By Cathy Schoen, Robin Osborn, Michelle M. Doty, Meghan Bishop, Jordon Peugh and Nandita Murukutla
Health Affairs
November 1, 2007

This 2007 survey compares adults’ health care experiences in Australia, Canada, Germany, the Netherlands, New Zealand, the United Kingdom, and the United States. In all countries, the study finds that having a “medical home” that is accessible and helps coordinate care is associated with significantly more positive experiences. There were wide country differences in access, after-hours care, and coordination but also areas of shared concern. Patient-reported errors were high for those seeing multiple doctors or having multiple chronic illnesses. The United States stands out for cost-related access barriers and less-efficient care.

The survey asked adults about their overall health system views, confidence, access, cost burdens, and perceptions of waste and complexity. Repeating the pattern observed since 1998, U.S. adults held the most negative views and were the most likely to report affordability concerns. In contrast to the United States, public views in Canada and New Zealand have grown steadily more positive in the past decade and are now comparable to views in Australia and the United Kingdom.

http://content.healthaffairs.org/cgi/content/abstract/26/6/w717?etoc

Comment:

By Don McCanne, MD

Nothing new. This is yet another international study of health care experiences demonstrating that the United States has the most expensive and least efficient system and that we have the most negative views of all the nations studied. We have a lousy system, and we don’t like it.

The U.S. opponents of reform continue to expound on how we have the greatest health care system in the world, and none of us would ever tolerate the government controlled systems of other nations. But the truth is that their systems are less expensive, more efficient, and more appreciated by their citizens.

The first step in reform is to accept the true facts as they are. The second step is to find enough money to pay for a high-performance health care system. Fortunately, we’ve already accomplished that step since we’re currently spending enough; we merely need to make the contributions more equitable. The next step is to establish a rational system of allocating those funds, beginning with the establishment of a medical home for each and every individual residing in the United States.

With the funds we already have, a high-performance system is only a few policy steps away.

By Mary E. Plomondon, PhD, MSPH; David J. Magid, MD, MPH; John F. Steiner, MD, MPH; Samantha MaWhinney, ScD; Blair D. Gifford, PhD; Sarah C. Shih, MPH; Gary K. Grunwald, PhD; and John S. Rumsfeld, MD, PhD
The American Journal of Managed Care
August 2007

The median primary care provider turnover rate was 7.1% (range, 0%-53.3%). After adjustment for plan characteristics, health plans with higher primary care provider turnover rates had significantly lower measures of member satisfaction, including overall rating of healthcare.

Health plans with higher provider turnover rates also had lower rates of preventive care, including childhood immunization, well-child visits, cholesterol screening after cardiac event, and cervical cancer screening.

The cost of physician turnover is extremely high, estimated at 3.4% to 5.8% of a health plan’s annual operating budget.

http://www.ajmc.com/Article.cfm?Menu=1&ID=3346

Comment:

By Don McCanne, MD

One of the most important goals of health care reform is to provide everyone with access to a primary care medical home. Not only would that enhance the quality and cost effectiveness of health care, but it would also provide each person with a long term relationship with a trusted health care professional.

The accelerating deterioration that is taking place in our primary care infrastructure threatens that goal. And private health plans are compounding that problem.

It is rare for an individual to be covered indefinitely by the same health plan. Employers often change their plans in an effort to slow the rate of premium increases. Individual employees frequently change their health plans when they have a change in employment. Young adults need new coverage when they are dropped from their parents’ plans. Since different plans use different lists of authorized providers, an individual may lose coverage of his or her primary care professional.

This study demonstrates that even maintaining the same health care coverage is not enough. A patient can lose his or her medical home merely because the insurer has a higher than average turnover in contracts with primary care professionals.

Clearly, placing a superfluous, intrusive private insurer between the patient and the primary care provider can be disruptive to the long-term coordinated care that a medical home should bring. Further, physician turnover is expensive, adding yet more waste to the administrative excesses that private insurers bring us.

Why should we want to have a choice of health plans when that will not assure us a stable choice of our physicians? Wouldn’t it be much better to switch to single payer national health insurance? Then we could always have choice of our own medical home and stay there for as long as we desire.

Editorial
The Wall Street Journal
October 29, 2007

The frequent claim is that eliminating profits and private administrative expenses would more than pay for the cost of covering all the uninsured.

Well — no, as demonstrated in a new study by Benjamin Zycher, a senior fellow at the Manhattan Institute and a former senior economist for the Reagan Council of Economic Advisers. He estimates that the real economic costs of moving to single payer would be at least twice those of today’s semimarket patchwork.

“Administrative” costs, generally speaking, are those not directly funding medical care but instead spent to deliver insurance benefits. Sure enough, on paper Medicare’s are about 3% of outlays, compared to 11% to 14% for the private system. But Mr. Zycher notes that a more accurate measure of Medicare’s administration would include other indirect federal services, such as tax collection, which round them up by about double. Fold in the incentives for the uninsured to consume more medical services under single-payer than they do now, and those “savings” are revealed as make-believe.

Mr. Zycher also points out that the adverse effects of the increased taxation required for “Medicare for all” more than outweigh the potential efficiencies. It costs the economy more than a dollar — the bottom-rung estimate is 20% — to send a dollar to Washington, so in the end Medicare clocks in substantially above private insurance.

The analysis also offers some reality about what those supposedly wasteful private administrative expenses actually do. Underwriting — i.e., the pricing of premiums in accordance with risks and health status — is often assailed by politicians, but the administrative scrutiny leads to an efficiency. It allocates costs in proportion to benefits: You get, in other words, what you pay for.

http://online.wsj.com/article/SB119362351042074490.html

And…

Comparing Public and Private Health Insurance: Would A Single-Payer System Save Enough to Cover the Uninsured?

By Benjamin Zycher
Manhattan Institute for Policy Research
October 2007

The public discussion of prospective reform of the U.S. health-care system has focused in substantial part on the question of how to extend insurance coverage to those now uninsured, and on how to deal with the attendant increased costs for the system as a whole. Some argue that a single-payer system similar to Medicare would realize savings in administrative costs sufficient to extend insurance coverage to all of the uninsured. The central objective of this study is a comparison of the administrative and other important non-benefit costs of private health-insurance plans with those of Medicare, which is used as a prototype for a large single-payer (that is, government-financed) insurance system.

The lowest plausible assumption about the excess burden engendered by the federal tax system–20 percent–raises the true cost of delivering Medicare benefits to about 24-25 percent of Medicare outlays, or about double the net cost of private health insurance. A more realistic assumption — say, 50 percent — raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.

http://www.manhattan-institute.org/html/mpr_05.htm

Comment:

By Don McCanne, MD

Normally we wouldn’t respond to a dishonest study like this since it would give it further unwarranted exposure and provide it with a limited degree of credibility merely because we thought it was worth our time to comment on it. Unfortunately, The Wall Street Journal has granted it their editorial stamp-of-approval, and the conservative and libertarian non-think tanks are gearing up to be certain that the conclusions in Zycher’s report are widely distributed. We will be hearing more about this, and we should be prepared to respond.

Although this study is presented under the guise of comparing administrative costs between Medicare and the private insurance plans, it is important to note that Zycher states that “a term perhaps more useful than ‘administrative’ costs might be ‘non-benefit’ costs.” Thus, primarily for the Medicare model, he includes much more than administrative costs.

Let’s look at how he adjusts the explicit administrative costs of Medicare. As an example, look at how he measures the amount of administration of justice in the Medicare program. He notes that Medicare spending ($356 billion for 2005) is 17.1 percent of federal non-defense spending ($2081 billion). Thus, he concludes, because of the costs of investigating Medicare fraud, Medicare consumes a prorated 17.1 percent of the government costs of the administration of justice. The dollar amount involved in this calculation alone increases the administrative costs of Medicare from 3.1 percent to 5.1 percent. Considering Dr. Zycher’s training as an economist, stating that Medicare consumes 17.1 percent of the government’s administrative costs for justice is not simply a distortion of the facts; it is a blatant lie.

The most egregious fraud in Zycher’s analysis is the cost of Medicare that “appears nowhere in government budgets,” and that is “the real economic cost of the distortions created by the tax system.”

Zycher quotes Martin Feldstein as his authority, to wit, “The traditional method of analyzing the distorting effects of the income tax greatly underestimates its total deadweight loss as well as the incremental deadweight loss of an increase in income tax rates. … The true deadweight losses are substantially greater than [prior] conventional estimates because the traditional framework ignores the effect of higher income tax rates on tax avoidance through changes in the form of compensation… and through changes in the patterns of consumption…”

This concept ignores completely the fact that government services are an integral part of our total economy, and the (greatly exaggerated) deadweight losses from taxing the private sector are more than recovered through the higher value of services provided in the public sector (certainly a pompous statement, but no more so than Feldstein’s).

It is primarily this “economic cost of the distortions created by the tax system” that leads Zycher to his conclusion that “a more realistic assumption — say, 50 percent — raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.”

Another outrageous concept in Zycher’s study is his description of how the administrative services of the private insurance industry provide market “efficiency.” He indicates that cross subsidies in insurance are anti-competitive because insurers would have to charge those with fewer health care needs higher premiums than are warranted based on their use of services. The purchasers of insurance are receiving benefit from the administrative services such as medical underwriting that are used to prevent cross subsidies from the healthy sector to the sick sector. As he states, “the administrative costs borne by insurers seeking to align premiums with costs are efficient, in the sense that they provide a somewhat subtle service valued by consumers: avoidance of premiums that subsidize others.”

Imagine the possibilities of using innovative economic theory to analyze the real costs of the private insurance industry. As did Zycher, we’ll use both the administrative costs and the “non-benefit” costs.

What is the dollar value of a human body and soul? That is almost impossible to quantify, but we can get a relative estimate based on our recent tragic fires here in Southern California. Victim after victim, many of whom lost million-dollar homes and all their possessions, stated they were so fortunate to escape with their lives and their health, and all the rest of it was just “things.” A million dollar home is nothing compared to your family.

So what is the body and soul component of health care worth? It is a value that would appear nowhere in a budget. But what would that component be in an $80 office visit? Considering quality of life gained through medical care and other factors such as being able to return to work earlier, it would not be unreasonable to place that value at around $800. Or what about a $20,000 hospitalization? A marked improvement in quality of life and perhaps even prevention of premature death could easily have a value of around $200,000. The victims of the fire might suggest that even a million dollars wouldn’t cover it, but it seems fair to say, by this reasoning, that the value of medical care ministered to the body and soul can be estimated to be about ten times the cost of that care.

So how might this apply to the “non-benefit” costs of the private insurance industry? Although they insure about two-thirds of us, they pay only about one-fourth of our health care costs. Thus the private sector insurance industry has used the power of the market successfully to avoid paying for about three-fourths of our $2.2 trillion health care expenditures, shifting about $1.7 trillion to us as individuals and as taxpayers. The “non-benefit” cost to us of the care they have avoided covering is about $17 trillion! That is more than our $13 trillion GDP!

Enough of these silly games! What we need to carry on the health reform debate are the true facts and legitimate analyses of the policy implications. What we don’t need is to read more dishonest reports while the ideologues opposed to health care justice snicker in the background.

Medicare for All?

Editorial
The Wall Street Journal
October 29, 2007

The frequent claim is that eliminating profits and private administrative expenses would more than pay for the cost of covering all the uninsured.

Well — no, as demonstrated in a new study by Benjamin Zycher, a senior fellow at the Manhattan Institute and a former senior economist for the Reagan Council of Economic Advisers. He estimates that the real economic costs of moving to single payer would be at least twice those of today’s semimarket patchwork.

“Administrative” costs, generally speaking, are those not directly funding medical care but instead spent to deliver insurance benefits. Sure enough, on paper Medicare’s are about 3% of outlays, compared to 11% to 14% for the private system. But Mr. Zycher notes that a more accurate measure of Medicare’s administration would include other indirect federal services, such as tax collection, which round them up by about double. Fold in the incentives for the uninsured to consume more medical services under single-payer than they do now, and those “savings” are revealed as make-believe.

Mr. Zycher also points out that the adverse effects of the increased taxation required for “Medicare for all” more than outweigh the potential efficiencies. It costs the economy more than a dollar — the bottom-rung estimate is 20% — to send a dollar to Washington, so in the end Medicare clocks in substantially above private insurance.

The analysis also offers some reality about what those supposedly wasteful private administrative expenses actually do. Underwriting — i.e., the pricing of premiums in accordance with risks and health status — is often assailed by politicians, but the administrative scrutiny leads to an efficiency. It allocates costs in proportion to benefits: You get, in other words, what you pay for.

http://online.wsj.com/article/SB119362351042074490.html

And…

Comparing Public and Private Health Insurance: Would A Single-Payer System Save Enough to Cover the Uninsured?

By Benjamin Zycher
Manhattan Institute for Policy Research
October 2007

The public discussion of prospective reform of the U.S. health-care system has focused in substantial part on the question of how to extend insurance coverage to those now uninsured, and on how to deal with the attendant increased costs for the system as a whole. Some argue that a single-payer system similar to Medicare would realize savings in administrative costs sufficient to extend insurance coverage to all of the uninsured. The central objective of this study is a comparison of the administrative and other important non-benefit costs of private health-insurance plans with those of Medicare, which is used as a prototype for a large single-payer (that is, government-financed) insurance system.

The lowest plausible assumption about the excess burden engendered by the federal tax system–20 percent–raises the true cost of delivering Medicare benefits to about 24-25 percent of Medicare outlays, or about double the net cost of private health insurance. A more realistic assumption — say, 50 percent — raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.

http://www.manhattan-institute.org/html/mpr_05.htm

Comment:

By Don McCanne, MD

Normally we wouldn’t respond to a dishonest study like this since it would give it further unwarranted exposure and provide it with a limited degree of credibility merely because we thought it was worth our time to comment on it. Unfortunately, The Wall Street Journal has granted it their editorial stamp-of-approval, and the conservative and libertarian non-think tanks are gearing up to be certain that the conclusions in Zycher’s report are widely distributed. We will be hearing more about this, and we should be prepared to respond.

Although this study is presented under the guise of comparing administrative costs between Medicare and the private insurance plans, it is important to note that Zycher states that “a term perhaps more useful than ‘administrative’ costs might be ‘non-benefit’ costs.” Thus, primarily for the Medicare model, he includes much more than administrative costs.

Let’s look at how he adjusts the explicit administrative costs of Medicare. As an example, look at how he measures the amount of administration of justice in the Medicare program. He notes that Medicare spending ($356 billion for 2005) is 17.1 percent of federal non-defense spending ($2081 billion). Thus, he concludes, because of the costs of investigating Medicare fraud, Medicare consumes a prorated 17.1 percent of the government costs of the administration of justice. The dollar amount involved in this calculation alone increases the administrative costs of Medicare from 3.1 percent to 5.1 percent. Considering Dr. Zycher’s training as an economist, stating that Medicare consumes 17.1 percent of the government’s administrative costs for justice is not simply a distortion of the facts; it is a blatant lie.

The most egregious fraud in Zycher’s analysis is the cost of Medicare that “appears nowhere in government budgets,” and that is “the real economic cost of the distortions created by the tax system.”

Zycher quotes Martin Feldstein as his authority, to wit, “The traditional method of analyzing the distorting effects of the income tax greatly underestimates its total deadweight loss as well as the incremental deadweight loss of an increase in income tax rates. … The true deadweight losses are substantially greater than [prior] conventional estimates because the traditional framework ignores the effect of higher income tax rates on tax avoidance through changes in the form of compensation… and through changes in the patterns of consumption…”

This concept ignores completely the fact that government services are an integral part of our total economy, and the (greatly exaggerated) deadweight losses from taxing the private sector are more than recovered through the higher value of services provided in the public sector (certainly a pompous statement, but no more so than Feldstein’s).

It is primarily this “economic cost of the distortions created by the tax system” that leads Zycher to his conclusion that “a more realistic assumption — say, 50 percent — raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or between four and five times the net cost of private health insurance.”

Another outrageous concept in Zycher’s study is his description of how the administrative services of the private insurance industry provide market “efficiency.” He indicates that cross subsidies in insurance are anti-competitive because insurers would have to charge those with fewer health care needs higher premiums than are warranted based on their use of services. The purchasers of insurance are receiving benefit from the administrative services such as medical underwriting that are used to prevent cross subsidies from the healthy sector to the sick sector. As he states, “the administrative costs borne by insurers seeking to align premiums with costs are efficient, in the sense that they provide a somewhat subtle service valued by consumers: avoidance of premiums that subsidize others.”

Imagine the possibilities of using innovative economic theory to analyze the real costs of the private insurance industry. As did Zycher, we’ll use both the administrative costs and the “non-benefit” costs.

What is the dollar value of a human body and soul? That is almost impossible to quantify, but we can get a relative estimate based on our recent tragic fires here in Southern California. Victim after victim, many of whom lost million-dollar homes and all their possessions, stated they were so fortunate to escape with their lives and their health, and all the rest of it was just “things.” A million dollar home is nothing compared to your family.

So what is the body and soul component of health care worth? It is a value that would appear nowhere in a budget. But what would that component be in an $80 office visit? Considering quality of life gained through medical care and other factors such as being able to return to work earlier, it would not be unreasonable to place that value at around $800. Or what about a $20,000 hospitalization? A marked improvement in quality of life and perhaps even prevention of premature death could easily have a value of around $200,000. The victims of the fire might suggest that even a million dollars wouldn’t cover it, but it seems fair to say, by this reasoning, that the value of medical care ministered to the body and soul can be estimated to be about ten times the cost of that care.

So how might this apply to the “non-benefit” costs of the private insurance industry? Although they insure about two-thirds of us, they pay only about one-fourth of our health care costs. Thus the private sector insurance industry has used the power of the market successfully to avoid paying for about three-fourths of our $2.2 trillion health care expenditures, shifting about $1.7 trillion to us as individuals and as taxpayers. The “non-benefit” cost to us of the care they have avoided covering is about $17 trillion! That is more than our $13 trillion GDP!

Enough of these silly games! What we need to carry on the health reform debate are the true facts and legitimate analyses of the policy implications. What we don’t need is to read more dishonest reports while the ideologues opposed to health care justice snicker in the background.