AMSA (American Medical Student Association), April 12, 2019

The American Medical Student Association (AMSA) stands in strong support of Rep. Pramila Jayapal’s Medicare for All Act of 2019, H.R. 1384, and of Sen. Bernie Sanders Medicare for All Act, S. 1129. As an organization of future physicians, AMSA seeks to improve the health and enhance healthcare access for everyone in America, true healthcare for all; and the federal single-payer system proposed in the Medicare for All Act would be a momentous step toward that vision.

The current system creates a huge administrative burden that takes physicians away from patient care, allows pharmaceutical companies to drive up costs of medicines, and makes essential healthcare services unaffordable for many. As AMSA National President Perry Tsai, M.D., Ph.D., remarked at the introduction of Sen. Sanders’ bill, “For each thing we learn on our way to becoming physicians who care for patients, we find one more thing that will prevent us from caring for our patients…Our dream [of caring for patients] is turning into a nightmare, and we will not stand for it.” Comprehensive health coverage through Medicare for All would result in lower administrative costs, increased healthcare access for everyone regardless of employment, and reduced burdens on physicians such that they can spend more energy on patient care.

“As medical trainees, we have witnessed on multiple occasions how the current healthcare system fails to provide affordable, high quality, comprehensive care to all patients and their families,” Avanthi Jayaweera, AMSA’s Education and Advocacy Fellow, said. “We are inheriting a system that puts profits over our patients’ lives. The next generation of physicians want Medicare for All to allow for a future where we can put our patients first just as we are taught in our clinical training.”

AMSA is proud to support these bills to establish Medicare for All and is organizing a Health Care for All Week of Action, April 15-19, in order to educate and engage medical trainees to ask their members of Congress to support Medicare for All. Hanan Rakine, co-chair of AMSA’s Health Care for All Campaign, stresses, “It is our role as future health care professionals to advocate for our patients’ well-being and right to health care.”

Through our Health Care for All Campaign, AMSA has over 50 years of experience fighting for equitable, efficient and quality universal health care coverage. Unburdened by conflicts-of-interest, medical students are fighting for the healthcare system that our nation and our communities need, not the system pharmaceutical and insurance companies have created. As the largest body of future doctors in the U.S., AMSA is fighting for a future that puts patients ahead of special interests. AMSA believes that no person should go without needed emergent or preventive health care services. AMSA believes that these proposals released by Rep. Jayapal and Sen. Sanders will address the current inequities of the U.S. healthcare system by ensuring every individual living in the U.S. has access to comprehensive health care benefits.

About the American Medical Student Association:

AMSA is the oldest and largest independent association of physicians-in-training in the United States. Founded in 1950, AMSA is a student-governed, non-profit organization committed to representing physicians-in-training, advocating for quality and affordable health care for all, and building the next generation of physician leaders.

https://www.amsa.org…

---

Comment:

By Don McCanne, M.D.

With AMSA’s endorsement of both Rep. Pramila Jayapal’s and Sen. Bernie Sanders’ Medicare for All Acts of 2019, we know that the future of health care is in very good hands.

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

By Paul O’Rourke-Babb
Enterprise-Record, April 7, 2019

New Medicare-for-All legislation (The Medicare for All Act of 2019, HR 1384) was just introduced in the U.S. House of Representatives by Rep. Pramila Jayapal (D-Wash) with 103 cosponsors. I’m for it. Our nation has another, better, chance to fix our broken health insurance system.

As a retired Nurse Practitioner and a long-time Butte County resident, I strongly believe Medicare for All will give our communities the health care security that we desperately need. Here’s why.

Whether you’re a patient, a health care provider or a hospital, I don’t need to tell you the health care challenges we were facing before the fire just got a whole lot worse. You already know.

Fifty thousand people have been displaced. Adventist Hospital, doctors’ and therapists’ offices, and clinics have been damaged or destroyed by fire. If you owned your business and lost it, you also lost your ability to pay for private insurance. If your employer was burned out, you lost your job and if your employer was sponsoring your health insurance, you lost that too.

Getting health care was a problem before the fire, but it’s even worse now. No matter whether you get insurance through work, Covered California or Medicare, the scarcity of primary care doctors was already a problem. If you’re on Medi-Cal, almost no physician would accept you as a patient. At the same time that the number of people who qualify for Medi-Cal will likely rise, the ability of doctors to hire staff and see those people will worsen.

That’s because many patients and their doctors lost their homes and businesses and had to move away to find shelter. The Butte County vacancy rate was already critical at around 2%. Then the fire took out an estimated 6.5% of the county’s housing units.

On top of that, our communities have been traumatized. Month-long waits or long drives to access mental health care were common before the fire. Today it’s worse.

Affording health care remains another big problem. Over 21% of Butte County households were living in poverty before the fire. But even at higher incomes, the costs of health insurance prevented 4 in 10 of us from seeking the care we need.

Now it’s worse. Insurance premiums, deductibles and co-pays don’t magically disappear during disasters. But the money to pay them has to compete with the need to rebuild our lives from scratch.

Area hospitals, greatly impacted by the fire, are also disproportionately burdened by having to deal with multiple insurance companies and this adds a layer of completely unnecessary expense to our health care.

Medicare for All would make health care more affordable. Here’s how:

It would reduce the cost of billing.

Medicare for All would dramatically reduce the average $99,581 that physicians spend each year on billing and insurance-related work just to get paid. It would save hospitals millions of dollars on redundant and often competing billing administration, up to 25% to 30% of their budgets.

Reduced billing costs means savings for you and for a public insurance system.

It would finance health care in a completely different way.

A public Medicare-for-All system will eliminate upfront costs like premiums, deductibles and co-pays. A combination of taxes, based on one’s ability to pay, would ensure that everybody would pay their fair share for the same comprehensive policy. And universal coverage would ensure that the system would remain solvent and financially stable.

It would cost you less.

The savings from a more efficient health care system means that we would pay less in taxes than we are now paying in premiums and out-of-pocket costs.

We would all have the same comprehensive, high-quality health insurance no matter what circumstances change in our lives.

You could see the doctor of your choice, even if your doctor had to set up a new practice in another area or gave up private practice and took a job at a hospital.

When I moved to Butte County many years ago for work, the active arts community and beautiful environment attracted me. Life here should be peaceful and uncomplicated. When it comes to our health care, it’s anything but. It doesn’t have to be this way. Contact your congressional representatives and voice support for Jayapal’s new bill. At the same time, let your state legislators know that you also support California Medicare for All. We need it now, more than ever.

Paul O’Rourke-Babb is a retired Nurse Practitioner and longtime member of Physicians for a National Health Program. He lives in Chico.

https://www.chicoer.com…

---

Comment:

By Don McCanne, M.D.

The Butte County fire in which the beautiful town of Paradise was destroyed was a heart-wrenching experience for my wife and me, especially wistful since we had visited our dear friends there frequently in years past. Our friend and health care reform colleague, Paul O’Rourke-Babb, describes in his article what this meant to so many residents of Butte County. It was a terribly tragic event that only those who were there to experience it can truly comprehend.

So why does this belong in a blog on single payer Medicare for All? Paul tells us. Although they lost their hospitals and clinics, the surrounding communities were there to help. But they were restricted by the deficiencies in our highly dysfunctional health care financing system. Imagine if, instead, everyone was covered by a single payer Medicare for All program. All attention would be directed to providing the care needed, with no concerns about insurance coverage, cost sharing, provider networks, prior authorization requirements, or any of the other cruel, parsimonious features of our current system.

When the fire and forest services were battling the blazes destroying the homes, they did not first check to see if the homes were registered to qualify for fire services nor did they have to obtain prior authorization to extinguish the blazes. We have often said that health care should always be there for you just as the fire department is when you need it. We would have that with a well designed, single payer Medicare for All.

Maybe it would not have made much difference during the urgent moments of the fire, but it can make a very big difference now for those who lost their work and the health insurance that went with it and are now facing medical bills that compound the financial hardships that they are facing. We can do only so much to try to console those facing grief, but at least we can take worries about paying for health out of any future tragedy like this – by enacting and implementing single payer Medicare for All.

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

Bureau of Labor Statistics, March 15, 2019

Separations

Total separations includes quits, layoffs and discharges, and other separations. Total separations is referred to as turnover. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. Other separations includes separations due to retirement, death, disability, and transfers to other locations of the same firm.

Annual Levels and Rates

In 2018, there were 68.9 million hires, an increase of 3.3 million from 2017. Total separations (the sum of quits, layoffs and discharges, and other separations) rose by 2.6 million in 2018 to 66.1 million. Quits rose for the ninth consecutive year reaching 40.1 million in 2018, up by 2.4 million. Quits comprised 61 percent of total separations. Layoffs and discharges edged up by 307,000 in 2018 to 21.9 million and comprised 33 percent of total separations. Other separations edged down by 44,000 in 2018 to 4.1 million and comprised 6 percent of total separations.

The annual hires for 2018 was 46.3 percent of the annual average CES (Current Employment Statistics) employment level. This rate has been trending upwards since 2009. The annual total separations rate for 2018 was 44.3 percent. The annual rates for the components of total separations were 26.9 percent for quits, 14.7 percent for layoffs and discharges, and 2.8 percent for other separations.

https://www.bls.gov…

---

Comment:

By Don McCanne, M.D.

We are being told repeatedly that we should not enact a single payer Medicare for All program because people like their insurance they get at work, and they should be able to keep it if they want. Yet in 2018, 66 million individuals left their employment – a turnover rate of 44 percent!

For those 66 million separations from work, employer-sponsored plans did not prove to be the stable coverage that most of us want. Sure, many of these individuals were not even offered coverage at work, but that is more evidence that the employer-sponsored plans that the Affordable Care Act was designed to protect often do not provide reliable, stable coverage.

Of course there are other problems with employer-sponsored plans. They frequently have excessive cost sharing requirements, especially high deductibles, that can create financial hardship and impair access to care. Provider networks frequently prevent access to the patients’ choices of health care professionals and facilities, and often even fail to include much choice for highly specialized problems (though some larger employers may have special programs for centers of excellence). With change of employment, provider networks, benefits covered, and cost sharing requirements may change dramatically, potentially creating instability in the individual’s health care.

So who are these individuals who are so pleased with the health insurance that they get at work? Well, the workforce is a relatively healthy population that on average does not require much health care. Many feel secure with the financial protection that they believe their plan is providing even though they may have little experience with the system because of their good health. Some do have more significant medical problems and many of them do find professionals with whom they are pleased, and so the system works fairly well for them. But what about those who can’t go to their established care sources, or who cannot afford the out-of-pocket cost sharing, or who cannot afford the medications on which they have been maintained, or are one of the 44 percent with employment turnover and find that their new employer does not provide coverage, yet they earn too much for ACA subsidies? How can you say that employer-sponsored plans work well for them?

Another thing, employers insure predominantly the healthy workforce and their young healthy families. Those with more significant and costly medical problems tend to receive their care from government programs – Medicaid, Medicare, the VA system, safety-net institutions, and cost shifting by the uninsured (disproportionate share payments, etc.) – financed by us, the taxpayers. Pooling risk is one of the most fundamental functions of health insurance, so why are we granting employers favorable selection in their risk pools while passing adverse selection onto the taxpayers? Obviously it would be much more equitable to have one universal risk pool under single payer Medicare for All. Insurance premiums paid by employees along with forgone wage increases to cover the employer’s contribution are a form of regressive financing of health care – the opposite of the more equitable progressive financing of a tax-funded single payer system.

Next time you are told that we have to reject single payer Medicare for All because it would not allow individuals to have the choice of remaining enrolled in a health plan at work, point out that last year the 66 million people experiencing work separations did not have that choice, even if they previously had been offered insurance at work.

---

Addendum: About that 66 million job turnover

Quote of the Day, Addendum for April 11, 2019

About that 66 million job turnover each year, Dr. Ed Weisbart makes a very important point:

“I’ve been using numbers like this for a while but to make a different point — that the ~1.3M job displacements from single payer are a single bump in the road, with mitigation strategies, compared to the unending sea that is our current culture. 60M every year, for decades before and decades to come, vs 1M in a single planned way.”

---

Comment:

By Don McCanne, M.D.

Thus not only can we use this number of a 66 million job turnover each year as as an argument against “you can keep your insurance,” but also as an indication that the job displacement caused by eliminating private insurance does not create a formidable employment nightmare for the one million or so that might be displaced. We can do it.

---

Another addendum: About that 66 million job turnover

Quote of the Day, Second addendum for April 11, 2019

About that 66 million job turnover each year, UMass economics professor Gerald Friedman makes another very important point:

“Excellent note! To these 66 million need to be added all those whose employers change their insurance plan. And this is a growing problem because of narrow insurance plans where people need to change their primary care provider.”

---

Comment:

By Don McCanne, M.D.

None needed. This thing has a life of its own.

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

Physicians for a National Health Program (PNHP), April 10, 2019

Dear colleague,

Today is another important day in the movement towards improved Medicare for All. This morning, Sen. Bernie Sanders introduced the Medicare for All Act of 2019 in the Senate, along with 14 co-sponsors. Sen. Sanders has long been a strong voice for health care justice in the U.S., and we welcome his continued advocacy and leadership for single-payer reform.

What’s in the bill?

The Medicare for All Act of 2019 mostly follows the Senator’s 2017 bill, with one notable addition. Here’s a summary of what’s in the bill:

• Eligibility: Covers everyone residing in the U.S.
• Benefits: Covers medically-necessary services including primary and preventive care, mental health care, reproductive care (bans the Hyde Amendment), vision and dental care, and prescription drugs. This bill also provides home- and community-based long-term services and supports, which were not covered in the 2017 Medicare for All Act.
• Patient Choice: Provides full choice of any participating doctor or hospital. Providers may not dual-practice within and outside the Medicare system.
• Patient Costs: Provides first-dollar coverage without premiums, deductibles or copays for medical services, and prohibits balance billing. Copays for some brand-name prescription drugs.
• Cost Controls: Prohibits duplicative coverage. Drug prices negotiated with manufacturers.
• Timeline: Provides for a four-year transition. In year one, improves Medicare by adding dental, vision and hearing benefits and lowering out-of-pocket costs for Parts A & B; also lowers eligibility age to 55 and allows anyone to buy into the Medicare program. In year two, lowers eligibility to 45, and to 35 in year three.

How can the bill be improved?

Similar to the 2017 bill, the launch of this bill is a major step forward in the fight for Medicare for All. At the same time, PNHP again recommends ways that this bill can be improved:

Fund hospitals through global budgets, with separate funding for capital projects: A “global budget” is a lump sum paid to hospitals and similar institutions to cover operating expenses, eliminating wasteful per-patient billing. Global budgets could not be used for capital projects like expansion or modernization (which would be funded separately), advertising, profit, or bonuses. Global budgeting minimizes hospitals’ incentives to avoid (or seek out) particular patients or services, inflate volumes, or upcode. Funding capital projects separately, in turn, allows us to ensure that new hospitals and facilities are built where they are needed, not simply where profits are highest. They also allow us to control long term cost growth.

End “value-based” payment systems and other pay-for-performance schemes: This bill continues current flawed Medicare payment methods, including alternative payment models (including Accountable Care Organizations) established under the ACA, and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Studies show these payment programs fail to improve quality or reduce costs, while penalizing hospitals and doctors that care for the poorest and sickest patients.

Establish a national long-term care program: This bill includes home- and community-based long-term services and supports, a laudable improvement from the 2017 bill. However, institutional long-term care coverage for seniors and people with disabilities will continue to be covered under state-based Medicaid plans, complete with a maintenance of effort provision. PNHP recommends that Sen. Sanders include institutional long-term care in the national Medicare program, as it is in Rep. Pramila Jayapal?s single-payer bill, H.R. 1384.

Ban investor-owned health facilities: For-profit health care facilities and agencies provide lower-quality care at higher costs than nonprofits, resulting in worse outcomes and higher costs compared to not-for-profit providers. Medicare for All should provide a path for the orderly conversion of investor-owned, for-profit health-care providers to not-for-profit status.

Fully cover all medications, without copayment: Sen. Sanders’ bill excludes cost-sharing for health care services. However, it does require small patient copays (up to $200 annually) on certain non-preventive prescription drugs. Research shows that copays of any kind discourage patients from seeking needed medical care, increasing sickness and long-term costs. Experience in other nations prove that they are not needed for cost control.

What’s next?

Single-payer opponents, including deep-pocketed lobbying groups like the Partnership for America’s Health Care Future that represent corporate health care interests, will certainly attack this bill and its co-sponsors. At the same time, a slew of alternative proposals that fall short of what is needed, like a public option, could confuse the public.

Let’s remind our members of Congress that a majority of Americans (including a growing majority of physicians) support real single-payer reform. So please consider calling both of your U.S. Senators at (202) 224-3121 and request that they co-sponsor the Medicare for All Act of 2019. If they are already a co-sponsor, thank them and ask them to work towards improving this bill, educating their colleagues, and amplifying the work of grassroots organizers.

The fight for a just health care system for all is moving forward. Together, it’s a fight we can win.

Sincerely,

Adam Gaffney, M.D., M.P.H
President

---

Comment:

By Don McCanne, M.D.

Single payer Medicare for All bills have now been introduced in both the House and the Senate. They are both named Medicare for All Act of 2019, although there are significant differences in the bills. What do we do with them?

In this session of Congress, neither bill can clear the Senate, and they would certainly face a veto by President Trump. But that is true of other reform measures, especially those that offer a Medicare-like public option. So our goal during this session of Congress is to use the two single payer Medicare for All bills to educate, not only the public at large, but also present and potential future members of Congress and potential presidential candidates. But remember, the politicians need to hear it from their constituents. The public leads, politicians follow, unless corrupted.

The most important message is why the single payer model of Medicare for All is the only model that will achieve the goal of truly affordable and equitable health care for absolutely everyone. There is a surge in popularity for reform that protects private employer-sponsored plans and the private Medicare Advantage plans, reflecting the fact that the public and many politicians do not realize the profound differences in the efficiency, affordability, and equity of the two models of reform: single payer Medicare for All versus public option Medicare for some. Tweaks to the Affordable Care Act do not even qualify as a game changer.

For those who do understand the single payer model, it is important to educate them on the policy details that are important, such as those concerns listed in the PNHP message above. Time is short. Potential presidential candidates are already refining their policy positions, as are members and candidates for Congress. Their positions should be clear before the election, and the policy details of the legislation should be carefully defined before the next session of Congress begins. This work has to be done now. Relying on a drawn-out, legislative sausage-making process could be disastrous. Human lives depend on getting it right.

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

I’ve spent decades studying US health care. Time to get real: Medicare for All is the only reasonable path to controlling costs and covering everyone.

By Gerald Friedman
USA TODAY, April 8, 2019

There is an instinct among political pundits to confuse caution for practicality — an assumption that those who advocate for incremental change are being reasonable, while those pushing for bold reforms aren’t. This is seen most starkly in the debate around health care reform, despite the fact that the “practical” pushers of limited reform fail to address the real problems in our health care system.

We all recognize that the status quo isn’t working. We spend more per person than any other country on health care, but we aren’t getting any bang for our buck. We have lower life expectancy, higher infant mortality rates and more preventable deaths, and too many personal bankruptcies are due at least in part to medical bills.

Where we disagree is the solution. The favorite new “reasonable” plan is “Medicare for America,” a bill from Reps. Jan Schakowsky and Rosa DeLauro that has won the support of big names like Texas presidential hopeful Beto O’Rourke and the Center for American Progress, the left-of-center think tank where the plan originated as “Medicare Extra for All.” It has been extolled in opinion pieces for some of America’s largest newspapers as a “realistic” plan to fix what’s broken in our health care system.

On the other side, if punditry is to be believed, there are the Medicare for All “hard-liners” who believe in expanding a significantly improved Medicare system to every American, with coverage that includes dental, vision and long-term care. This is portrayed as radical or even unreasonable.

Time to get real. As an economist who has spent decades studying our health care system, I can tell you that Medicare for All advocates are the only ones who are being reasonable, because theirs is the only plan that will control health care costs while finally achieving universal coverage.

Insurance companies are middle men

The problem with incremental plans, whether they are public options, buy-ins to Medicare or Medicaid, or pumping more money into subsidies in the Affordable Care Act’s individual marketplace, is that they preserve the private health insurance system weighing down our health care.

This may be why pundits and centrist politicians view those plans as “reasonable,” but it means that they are leaving the main reason for our system’s dysfunction in place: the multipayer, for-profit financing model.

Commercial insurance companies are nothing more than middle men. They add no value to our system, but they do drive up costs with their bloated claims departments, marketing and advertising budgets and executive salaries. We pay for all of these things before a single dollar is spent on the delivery of care.
They also create extra costs for providers who need large administrative staffs to deal with billing systems, accounting for as much as $100,000 per physician.

Any plans short of Medicare for All leaves these costs in place. In other words, they leave hundreds of billions of dollars a year in savings on the table.

Medicare for All attacks costs

The waste goes beyond administrative savings. While pharmaceutical companies and hospital groups are consolidating and forming regional monopolies, our fragmented, multipayer system leaves no one insurance plan with a large enough share of the market to negotiate effectively. That allows these companies to essentially set their own inflated prices and bilk the public for hundreds of billions of dollars.

Is it any wonder that they oppose Medicare for All?

If we’re talking about which health care reform plans are serious about attacking cost, providing universal coverage and making sure everyone has access to health care, Medicare for All is the only reasonable answer. No other plan does this effectively, which is why I suspect that the Center for American Progress has not come out with spending estimates. Basic economic tenets tell us that their plan will not reduce health care spending as effectively.

Is Medicare for All bold? Absolutely. Is it reasonable? You bet. It is time to accept that Medicare for All is the practical alternative.

Gerald Friedman, a health care and labor economist, is an economics professor at University of Massachusetts Amherst and the director of the Hopbrook Institute. Follow him on Twitter: @gfriedma.

https://www.usatoday.com…

---

Comment:

By Don McCanne, M.D.

The incrementalists who advocate for tweaks to the Affordable Care Act, perhaps with the addition of a Medicare-like public option, claim to be taking a reasonable pathway to reform. But is it really reasonable to advocate for a system that wastes tremendous resources while leaving tens of millions without adequate coverage and impaired health outcomes, not to mention financial hardship? Well it is unreasonable to make such a claim when fundamental structural reform of our financing system through single payer Medicare for All would establish an equitable and affordable system that ensures health care for everyone. Claiming that displacing the dysfunctional private insurance system is unreasonable is, well, unreasonable.

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

By Emily Gee and Topher Spiro
Center for American Progress, April 8, 2019

Anyone interacting with the U.S. health care system is bound to encounter examples of unnecessary administrative complexity—from filling out duplicative intake forms to transferring medical records between providers to sorting out insurance bills. This administrative complexity, with its associated high costs, is often cited as one reason the United States spends double the amount per capita on health care compared with other high-income countries even though utilization rates are similar.

Components of administrative costs

The main components of administrative costs in the U.S. health care system include BIR costs and hospital or physician practice administration.

To date, few studies have estimated the systemwide cost of health care administration extending beyond BIR activities. In a 2003 article in The New England Journal of Medicine, researchers Steffie Woolhandler, Terry Campbell, and David Himmelstein concluded that overall administrative costs in 1999 amounted to 31 percent of total health care expenditures or $294 billion—roughly $569 billion today when adjusted for medical care inflation. A more recent paper by Woolhandler and Himmelstein, which looked at 2017 spending levels, placed the total cost of administration at $1.1 trillion.

Billing and insurance-related costs

Many studies of administrative costs limit their scope to BIR costs. The BIR component of administration is most relevant to systemwide reforms that seek to reduce the expenses related to claims processing, billing rates, or health insurance. The largest share of BIR costs is attributable to insurance companies’ profits and overhead and to providers where BIR costs include tasks such as record-keeping for claims submission and billing.

Applying the NAM’s (National Academy of Medicine) percentages of BIR costs to recent projections of national health expenditures from the Centers for Medicare and Medicaid Services (CMS), CAP estimates that BIR costs will amount to $496 billion for 2019. According to CAP’s calculations, this includes $158 billion in overhead for private insurance; $56 billion for administration of public insurance programs; and $282 billion for the BIR costs of hospitals, physicians, and other care providers.

Excess administrative costs

Most studies that have attempted to identify excess costs in the American health care system rely on comparisons between the United States and Canada. In their 2010 review of the literature on the difference between the two countries’ health expenditures, economists Alexis Pozen and David M. Cutler… (estimated) per capita administrative excess in the United States, when compared with Canada, translates into a gap of $340 billion (adjusted).

Woolhandler and Himmelstein estimate that the United States currently spends $1.1 trillion on health care administration, and of that amount, $504 billion is excess.

All estimates of administrative costs are inherently sensitive to what portion of health care spending one considers administrative. Such tasks, however, can fall into a gray area between administrative and clinical.

Administrative costs for payers

Within the U.S. system, the share of expenditures that are attributable to administrative costs varies greatly by payer. The BIR costs for traditional Medicare and Medicaid hover around 2 percent to 5 percent, while those for private insurance is about 17 percent. Organisation for Economic Co-operation and Development (OECD) data also show that other nations are able to achieve low levels of administrative costs while maintaining universal coverage across all ages of the population.

International health system data demonstrate that the United States is a clear outlier on administrative spending. Countries with single-payer systems are among those with the lowest administrative costs. OECD data also show that within a country, administrative costs are higher in private insurance than in government-run programs.

Countries that have multipayer systems with stricter rate regulation also achieve much lower administrative costs than the United States. If the United States could reduce administrative costs down to Canadian levels, it would save 68 percent of current administrative expenditures; reducing to German-level administrative costs would save 42 percent of current administrative expenditures. However, to assume that by simply adapting another country’s health care system—whether it is Canada’s single-payer Medicare, Germany’s sickness funds, or Switzerland’s heavily regulated private plans—the United States would automatically achieve the same level of administrative costs may ignore other fundamental differences between countries, including the market power of health care providers, political systems, and attitudes toward health care. Nevertheless, the experience of other multipayer systems such as those in Germany and Switzerland suggests that the United States could substantially reduce both administrative expenditures and overall health care spending by bringing down reimbursement rates and regulating insurance—even while continuing to allow multiple payers and private health care providers.

Administrative costs for health care providers

A study of administrative costs in California found that administrative costs represented about one-quarter of physician revenue and one-fifth of hospital revenue, and BIR costs accounted for roughly half of administrative expenditures for physician and hospital services covered by private insurance. In a separate study, Himmelstein and others reported that one-quarter of U.S. hospital spending went toward administration.

As with BIR costs, provider administrative costs in the United States are higher than those in other comparable countries. Hospital administrative costs in the United States far exceed those of other nations. In their comparison of hospital administrative costs among eight Western nations, Himmelstein and co-authors found that the United States had the highest levels, at 25.3 percent of total hospital expenditures. They conclude that in nations where hospital administrators have minimal responsibilities for procuring financing and where the hospital reimbursement system is least complex, administrative costs can be reduced to 12 percent of expenditures. These findings suggest that reforms that introduce global budgeting or limit the need to bargain with multiple payers could potentially bring down excess hospital administrative costs in the United States.

Lower administrative costs in single-payer and multipayer systems

Although administrative costs contribute to the high expenditures in the United States, they are not the primary reason for the health care spending gap. As economist Uwe Reinhardt and others candidly put it, “It’s the prices, stupid.”

Comparative evidence from U.S. states also suggests that America’s multipayer system explains some, but by no means all, of the discrepancy between the United States and other developed nations. Harvard University researchers Joseph P. Newhouse and Anna Sinaiko observe that “there is considerable variation across the states in spending levels, with the lowest quintile of states spending approximately the same percentage as the higher spending OECD countries other than the U.S. This implies that the [United States’] pluralistic financing system may not be an important cause of the large percentage of GDP that the U.S. devotes to health care.”

Systemwide reforms to lower administrative costs

Health care financing experts believe that changes to how Americans pay for coverage could dramatically reduce administrative costs. Researchers simulating the effects of single-payer programs have assumed that administrative costs would be brought down substantially.

Exactly how such lower costs could be achieved is another question. Reducing BIR costs requires simplifying the billing and payment process, which could be accomplished in a number of ways. Two avenues for reducing administrative costs as well as overall health costs are global budgeting and uniform rate-setting. These two concepts are central to health systems around the world and are also responsible for keeping administrative costs lower, whether a country has a multipayer or single-payer system. Another paperwork-reducing option would be a centralized claims clearinghouse to allow providers to submit all claims to a single entity, as they do in Germany and Japan.

All-payer rates and global budgeting

Setting all-payer reimbursement rates would eliminate the need for providers to negotiate rates with individual private insurers, while also giving policymakers better leverage for controlling overall health care cost growth. In the current U.S. system, providers charge different rates to different payers, and the billing process is complicated and opaque. Setting all-payer rates would simplify billing and improve transparency by establishing a single set of rates for each provider, while also giving regulators a tool to protect consumers from exorbitant rates.

Global budgeting—the practice of paying providers revenue based on their expected costs—also holds promise for both lowering administrative spending and overall costs. As opposed to traditional fee-for-service payments, which reward providers for doing more, global budgeting incentivizes providers to deliver care more efficiently. Global budgeting is a feature of many countries with much lower health care administrative costs, including Scotland, Wales, and Germany. As Woolhandler, Campbell, and Himmelstein point out in their 2003 article, “The existence of global budgets in Canada has eliminated most billing and minimized internal cost accounting, since charges do not need to be attributed to individual patients and insurers.” As Germany shows, both single-payer and multipayer systems can use global budgets.

A system combining all-payer rates and global budgeting is already partially in place in the state of Maryland, where each hospital has a single set of rates it bills to Medicare, Medicaid, commercial insurers, and other payers. Maryland’s system is keeping overall cost growth lower than the national trend. According to RAND analysis of hospital costs, Maryland hospitals have administrative costs that are 9 percent lower than the national average.

In their analysis of three universal health care options for Vermont, including single payer, researchers William C. Hsiao, Steven Kappel, and Jonathan Gruber estimated substantial savings from administrative simplicity from each option. The two single-payer options they examined would result in even greater administrative savings of between 7.3 percent and 7.8 percent, depending on the rate-setting mechanism. The group estimated that a third scenario, which would establish a centralized claims clearinghouse while allowing multiple payers, could generate savings equal to 3.6 percent of total expenditures. This suggests that about half of the total administrative savings from a single-payer system could be obtained within a regulated multipayer system.

Policy proposals directed at administrative costs

While major changes to the U.S. health care system have the greatest potential to bring down costs, more incremental changes could reduce administrative waste. A recent bill proposed by Sens. Bill Cassidy (R-LA) and Tina Smith (D-MN) would direct the HHS secretary to set goals to cut “unnecessary costs and administrative burdens” throughout the health care system by 50 percent over the next 10 years. It would also provide grant money for state-based efforts to bring down administrative costs. Some possible avenues for achieving those kinds of reductions include changes to payment rules, improvements to facilitate electronic record-keeping and information exchange, and simplification of public insurance programs.

In their 2009 article in The New England Journal of Medicine, David Cutler, Elizabeth Wikler, and Peter Basch proposed one such package of reforms. The authors estimated that providers could save $17.9 billion to $23 billion annually with several, more incremental changes to the system, including greater adoption of EHR systems; integrated administrative and clinical systems; national and standardized reporting requirements and credentialing of providers; streamlined enrollment in public insurance programs; and greater automation. In a separate report, the same authors proposed additional reforms that they estimated could reduce excess administrative costs by $40 billion, or 25 percent of total health care expenditures.

In a 2010 study published in Health Affairs, Bonnie B. Blanchfield and other Massachusetts researchers concluded that the administrative burden on physician organizations could be reduced by a “single transparent set of payment rules for a system with multiple payers.” The authors recommended that the United States adopt “a standard set of payment requirements, increased payment-rule transparency, standardized forms, and a standard set of data exchange requirements.” Doing so could save $7 billion in billing costs for physician and other clinical services, according to the authors’ estimates.

Conclusion

Although estimates vary, a large body of evidence shows that the United States is spending about twice as much as needed on the administration of health care. Other nations enjoy world-class health care systems while spending a fraction of what the United States does on governance, billing, and insurance.

A structural overhaul of how health care is financed and priced that includes key features of other countries’ systems—whether one payer or many—would go a long way toward eliminating excess administrative costs. Simplifying the payment system should be an essential part of future health reform and would make the U.S. system work better for taxpayers and patients alike.

Emily Gee is the health economist of Health Policy at the Center for American Progress. Topher Spiro is the vice president for Health Policy and a senior fellow for Economic Policy at the Center.

This publication was made possible in part by a grant from the Peter G. Peterson Foundation.

https://www.americanprogress.org…

15 page PDF:
https://cdn.americanprogress.org…

---

Comment:

By Don McCanne, M.D.

The president and CEO of the Center for American Progress (CAP) is Clintonite Neera Tanden. She played a very active role in keeping Bernie Sanders’ single payer Medicare for All out of the Democratic Party platform to help protect her candidate, Hillary Clinton. Although her candidate lost the presidential election, Tanden has continued to oppose the single payer model of reform.

With the growing popularity of the Medicare for All concept, CAP developed the Medicare Extra for All counterproposal – a proposal that would include a Medicare public option. The promotion of this proposal suggested that it would be better than a single payer model because it would preserve the choice of private insurance options, including employer-sponsored plans and private Medicare Advantage (renamed Medicare Choice). They suggested that administrative savings would help fund the program, but they did not present a compelling case for that.

This current report from CAP is important because it does acknowledge the profound administrative waste in our system, citing many of the important studies confirming this (plus some of the lousy ones). They then suggest that we do not have to change to a single government payer to implement the tools that result in the single payer administrative savings, that these savings can be achieved, “whether one payer or many.”

Although most of the report above is composed primarily of excerpts, the section, “Policy proposals directed at administrative costs,” is duplicated in its entirety. They suggest that implementing these policies could save perhaps tens of billions of dollars. Yet earlier in the article they report, “Woolhandler and Himmelstein estimate that the United States currently spends $1.1 trillion on health care administration, and of that amount, $504 billion is excess.” It appears that they have not made the case that it does not make much of a difference by shifting to single payer when administrative savings of a multiplayer system would be in the tens of billions whereas single payer system savings would be in the neighborhood of half a trillion dollars.

Another problem is that they do not explicitly acknowledge the differences between private insurers in other nations and private insurers in the United States. They are very different creatures. In other nations they function more as social insurance models serving the public good. In the United States they are crafted as business models driven by profits (or “margins” in the nonprofits). If we were to have a multipayer system that produced European efficiencies, then we would have to disband current insurers and replace them with European-style insurers. (American insurers walk out of markets for far more trivial reasons.) Obviously it would be far easier and much more efficient to replace them with an improved and expanded version of Medicare.

The media has already been reporting that Americans want to have a choice of private plans, especially employer-sponsored plans, saying that support for single payer Medicare for All declines if individuals are deprived of private options. This CAP report was designed to support that reasoning. Already today, Sarah Kliff (VoxCare) quotes co-author Topher Spiro as saying, “Uniform rate setting is a key feature of a system that would have lower administrative costs. That could be in the context of a single-payer system or a regulated, multi-payer system.”

This report will be used to say that we can leave the private insurers in place. My immediate response is, “Bull!” See if you can come up with a short, emphatic response that addresses the flawed policy instead – a response that would improve our messaging.

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