By Bob Herman
Axios, October 10, 2019

The Trump administration is proposing to loosen regulations that prohibit doctors from steering patients insured by federal programs to facilities where they have a financial interest and that outlaw health care companies from offering bribes and kickbacks in exchange for patient referrals.

Why it matters: The industry has long clamored for an overhaul to these laws, which companies say obstruct their goals of providing “value-based care.” But critics worry the broad and vague changes could engender more fraud and abuse than there already is.

Driving the news: The Department of Health and Human Services would create new exemptions for the physician self-referral law and the federal anti-kickback statute — decades-old, complex laws that forbid payments that encourage unnecessary care and increase taxpayer costs.

• Hospitals, doctors, nursing homes and other entities would be able to create “value-based arrangements,” and those deals could include exchanging bonuses or other types of “remuneration” without running afoul of referral laws.
• For example, under these exemptions, a hospital could provide a nursing home with a behavioral health nurse for certain discharged patients, or a hospital could donate cybersecurity technology to a physician’s office.
• Many exemptions already exist, including for organizations called “accountable care organizations” that try to keep a patient’s care within a narrow set of hospitals and doctors, but these changes would go much further.

Between the lines: The overarching concern is everyone’s definition of “value” is different. How will regulators know whether providers are acting in good faith to coordinate care, or if they are using “value-based care” as a cover to control patient referrals and enrich themselves?

A major exclusion: Pharmaceutical companies, medical device firms, labs and medical equipment makers are cut out from the changes because the federal government is afraid those companies would “misuse the proposed safe harbors.”

• Pharma lobbyists, in particular, have pushed hard to change the law so drug companies could directly subsidize drug copays for Medicare and Medicaid patients, even though federal officials have said that practice “masks the high prices those companies charge for their drugs.”
• HHS Secretary Alex Azar told reporters the government may consider separate regulations for value-based drug contracts, even though the evidence of those deals’ effectiveness is limited at best.

The bottom line: These changes come at the same time that hospitals, physicians, pharmaceutical companies and others are paying out billions of dollars every year in fraud settlements.

• Public comments are due Dec. 31, and if this comment process is anything like the initial requests that asked for guidance, the industry will be heavily involved.

https://www.axios.com…

HHS Press Release with links to proposed rules:
https://www.hhs.gov…

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Comment:

By Don McCanne, M.D.

There was a reason for the Stark laws. As health care was transitioning from a profession of the healing arts into the business market model of the medical-industrial complex, innovation in the business sense, as opposed to the professional health care sense, was introducing behaviors that previously had been considered unethical if not outright fraud but without statutory guides to limit this behavior – behavior based primarily on greed. Pete Stark led the way in providing guidance which, unfortunately, had to be backed up with legislation and regulation since the industry seemed incapable of controlling its own transgressions.

The Trump administration has made great efforts to reduce the role of government in health care and turn control of health care back to the industry. In their HHS press release CMS Administrator Seema Verma stated, “We serve patients poorly when government regulations gather dust in the attic: they become ever more stale and liable to wreak havoc throughout the healthcare system… We are updating our antiquated regulations to decrease burden for providers…”

So the Trump administration’s answer to kickbacks, fee splitting, abuse, fraud, and the like is to change the rules and then relabel these behaviors “value-based arrangements” (see HHS press release), and let the market work.

How can we fix our health care system when our political leaders do not seem to be able to differentiate right from wrong? Or maybe they just don’t care.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Some Democratic candidates are pushing it as a free-choice version of Medicare for All. That’s good rhetoric but bad policy.

By David U. Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.
The Nation, October 7, 2019

Health care reform has been the most hotly contested issue in the Democratic presidential debates. Bernie Sanders and Elizabeth Warren have been pushing a single-payer Medicare for All plan, under which a public insurer would cover everyone. They would ban private insurance, except for items not covered by the public plan, such as cosmetic surgery or private rooms in hospitals. The other Democratic contenders favor a “public option” reform that would introduce a Medicare-like public insurer but would allow private insurers to operate as well. They tout this approach as a less traumatic route to universal coverage that would preserve a free choice of insurers for people happy with their plans. And some public option backers go further, claiming that the system would painlessly transition to single payer as the public plan outperforms the private insurers.

That’s comforting rhetoric. But the case for a public option rests on faulty economic logic and naive assumptions about how private insurance actually works. Private insurers have proved endlessly creative at gaming the system to avoid fair competition, and they have used their immense lobbying clout to undermine regulators’ efforts to rein in their abuses. That’s enabled them to siphon hundreds of billions of dollars out of the health care system each year for their own profits and overhead costs while forcing doctors and hospitals to waste billions more on billing-related paperwork.

Those dollars have to come from somewhere. If private insurers required their customers to pay the full costs of private plans, they wouldn’t be able to compete with a public plan like the traditional Medicare program, whose overhead costs are far lower. But this is not the case: In fact, taxpayers—including those not enrolled in a private plan—pick up the tab for much of private insurers’ profligacy. And the high cost of keeping private insurance alive would make it prohibitively expensive to cover the 30 million uninsured in the United States and to upgrade coverage for the tens of millions with inadequate plans.

Public option proposals come in three main varieties:

§ A simple buy-in. Some proposals, including those by Joe Biden and Pete Buttigieg, would offer a Medicare-like public plan for sale alongside private plans on the insurance exchanges now available under the Affordable Care Act. These buy-in reforms would minimize the need for new taxes, since most enrollees would be charged premiums. But tens of millions would remain uninsured or with coverage so skimpy, they still couldn’t afford care.

§ Pay or play. This variant (similar to the plan advanced by the Center for American Progress and endorsed by Beto O’Rourke) would offer employers a choice between purchasing private insurance or paying a steep payroll tax (about 8 percent). Anyone lacking employer-paid private coverage would be automatically enrolled in the public plan. The public option would be a good deal for employers who would otherwise have to pay more than 8 percent of their payroll for private coverage—for example, employers with older or mostly female workers (who tend to use more care and incur high premiums) or with lots of low-wage workers (for whom 8 percent of payroll is a relatively small sum). But many firms employing mostly young, male, or highly paid workers (e.g., finance and tech) would likely stay with a private insurer.

§ Medicare Advantage for All. The public option approach favored by Kamala Harris would mimic the current Medicare Advantage program. Medicare Advantage plans are commercial managed care products currently offered by private insurers to seniors. The Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicare, collects the taxes that pay for the program and passes the funds ($233 billion in 2018) along to the insurance companies. Under this approach, the public option would operate alongside the private Medicare Advantage plans and compete with them, as the traditional fully public Medicare program currently does.

No working models of the buy-in or pay-or-play public option variants currently exist in the United States or elsewhere. But decades of experience with Medicare Advantage offer lessons about that program and how private insurers capture profits for themselves and push losses onto their public rival—strategies that allow them to win the competition while driving up everyone’s costs.

IN US HEALTH INSURANCE, GOOD GUYS FINISH LAST

A public option plan that facilitates enrollees’ genuine access to health care can’t compete with private insurers that avoid the expensively ill and obstruct access to care. Despite having overhead costs almost seven times that of traditional Medicare (13.7 versus 2 percent), Medicare Advantage plans have grown rapidly. They now cover more than one-third of Medicare beneficiaries, up from 13 percent in 2005. Greed has trumped efficiency, and the efforts of regulators to level the playing field have been overwhelmed by insurers’ profit-driven schemes to tilt it.

Private insurers employ a dizzying array of profit-enhancing schemes that would be out of bounds for a public plan. These schemes, which continually evolve in response to regulators’ efforts to counter them, boil down to four strategies that are legal, in addition to occasional outright fraud.

§ Obstructing expensive care. Plans try to attract profitable, low-needs enrollees by assuring convenient and affordable access to routine care for minor problems. Simultaneously, they erect barriers to expensive services that threaten profits—for example, prior authorization requirements, high co-payments, narrow networks, and drug formulary restrictions that penalize the unprofitably ill. While the fully public Medicare program contracts with any willing provider, many private insurers exclude (for example) cystic fibrosis specialists, and few Medicare Advantage plans cover care at cancer centers like Memorial Sloan Kettering. Moreover, private insurers’ drug formularies often put all of the drugs—even cheap generics—needed by those with diabetes, schizophrenia, or HIV in a high co-payment tier.

Insurers whose first reaction to a big bill is “claim denied” discourage many patients from pursuing their claims. And as discussed below, if hassling over claims drives some enrollees away, even better: The sickest will be the most hassled and therefore the most likely to switch to a competitor.

§ Cherry-picking and lemon-dropping, or selectively enrolling people who need little care and disenrolling the unprofitably ill. A relatively small number of very sick patients account for the vast majority of medical costs each year. A plan that dodges even a few of these high-needs patients wins, while a competing plan that welcomes all comers loses.

In the employer market, cherry-picking is easy: Private insurers offer attractive premiums to businesses with young, healthy workers and exorbitant rates to those with older, sicker employees. As a letter this summer to The New York Times put it, like casinos, health insurers are profitable because they know the odds of every bet they place—and the house always wins.

The CMS, in theory, requires Medicare Advantage plans to take all comers and prohibits them from forcing people out when they get sick. But regulators’ efforts to enforce these requirements have been overwhelmed by insurers’ chicanery. To avoid the sick, private insurers manipulate provider networks and drug formulary designs. Despite the ban on forcing enrollees out, patients needing high-cost services like dialysis or nursing home care have switched in droves from private plans to traditional, fully public Medicare. And as a last resort, Medicare Advantage plans will stop offering coverage in a county where they’ve accumulated too many unprofitable enrollees, akin to a casino ejecting players who are beating the house.

Finally, Medicare Advantage plans cherry-pick through targeted marketing schemes. In the past, this has meant sign-up dinners in restaurants difficult to access for people who use wheelchairs or offering free fitness center memberships, a perk that appeals mainly to the healthiest seniors. But higher-tech approaches are just around the corner. Will Oscar, the health insurer founded by Jared Kushner’s brother—with Google’s parent company as a significant investor—resist the temptation to use Google’s trove of personal data to target enrollment ads toward profitable enrollees like tennis enthusiasts and avoid purchasers of plus-size clothing or people who have searched online for fertility treatments?

§ Upcoding, or making enrollees look sicker on paper than they really are to inflate risk-adjusted premiums. To counter cherry-picking, the CMS pays Medicare Advantage plans higher premiums for enrollees with more (and more serious) diagnoses. For instance, a Medicare Advantage plan can collect hundreds of dollars more each month from the government by labeling an enrollee’s temporary sadness as “major depression” or calling trivial knee pain “degenerative arthritis.” By applying serious-sounding diagnoses to minor illnesses, Medicare Advantage plans artificially inflate the premiums they collect from taxpayers by billions of dollars while adding little or nothing to their expenditures for care.

Though most upcoding stays within the letter of the law and merely stretches medical terminology, the CMS’s (rare) audits of enrollees’ charts indicate that Medicare Advantage plans are collecting $10 billion annually from taxpayers for entirely fabricated diagnoses. And that’s only a small fraction of their overall take from upcoding. Private insurers keep most of this pilfered money for their profits and overhead, but they use a portion to fund added benefits (for example, eyeglasses or slightly lower co-payments for routine care) that attract new enrollees and help private plans to seemingly outcompete traditional Medicare.

§ Lobbying to get excessive payments and thwart regulators. Congress has mandated that the CMS overpay Medicare Advantage plans by 2 percent (and even more where medical costs are lower than average). On top of that, Seema Verma, Trump’s CMS administrator, has taken steps that will increase premiums significantly and award unjustified “quality bonuses,” ignoring advice from the Medicare Payment Advisory Commission that payments be trimmed because the government is already overpaying the private plans. And she has ordered changes to the CMS’s Medicare website to trumpet the benefits of Medicare Advantage enrollment.

In sum, a public option insurer that, like traditional Medicare, doesn’t try to dodge unprofitable enrollees would be saddled with more than its share of sick, expensive patients and would become a de facto high-cost, high-risk pool. The CMS’s decades-long efforts to level the playing field have been thwarted by insurers’ upcoding, belying their promises of fair competition. And insurance companies have used their political muscle to sustain and increase their competitive advantage over traditional Medicare. The result: The public plan (and the taxpayers) absorbs the losses while private insurers skim off profits, an imbalance so big that private plans can outcompete a public plan despite squandering vast sums on overhead costs, CEO salaries, and shareholder profits.

SINGLE PAYER WOULD SAVE, PUBLIC OPTION WON’T

This year alone, private insurers will take in $252 billion more than they pay out, equivalent to 12 percent of their premiums. A single-payer system with overhead costs comparable to Medicare’s (2 percent) could save about $220 billion of that money. A public option would save far less—possibly zero, if much of the new public coverage is channeled through Medicare Advantage plans, whose overhead, at 13.7 percent, is even higher than the average commercial insurer.

Moreover, a public option would save little or nothing on hospitals’ and doctors’ sky-high billing and administrative costs. In a single-payer system, hospitals and other health facilities could be funded via global, lump-sum budgets—similar to the way cities pay fire departments—eliminating the need to attribute costs to individual patients and collect payments from them and their insurers. That global budget payment strategy has cut administrative costs at hospitals in Canada and Scotland to half the US level. The persistence of multiple payers would preclude such administrative streamlining, even if all of the payers are charged the same rates. (Under Maryland’s mislabeled global budget system, the state’s hospitals charge uniform rates but continue to bill per patient; our research indicates that their administrative costs haven’t fallen at all, according to their official cost reports.)

Similarly, for physicians and other practitioners, the complexity involved in billing multiple payers, dealing with multiple drug formularies and referral networks, collecting co-payments and deductibles, and obtaining referrals and prior authorizations drives up office overhead costs and documentation burdens.

The excess overhead inherent to multipayer systems imposes a hidden surcharge on the fees that doctors and hospitals must charge all patients—not just those covered by private insurance. All told, a public option reform would sacrifice about $350 billion annually of single payer’s potential savings on providers’ overhead costs, over and above the $220 billion in savings it could sacrifice annually on insurers’ overhead.

Finally, a public option would undermine the rational health planning that is key to the long-term savings under single payer. Each dollar that a hospital invests in new buildings or equipment increases its operating costs by 20 to 25 cents in every subsequent year. At present, hospitals that garner profits (or “surpluses” for nonprofits) have the capital to expand money-making services and buy high-tech gadgets, whether they’re needed or not, while neglecting vital but unprofitable services. For instance, hospitals around the country have invested in proton-beam-radiation therapy centers that cost hundreds of millions of dollars apiece. (Oklahoma City alone now has two.) Yet there’s little evidence that those machines are any better for most uses than their far cheaper alternatives. Similarly, hospitals have rushed to open invasive cardiology and orthopedic surgery programs, often close to existing ones. These duplicative investments raise costs and probably compromise quality.

Meanwhile, primary care and mental health services have languished, and rural hospitals and other cash-strapped facilities that provide much-needed care spiral toward closure. As in Canada and several European nations, a single-payer system could fund new hospital investments through government grants based on an explicit assessment of needs, instead of counting on private hospitals to use their profits wisely. That strategy has helped other nations direct investments to areas and services with the greatest need and to avoid funding wasteful or redundant facilities. Public option proposals would perpetuate current payment strategies that distort investment and raise long-term costs.

Because a public option would leave the current dysfunctional payment approach in place, it would sacrifice most of the savings available via single-payer reform. The bottom line is that a public option would either cost much more or deliver much less than single payer.

WHY NOT IMPORT GERMAN, SWISS, OR DUTCH HEALTH CARE?

Public option proponents often cite Germany, Switzerland, and the Netherlands as exemplars of how private insurers can coexist with thriving public health care systems. But they ignore the vast differences between those nations’ private insurers and ours.

The nonprofit German “sickness funds,” which cover 89 percent of the population (only wealthy Germans are allowed to purchase coverage from for-profit insurers), are jointly managed by employers and unions—a far cry from our employer-based coverage. The government mandates identical premium rates for all the sickness funds, takes money from those with low-risk enrollees and subsidizes others with older and sicker ones, and directly pays for most hospital construction. All sickness funds offer identical benefit packages, pay the same fees, and cover care from any doctor or hospital.

Although the details differ, a similarly stringent regulatory regime applies in Switzerland, whose system descended from Otto von Bismarck’s original German model, and as in Germany, the government funds most hospital construction. While for-profit insurers can sell supplemental coverage, only nonprofits are allowed to offer the mandated benefit package.

Since 2006, the Netherlands has been transitioning from the German-style universal coverage system to a more market-oriented approach championed by corporate leaders. However, the government pays directly for all long-term care, and a strong ethos of justice and equality has pressured both public and private actors to avoid any erosion of social solidarity. The Netherlands has long enjoyed ready access to care, and its system hasn’t descended (yet) into an American-style abyss. But under the new regime, hospital administrative costs have risen nearly to US levels, overall health costs have increased rapidly, doctors complain of unsustainable administrative burdens, and even in such a small nation, tens of thousands of people are uninsured. Insurers spend massively on marketing and advertising, and private insurers’ overhead costs average 13 percent of their premiums. Moreover, the United States and the Netherlands aren’t the only places where for-profit insurers’ overhead costs are high: They average 12.4 percent in Switzerland, 20.9 percent in Germany, and 26.2 percent in the United Kingdom.

Transforming the immensely powerful, profit-driven insurance companies of the United States into benign nonprofit insurers in the Swiss or German mold would be as heavy a lift as adopting Medicare for All. Nor can we count on the cultural restraints that have thus far softened the Dutch insurers’ rapacious tendencies and prevented a reversal of that country’s long-standing health care successes.

A final point: While allowing private insurers to compete with a public plan amounts to a poison pill, the same isn’t true for supplemental private plans that are allowed to cover only those items excluded from the public benefit package. While Canada bans the sale of private coverage that duplicates the public plan’s benefits, it has always allowed supplemental coverage, and that hasn’t sabotaged its system.

The efficiencies of a single-payer system would make universal coverage affordable and give everyone in the United States their free choice of doctors and hospitals. But that goal will remain out of reach if private insurers are allowed to continue gaming the system. Preserving the choice of insurer for some would perpetuate the affordability crisis that has bedeviled the US health care system for generations. Proponents of the public option portray it as a nondisruptive, free-choice version of single payer. That may be good campaign rhetoric, but it’s terrible policy.

David U. Himmelstein, MD and Steffie Woolhandler, MD, MPH are Distinguished Professors of Public Health at the City University of New York at Hunter College and are co-founders of Physicians for a National Health Program.

https://www.thenation.com…

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Comment:

By Don McCanne, M.D.

Adding a Medicare-like public option to our current fragmented health care financing system dominated by private plans, including private Medicare Advantage plans, combined with public programs such as our less-than-perfect Medicare and Medicaid programs, would only perpetuate the health care injustices unique to the most expensive health care system in the world.

The issues are complicated, but for health care justice to prevail, we must get reform right. Please share this article widely so that, by helping us all understand, we can accelerate our forward movement in breaking down the political barriers to reform.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Estimated Costs and Potential for Savings

By William H. Shrank, MD, MSHS ¹; Teresa L. Rogstad, MPH ¹; Natasha Parekh, MD, MS ²
JAMA, Special Communication, October 7, 2019

Author Affiliations

1. Humana Inc, Louisville, Kentucky
2. Division of General Internal Medicine, University of Pittsburgh School of Medicine, Pittsburgh, Pennsylvania

Abstract

Importance: The United States spends more on health care than any other country, with costs approaching 18% of the gross domestic product (GDP). Prior studies estimated that approximately 30% of health care spending may be considered waste. Despite efforts to reduce overtreatment, improve care, and address overpayment, it is likely that substantial waste in US health care spending remains.

Objectives: To estimate current levels of waste in the US health care system in 6 previously developed domains and to report estimates of potential savings for each domain.

Evidence: A search of peer-reviewed and “gray” literature from January 2012 to May 2019 focused on the 6 waste domains previously identified by the Institute of Medicine and Berwick and Hackbarth: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity. For each domain, available estimates of waste-related costs and data from interventions shown to reduce waste-related costs were recorded, converted to annual estimates in 2019 dollars for national populations when necessary, and combined into ranges or summed as appropriate.

Findings: The review yielded 71 estimates from 54 unique peer-reviewed publications, government-based reports, and reports from the gray literature. Computations yielded the following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion. The estimated annual savings from measures to eliminate waste were as follows: failure of care delivery, $44.4 billion to $93.3 billion; failure of care coordination, $29.6 billion to $38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure, $81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. No studies were identified that focused on interventions targeting administrative complexity. The estimated total annual costs of waste were $760 billion to $935 billion and savings from interventions that address waste were $191 billion to $282 billion.

Conclusions and Relevance: In this review based on 6 previously identified domains of health care waste, the estimated cost of waste in the US health care system ranged from $760 billion to $935 billion, accounting for approximately 25% of total health care spending, and the projected potential savings from interventions that reduce waste, excluding savings from administrative complexity, ranged from $191 billion to $282 billion, representing a potential 25% reduction in the total cost of waste. Implementation of effective measures to eliminate waste represents an opportunity reduce the continued increases in US health care expenditures.

From the Results

Administrative Complexity: Two articles addressed cost of waste from administrative complexity (Table 2), and no articles were identified that addressed savings from interventions. The estimated total annual cost of waste in this category was $265.6 billion.

From the Discussion

This review of the current literature of the cost of waste in the US health care system and evidence about projected savings from interventions that reduce waste suggests that the estimated total costs of waste and potential savings from interventions that address waste are as high as $760 billion to $935 billion and $191 billion to $282 billion, respectively.

The administrative complexity category was associated with the greatest contribution to waste, yet there were no generalizable studies that had targeted administrative complexity as a source for waste reduction. Some of that complexity results from fragmentation in the health care system. The greater opportunity to reduce waste in this category should result from enhanced payer collaboration with health systems and clinicians in the form of value-based payment models. In value-based models, in particular those in which clinicians take on financial risk for the total cost of care of the populations they serve, many of the administrative tools used by payers to reduce waste (such as prior authorization) can be discontinued or delegated to the clinicians, reducing complexity for clinicians and aligning incentives for them to reduce waste and improve value in their clinical decision-making. As more clinicians transition into value-based payment arrangements with financial risk, administrative burden and oversight could be reduced for all health care constituencies, including payers, hospitals, and physician practices; adoption of global prepayment mechanisms for patients and populations rather than fee-for-service payments would be expected to accelerate reductions in administrative complexity. Moreover, there is a need for better methods of assessing strategies to reduce administrative complexity while maintaining quality and without increasing spending. Presumably, all health systems, clinician practices, and payers have efforts underway to simplify processes and explore digital solutions to reduce administrative complexity. The science describing the success of these interventions is limited and more evidence is needed to quantify the waste in this category that could be reduced and the resulting savings.

The category that represents the second largest contributor to waste in the United States is pricing failure. In many ways, the evolution to value-based care would be expected to produce the least savings in this category since pharmaceutical pricing represents a major component of this waste domain and would not be affected by new approaches to care delivery and reimbursement.

Administrative complexity is the greatest source of waste in the United States today and can be a result of payers’ efforts to reduce waste by reducing overtreatment and low-value care. In value-based arrangements, improvements could be expected to reduce waste in both categories.

Conclusions

In this review based on 6 previously identified domains of health care waste, the estimated cost of waste in the US health care system ranged from $760 billion to $935 billion, accounting for approximately 25% of total health care spending, and the projected potential savings from interventions that reduce waste, excluding savings from administrative complexity, ranged from $191 billion to $282 billion, representing a potential 25% reduction in the total cost of waste. Implementation of effective measures to eliminate waste represents an opportunity to reduce the continued increases in US health care expenditures.

Table 2. Cost Estimates by Waste Domain

• Administrative complexity
  • Billing and coding waste – $248 billion
  • Physician time spent reporting on quality measures – $17.6 billion
  • Total – $265.6 billion

Table 3. Estimates of Savings From Interventions That Address Waste

• Administrative complexity
  • Not applicable

For full article (plus click on “Editorial Comment” for five editorials on this article):
https://jamanetwork.com…

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Single-Payer Reform: The Only Way to Fulfill the President’s Pledge of More Coverage, Better Benefits, and Lower Costs

By Steffie Woolhandler, MD, MPH; David U. Himmelstein, MD
Annals of Internal Medicine, April 18, 2017

Table. Estimated Administrative and Prescription Drug Savings Under Single-Payer Reform, 2017

$219.6 billion – Insurance overhead and administration of public programs
$149.3 billion – Hospital administration and billing
$ 75.3 billion – Physicians’ office administration and billing
$503.2 billion – Total administration
$113.2 billion – Outpatient prescription drugs
$616.4 billion – Total administration plus outpatient prescription drugs

https://annals.org…

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The Huge Waste in the U.S. Health System

By Austin Frakt
The New York Times, October 7, 2019

A new study, published Monday in JAMA, finds that roughly 20 percent to 25 percent of American health care spending is wasteful. It’s a startling number but not a new finding. What is surprising is how little we know about how to prevent it.

The largest source of waste, according to the study, is administrative costs, totaling $266 billion a year. This includes time and resources devoted to billing and reporting to insurers and public programs. Despite this high cost, the authors found no studies that evaluate approaches to reducing it.

“That doesn’t mean we have no ideas about how to reduce administrative costs,” said Don Berwick, a physician and senior fellow at the Institute for Healthcare Improvement and author of an editorial on the JAMA study.

Moving to a single-payer system, he suggested, would largely eliminate the vast administrative complexity required by attending to the payment and reporting requirements of various private payers and public programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. “What stands in the way of reducing waste — especially administrative waste and out-of-control prices — is much more a lack of political will than a lack of ideas about how to do it.”

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NYT Reader Comment:

By Don McCanne, M.D.

Direct quote from the JAMA article:

“The administrative complexity category was associated with the greatest contribution to waste, yet there were no generalizable studies that had targeted administrative complexity as a source for waste reduction.”

They reported as administrative complexity only “billing and coding waste” and “physician time spent on quality measures” which they calculate at $265.6 billion, when actually recoverable administrative waste is closer to $500 billion (Himmelstein and Woolhandler).

Yet the authors did not include this “greatest contribution to waste” – administrative excesses – in their calculations of recoverable waste, passing it off as “not applicable.”

The single payer model of Medicare for All would recapture this half a trillion dollars in administrative waste, and yet they disregard it. That is far more than the $191 billion in savings that the authors propose by multiple small tweaks to our dysfunctional system.

It is understandable how the authors from Humana would want to protect their industry, but it is difficult to understand why the editors of JAMA would widely distribute this article (for free!) that seems to be designed to counter the call for replacing the dysfunctional private insurance industry and the burden it places on the delivery system with an efficient system of Single Payer Medicare for All.

If you are going to ferret out waste, shouldn’t you attack the biggest heap?

https://www.nytimes.com…

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By Associated Press
Los Angeles Times, October 4, 2019

Immigrants applying for U.S. visas will be denied entry into the country unless they can prove they can afford healthcare, according to a proclamation signed Friday by President Trump.

The new rule applies to people seeking immigrant visas from abroad — not those in the U.S. already. It does not affect lawful permanent residents. It does not apply to asylum seekers, refugees or children.

But it would apply to the spouses and parents of U.S. citizens. That could have an impact on families who are trying to bring their parents to the U.S.

The proclamation says immigrants will be barred from entering the country unless they are to be covered by health insurance within 30 days of entering or have enough financial resources to pay for any medical costs. The measure will be effective Nov. 3.

The Trump administration is trying to move away from a family-based immigration system and into a merit-based system, and Friday’s proclamation is another effort to limit immigrant access to public programs.

“This new attempt at an immigration ban is as shameless as it is stunning,” tweeted Doug Rand, a former Obama administration official who is a cofounder of Boundless Immigration. “It will be chaotic to implement and guaranteed to separate U.S. citizens from their legal immigrant spouses and other close relatives.”

https://www.latimes.com…

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Presidential Proclamation on the Suspension of Entry of Immigrants Who Will Financially Burden the United States Healthcare System

Issued October 4, 2019

Section 1. Suspension and Limitation on Entry. (a) The entry into the United States as immigrants of aliens who will financially burden the United States healthcare system is hereby suspended and limited subject to section 2 of this proclamation. An alien will financially burden the United States healthcare system unless the alien will be covered by approved health insurance, as defined in subsection (b) of this section, within 30 days of the alien’s entry into the United States, or unless the alien possesses the financial resources to pay for reasonably foreseeable medical costs.

https://www.whitehouse.gov…

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Comment:

By Don McCanne, M.D.

This Presidential Proclamation requiring that immigrants have health insurance or the ability to pay will have a negative impact, especially on families that are trying to reunite within the United States. It is perplexing that President Trump believes that immigrants should have health insurance with the penalty of being denied reunification with their families for failing to meet that requirement, yet he, with the complicity of a Republican Congress, has removed the penalty for the failure of U.S. residents to have health insurance.

Is this proclamation about ensuring that physicians and hospitals be paid when they provide health care services to immigrants? If that is their concern, then why do they reject that assurance when the patients are U.S. residents, even though coverage is required by law (ACA)? Far greater numbers remain uninsured due to waiving the ACA penalty than would be uninsured as a result of being recent immigrants, especially since many of them would have insurance through their work or through the employment of family members.

No, this is not about being concerned over payment to health care professionals and institutions. Rather it is merely another barrier for immigration, and not a very effective one at that.

If the administration was really concerned about financing our health care system, you would think that they would adopt policies that would ensure that occurred. Under the single payer model of Medicare for All, payment would be made automatically for all health care services rendered throughout the nation, including for immigrants who, as a group, contribute significantly to the productivity of our economy.

Reuniting families is not a problem that needs a solution; just reunite them. Financing health care is. President Trump needs to fire immigrant-basher Stephen Miller and sit down with people who can explain health care financing to him. He says that it is complicated, but we can make it simple for him: Everybody in, nobody out.

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By Henry A. Waxman
Health Affairs Blog, October 4, 2019

As Americans, we like to think of ourselves as number one in everything, but in some cases — health care costs prime among them — it’s a dubious distinction. The fact that we spend twice as much on health care as the average for wealthy industrialized countries while having the lowest life expectancy and the highest infant mortality rates is a national disgrace.

While fixing this toxic combination of skyrocketing costs and poor health outcomes is complicated to say the least, there is one simple, common sense solution to a big part of the problem that can be achieved right now. All it takes is a small dose of political courage.

That step is to lower drug costs now by empowering Medicare to negotiate prices with the pharmaceutical industry. This is exactly what H.R. 3 — the Lower Drug Costs Now Act, introduced by House Committee Chairmen Pallone, Neal, and Scott — will achieve.

Skyrocketing Prices

Currently, U.S. drug prices are, on average, 3.7 times higher than the combined average of 11 other similar countries, according to a just-released study of 79 single-source brand-name drugs by the House Ways & Means Committee. In some cases, individual drug prices were an astounding 67 times higher. And they keep rising at unprecedented speed. The list prices for more than 3,400 drugs increased by 17 percent from July 2018 to July 2019, and from 2011 to 2016, prescription drug spending in the U.S. grew at 2.5 times the inflation rate. It’s especially disturbing that insulin costs per patient, taking into account prices and cost-sharing, nearly doubled from 2012 to 2016.

Why do these appalling price disparities exist? The primary reason is that every other industrialized country negotiates drug prices with the pharmaceutical industry, using their purchasing power to save taxpayer and consumer dollars. The drug companies, by their own admission, still earn profits in these countries — just not exorbitant windfalls. There is no logical reason why current law prohibits Medicare from doing the same.

In fact, the Veterans Health Administration and the U.S. Department of Defense’s TRICARE program both negotiate the price of drugs — and they pay much less than Medicare Part B and Part D, too.

Savings From Negotiation

Passing the Lower Drug Costs Now Act will save the federal government at least $100 billion over 10 years. That’s based on the amount the Congressional Budget Office (CBO) estimates would be saved by a similar but weaker drug pricing bill, introduced by Senate Finance Committee Chairman Charles Grassley (R-Iowa), that has many of the same provisions as H.R. 3. Like H.R. 3, for example, the Senate bill includes a cap on out-of-pocket costs. However, unlike H.R. 3, the Senate Bill leaves out Medicare negotiation.

In fact, H.R. 3 will likely save far more as a result of including negotiation. The bill creates a maximum fair price for any negotiated drug based on an average international market price index to ensure that Americans don’t pay more than the residents of other countries. The House Ways & Means Committee found that the U.S. could save $49 billion annually on Medicare Part D alone by using average drug prices for other countries.

The savings will go far beyond savings to the federal budget and taxpayers. There is a provision in the bill that requires manufacturers to offer the negotiated price to group health plans and health insurance issuers as well. So all Americans, including those with private insurance, will save money because they will pay the Medicare-negotiated prices.

The Lower Drug Costs Now Act will also help Medicare enrollees directly by creating a new, $2,000 out-of-pocket limit on their prescription drug costs, assuring financial protection that seniors currently are not guaranteed in the program. Furthermore, some of the bill’s savings will be reinvested in innovation and the search for new breakthrough treatments and cures at the National Institutes of Health (NIH).

The pharmaceutical industry claims this legislation creates an obstacle or disincentive to bringing new, life-saving medicines to market. In fact, the industry itself spends more on advertising, marketing and stock buybacks than they it does on research and development. Drug manufacturers also benefit enormously from taxpayer-funded research, yet still get to pocket the profits themselves. Notably, NIH funding contributed to research associated with every one of the 210 new drugs approved between 2010 and 2016. Moreover, H.R. 3’s use of the savings from lower drug prices to increase NIH’s research budget will arguably accelerate the development of innovative, life-saving drugs.

Building On Decades Of Progress

Passage of this legislation would mean a lot to me personally, as well. Over the course of my 40 years in Congress, I worked painstakingly to hold down prescription drug costs while creating incentives to encourage innovation. I was able to sponsor several pieces of legislation — the Hatch-Waxman Act, the Orphan Drug Act and the Affordable Care Act in particular — that increased access to prescription drugs for millions of Americans while balancing drug innovation with price competition. The Lower Drug Costs Now Act would take these gains a vital step further.

Unlike most issues in Washington, D.C., this has bipartisan support and the potential for achieving positive change. President Trump has long called for lowering prescription drug costs, even citing Medicare negotiation, and has indicated his willingness to support such legislation. While Big Pharma will furiously lobby to defeat these bills, when you have the speaker of the House and the president on the same side, there is no excuse for inaction.

There is simply no acceptable explanation for the fact that Americans spend seven times what the Japanese pay for prescription drugs. No reason why Americans pay nearly five times more for Humira, the best-selling prescription drug in the world, than the residents of other industrialized countries. The pharmaceutical marketplace in the U.S. is broken when it comes to brand-name drugs with long monopoly protection and it’s time we fix it.

https://www.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

People are dying because of the exorbitant cost of drugs in the United States. Expanding the federal government’s ability to negotiate drug prices, as H.R. 3 would do, would make drugs more affordable for patients and taxpayers, and, more importantly, it would also reduce suffering and save lives.

Although many of us are generally opposed to incrementalism in health care reform – taking tiny steps that will never reach health care nirvana – addressing prescription drug costs should be considered an exception. In spite of our current highly dysfunctional government, passing this legislation now should be achievable, and in no way should it reduce our passion for and our efforts to enact and implement a program of health care justice for all.

Although only an incremental step, enabling our government to negotiate drug prices is an important step forward. We should do that immediately and then intensify our efforts on changing the political climate to make way for single payer Medicare for All.

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By Annie Karni and Abby Goodnough
The New York Times, October 3, 2019, Updated 2:38 p.m. ET

President Trump is expected to unveil a new executive order on Thursday afternoon that calls for expanding the benefits offered by private Medicare plans, framing the decision as the responsible alternative to the “Medicare-for-All” policies supported by some of his Democratic political opponents.

The executive order, originally called “Protecting Medicare from Socialist Destruction,” was renamed “Protecting and Improving Medicare for our Nation’s Seniors” ahead of Mr. Trump’s speech.

Joe Grogan, the director of the White House Domestic Policy Council, said that the goal was to contrast what he said was the administration’s commitment to protecting seniors with “the vision for Medicare as a one-size-fits-all, single-payer system” supported by many Democratic candidates. He said the plan offered by Democrats would destroy health benefits for seniors who had paid into this program for their entire lives.

“Medicare for all is Medicare for none,” added Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, who has been a vocal critic not just of the Democrats’ proposals, but also of the Affordable Care Act. “Proposals like Medicare for All, as well as the public option, they are morally wrong because they would demote American seniors to second-class status.”

Mr. Trump has repeatedly promised to unveil a new health care plan; instead he has issued a series of executive orders and proposed rules to counter Democratic health care proposals for expanding coverage.

https://www.nytimes.com…

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Comment:

By Don McCanne, M.D.

Sorry. Today’s message was to have been on President Trump’s executive order on “Protecting Medicare from Socialist Destruction,” though they changed the name to “Protecting and Improving Medicare for our Nation’s Seniors.” I listened to Trump’s uninformative harangue before he signed the executive order, but they have not released it yet.

Wait! Hold the presses! The White House just released the following Fact Sheet:

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President Donald J. Trump’s Healthcare Agenda Puts Seniors and American Patients First

The White House, October 3, 2019

“We will not rest until Americans have the healthcare system they need and deserve, a system that finally puts American patients first.” – President Donald J. Trump

PUTTING AMERICAN PATIENTS FIRST: Since the beginning of his Administration, President Trump has put patients first so every American has the highest quality of healthcare in the world.

• Making healthcare more affordable by lowering out of control prescription drug prices and making new affordable healthcare options available.
• Putting patients in control of their healthcare by finally providing transparency and choice so every American can choose the care that fits their needs.
• Unleashing American innovation to provide new treatment options for patients living with disease.

PUTTING AMERICAN SENIORS FIRST: President Trump is taking action to protect and improve the Medicare system for America’s seniors.

• President Trump is signing a new Executive Order to improve seniors’ healthcare and improve the fiscal sustainability of Medicare. The order will advance policies that:
  • Empower patients by giving them more plan choices, more access to telehealth and new therapies, and more time with providers.
  • Streamline the approval of therapies, while reducing obstacles to improved patient care.
  • Improve quality by implementing reforms that better link payments to value.
  • Protect beneficiaries by eliminating waste, fraud, and abuse.
  • Maximize freedom for Medicare patients and providers by reducing regulatory burdens and eliminating unnecessary barriers.
• President Trump is putting seniors first by strengthening the Medicare system and helping ensure the program’s availability for years to come.
  • Medicare-for-All bills proposed by Democrats in Congress threaten to end the Medicare program as we know it and eliminate choice for America’s seniors.
  • Seniors are overwhelmingly satisfied with their Medicare coverage and President Trump will stand up to protect it.
• This order will improve the ability of seniors to make choices about their insurance, helping them access the best healthcare providers and the latest innovative therapies.

PROTECTING VULNERABLE AMERICANS: President Trump is committed to protecting vulnerable American patients and families.

• The President has reaffirmed that protecting Americans with preexisting conditions is fundamental to his healthcare agenda.
• President Trump is committed to ending surprise billing so no American is ever blindsided by medical bills for services they never agreed to.
  • The President has put forward principles on surprise billing to ensure patients are not taken advantage of and have the information they need to make informed decisions.
  • More than two-thirds of Americans worry about unexpected medical bills, according to a 2018 poll by the Kaiser Family Foundation.

PROVIDING AFFORDABLE OPTIONS: By lowering costs, President Trump is making sure every American can afford high quality healthcare.

• Last year, President Trump released a historic blueprint to drive down drug prices.
• Medicare Advantage premiums will drop next year to their lowest level since 2007, a 28 percent decrease since 2017.
• Medicare Part D premiums next year will be their lowest in the last 7 years.
• Prescription drug prices fell in 2018 for the first year in nearly five decades.
• The Food and Drug Administration approved a record number of generic drugs in 2017 and 2018 that will improve competition and drive down prices.
  • New generic drug approvals saved consumers $26 billion through the first year and a half of President Trump’s Administration.
• The Trump Administration laid the foundation to start importing certain prescription drugs that are cheaper in other countries.

PUTTING PATIENTS IN CONTROL: President Trump is making sure patients control their own healthcare by empowering them to make informed decisions and giving them more choices.

• The number of Medicare Advantage plans available to our seniors has increased by nearly 1,200 over the last two years.
• President Trump is working to expand Association Health Plans, which make it easier for employers to join together and offer more affordable health coverage to their employees.
• Through Health Reimbursement Arrangements, employers will be able to help their employees pay for the cost of insurance that they select in the individual market.
• The Administration expanded the availability of short-term, limited duration plans, which offer flexible coverage options and can be up to 60 percent cheaper than Obamacare plans.
• President Trump is working to ensure hospitals cannot hide prices for their services, requiring them to publicize more data and put quality and price information into patients’ hands.
• The President signed legislation ending “gag” clauses that prevented pharmacists from providing patients with information about lower cost options.
• President Trump signed legislation ending Obamacare’s individual mandate penalty, which forced many Americans to buy health plans they did not want.
• The Trump Administration is working to provide electronic health records to patients by requiring providers to give patients their data.

ENSURING HIGH QUALITY CARE: President Trump is working to promote innovative solutions and expand treatment options for Americans living with disease.

• President Trump launched an effort to improve kidney health and treatment in America, giving hope to the over 30 million Americans afflicted with kidney disease.
• The Administration has significantly increased funding for opioid and pain research and is supporting research for a vaccine to prevent opioid addiction.
  • Drug overdose deaths declined nationally last year for the first time in decades.
• President Trump signed into law $1 billion in increased Alzheimer’s research funding, reflecting his commitment to finding a cure.
• The Trump Administration is working to encourage new, innovative approaches to treating childhood cancer.
• President Trump signed Right to Try legislation to give terminally ill patients the ability to access potentially lifesaving cures.
• The President launched an initiative to eliminate the HIV epidemic in the United States within 10 years.

https://www.whitehouse.gov…

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Further comment:

By Don McCanne, M.D.

We waited for this? Now I’m really sorry.

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Addendum:

By Don McCanne, M.D.

This is the link to President Trump’s “Executive Order on Protecting and Improving Medicare for Our Nation’s Seniors” – the subject of today’s Quote of the Day:

By Alan Rappeport and Thomas Kaplan
The New York Times, October 1, 2019

Progressive Democrats are advocating the most drastic shift in tax policy in over a century as they look to redistribute wealth and chip away at the economic power of the superrich with new taxes that could fundamentally reshape the United States economy.

As they compete for the Democratic presidential nomination, Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have proposed wealth taxes that would shrink the fortunes of the richest Americans. Their plans envision an enormous transfer of money from the wealthy to ordinary people, with revenue from the wealth tax used to finance new social programs like tuition-free college, universal child care and “Medicare for all.”

Income inequality has surged in the United States in the last 50 years, with the top 0.1 percent now controlling about a fifth of the nation’s wealth. That concentration of wealth has coincided with stagnant wages, rising college costs and the lingering effects of the Great Recession, which erased trillions of dollars in household wealth, ravaging the middle class. New figures from the Census Bureau released last week show that income inequality in the United States reached its highest level last year since the government began tracking it in 1967.

Polls have found widespread support for the idea of taxing wealth. A poll conducted for The New York Times by the internet research firm SurveyMonkey this summer found that two-thirds of Americans, including a majority of Republicans, backed a 2 percent tax on households worth over $50 million, which is the heart of Ms. Warren’s plan.

The tax proposed by Ms. Warren would apply to households worth over $50 million. She would impose a 2 percent tax on net worth above $50 million, and a 3 percent tax on net worth above $1 billion.

The plan from Mr. Sanders would apply to a larger number of households, and it would be particularly aggressive on billionaires. His tax would start out at 1 percent on net worth from $32 million to $50 million for married couples, and it would top out at 8 percent on net worth over $10 billion.

Emmanuel Saez and Gabriel Zucman, the two University of California, Berkeley, economists who helped Ms. Warren and Mr. Sanders develop their plans, project that Ms. Warren’s proposal would hit about 70,000 households and generate $2.6 trillion in revenue for the federal government over a decade. They project that Mr. Sanders’s proposal would apply to 180,000 households and raise $4.35 trillion over 10 years.

Mr. Zucman said in an interview that he believes a wealth tax would have a modest but positive impact on growth. By reducing the power of the wealthiest, he argued, it would make markets more competitive and spur innovation.

https://www.nytimes.com…

Comparison of the Warren and Sanders wealth tax proposals, by Emmanuel Saez and Gabriel Zucman, University of California, Berkeley:
http://gabriel-zucman.eu…

“Progressive wealth taxation” by Emmanuel Saez and Gabriel Zucman, Brookings Papers on Economic Activity:
https://www.brookings.edu…

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Comment:

By Don McCanne, M.D.

In the discussions of the single payer model of Medicare for All you frequently hear, “How are we going to pay for it?” – almost as if it is an unanswerable question. Well, the short answer is that our current national health expenditures are already enough to pay for such a system – comprehensive health care for everyone.

What is not working is the distribution of payments into the system. For perspective, annual premiums for employer-sponsored family health insurance are now over $20,000 whereas median household income is about $62,000. Clearly the typical family cannot afford to pay an equally allocated share of our nation’s health expenditures. Yet the money is there; it’s just that it has been distributed upwards with stagnant incomes for most of us and rapidly rising income and wealth for those at the top.

The work of Piketty, Saez and Zucman has shown that equitable financing of government functions can no longer depend on progressive income taxes alone, but now must include progressive wealth taxes, but without the need to tax the first tens of millions of personal wealth. It is difficult to be sympathetic towards the billionaire who would pay no wealth taxes on the first 30 to 50 million dollars of wealth and with progressive tax rates not exceeding a single digit on the remaining wealth. Since the productivity gains of the workers have flowed mostly to the top, along with the economy’s rents, progressive wealth taxes are essential if we are to return to the people some of these superabundant surpluses of the plutocrats. No plutocrat will be deprived of an evening aperitif or other favored indulgences.

Besides progressive income taxes and progressive wealth taxes, there are other equitable sources of revenues that could be used to help fund Medicare for All. An example is a Tobin tax on equity trades, taxing the gamblers who trade frequently, often with large profits that may have a negative impact on individual 401(k) and IRA retirement accounts. Basically these various equitable – fair – revenues would be used to fund a universal, national risk pool that would make health care affordable for everyone.

Some in the single-payer movement have even been reluctant to use the word “tax.” That’s wrong. It is equitable taxes that would make health care affordable for absolutely everyone. Why should you try to dodge that?

PNHP does not support any political party nor their candidates for office.

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