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Let’s eliminate the actual cause of surprise medical bills

Let’s eliminate the actual cause of surprise medical bills

Surprise Medical Bills Cost Americans Millions. Congress Is Finally Set to Ban Most of Them.

By Sarah Kliff and Margot Sanger-Katz
The New York Times, December 20, 2020

After years of being stymied by well-funded interests, Congress has agreed to ban one of the most costly and exasperating practices in medicine: surprise medical bills.

Surprise bills happen when an out-of-network provider is unexpectedly involved in a patient’s care. Patients go to a hospital that accepts their insurance, for example, but get treated there by an emergency room physician who doesn’t. Such doctors often bill those patients for large fees, far higher than what health plans typically pay.

Language included in the $900 billion spending deal reached Sunday night and headed for final passage on Monday will make those bills illegal. Instead of charging patients, health providers will now have to work with insurers to settle on a fair price. The new changes will take effect in 2022, and will apply to doctors, hospitals and air ambulances, though not ground ambulances.

Some private-equity firms have turned this kind of billing into a robust business model, buying emergency room doctor groups and moving the providers out of network so they could bill larger fees.

https://www.nytimes.com…

Unpacking The No Surprises Act: An Opportunity To Protect Millions

By Jack Hoadley, Katie Keith, Kevin Lucia
Health Affairs Blog, December 18, 2020

The No Surprises Act includes several changes from prior compromise bills. These changes largely center on the mechanism to determine how much out-of-network providers will be paid by insurers. Unlike many prior bills, the No Surprise Act would not establish a benchmark payment standard for insurers to pay out-of-network providers. Instead, insurers and providers would try to resolve payment disputes on their own. If that failed, these stakeholders could turn to arbitration. This change (arbitration with no benchmark payment standard) is more favorable to health care providers like hospitals and physicians than prior bills. But the bill also includes several important guardrails to help ensure that the arbitration process—which critics have argued can be inflationary—is not abused.

House Speaker Nancy Pelosi (D-CA) has voiced her support, as has Senate Minority Leader Chuck Schumer (D-NY). The White House has confirmed that President Trump would sign the bill.

The bill adopts “baseball-style” arbitration rules: each party would offer a payment amount, and the arbitrator would select one amount or the other with no ability to split the difference. The decision would then be binding on the parties, although the parties could continue to negotiate or settle.

The losing party would be responsible for paying the administrative costs of arbitration.

https://www.healthaffairs.org…

Proposed “No Surprises Act” favors commercial health plans

AMA, December 18, 2020

The most recently circulated “No Surprises Act” before Congress is an improvement over previous iterations of the bill that seeks a legislative remedy to the issue of surprise billing, but—in its current form—the measure still puts financially stressed physician practices at a disadvantage while favoring commercial health plans.

https://www.ama-assn.org…

Comment:

By Don McCanne, M.D.

When looking for solutions to a problem it would be wise to first look at the cause of the problem.

Surprise medical bills are bills that patients receive, sometimes quite large, that should normally have been paid by their insurers but were denied because the provider of services was not in the insurer’s provider network. When a person has obtained insurance in good faith, most agree that it is very unfair to deny payment for legitimate medical services.

So what’s the reason for this problem? Rather than having government administered pricing for health care insured by the private sector, our legislators and regulators have decided to turn the problem of high health care prices over to the private insurers who then use markets to control prices. (Government programs such as Medicare and Medicaid are a different matter.)

The private insurance innovation that gave the insurers tremendous control over prices was to establish provider networks in which the approved providers signed contracts with the insurers, controlling their payment rates. Under threat of being excluded from coverage, providers agreed to reduced payment rates. This actually benefited patients since it slowed down escalation of insurance premiums which were becoming unaffordable. The trade-off for the patient was that they no longer had free choice of their physicians and hospitals, but patients were willing to make that compromise in exchange for supposedly putting a lid on health care spending. What went wrong is that it turned out that there are many circumstances wherein the patient inadvertently received services from providers who were not in the insurers’ networks. Since those providers did not have a contract with the insurers, bills were generated at the full, non-discounted prices, and the patients were responsible for them whenever the insurance policy excluded out-of-network coverage.

The patients do have some blame since they purchased plans with provider network restrictions. The providers may have some blame if they had had the opportunity to contract but declined to do so to avoid restrictions on their fees.

But what about the private insurers? They take away provider choice from the patients, and they take away the payment source from the providers whom they often excluded from contracts by granting exclusivity and a higher volume of patients to those who agreed to accept lower payments. This arrangement provides a disservice to patients and to a portion of the health care provider community. So who benefits? The private insurers! As they tend to dominate the local market, they can run roughshod over everyone else, while blaming the providers with whom they did not contract for causing surprise bills that their own mercenary scheme created.

Compare this to a nation that has government administered pricing for all health care through a single payment source – a social insurance program. The government will not pay exorbitant prices but it will pay fair prices that ensures that there is adequate capacity in the health care delivery system. Patients have their choices of their health care providers, and the providers don’t have to deal with private intermediaries since payment is automatic. They just take care of the patients.

So is this legislation a fair resolution of the problem, leaving it in control of the private sector? What is fair about allowing the insurers to selectively contract with whom they wish, depriving patients of their choices, but also granting the insurers the right to demand contracted rates from providers with whom they have no contracts? Besides, with a system already overburdened with administrative excesses created by the private insurers, why should we be adding the additional administrative burden of compulsory arbitration?

So let’s go back to Congress and define for them the problem. Well, it’s the insurers, stupid. We need to dump the private insurers and establish our own single payer improved Medicare for All. Yet Pelosi and Schumer and the Republicans and the neoliberals who all understand the clear superiority of the Medicare for All model have continued to exclude it from consideration. Affordable, equitable health care for everyone. Why do they keep rejecting that?

By the way, for you doctors who refused to join the networks because you wanted your full extortionate fees seem to be the same doctors who pushed for mandatory arbitration in this legislation. If you think you are going to get your full fees, you should realize that this is baseball arbitration. Under those rules the arbitrators will not cut a compromise but rather will decide on behalf of one party. Will they decide on behalf of the insurer who will pay standard contracted rates in the community, or will they decide for you and your outrageously high prices? Guess what, doctor, you lose, and you also get to pay the arbitration costs. Medicare for all really would be a better deal for you – a system in which the patient is your friend rather than your enemy.

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Rutledge further demonstrates need for ERISA reform

U.S. Department of Labor

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

https://www.dol.gov…

Restoring The Preemption Status Quo: Rutledge, ERISA, And State Health Policy Efforts

By Carmel Shachar, I. Glenn Cohen
Health Affairs Blog, December 17, 2020

On Dec 10, 2020, the Supreme Court issued its opinion in Rutledge v. Pharmaceutical Care Management. While this case was perhaps overshadowed by recent election litigation, it is an important development in the ongoing tug of war between state health care policy initiatives and the federal Employment Retirement Income Security Act (ERISA) of 1974. ERISA’s very broad preemption clause has been used to block state efforts to regulate certain types of health insurance plans on several occasions. Before Rutledge, the last major ERISA health care case, Gobeille v. Liberty Mutual Insurance, allowed these health plans to use ERISA as a shield against state health care policy initiatives.

Rutledge represents a step back from the expansive application of ERISA preemption found in Gobeille. That is very welcome news to states looking to control pharmaceutical pricing in health insurance plans and (likely to a lesser extent) to states considering other major health policy initiatives. Nevertheless, Rutledge represents a return to ERISA preemption status quo rather than a new path forward in balancing ERISA and state health care reforms. There is still a significant need for Congress to reconsider the broad preemption mandate it created in ERISA, especially in the context of health care policy.

ERISA, Preemption, And State Health Care Reform Efforts

ERISA is a federal statute designed to set minimum standards for voluntarily established pensions and other employee benefit plans. ERISA is perhaps mostly notable because it includes one of the broadest preemption clauses of any federal statute. This clause blocks any state regulation of the administration of these employee benefit plans in favor of federal regulation. The purpose of this clause was to allow multistate employers to offer a single, consistent plan to all of their workers, reducing administrative and regulatory burdens while keeping administrative costs low.

While it was never intended to be a health care statute, ERISA does govern employer-sponsored health care plans, or insurance plans in which an employer covers the full financial risk of its employees’ claims for health care benefits, because they are a type of employee benefit plan. These types of health insurance plans represent a significant portion of the health insurance market. In 2018, 61 percent of workers who got their health insurance through their employer were enrolled in plans that were at least partially self-funded and fell into this category.

Setting The Stage For Rutledge

In 2016, the Supreme Court expanded the application of ERISA preemption to health care laws in Gobeille v. Liberty Mutual Insurance. The Court concluded that ERISA preempted a Vermont state law mandating that all health care plans report claims data to the Vermont all-payer claim database.

Gobeille was an expansion of ERISA’s preemptory reach, striking down the Vermont state law because it could result in wasteful administrative costs, thereby frustrating ERISA’s purpose.

There was significant concern that Rutledge would follow Gobeille in extending the reach of ERISA into state health care reform efforts. In this case, the potentially preempted state statue was Arkansas Act 900, which sought to regulate drug pricing by imposing requirements on pharmacy benefit managers (PBMs) such as Caremark. The purpose behind Arkansas Act 900 was to ensure that PBMs do not undermine pharmacies by reimbursing them less than what it costs pharmacies to procure drugs from wholesalers.

A Return To The Preemption Status Quo

Fortunately, the Court, in a short and unanimous opinion (Justice Barrett did not participate), rejected the argument that ERISA blocks the application of Arkansas Act 900 to employer-sponsored health insurance plans. To arrive at this conclusion, Justice Sonia Sotomayor used an ERISA analysis that drew heavily on the cases from the 1990s, such as Travelers Insurance. In fact, she drew significant parallels between Rutledge and Travelers, which concluded that a New York State law imposing a 13 percent surcharge on hospitals that used non-Blue Cross/Blue Shield insurers did not violate ERISA.

Justice Sotomayor stated that “[t]he logic of Travelers decides this case.” Sotomayor argued that, “[l]ike the New York surcharge law in Travelers, . . . [Arkansas Act 900] is merely a form of cost regulation” and not “primarily concerned with pre-empting laws that require providers to structure benefit plans in particular ways.”

What Next?

It is clear that the Justices were unhappy with the reading of Gobeille offered by the challengers to Arkansas Act 900. State regulators and policymakers no doubt breathed a sigh of relief that the Court suggested more of a return to its 1990’s ERISA preemption jurisprudence, case law that is more favorable to health care reform efforts. But it is far too soon to declare victory – while today Gobeille may not be extended, it has not been interred in whole or in part. It remains murky how far a state can go in health reform without foundering on the shoals of ERISA preemption.

In an ideal world Congress could step in with ERISA-reforming legislation that articulates better boundaries for preemption’s reach, acknowledging explicitly or implicitly that ERISA was never intended to regulate health care. But even if, unfortunately, Congressional reform of ERISA preemption is unlikely, the latest Supreme Court decision signals to health care reformers that the ERISA obstacles may not prove as formidable as they did before.

https://www.healthaffairs.org…

The Implications Of Rutledge v. PCMA For State Health Care Cost Regulation

By Erin C. Fuse Brown, Elizabeth Y. McCuskey
Health Affairs Blog, December 17, 2020

On December 10, 2020, the Supreme Court handed a significant win to states and broadened the path forward for state health care cost control efforts. In Rutledge v. Pharmaceutical Care Management Association, the Court ruled 8-0 that the Employee Retirement Income Security Act (ERISA) did not preempt Arkansas’s law regulating pharmacy benefit managers (PBMs), the intermediaries that administer prescription drug benefits for health plans.

In Rutledge, Justice Sonia Sotomayor spoke for the unanimous Court in holding that a state law requiring PBMs to pay pharmacies no less than their acquisition costs for prescription drugs was not preempted by ERISA, the federal statute governing employee benefits. The Court concluded, “ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.”

The Implications For State Health Care Regulation

Most immediately, Rutledge puts PBM regulations passed by more than 45 states on much firmer footing. These laws do different things, but they are all aimed at reigning in prescription drug costs.

Applying the logic of Rutledge, PBM laws are a form of health care cost regulation, and PBMs are not health plans but rather their administrative contractors, so ERISA should not preempt states’ PBM regulations.

Moreover, the Rutledge decision extends beyond PBMs to all state health care rate regulation. The Travelers case previously established that states can regulate the rates paid to health care providers, and the Rutledge Court extended the logic of Travelers to state regulation of prescription drug reimbursement rates. Health care rate regulation—whether for services or therapeutics—is clearly fair game for states, including when the state dictates how much payers must reimburse providers and suppliers.

In sum, Rutledge narrows the range of state regulations preempted by ERISA, while broadening those that are not. Justice Sotomayor’s opinion helpfully lists the types of state health care laws that ERISA does preempt: (1) laws that require plans to cover specific benefits; (2) laws that bind plan administrators to specific rules for determining beneficiary status; and (3) laws that create acute, indirect, economic effects that force a plan to adopt a certain scheme of coverage. State rate regulation avoids ERISA preemption because it does not tell plans what they must cover or whom, but merely regulates the cost of the items and services covered. This category of cost regulation leaves a lot of running room for states to pursue policies to control health care costs and improve affordability for consumers—the primary objects of most current health policy.

Congress Still Needs To Fix ERISA

While Rutledge represents an unequivocal win for state health reform, the case does not get the ERISA monkey off the backs of states. The courts have made a mess of ERISA jurisprudence, owing in part to the statute’s inscrutable language preempting all state laws that “relate to” employee benefits. ERISA cases are unpredictable and often difficult to reconcile.

While Rutledge’s measured application of ERISA’s broad preemption offers some meaningful and welcome running room for state health care cost regulation, it does not alter the fundamental obstacle that ERISA preemption poses to state health reform. Removing this obstacle requires Congressional intervention, either by altering the statute’s preemption language, adding a waiver mechanism, or both. At the very least, reforming ERISA by adding a federal waiver provision has a growing and bipartisan chorus of support.

Left untouched by Congress, ERISA preemption will continue to fuel relentless industry litigation challenging state reforms and deprive states of the health care regulation tools they urgently need. ERISA reform is health reform.

https://www.healthaffairs.org…

Comment:

By Don McCanne, M.D.

This ERISA development is technical, but it’s important.

According to the U.S. Department of Labor, ERISA is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. When plans are provided in the private sector they need government oversight to ensure that individuals covered by these plans are protected.

We already have a problem here. Government plans that are not privatized, such as the traditional Medicare program, do not need special protection for the participants. Yet in the private sector, they do. Not only is there a public vs. private divide, there is also a federal vs. state divide. ERISA has been used to limit the state role in providing health plan oversight, yet decisions, such as Rutledge, have created confusion as to the proper roles of the federal government, the states, and the private sector in providing oversight for benefit plans. But it is not the federal government, nor the state, nor the private sector that needs the assurance of oversight, it is the plan beneficiaries themselves. As well meaning as ERISA is, it is often the monkey wrench that screws up the plan oversight to the detriment of the plan beneficiaries.

Efforts to enact comprehensive single payer plans on a state level have often been stymied to some extent by ERISA. The Rutledge decision slightly loosens the restrictions, but it falls far short of what is needed to allow policymakers and politicians to design, enact and implement a program that has the sole purpose of making health care accessible and affordable for everyone. Let’s end ERISA preemption and enact single payer improved Medicare for All, preferably on the federal level, but perhaps transitionally on a state level until barriers to federal enactment can be removed. Don’t let the opponents halt much needed reform by injecting into the process the ERISA boogeyman.

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So how much do you really spend on health care?

Steady Growth For The Fourth Consecutive Year

By Anne B. Martin, Micah Hartman, David Lassman, Aaron Catlin
Health Affairs, December 16, 2020

Abstract

US health care spending increased 4.6 percent to reach $3.8 trillion in 2019, similar to the rate of growth of 4.7 percent in 2018. The share of the economy devoted to health care spending was 17.7 percent in 2019 compared with 17.6 percent in 2018. In 2019 faster growth in spending for hospital care, physician and clinical services, and retail purchases of prescription drugs—which together accounted for 61 percent of total national health spending—was offset mainly by expenditures for the net cost of health insurance, which were lower because of the suspension of the health insurance tax in 2019.

https://www.healthaffairs.org…

Comment:

By Don McCanne, M.D.

In the earlier years of introducing the single payer model of health care financing to the public through various speeches, forums and the like, it was very common to receive a question from the audience demanding to know what they would have to pay in taxes for government health care because they wanted to compare that with what they were already paying, and, after all, their insurance seemed like a good plan.

When asked what they were currently paying, most either didn’t want to say or weren’t really sure. Those who did answer the question often reported the amount of the insurance premium that was taken from the paycheck of the family’s income source, plus the portion that they would have to pay in deductibles and copayments (or coinsurance if they knew what that was). Some of the more sophisticated audience members added Medicare payroll taxes, even though they were for deferred health care in their retirement years. If you add those up, it might seem like health care costs are more reasonable than a comprehensive government program would cost.

But what were the audience members leaving out? What are some of the relatively hidden expenses of health care?

  • Most are not aware of the exact amount of the employer’s contribution to the employer-sponsored health plans – an amount that is usually much larger than the employee’s payroll deduction for the plan. Also, of great importance, most economists agree that the employer’s contribution is actually paid by the employee in the form of forgone wage or salary increases, though many do not realize that.
  • The funding of Medicare is complex. The Medicare Hospital Insurance Trust Fund is funded not only through payroll taxes but also through income taxes paid on Social Security benefits, interest earned on the trust fund investments (the people’s money), and Medicare Part A premiums from people who aren’t eligible for premium-free Part A. The Supplementary Medical Insurance Trust Fund is funded by general funds authorized by Congress (our taxes), premiums for Medicare Part B (medical insurance) and premiums for Medicare Part D (drug coverage), and other sources such as interest on the trust fund investments. Those receiving Medicare services also have to pay deductibles and coinsurance, although that might be covered by another plan for which premiums must be paid either directly or indirectly. The option of private Medicare Advantage plans adds further complexity to the calculations. So it is difficult for each person to determine exactly what they are paying for Medicare.
  • Without going into detail, Medicaid is funded by both federal and state taxes, which we pay even though the benefits go only to low-income individuals.
  • One of the larger funding sources is the tax expenditure that we pay for the deductions received by employers (actually, by extension, the employees) for the employer contribution to employer-sponsored health plans. Actually this is a relatively cruel policy in that these taxpayer subsidies to employer-sponsored plans are inversely related to income – higher-income individuals receive much higher taxpayer support than do lower-income individuals.
  • Government employees on the federal, state, and local levels tend to have a major portion of their health plan premiums paid by the government, which, of course, means paid by us the taxpayers.
  • Whenever you purchase products or services, included in the price is overhead expenses and that includes employer-sponsored health plans. That is not only for the original producer of the products or services, but it is also for all of the intermediaries such as shippers, retailers, employees of business insurers and endless other employees that support the production and distribution of products and services that we receive. Of course, some of this is double-counting health spending already listed, but it is important to understand the flow of money into our health care system.
  • The complexity of health care costs creates a tremendous amount of expensive administrative excesses for which we all end up paying. Again, some of this may be double-counted, but it is particularly important to understand that much of this waste would be recoverable with the enactment and implementation of a single payer Medicare for All.
  • You can likely think of other sources of health care spending that should be included here.

The Milliman Medical Index is an estimate of the health care costs for a hypothetical family of four covered by an average employer-sponsored preferred provider organization (PPO) plan. For 2020, that amount is $28,653. Keep in mind that America’s workforce and their young families are a relatively healthy sector of the U.S. population. For other sectors, the cost may be significantly greater.

So how much do we really pay for health care? According to the current release from the CMS Office of the Actuary, our national health expenditures for 2019 were $3.8 trillion. With a 2019 U.S. population of 328.2 million, that is an average expenditure of $11,578 per person.

For a family of four that would be about $46,000, considerably more than the $28,000 estimate by the Milliman Medical Index. But that shows how difficult it is to break down the cost for each individual or family who would want to compare what they believe they are spending with the cost for each individual in a Medicare for All program.

Many studies have been done of what the cost of a single payer would be and how that would compare to what we are currently spending. Very roughly the average cost for most of us would be about 5 percent less than what we are spending (median 3.5 percent by the Cai et al study). Only the very wealthy would pay more but not near enough to be detectable by a change in their lifestyles.

So how much are you, as an individual, spending on health care now? As you can see it is so complex that it would be almost impossible to estimate. So we have to settle with averages. So how much will you spend in taxes to pay for single payer Medicare for All? That also will vary for each individual, but we can say that it will be equitable and affordable since the financing will be through progressive taxes based on each individual’s ability to pay.

People worry about the taxes but if they just focus on the fact that the taxes will be fair and affordable, then they can celebrate knowing that they will have quality health care of their own choosing whenever and wherever they need it, for life! Nothing else on the horizon promises that.

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“Funding HR 676: The Expanded and Improved Medicare for All Act”

University of Massachusetts at Amherst 2013

Title: Funding HR 676: The Expanded and Improved Medicare for All Act
Year: 2013
Author: Gerald Friedman
Institution: University of Massachusetts at Amherst
Plan Analyzed: H.R. 676
Percent Change in National Health Expenditure under M4A (1-year): -6.2% (2014)

Read Study:

Funding HR 676: The Expanded and Improved Medicare for All Act 

Abstract:

The Expanded and Improved Medicare for All Act, HR 676, introduced into the 113th Congress by Rep. John Conyers Jr. and 37 initial co-sponsors, would establish a single authority responsible for paying for medically necessary health care for all residents of the United States. Under the single-payer system created by HR 676, the U.S. could save an estimated $592 billion annually by slashing the administrative waste associated with the private insurance industry ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). In 2014, the savings would be enough to cover all 44 million uninsured and upgrade benefits for everyone else. No other plan can achieve this magnitude of savings on health care. Specifically, the savings from a single-payer plan would be more than enough to fund $343 billion in improvements to the health system such as expanded coverage, improved benefits, enhanced reimbursement of providers serving indigent patients, and the elimination of co-payments and deductibles in 2014. The savings would also fund $51 billion in transition costs such as retraining displaced workers and phasing out investor owned, for-profit delivery systems. Health care financing in the U.S. is regressive, weighing heaviest on the poor, the working class, and the sick. With the progressive financing plan outlined for HR 676 (below), 95% of all U.S. households would save money. HR 676 would also establish a system for future cost control using proven-effective methods such as negotiated fees, global budgets, and capital planning. Over time, reduced health cost inflation over the next decade (“bending the cost curve”) would save $1.8 trillion, making comprehensive health benefits sustainable for future generations.

Overview:

Dr. Friedman conducts an easy-to-follow cost analysis of H.R. 676 using a projection model. Dr. Friedman also discusses financing this program through both existing funding sources and “progressive taxation.”

  • Section I: Financing needs for single payer
    • Current regressive and obsolete funding sources to be replaced by progressive taxation
    • Estimated costs of system improvements and transition costs
  • Section II: Single-payer system savings as a source of financing
    • Savings on provider administrative overhead and drug prices
    • Savings on the administrative overhead of private insurers, Medicaid, and employers
  • Section III: A progressive financing plan for HR 676 for 2014
  • Conclusion: Single payer covers more, costs less for 95 percent of Americans

Further Reading:

Gordon Mosser Critical Review and comment by Dr. Don McCanne

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

The Urban Institute 2016

Title: The Sanders Single-Payer Health Care Plan: The Effect on National Health Expenditures and Federal and Private Spending
Year: 2016
Author: John Holahan, Lisa Clemans-Cope, Matthew Buettgens, Melissa Favreault, Linda J. Blumberg, and Siyabonga Ndwandwe
Institution: Urban Institute
Funding Source: N/A
Plan Analyzed: Bernie Sanders’ 2016 campaign proposal (eventually became S. 1804 Medicare for All Act of 2017)
Percent Change in National Health Expenditure under M4A (1-year): 16.9% (2017)
Percent Change in National Health Expenditure under M4A (10-year): 16.6% (2017-26)
Increases in federal health expenditures: $456.9 billion (2017)

Read Study:

The Sanders Single-Payer Health Care Plan

Abstract:

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

Overview:

  • 2016 study done by the Urban Institute utilizing a microsimulation approach to conduct a cost analysis of the Sanders Medicare for All proposal from the 2016 presidential primary in contrast to projection studies that had been done up to that point.
  • This study considers how cost would be affected by:
    • Acute healthcare spending increases by non-elderly individuals who would not otherwise be enrolled in Medicare
    • Acute healthcare spending increases by those who would otherwise be enrolled in medicare under currently law
    • Increase in utilization costs for long term services and supports
  • This study discusses
    • Assumptions that tend to over/underestimate costs when considering M4A.

Further Reading:

“An Analysis of Senator Sanders’ Single-Payer Plan”

Emory University 2016

Title: An Analysis of Senator Sanders Single Payer Plan
Year: 2019
Author: Kenneth Thorpe
Institution: Emory University
Plan Analyzed: S. 1129
Increases in federal health expenditures: $1.9 trillion (2017) and $24.6 trillion (2017-26)

Read Study:

An Analysis of Senator Sanders’s Single Payer Plan

Abstract:

Senator Sanders has proposed eliminating private health insurance and the exchanges created through the Affordable Care Act and replacing it with a universal Medicare program with no cost sharing. The plan would shift virtually all health care spending from private and public sources today onto the federal budget. The campaign estimates his plan would cost an average of $1.38 trillion per year over the next decade. They outline a variety of payroll and income tax increases, higher taxes for capital gains and dividends, taxes on estates of high income households and eliminate tax breaks that subsidize health insurance. Collectively he claims these taxes fully pay for the costs of the single payer plan. The analysis presented below however estimates that the average annual cost of the plan would be approximately $2.5 trillion per year creating an average of over a $1 trillion per year financing shortfall. To fund the program, payroll and income taxes would have to increase from a combined 8.4 percent in the Sanders plan to 20 percent while also retaining all remaining tax increases on capital gains, increased marginal tax rates, the estate tax and eliminating tax expenditures. The plan would create enormous winners and losers even with the more generous benefits with respect to what households and businesses pay today compared to what they would pay under a single payer plan. Overall, over 70 percent of working privately insured households would pay more under a fully funded single payer plan than they do for health insurance today.

Overview:

This study is unique because it primarily focuses on the increase in federal health care spending and how this increase might be financed.

This study considers:

  • The impact of increased payment rates for current Medicare/Medicaid beneficiaries.
  • Financing mechanisms for increased federal spending.
  • Populations that would be “at-risk” based on proposed financing mechanisms.

Further Reading:

Gordon Mosser Critical Review and comment by Dr. Don McCanne

“Exploring Single-Payer Alternatives for Health Care Reform”

RAND 2016

Title: Exploring Single-Payer Alternatives for Health Care Reform
Year: 2016
Authors: Jodi L. Liu
Institution: Pardee RAND graduate school
Funding Source: N/A
Plan Analyzed: S. 1782 / H.R. 1200
Percent Change in National Health Expenditure under M4A (1-year): -5% (2017)
Percent Change in National Health Expenditure under M4A (10-year): NS
Increase in Federal health expenditures: $446 billion (2017)

Read Study:

Exploring Single-Payer Alternatives for Health Care Reform

Study Abstract:

The Affordable Care Act (ACA) has reduced the number of uninsured and established new cost containment initiatives. However, interest in more comprehensive health care reform such as a single-payer system has persisted. Definitions of single-payer systems are heterogeneous, and estimates of the effects on spending vary. The objectives of this dissertation were to understand single-payer proposals and to estimate health care spending under single-payer alternatives in the United States. Single-payer proposals are wide-ranging reform efforts spanning financing and delivery, but vary in the provisions. I modeled two sets of national scenarios – one labeled comprehensive and the other catastrophic – and compared insurance coverage and spending relative to the ACA in 2017. First, I estimated the effects of utilization and financing changes, and then I added the effects of “other savings and costs” relating to administration, drug and provider prices, and implementation. Due to coverage of all legal residents and low cost sharing, and prior to adjusting for other savings and costs, the comprehensive scenario increased national health care expenditures by $435 billion and federal expenditures by $1 trillion relative to the ACA. The range of the net effect of the other savings and costs in the literature was $1.5 trillion in savings to $140 billion in costs, with a mean estimate of $556 billion in savings. If this mean estimate was applied to the comprehensive scenario, national expenditures would be $121 billion lower but federal expenditures would still be $446 billion higher relative to the ACA. The catastrophic scenario also covered all legal residents but increased overall cost sharing, resulting in a reduction in national expenditures by $211 billion and federal expenditures by $40 billion even before adjusting for other savings and costs. Average household spending on health care in both sets of scenarios could be more progressive by income than spending under the ACA. I also developed an interactive, web-based cost tool that allows the savings and cost assumptions to be adjusted by any user. As the debate on how to finance health care for all Americans continues, this study provides increased transparency about economic evaluations of health care reform.

Overview:

  • This comprehensive 2016 paper served as Jodi Liu’s dissertation, which utilizes a microsimulation model to account for costs/savings and individual level variation
  • The paper contains four main chapters:
    • Chapter 1: A review of types of health care systems, single-payer systems worldwide, and brief overview of single-payer health care reform in the United States
    • Chapter 2: Definitions of single-payer health care systems and a survey of single-payer proposals
    • Chapter 3: Estimates of health insurance coverage and spending under single-payer scenarios
      • Liu looks at 2 policy scenarios: Comprehensive (comprehensive benefits without cost-sharing) and Catastrophic (coverage only against large financial loss)
      • Comp-Base Scenario – Single-payer bill as written: 98% Actuarial value (2% OOP for individuals)
      • Comp-Low AV Scenario – a 78% AV plan (22% OOP for individuals)
      • Comp-High Tax Scenario – 98% AV, but income tax adjusted upward to match federal expenditure under ACA
    • Chapter 4: Description of a cost tool that could be used to understand assumptions (not available)

Wharton Professor Robert Hughes advocates for universal health care

Does the U.S. Need Universal Health Care?

Interview of Robert Hughes, professor of business ethics and legal studies at Wharton
The Wharton School of the University of Pennsylvania, Knowledge@Wharton, December 8, 2020

Nothing quite exposes the inequalities that exist in American society more than the health care system. It’s a complex combination of private insurance, public programs and politics that drives up costs, creating significant barriers to lifesaving medical treatment for large segments of the population. In America, access to quality health care often depends on income, employment and status.

Robert Hughes, professor of business ethics and legal studies at Wharton, is an advocate for universal health care coverage. Drawing deeply on his research in philosophy, Hughes believes that equal access to medical care is beneficial for both liberty and social stability. Health, he says, should not be tied to wealth.

“I think it’s very disturbing that people have to go to GoFundMe in order to get their medical treatments paid for. It creates a power imbalance,” he said, referring to the crowdsourcing platform used to help raise money for patient bills. “That’s why I say that truly universal health care would be good for people’s liberty. Because you’re not really free if you’re depending on charity, especially discretionary charity like the kind you see on GoFundMe, for a basic need like health care.”

The ACA, commonly referred to as Obamacare, brought the U.S. closer to providing universal health care through subsidized private health insurance, but Hughes said there’s still a wide gap. He believes policymakers should ensure that everyone has coverage and access to the same needed treatments.

The professor argued the case for universal health care in a paper titled “Egalitarian Provision of Necessary Medical Treatment,” which was published last year in the Journal of Ethics. (The author-accepted version is here.) He examined the health care systems of the U.K., Australia and Canada, concluding that Canada’s single-payer system is the most advantageous for the U.S.

“I don’t understand why there’s so much resistance to the idea of truly universal health insurance in the United States, given that this is something that other industrial countries just do,” Hughes said.

He acknowledged that the U.S. doesn’t have the “political will” to change a system that’s been entrenched since the end of World War II, when employers began offering health insurance to their workers instead of higher wages.

Link includes 12 minute podcast:
https://knowledge.wharton.upenn.edu…

Egalitarian Provision of Necessary Medical Treatment

By Robert C. Hughes
The Journal of Ethics, October 31, 2019

Abstract

Considerations of autonomy and independence, properly understood, support strictly egalitarian provision of necessary medical treatment. If the financially better-off can purchase access to necessary medical treatments that the financially less well-off cannot purchase without help, then their discretionary power to give or to withhold monetary gifts indirectly gives them the power to make life-and-death or sickness-and-health decisions for others. To prevent private citizens from having this objectionable form of power, government must ensure that citizens’ finances do not affect their access to medical treatments that significantly prolong life, relieve suffering, or cure or mitigate disabilities. Government should ensure this even if doing so involves leveling down and even if it is unclear whether egalitarian provision of necessary treatment would provide better care to the poor than a less egalitarian health care system would.

The Journal of Ethics: Abstract
https://link.springer.com…

Author’s pre-copyedit version of the full article:
http://robertchughes.com…

Comment:

By Don McCanne, M.D.

Robert Hughes’ position on universal health care is one that is certainly familiar to supporters of single payer Medicare for All. What is unique here is that Hughes is a professor of business ethics and legal studies at the University of Pennsylvania’s Wharton School, which some believe is a center of conservative thought at an otherwise liberal university.

His views on egalitarian provision of necessary medical treatment should provoke thought. Does care need to be egalitarian (equal for all), or can it ethically be equitable (merely fair for all)? Should “leveling down” be applied to services for the affluent so that they do not exceed services for the poor? If leveling down is applied only to unnecessary services then can’t a wealthy nation like the United States afford to provide all necessary services for everyone? If so, then would it be ethical to avoid leveling down unnecessary health services that might be desired by the affluent as long as they were not financed by the government? But then how would you silo unnecessary services?

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“The Costs of a National Single-Payer Healthcare System”

Mercatus Center 2018

Title: The Costs of a National Single-Payer Healthcare System
Year: 2018
Authors: Charles Blahaus
Institution: Mercatus Center
Funding Source: Koch
Plan Analyzed: S. 1804 Medicare for All Act of 2017
Percent Change in National Health Expenditure under M4A (1-year): -2.03% (2022)
Percent Change in National Health Expenditure under M4A (10-year): -3.44% (2022-31)
Increase in Federal health expenditures: $5.838 trillion (2017-26)

Read Study:

The Costs of a National Single-Payer Healthcare System

Study Abstract:

The leading current bill to establish single-payer health insurance, the Medicare for All Act (M4A), would, under conservative estimates, increase federal budget commitments by approximately $32.6 trillion during its first 10 years of full implementation (2022–2031), assuming enactment in 2018. This projected increase in federal health care commitments would equal approximately 10.7 percent of GDP in 2022, rising to nearly 12.7 percent of GDP in 2031 and further thereafter. Doubling all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan. It is likely that the actual cost of M4A would be substantially greater than these estimates, which assume significant administrative and drug cost savings under the plan, and also assume that health care providers operating under M4A will be reimbursed at rates more than 40 percent lower than those currently paid by private health insurance.

Overview:

  • The Mercatus Report focuses on national health expenditures (NHE), but places particular emphasis on federal health expenditures.
  • The Report focuses on:
    • An overview of the findings and rationale for why Blahaus believes his estimate is an “underestimate”
    • Detail Increased Demand and Utilization assumptions and Long Term Services and Supports (LTSS)
    • Savings from Provider Payment Reductions, Drug Costs, Administrative Savings. Blahaus underscores that all of these savings will likely not be achieved because his estimates require a perfect transition from policy to practice. (Administrative Tasks, Prescription Drug Negotiation, etc) operate their optimal capacity/efficiency
    • Effects on NHE and the Federal Budget, expressing skepticism about financing plans despite not laying out any particular financing plans
    • Appendix with Financial Effects of different scenarios under Medicare for All

PNHP Response:

PNHP co-founders Drs. David Himmelstein and Steffie Woolhandler critique the Mercatus reports as “ideology masquerading as health economics.”

Further Reading:

  • “SinglePayerGate” misses the point: (Vox)
  • Blahous Rebuttal: (e21)

“Economic Analysis of Medicare for All”

Political Economy Research Institute (PERI) 2018

Title: Economic Analysis of Medicare for All
Year: 2018
Author: Robert Pollin, James Heintz, Peter Arno, Jeannette Wicks-Lim, and Michael Ash
Institution: Political Economy Research Institute (PERI) U-Mass Amherst
Funding Source: California Nurses Association/National Nurses United
Plan Analyzed: S. 1804 Medicare for All Act of 2017
Percent Change in National Health Expenditure under M4A (1-year): -9.6% (2017)
Percent Change in National Health Expenditure under M4A (10-year): -11.9% (2017-26)
Increase in Federal health expenditures: $1.35 trillion (2017-26)

Read Study:

PERI – Economic Analysis of Medicare for All

Study Abstract:

This study by PERI researchers Robert Pollin, James Heintz, Peter Arno, Jeannette Wicks-Lim and Michael Ash presents a comprehensive analysis of the prospects for a Medicare-for-All health care system in the United States. The most fundamental goals of Medicare for All are to significantly improve health care outcomes for everyone living in the United States while also establishing effective cost controls throughout the health care system. These two purposes are both achievable. As of 2017, the U.S. was spending about $3.24 trillion on personal health care—about 17 percent of total U.S. GDP. Meanwhile, 9 percent of U.S. residents had no insurance and 26 percent were underinsured—they were unable to access needed care because of prohibitively high costs. Other high-income countries spend an average of about 40 percent less per person and produce better health outcomes. Medicare for All could reduce total health care spending in the U.S. by nearly 10 percent, to $2.93 trillion, while creating stable access to good care for all U.S. residents.

Overview:

  • The PERI study is a lengthy and comprehensive cost-analysis study. The authors explain their assumptions and counterfactuals at length and show their calculations in a very easy-to-follow format.
  • The Report contains 7 sections:
    • Chapter 1: Underscores why affordable health care can improve health outcomes
    • Chapters 2-3: Identifies sources of costs and savings
    • Chapter 4: Financing Plans for Medicare For All
    • Chapter 5: Effects of financing plans on families (based on income) and businesses (small, medium, and large)
    • Chapter 6: Considers the logistics and the costs of transitioning from our current system to a single-payer system (“Just Transition”)
    • Chapter 7: Estimates the effects of Medicare for All on health care spending as a share of US GDP, and other macroeconomic impacts

PNHP Response:

PNHP co-founders Drs. Steffie Woolhandler and David Himmelstein, and PNHP president Dr. Adam Gaffney, submitted a reviewer assessment of the PERI study. They note that the PERI analysis may understate administrative savings, but overall find it to be a “highly credible economic analysis.”

Further Reading:

Facing job loss with Just Transition (KHN)

“From Incremental to Comprehensive Health Insurance Reform: How Various Reform Options Compare on Coverage and Costs”

The Urban Institute 2019

Title: From Incremental to Comprehensive Health Insurance Reform: How Various Reform Options Compare on Coverage and Costs
Year: 2019
Author: Linda J. Blumberg, John Holahan, Matthew Buettgens, Anuj Gangopadhyaya, Bowen Garrett, Adele Shartzer, Michael Simpson, Robin Wang, Melissa M. Favreault, and Diane Arnos
Institution: Urban Institute
Funding Source: The Commonwealth Fund
Plan Analyzed: “Reform 8”
Percent Change in National Health Expenditure under M4A (1-year): 20.6% (2020)
Percent Change in National Health Expenditure under M4A (10-year): NS
Increases in federal health expenditures: $33.988 trillion (2020-29)

Read Study:

From Incremental to Comprehensive Health Insurance Reform: How Various Reform Options Compare on Coverage and Costs

Abstract:

Policymakers, including candidates in the 2020 presidential campaign and members of Congress, have proposed a variety of options to address the shortcomings of the current health care system. These range from improvements to the Affordable Care Act to robust single-payer reform.

There are numerous challenging trade-offs when choosing an approach to health care reform, including covering the uninsured, improving the affordability of health care, and raising the government funding required to implement them. The public and policymakers alike need more information about the potential effects of various health reform proposals.

This study, funded by the Commonwealth Fund, analyzes eight health care reforms and their potential effects on health insurance coverage and spending. Each of the analyzed reform proposals makes health insurance considerably more affordable by reducing people’s premiums and cost sharing. Some reforms also reduce US health care costs, and all require additional federal dollars.

Overview:

  • This study is unique in that it outlines 8 potential health care policy reform options, and then outlines impacts on national health expenditures, federal health expenditure, and insurance rates. It utilizes the same microsimulation approach that the Urban institute utilized in its 2016 paper.
  • Reforms considered by this paper include those that:
    • Build on the ACA
      • Reform 1: Enhanced financial assistance
      • Reform 2: Federal individual mandate and STLD prohibitions
      • Reform 3: Filling the Medicaid eligibility gap
      • Reform 4: Public option and/or capped provider payment rates
      • Reform 5: CARE, no ESI firewall
      • Reform 6: Further enhanced financial assistance
    • Replace the ACA
      • Reform 7: Single-payer lite
      • Reform 8: Single-payer enhanced

PNHP Response:

PNHP co-founders Drs. David Himmelstein and Steffie Woolhandler found that “the Urban Institute analysis grossly underestimates the administrative savings under single payer, and projects increases in the number of doctor visits and hospitalizations that far exceed the capacity of doctors and hospitals to provide this added care.” Their full critique here, and a QOTD response from Dr. Don McCanne, including comments from PNHP president Dr. Adam Gaffney, here.

Further Reading:

Comparing Health Insurance Reform Options: From “Building on the ACA” to Single Payer

“National Health Spending Estimates Under Medicare for All”

RAND 2019

Title: National Health Spending Estimates Under Medicare for All
Year: 2019
Authors: Jodi L. Liu and Christine Eibner
Institution: RAND
Funding Source: Modeled after H.R. 1384
Plan Analyzed: S. 1782 / H.R. 1200
Percent Change in National Health Expenditure under M4A (1-year): +1.75% (2019)
Percent Change in National Health Expenditure under M4A (10-year): NS
Increases in federal health expenditures: $2.4 trillion (2019)

Read Study:

National Health Spending Estimates Under Medicare for All

Study Abstract:

We estimate that total health expenditures under a Medicare-for-All plan that provides comprehensive coverage and long-term care benefits would be $3.89 trillion in 2019 (assuming such a plan was in place for all of the year), or a 1.8 percent increase relative to expenditures under current law. This estimate accounts for a variety of factors including increased demand for health services, changes in payment and prices, and lower administrative costs. We also include a supply constraint that results in unmet demand equal to 50 percent of the new demand. If there were no supply constraint, we estimate that total health expenditures would increase by 9.8 percent to $4.20 trillion.

While the 1.8 percent increase is a relatively small change in national spending, the federal government’s health care spending would increase substantially, rising from $1.09 trillion to $3.50 trillion, an increase of 221 percent.

Overview:

  • An update done by extrapolating projections from the microsimulation modelling in the 2016 RAND study. No new modelling was undertaken for this analysis.
  • This study considers:
    • Increased demand for medical services and long-term care services and supports (LTSS)
    • Savings from all-payer rates for services, prices for drugs and devices, administrative costs
    • Supply-side constraints for services
    • Level of financing needed for Medicare For All

PNHP Response:

Regarding increased utilization, we would highlight three studies from 2019 that found large-scale coverage expansions in the United States (Medicare/Medicaid in the late 1960s and the ACA in the early 2010s) did not lead to a society-wide increase in hospitalizations or doctor visits, and that large-scale expansions in other nations also did not cause a spike in utilization. (See “Utilization of health care services after large coverage expansions.”)