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Medicare-for-All: Why We Should Say Yes, Not "Yes But"

Medicare-for-All: Why We Should Say Yes, Not "Yes But"

by Merton Bernstein and Theodore Marmor
Health Affairs Blog
August 28th, 2008

Many health policy experts regard Medicare-for-All as a model for reform of America’s indisputably troubled and costly medical arrangements. They express admiration for its administrative efficiency and the resulting savings that could pay for extending coverage, perhaps to all. For example, in a June 2008 Health Affairs article, Commonwealth Fund authors said: “Compared to a Medicare-for-All approach, our [Building Blocks] framework does not achieve the simplicity, consolidated risk, administrative overhead, and provider payment net savings of covering nearly everyone through Medicare.”

Sometimes even Medicare-for-All admirers succumb to the “yes but” syndrome, as in “yes, but Medicare-for-All is politically impractical.” For example, after praising Medicare-for-All, The Health Care Mess concluded that “political reality compels us to ask whether there are not other ways” (besides Medicare-for-All) and answered that question “yes.” Princeton economist Paul Krugman, who had extolled Medicare-for-All in 2006, put a foot in the “yes but” camp in 2007. He welcomed the Edwards, Massachusetts, and Schwarzenegger plans to compel individuals to select from among insurance plans, thereby forgoing Medicare-for-All’s economies. The Edwards and Obama plans required a Medicare-like plan as one option. Krugman argued that such a plan’s lower cost will eventually crowd out more expensive private plans. This overlooks private insurance’s history of cutting prices to gain market share, later returning to double-digit boosts. Also, the Massachusetts program actually is not universal; it omits children, among others, and it is having real trouble meeting its costs. The California legislature as well rejected the “Governator’s” plan as too costly.

Though the political “yes, buts” surrounding Medicare-for-All prove groundless, they deserve discussion. However, the “yes, buts” should not preempt discussion of Medicare-for-All’s substantive advantages, as they all too often do. For example, the May/June 2008 issue of Health Affairs, a 200-page-plus compendium on health reform and expanding coverage, does not contain a single article devoted to Medicare-for-All. In this post, we first describe the advantages of Medicare-for-All, then demonstrate that the evidence behind the political “yes, buts” is exaggerated and flawed.

Medicare, The Most Practical Platform — It’s Been On The Job For Decades

After all is said and done, Medicare makes the most practical platform for both extending coverage and taming medical cost inflation. Not least, Medicare has been on the job for more than four decades and has resolved hundreds of practical problems that any large-scale health program must address. In contrast, any step-by-step program, even one that purports to be “Medicare-like,” must start from scratch — because the “like” must mean that it differs from Medicare. Those differences would require constantly testing the applicability of Medicare decisions to any differing regime. Each subsequent extension of coverage would require like determinations. It does not make sense to keep reinventing the wheel, or prescribing something that resembles a wheel but somehow differs from it (not quite so round, perhaps).

Incremental Proposals Do Not Reduce Costs; They Increase Them

Some members of the “yes, but” club advocate modest steps to expand coverage with the stated ultimate goal of universal coverage. The proposals put forth by the leading Democratic presidential rivals fit that category. Oddly enough, those proposals, by their proponents’ own calculations, would increase total costs $60-$120 billion dollars annually. (These sums probably understate the additional costs because of overly optimistic projections of savings by other features, such as electronic record keeping.)

These anticipated additional costs derive from a major common design feature: they would provide individually determined, means-tested subsidies to make costs appear affordable. Yet those tests, which must be done for tens of millions of participants, substantially increase outlays. For example, means-tested Medicaid incurs administrative costs that are some four percentage points higher than those of the original Medicare (Parts A and B). Because incomes vary, means testing must be done again and again — for Medicaid every thirteen weeks. Clearly, this is less practical than Medicare for All, which would reduce non-benefit and per capita outlays while expanding coverage.

Senator McCain proposes to eliminate tax subsidies for employers that provide health insurance and for employees who receive such coverage. That is almost surely a political nonstarter because of employer and employee opposition. His subsidies to recipients would not meet the costs of adequate plans. And the elimination of employer tax breaks would lessen the willingness of employers to provide medical care insurance, enlarging the ranks of the uninsured.

In addition, private plans’ non-benefit costs include plan advertising, lobbying, commissions to salespeople and agencies, often enormous executive compensation, and profits. Moreover, employers must assess the relative costs and benefits of available private plans; that takes the assistance of experts like actuaries, accountants, lawyers, and personnel administrators, to say nothing of the entrepreneur’s own limited time. Further, many health care providers have many differing charges for the very same procedures, depending upon the patient’s insurer. Administering those numerous variables takes much time, effort, and money.

Massive Savings With Medicare for All: Simplification Leads To Reduced Costs

We must move to a system that reduces per capita costs and pays for expanding coverage from those savings. That’s where Medicare for All shines. Much of its savings derive from simplifying medical care insurance: with everyone eligible, there is no need to trudge through data to ascertain eligibility; with only one regional set of provider reimbursement rates, there is no need to match a claimant’s bill with hundreds or thousands of possible rate schedules. With Medicare-for-All covering all medically necessary treatments with practically no exclusions, coverage would seldom be an issue. Simple is cheap. In contrast, where 300 million people have the choice of insurance plans (family members often are covered by different plans in today’s kaleidoscopic scene), every element of coverage and treatment must be ascertained.

The “One-Size-Fits-All” Objection Falls Apart

Ironically, Medicare-for-All and other “single-payer” plans are frequently disparaged as “one-size-fits-all” programs, as if that were undesirable. Yet we all need the same protection in the event of illness or injury, and many of us want that for everyone else as well. Indeed, the most exemplary rule of all time is to “do unto others as you would have them do unto you.” That “one-size-fits-all” rule is hard to beat. In fact, by pooling all existing contributions from all plan sponsors and participants, existing varying contribution rates would be perpetuated. That way, premiums and contributions would not be one-sized after all. And those rates could share in Medicare- for-All’s savings.

Medicare-for-All Would Eliminate Employment Discrimination Against Women Of Child-Bearing Years And The Elderly

Medicare for All also would banish the current discriminatory insurer rate practices that discourage the employment of women of child-bearing age and older people. Private medical care insurance varies its rates by the age and gender of the population covered. As on average women of child-bearing age and older employees have high projected medical care costs, insurers charge according to the proportion of such members in a group. Human resources departments do not need to advise those making hiring and lay-off decisions of these patterns. The resultant discrimination is, however, very hard to prove, and those who feel the rough side of discriminatory practices are reluctant to challenge them and become marked as “troublemakers.”

Medicare for All would set employers’ and employees’ future premiums without regard to gender or age, resulting in nondiscriminatory insurance rates and employment. That’s good for women and older people — and good for the economy. Increased employment expands the numbers contributing to Medicare and Social Security and — indeed — the output of the economy.

Medicare-for-All also means the end of refusing coverage for pre-existing conditions, so typical of private insurance. In contrast, Massachusetts’ “reform” law permits delaying coverage for pre-existing conditions.

We Can Finance Medicare for All By Pooling What We Already Spend

With Medicare-for-All, medical care providers and insurers would save huge amounts on billing. Those sums can be shifted to treating more people and to pay for types of medical care not now covered by Medicare and typically excluded or extremely limited by private plans — most notably vision, hearing, and dental treatment. Any health care personnel displaced by the change to Medicare-for-All should have preference for retraining.

The expansion of coverage would create new jobs for insurance workers and put dollars already being spent to better use. What a boon to individuals and families, to business and government, that would be. And wouldn’t it be a blessing to doctors, nurses, and other caregivers to devote their time and skills to doing what they are trained to do — providing preventive and healing services? Now, that’s worth discussing.

“Too Much Government” — Another “Yes, But” That Does Not Wash; Medicare for All Banishes Insurer And Employer-Sponsor Conflicts Of Interest

During the 1994 tour to drum up support for the Clinton health care proposals, a principal proponent (at a St. Louis session attended by Bernstein) dismissed single-payer plans as involving “too much government.” That argument disappears with Medicare for All because Medicare uses private insurers as intermediaries to administer the program, applying uniform regional rates promulgated by medical care cost experts; insurers provide those services at very low cost. In contrast, when insurers administer private programs, every dollar of benefits comes out of insurer profits or adds to sponsor costs. Typically sponsors seek an intermediary whose services result in the lowest outlays. Those roles pit insurers and sponsors against patients. Medicare for All eliminates those conflicts.

Lake/Herndon Reports Dissed Medicare for All With Inappropriate Focus Groups, Slanted Questions

Some “yes, buts” originated in the studies performed by Lake Research Partners for the Herndon Alliance, composed of groups advocating expanding health care coverage. For example, the key Lake/Herndon 2006 effort used focus groups in Atlanta, Georgia, and Columbus, Ohio. Columbus has long been considered the gold standard for surveying consumers’ preferences concerning things like differently colored ketchups or mustards, but the city makes an especially poor area for assessing public attitudes toward health policy, especially public programs. The Columbus area has long been marinated in anti-Social Security sentiment. The Columbus Dispatch is a famously conservative Republican advocate. The two largest state employee pension programs (the Ohio Public Employees Retirement System and the Ohio State Teachers Retirement System — headquartered in Columbus) have fiercely and volubly protected their turf against Social Security.

Beyond that, major private insurers and large banks in the Columbus area offer pension services, and they employ substantial portions of the local population. These factors result in disproportionate numbers of Columbus area natives who regard public social insurance programs as undesirable and against their interests. Obviously, it is a poor source for focus groups evaluating social insurance health care programs.

In addition, the questionnaire posed to the focus groups was slanted in favor of what it called “Guaranteed Affordable Choice” (GAC) and against “single-payer.” It defined GAC as offering health insurance for “all necessary medical services” at low contributory rates. (In 2008 correspondence, the Herndon Group president noted that its cost estimates did not cover the promised subsidies and called both the employee and employer contribution rate used in the questionnaire as an “understatement” and “an underestimate.”) In contrast, the single-payer proposal was described as “government-financed [and] . . . financed by tax dollars for a comprehensive set of medical services.” There was no mention that the GAC proposal elsewhere in the questionnaire cited taxes as its source of funding. So the questionnaire made it sound as if GAC would cover more medical services and that “single-payer” would require taxes, without specifying that GAC also would be tax-financed. It bears comment that the questionnaire used “single-payer,” a formulation with less appeal than “Medicare-for-All.” The 2006 report cautioned advocates of expanded health care coverage about “Skepticism Toward Gov’t, Social Security, Medicare” (page 62). Yet an almost contemporaneous survey by Lake Associates for a different group (the American Academy of Family Physicians) reported that 77% of those surveyed placed “Protecting Social Security” among their highest priorities.

Medicare-for-All — The Most Practical Health Reform Option

To date, Medicare-for-All has been framed, incorrectly, in ideological terms. In reality, Medicare-for-All is the most practical reform option. It would greatly reduce non-benefit outlays and lessen employment discrimination. Those features should translate into powerful political support.

Our economic situation requires that we pursue less wasteful policies; reducing health care costs that exceed what other developed nations spend heads that agenda. We need the economies of Medicare-for-All as much for the well-being of American enterprise as for the adequate medical care of our people. We can no longer tolerate a health insurance nonsystem that costs too much, protects too few, and offers too little. Medicare-for-All makes a lot of sense, and no health care reform symposium or national debate should ignore it.

3 Responses to “Medicare-for-All: Why We Should Say Yes, Not “Yes But””

Kip Sullivan Says:
September 5th, 2008 at 4:03 pm

Simpson says it’s “incredibly dishonest” to say Medicare’s overhead is “lower” (than that of health insurance companies, presumably). Simpson’s statement ignores the facts, and is illogical.

First the facts.

According to the latest annual report of the Medicare board of trustees (these reports are required by law), Medicare spent $431.5 billion dollars in 2007. Of this amount, $6.3 billion was administrative expenditures (or overhead). If we do the math, we determine that Medicare’s overhead was 1.5 percent of its expenditures. Other data presented in the trustees report indicate Medicare’s overhead was about 2 percent throughout this decade, about 2 percent during the 1990s, and about 3 percent in the 1980s.

During the last three or four decades, the comparable figure for health insurance companies has been 20 percent while the comparable figure for self-insured firms has been about 10 percent. I think it is safe to say all reasonable people would agree that 2 percent is “lower” than 20 percent and 10 percent.

Even if you didn’t know these figures, your common sense tells you Medicare’s overhead costs have to be lower than the insurance industry’s. Medicare spends little or nothing on a variety of administrative activities that insurance companies spend substantial sums of money on, including:

* marketing;
* underwriting (which means doing the research necessary to determine applicants’ health histories and whether to insure them and if so at what price);
* making routine use of “utilization review” (aka telling doctors how to practice medicine);
* restricting patients’ choice of provider (it costs money to assemble “networks” of providers that include some providers and exclude others);
* lobbying;
* financing costly salaries and perks for executives; and
* financing profits.

(I consider profit to be a subset of administrative costs, others don’t. Insurance companies typically allocate 3 to 5 percent of their revenues or expenditures to profit.)

Among experts who publish in peer-reviewed journals, the 2-percent figure for Medicare is widely (probably universally) accepted. I offer two examples of expert opinion from the conservative side of the health care reform debate: the Lewin Group, and a coalition of organizations and individuals that signed an open letter to Congress in 1999.

The Lewin Group is a consulting firm which is on record criticizing single-payer proponents. It often makes unjustifiably favorable assumptions about the cost-cutting abilities of health insurance companies. It was purchased by United Health Group last year. It uses the 2-percent figure to estimate Medicare’s overhead costs and the overhead costs of Medicare-like systems (cf the Lewin Group’s reports for the states of California and Colorado).

In 1999, a coalition of conservative and middle-of-the road groups and individuals signed an open letter to Congress begging Congress to raise Medicare’s administrative spending level to the level “found in the private sector” so that Medicare would be better equipped to function like a managed care insurance company. The coalition included the Heritage Foundation, the former Health Insurance Association of America (the trade group that represented the non-HMO wing of the health insurance industry), the American Enterprise Institute, the Concord Coalition, and Wellpoint Health Networks.

This coalition stated that Medicare’s overhead was less than 2 percent. Here is how they put it: “The latest report of the Medicare trustees points out that HCFA’s administrative expenses represented only 1 percent of the outlays of the Hospital Insurance trust fund [which finances Part A] and less than 2 percent of the Supplementary Medical Insurance trust fund [which at that time financed Part B]” (Heritage Foundation et al., “Open letter to Congress and the executive: Crisis facing HCFA and millions of Americans,” Health Affairs 1999;18(1):8-10, 8). Obviously, the average of these two trust funds comes to less than 2 percent.

Now that the basic facts are in front of us, let’s examine Simpson’s strange logic. It is strange in two ways.

First, Simpson assumes undetected fraud is a problem only for Medicare. It is in fact a serious problem for all health insurers, public and private. The US GAO has estimated that fraud eats up 10 percent of all US spending on health care. A national coalition against fraud, which includes US health insurance companies, puts the total at closer to 3 percent. Whatever the accurate number, fraud is occurring at epidemic levels, and it is afflicting private-sector insurers as well as public insurers. If we’re going to charge Medicare with higher-than-reported overhead costs because Medicare is not immune to fraud, then we must do the same for private insurers. If we do that, Medicare’s low overhead costs remain low vis a vis the insurance industry’s overhead costs.

But Simpson’s proposal that we raise our estimate of an insurer’s overhead by the amount by which the insurer is defrauded is irrational, arguably delusional. We may all fervently wish that public and private insurers spent enough money to eliminate fraud. (I am as upset as Simpson is by the Bush administration’s devil-may-care attitude about private-sector corporations ripping off the taxpayer, be it wheelchair manufacturers defrauding Medicare or Halliburton defrauding the Pentagon.) But our wishes can’t change reality — our wishes can’t change what Medicare or any other insurer actually spent on fraud detection in 2007 or any other year.

But just to humor Simpson, let’s follow his odd logic to its conclusion. Let’s raise Medicare’s overhead costs and total spending by the $2.8 billion in fraud that Simpson says Medicare failed to detect and see what happens to Medicare’s overhead ratio, and let’s for kicks just totally ignore fraud committed against the private sector. Total spending for Medicare in 2007 would rise to $431.5 + $2.8 = $434.3. Administrative spending would rise to $6.3 + $2.8 = $9.1 billion. Medicare’s new Simpson-style overhead ratio is no longer 1.5 percent but is instead 2.1 percent, still far lower than the comparable figure for health insurance companies or even self-insured firms.

I won’t return Simpson the favor of calling him “incredibly dishonest” because he got his facts so wrong. I will say I think he wrote a very sloppy post.

Merton Bernstein Says:
August 29th, 2008 at 11:51 am

One cannot judge the efficiency of Medicare by the actions – and inactions – of the Bush administration which is so antagonistic to social insurance. The assessment which Simpson cites is typical of that administration – making baseless claims of achievements that are bogus. Just call it another “Mission accomplished”.

Brian Simpson Says:
August 28th, 2008 at 11:39 pm

Can we please stop repeating this incredibly dishonest line about Medicare having lower overhead? They have lower overhead because they do not police fraud as effectively as they should. According to a New York Times article (not exactly a small government newspaper):

Quote:

But according to a confidential draft of a federal inspector general’s report, those claims of success, which earned Medicare wide praise from lawmakers, were misleading.

In calculating the agency’s rate of improper payments, Medicare officials told outside auditors to ignore government policies that would have accurately measured fraud, according to the report. For example, auditors were told not to compare invoices from salespeople against doctors’ records, as required by law, to make sure that medical equipment went to actual patients.

As a result, Medicare did not detect that more than one-third of spending for wheelchairs, oxygen supplies and other medical equipment in its 2006 fiscal year was improper, according to the report. Based on data in other Medicare reports, that would be about $2.8 billion in improper spending

End quote

$2.8 billion dollars in improper spending blows that 3% administrative costs sky high. That much widespread abuse of a system doesn’t exactly instill confidence in Medicare as a prescription for all.

Medicare-for-All: Why We Should Say Yes, Not “Yes But”

by Merton Bernstein and Theodore Marmor
Health Affairs Blog
August 28th, 2008

Many health policy experts regard Medicare-for-All as a model for reform of America’s indisputably troubled and costly medical arrangements. They express admiration for its administrative efficiency and the resulting savings that could pay for extending coverage, perhaps to all. For example, in a June 2008 Health Affairs article, Commonwealth Fund authors said: “Compared to a Medicare-for-All approach, our [Building Blocks] framework does not achieve the simplicity, consolidated risk, administrative overhead, and provider payment net savings of covering nearly everyone through Medicare.”

Sometimes even Medicare-for-All admirers succumb to the “yes but” syndrome, as in “yes, but Medicare-for-All is politically impractical.” For example, after praising Medicare-for-All, The Health Care Mess concluded that “political reality compels us to ask whether there are not other ways” (besides Medicare-for-All) and answered that question “yes.” Princeton economist Paul Krugman, who had extolled Medicare-for-All in 2006, put a foot in the “yes but” camp in 2007. He welcomed the Edwards, Massachusetts, and Schwarzenegger plans to compel individuals to select from among insurance plans, thereby forgoing Medicare-for-All’s economies. The Edwards and Obama plans required a Medicare-like plan as one option. Krugman argued that such a plan’s lower cost will eventually crowd out more expensive private plans. This overlooks private insurance’s history of cutting prices to gain market share, later returning to double-digit boosts. Also, the Massachusetts program actually is not universal; it omits children, among others, and it is having real trouble meeting its costs. The California legislature as well rejected the “Governator’s” plan as too costly.

Though the political “yes, buts” surrounding Medicare-for-All prove groundless, they deserve discussion. However, the “yes, buts” should not preempt discussion of Medicare-for-All’s substantive advantages, as they all too often do. For example, the May/June 2008 issue of Health Affairs, a 200-page-plus compendium on health reform and expanding coverage, does not contain a single article devoted to Medicare-for-All. In this post, we first describe the advantages of Medicare-for-All, then demonstrate that the evidence behind the political “yes, buts” is exaggerated and flawed.

Medicare, The Most Practical Platform — It’s Been On The Job For Decades

After all is said and done, Medicare makes the most practical platform for both extending coverage and taming medical cost inflation. Not least, Medicare has been on the job for more than four decades and has resolved hundreds of practical problems that any large-scale health program must address. In contrast, any step-by-step program, even one that purports to be “Medicare-like,” must start from scratch — because the “like” must mean that it differs from Medicare. Those differences would require constantly testing the applicability of Medicare decisions to any differing regime. Each subsequent extension of coverage would require like determinations. It does not make sense to keep reinventing the wheel, or prescribing something that resembles a wheel but somehow differs from it (not quite so round, perhaps).

Incremental Proposals Do Not Reduce Costs; They Increase Them

Some members of the “yes, but” club advocate modest steps to expand coverage with the stated ultimate goal of universal coverage. The proposals put forth by the leading Democratic presidential rivals fit that category. Oddly enough, those proposals, by their proponents’ own calculations, would increase total costs $60-$120 billion dollars annually. (These sums probably understate the additional costs because of overly optimistic projections of savings by other features, such as electronic record keeping.)

These anticipated additional costs derive from a major common design feature: they would provide individually determined, means-tested subsidies to make costs appear affordable. Yet those tests, which must be done for tens of millions of participants, substantially increase outlays. For example, means-tested Medicaid incurs administrative costs that are some four percentage points higher than those of the original Medicare (Parts A and B). Because incomes vary, means testing must be done again and again — for Medicaid every thirteen weeks. Clearly, this is less practical than Medicare for All, which would reduce non-benefit and per capita outlays while expanding coverage.

Senator McCain proposes to eliminate tax subsidies for employers that provide health insurance and for employees who receive such coverage. That is almost surely a political nonstarter because of employer and employee opposition. His subsidies to recipients would not meet the costs of adequate plans. And the elimination of employer tax breaks would lessen the willingness of employers to provide medical care insurance, enlarging the ranks of the uninsured.

In addition, private plans’ non-benefit costs include plan advertising, lobbying, commissions to salespeople and agencies, often enormous executive compensation, and profits. Moreover, employers must assess the relative costs and benefits of available private plans; that takes the assistance of experts like actuaries, accountants, lawyers, and personnel administrators, to say nothing of the entrepreneur’s own limited time. Further, many health care providers have many differing charges for the very same procedures, depending upon the patient’s insurer. Administering those numerous variables takes much time, effort, and money.

Massive Savings With Medicare for All: Simplification Leads To Reduced Costs

We must move to a system that reduces per capita costs and pays for expanding coverage from those savings. That’s where Medicare for All shines. Much of its savings derive from simplifying medical care insurance: with everyone eligible, there is no need to trudge through data to ascertain eligibility; with only one regional set of provider reimbursement rates, there is no need to match a claimant’s bill with hundreds or thousands of possible rate schedules. With Medicare-for-All covering all medically necessary treatments with practically no exclusions, coverage would seldom be an issue. Simple is cheap. In contrast, where 300 million people have the choice of insurance plans (family members often are covered by different plans in today’s kaleidoscopic scene), every element of coverage and treatment must be ascertained.

The “One-Size-Fits-All” Objection Falls Apart

Ironically, Medicare-for-All and other “single-payer” plans are frequently disparaged as “one-size-fits-all” programs, as if that were undesirable. Yet we all need the same protection in the event of illness or injury, and many of us want that for everyone else as well. Indeed, the most exemplary rule of all time is to “do unto others as you would have them do unto you.” That “one-size-fits-all” rule is hard to beat. In fact, by pooling all existing contributions from all plan sponsors and participants, existing varying contribution rates would be perpetuated. That way, premiums and contributions would not be one-sized after all. And those rates could share in Medicare- for-All’s savings.

Medicare-for-All Would Eliminate Employment Discrimination Against Women Of Child-Bearing Years And The Elderly

Medicare for All also would banish the current discriminatory insurer rate practices that discourage the employment of women of child-bearing age and older people. Private medical care insurance varies its rates by the age and gender of the population covered. As on average women of child-bearing age and older employees have high projected medical care costs, insurers charge according to the proportion of such members in a group. Human resources departments do not need to advise those making hiring and lay-off decisions of these patterns. The resultant discrimination is, however, very hard to prove, and those who feel the rough side of discriminatory practices are reluctant to challenge them and become marked as “troublemakers.”

Medicare for All would set employers’ and employees’ future premiums without regard to gender or age, resulting in nondiscriminatory insurance rates and employment. That’s good for women and older people — and good for the economy. Increased employment expands the numbers contributing to Medicare and Social Security and — indeed — the output of the economy.

Medicare-for-All also means the end of refusing coverage for pre-existing conditions, so typical of private insurance. In contrast, Massachusetts’ “reform” law permits delaying coverage for pre-existing conditions.

We Can Finance Medicare for All By Pooling What We Already Spend

With Medicare-for-All, medical care providers and insurers would save huge amounts on billing. Those sums can be shifted to treating more people and to pay for types of medical care not now covered by Medicare and typically excluded or extremely limited by private plans — most notably vision, hearing, and dental treatment. Any health care personnel displaced by the change to Medicare-for-All should have preference for retraining.

The expansion of coverage would create new jobs for insurance workers and put dollars already being spent to better use. What a boon to individuals and families, to business and government, that would be. And wouldn’t it be a blessing to doctors, nurses, and other caregivers to devote their time and skills to doing what they are trained to do — providing preventive and healing services? Now, that’s worth discussing.

“Too Much Government” — Another “Yes, But” That Does Not Wash; Medicare for All Banishes Insurer And Employer-Sponsor Conflicts Of Interest

During the 1994 tour to drum up support for the Clinton health care proposals, a principal proponent (at a St. Louis session attended by Bernstein) dismissed single-payer plans as involving “too much government.” That argument disappears with Medicare for All because Medicare uses private insurers as intermediaries to administer the program, applying uniform regional rates promulgated by medical care cost experts; insurers provide those services at very low cost. In contrast, when insurers administer private programs, every dollar of benefits comes out of insurer profits or adds to sponsor costs. Typically sponsors seek an intermediary whose services result in the lowest outlays. Those roles pit insurers and sponsors against patients. Medicare for All eliminates those conflicts.

Lake/Herndon Reports Dissed Medicare for All With Inappropriate Focus Groups, Slanted Questions

Some “yes, buts” originated in the studies performed by Lake Research Partners for the Herndon Alliance, composed of groups advocating expanding health care coverage. For example, the key Lake/Herndon 2006 effort used focus groups in Atlanta, Georgia, and Columbus, Ohio. Columbus has long been considered the gold standard for surveying consumers’ preferences concerning things like differently colored ketchups or mustards, but the city makes an especially poor area for assessing public attitudes toward health policy, especially public programs. The Columbus area has long been marinated in anti-Social Security sentiment. The Columbus Dispatch is a famously conservative Republican advocate. The two largest state employee pension programs (the Ohio Public Employees Retirement System and the Ohio State Teachers Retirement System — headquartered in Columbus) have fiercely and volubly protected their turf against Social Security.

Beyond that, major private insurers and large banks in the Columbus area offer pension services, and they employ substantial portions of the local population. These factors result in disproportionate numbers of Columbus area natives who regard public social insurance programs as undesirable and against their interests. Obviously, it is a poor source for focus groups evaluating social insurance health care programs.

In addition, the questionnaire posed to the focus groups was slanted in favor of what it called “Guaranteed Affordable Choice” (GAC) and against “single-payer.” It defined GAC as offering health insurance for “all necessary medical services” at low contributory rates. (In 2008 correspondence, the Herndon Group president noted that its cost estimates did not cover the promised subsidies and called both the employee and employer contribution rate used in the questionnaire as an “understatement” and “an underestimate.”) In contrast, the single-payer proposal was described as “government-financed [and] . . . financed by tax dollars for a comprehensive set of medical services.” There was no mention that the GAC proposal elsewhere in the questionnaire cited taxes as its source of funding. So the questionnaire made it sound as if GAC would cover more medical services and that “single-payer” would require taxes, without specifying that GAC also would be tax-financed. It bears comment that the questionnaire used “single-payer,” a formulation with less appeal than “Medicare-for-All.” The 2006 report cautioned advocates of expanded health care coverage about “Skepticism Toward Gov’t, Social Security, Medicare” (page 62). Yet an almost contemporaneous survey by Lake Associates for a different group (the American Academy of Family Physicians) reported that 77% of those surveyed placed “Protecting Social Security” among their highest priorities.

Medicare-for-All — The Most Practical Health Reform Option

To date, Medicare-for-All has been framed, incorrectly, in ideological terms. In reality, Medicare-for-All is the most practical reform option. It would greatly reduce non-benefit outlays and lessen employment discrimination. Those features should translate into powerful political support.

Our economic situation requires that we pursue less wasteful policies; reducing health care costs that exceed what other developed nations spend heads that agenda. We need the economies of Medicare-for-All as much for the well-being of American enterprise as for the adequate medical care of our people. We can no longer tolerate a health insurance nonsystem that costs too much, protects too few, and offers too little. Medicare-for-All makes a lot of sense, and no health care reform symposium or national debate should ignore it.

3 Responses to “Medicare-for-All: Why We Should Say Yes, Not “Yes But””

Kip Sullivan Says:
September 5th, 2008 at 4:03 pm

Simpson says it’s “incredibly dishonest” to say Medicare’s overhead is “lower” (than that of health insurance companies, presumably). Simpson’s statement ignores the facts, and is illogical.

First the facts.

According to the latest annual report of the Medicare board of trustees (these reports are required by law), Medicare spent $431.5 billion dollars in 2007. Of this amount, $6.3 billion was administrative expenditures (or overhead). If we do the math, we determine that Medicare’s overhead was 1.5 percent of its expenditures. Other data presented in the trustees report indicate Medicare’s overhead was about 2 percent throughout this decade, about 2 percent during the 1990s, and about 3 percent in the 1980s.

During the last three or four decades, the comparable figure for health insurance companies has been 20 percent while the comparable figure for self-insured firms has been about 10 percent. I think it is safe to say all reasonable people would agree that 2 percent is “lower” than 20 percent and 10 percent.

Even if you didn’t know these figures, your common sense tells you Medicare’s overhead costs have to be lower than the insurance industry’s. Medicare spends little or nothing on a variety of administrative activities that insurance companies spend substantial sums of money on, including:

* marketing;
* underwriting (which means doing the research necessary to determine applicants’ health histories and whether to insure them and if so at what price);
* making routine use of “utilization review” (aka telling doctors how to practice medicine);
* restricting patients’ choice of provider (it costs money to assemble “networks” of providers that include some providers and exclude others);
* lobbying;
* financing costly salaries and perks for executives; and
* financing profits.

(I consider profit to be a subset of administrative costs, others don’t. Insurance companies typically allocate 3 to 5 percent of their revenues or expenditures to profit.)

Among experts who publish in peer-reviewed journals, the 2-percent figure for Medicare is widely (probably universally) accepted. I offer two examples of expert opinion from the conservative side of the health care reform debate: the Lewin Group, and a coalition of organizations and individuals that signed an open letter to Congress in 1999.

The Lewin Group is a consulting firm which is on record criticizing single-payer proponents. It often makes unjustifiably favorable assumptions about the cost-cutting abilities of health insurance companies. It was purchased by United Health Group last year. It uses the 2-percent figure to estimate Medicare’s overhead costs and the overhead costs of Medicare-like systems (cf the Lewin Group’s reports for the states of California and Colorado).

In 1999, a coalition of conservative and middle-of-the road groups and individuals signed an open letter to Congress begging Congress to raise Medicare’s administrative spending level to the level “found in the private sector” so that Medicare would be better equipped to function like a managed care insurance company. The coalition included the Heritage Foundation, the former Health Insurance Association of America (the trade group that represented the non-HMO wing of the health insurance industry), the American Enterprise Institute, the Concord Coalition, and Wellpoint Health Networks.

This coalition stated that Medicare’s overhead was less than 2 percent. Here is how they put it: “The latest report of the Medicare trustees points out that HCFA’s administrative expenses represented only 1 percent of the outlays of the Hospital Insurance trust fund [which finances Part A] and less than 2 percent of the Supplementary Medical Insurance trust fund [which at that time financed Part B]” (Heritage Foundation et al., “Open letter to Congress and the executive: Crisis facing HCFA and millions of Americans,” Health Affairs 1999;18(1):8-10, 8). Obviously, the average of these two trust funds comes to less than 2 percent.

Now that the basic facts are in front of us, let’s examine Simpson’s strange logic. It is strange in two ways.

First, Simpson assumes undetected fraud is a problem only for Medicare. It is in fact a serious problem for all health insurers, public and private. The US GAO has estimated that fraud eats up 10 percent of all US spending on health care. A national coalition against fraud, which includes US health insurance companies, puts the total at closer to 3 percent. Whatever the accurate number, fraud is occurring at epidemic levels, and it is afflicting private-sector insurers as well as public insurers. If we’re going to charge Medicare with higher-than-reported overhead costs because Medicare is not immune to fraud, then we must do the same for private insurers. If we do that, Medicare’s low overhead costs remain low vis a vis the insurance industry’s overhead costs.

But Simpson’s proposal that we raise our estimate of an insurer’s overhead by the amount by which the insurer is defrauded is irrational, arguably delusional. We may all fervently wish that public and private insurers spent enough money to eliminate fraud. (I am as upset as Simpson is by the Bush administration’s devil-may-care attitude about private-sector corporations ripping off the taxpayer, be it wheelchair manufacturers defrauding Medicare or Halliburton defrauding the Pentagon.) But our wishes can’t change reality — our wishes can’t change what Medicare or any other insurer actually spent on fraud detection in 2007 or any other year.

But just to humor Simpson, let’s follow his odd logic to its conclusion. Let’s raise Medicare’s overhead costs and total spending by the $2.8 billion in fraud that Simpson says Medicare failed to detect and see what happens to Medicare’s overhead ratio, and let’s for kicks just totally ignore fraud committed against the private sector. Total spending for Medicare in 2007 would rise to $431.5 + $2.8 = $434.3. Administrative spending would rise to $6.3 + $2.8 = $9.1 billion. Medicare’s new Simpson-style overhead ratio is no longer 1.5 percent but is instead 2.1 percent, still far lower than the comparable figure for health insurance companies or even self-insured firms.

I won’t return Simpson the favor of calling him “incredibly dishonest” because he got his facts so wrong. I will say I think he wrote a very sloppy post.

Merton Bernstein Says:
August 29th, 2008 at 11:51 am

One cannot judge the efficiency of Medicare by the actions – and inactions – of the Bush administration which is so antagonistic to social insurance. The assessment which Simpson cites is typical of that administration – making baseless claims of achievements that are bogus. Just call it another “Mission accomplished”.

Brian Simpson Says:
August 28th, 2008 at 11:39 pm

Can we please stop repeating this incredibly dishonest line about Medicare having lower overhead? They have lower overhead because they do not police fraud as effectively as they should. According to a New York Times article (not exactly a small government newspaper):

Quote:

But according to a confidential draft of a federal inspector general’s report, those claims of success, which earned Medicare wide praise from lawmakers, were misleading.

In calculating the agency’s rate of improper payments, Medicare officials told outside auditors to ignore government policies that would have accurately measured fraud, according to the report. For example, auditors were told not to compare invoices from salespeople against doctors’ records, as required by law, to make sure that medical equipment went to actual patients.

As a result, Medicare did not detect that more than one-third of spending for wheelchairs, oxygen supplies and other medical equipment in its 2006 fiscal year was improper, according to the report. Based on data in other Medicare reports, that would be about $2.8 billion in improper spending

End quote

$2.8 billion dollars in improper spending blows that 3% administrative costs sky high. That much widespread abuse of a system doesn’t exactly instill confidence in Medicare as a prescription for all.

Libertarian supports single payer

Libertarians face off on issues

By Andy Steinke
wiscnews.com
September 5, 2008 (date accessed)
Third Congressional District Libertarian candidates Ben Olson III and Kevin Barrett faced off in a debate Sunday night aboard Captain Chris Soma’s boat in Wisconsin Dells.
The two are the first Libertarians to face each other in a primary in the state as they seek the seat held by Ron Kind, a Democrat.
The two called the debate to give the public an opportunity to hear their perspectives on the health care system, Social Security, the war in Iraq and more.
Barrett and Olson agreed in principle on many Libertarian ideals, but it appears the main dissenting point in their campaigns will be their view of the nation’s health care system.
While the acknowledged Libertarian viewpoint is to keep the government from accruing more power than it already has, Barrett, 49, said he was in favor of a single payer health care system run by the government. Barrett said he could flip-flop on the issues, however, if he was offered a better alternative.
“I do think that single payer health care is the best solution to our current problem,” Barrett said, “that doesn’t mean that I believe in it philosophically. Actually I would prefer a non-government run health care system.”
Olson, 55, is running against Barrett in what may be the nation’s first Libertarian primary Sept. 9, because he doesn’t support Barrett’s stance on the health care issue and because he wants a “true Libertarian” on the November ballot.
“In regards to health care,” Olson said, “with our country already heading down a path towards bankruptcy, the last thing that I would want to give the government is the power to run our national health care system.” However, Olson failed to give a different solution to the nation’s health care problem.
“There are a lot of problems and I’m not sure that I have the answer,” Olson said. “But I do know that I firmly believe that the government administering health care in this country is not the answer.”
http://www.wiscnews.com/wde/news/302742

Everyone agrees that our health care system is not performing adequately for far too many of us, especially considering how expensive it is. Currently the nation is debating a spectrum of reform proposals to improve the performance of our system, though many proposals would actually compound the deficiencies.
A major confounding problem is that almost all of us do care about the health of our fellow Americans; even most Libertarians do. Though Libertarians support free market solutions that keep the government out of our lives, anyone who studies the health care system understands that reliance on markets alone cannot ever be effective in ensuring that everyone receives the health care that they need.
What is unprecedented about this debate is that one Libertarian has decided that the single payer model is the “best solution to our current problem.” The other Libertarian doesn’t have an answer but believes that the Libertarian anti-government ideology should have precedence over a solution that would work, merely because effective solutions include a role for government.
No serious student of health policy would contend that a free market of competing private health plans would ever be effective in ensuring affordable health care for everyone. Even the current political proposals touting market competition of private plans support a major role of government through large tax subsidies (such as Sen. McCain’s proposals for a $5000 tax credit for family insurance, and for federally-supported high-risk pools). Effective reform is impossible without a major role for government.
At least one Libertarian who distrusts government has looked at the options and has decided that, if his fellow Americans are going to receive the health care that they need, and the government will have to be involved, then we might as well go ahead and chose the option that is the most efficient and most effective: “a single payer health care system run by the government.”
Now that’s a man who cares about the rest of us.

Libertarian supports single payer

Libertarians face off on issues

By Andy Steinke
wiscnews.com
September 5, 2008 (date accessed)

Third Congressional District Libertarian candidates Ben Olson III and Kevin Barrett faced off in a debate Sunday night aboard Captain Chris Soma’s boat in Wisconsin Dells.

The two are the first Libertarians to face each other in a primary in the state as they seek the seat held by Ron Kind, a Democrat.

The two called the debate to give the public an opportunity to hear their perspectives on the health care system, Social Security, the war in Iraq and more.

Barrett and Olson agreed in principle on many Libertarian ideals, but it appears the main dissenting point in their campaigns will be their view of the nation’s health care system.

While the acknowledged Libertarian viewpoint is to keep the government from accruing more power than it already has, Barrett, 49, said he was in favor of a single payer health care system run by the government. Barrett said he could flip-flop on the issues, however, if he was offered a better alternative.

“I do think that single payer health care is the best solution to our current problem,” Barrett said, “that doesn’t mean that I believe in it philosophically. Actually I would prefer a non-government run health care system.”

Olson, 55, is running against Barrett in what may be the nation’s first Libertarian primary Sept. 9, because he doesn’t support Barrett’s stance on the health care issue and because he wants a “true Libertarian” on the November ballot.

“In regards to health care,” Olson said, “with our country already heading down a path towards bankruptcy, the last thing that I would want to give the government is the power to run our national health care system.” However, Olson failed to give a different solution to the nation’s health care problem.

“There are a lot of problems and I’m not sure that I have the answer,” Olson said. “But I do know that I firmly believe that the government administering health care in this country is not the answer.”

http://www.wiscnews.com/wde/news/302742

Comment:

By Don McCanne, MD

Everyone agrees that our health care system is not performing adequately for far too many of us, especially considering how expensive it is. Currently the nation is debating a spectrum of reform proposals to improve the performance of our system, though many proposals would actually compound the deficiencies.

A major confounding problem is that almost all of us do care about the health of our fellow Americans; even most Libertarians do. Though Libertarians support free market solutions that keep the government out of our lives, anyone who studies the health care system understands that reliance on markets alone cannot ever be effective in ensuring that everyone receives the health care that they need.

What is unprecedented about this debate is that one Libertarian has decided that the single payer model is the “best solution to our current problem.” The other Libertarian doesn’t have an answer but believes that the Libertarian anti-government ideology should have precedence over a solution that would work, merely because effective solutions include a role for government.

No serious student of health policy would contend that a free market of competing private health plans would ever be effective in ensuring affordable health care for everyone. Even the current political proposals touting market competition of private plans support a major role of government through large tax subsidies (such as Sen. McCain’s proposals for a $5000 tax credit for family insurance, and for federally-supported high-risk pools). Effective reform is impossible without a major role for government.

At least one Libertarian who distrusts government has looked at the options and has decided that, if his fellow Americans are going to receive the health care that they need, and the government will have to be involved, then we might as well go ahead and chose the option that is the most efficient and most effective: “a single payer health care system run by the government.”

Now that’s a man who cares about the rest of us.

An interview with PNHP Senior Health Policy Fellow Dr. Don McCanne on McCain and Obama's health care proposals.

Dr. McCanne served as PNHP President in 2003-2004 and writes a daily health policy “quote of the day” for single payer advocates. Subscribe by dropping a note to don@mccanne.org.

PNHP: How would you characterize Sen. McCain’s health care plan?

Dr. Don McCanne: Of the two candidates, McCain would rely more on the private sector and market forces to produce changes in the health care system. He says he would free up the market to allow private insurers to compete with each other to create plans with premiums we could afford.

Compared to Obama’s proposals, McCain’s program represents a much greater change from what we have now. He would shift responsibility for health care from employers to individuals by providing tax incentives for people to move to a deregulated, individual private insurance market.

What would be the impact?

McCain’s plan will likely result in many more people being uninsured and underinsured.

First of all, with workers receiving a government subsidy for health insurance – $2,500 for individuals, $5,000 for a family – employers are going to be motivated to terminate their health insurance programs and turn people over to the individual market.

McCain is basically proposing to change health insurance from a defined benefit to a defined contribution. In today’s market, what kind of family health insurance can be purchased with a $5,000 defined contribution? The average family premium is about $12,000, and that doesn’t include deductibles, co-pays and other out-of-pocket expenses.

I believe the private insurance companies will treat people in the marketplace very shabbily. Many people will be unable to afford any insurance – and it won’t only be those who are older or who have pre-existing conditions, sectors the insurance companies don’t want to cover at all.

Second, his proposal for less regulation of the insurance industry means that industry will be offering grossly inadequate insurance products to people in order to compete on price. The insurers can’t afford to provide real, comprehensive insurance and at the same time make their premiums affordable.

As a result, there will be a huge increase in the underinsured population. People will be losing their employer-based insurance and will be swelling the ranks of the uninsured and underinsured. This will result in a massive, catastrophic failure of the system. It will be horrible.

What about his claim that he’s not turning his back on people who have difficulty getting insurance, e.g. those with pre-existing conditions?

McCain proposes to cover such people through his “guaranteed access plan”, but that’s just a continuation of the state high-risk pools that we already have in place for individuals who typically can’t obtain insurance. These plans don’t work.

States are supposed to do their part in this scenario. But currently only about 190,000 people nationally are in these pools of high-risk individuals. These are very expensive pools. States just don’t have the funds to adequately finance them. So turning to the states – that’s no solution at all. It’s not a serious approach.

Would McCain’s plan give people more choice or control costs?

No.

Most insurance companies have preferred provider lists and most HMOs have closed panels that restrict patients to doctors in the HMO. Although McCain touts the freedom to choose your insurer or HMO, these institutions actually take away your freedom to choose who your doctor is or which hospital you can use – the choice we really want.

McCain’s proposals for containing costs are very weak.

The greatest source of administrative waste in U.S. health care today is our dysfunctional, fragmented private insurance system. That’s where the largest administrative costs are. And the individual insurance market – the market that McCain wants to expand – involves even higher administrative costs. So costs will likely go up.

Cost control is only achieved when you have real control over the health dollars. Only then can you develop incentives, for example, to expand primary care. Only then can you realign financial incentives away from an array of excessive, non-beneficial high-tech services that yield little value, and redirect it to primary care, which delivers greater value at lower cost.

What about Sen. Obama’s proposals?

Obama’s plan emphasizes increased government regulation and oversight of private and public insurance plans, leading to an incremental expansion of the existing system. As part of this, he would introduce a new Medicare-like plan for persons under 65 to serve as an alternative to private health insurance plans.

In terms of universal coverage, Obama’s plan probably will not expand coverage very much, mainly because his plan doesn’t do much to bring down the cost of health care. It continues to use the defective private insurance model.

The problem is that private insurers will not accept everyone in the risk pool, lest their costs go up. Even if regulations require them to do so, they still game the system through measures such as selective marketing. So people who are at higher risk will head for the new public or semi-public plans.

These plans, which under Obama’s proposal would be available through a new National Health Insurance Exchange, would be required to accept people with pre-existing conditions. But they would still involve payment of premiums, co-pays and deductibles.

He says these plans will be as good as what members of Congress get, right?

Obama says they would be patterned after the Federal Employee Health Benefits Program, but that may not be all that great. The plans that are offered to federal employees vary in price and a Senator can afford a plan that has far better benefits that his staffers. The FEHBP plans are not totally stripped down, but they still have deductibles, co-pays and other out-of-pocket expenses, and restrict people to a limited list of providers. In fact, 100,000 federal workers eligible for the FEHBP plans remain uninsured primarily because they cannot afford their share of the costs. Obviously that program wouldn’t work for far too many of us.

Additionally, the program Obama describes will be costly. He says individuals who can’t afford the premiums offered through the health insurance exchange plans will receive subsidies. But I think these subsidies will have to be much larger than estimated and will have to be provided to a much larger number of people than he currently estimates – not only low-income, but middle-income people and even those at the lower end of the high-income group.

So Obama’s stated goal of universal coverage will be foiled by the lack of availability of affordable plans that have adequate benefits. His approach is flawed because the private health plans are not going to be able to have enough benefits if they’re going to have affordable premiums.

Some say Obama’s new public plan could lead to something bigger and better.

The offering of a public plan option, which, incidentally, he shares with Sen. Hillary Clinton and professor Jacob Hacker, is not as simple as it would seem. Depending on the details and amount of funding, it has the potential to be the most important feature of his plan, or it could be a disaster. But even so, it alone won’t lead to anything even close to universal coverage. Obama has stated repeatedly that he knows that single payer is a superior solution for health care reform.

It’s likely that the public plan will be impacted by adverse selection – i.e. that individuals who are sick, or small businesses who have workers with costly disorders such as diabetes or cancer, will tend to seek out the public plans because the private plans would likely withdraw from markets that include high-cost individuals – markets in which they would be losing money. These individuals and small businesses will end up in relatively high-risk pools. It is essential those pools be adequately funded.

To fund the public high risk pools, either the private insurance companies would have to shift some of their funds into the public program through risk adjustment, or, as the public program uses up its funds, the government would have to make a greater contribution. To compete with the private plans, the public program and private plans would have to be funded at the same levels accurately corrected for the level of risk in their pools. That’s not technically feasible. Nobody has a way to do that. So insurers are always able to game the system.

Even if you could get private insurers to compete with the public program on a level playing field, that still leaves a lot of problems. You still don’t get the administrative savings you would under a single-payer system. Providers would still have to deal with multiple insurers. And both the Organization for Economic Cooperation and Development and the World Health Organization say systems that leave private plans in place are more expensive, less efficient and less equitable than a single public system.

What about cost control?

Again, Obama’s proposals, like McCain’s, are weak in this area. The defective private insurance model, to the extent in remains in place, drives up costs and blocks effective group bargaining and health planning.

The private health insurance plans of the 21st century have decided that they should cover only the healthy, putting an end to risk pools that enable a transfer from the many who are healthy to those with sickness or injury. They also realize that they should avoid competing with each other based on lower premiums, but should instead use their oligopolies to push premiums up to the maximum that the market will bear.

Only this month the two largest publicly traded health insurers, WellPoint and UnitedHealth Group, said they would not try to hold down premiums in the name of getting more members. “We will not sacrifice profitability for membership,” said one WellPoint official.

Yet both McCain and Obama propose to leave this industry in charge.

What’s the alternative?

What we really need is a system that removes the financial burden from patients and more effectively pools our funds into a public program that is able to address costs more effectively by introducing greater efficiency and value into our health care system.

Such a system would guarantee comprehensive health care to everyone by replacing the private insurance industry with a tax-supported government agency or agencies that would pay all medical bills, similar to the way Medicare operates today, but even better than Medicare. People would have the freedom to choose their own doctors and hospitals.

That’s a single-payer system. Such a system is embodied in H.R. 676, the “U.S. National Health Insurance Act,” introduced by Rep. John Conyers. It currently has 90 co-sponsors in Congress, more than any other health reform proposal.

How do you reply to those who say single payer is politically infeasible?

There are some in the political arena and health policy field who say the 2008 policy debate is over. They say single payer has lost out, and it’s time to move on.

The only problem is that single payer is the only plan that will work.

Keep in mind that any health care reform will have to be crafted and enacted by Congress. Whatever bill Congress comes up with will most likely not resemble either of the presidential candidates’ proposals very much. Only the general concepts will come into play. Congress will need to enact the specifics.

So it’s important to continue to educate people on basic health policy, contrasting the defective private insurance model with single-payer national health insurance. For members of groups like Physicians for a National Health Program, that means continuing to speak at forums and grand rounds, to write op-eds and letters to the editor, and to attend campaign-related events and raise the issue of why we need single payer.

At a glance

McCain’s proposal

* Increases number of uninsured and “underinsured”
* Increases administrative overhead (currently 31 percent of health spending)
* No effective cost containment
* Relies on private insurance market to shape system
* Moves people away from employer-based system to the individual market by offering tax credits ($2,500 individual, $5,000 family) that can be used to buy individual insurance
* Deregulates insurance markets, e.g. by dropping state-defined standards
* Encourages Health Savings Accounts
* Offers vague “Guaranteed Access Program” to address problem of the historically uninsurable – e.g. people with pre-existing conditions – that involves state-based risk pools

Obama’s proposal

* Partially reduces number of uninsured with $100 billion in new public funding
* Requires some employers to provide insurance or pay into a public insurance program, i.e. “play or pay”
* No effective cost-containment
* Mandates that all children be insured
* Expands Medicaid and State Children’s Health Insurance Program
* Sets up public insurance program as alternative to private insurers
* Sets up “National Health Insurance Exchange” through which insurers could not deny coverage to people with pre-existing conditions with tax subsidies to low-income
* Provides government reinsurance to employers for handling catastrophic illness or injury

An interview with PNHP Senior Health Policy Fellow Dr. Don McCanne on McCain and Obama’s health care proposals.

Dr. McCanne served as PNHP President in 2003-2004 and writes a daily health policy “quote of the day” for single payer advocates. Subscribe by dropping a note to don@mccanne.org.

PNHP: How would you characterize Sen. McCain’s health care plan?

Dr. Don McCanne: Of the two candidates, McCain would rely more on the private sector and market forces to produce changes in the health care system. He says he would free up the market to allow private insurers to compete with each other to create plans with premiums we could afford.

Compared to Obama’s proposals, McCain’s program represents a much greater change from what we have now. He would shift responsibility for health care from employers to individuals by providing tax incentives for people to move to a deregulated, individual private insurance market.

What would be the impact?

McCain’s plan will likely result in many more people being uninsured and underinsured.

First of all, with workers receiving a government subsidy for health insurance – $2,500 for individuals, $5,000 for a family – employers are going to be motivated to terminate their health insurance programs and turn people over to the individual market.

McCain is basically proposing to change health insurance from a defined benefit to a defined contribution. In today’s market, what kind of family health insurance can be purchased with a $5,000 defined contribution? The average family premium is about $12,000, and that doesn’t include deductibles, co-pays and other out-of-pocket expenses.

I believe the private insurance companies will treat people in the marketplace very shabbily. Many people will be unable to afford any insurance – and it won’t only be those who are older or who have pre-existing conditions, sectors the insurance companies don’t want to cover at all.

Second, his proposal for less regulation of the insurance industry means that industry will be offering grossly inadequate insurance products to people in order to compete on price. The insurers can’t afford to provide real, comprehensive insurance and at the same time make their premiums affordable.

As a result, there will be a huge increase in the underinsured population. People will be losing their employer-based insurance and will be swelling the ranks of the uninsured and underinsured. This will result in a massive, catastrophic failure of the system. It will be horrible.

What about his claim that he’s not turning his back on people who have difficulty getting insurance, e.g. those with pre-existing conditions?

McCain proposes to cover such people through his “guaranteed access plan”, but that’s just a continuation of the state high-risk pools that we already have in place for individuals who typically can’t obtain insurance. These plans don’t work.

States are supposed to do their part in this scenario. But currently only about 190,000 people nationally are in these pools of high-risk individuals. These are very expensive pools. States just don’t have the funds to adequately finance them. So turning to the states – that’s no solution at all. It’s not a serious approach.

Would McCain’s plan give people more choice or control costs?

No.

Most insurance companies have preferred provider lists and most HMOs have closed panels that restrict patients to doctors in the HMO. Although McCain touts the freedom to choose your insurer or HMO, these institutions actually take away your freedom to choose who your doctor is or which hospital you can use – the choice we really want.

McCain’s proposals for containing costs are very weak.

The greatest source of administrative waste in U.S. health care today is our dysfunctional, fragmented private insurance system. That’s where the largest administrative costs are. And the individual insurance market – the market that McCain wants to expand – involves even higher administrative costs. So costs will likely go up.

Cost control is only achieved when you have real control over the health dollars. Only then can you develop incentives, for example, to expand primary care. Only then can you realign financial incentives away from an array of excessive, non-beneficial high-tech services that yield little value, and redirect it to primary care, which delivers greater value at lower cost.

What about Sen. Obama’s proposals?

Obama’s plan emphasizes increased government regulation and oversight of private and public insurance plans, leading to an incremental expansion of the existing system. As part of this, he would introduce a new Medicare-like plan for persons under 65 to serve as an alternative to private health insurance plans.

In terms of universal coverage, Obama’s plan probably will not expand coverage very much, mainly because his plan doesn’t do much to bring down the cost of health care. It continues to use the defective private insurance model.

The problem is that private insurers will not accept everyone in the risk pool, lest their costs go up. Even if regulations require them to do so, they still game the system through measures such as selective marketing. So people who are at higher risk will head for the new public or semi-public plans.

These plans, which under Obama’s proposal would be available through a new National Health Insurance Exchange, would be required to accept people with pre-existing conditions. But they would still involve payment of premiums, co-pays and deductibles.

He says these plans will be as good as what members of Congress get, right?

Obama says they would be patterned after the Federal Employee Health Benefits Program, but that may not be all that great. The plans that are offered to federal employees vary in price and a Senator can afford a plan that has far better benefits that his staffers. The FEHBP plans are not totally stripped down, but they still have deductibles, co-pays and other out-of-pocket expenses, and restrict people to a limited list of providers. In fact, 100,000 federal workers eligible for the FEHBP plans remain uninsured primarily because they cannot afford their share of the costs. Obviously that program wouldn’t work for far too many of us.

Additionally, the program Obama describes will be costly. He says individuals who can’t afford the premiums offered through the health insurance exchange plans will receive subsidies. But I think these subsidies will have to be much larger than estimated and will have to be provided to a much larger number of people than he currently estimates – not only low-income, but middle-income people and even those at the lower end of the high-income group.

So Obama’s stated goal of universal coverage will be foiled by the lack of availability of affordable plans that have adequate benefits. His approach is flawed because the private health plans are not going to be able to have enough benefits if they’re going to have affordable premiums.

Some say Obama’s new public plan could lead to something bigger and better.

The offering of a public plan option, which, incidentally, he shares with Sen. Hillary Clinton and professor Jacob Hacker, is not as simple as it would seem. Depending on the details and amount of funding, it has the potential to be the most important feature of his plan, or it could be a disaster. But even so, it alone won’t lead to anything even close to universal coverage. Obama has stated repeatedly that he knows that single payer is a superior solution for health care reform.

It’s likely that the public plan will be impacted by adverse selection – i.e. that individuals who are sick, or small businesses who have workers with costly disorders such as diabetes or cancer, will tend to seek out the public plans because the private plans would likely withdraw from markets that include high-cost individuals – markets in which they would be losing money. These individuals and small businesses will end up in relatively high-risk pools. It is essential those pools be adequately funded.

To fund the public high risk pools, either the private insurance companies would have to shift some of their funds into the public program through risk adjustment, or, as the public program uses up its funds, the government would have to make a greater contribution. To compete with the private plans, the public program and private plans would have to be funded at the same levels accurately corrected for the level of risk in their pools. That’s not technically feasible. Nobody has a way to do that. So insurers are always able to game the system.

Even if you could get private insurers to compete with the public program on a level playing field, that still leaves a lot of problems. You still don’t get the administrative savings you would under a single-payer system. Providers would still have to deal with multiple insurers. And both the Organization for Economic Cooperation and Development and the World Health Organization say systems that leave private plans in place are more expensive, less efficient and less equitable than a single public system.

What about cost control?

Again, Obama’s proposals, like McCain’s, are weak in this area. The defective private insurance model, to the extent in remains in place, drives up costs and blocks effective group bargaining and health planning.

The private health insurance plans of the 21st century have decided that they should cover only the healthy, putting an end to risk pools that enable a transfer from the many who are healthy to those with sickness or injury. They also realize that they should avoid competing with each other based on lower premiums, but should instead use their oligopolies to push premiums up to the maximum that the market will bear.

Only this month the two largest publicly traded health insurers, WellPoint and UnitedHealth Group, said they would not try to hold down premiums in the name of getting more members. “We will not sacrifice profitability for membership,” said one WellPoint official.

Yet both McCain and Obama propose to leave this industry in charge.

What’s the alternative?

What we really need is a system that removes the financial burden from patients and more effectively pools our funds into a public program that is able to address costs more effectively by introducing greater efficiency and value into our health care system.

Such a system would guarantee comprehensive health care to everyone by replacing the private insurance industry with a tax-supported government agency or agencies that would pay all medical bills, similar to the way Medicare operates today, but even better than Medicare. People would have the freedom to choose their own doctors and hospitals.

That’s a single-payer system. Such a system is embodied in H.R. 676, the “U.S. National Health Insurance Act,” introduced by Rep. John Conyers. It currently has 90 co-sponsors in Congress, more than any other health reform proposal.

How do you reply to those who say single payer is politically infeasible?

There are some in the political arena and health policy field who say the 2008 policy debate is over. They say single payer has lost out, and it’s time to move on.

The only problem is that single payer is the only plan that will work.

Keep in mind that any health care reform will have to be crafted and enacted by Congress. Whatever bill Congress comes up with will most likely not resemble either of the presidential candidates’ proposals very much. Only the general concepts will come into play. Congress will need to enact the specifics.

So it’s important to continue to educate people on basic health policy, contrasting the defective private insurance model with single-payer national health insurance. For members of groups like Physicians for a National Health Program, that means continuing to speak at forums and grand rounds, to write op-eds and letters to the editor, and to attend campaign-related events and raise the issue of why we need single payer.

At a glance

McCain’s proposal

* Increases number of uninsured and “underinsured”
* Increases administrative overhead (currently 31 percent of health spending)
* No effective cost containment
* Relies on private insurance market to shape system
* Moves people away from employer-based system to the individual market by offering tax credits ($2,500 individual, $5,000 family) that can be used to buy individual insurance
* Deregulates insurance markets, e.g. by dropping state-defined standards
* Encourages Health Savings Accounts
* Offers vague “Guaranteed Access Program” to address problem of the historically uninsurable – e.g. people with pre-existing conditions – that involves state-based risk pools

Obama’s proposal

* Partially reduces number of uninsured with $100 billion in new public funding
* Requires some employers to provide insurance or pay into a public insurance program, i.e. “play or pay”
* No effective cost-containment
* Mandates that all children be insured
* Expands Medicaid and State Children’s Health Insurance Program
* Sets up public insurance program as alternative to private insurers
* Sets up “National Health Insurance Exchange” through which insurers could not deny coverage to people with pre-existing conditions with tax subsidies to low-income
* Provides government reinsurance to employers for handling catastrophic illness or injury

Employers shift to underinsurance

Health benefit cost growth predicted to ease slightly in 2009 as employers shift cost

Mercer
September 4, 2008
After three years of double-digit growth in the first half of the decade, annual health benefit cost increases slowed to about 6 percent in 2005 and have stayed there ever since.
Mercer’s complete survey results won’t be released until later in the year, but for the 1,317 employer health plan sponsors that have responded so far, the total cost to renew their current health plans — if they were to make no changes — would grow by nearly 8 percent on average. Small employers (those with 10-499 employees) would see an even higher increase, of about 10 percent. However, the majority of respondents say they will take action to lower their actual cost increases.
“It’s a relief to see cost growth trending down, even slightly,” said Blaine Bos, a senior Mercer health and benefits consultant based in Minneapolis. “But this is not an unqualified success story. While some employers are holding down cost growth with innovative methods of improving health care quality and efficiency, more typically employers struggling with increases they can’t handle resort to the tried and true method of shifting cost to employees.”
Well over half (59 percent) of employers taking action to reduce their 2009 cost increase will raise deductibles, copayments, coinsurance or employee out-of-pocket spending limits. Employee cost-sharing has risen sharply over the past five years.
http://www.mercer.com/summary.htm?idContent=1319885

Is it good news that employers’ health benefit cost growth is easing slightly? No. If you look at the full picture, it’s terrible news. Health care costs are continuing to increase at an unsustainable rate, but employers are dumping the problem onto the backs of their employees by “the tried and true method of shifting cost to employees.”
Products available in the individual insurance market are no longer providing adequate protection because of increases in deductibles, copayments and coinsurance that trade off affordable premiums for unaffordable access to health care – the very definition of underinsurance.
Employers are now seeking relief from the costs of their health benefit programs by following the lead of the individual market and converting their programs into underinsurance plans.
Reform proposals that would expand competition of plans in the individual market won’t work because most of the plans will be underinsurance products if the premiums are to be competitive. Reform proposals that would expand on employer-sponsored coverage won’t work if that sector becomes saturated with similar underinsurance plans.
If we regulate the markets to prevent the sale of underinsurance products, then the increase in health care costs will continue to make premiums unaffordable for either employers or individuals.
If we really do want everyone to have affordable access to all necessary health care, we have no option but to establish a universal risk pool that is equitably funded, and then to take advantage of our own monopsony to provide us with greater value in our health care purchasing. We are already at that point, and there is nowhere else to turn.

Employers shift to underinsurance

Health benefit cost growth predicted to ease slightly in 2009 as employers shift cost

Mercer
September 4, 2008

After three years of double-digit growth in the first half of the decade, annual health benefit cost increases slowed to about 6 percent in 2005 and have stayed there ever since.

Mercer’s complete survey results won’t be released until later in the year, but for the 1,317 employer health plan sponsors that have responded so far, the total cost to renew their current health plans — if they were to make no changes — would grow by nearly 8 percent on average. Small employers (those with 10-499 employees) would see an even higher increase, of about 10 percent. However, the majority of respondents say they will take action to lower their actual cost increases.

“It’s a relief to see cost growth trending down, even slightly,” said Blaine Bos, a senior Mercer health and benefits consultant based in Minneapolis. “But this is not an unqualified success story. While some employers are holding down cost growth with innovative methods of improving health care quality and efficiency, more typically employers struggling with increases they can’t handle resort to the tried and true method of shifting cost to employees.”

Well over half (59 percent) of employers taking action to reduce their 2009 cost increase will raise deductibles, copayments, coinsurance or employee out-of-pocket spending limits. Employee cost-sharing has risen sharply over the past five years.

http://www.mercer.com/summary.htm?idContent=1319885

Comment:

By Don McCanne, MD

Is it good news that employers’ health benefit cost growth is easing slightly? No. If you look at the full picture, it’s terrible news. Health care costs are continuing to increase at an unsustainable rate, but employers are dumping the problem onto the backs of their employees by “the tried and true method of shifting cost to employees.”

Products available in the individual insurance market are no longer providing adequate protection because of increases in deductibles, copayments and coinsurance that trade off affordable premiums for unaffordable access to health care – the very definition of underinsurance.

Employers are now seeking relief from the costs of their health benefit programs by following the lead of the individual market and converting their programs into underinsurance plans.

Reform proposals that would expand competition of plans in the individual market won’t work because most of the plans will be underinsurance products if the premiums are to be competitive. Reform proposals that would expand on employer-sponsored coverage won’t work if that sector becomes saturated with similar underinsurance plans.

If we regulate the markets to prevent the sale of underinsurance products, then the increase in health care costs will continue to make premiums unaffordable for either employers or individuals.

If we really do want everyone to have affordable access to all necessary health care, we have no option but to establish a universal risk pool that is equitably funded, and then to take advantage of our own monopsony to provide us with greater value in our health care purchasing. We are already at that point, and there is nowhere else to turn.

A feasible health care plan

By ALWIN STEINMANN
Albany Times Union
Thursday, September 4, 2008

There have been a number of recent items on the opinion pages regarding the important and timely topic of health care, in particular, the issue of a single-payer system. Both Dr. John Bennett (Aug. 22) and Joel Margolis (Aug. 21) are critical of this potential solution for the problems that plague our nation’s medical system. Mr. Margolis implies that the nation can’t afford a Medicare-like system that would cover all Americans, yet the facts would argue otherwise. If one were to add up all the public monies currently spent on health care in the U.S. and applied it across our entire population, on a per capita basis, we already spend more than many industrialized countries do to cover all their citizens.

Dr. Bennett cites the shortfalls of the current Medicare system, but a “Medicare-for-all” product would look very different from the Medicare that we have been dealing with for four decades. A single-payer system based on Medicare would utilize its financial and administrative infrastructure to provide benefits that are better suited to a wider spectrum of patients and reward preventive care and chronic disease management. He closes by concluding that not-for-profit health insurers are the most qualified entities to tackle our broken health care system by virtue of their “proven track record of keeping costs down and managing the delivery of medical services.”

Given the fact that the U.S. spends nearly twice as much per capita on health care as any other industrialized nation and ranks well below those nations in the overall quality of care delivered, I am wondering what record he is referring to. The “proven track record” of our current system is the best argument for a major overhaul.

A number of medical professional societies, have called for health care reforms to provide universal coverage including the possibility of a single-payer system. An article published in the Annals of Internal Medicine showed that the majority of polled physicians (59 percent) supported the notion of a single-payer system. Given that 15 percent of our population lacks health insurance, and our overall expenditures on health care is in excess of $2.1 trillion, a single-payer system is no longer a fringe idea to be thought of as a dream. It’s instead a realistic solution to a health care system that rewards excessive care and administrative infrastructure while ignoring the real needs of its patients and providers.

Alwin Steinmann is a doctor. He lives in Slingerlands.

America Un-Covered

With 47 million uninsured, how does this nation care for its people?

by Cheryl SooHoo
Ward Rounds
Northwestern University Feinberg School of Medicine
Summer 2008, Volume 25, Number 2

(Excerpts)


Dr. Quentin Young, PNHP National Coordinator

In the April 1 issue of the Annals of Internal Medicine, two physician researchers from Indiana University revealed results from their 2007 survey of physicians whom they queried on the subject of government-organized national health insurance (NHI). A follow up to a 2002 survey, the new poll indicated that a larger percentage of doctors–59 versus 49 percent five years ago–supported health care reform to achieve greater coverage for individuals living in the United States. Numerous media outlets reported on the survey’s results, prompting the American Medical Association (AMA), among others, to weigh in on the universal health care discussion. …

… For recently retired internist Quentin D. Young, MD ’48, championing the creation of a singlepayer NHI plan that would expand the existing Medicare model and essentially eliminate private insurance has led to conversations with members of Congress, including Senator Barack Obama (D-Ill.), the Democratic Party’s presumptive nominee for the highest office in the land.

“We’ve talked, because I wanted to know what his views were on the single-payer proposal. In fact, I’ve known Obama for a long time. He sees a colleague physician in my Hyde Park practice,” shares Dr. Young, national coordinator of Chicago-based Physicians for a National Health Program (PNHP). And what does Dr. Young think of Congressman Obama’s health care platform? “In my opinion it’s bad because it maintains employer-based private insurance! Although he no longer does, Obama did support singlepayer in the past.”

With some 15,000 members, PNHP describes itself as a physicians group that believes all people have a right to access high-quality comprehensive care. Achieving that particular vision begins with educating physicians on the need for a single-payer NHI plan, through vehicles the medical profession finds credible such as peer-reviewed journals and grand rounds lectures.

“Doctors by definitrd. “Many consider them the most knowledgeable elements in the equation and, not least, they have earned inion are involved in the health system,” remarks Dr. Young, the 2008 recipient of the Feinberg School’s Distinguished Alumni Awafluence as discussants on health issues.”

One “scholarly” coup for the group and others was an article that appeared in the August 2003 issue of the Journal of the American Medical Association. In that piece, the Physicians’ Working Group for Single-Payer National Health Insurance, which included faculty members from Harvard University as well as Dr. Young, a faculty member at the University of Illinois and former chair of internal medicine at Cook County Hospital, methodically laid out their NHI proposal.

Administered by a single public agency that organizes health financing but leaves the delivery of care largely private, NHI would feature universal, comprehensive coverage and a free choice of providers. The plan backed by PNHP would call for physicians to receive fee-for-service payments dictated by a negotiated formulary or draw salaries from hospitals or nonprofit HMO/group practices. A global budget would take care of each hospital’s operating costs. Financing for the system would come from taxes and bidding adieu to private insurers. Recapturing the administrative “waste” of large corporations currently managing the mosaic of health plans available in the United States would more than pay for NHI as evidenced by a current U.S. government program, believes Dr. Young.

“America already has singlepayer national health insurance. It’s called ‘Medicare,'” he explains. “Medicare is the most successful program in the country, outshining any of the private sector insurance companies with their high administrative costs. Thirty-one percent of all health care dollars now go to absorbing the administrative costs of the big carriers. Medicare has an administrative cost of 3 percent. When you are dealing with a system where every percentage point is 21 billion dollars, the costs are fairly significant.”

PNHP has faced many critics, from those who consider the group’s plan tantamount to “socialized” medicine to those who fear rationing of health care services. And using the Medicare program as a model raises its own serious financial issues as Medicare’s hospital insurance trust fund, on its present course, is expected to run out of money in 2019, according to a report from the Board of Trustees for Medicare released this March.

Yet octogenarian Dr. Young remains optimistic. His enthusiasm for NHI continues to be bolstered by growing legislative support for House Resolution (H.R.) 676–the “Expanded and Improved Medicare for All Act.” Rep. John Conyers (D-Mich.) first introduced the bill in 2005, after inviting Dr. Young and other NHI proponents to Washington to present their proposal for possible legislation. Additionally, Dr. Young’s observation that “American doctors have learned that there is something worse than government, and it is called corporations” has him convinced that PNHP’s vision finally is reaching the mainstream.

“Until quite recently, we were considered irrelevant because we were unfeasible,” he says. “That’s over now. There have been enough victories and public discussion so that we have become the ‘undesirable’ alternative. Doesn’t sound like much, but that’s upward mobility!”

Dr. Claudia Fegan, "Everybody In Nobody Out"

Dr. Claudia Fegan speaks on single payer health care and HR 676 at the HR 676 Congressional caucus reception during the Democratic National Convention, August 26, 2008 in Denver, CO.