By Lee Fang and Nick Surgey
The Intercept, November 20, 2018

Now that the midterms are finally over, the battle against “Medicare for All” that has been quietly waged throughout the year is poised to take center stage.

Internal strategy documents obtained by The Intercept and Documented reveal the strategy that private health care interests plan to use to influence Democratic Party messaging and stymie the momentum toward achieving universal health care coverage.

At least 48 incoming freshman lawmakers campaigned on enacting “Medicare for All” or similar efforts to expand access to Medicare. And over the last year, 123 incumbent House Democrats co-sponsored “Medicare for All” legislation — double the number who supported the same bill during the previous legislative session.

The growing popularity of “Medicare for All” in the House has made progressives optimistic that the Democratic Party will embrace ideas to expand government coverage options with minimal out-of-pocket costs for patients going into the 2020 election. But industry groups have watched the development with growing concern.

Over the summer, leading pharmaceutical, insurance, and hospital lobbyists formed the Partnership for America’s Health Care Future, an ad hoc alliance of private health interests, to curb support for expanding Medicare.

The campaign, according to one planning document, is designed to “change the conversation around Medicare for All,” then “minimize the potential for this option in health care from becoming part of a national political party’s platform in 2020.”

Behind the scenes, the group attempted to sway candidates during the midterms, encouraging several of them to focus on shoring up the Affordable Care Act instead of supporting single-payer health care.

The documents show that Partnership representatives spoke to the staffs of Democratic Sens. Bill Nelson of Florida and Joe Donnelly of Indiana, and received confirmation that both senators would maintain their “moderate position.” When the team met with Rep.-elect Lori Trahan, D-Mass., she said that although she does not speak about the issue, she agreed that “language around single payer should be tempered.” (None of the three politicians’ offices provided responses to inquiries from The Intercept.)

In several competitive races, the Partnership pressed candidates to use industry-crafted talking points when speaking about health care. In one internal planning document circulated with health care lobbyists, the Partnership touted its influence over Danny O’Connor, the Columbus, Ohio-area Democrat who ran for the 12th Congressional District, claiming that O’Connor used Partnership talking points “in national news interviews.” (O’Connor’s campaign did not respond to a request for comment.)

Several of the candidates who agreed to embrace the Partnership’s messaging and policy ideas, including Donnelly and O’Connor, came up short on Election Day. A recount ending on November 18 confirmed that Nelson received fewer votes than Republican challenger Rick Scott. But soon after Election Day results came in, the Partnership went on the offensive, informing reporters that candidates who embraced “Medicare for All” had also lost, pointing to the defeat of progressives such as Kara Eastman in Nebraska. The group also relied on research from the business-friendly Democratic think tank Third Way to argue that victorious pro-“Medicare for All” candidates couldn’t attribute their success to having supported “Medicare for All” because few Democrats explicitly mentioned the policy in their campaign advertisements.

“’Medicare for All’ didn’t win,” said Joel Kopperud, the vice president of government affairs at the Council of Insurance Agents and Brokers, one of the industry groups backing the Partnership. “I don’t think that the Bernie Sanders $32 trillion solution that’s going to eviscerate the insurance for 156 million Americans is really something that’s going to be helpful to the party in critical states,” he added in an interview with The Intercept.

Kopperud represents insurance brokers who sell employer-based health insurance coverage. He noted that his organization has a vested interest in backing the Partnership. “Medicare for All,” as some envision the policy, would eventually eliminate the need for most health insurance plans — a death knell for companies represented by the CIAB.

Private health care lobbyists are confident that they can prevent any federal expansion of Medicare in Congress, given Republican control of the Senate and the White House. In the states, CIAB and other private health groups have easily defeated measures to develop single-payer proposals, such as the ColoradoCare ballot question in 2016.

But the political calculus could be changing. Recent election gains by Democrats in state government could create new opportunities for proponents of expanded government-backed health care initiatives. Gov.-elect Gavin Newsom of California campaigned on single payer and is expected to have one of the largest Democratic supermajorities in recent memory in the legislature, though California has a notoriously complex state constitution that would likely require an amendment before any significant government plan could be created.

The growing momentum for “Medicare for All” could raise expectations for the next time Democrats are in full control of power in Washington, industry groups worry. They are already pressuring conservative-leaning caucuses in the House of Representatives, such as the Blue Dogs and New Democrats Coalition, to push back against insurgent progressives’ demands.

Reframing the Debate

For industry opponents of expanded government health insurance, there are two main challenges. One is combatting growing public support for the idea. The other is shaping elite opinion within the Beltway.

Over the last two years, several opinion surveys show rising support for expanding Medicare. In March, the Kaiser Health Tracking Poll found that 59 percent of Americans support the idea, and by August, a poll conducted by Reuters-Ipsos found an astounding 70 percent of Americans support “Medicare for All,” including a majority of self-identified Republicans.

But the Partnership is quick to zero in on research that shows support for the idea drops precipitously when respondents are told that the plan would require ending employer-based coverage, tax increases, and increased government control.

The campaign has worked with advertising agencies to draw up a series of messages to convince select audiences. Several of the messages, categorized as “positive,” are dedicated to educating the public on more minimal reforms that do not include expanding Medicare. Other messages, categorized as “persuasion” and “aggressive,” are designed to instill fear about what could happen if “Medicare for All” passes.

In the coming weeks, the Partnership plans to ramp up a campaign designed to derail support for “Medicare for All.” The group, working with leading Democratic political consultants, will place issue advertisements to target audiences, partner with Beltway think tanks to release studies to raise concerns with the plan, and work to shape the public discourse through targeted advocacy in key congressional districts.

The Partnership has tapped consulting firms with deep ties to Democratic officials. Forbes-Tate, a lobbying firm founded by former officials in President Bill Clinton’s administration and conservative Democrats in Congress, is managing part of the Partnership coalition. Blue Engine Message & Media, a firm founded by former campaign aides to President Barack Obama, has handled the Partnership’s interactions with the media.

In one planning document circulated over the summer, the Partnership suggested a series of messages to wean Americans away from supporting single payer. The talking points emphasize that the current system provides “world-class care,” and that any move away from the Affordable Care Act would be “ripping apart our current system.”

The strategy exploits familiar themes that have long been used by business groups against new government health care programs, calling for allies to say lines such as “bureaucrats in DC have no understanding of a person’s medical situation and will be making decisions about your health care instead of doctors.”

The Partnership plans to form a speakers bureau of former Democratic elected officials who can leverage the media to make the case that expanding Medicare is bad politics and policy. The memo names former Democratic Majority Leader Tom Daschle, now a health insurance lobbyist at the law firm Baker Donelson, as one such potential surrogate.

The memo points to early success in shaping media coverage, citing several “earned media” columns such as one published in August by former Rep. Jill Long Thompson, D-Ind., which argues that Democrats should only focus on small reforms to the Affordable Care Act, and warns against wasting political capital on pursuing a “government-controlled health insurance system.” Thompson, now an associate professor at Indiana University Bloomington, did not respond to a request for comment.

Adam Gaffney, president-elect of Physicians for a National Health Program, a national coalition that advocates in favor of “Medicare for All,” said he is not surprised by the messaging.

“What we’re seeing is the wages of success: With single payer on the rise, it was only a matter of time before the insurance companies, big pharma, and other big-money groups came out swinging,” said Gaffney, who also serves as an instructor at Harvard Medical School.

“The smear of ‘socialized medicine’ has been used a thousand times and has lost its bite,” he added.

Influencing the 2020 Democratic Field

“We’re all focused on 2020,” Lauren Crawford Shaver, a partner at Forbes-Tate who is helping to manage the Partnership campaign, recently told the National Association of Health Underwriters in a podcast produced by the group.

Shaver, a former top staffer for the Hillary Clinton presidential campaign, explained to the group that she is working to peel support away from the “Medicare for All” bill sponsored by Sen. Bernie Sanders, I-Vt. The Sanders bill is currently sponsored by several rumored 2020 Democratic presidential candidates, including Sens. Elizabeth Warren, D-Mass.; Kamala Harris, D-Calif.; and Kirsten Gillibrand, D-N.Y.

“The No. 1 thing we need to focus on is that there are a lot of likely candidates that currently support the Senate bill,” said Shaver. “We need to make sure we educate the public, we educate both parties, and we educate all the campaigns about both the policy and political challenges.”

Shaver encouraged health care companies concerned about the growing popularity of “Medicare for All” to mobilize opposition among clients, customers, and employees. Industry groups will likely have workers or customers residing in key districts who can be tapped to influence wavering lawmakers on Capitol Hill.

The Partnership plans to “take stories of how these proposals would directly impact your clients and the constituents of the policymakers who are voting for or against these proposals,” Shaver said.

The Partnership strategy echoes the health insurance industry’s campaign to shape the 2008 presidential primary. At that time, the health insurance lobby group known as America’s Health Insurance Plans, or AHIP, tapped the consulting firm APCO to develop an effort to label any government-run insurance option as an existential threat to Democratic political goals. The initiative emerged from a plan to minimize the impact of Michael Moore’s documentary “Sicko,” which was deeply critical of the American health care system.

The campaign involved planting studies with think tanks, mobilizing pundits on television, and sponsoring YouTube videos on “the horrors of government-run systems,” among other publicity tactics. The APCO-crafted blitz leaned on right-wing voices such as Fox News pundit John Stossel, conservative think tanks like the American Enterprise Institute, and centrist Democratic groups such as the Democratic Leadership Council, a now-defunct group associated with the Third Way. The 2008 campaign adopted a two-pronged strategy: position private health insurance as the only positive solution to America’s health care woes and “disqualify government-run health care as a politically viable solution.”

Now, the same lobby groups are involved in a similar effort. AHIP, the insurance trade group behind the 2008 plan, is also a sponsor of the Partnership’s 2020 campaign, along with the Federation of American Hospitals, Pharmaceutical Research and Manufacturers of America, the Blue Cross Blue Shield Association, the Biotechnology Innovation Organization, and the American Medical Association.

By Steffie Woolhandler, M.D., M.P.H. and David Himmelstein, M.D.
Health Affairs, Blog, November 19, 2018

Single-payer reform is in the news—and in the U.S. House and Senate. One hundred twenty-three Congresspeople have signed on as co-sponsors of H.R. 676, the single-payer legislation in House of Representatives, and 16 Senators have formally endorsed S.1804, the Senate version. (Disclosure: H.R. 676 was closely modeled on the Physicians for a National Health Program reform proposal published in JAMA, for which we served as lead authors).

While both bills would cover all Americans under a single, tax-funded insurance program, they prescribe different provider payment strategies. The Senate version largely adopts Medicare’s current payment mechanisms; the House bill’s is modeled on Canada’s single-payer program, also called “Medicare,” which pays hospitals global budgets (much as a fire department is paid in the U.S.) and sharply constrains opportunities for investor-owned care.

These differences haven’t attracted much attention from politicians or the press, and few patients are aware of, or deeply concerned about them. That’s not surprising, since both bills address the lay public’s most pressing payment-related concern: they would drastically shrink (S.1804) or completely eliminate (H.R. 676) out-of-pocket payments for needed care.

But these divergent payment strategies would create very different financial incentives for providers, shaping the culture of medicine and the financial viability of a single-payer reform. The Senate version would, like Medicare, pay hospitals and other institutional providers on a per-patient basis, intermixing payments for current operating expenses with funding for future capital investments and profits. As at present, hospitals’ success, and even survival, would depend on generating profits (“surpluses” in non-profit facilities). Hospitals with a favorable bottom line could invest and add new buildings and programs, while unprofitable ones couldn’t modernize or expand, risking a downward spiral toward takeover or closure.

It’s this profit imperative that drives hospitals’ financial gaming, e.g. upcoding, and concentration on the most lucrative services, such as elective cardiac and orthopedic services, rather than money losers like mental health. This payment mechanism (and S.1804 as a whole) also leaves the door open to investor-owned providers.

In contrast, the House bill would abolish per-patient billing by hospitals and other institutions, and its global budget payments would cover only operating costs; hospitals would be prohibited from retaining surpluses, and capital investments would be funded through separate government grants. The bill would also explicitly proscribe payments to investor-owned facilities, and it calls for their conversion to non-profit status financed by issuing bonds.

Implications For The Financial Viability Of Reform

Expanding and improving coverage, as both S.1804 and H.R. 676 would do, is expected to increase care utilization and hence clinical costs. Yet most analysts foresee savings on billing and administration (as well as on prescription drugs prices) that would offset these increases. Both bills would replace the current welter of private plans—with average overhead of about 12 percent of premiums—with a single public insurer whose overhead would likely be similar to the traditional Medicare program’s 2 percent, or the 1.6 percent in Canadian Medicare (National Health Expenditure Trends, 1975 to 2017: Data Tables — Series A).

But insurance overhead accounts for only 44 percent of the administrative savings that could be realized under a single-payer program; the rest comes from streamlining providers’ administrative work. For instance, U.S. hospitals’ administrative costs average 25.3 percent of their total revenues, versus only 12 percent in single-payer systems like Canada’s and Scotland’s that pay global operating budgets and minimize rewards for financial gaming.

Medicare’s payment approach requires hospitals to bill for and justify each hospitalization, a requirement that persists in value-based payment schemes like ACOs and would continue under S.1804. Hence, hospitals would have to maintain much of their current wasteful billing, documentation, and internal cost-tracking systems. Retaining the profit imperative would also continue to reward hospitals for financial gaming and tailoring services to profitability, driving up both administrative costs and wasteful spending on low-value care.

Instead of bundled payment arrangements tied to individual patients, the House version would substitute an institution-wide bundled payment, i.e., a global budget covering all operating costs. As noted above, that approach has streamlined hospital administration in other nations, which have been more effective than the United States at restraining overall costs. In contrast, ACOs have increased providers’ administrative costs by about $200 per patient annually, and have generated trivial or no savings after accounting for Medicare’s “shared savings” bonus payments. Similarly, Medicare’s (and other payers’) pay-for-performance initiatives impose substantial administrative costs on providers, with no evidence that they’ve improved patients’ outcomes in any setting.

In sum, the financial viability of a single-payer reform turns on cutting administrative costs and minimizing incentives for financial gaming. Maintaining Medicare’s current payment strategies, as under S.1804, would be substantially costlier than adopting the non-profit global-budgeting strategy used in several other nations.

Implications For Medical Culture

Differences in payment strategies also have implications for the work lives of doctors and other clinical personnel. Medicare’s turn to ACOs effectively forces providers to become insurers who bear the risk of their patients’ medical expenses, even those incurred in other venues. This strategy virtually banished small independent providers, triggering a wave of mergers and acquisitions. Community hospitals have been gobbled up, and a rapidly growing share of doctors have become employees.

The profit imperative imposed on hospitals and physician practices by Medicare’s payment incentives filters down to doctors. It manifests as morale-sapping productivity pressures; redundant documentation requirements; time wasted on mandatory upcoding classes; and the sense that clinical priorities have become subservient to financial ones. The length of doctors’ notes in EPIC’s electronic health record—larded with clinically useless templated and copied material, and four times as long in the U.S. as in other nations—gives one indication of how payment rules translate into burnout.

The Senate’s version risks maintaining these ACO-driven incentives, and even risks the reemergence of private insurance under the guise of vertically integrated, risk-bearing corporate ACOs.

The Future Of Investor-Owned Care

The House single-payer bill envisions a buyout of the investor-owned facilities needed to provide care under the single-payer system, while the Senate version would leave them in current hands.

Proponents of the House approach acknowledge that many non-profit health care organizations have drifted far from their charitable roots. However, they cite evidence that for-profit providers (including hospitals, dialysis centers, nursing homes, home care agencies, and hospices) provide inferior care at inflated prices (see, for instance here, here, here, here and here) and are more likely to bend care to profitability (see here, here, here and here). For-profit hospitals spend less on nurses and other clinical aspects of care, but more on administration and financial management; for-profit chains have often been cited for questionable business practices and have been repeatedly implicated in large scale fraud (see here, here, here and here).

According to CMS, for-profit nursing homes are cited for quality deficiencies 28 percent more often than non-profits, and for deficiencies that place residents in immediate jeopardy 53 percent more frequently. Investor-owned home care agencies cost Medicare $752 more per patient than non-profit agencies, while providing worse care.

Yet even some who would prefer to exclude investor-owned facilities from a single-payer system worry about the cost of a buyout. In conversations with Congressional aides, some have suggested that these costs could amount to $1 trillion or more, although none could cite a source for that figure. While it’s not clear exactly how to value the assets of investor-owned medical facilities, estimates of their current capital assets and of their stock market valuations provide some guidance.

In the detailed cost reports filed with Medicare covering fiscal year 2016 (the most recent year for which virtually all reports are available), all for-profit hospitals taken together reported total capital assets of $97.845 billion at the start of the year, and additional purchases totaling $7.453 billion (Himmelstein & Woolhandler, unpublished analysis of hospital cost reports). So the total capital stock of all for-profit hospitals – including not just acute care hospitals, but most other inpatient facilities besides stand-alone nursing homes – totaled $105.298 billion. (The comparable figure for non-profits is $718.628 billion).

Since most investor-owned providers also carry debt, it’s not surprising that the capital asset figures are considerably higher than the stock market value of the firms that own the facilities. As indicated in Exhibit 1, the market valuation of the five publicly-traded firms that account for the vast majority of for-profit hospitals totals $50.071 billion. While data on the market value of the (smaller) privately held for-profit hospital chains is not available, the value of the larger chains, and past sale prices for three of the privately-held firms, suggests that they’d add only several billion to the total.

Exhibit 1: Market Value Of Investor-Owned Health Care Providers

Notes for Exhibit: Figures for market capitalization for firms that are included in the Fortune 500 were taken from Fortune June 1, 2018. Other figures are from Google Finance and other online sources, searched October 26, 2018.

* Privately-held firm, no market capitalization or recent sale price data available

** Figures include value of dialysis supply business as well as health service delivery. Fresenius figure is adjusted for share of business in U.S.

*** Figures for some nursing firms include value of senior living communities

Similarly, as Exhibit 1 shows, the total value of shares in publicly traded nursing home firms, rehab, dialysis, and home care and hospice providers is relatively modest: less than $50 billion. And these valuations (which fluctuate from day-to-day) include aspects of the businesses that would not be included in a buyout, e.g. the value of real estate devoted to senior living communities, or the roughly 15 percent of DaVita’s business that’s unrelated to dialysis and the 20 percent of Fresenius’ revenues attributable to sales of products such as dialysis supplies.

Overall, the fair market value of investor-owned facilities covered by a buyout, whether assessed by capital stock or stock prices, seems unlikely to exceed $150 billion. Purchasing these assets using Treasury Bill financing over 15 years at the current interest rate of 3 percent would cost about $12.75 billion annually, equivalent to about 1 percent of annual hospital costs. Moreover, even in the short term, some or all of these costs would be offset by savings on profits, which totaled more than $6 billion in 2017 for just three of these firms (HCA, DaVita and Fresenius).

Bottom line: A buyout of investor-owned facilities is affordable. Indeed, it might well lower costs.

Looking Forward

In the short run, the divergence between the House and Senate versions of single-payer reform is of little consequence. No bill will be enacted under the current administration. Yet with support for single payer blossoming among Democratic leaders and the public, the prospect of legislative action is increasing, and with it the push for convergence. Indeed, Pramila Jayapal, the leader of the House Single-Payer Caucus, has indicated her intent to move the two bills closer together.

In aligning the bills, House members should, in our view, adopt some aspects of the Senate’s bill, notably its repeal of the Hyde Amendment that forbids using federal funds for abortion, as well as its greater specificity. But Senators should adopt the House bill’s payment strategies and commitment to non-profit ownership of health care providers.

https://www.healthaffairs.org…