Covering the Uninsured: Options for Reform

Kaiser Commission on Medicaid and the Uninsured
Alliance for Health Reform
March 2, 2009
Bradley Herring, Ph.D., Assistant Professor, The Johns Hopkins University, speaking on “Potential Complications with the Different Approaches to Health Reform”:
First off, single payer, HR 676. The underlying appeal of this is essentially that it is very elegant, and simple. You pay taxes into the system and in return you get the medical care that you need. And then also it’s universal. This is probably the only approach that’s actually going to get us to having no uninsured. That kind of notion of being universal – getting everyone covered. This is probably the only one that’s going to do it. But then moreover if you think about universal as having the system in which everybody essentially has got the same kind of coverage, and we’re all in the same boat together – single payer is really probably the only way we might get there. Another thing underlying the appeal about single payer is that there would be large reductions in the administrative costs. So Medicare has administrative costs between about 2 to 3 percent whereas private insurance varies considerably across different markets but averages about 14 to 15 percent.
Potential complications. Well, if you look at the description of single payer, and particularly on John Conyers’s website, it kind of seems like a health care utopia. You get the health care you need, cost sharing is reduced – right now there is pretty significant cost sharing in the Medicare program – and that is going to go away. But I think many of us might agree that somebody’s got to say no, right, that you can’t consume all of the health care that we’d like. Someone’s got to be in place to say no. There are certain treatments that we shouldn’t be receiving or certain patients that shouldn’t receive certain treatments.
Taxes is a big issue, right, so I don’t want to be hysterical. I actually think that taxes should kind of go up a little bit to address the fiscal situation we’re in in the U.S. But many people probably balk at the extent to which taxes have to go up to pay for a single payer. HR 676 includes payroll taxes, increasing from about 1.5 percent to 4.75 percent, on the employee side and the employer side. Repeal the Bush tax cuts. Get in line. Everyone’s targeting these Bush tax cuts – the single most popular pay-for in history. And then on top of that, the proposal would increase the marginal tax rates for the top 5 percent and the top 1 percent of income, an additional 5 percent or 10 percent respectively. And also include a tax on stock transactions.
The final thing I’ll say about single payer is that it most likely is going to result in lower payments to providers. If you look at the MedPAC data comparing private reimbursements and public reimbursements, they’re about 15 to 20 percent lower on the public side.
(Prof. Herring then discusses the three other models of reform: the Republican/McCain proposal, Obama/Baucus proposal, and the Wyden/Bennett proposal)
Q & A:
Audience member (from Center for Budget and Policy Priorities): Dr. Herring and the other panelists, I was wondering if you could discuss the ability of all of the various options to control costs of the health system. If health costs grow at their current rate, no insurance system, no matter how well designed, will be able to cover everyone because we won’t be able to afford it. Thank you.
Prof. Herring: So, off the top of my head, I would think that the single payer approach yields the most promise towards reducing health care costs because it can essentially happen by fiat, right. The government can say what we’re going to spend, and, if Congress is so willing to actually follow through on that, I mean, kind of decide what we’d want to spend. I think the Republican vision of tax reform and getting people into individual plans has a lot of promise for lowering the growth in spending in the sense that people would face strong incentives to purchase cheaper plans with higher deductibles, less access to costly technology, which will certainly, I think, reduce spending, but, taking a step away, we have to ask is that really appropriate? Is that where we want to go? I think the Wyden bill then, in turn, might probably rank third in terms of its ability to reduce the growth in spending. I think for some of these reasons alluded to in the more Republican approach in which there’s a system by which individuals are choosing, on cost, plans – in making decisions to purchase basic versus more comprehensive plans. And then finally I think with the Obama plan, and Baucus’s, the result is that, yes, we might get everybody covered but in a wildly fragmented system that it might be really hard to control costs moving forward with these different things, you know, to kind of plug (moves arms as if plugging multiple leaks in the system).
http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=3120

Should we care what Johns Hopkins Professor Bradley Herring has to say about single payer? Emphatically, yes. Prof. Herring is theoretically an academic purist, and has no relationship with the single payer community. Many of his policy studies on private health insurance have been done with Mark Pauly, of “moral hazard” fame. That would certainly place him outside of the single payer camp.
A recent Quote of the Day (2/6/09) covered the OECD working paper, “Health Care Reform in the United States.” My comment was quite critical because the paper ignored single payer while discussing the merits of private insurance reform, especially the work of Jonathan Gruber on the Massachusetts plan. The working paper was coauthored by two staff economists from OECD and, yes, Prof. Bradley Herring. In no way could he be considered to be a single payer ideologue.
Although I transcribed only his comments on single payer, you should listen to him on all four models (at the link above – a transcript will be available soon). He describes single payer as a system that actually gets everyone covered, that you get the medical care that you need, that there would be large reductions in administrative costs, and that “the single payer approach yields the most promise towards reducing health care costs.”
The other three models fall short on these goals, but look at what he says about how they control costs. Each model spends more money on administration in order to control costs by reducing benefits and by erecting financial barriers to care. As Prof. Herring asks, “Is that where we want to go?”
Tomorrow President Obama holds the White House summit on health care reform. A broad spectrum of special interests have been invited, but the single payer community has been explicitly excluded, except for Congressman John Conyers. Does that mean that they will search guests at the door to be certain that none of them bring in a copy of Prof. Herring’s comments? The turfs of the special interests would certainly be threatened by exposing the attendees to sound policy science.

Kaiser Commission on Medicaid and the Uninsured
Alliance for Health Reform
March 2, 2009

Bradley Herring, Ph.D., Assistant Professor, The Johns Hopkins University, speaking on “Potential Complications with the Different Approaches to Health Reform”:

First off, single payer, HR 676. The underlying appeal of this is essentially that it is very elegant, and simple. You pay taxes into the system and in return you get the medical care that you need. And then also it’s universal. This is probably the only approach that’s actually going to get us to having no uninsured. That kind of notion of being universal – getting everyone covered. This is probably the only one that’s going to do it. But then moreover if you think about universal as having the system in which everybody essentially has got the same kind of coverage, and we’re all in the same boat together – single payer is really probably the only way we might get there. Another thing underlying the appeal about single payer is that there would be large reductions in the administrative costs. So Medicare has administrative costs between about 2 to 3 percent whereas private insurance varies considerably across different markets but averages about 14 to 15 percent.

Potential complications. Well, if you look at the description of single payer, and particularly on John Conyers’s website, it kind of seems like a health care utopia. You get the health care you need, cost sharing is reduced – right now there is pretty significant cost sharing in the Medicare program – and that is going to go away. But I think many of us might agree that somebody’s got to say no, right, that you can’t consume all of the health care that we’d like. Someone’s got to be in place to say no. There are certain treatments that we shouldn’t be receiving or certain patients that shouldn’t receive certain treatments.

Taxes is a big issue, right, so I don’t want to be hysterical. I actually think that taxes should kind of go up a little bit to address the fiscal situation we’re in in the U.S. But many people probably balk at the extent to which taxes have to go up to pay for a single payer. HR 676 includes payroll taxes, increasing from about 1.5 percent to 4.75 percent, on the employee side and the employer side. Repeal the Bush tax cuts. Get in line. Everyone’s targeting these Bush tax cuts – the single most popular pay-for in history. And then on top of that, the proposal would increase the marginal tax rates for the top 5 percent and the top 1 percent of income, an additional 5 percent or 10 percent respectively. And also include a tax on stock transactions.

The final thing I’ll say about single payer is that it most likely is going to result in lower payments to providers. If you look at the MedPAC data comparing private reimbursements and public reimbursements, they’re about 15 to 20 percent lower on the public side.

(Prof. Herring then discusses the three other models of reform: the Republican/McCain proposal, Obama/Baucus proposal, and the Wyden/Bennett proposal)

Q & A:

Audience member (from Center for Budget and Policy Priorities): Dr. Herring and the other panelists, I was wondering if you could discuss the ability of all of the various options to control costs of the health system. If health costs grow at their current rate, no insurance system, no matter how well designed, will be able to cover everyone because we won’t be able to afford it. Thank you.

Prof. Herring: So, off the top of my head, I would think that the single payer approach yields the most promise towards reducing health care costs because it can essentially happen by fiat, right. The government can say what we’re going to spend, and, if Congress is so willing to actually follow through on that, I mean, kind of decide what we’d want to spend. I think the Republican vision of tax reform and getting people into individual plans has a lot of promise for lowering the growth in spending in the sense that people would face strong incentives to purchase cheaper plans with higher deductibles, less access to costly technology, which will certainly, I think, reduce spending, but, taking a step away, we have to ask is that really appropriate? Is that where we want to go? I think the Wyden bill then, in turn, might probably rank third in terms of its ability to reduce the growth in spending. I think for some of these reasons alluded to in the more Republican approach in which there’s a system by which individuals are choosing, on cost, plans – in making decisions to purchase basic versus more comprehensive plans. And then finally I think with the Obama plan, and Baucus’s, the result is that, yes, we might get everybody covered but in a wildly fragmented system that it might be really hard to control costs moving forward with these different things, you know, to kind of plug (moves arms as if plugging multiple leaks in the system).

http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=3120

Comment:

By Don McCanne, MD

Should we care what Johns Hopkins Professor Bradley Herring has to say about single payer? Emphatically, yes. Prof. Herring is theoretically an academic purist, and has no relationship with the single payer community. Many of his policy studies on private health insurance have been done with Mark Pauly, of “moral hazard” fame. That would certainly place him outside of the single payer camp.

A recent Quote of the Day (2/6/09) covered the OECD working paper, “Health Care Reform in the United States.” My comment was quite critical because the paper ignored single payer while discussing the merits of private insurance reform, especially the work of Jonathan Gruber on the Massachusetts plan. The working paper was coauthored by two staff economists from OECD and, yes, Prof. Bradley Herring. In no way could he be considered to be a single payer ideologue.

Although I transcribed only his comments on single payer, you should listen to him on all four models (at the link above – a transcript will be available soon). He describes single payer as a system that actually gets everyone covered, that you get the medical care that you need, that there would be large reductions in administrative costs, and that “the single payer approach yields the most promise towards reducing health care costs.”

The other three models fall short on these goals, but look at what he says about how they control costs. Each model spends more money on administration in order to control costs by reducing benefits and by erecting financial barriers to care. As Prof. Herring asks, “Is that where we want to go?”

Tomorrow President Obama holds the White House summit on health care reform. A broad spectrum of special interests have been invited, but the single payer community has been explicitly excluded, except for Congressman John Conyers. Does that mean that they will search guests at the door to be certain that none of them bring in a copy of Prof. Herring’s comments? The turfs of the special interests would certainly be threatened by exposing the attendees to sound policy science.

Doctors Fight Plan to Limit Beds in ER

By Thomas M. Burton
The Wall Street Journal
February 28, 2009
A plan to curb the number of beds available to emergency-room patients at one of the nation’s most prestigious hospitals has spurred a divisive internal debate that is being closely watched by hospital physicians across the country.
At issue at the University of Chicago Medical Center, located in the South Side’s Hyde Park neighborhood, is a proposal that could limit the number of beds available to emergency-room patients. In February, two high-ranking doctors quit their administrative posts to protest the plan, saying it could lengthen already long waiting times for patients who visit the ER.
The dispute touches on one of the most critical questions facing hospitals that serve low-income populations: How many patients on Medicaid insurance, and older patients on Medicare, can a hospital afford to serve?
Many emergency physicians across the country say limiting beds for ER patients could become a means of economizing that might spread to other hospitals.
One 2007 internal report on the emergency department said, “On many afternoons/evenings, 30 or more patients are waiting with longest wait-to-be-seen times often exceeding 8-9 hours.” The same document showed that by 2007 the sickest ER patients who need intensive care waited, on average, 14 hours before being transferred to the ICU. In recent interviews, hospital doctors said those waits have been increasing.
Peer-reviewed studies suggest lengthy waits can be dangerous. “Critically ill emergency department patients with a greater than six-hour delay in intensive-care-unit transfer had increased hospital length of stay and higher intensive-care-unit and hospital mortality,” according to a 2007 study in Critical Care Medicine.
James L. Madara, the University of Chicago’s chief executive and dean of medicine, declined to comment on specific wait times at his hospital, but said the administration’s intent is to set aside more beds for specialties like oncology, gastroenterology and neurosurgery that attract patients from around the U.S.
Among other moves, the hospital is considering cutting the number of beds available to ER patients who are so acutely ill that they must be transferred to general-medicine or intensive-care wards. It plans to close, for economy reasons, a 24-bed general medicine unit and an intensive care unit of just under half that size. These units at present serve many emergency patients, hospital doctors say.
In his Feb. 1 letter to the administration, Dr. Vanden Hoek suggested that several of the changes could favor patients with private insurance. “Some patients will have rapid access to an ICU or private bed,” he wrote, but lower-income emergency patients who require admission to the hospital “will not be so lucky.”
http://online.wsj.com/article/SB123577975486997825.html

This article points out that a final decision has not been made, but it is nevertheless shocking that a non-profit university hospital has had under consideration a proposal to reduce the number of beds in an emergency room that already has a strained capacity.
The reason given for even considering rationing of emergency room beds demonstrates just how sick our health care financing system is. They would increase the overload of the emergency room to a level that would drive away low income populations so that they would not have to admit those who are “so acutely ill that they must be transferred to general-medicine or intensive-care wards” within their hospital. Just to be sure, they would reduce those acute in-patient beds as well. At the same time that they would create deliberate rationing for acutely ill, low-income individuals, they would expand their bed capacity for lucrative services for insured patients.
Sick, sick, sick!
This isn’t about a lack of money, because we already spend more than enough to pay for these services. This is about the way we finance health care. The uninsured and those in the under-funded Medicaid program are a drain on resources, and it is understandable that the administrators would want to reduce that drain. But our sick system of financing care leads them to the consideration of truly perverse methods of reducing that burden.
The current leading proposal to expand our fragmented, dysfunctional system of financing health care will not correct the perversities of a multi-tiered system. But imagine if we re-directed the $2.5 trillion that we are already spending into a single payer national health program, these perversities would be sharply curtailed. Health delivery system design would be based on patient needs rather than on the nature and distribution of the financing sources. Can’t those in Washington working on reform understand this? It’s not that complicated of a concept.

By Thomas M. Burton
The Wall Street Journal
February 28, 2009

A plan to curb the number of beds available to emergency-room patients at one of the nation’s most prestigious hospitals has spurred a divisive internal debate that is being closely watched by hospital physicians across the country.

At issue at the University of Chicago Medical Center, located in the South Side’s Hyde Park neighborhood, is a proposal that could limit the number of beds available to emergency-room patients. In February, two high-ranking doctors quit their administrative posts to protest the plan, saying it could lengthen already long waiting times for patients who visit the ER.

The dispute touches on one of the most critical questions facing hospitals that serve low-income populations: How many patients on Medicaid insurance, and older patients on Medicare, can a hospital afford to serve?

Many emergency physicians across the country say limiting beds for ER patients could become a means of economizing that might spread to other hospitals.

One 2007 internal report on the emergency department said, “On many afternoons/evenings, 30 or more patients are waiting with longest wait-to-be-seen times often exceeding 8-9 hours.” The same document showed that by 2007 the sickest ER patients who need intensive care waited, on average, 14 hours before being transferred to the ICU. In recent interviews, hospital doctors said those waits have been increasing.

Peer-reviewed studies suggest lengthy waits can be dangerous. “Critically ill emergency department patients with a greater than six-hour delay in intensive-care-unit transfer had increased hospital length of stay and higher intensive-care-unit and hospital mortality,” according to a 2007 study in Critical Care Medicine.

James L. Madara, the University of Chicago’s chief executive and dean of medicine, declined to comment on specific wait times at his hospital, but said the administration’s intent is to set aside more beds for specialties like oncology, gastroenterology and neurosurgery that attract patients from around the U.S.

Among other moves, the hospital is considering cutting the number of beds available to ER patients who are so acutely ill that they must be transferred to general-medicine or intensive-care wards. It plans to close, for economy reasons, a 24-bed general medicine unit and an intensive care unit of just under half that size. These units at present serve many emergency patients, hospital doctors say.

In his Feb. 1 letter to the administration, Dr. Vanden Hoek suggested that several of the changes could favor patients with private insurance. “Some patients will have rapid access to an ICU or private bed,” he wrote, but lower-income emergency patients who require admission to the hospital “will not be so lucky.”

http://online.wsj.com/article/SB123577975486997825.html

Comment:

By Don McCanne, MD

This article points out that a final decision has not been made, but it is nevertheless shocking that a non-profit university hospital has had under consideration a proposal to reduce the number of beds in an emergency room that already has a strained capacity.

The reason given for even considering rationing of emergency room beds demonstrates just how sick our health care financing system is. They would increase the overload of the emergency room to a level that would drive away low income populations so that they would not have to admit those who are “so acutely ill that they must be transferred to general-medicine or intensive-care wards” within their hospital. Just to be sure, they would reduce those acute in-patient beds as well. At the same time that they would create deliberate rationing for acutely ill, low-income individuals, they would expand their bed capacity for lucrative services for insured patients.

Sick, sick, sick!

This isn’t about a lack of money, because we already spend more than enough to pay for these services. This is about the way we finance health care. The uninsured and those in the under-funded Medicaid program are a drain on resources, and it is understandable that the administrators would want to reduce that drain. But our sick system of financing care leads them to the consideration of truly perverse methods of reducing that burden.

The current leading proposal to expand our fragmented, dysfunctional system of financing health care will not correct the perversities of a multi-tiered system. But imagine if we re-directed the $2.5 trillion that we are already spending into a single payer national health program, these perversities would be sharply curtailed. Health delivery system design would be based on patient needs rather than on the nature and distribution of the financing sources. Can’t those in Washington working on reform understand this? It’s not that complicated of a concept.

Hearing: Scoring Health Care Reform: CBO’s Budget Options

United States Senate Committee on Finance
February 25, 2009
Closing comments
Sen. Max Baucus, Chairman: Thank you very much, Dr. Elmendorf. We have a huge problem, haven’t we? This is the most difficult public policy undertaking I’ve experienced in my Senate life here. I’ve been here thirty years, and nothing is as difficult as this. Nothing is as important as this, and I cannot think of anything that depends so much on CBO, especially at a time we’re in new territory. We’re not in the old situation where Sen. Grassley once said whatever CBO says is God, you’re God. My judgement, you’re not God.
Douglas Elmendorf, CBO Director: Correct
Sen. Baucus: My judgement is that you got the whole new era – you might be Moses, but not God – but you got the whole new era… where as I said earlier it’s not too much of an overstatement to say CBO can make or break health care reform, and I mean that because we got to go by your numbers…
Dr. Elmendorf: Senator, may I respectfully disagree that…
Sen. Baucus: I do believe that there are several different intellectually honest pathways to get from here to there. It’s not just one automatic, and so it needs – you got to be ever more creative to find intellectually honest pathways to get the savings we have to have – practically and both politically – to get health care reform.
Dr. Elmendorf: Senator, I would like to just respectfully disagree with the make or break role that you have assigned to us. We will do our very best to provide you and all of the members of this committee and the rest of the members of the Congress with the technical information that you need, the best estimates that the knowledge of the world can provide about the effects of alternative policies, but, as you understand, the hard decisions will be yours.
Sen. Baucus: No, that’s incorrect. The hard decisions will be all ours, both of us, you and me. You can’t pass the buck. The hard decisions are here, and the hard decisions are yours and the hard decisions are all of us in this country in trying to make this work. Meeting’s adjourned.
Dr. Elmendorf: Thank you, Senator
http://finance.senate.gov/sitepages/hearing022509.htm
Video of hearing – click link of 2/25/09:
http://finance.senate.gov/sitepages/hearings.htm

In this closing exchange, Sen. Max Baucus seems to be annoyed with Douglas Elmendorf, Director of the Congressional Budget Office. What is the background here?
Sen. Baucus is determined to lead the way to comprehensive health care reform. His model is basically the Hacker/Obama/Kennedy/Daschle/Massachusetts/Commonwealth model which is based on expanding the use of regulated private health plans, while continuing to expand existing public programs.
To help Congress with its efforts on reform, CBO recently released two volumes on 1) issues on analyzing health insurance proposals, and 2) budget options for health care (both available at the CBO website www.cbo.gov). It is quite clear, based on these two reports and on the innumerable analyses in the health policy literature, that Baucus’s model would be scored by the CBO as outrageously expensive while falling far short on many of the important goals for health care reform.
The CBO is noted for its impartiality in providing Congress with intellectually honest evaluations of various Congressional proposals. From Sen. Baucus’s comments, it’s obvious that this constitutes a major barrier to his ambitions to enact reform along the lines of his model. Rather than an arm’s-length analysis, Sen. Baucus is demanding that Dr. Elmendorf shift from the role of an impartial analyst to the role of a policymaker by becoming “creative,” making the “hard decisions,” to “find intellectually honest pathways to get the savings we have to have.”
We can understand Sen. Baucus’s frustration in his inability to obtain a favorable analysis of his highly flawed, “wish-they-would-work” policies. But we can fault him for demanding that Dr. Elmendorf compromise his professional integrity by participating in the policy decisions over a fundamentally flawed framework of reform, and then applying to the final product his personal stamp of endorsement. That is not and must never be the role of the CBO Director.
This also partially explains why Sen. Baucus is becoming ever more strident in his demand that single payer be totally excluded from the dialogue on reform. Innumerable analyses, including some by the CBO, have shown that the single payer model actually would achieve our goal of affordable health care for everyone. Objective, side-by-side CBO analyses would destroy any chance of convincing Congress to enact Sen. Baucus’s model.
Since reform should be based on the best data available, isn’t such an analysis exactly what we should have right now? If Sen. Baucus is sincere in wanting reform that works for all of us, he should be the first one to request that CBO do that study.
DrSteveB also covers this well in his Daily Kos blog today:
http://www.dailykos.com/story/2009/3/2/7495/94300/238/703544