funding agencies bargain down prices charged by the private doctors and clinics. Second, the Canadian process entails dramatically less paper work (and expense) than realized by our providers and insurers.

One study found that Canadian doctors spend about one-tenth as much time as their American counterparts do on payment system forms and reports. This allows their doctors to spend more time with patients and explains how their 2.2 physicians per 1,000, is lower than our 2.4 per 1,000, enabling them to serve all their citizens.

Another found that American insurance companies have twice the overhead costs of the Canadian funding agencies.

The result of these savings is that Canada spends less, both as a percent of their GDP and in real dollars than we do on their total health care system. In Canada, 10 percent to 12 percent of their GDP goes toward health expenses that cover all citizens. We spend 16 percent to 17 percent of our GDP on health services even though more than 10 percent of our citizens do not have coverage.

A major American criticism of the Canadian system is that patients have unacceptable wait times for procedures other than visits to family physicians. One study found the following median wait times: slightly more than four weeks for appointments with specialists, two weeks for diagnostic services such as MRI and four weeks for surgery.

Other countries that use the single-payer system include Australia, Spain, Slovenia, Italy, Taiwan, Great Britain, Iceland, Finland, Sweden and Norway. Taiwan is an interesting case. It is clearly seen as the most conservative country in East Asia. Its National Health Insurance was instituted in 1995, and its system provides equal access to health care for all citizens.

Most health care providers are private firms that compete in a market for clients. The payment agency is funded by a payroll tax and additional general fund government expenditures. Recently the system switched from a fee for service payment to a prospective payment system for each patient enrolled in private clinics.

The system in Taiwan spends about 6 percent of their GDP to cover health needs of all citizens. While some may consider Taiwan a developing country, its average life expectancy is essentially the same as ours.

With these results, we must ask why the single payer is not seriously considered in our country.

The answer is clear: People and firms that profit generously from the existing system are highly motivated to use their resources to block any threat to their favorable position. These include insurance companies, drug firms and medical specialists or corporations that employ them.

When will we have an honest discussion of health care funding?

Kenneth Zapp is a professor emeritus at Metropolitan State University and a mentor for Savannah SCORE. Contact him at Kenneth.Zapp@metrostate.edu.

http://businessinsavannah.com/bis/2016-03-14/zapp-few-words-single-payer-medical-system#

PNHP note: Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidate for public office.

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A reader responds …

Medicare for all is the way forward

By Jack Bernard
Business in Savannah (Ga.), March 18, 2016

I was both pleased and surprised to read Ken Zapp’s op-ed regarding single payer. He is right on target.

The passage of the Affordable Care Act (ACA) was a positive from the standpoint of coverage. Although it has not met its goals, projections were that 9.1 million would be signed up via health insurance marketplaces and only 8.8 million were, the ACA still has been a major positive regarding access. And, if the Supreme Court had not gutted the Medicaid expansion provision in a strange politically motivated move, many more would be covered.

In any case, there are still tens of millions still uncovered. These are our friends and neighbors, hard working people who are employed by firms that do not provide health insurance.

Now for the negative side of the ACA: it is built on a rotten fiscal foundation, depending upon private insurance. As I wrote in various published letters and op-eds when it was first passed, the ACA will cost taxpayers a lot more than predicted.

Insurers will only participate if they can make money, profits. Many are currently suffering huge losses due to adverse selection and are seriously considering withdrawal. In simple language, the sickest people are enrolling and the healthiest are choosing to opt out. Inevitably, premiums will go up due to financial pressures on the insurers which remain in the program.

Under Medicare for All, this obstacle is overcome. There is one insurer (the good old US of A) that covers everyone and can apply leverage to obtain lower prices. But, Medicare for All is not socialism, whereby provision of services is done by the government.

As is true under the Medicare program for the last 50 years, providers of care (hospitals, nursing homes, MDs, pharmacies, etc.) remain private. In fact, the primary socialized medicine system in this nation is the VA program, not Medicare.

As Mr. Zapp indicates, numerous other nations have single payer. Their per capita health care costs are half ours, while morbidity and mortality rates are better than ours.

Isn’t it time that we admit the obvious: we do not have the best health care system in the world. But, we would if we went to Medicare for All.

Jack Bernard is a retired senior health care executive and, the former director of health planning for the state of Georgia.

http://businessinsavannah.com/bis/2016-03-18/opnion-medicare-all-way-forward

Should poor-performing hospitals be expelled from exchange plans?

California Insurance Marketplace Wants To Kick Out Poor-Performing Hospitals

By Chad Terhune
California Healthline, March 18, 2016

California’s insurance exchange is threatening to cut hospitals from its networks for poor performance or high costs, a novel proposal that is drawing heavy fire from medical providers and insurers.

The goal is to boost the overall quality of patient care and make coverage more affordable, said Peter Lee, executive director of the Covered California exchange.

“The first few years were about getting people in the door for coverage,” said Lee, a key figure in the roll-out of the federal health law. “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality. We don’t want to throw anyone out, but we don’t want to pay for bad quality care either.”

It appears to be the first proposal of its kind in the country. The exchange’s five-member board is slated to vote on it next month. If approved, insurers would need to identify hospital “outliers” on cost and quality starting in 2018. Medical groups and doctors would be rated after that.

Providers who don’t measure up stand to lose insured patients and suffer a black eye that could sully their reputations with employers and other big customers.

By 2019, health plans would be expected to expel poor performers from their exchange networks.

The idea has already sparked fierce opposition. Doctors and hospitals accuse the exchange of overstepping its authority and failing to spell out the specific measures they would be judged on.

Health insurers, normally at odds with providers, have joined them in the fight. The insurers are balking at the prospect of disclosing their negotiated rates with providers. Health plans have long resisted efforts that would let competitors or the public see the deals they make with doctors and hospitals.

But scrutinizing the negotiated rates would help the exchange identify high-cost providers and allow policyholders with high deductibles to see the differences in price before undergoing a surgery or imaging test.

Lee said it’s time for the exchange to move beyond enrollment and flex its market power on behalf of its 1.5 million members. He said insurers haven’t been tough enough on hospitals and doctors.

“California is definitely ahead of the pack when it comes to taking an active purchasing role, and exclusion is a pretty big threat,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. “There may be a dominant hospital system that’s charging through the nose, but without them you don’t have an adequate network. It will be interesting to see how Covered California threads that needle.”

A study last year found that 75 percent of Covered California plans had narrow physician networks, with more restricted choices than all but three other states.

“I don’t know of anyone even close to trying this,” said Dan Polsky, the study’s author and executive director of the Leonard Davis Institute of Health Economics at the University of Pennsylvania. “I applaud Covered California for being bold to improve quality and reduce costs, but I worry about the implementation.”

Polsky said measuring quality can be complicated, and steps must be taken to ensure hospitals and doctors aren’t penalized for treating sicker patients or serving lower-income areas. Most quality-boosting efforts use financial bonuses and penalties rather than exclusion.

Under the Covered California plan, hospitals would be judged on a wide range of performance and safety measures, from rates of readmission and hospital-acquired infections to adverse drug events. The exchange said it will draw on existing measures already tracked by Medicare and other groups, and it will work with hospitals, consumer advocates and other experts over the next 18 months to finalize the details.

California physicians warn that the exchange’s proposal could further reduce networks that are already too thin for patients.

Charles Bacchi, chief executive of the California Association of Health Plans, predicted that Covered California’s idea will backfire, discouraging hospitals and doctors from participating in the exchange and driving up premiums as a result.

“It’s the right goal but the wrong approach,” Bacchi said. “Covered California is proposing a top-down, arbitrary measurement system that carries a big stick. This can make it difficult for health plans and providers to work together constructively.”

http://californiahealthline.org/news/california-insurance-marketplace-wants-to-kick-out-poor-performing-hospitals/

California has been an “active purchaser” of health plans for its ACA exchange – Covered California. To help keep insurance premiums down, it has contracted with plans that have amongst the narrowest provider networks in the nation. Now they want to measure quality and costs and expel providers, beginning with the hospitals, that rank poorly on these measurements. What could be wrong with this?

Choosing physicians and hospitals is much more involved than merely exercising personal preferences. Impaired accessibility, instability, lack of continuity with changing contracts, lack of integration of services, surprise out-of-network billings, and the like are just a few of the reasons that narrow networks are disadvantageous for patients, and, after all, shouldn’t the system be designed primarily to take care of patients?

The purported reason for active purchasing is to obtain higher quality at lower cost. But we don’t even know how to measure quality beyond token star-type ratings. Outcomes are much more dependent on socioeconomic factors than they are on the quality of the delivery services. So then is cost alone an adequate reason to pursue active purchasing? The traditional Medicare program is far more effective at controlling costs than are the private sector health plans, including those offered through the exchanges. So forget quality and cost as determinants of optimal provider networks.

Dedicated physicians and hospitals who care for some of the sickest and most deprived patients do not score as high on quality measures simply because the measurements are more focused toward the carriage trade. What an injustice it would be for the poor and sick if we expelled their physicians and hospitals merely because they failed the tests of some naive policy wonk from behind the scenes.

Patients should have free choice of their physicians and hospitals in a system that is affordable for all. We could have that by changing to a single payer national health program – an improved Medicare for all.

Policy experts give Hillary’s plan a passing grade?

Clinton’s Health Plan Gets Mostly Passing Grades From Policy Experts

By Joyce Frieden
MedPage Today, March 15, 2016

Democratic presidential candidate Hillary Clinton’s ideas for improving the Affordable Care Act (ACA) drew cautious praise from health policy scholars, but they said they had no chance of enactment without a major change in Congressional attitudes.

“If we’re really serious about getting to the general uninsured and getting costs down, and it’s a choice between scratching everything and starting over [or] building on the Affordable Care Act … I would build on what Clinton’s talking about,” Ken Thorpe, PhD, of Emory University in Atlanta, said in a phone interview.

Clinton’s plan is “Very much a small adjustment to ACA, and in the climate we have, getting anything through [Congress] is a real challenge,” said Paul Hughes-Cromwick, MA, of the Center for Sustainable Health Spending at the Altarum Institute, in Ann Arbor, Mich. “Most of what she’s talking about is very small, and some things are already happening.”

On her website, Clinton lists the following planks among those in her healthcare proposal:

*  Make premiums more affordable and lessen out-of-pocket expenses for consumers purchasing health insurance on the ACA exchanges. This would include a tax credit of up to $5,000 per family to offset a portion of out-of-pocket and premium costs above 5% of income.

*  Support new incentives to encourage all states to expand Medicaid. Clinton proposes allowing any state that signs up for the Medicaid expansion to receive a 100% match for the first 3 years.

*  Invest in navigators, advertising, and other outreach activities to make exchange enrollment easier. Today, as many as 16 million people or half of all those uninsured are eligible but not enrolled in Medicaid or an exchange plan. Clinton plans to invest $500 million per year in an aggressive enrollment campaign.

*  Expand access to affordable healthcare to families regardless of immigration status. Clinton “believes we should let families — regardless of immigration status — buy into the Affordable Care Act exchanges,” according to her website.

*  Continue to support a “public option.” Clinton wants states to be able to establish a public option under which people could buy into a publicly funded health insurance plan.

*  Defend the ACA. “Hillary will continue to defend the ACA against Republican efforts to repeal it,” the website said. “She’ll build on it to expand affordable coverage, slow the growth of overall health care costs (including prescription drugs), and make it possible for providers to deliver the very best care to patients.”

*  Lower out-of-pocket costs like co-pays and deductibles. “Hillary believes that workers should share in slower growth of national healthcare spending through lower costs,” according to the website.

*  Reduce the cost of prescription drugs. “Hillary believes we need to demand lower drug costs for hardworking families and seniors.”

*  Transform our healthcare system to reward value and quality. “Hillary is committed to building on delivery system reforms in the Affordable Care Act that improve value and quality care for Americans.”

Compared with the plan offered by Clinton’s Democratic primary opponent, Sen. Bernie Sanders (I-Vt.), who wants to institute a single-payer “Medicare-for-all” program, hers is “definitely more realistic,” said Michael Sparer, PhD, JD, of Columbia University in New York City, in an interview. However, “a lot depends on what happens to Congress as well [if she becomes President]. If something would change in Congressional makeup, I think she has a pretty clear fix-it agenda.”

Even without such a change in Congress, “she will try to use whatever authority under ACA to encourage states to experiment,” he added.

Similarly, Elbert Huang, MD, MPH, at the University of Chicago, said he was impressed by the level of specificity in Clinton’s plan, especially compared with those of Sanders and Republican presidential candidate Donald Trump.

Jon Oberlander, PhD, of the University of North Carolina-Chapel Hill, agreed in an email that, overall, Clinton’s plan is “more than realistic” — “if we are to continue to make progress in reducing the uninsured population, making Obamacare more affordable for Americans with modest incomes is imperative. Politically, however, even these incremental measures are not so easy.”

However, Oberlander continued, “As for [Clinton’s] public option … its chances of enactment in the current Congressional environment are zero. Even if Democrats retake majorities in Congress in 2016, it would face an uphill path to enactment.”

A federally run public option, he said, “is symbolic politics, something that liberal Democrats like that allows Clinton to counter Sanders’ single-payer proposal.”

Clinton’s Medicaid expansion proposal “will be incredibly tricky to pull off politically,” said David Becker, PhD, of the University of Alabama at Birmingham School of Public Health, in an email to MedPage Today.

“Even in a state like Louisiana where Medicaid expansion will take effect on July 1, it is somewhat unlikely that Republican senators and representatives would support expanding federal support. This proposal also assumes that states that have already expanded their programs will be happy to support the extension of funding without asking for something in return.”

As to spending more money on navigators, “I’m not entirely sure this is money well spent,” Becker said. “People that are eligible but not enrolled for public health insurance programs tend to be low-utilizers who re-enroll when they need care. Although marketing and outreach efforts have varied across the states, the benefits of increased spending on these efforts are not clear.”

Clinton’s proposal to lower out-of-pocket costs might work with plans on the insurance exchanges, said Alan Sager, PhD, at Boston University, but is incompatible with the economics of private insurance.

“For private employers it’s very tough today, since employers and their benefits advisors think that higher out-of-pocket costs are the one tool they can wield to contain their healthcare costs,” Sager said in an email. “Many economists fantasize that higher out-of-pocket costs will somehow shoehorn size 10 healthcare into size 5 free-market competition. And some reporters and ‘consumer advocates’ fantasize that better information about price and quality will make us healthcare super-shoppers.”

Sager added, “Without real cost controls — not widely supported politically by Americans — out-of-pocket costs will continue to look to many people like the only game in town” for restraining overall costs.

He also dismissed the “reward value and quality” part of Clinton’s plan, calling it “tough to do without torturing hospitals and doctors to make them give us still more data. And they control the data so they can game the measures of value/quality if they want.”

David Howard, PhD, another Emory University scholar, told MedPage Today that he was troubled by Clinton’s proposing of new spending without suggesting how the costs would be offset.

“Clinton promises new subsidies for people who buy insurance on the exchanges, new subsidies to help offset out-of-pocket costs, and additional funds to subsidize state Medicaid expansions,” he wrote in an email. “At a time when the federal government is struggling to afford entitlements, it is irresponsible to promise new spending without offsetting spending reductions elsewhere.”

Jan Carney, MD, MPH, at the University of Vermont in Burlington, said she is concerned about what’s missing from all the candidates’ proposals, including Clinton’s.

“Public health issues such as infant mortality, obesity, HIV, injuries, homicides, and drug-related deaths all represent preventable contributors to health care costs,” she said in an email. “These specific areas (where we do much worse than other countries) and other areas of public health, would make a strong addition to this national healthcare discussion.”

Christopher Jones, PhD, of the Vermont Center for Clinical and Translational Science, in Burlington, named another topic of concern: biocybersecurity. “Health information has a longer shelf life than financial information and when both are sold on the black market, it is health information that commands a higher price,” he said in an email. “This will most assuredly be a concern for the Democratic candidate when s/he gets elected.”

http://www.medpagetoday.com/Washington-Watch/ElectionCoverage/56734

***

Comment:

By Don McCanne, M.D.

Not a very exciting article. And that’s the point. When you read Hillary Clinton’s proposals, they all fall under the category of mere tweaks to our current dysfunctional system.

Tens of millions will remain uninsured; underinsurance will not be eliminated; Medicaid would be expanded without addressing its deficiencies in access; administrative excesses, including waste in marketing would increase; the undocumented would be allowed in without a way to pay for it; an ineffectual public option would continue to be offered through Section 1332 waivers; and so forth. Lower co-pays and deductibles along with a higher tax credit would be helpful, but to be effective, it would require significantly higher taxes when we have a Congress that continues to resist, on a bipartisan basis, any tax increases.

Although the title of this article indicates that the health policy experts cited give her efforts a “passing grade,” they basically do not see much more than fine tuning of the status quo. There is no suggestion that we could achieve reform goals of universality, affordability, increased provider choice, greater access, greater administrative efficiency, and optimal equity in the financing of health care.

Many of the Clinton measures proposed would further increase health care spending while falling short on goals. That would be a shame when instead we could place effective controls on spending through a single payer national health program – an improved Medicare for all – while achieving all of the listed goals of reform.

Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidates for public office.

Policy experts give Hillary’s plan a passing grade?

Clinton’s Health Plan Gets Mostly Passing Grades From Policy Experts

By Joyce Frieden
MedPage Today, March 15, 2016

Democratic presidential candidate Hillary Clinton’s ideas for improving the Affordable Care Act (ACA) drew cautious praise from health policy scholars, but they said they had no chance of enactment without a major change in Congressional attitudes.

“If we’re really serious about getting to the general uninsured and getting costs down, and it’s a choice between scratching everything and starting over [or] building on the Affordable Care Act … I would build on what Clinton’s talking about,” Ken Thorpe, PhD, of Emory University in Atlanta, said in a phone interview.

Clinton’s plan is “Very much a small adjustment to ACA, and in the climate we have, getting anything through [Congress] is a real challenge,” said Paul Hughes-Cromwick, MA, of the Center for Sustainable Health Spending at the Altarum Institute, in Ann Arbor, Mich. “Most of what she’s talking about is very small, and some things are already happening.”

On her website, Clinton lists the following planks among those in her healthcare proposal:

*  Make premiums more affordable and lessen out-of-pocket expenses for consumers purchasing health insurance on the ACA exchanges. This would include a tax credit of up to $5,000 per family to offset a portion of out-of-pocket and premium costs above 5% of income.

*  Support new incentives to encourage all states to expand Medicaid. Clinton proposes allowing any state that signs up for the Medicaid expansion to receive a 100% match for the first 3 years.

*  Invest in navigators, advertising, and other outreach activities to make exchange enrollment easier. Today, as many as 16 million people or half of all those uninsured are eligible but not enrolled in Medicaid or an exchange plan. Clinton plans to invest $500 million per year in an aggressive enrollment campaign.

*  Expand access to affordable healthcare to families regardless of immigration status. Clinton “believes we should let families — regardless of immigration status — buy into the Affordable Care Act exchanges,” according to her website.

*  Continue to support a “public option.” Clinton wants states to be able to establish a public option under which people could buy into a publicly funded health insurance plan.

*  Defend the ACA. “Hillary will continue to defend the ACA against Republican efforts to repeal it,” the website said. “She’ll build on it to expand affordable coverage, slow the growth of overall health care costs (including prescription drugs), and make it possible for providers to deliver the very best care to patients.”

*  Lower out-of-pocket costs like co-pays and deductibles. “Hillary believes that workers should share in slower growth of national healthcare spending through lower costs,” according to the website.

*  Reduce the cost of prescription drugs. “Hillary believes we need to demand lower drug costs for hardworking families and seniors.”

*  Transform our healthcare system to reward value and quality. “Hillary is committed to building on delivery system reforms in the Affordable Care Act that improve value and quality care for Americans.”

Compared with the plan offered by Clinton’s Democratic primary opponent, Sen. Bernie Sanders (I-Vt.), who wants to institute a single-payer “Medicare-for-all” program, hers is “definitely more realistic,” said Michael Sparer, PhD, JD, of Columbia University in New York City, in an interview. However, “a lot depends on what happens to Congress as well [if she becomes President]. If something would change in Congressional makeup, I think she has a pretty clear fix-it agenda.”

Even without such a change in Congress, “she will try to use whatever authority under ACA to encourage states to experiment,” he added.

Similarly, Elbert Huang, MD, MPH, at the University of Chicago, said he was impressed by the level of specificity in Clinton’s plan, especially compared with those of Sanders and Republican presidential candidate Donald Trump.

Jon Oberlander, PhD, of the University of North Carolina-Chapel Hill, agreed in an email that, overall, Clinton’s plan is “more than realistic” — “if we are to continue to make progress in reducing the uninsured population, making Obamacare more affordable for Americans with modest incomes is imperative. Politically, however, even these incremental measures are not so easy.”

However, Oberlander continued, “As for [Clinton’s] public option … its chances of enactment in the current Congressional environment are zero. Even if Democrats retake majorities in Congress in 2016, it would face an uphill path to enactment.”

A federally run public option, he said, “is symbolic politics, something that liberal Democrats like that allows Clinton to counter Sanders’ single-payer proposal.”

Clinton’s Medicaid expansion proposal “will be incredibly tricky to pull off politically,” said David Becker, PhD, of the University of Alabama at Birmingham School of Public Health, in an email to MedPage Today.

“Even in a state like Louisiana where Medicaid expansion will take effect on July 1, it is somewhat unlikely that Republican senators and representatives would support expanding federal support. This proposal also assumes that states that have already expanded their programs will be happy to support the extension of funding without asking for something in return.”

As to spending more money on navigators, “I’m not entirely sure this is money well spent,” Becker said. “People that are eligible but not enrolled for public health insurance programs tend to be low-utilizers who re-enroll when they need care. Although marketing and outreach efforts have varied across the states, the benefits of increased spending on these efforts are not clear.”

Clinton’s proposal to lower out-of-pocket costs might work with plans on the insurance exchanges, said Alan Sager, PhD, at Boston University, but is incompatible with the economics of private insurance.

“For private employers it’s very tough today, since employers and their benefits advisors think that higher out-of-pocket costs are the one tool they can wield to contain their healthcare costs,” Sager said in an email. “Many economists fantasize that higher out-of-pocket costs will somehow shoehorn size 10 healthcare into size 5 free-market competition. And some reporters and ‘consumer advocates’ fantasize that better information about price and quality will make us healthcare super-shoppers.”

Sager added, “Without real cost controls — not widely supported politically by Americans — out-of-pocket costs will continue to look to many people like the only game in town” for restraining overall costs.

He also dismissed the “reward value and quality” part of Clinton’s plan, calling it “tough to do without torturing hospitals and doctors to make them give us still more data. And they control the data so they can game the measures of value/quality if they want.”

David Howard, PhD, another Emory University scholar, told MedPage Today that he was troubled by Clinton’s proposing of new spending without suggesting how the costs would be offset.

“Clinton promises new subsidies for people who buy insurance on the exchanges, new subsidies to help offset out-of-pocket costs, and additional funds to subsidize state Medicaid expansions,” he wrote in an email. “At a time when the federal government is struggling to afford entitlements, it is irresponsible to promise new spending without offsetting spending reductions elsewhere.”

Jan Carney, MD, MPH, at the University of Vermont in Burlington, said she is concerned about what’s missing from all the candidates’ proposals, including Clinton’s.

“Public health issues such as infant mortality, obesity, HIV, injuries, homicides, and drug-related deaths all represent preventable contributors to health care costs,” she said in an email. “These specific areas (where we do much worse than other countries) and other areas of public health, would make a strong addition to this national healthcare discussion.”

Christopher Jones, PhD, of the Vermont Center for Clinical and Translational Science, in Burlington, named another topic of concern: biocybersecurity. “Health information has a longer shelf life than financial information and when both are sold on the black market, it is health information that commands a higher price,” he said in an email. “This will most assuredly be a concern for the Democratic candidate when s/he gets elected.”

http://www.medpagetoday.com/Washington-Watch/ElectionCoverage/56734

Not a very exciting article. And that’s the point. When you read Hillary Clinton’s proposals, they all fall under the category of mere tweaks to our current dysfunctional system.

Tens of millions will remain uninsured; underinsurance will not be eliminated; Medicaid would be expanded without addressing its deficiencies in access; administrative excesses, including waste in marketing would increase; the undocumented would be allowed in without a way to pay for it; an ineffectual public option would continue to be offered through Section 1332 waivers; and so forth. Lower co-pays and deductibles along with a higher tax credit would be helpful, but to be effective, it would require significantly higher taxes when we have a Congress that continues to resist, on a bipartisan basis, any tax increases.

Although the title of this article indicates that the health policy experts cited give her efforts a “passing grade,” they basically do not see much more than fine tuning of the status quo. There is no suggestion that we could achieve reform goals of universality, affordability, increased provider choice, greater access, greater administrative efficiency, and optimal equity in the financing of health care.

Many of the Clinton measures proposed would further increase health care spending while falling short on goals. That would be a shame when instead we could place effective controls on spending through a single payer national health program – an improved Medicare for all – while achieving all of the listed goals of reform.

Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidates for public office.

Oaths Taken: Graduating Medical Students Pledge Support for Single-Payer Health Care

For a current, nationwide list of students who have signed the Match Day Pledge, click here. If you would like to speak with a student in your community, please contact PNHP at (312) 782-6006.

FOR IMMEDIATE RELEASE, March 17, 2016
Contact: Mark Almberg, PNHP Communications Director, 312-782-6006, mark@pnhp.org
Contact: Emily Henkels, PNHP National Organizer, 312-782-6006, e.henkels@pnhp.org

This Friday, March 18, is going to be a big day for Scott Goldberg. As a fourth-year medical student at the University of Chicago’s Pritzker School of Medicine, he’ll be learning which of his chosen residency programs he’s been matched with, and just like that he’ll be off to the races as a medical professional.

Match Day, as it’s come to be known, “is an important milestone in the career of future physicians,” according to Goldberg. “It is a rite of passage, representing the transition from students to doctors.”

And while medical students nationwide are eager to celebrate Match Day as the culmination of years of study, and as a towering personal and professional achievement, a growing number are also taking time to advocate for improvements to the health care system they are about to enter.

This year, more than 100 graduating students across the U.S. have already signed the Match Day Pledge as a way of signaling their support for a single-payer health care system covering all Americans. Many of these signees are members of Students for a National Health Program (SNaHP), the fast-growing student arm of Physicians for a National Health Program.

Why are these future physicians so eager to commit themselves to the fight for single payer? At a recent national summit in Nashville, 170 attendees from across the country cited reasons ranging from the moral imperative to care for patients based on need and need alone, to the frustration and waste tied to administration of our current, corporate-dominated system.

Single payer, as a policy, has long been favored by health experts, economists, and the public at large. It has proven successful in other industrialized countries, such as Canada, and has made a tremendous, positive impact on seniors in the United States in the form of Medicare.

And while vested corporate interests have kept single payer out of mainstream political discourse for years, it has come roaring back in 2016. Viable presidential candidates have advocated Medicare for All, public polling has reflected support for this policy (along with frustration over the shortcomings of the Affordable Care Act), and young people in particular have been enthusiastic about pressing for transformative change.

Young people, of course, includes young soon-to-be physicians who are eager to support a policy that would be a medical and financial boon for millions of Americans.

Says Goldberg, “By signing the Match Day Pledge, we are using our first signatures as residents to publicly declare our support for a truly equitable health care system that serves all patients, regardless of ability to pay, and to commit ourselves to achieving single payer in our lifetimes.”

Physicians for a National Health Program (PNHP) is a non-profit research and education organization of 20,000 physicians, medical students, and health professionals who support single-payer national health insurance. The Match Day Pledge project was initiated by the residents’ arm of PNHP, Residents for a National Health Program. For more information, visit www.pnhp.org.

Kenneth Arrow says single payer is better than any other system

“There Is Regulatory Capture, But It Is By No Means Complete”

Interview of Kenneth J. Arrow
Pro-Market: the blog of the Stigler Center at the University of Chicago Booth School of Business, March 15, 2016

Kenneth J. Arrow, one of the most influential economists of the 20th century, reflects on the benefits of a single payer health care system, the role of government and regulatory capture.

Kenneth J. Arrow requires very little introduction. Very few people, if any, can say they have influenced the development of economic theory in the 20th century as deeply as Arrow, who revolutionized the field of economics with groundbreaking contributions to general equilibrium theory, welfare theory, social choice theory and risk. In 1972, at the age of 51, Arrow won the Nobel Prize in Economics (sharing the prize with John R. Hicks). Arrow was the youngest economist ever to win the prize, a title he still holds to this day.

Born in New York in 1921, the son of Romanian-Jewish immigrants, Arrow’s life and work were profoundly influenced by the experience of growing up during the Great Depression. Over the years, his published papers on a wide variety of subjects, from innovation and monopolies to racial discrimination, information and climate change. In 1963, he published his classic paper on health care, Uncertainty and the Welfare Economics of Health Care, which was the first to show that existing competitive market models cannot be applied to the health care industry. The article effectively created the field of health economics, and is still frequently cited in debates regarding the role of non-market forces and institutions (like government) in the health system.

Q: Looking back on your seminal 1963 paper about healthcare industry – it seems that the American health care system has only gotten worse since. Some people claim that it is the worst among developed nations in terms of cost, waste and wrong incentives to physicians, hospitals and research, and influence of special interest groups – producing very high rents, and little value.

Certainly in terms of inefficiency, I don’t think it has improved at all. The system is about as inefficient, and it was pretty inefficient then too. If we look at measurements like cost per capita, compared to comparable countries like Canada or the UK, it got worse. The rather reasonable attempts to improve the delivery, that is to extend health care to more people, have led to a bigger system, and therefore more complexity and more chance for exploitation. We talk about a price system, but that is not what we have. What we have is a system in which one buyer will pay ten times what other buyers will pay for similar medical devices, or services. So the idea of a price system as the source of efficiency fails at the most elementary level.

These things are never simple. You do want incentives for pharmaceutical companies to generate new drugs. Developing drugs is a pretty expensive proposition, and the failure rate is pretty high, so we have to create incentives for companies to innovate. The problem with what’s happening now is that to some extent, because the American market is not uncontrolled and other markets are, we are subsidizing new drugs to other countries.

Q: Is there a way to mitigate this problem?

This is not a problem that’s just confined to the pharmaceutical industry, but I think it’s most intense there. The question of intellectual property goes back several hundred years. Since the 17th century, the basic deal is that in return for the innovation, you give [innovators] monopoly power. That’s the way you pay for the upfront costs and provide incentive. This of course gives rise to monopolies, which is an inevitable conflict. Even Hayek was disturbed about whether intellectual property is really property in the same sense that a house is property.

The truth is it’s very easy to rail against it, but it’s not easy to find a substitute. People have proposed substitutes from time to time, like paying the innovator the social value of the innovation, and insist on free competition after that. But since no one knows how to evaluate the social value, it’s not a very practical answer.

There is no easy way out of this conflict, though a better-regulated system could help. A better bargaining position will improve matters, but you have to be a little careful, because you don’t want to hurt innovation. What you have under the present situation is a great incentive for health providers, hospitals and HMO, to get bigger, because that improves their bargaining position vis-à-vis the insurance companies.

A single payer will have control that will allow it to prevent things like differential pricing from happening. If the government was allowed to use its bargaining power, it would dominate. There will be monopolies, but they would be facing a single payer. A monopoly usually has power because it is the only one facing a large market of diverse individuals.

I’m afraid you’re talking to someone who’s an “on the one hand, on the other hand” type of person, which makes me a poor advocate.

Q: It does sound like you are strongly in favor a single-payer system, though.  Last year you signed, along with 266 other economists, a declaration that called on policymakers around the world to work toward universal health coverage.

I wouldn’t say I’m strongly in favor of a single payer system. I can find objections to it. But I still think it’s better than any other system. However, the idea of permitting private practice must not be ruled out. Similar to the UK, there can be a single payer system which everybody can go to, and private medical practices for those who want. In the UK, private medicine is about 20 percent of the total, so there is this escape valve for those who want it, but also a single payer system that anybody can join.

Q: Perhaps the way to fix the American health care system is simply to adopt the UK model?

I would say the Canadian model, rather than the UK model. But it’s so politically out of the question I don’t even think about it.

Q: So you’re saying that one answer to the influence of special interest groups in the health care system is to have the government intervene in a major way, whether it is through a single payer system or something more akin to the UK model?

That’s right. Of course, George Stigler would say that there could be regulatory capture, but so far it doesn’t seem to have happened really.

Q: Doesn’t the rather-muted regulatory response to phenomena like pharmaceutical price hikes and “evergreening” – making minor tweaks to existing formulations in order to artificially extend patents – suggest at least a possibility of a capture?

There’s no question that every time you have interaction between government and private interests, especially concentrated ones, they’re always going to have power. In this case, I think there’s no alternative.

Medicare particularly has succeeded in imposing price regulations of a pretty detailed nature without too much trouble. Recent regulations regarding readmission rates for Medicare have gone through a surprising lack of opposition. We know that other countries have also succeeded in doing this without too many scandals, even countries that are not thought of as models of good government.

Q: In that 1963 paper you wrote that “the laissez-faire solution for medicine is  intolerable.” 50 years later, do you still believe that to be true?

We don’t have a laissez-faire system. The intervention of the federal government, as measured by expenditures, is growing. It is not a private system at all. Roughly 50 percent of health costs are paid for by the government, and state governments are spending more and more on health. It’s crowding out education. State budget-support for education, especially higher education, is crowded out by two things: health and prisons. Nobody is prepared for the idea of a laissez-faire system, and we never really had one.

https://promarket.org/there-is-regulatory-capture-but-it-is-by-no-means-complete/

Arrow, Kenneth J., “Uncertainty and the Welfare Economics of Medical Care, The American Economic Review, December 1963:
https://www.aeaweb.org/aer/top20/53.5.941-973.pdf

***

Comment:

By Don McCanne, M.D.

Nobody understands markets and health care better than Nobel laureate Kenneth Arrow who wrote the classic treatise on the topic over half a century ago. Based on his work, it is clear that the government must be involved if we are to improve efficiency in the system as we attempt to expand it to include everyone. So what does Kenneth Arrow think about single payer as a model for health care?

Although he understands that there are some deficiencies in the single payer model, he states, “it’s better than any other system.” He does say that he believes that private practice should be permitted as an option, like they have in the United Kingdom. But when asked if the United States should adopt the UK system, he says, “I would say the Canadian model, rather than the UK model.” That’s interesting in that Canada does not permit health care to be paid for privately if it is covered by their single payer Medicare program (although that continues to be challenged by the Canadian privatizers).

Kenneth Arrow is not an ideologue. He is a gifted, two-handed economist (i.e., looks at the options). He has stated that single payer is better than any other system, and we should listen to him.

Medicare for all really is ‘the only answer’

By the Editorial Board
The Capital Times (Madison, Wis.), March 16, 2016

Dr. Quentin Young, one of the greatest economic and social justice campaigners of the modern era, has died at age 92. Young served as a personal physician for the Rev. Martin Luther King Jr. and organized the Medical Committee for Human Rights, which provided medical support for activists during the 1964 Freedom Summer in Mississippi. He helped to shape and advance the call for an understanding of health care not as a commodity but as a human right.

Young was a friend and ally of this newspaper, a source of insight and inspiration for many years, and an ally in our campaigning for universal health care, which dates back to the days when Capital Times founder William T. Evjue was cheering on the efforts of Franklin Delano Roosevelt and Harry Truman to establish a national health care program. Over the years, we celebrated Young’s work and joined him and his dear friends, the late Madison area physicians Gene and Linda Farley, in championing efforts to establish a single-payer “Medicare for all” health care system in the United States.

More than three decades ago, as he was working to forge the Physicians for a National Health Program movement, Young warned of “the corporate takeover of medicine.” As PNHP notes, “he sounded the alarm about the growing encroachment of corporate conglomerates on U.S. health care, noting that giant investor-owned firms were rapidly subordinating the best interests of patients and the medical profession to the maximization of corporate profit.”

To counter the crisis, PNHP said in its statement on the doctor’s death, Young became “the nation’s most eloquent and high-profile spokesperson for single-payer national health insurance, or improved Medicare for all.” He worked closely with an old ally from civil rights movement days, Congressman John Conyers Jr., D-Mich., on behalf of H.R. 676, “The Expanded and Improved Medicare for All Act,” the single-payer health care proposal backed by dozens of House and Senate members. Young gave credit to the efforts of President Obama — a friend and a patient of the physician’s Chicago clinic — to develop and implement the Affordable Care Act. But while he could identify positive elements of the ACA, Young argued it was an inadequate reform that left too many Americans with no coverage or insufficient coverage and that failed to control costs because it maintained an arrangement where “the insurance companies are still going to make their profits.”

Young, who served as PNHP’s national coordinator for more than two decades, remained an outspoken advocate for single-payer to the end. Making his case for “single-payer national health insurance, government-run, based on the tax system,” Young said in a 2004 interview posted on the organization’s website that “universal health care is no longer the best answer; it’s the only answer. There was a time when there were alternatives that might have worked, but that day is passed. We’ve had too much of a transfer of power from patients and physicians, for that matter, to giant corporate interests that are dedicated to the goal of maximizing profits, which accounts for much of the distress in the American health system.”

During the course of the 2016 presidential race, proposals for single-payer reform have taken hits from the campaigns of Hillary Clinton and a number of the Republicans who are seeking the presidency. Clinton has argued that the plan for single-payer offered by Vermont Sen. Bernie Sanders, her opponent for the Democratic presidential nomination, is “an idea that will never, ever come to pass.”

In the Democratic debate on March 10 in Miami, the former secretary of state complained about “Senator Sanders wanting to throw us into a contentious debate over single-payer.” Sanders, who has hailed Young as “a national hero,” replied: “I think if the rest of the world can do it, we can. And by the way, not only are we being ripped off by the drug companies, we are spending far, far more per capita on health care than any other major country on earth. You may not think the American people are prepared to stand up to the insurance companies or the drug companies. I think they are.”

That was the view that Young advanced in his last years, including in his brilliant 2013 autobiography, “Everybody In, Nobody Out: Memoirs of a Rebel Without a Pause.” The doctor wrote: “I’ve never wavered in my belief in humanity’s ability — and our collective responsibility — to bring about a more just and equitable social order. I’ve always believed in humanity’s potential to create a more caring society.”

The Capital Times has embraced that faith since its founding in 1917, but there is no question that our faith was enhanced and extended by our association with Young. We will honor his memory by continuing to be absolute and unequivocal in our championship of the essential understanding that health care must never be undermined by profiteering. It must always be understood as a human right that should be guaranteed for all.

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