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Himmelstein and Woolhandler critique the Mercatus analysis of single payer costs

Himmelstein and Woolhandler critique the Mercatus analysis of single payer costs

The Mercatus Center's Estimate of the Costs of a National Single-Payer Healthcare System: Ideology Masquerading as Health Economics

By David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, August 2, 2018

The Mercatus Center’s estimate of the cost of implementing Sen. Bernie Sanders’ Medicare for All Act (M4A) projects outlandish increases in the utilization of medical care, ignores vast savings under single-payer reform, and fails to even mention the extensive and well-documented evidence on single-payer systems in other nations – which all spend far less per person on health care than we do. But despite adopting a raft of faulty assumptions that inflate the estimated cost of implementing single payer, the Mercatus Center’s report concludes that universal first dollar coverage under Sen. Sanders’ bill would actually decrease the nation’s total health expenditures, saving the average American about $6,000 over ten years.

We outline below some of the most glaring errors in the Mercatus Center analysis of Medicare for All, which was led by Charles Blahous.

1. Administrative savings, Part 1: Blahous assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 13 percent in private insurance. Although overhead in Canada’s single payer system is only 1.8%, Blahous justifies his 6 percent estimate by citing Medicare’s current overhead, which includes the extraordinarily high overhead costs of private Medicare HMOs run by UnitedHealthcare and other insurance firms. However, Sen. Sanders’ proposal would exclude these for-profit insurers, and instead build on the traditional Medicare program, whose overhead is less than 3 percent. Moreover, by simplifying hospital payments by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments, a well-designed single-payer program could fully reduce overhead to Canada’s level of about 1.8 percent. Cutting insurance overhead to less than 2 percent (rather than the 6 percent that Blahous projects) would save approximately $2.9 trillion more than Blahous estimates over a 10 year period.

2. Administrative savings, Part 2: Blahous seems unaware of the extensive literature documenting the huge administrative burden – and resulting costs – borne by U.S. doctors and hospitals, and the savings that would be realized under a streamlined single-payer system. Every serious analyst of single-payer reform has acknowledged these savings, including the Congressional Budget Office, the Government Accountability Office, the Lewin Group (a consulting firm owned by UnitedHealth Group), and Prof. Kenneth Thorpe.

These provider savings on paperwork would, in fact, be much larger than the savings on insurance overhead. At present, U.S. hospitals spend one-quarter of their total budgets on billing and administration, more than twice as much as hospitals spend in single payer systems like Canada’s or Scotland’s. Similarly, U.S. physicians, who must bill hundreds of different insurance plans with varying payment and coverage rules, spend two to three times as much as our Canadian colleagues on billing.

Overall, these administrative savings for doctors and hospitals would amount to about $3.4 trillion over 10 years. Additional savings of almost $2.0 trillion from streamlined billing and administration would accrue to nursing homes, home care agencies, ambulance companies, drug stores, and other health care providers.

In total, the Blahous analysis underestimates administrative savings by about $8.3 trillion over 10 years.

3. Drug costs: Blahous projects that the only drug savings achievable through a single-payer plan would come from switching patients from brand name drugs to generics. He assumes that the prices of drugs – both generics and brand name drugs – could not be lowered through the price negotiations called for in Sen. Sander’s bill. Blahous claims that the savings achievable through negotiations cannot be estimated, ignoring the price reductions of about 40-50% that have been achieved by the VA and by many other nations that use the methods called for in the Sanders legislation.

Reducing drug prices to the levels currently paid by European nations would save at least $1.7 trillion more than Blahous posits over 10 years.

4. Utilization of care: Blahous projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase he foresees for specific services like doctor visits or hospital care. However, it is clear that the medical care system does not have the capacity to provide the huge surge in care that he posits.

For instance Blahous’ figures for the increase in acute care suggest that Sanders’ plan would result in more than 100 million additional doctor visits and several million more hospitalizations each year. But there just aren’t enough doctors and hospital beds to deliver that much care. Doctors are already working 53 hours per week, and experience from past reforms tells us that they won’t increase their hours, nor will they see many more patients per hour.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada. Doctors and hospitals can adjust care to meet increasing demand, as happens every year during flu season.

Moreover, no surge materialized when Medicare was implemented and millions of previously uninsured seniors got coverage. Between 1964 (before Medicare) and 1966 (the year when Medicare was fully functioning) there was absolutely no increase in the total number of doctor visit in the U.S.; Americans averaged 4.3 visits per person in 1964 and 4.3 visits per person in 1966. Instead, the number of visits by poor seniors went up, while the number of visits by healthy and wealthy patients went down slightly. The same thing happened in hospitals. There were no waiting lists, just a reduction in the utilization of unneeded elective care by wealthier patients, and the delivery of more care to sick people who needed it.

Bizarrely, despite projecting a $2.213 trillion increase in total payments to providers over 10 years, Blahous claims that the program would lead to massive financial losses for doctors and hospitals (top of page 19).

5. Long Term Care: The original version of Blahous’ report estimated that the Sanders bill would increase expenditures for long term care by $1.849 trillion over 10 years. He was apparently unaware that the Sanders bill would not immediately implement major changes in the long term care financing system. When informed of this error he deleted this section of the report, and recalculated his figures.

In summary, Blahous grossly underestimates the administrative savings under single payer; projects increases in the number of doctor visits and hospitalizations that far exceed the capacity of doctors and hospitals to provide this added care; and posits that our country would continue to pay much more for drugs and medical equipment than people in every other nation with national health insurance. He thus overestimates national health expenditures by about $10 trillion over 10 years.

Blahous also neglects to mention that massive savings would accrue to businesses, households, and state and local governments that would no longer be saddled with health insurance premiums or out-of-pocket costs. These savings would more than compensate for the increased federal government expenditures. The Sanders bill would, in reality, shift spending from private to public sources, and from state and local governments to the federal government. Over 10 years, our nation would surely pay less overall under Sen. Sanders bill than under current arrangements.

Moreover, despite overestimating new costs and underestimating savings Blahous admits that Sanders’ program would cover all of the uninsured, and upgrade coverage for the vast majority of Americans who currently have private insurance or Medicare, while decreasing total health expenditures by $2 trillion over ten years.

Blahous’ biased, anti-single payer estimate inadvertently bolsters the evidence that a single payer reform would greatly increase the efficiency and fairness of the U.S. health care system.

Drs. Himmelstein and Woolhandler are distinguished professors of health policy at the City University of New York at Hunter College and lecturers in medicine at Harvard Medical School. The opinions expressed do not necessarily reflect those institutions’.

https://www.pnhp.org…

***

Comment:

By Don McCanne, M.D.

Res ipsa loquitur.

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Dr. Paul Song on ‘Rising Up With Sonali’

PNHP national board member Dr. Paul Song appeared on “Rising Up With Sonali” on Free Speech TV and Pacifica radio stations on August 2, 2018. He discussed a recent study from the Koch-funded Mercatus Center that concluded Sen. Bernie Sanders’ Medicare for All Act would reduce overall health spending while covering all Americans.

The Mercatus Center’s Estimate of the Costs of a National Single-Payer Healthcare System: Ideology Masquerading as Health Economics

By David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, August 2, 2018

The Mercatus Center’s estimate of the cost of implementing Sen. Bernie Sanders’ Medicare for All Act (M4A) projects outlandish increases in the utilization of medical care, ignores vast savings under single-payer reform, and fails to even mention the extensive and well-documented evidence on single-payer systems in other nations – which all spend far less per person on health care than we do. But despite adopting a raft of faulty assumptions that inflate the estimated cost of implementing single payer, the Mercatus Center’s report concludes that universal first dollar coverage under Sen. Sanders’ bill would actually decrease the nation’s total health expenditures, saving the average American about $6,000 over ten years.

We outline below some of the most glaring errors in the Mercatus Center analysis of Medicare for All, which was led by Charles Blahous.

1. Administrative savings, Part 1: Blahous assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 13 percent in private insurance. Although overhead in Canada’s single payer system is only 1.8%, Blahous justifies his 6 percent estimate by citing Medicare’s current overhead, which includes the extraordinarily high overhead costs of private Medicare HMOs run by UnitedHealthcare and other insurance firms. However, Sen. Sanders’ proposal would exclude these for-profit insurers, and instead build on the traditional Medicare program, whose overhead is less than 3 percent. Moreover, by simplifying hospital payments by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments, a well-designed single-payer program could fully reduce overhead to Canada’s level of about 1.8 percent. Cutting insurance overhead to less than 2 percent (rather than the 6 percent that Blahous projects) would save approximately $2.9 trillion more than Blahous estimates over a 10 year period.

2. Administrative savings, Part 2: Blahous seems unaware of the extensive literature documenting the huge administrative burden – and resulting costs – borne by U.S. doctors and hospitals, and the savings that would be realized under a streamlined single-payer system. Every serious analyst of single-payer reform has acknowledged these savings, including the Congressional Budget Office, the Government Accountability Office, the Lewin Group (a consulting firm owned by UnitedHealth Group), and Prof. Kenneth Thorpe.

These provider savings on paperwork would, in fact, be much larger than the savings on insurance overhead. At present, U.S. hospitals spend one-quarter of their total budgets on billing and administration, more than twice as much as hospitals spend in single payer systems like Canada’s or Scotland’s. Similarly, U.S. physicians, who must bill hundreds of different insurance plans with varying payment and coverage rules, spend two to three times as much as our Canadian colleagues on billing.

Overall, these administrative savings for doctors and hospitals would amount to about $3.4 trillion over 10 years. Additional savings of almost $2.0 trillion from streamlined billing and administration would accrue to nursing homes, home care agencies, ambulance companies, drug stores, and other health care providers.

In total, the Blahous analysis underestimates administrative savings by about $8.3 trillion over 10 years.

3. Drug costs: Blahous projects that the only drug savings achievable through a single-payer plan would come from switching patients from brand name drugs to generics. He assumes that the prices of drugs – both generics and brand name drugs – could not be lowered through the price negotiations called for in Sen. Sander’s bill. Blahous claims that the savings achievable through negotiations cannot be estimated, ignoring the price reductions of about 40-50% that have been achieved by the VA and by many other nations that use the methods called for in the Sanders legislation.

Reducing drug prices to the levels currently paid by European nations would save at least $1.7 trillion more than Blahous posits over 10 years.

4. Utilization of care: Blahous projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase he foresees for specific services like doctor visits or hospital care. However, it is clear that the medical care system does not have the capacity to provide the huge surge in care that he posits.

For instance Blahous’ figures for the increase in acute care suggest that Sanders’ plan would result in more than 100 million additional doctor visits and several million more hospitalizations each year. But there just aren’t enough doctors and hospital beds to deliver that much care. Doctors are already working 53 hours per week, and experience from past reforms tells us that they won’t increase their hours, nor will they see many more patients per hour.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada. Doctors and hospitals can adjust care to meet increasing demand, as happens every year during flu season.

Moreover, no surge materialized when Medicare was implemented and millions of previously uninsured seniors got coverage. Between 1964 (before Medicare) and 1966 (the year when Medicare was fully functioning) there was absolutely no increase in the total number of doctor visit in the U.S.; Americans averaged 4.3 visits per person in 1964 and 4.3 visits per person in 1966. Instead, the number of visits by poor seniors went up, while the number of visits by healthy and wealthy patients went down slightly. The same thing happened in hospitals. There were no waiting lists, just a reduction in the utilization of unneeded elective care by wealthier patients, and the delivery of more care to sick people who needed it.

Bizarrely, despite projecting a $2.213 trillion increase in total payments to providers over 10 years, Blahous claims that the program would lead to massive financial losses for doctors and hospitals (top of page 19).

5. Long Term Care: The original version of Blahous’ report estimated that the Sanders bill would increase expenditures for long term care by $1.849 trillion over 10 years. He was apparently unaware that the Sanders bill would not immediately implement major changes in the long term care financing system. When informed of this error he deleted this section of the report, and recalculated his figures.

In summary, Blahous grossly underestimates the administrative savings under single payer; projects increases in the number of doctor visits and hospitalizations that far exceed the capacity of doctors and hospitals to provide this added care; and posits that our country would continue to pay much more for drugs and medical equipment than people in every other nation with national health insurance. His thus overestimates national health expenditures by about $10 trillion over 10 years.

Blahous also neglects to mention that massive savings would accrue to businesses, households, and state and local governments that would no longer be saddled with health insurance premiums or out-of-pocket costs. These savings would more than compensate for the increased federal government expenditures. The Sanders bill would, in reality, shift spending from private to public sources, and from state and local governments to the federal government. Over 10 years, our nation would surely pay less overall under Sen. Sanders bill than under current arrangements.

Moreover, despite overestimating new costs and underestimating savings Blahous admits that Sanders’ program would cover all of the uninsured, and upgrade coverage for the vast majority of Americans who currently have private insurance or Medicare, while decreasing total health expenditures by $2 trillion over ten years.

Blahous’ biased, anti-single payer estimate inadvertently bolsters the evidence that a single payer reform would greatly increase the efficiency and fairness of the U.S. health care system. 

Drs. Himmelstein and Woolhandler are distinguished professors of health policy at the City University of New York at Hunter College and lecturers in medicine at Harvard Medical School. The opinions expressed do not necessarily reflect those institutions’.

QOTD Addendum: RAND study of the New York Health Act

Distributed as Quote of the Day on August 1, 2018

This morning the RAND study on the single payer New York Health Act was sent out primarily to demonstrate another study showing that the single payer model is effective for ensuring that everyone is covered while containing health care costs. However, a critique of the RAND analysis was not distributed, even though there are some significant deficiencies in the study.

One of the most important policies that characterizes a well designed single payer system is the recovery of a tremendous amount of administrative waste. Many of the studies minimize the amount of waste that exists and that can be recovered, in spite of the abundance of evidence published in the academic policy literature. This is crucial because that concept is often omitted from reports in the lay literature, and so the public is not well informed on this exceedingly important feature of the single payer model. In your single payer advocacy, always be sure that the magnitude of the recoverable administrative waste is not omitted from the discussions.

David Himmelstein and Steffie Woolhandler, distinguished professors of health policy at the City University of New York at Hunter College and co-founders of PNHP, have provided the following brief critique of the RAND study. In it they show that the benefit of single payer is far greater that that reported by the RAND authors, especially regarding the administrative savings.

***

Comments on the Rand Estimates of the Costs of the New York Health Act

By David U. Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.

1) The projected net changes in utilization given supply constraints are in the ballpark, although the portrayal of the supply constraints as implying waits is unduly negative. Supply constraints limited utilization increases with the implementation of Medicare and the ACA, yet there was no perceptible increase in waits for care. Rather, there was probably a reduction in unnecessary care for the previously well insured.

2) The estimate of reductions in drug prices is too low given the experience in other nations. In particular, the assumption that prices of drugs delivered in physicians’ offices would be reduced by a smaller percentage than other drug prices seems unjustified.

3) The estimates of administrative savings are absurdly low.

a) The assumption that health plan administrative overhead would only be reduced to 6% is completely unjustified. FFS Medicare’s administrative overhead is under 3%, while Canada’s single payer programs averaged overhead of 1.6% in 2017 – a total of $2.7 billion (Canadian). (Canada’s overhead costs are lower, at least in part, because it pays hospitals global budgets rather than FFS, as Medicare does. It seems likely that the NYH act would also globally budget hospitals, and hence achieve savings comparable to those in Canada). As the Rand authors note, the overhead rates for Medicare as a whole (7%), and for Medicaid (7%) are inflated because they include the extremely high overhead of managed care plans in those programs.

Rand claims that health plan administrative costs would be driven up by the need to verify residency, deal with out-of-state services, and track Medicaid and Medicare eligibility in order to draw down federal matching funds. The Canadian provincial programs perform the first two of these functions. Tracking Medicaid eligibility should take trivial resources – essentially just verifying income, which can largely be gleaned from income tax and Social Security records. The Social Security Administration should be able to provide information on Medicare eligibility at virtually no cost to the state.

In sum, there is no justification for the claim that it would cost $16.6 billion to administer coverage for 20 million New Yorkers – $830 per person, more than 8-fold higher than Canada’s cost. A more reasonable estimate would be 2%, or at most 3%.

b) It is hard to decipher exactly how the Rand authors estimated provider administrative savings. In Table 4.1 they indicate that at present, administrative costs account for 13% of physician and clinical service expenditures, 12% of hospital expenditures in New York and 10% of other service expenditures. They then estimate that provider administrative spending could be reduced by 13%, i.e. equivalent to a savings of less than 2% of total revenues.

While they list several references to support this estimate (and provide some further description in footnote 16 on page 33), it is unclear how they arrived at these figures, which are at odds with the actual findings of several of the references they cite. For instance, the Blanchfield paper they cite estimated that “excess” administrative costs in physician practices accounted for 11.9% of total net revenues, or about $50,250 per physician. The Himmelstein, Campbell and Woolhandler paper that they cite, found that administrative costs consumed about 26.9% of physicians’ revenues and  24.3% of hospital revenues, while these costs were 16.1% and 12.9% respectively in Canada. (Himmelstein et al’s more recent analysis of hospital administrative costs in 8 nations, which appeared in Health Affairs in 2014 reached virtually identical conclusions regarding hospital administrative costs and savings.) Both the Jiwani study and the Pozen and Cutler papers reached virtually identical conclusions as the Himmelstein, Campbell, Woolhandler study regarding administrative savings under single payer. The Mora et al study they cite concluded that physicians’ administrative costs totaled about $83,000 per physician in the US vs. about $27,000 per doctor in Canada, far larger savings than Rand assumes.

They reference Rand hospital data, which apparently relies on the same data source as the Himmelstein analyses of hospital administrative costs (which have undergone extensive peer review), but provide no information on how they derived administrative cost estimates from these data, and as far as we can tell their methods have neither been published nor peer reviewed. They cite their analysis of hospital administrative costs in Maryland’s all-payer system, which is irrelevant to an analysis of single payer, then use this paper as a “low estimate” in order to justify excluding a high estimate from a study that is clearly relevant.

In sum, according to the documentation in the report, it appears that the Rand authors  have made an error in interpreting previous studies’ figures for administrative costs and savings for providers under single payer. These studies generally estimate that administrative SAVINGS under single payer would amount to 12%-13% of providers’ TOTAL REVENUES. The Rand authors appear to have mistakenly concluded that these figures are estimates of the total costs of administration (rather than potential savings), and have then assumed that 12% of administrative costs (rather than 12% of total revenues) would be saved. As a result they estimate that providers’ would achieve administrative savings of about 1% of total revenues, rather than about 12% – a very large difference.

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The Next Generation of Doctors Is Pushing for Universal Healthcare

The student caucus of the American Medical Association got the organization to agree to reconsider its decades-long opposition to single-payer healthcare.

By Shefali Luthra
Tonic, August 1 2018

When the American Medical Association—one of the nation’s most powerful healthcare groups—met in Chicago this June, its medical student caucus seized an opportunity for change.

Though they had tried for years to advance a resolution calling on the organization to drop its decades-long opposition to single-payer healthcare, this was the first time it got a full hearing. The debate grew heated—older physicians warned their pay would decrease, calling younger advocates naive to single-payer’s consequences. But this time, by the meeting’s end, the AMA’s older members had agreed to at least study the possibility of changing its stance.

“We believe healthcare is a human right, maybe more so than past generations,” says Brad Zehr, a 29-year-old pathology resident at Ohio State University, who was part of the debate. “There’s a generational shift happening, where we see universal healthcare as a requirement.”

The ins and outs of the AMA’s policy making may sound like inside baseball. But this year’s youth uprising at the nexus of the medical establishment speaks to a cultural shift in the medical profession, and one with big political implications.

Amid Republican attacks on the Affordable Care Act, an increasing number of Democrats—ranging from candidates to established Congress members—are putting forth proposals that would vastly increase the government’s role in running the health system. These include single-payer, Medicare-for-all, or an option for anyone to buy in to the Medicare program. At least 70 House Democrats have signed on to the new “Medicare-for-all” caucus.

Organized medicine, and previous generations of doctors, had for the most part staunchly opposed to any such plan. The AMA has thwarted public health insurance proposals since the 1930s and long been considered one of the policy’s most powerful opponents.

But the battle lines are shifting as younger doctors flip their views, a change that will likely assume greater significance as the next generation of physicians takes on leadership roles. The AMA did not make anyone available for comment.

Many younger physicians are “accepting of single-payer,” says Christian Pean, 30, a third-year orthopedic surgery resident at New York University.

In prior generations, “intelligent, motivated, quantitative” students pursued medicine, both for the income and because of the workplace independence—running practices with minimal government interference, says Steven Schroeder, 79, a longtime medical professor at the University of California-San Francisco.

In his 50 years of teaching, students’ attitudes have changed: “The ‘Oh, keep government out of my work’ feeling is not as strong as it was with maybe older cohorts,” Schroeder says. “Students come in saying, ‘We want to make a difference through social justice. That’s why we’re here.’”

Though “single-payer” healthcare was long dismissed as a left-wing pipe dream, polling suggests a slim majority of Americans now support the idea—though it is not clear people know what the term means.

A full single-payer system means everyone gets coverage from the same insurance plan, usually sponsored by the government. Medicare-for-all, a phrase that gained currency with the presidential campaign of Senator Bernie Sanders of Vermont, means everyone gets Medicare, but, depending on the proposal, it may or may not allow private insurers to offer Medicare as well. (Sanders’ plan, which eliminates deductibles and expands benefits, would get rid of private insurers.)

Meanwhile, lots of countries achieve universal healthcare—everyone is covered somehow—but the method can vary. For example, France requires all citizens to purchase coverage, which is sold through nonprofits. In Germany, most people get insurance from a government-run “public option,” while others purchase private plans. In England, healthcare is provided through the tax-funded National Health System.

American skeptics often use the phrase “socialized medicine” pejoratively to describe all of these models.

“Few really understand what you mean when you say single-payer,” says Frank Opelka, the medical director of quality and health policy for the American College of Surgeons, which opposes such a policy. “What they mean is, ‘I don’t think the current system is working.’”

But the willingness to explore previously unthinkable ideas is evident in young doctors’ ranks.

Recent surveys through LinkedIn, recruiting firm Merritt Hawkins and trade publication NEJM Catalyst indicate growing support. In the March NEJM survey, 61 percent of 607 respondents said single-payer would make it easier to deliver cost-effective, quality healthcare.

Delving further, that survey data shows support is stronger among younger physicians, says Namita Mohta, a hospitalist at Brigham and Women’s Hospital and clinical editor at NEJM Catalyst.

But it’s unclear whether these findings reflect young doctors’ feelings about the policy or whether they are tapping in to broader frustrations with the American health system.

Much like the general public, doctors often use terms like single-payer, Medicare-for-all, and universal healthcare interchangeably.

“Our younger generation is less afraid to come out and say we want universal healthcare,” says Anna Yap, 26, an emergency medicine resident at UCLA, who served as a medical student delegate to the AMA until this past June. “But how? It’s different in what forms we see.”

Younger doctors also pointed to growing concern about how best to keep patients healthy. They cited research that broadly suggests having health insurance tracks with better health outcomes.

“Medical students, I would say, are very interested in public health and improving social determinants of health—one of them being access to health insurance,” says Jerome Jeevarajan, 26, a neurology resident at the University of Texas-Houston, referring to non-medical factors that improve health, such as food or housing.

Some of the shift in opinion has to do with the changing realities of medical practice. Doctors now are more likely to end up working for large health systems or hospitals, rather than starting individual practices. Combined with the increasing complexity of billing private insurance, many said, that means contracting with the government may feel like less of an intrusion.

The debate is, at this point, still theoretical. Republicans—who control all branches of the federal government—sharply oppose single-payer. Meanwhile, single-state efforts in California, Colorado, and New York have fallen flat.

Also, doctors represent only one part of the sprawling healthcare industrial complex. Other healthcare interests—including private insurance, the drug industry, and hospital trade groups—have been slower to warm to catch phrases like single-payer or universal healthcare, all of which would likely mean a drop in income.

But increasingly physicians seem to be switching sides in the debate, and young physicians want to be part of the discussion.

“There’s tremendous potential…to be at the table if single-payer becomes a significant part of the political discourse, and create a system that is more equitable,” Pean says.

https://tonic.vice.com…

RAND analysis of the New York Health Act – a single payer proposal

RAND Corporation Study Confirms: New York Health Act "Could Expand Coverage While Reducing Total Health Spending"

Richard N. Gottfried, New York Assembly District 75
Chair, Assembly Health Committee

Gustavo Rivera, New York Senate District 33
Ranking Member, Senate Health Committee

August 1, 2018

State Senator Gustavo Rivera and Assembly Health Committee Chair Richard Gottfried, sponsors of the New York Health Act in the New York State Legislature, welcomed the findings of a study of the bill by the highly-regarded, independent, non-profit RAND Corporation. The study confirms that New York Health would reduce total health care costs, while increasing spending on actual care rather than administration and insurance company profit; provide full health coverage to every New Yorker; save substantial money for almost all New Yorkers; and generate a net increase in employment due to increases in disposable income. 

In December 2017, the New York State Health Foundation commissioned the RAND Corporation to assess the savings, costs, and feasibility of the New York Health Act. Using conservative estimates, the RAND study establishes that New Yorkers would use more health care services under the new single-payer plan than under the current system, even as total health care spending would be slightly lower in 2022 growing to a savings of $15 billion annually by 2031 due to administrative efficiencies. 

The study highlights that the majority of New Yorkers would pay less under the New York Health Plan – New Yorkers in the bottom 90% of household incomes would save an average of $2,800 per person annually – thanks to an equitable distribution of taxation based on the ability to pay. In addition, premiums, deductibles, copays, out-of-pocket payments, and out-of-network charges would be eliminated.

“This is an important validation of the New York Health Act by one of the most prestigious analytical firms in the country,” said Assembly Health Committee Chair Gottfried.  “RAND shows we can make sure every New Yorker gets the care they need and does not suffer financially to get it; save billions of dollars a year by cutting administrative costs, insurance company profit, and outrageous drug prices; and pay for it all more fairly.  Even though RAND thinks the net savings back in the pockets of New Yorkers will be less than I think we’d actually get, this is still a terrific deal for New York.  The study also shows it’s feasible to include long term care – home health care and nursing homes – in the bill.

“The RAND study makes it clear that the New York Health Act is not only feasible, but the most fiscally responsible option for our State”, said State Senator Gustavo Rivera, Ranking Member of State Senate Health Committee. “While we estimate that the benefits to New York State will be greater than those outlined in the study, we all agree that the implementation of the New York Health Act translates into more savings and jobs, while expanding critical health care coverage and access for all New Yorkers regardless of their wealth. I will continue to work with Assembly Member Gottfried and the many advocate organizations that support the bill as we stand up for what is right and work to implement an efficient and universal healthcare system in New York State.”

http://nyassembly.gov…

***

Estimating the Effects of a Single-Payer Proposal in New York State

By Jodi L. Liu, Chapin White, Sarah A. Nowak, Asa Wilks, Jamie Ryan, Christine Eibner
RAND, Research Brief, August 1, 2018

Key Findings

1. The New York Health Act could expand insurance coverage in New York without increasing overall health spending, if administrative costs are reduced and growth in provider payment rates is restrained.

2. Health care would be financed by taxes rather than by premiums and patient out-of-pocket payments. Substantial new taxes would be required.

3. Depending on how progressive new tax rates are, health care payments would decrease among most residents and would increase among the highest-income residents.

RAND Research Brief (6 pages):
https://www.rand.org…

RAND Full Research Report (125 pages):
https://www.rand.org…

RAND News Release:
https://www.rand.org…

***

Comment:

By Don McCanne, M.D.

This RAND study provides us with yet one more credible analysis that shows that single payer is a valid concept demonstrating that we can expand coverage to include everyone while controlling health care spending. This report should be particularly useful for health care reform advocates since it not only discusses single payer issues in general, but it also discusses the single payer concept as applied to one state, in this case New York.

Temporary political hurdles for New York include a Democrat in the state Senate who has shifted control to the Republicans by caucusing with them, and a CMS administrator in the Trump administration who has indicated that she will not cooperate with the waiver processes that would enable implementation of a single payer system at the state level.

Politics can change. It will be interesting to watch how New York does. But we must not let up on our efforts to enact a national single payer improved Medicare for all since our goal must remain one of achieving health care justice for all. If New York can get there first, then great for them. But let’s try to get the job done nationally as soon as possible so the states won’t have to act individually.

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Another payment model failure: bundling medical conditions

Evaluation of Medicare’s Bundled Payments Initiative for Medical Conditions

By Karen E. Joynt Maddox, M.D., M.P.H., E. John Orav, Ph.D., Jie Zheng, Ph.D., and Arnold M. By Epstein, M.D.
The New England Journal of Medicine, July 19, 2018

Abstract:

Background

The Center for Medicare and Medicaid Innovation (CMMI) launched the Bundled Payments for Care Improvement (BPCI) initiative in 2013. A subsequent study showed that the initiative was associated with reductions in Medicare payments for total joint replacement, but little is known about the effect of BPCI on medical conditions.

Methods

We used Medicare claims from 2013 through 2015 to identify admissions for the five most commonly selected medical conditions in BPCI: congestive heart failure (CHF), pneumonia, chronic obstructive pulmonary disease (COPD), sepsis, and acute myocardial infarction (AMI). We used difference-in-differences analyses to assess changes in standardized Medicare payments per episode of care (defined as the hospitalization plus 90 days after discharge) for these conditions at BPCI hospitals and matched control hospitals.

Results

A total of 125 hospitals participated in BPCI for CHF, 105 hospitals for pneumonia, 101 hospitals for COPD, 88 hospitals for sepsis, and 73 hospitals for AMI. At baseline, the average Medicare payment per episode of care across the five conditions at BPCI hospitals was $24,280, which decreased to $23,993 during the intervention period (difference, −$286; P=0.41). Control hospitals had an average payment for all episodes of $23,901, which decreased to $23,503 during the intervention period (difference, −$398; P=0.08; difference in differences, $112; P=0.79). Changes from baseline to the intervention period in clinical complexity, length of stay, emergency department use or readmission within 30 or 90 days after hospital discharge, or death within 30 or 90 days after admission did not differ significantly between the intervention and control hospitals.

Conclusions

Hospital participation in five common medical bundles under BPCI was not associated with significant changes in Medicare payments, clinical complexity, length of stay, emergency department use, hospital readmission, or mortality. (Funded by the Commonwealth Fund.)

From the Discussion

In summary, hospital participation in five common medical bundles under BPCI, as compared with nonparticipation, was not associated with changes from baseline in total Medicare payments per episode, case complexity, length of stay, emergency department use, hospital readmission, or mortality. Bundling of services to encourage more efficient care has great face validity and enjoys bipartisan support. For such bundling to work for medical conditions, however, more time, new care strategies and partnerships, or additional incentives may be required.

https://www.nejm.org…

***

Comment:

By Don McCanne, M.D.

In discussions of the disappointing results of experiments with alternative payment models, especially accountable care organizations, frequently advocates of these models recommend continuing to tweak them and study them further, but, at the same time, they also express enthusiasm for bundled payments as a promising cost saving and quality improvement tool.

Some surgical interventions, such as joint replacement, bundle into a neat package, and initial results suggest that these bundles can save money (although it remains unclear as to how much cost shifting takes place in the background of an institution offering a great variety of services of varying complexity – how do you allocate the multitude of other operational costs of the institution?).

For bundling to have a significant impact on costs, it would be important to include common major medical disorders since they account for a considerable portion of hospital admissions. This study of five five such disorders showed that bundling “was not associated with changes from baseline in total Medicare payments per episode, case complexity, length of stay, emergency department use, hospital readmission, or mortality.”

As with other reports of failures in innovative payment models the authors suggest “more time, new care strategies and partnerships, or additional incentives” i.e., more tweaking, and study the responses.

All of this is simply resulting in further delay in implementing a model that would actually accomplish the goals of efficiency and cost containment with the additional benefits of true universality, equity, and accessibility – a well designed, single payer, improved Medicare for all. Just think of the difference it would have made if we did this a quarter of a century ago when we began our advocacy. How much longer do we have to diddle around before we finally make our move?

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Does Bernie Sanders’s health plan cost $33 trillion — or save $2 trillion?

By Jeff Stein
The Washington Post, July 31, 2018

Congressional Republicans seized on a new study Monday estimating that a universal health-care plan by Sen. Bernie Sanders (I-Vt.) would cost the federal government $33 trillion by 2031, arguing that it proves Democrats have moved too far left.

Sanders, looking at the same study, says it shows his “Medicare for All” proposal would save Americans $2 trillion.

What’s going on here?

Republicans such as House Speaker Paul D. Ryan (R-Wis.) are correct that enacting Sanders’s single-payer plan would add trillions to government books, by placing all Americans on one government health insurer, according to both the study’s author and Sanders himself.

But Sanders is right that the study concludes that his plan would reduce overall spending on health care in the United States. Most U.S. spending on health care is done through the private sector. Sanders’s plan would transition virtually all of that spending to the public sector, dramatically increasing government expenditures on health care while also reducing national health-care spending overall, according to the report.

Sanders’s plan would also give health insurance to about 30 million Americans who lack it, while eliminating deductibles and premiums charged through private insurance.

“A Medicare-for-All health-care system would save the average family significant sums of money,” Sanders said in an email to The Washington Post. “Yes, an individual may pay more in taxes, but that family of four that is spending $28,000 a year for health care today will no longer pay premiums, co-pays or deductibles to private insurance companies.”

From 2019 to 2028, the federal government would spend an average of 2.8 trillion more per year on health care if Sanders’s plan were fully in place, according to the study, published by the Mercatus Center, a libertarian-leaning think tank. The study — written by Charles Blahous, a former official in President George W. Bush’s administration — notes that this price tag would not be covered by doubling what the government currently takes in through individual and corporate taxes.

Sanders’s plan calls for transitioning everyone in the United States onto the government health plan over the course of four years. In the first year, the federal government would drop the Medicare eligibility age from 65 to 55 — a proposal also backed by many centrist Senate Democrats — as well as enrolling everyone currently on Medicare and everyone younger than 18. It would then slowly add the rest of the population over the next three years, while offering insurance that charges no premiums or deductibles.

These changes would lead the U.S. government to control virtually all health spending in the United States — Sanders’s plan would also cover dental care and vision care — in what may be the biggest increase in federal expenditures in history, according to Blahous.

“The primary effect here is the expansion of the federal government,” Blahous said. His report questions whether it would be “desirable or practicable” for the federal government to so dramatically increase its spending on health care, given that the increase would dwarf many of the government’s other spending priorities.

But to single-payer advocates, there is no obvious difference to the average American between sending their money to a private insurer through premiums and sending it to the government through higher taxes.

And, they say, putting all Americans on one insurer would create a large-enough pool to force private health-care providers to charge less, while eliminating private insurers’ spending on marketing and administrative overhead that do not improve health outcomes.

On its current trajectory, the United States is projected to spend $7.65 trillion annually on health care by 2031, according to the Mercatus study. That number would drop to $7.35 trillion if Sanders’s plan were implemented, the study found. Over time, that adds up to a net savings of about $2.1 trillion.

“It’s a surprisingly positive view of Medicare for All from a very conservative research institute,” Larry Levitt, a health-care expert at the Kaiser Family Foundation, said of the Mercatus report. “According to the analysis, you could provide universal coverage with no patient cost-sharing and actually spend less on health care than we would under the status quo.”

Asked about the projected drop in national health spending, Blahous said the rise in government health-care spending was the significant finding of his report, not the change in overall national health spending. He also said that long-term pricing projections are inherently volatile and that he made generous assumptions about Sanders’s cost savings, also noting that in some other scenarios he analyzed, net health spending would go up.

“I’ve made all the favorable assumptions with respect to the author’s intent,” Blahous said in an interview. “The striking number people have to grapple with is whether the federal government could take on something of this magnitude.”

But Adam Gaffney, an expert at the Harvard Medical School who supports single payer, said Blahous is underestimating by billions of dollars the savings Sanders’s plan would create, by reducing spending on prescription drugs and administrative overhead.

Whether the U.S. political system could stomach the scale of these changes is another question altogether. Single-payer systems in many European countries demonstrate that they can reduce overall national health spending, but that does not mean that a Democratic administration could implement one without incurring an immense political backlash, said Harold Pollack, a health-care expert at the University of Chicago.

“I don’t look at this report and say it is a partisan hack job: The basic idea the Sanders plan would require a substantial increase in federal budget outlays is correct,” Pollack said. “But over the long run, the Sanders people are very correct that you could implement a system like this that would be more disciplined, more economical and more fair than the current U.S. health system.”

https://www.washingtonpost.com…

The Mercatus analysis of Bernie Sanders’ single payer bill

The Costs of a National Single-Payer Healthcare System

By Charles Blahous
Mercatus Center, July 30, 2018

Abstract

The leading current bill to establish single-payer health insurance, the Medicare for All Act (M4A – Senator Bernie Sanders), would, under conservative estimates, increase federal budget commitments by approximately $32.6 trillion during its first 10 years of full implementation (2022–2031), assuming enactment in 2018. This projected increase in federal healthcare commitments would equal approximately 10.7 percent of GDP in 2022, rising to nearly 12.7 percent of GDP in 2031 and further thereafter. Doubling all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan. It is likely that the actual cost of M4A would be substantially greater than these estimates, which assume significant administrative and drug cost savings under the plan, and also assume that healthcare providers operating under M4A will be reimbursed at rates more than 40 percent lower than those currently paid by private health insurance.

Increased Demand and Utilization

M4A would increase healthcare demand and utilization in at least three important ways. First, the plan would provide health insurance coverage to all Americans who are currently uninsured, greatly increasing their utilization of healthcare services. Coverage of the currently uninsured is estimated to increase their health service costs by roughly 89 percent.

Second, the plan would expand the range of services covered by existing insurance, explicitly covering dental, vision, and hearing care for all participants. This, too, would increase utilization of such services in addition to shifting their financing from private to public spending, especially for those now reliant on traditional Medicare.

Finally, the plan’s requirement that “no cost-sharing, including deductibles, coinsurance, copayments, or similar charges, be imposed on an individual” would also significantly increase healthcare utilization. Providing this first-dollar coverage is estimated to induce 11 percent additional demand for those currently covered by private insurance and 16 percent for those now in traditional Medicare without supplemental coverage.

Provider Payment Reductions

To offset the substantial cost increases created by stimulating additional consumer demand for and utilization of healthcare, the M4A bill would constrain expenditures by subjecting healthcare providers—including hospitals, physicians, and others—to Medicare payment rates. Under current law, Medicare reimburses healthcare providers at much lower rates than private health insurance does. In 2014, Medicare hospital payment rates were 62 percent of private insurance payment rates and are currently projected to decline to below 60 percent by the time M4A would be implemented, and to decline further afterward. Medicare physician payment rates were 75 percent of private insurance rates in 2016 and, per the terms of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), are projected to decline sharply in relative terms in future years, also falling below 60 percent within the first full decade of M4A.

The adoption of Medicare payment rates would represent a substantial reduction in provider reimbursements for care provided to everyone now covered by private insurance (though it would also be a temporary increase in physician payments for those now covered by Medicaid, which currently pays physicians at lower rates than does Medicare).

Drug Costs

This analysis credits the M4A proposal with approximately $846 billion in additional savings over the 2022–2031 period from negotiating lower prices for prescription drugs.

Administrative Savings

This analysis assumes substantial administrative cost savings generated by replacing private insurance with national single-payer insurance, specifically a reduction of seven percentage points (from an estimated 13 percent to 6 percent) in the administrative cost of covering those now holding private insurance.

Current administrative cost rates for Medicare as a whole are cited as being roughly 4 percent, though closer to 6 percent for Medicare Advantage. It is unlikely that the population now privately insured could be covered by M4A with administrative costs as low as 4 percent.

Long-Term Services and Supports

The M4A bill contains a “maintenance of effort” provision requiring states to continue their LTSS expenditures under Medicaid at current-law levels, automatically indexing the growth of these commitments going forward.

Effects on National Health Expenditures and the Federal Budget

Table 2 summarizes the financial effects of the M4A bill over its first 10 years of full implementation, which would be 2022 through 2031 if enacted in 2018. One striking finding evident in the table is that, even under the assumption that provider payments for treating patients now covered by private insurance are reduced by over 40 percent, aggregate health expenditures remain virtually unchanged: national personal healthcare costs decrease by less than 2 percent, while total health expenditures decrease by only 4 percent, even after assuming substantial administrative cost savings. The additional healthcare demand that arises from eliminating copayments, providing additional categories of benefits, and covering the currently uninsured nearly offsets potential savings associated with cutting provider payments and achieving lower drug costs. Thus, the essential expenditure change wrought by movement to a single-payer system would be to replace private spending on healthcare with government spending financed by taxpayers. At the same time, more generous healthcare insurance would be provided to everyone at the expense of healthcare providers, who would face reimbursements substantially below their service costs.

While these estimates show little net change in NHE, the same cannot be said of the projected effects on the federal budget. Table 2 includes an estimate for the net increase in federal health budget commitments of $32.6 trillion from 2022 through 2031, which, by itself, is more than all federal individual and corporate income taxes projected to be collected during that time period.

It should be noted that M4A’s elimination of employer-sponsored insurance, including the federal tax preferences now accorded to it, should increase worker wages net of employer- provided health benefits. These estimates incorporate the increased federal revenues CBO projects to arise from subjecting these higher expected wages to federal taxation. Thus, at the same time that M4A would dramatically increase federal spending, it would increase taxable worker wages net of employer-provided benefits, while also relieving individuals, families, and employers of the substantial health expenditures they would experience under current law. It would also relieve states of such Medicaid expenditure obligations as are transferred to the federal government. These offsetting effects should be considered when weighing the implications of requiring federal taxpayers to finance the enormous federal expenditure increases under M4A. These estimates should be understood as projecting the added federal cost commitments under M4A, as distinct from its net effect on the federal deficit. To the extent that the cost of M4A is financed by new payroll taxes, premium collections, or other revenue increases, the net effect on the federal budget deficit would be substantially less.

https://www.mercatus.org…

***

Comment:

By Don McCanne, M.D.

This and other analyses of Senator Bernie Sanders’ Medicare for All Act should not be considered definitive since the bill is not complete and there still is considerable disagreement on the specifics of the bill. The bill will certainly not become law in its present form.

That said, this analysis is not that much different from previous analyses from the Urban Institute and from Emory’s Kenneth Thorpe, both of which contain disputed assumptions, as does this analysis. Considering the similarities, it is interesting that this was done by the Mercatus Center’s Charles Blahous. The mission of Mercatus is “to generate knowledge and understanding of the institutions that affect the freedom to prosper.” Charles Koch is a member of its board.

The media is covering this analysis with headlines that Medicare for All would cost a “stunning $32.6 trillion,” “ridiculously expensive,” “over $32 trillion with a T,” “massive tax increases,” etc. The Mercatus release and the paper’s abstract also emphasize the resulting federal budget commitments. The $32.6 trillion federal spending is for the entire decade of 2022-2031.

Much more important is the total national health expenditures (NHE). Buried in the report, but left out of the media coverage, is this statement: “aggregate health expenditures remain virtually unchanged: national personal healthcare costs decrease by less than 2 percent, while total health expenditures decrease by only 4 percent.” Also, “the essential expenditure change wrought by movement to a single-payer system would be to replace private spending on healthcare with government spending financed by taxpayers. At the same time, more generous healthcare insurance would be provided to everyone.”

Thus they are not claiming that total national health expenditures will increase when compared to current projections, but only that much of our current private spending will shift to the government-administered Medicare for All with the benefit that everyone will be covered with a more generous program. That is a tremendous plus.

There are several problems with this study, but here I’ll mention just a couple.

Blahous predicts an 89 percent increase in costs for the previously uninsured. But he leaves out the fact that other transitions to single payer, such as that in Canada, resulted in a shift of care to those with greater needs. Excess care that was of little value that was provided to the wealthier “worried well” declined, but without any decrease in truly beneficial health care services and thus without adverse outcomes. Attention must still be given to ensuring adequate capacity in the system while avoiding wasteful excess capacity, but we can be assured that there will not be an abrupt increase in excessive queues for essential health care services. Or to Blahous’ point, because of this offset, increased access for the uninsured and underinsured will not result in a dramatic increase in health care spending.

Blahous states that there will be a 40 percent reduction in physician and hospital payment rates compared to private insurance. (He does provide an alternate analysis in which this reduction does not take place.) Although rates will be negotiated and publicly administered (ideally with global budgeting of hospitals), and there should be some increased efficiency in allocation of services (see prior paragraph), we can look to Canada to see what would likely happen. In actuality, there was little net change in income due to the implementation of the provincial single payer systems. We can expect the same here (though eight figure physician incomes will likely not be tolerated).

For an analysis of single payer, Blahous really misses the boat on recovery of administrative waste. He credits a savings of 7 percent of only the administrative cost of covering those now holding private insurance, but ignores all of the other profound administrative excesses that characterize our fragmented, dysfunctional health care financing system. For the first year of full implementation of Medicare for All (2022), he calculates a mere $78 billion in administrative savings, far less than the hundreds of billions that likely would be saved if the ultimate legislation were designed properly.

The link above is to the full Blahous analysis. You may want to save it to be able to show Medicare for All opponents what he actually concluded. Blahous, a conservative/libertarian economist, tells us that Medicare for All will not increase our spending and yet will include everyone and provide them with a much more generous program. Both Republicans and Democrats need to hear this message.

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Koch-Backed Think Tank Finds That “Medicare for All” Would Cut Health Care Spending and Raise Wages. Whoops.

By Ryan Grim and Zaid Jilani
The Intercept, July 30, 2018

A new study from the Mercatus Center at George Mason University is making headlines for projecting that Independent Vermont Sen. Bernie Sanders’s “Medicare for All” bill is estimated to cost $32.6 trillion — a number that’s entirely in line with 2016 projections, and is literally old news. But what the Associated Press headline fails to announce is a much more sanguine update: The report, by Senior Research Strategist Charles Blahous, found that under Sanders’s plan, overall health costs would go down, and wages would go up.

The study, which came out of the Koch-funded research center, was initially provided to the AP with a cost estimate that exceeded previous ones by an incredible $3 trillion — a massive error that was found and corrected by Sanders’s staff when approached by AP for comment.

But despite that correction, the report actually yields a wealth of good news for advocates of Sanders’s plan — a remarkable conclusion, given that Blahous is a former Bush administration economist working at a prominent conservative think tank.

Blahous’s paper, titled “The Costs of a National Single-Payer Healthcare System,” estimates total national health expenditures. Even though his cost-saving estimates are more conservative than others, he acknowledges that Sanders’s “Medicare for All” plan would yield a $482 billion reduction in health care spending, and over $1.5 trillion in administrative savings, for a total of $2 trillion less in overall health care expenditures between 2022 and 2031, compared to current spending.

In order to arrive at this number, Blahous looked at how “Medicare for All” could lower administrative costs and provide savings in areas like drug spending. He concluded that by empowering the secretary of Health and Human Services to negotiate for lower drug prices, Sanders’s plan would add “$846 billion in additional savings over the 2022-2031” period. These savings, and others, are offset by certain other costs, like those which come from higher “utilization,” or the increased amount health care services used once everyone is insured.

Blahous’s report also acknowledges some substantial benefits to eliminating employer-sponsored insurance. He writes that these changes “should increase worker wage net of employer-provided health benefits,” while also “relieving individuals, families, and employers of the substantial health expenditures they would experience under current law.” The report even admits that the Sanders bill would serve as a boon to states, freeing them from most Medicaid obligations.

But despite the explicit benefits acknowledged by the Blahous study, health policy experts and single-payer advocates David U. Himmelstein and Steffie Woolhandler, who reviewed the Mercatus study, argue that Blahous actually significantly undercounts savings that could result from “Medicare for All.”

“The Mercatus Center’s estimate of the cost of implementing Sen. Bernie Sanders’ Medicare for All Act (M4A) projects outlandish increases in the utilization of medical care, ignores vast savings under single-payer reform, and fails to even mention the extensive and well-documented evidence on single-payer systems in other nations – which all spend far less per person on health care than we do,” Himmelstein and Woolhandler explain. 

In a written analysis shared with The Intercept, Himmelstein and Woolhandler write that Blahous’s report undercounts administrative savings by more than $8.3 trillion over 10 years. Taking those savings into account would lower Blahous’s estimate from $32.6 trillion to $24.3 trillion.

Additionally, the policy experts believe that Blahous underestimates savings from drug prices; for example, ignoring the success the U.S. Veterans Administration, the Canadian government, and certain European governments have had in negotiating for lower drug prices. If the United States paid European prices, they conclude, another $1.7 trillion would be trimmed from Blahous’s total cost estimate, bringing it down to $22.6 trillion over 10 years.

Himmelstein and Woolhandler also claim that Blahous grossly overestimates how much extra care would be utilized as a result of expanding insurance coverage. Using Blahous’s projections, they note that he is essentially arguing that once every American is covered, there will be 100 million additional doctor visits and several million more hospitalizations each year. But Himmelstein and Woolhandler say that’s wildly off the mark. From their written analysis:

[T]here just aren’t enough doctors and hospital beds to deliver that much care. Doctors are already working 53 hours per week, and experience from past reforms tells us that they won’t increase their hours, nor will they see many more patients per hour.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care to those who are currently not getting what they need. That’s what happened in Canada. Doctors and hospitals can adjust care to meet increasing demand, as happens every year during flu season.

Moreover, no surge materialized when Medicare was implemented and millions of previously uninsured seniors got coverage. Between 1964 (before Medicare) and 1966 (the year when Medicare was fully functioning) there was absolutely no increase in the total number of doctor visit in the U.S.; Americans averaged 4.3 visits per person in 1964 and 4.3 visits per person in 1966. Instead, the number of visits by poor seniors did go up, but the number of visits by healthy and wealthy patients went down slightly. The same thing happened in hospitals. There were no waiting lists, just a reduction in the utilization of unneeded elective care by wealthier patients, and the delivery of more care to sick people who needed it.

Blahous explained the $3 trillion error in an email to The Intercept.

As you might imagine, any draft study like this is shown to many people along the way (at least 20 in this case) and goes through multiple rounds of re-estimation, editing and redrafting.  Estimates in prior drafts were revised in both directions (higher and lower) in subsequent drafts on the way to final publication. One of the more recent drafts before final publication was shown to the Sanders office,” he said. “That draft contained an estimate of long-term care costs reproduced from another study, which was cited because this study had no long-term care model to draw upon.  That previously-published study predated the introduction of the Sanders bill, the language of which the Sanders office asserted was not intended to increase federal financing of long-term care service utilization.  In reality there probably would be some increase in long-term care utilization under M4A because its broader coverage expansion would enable more people to make use of long-term care benefits already authorized under current law through Medicaid.  But rather than attempt to estimate that, I concluded the right thing to do was to reflect the language’s intended effect as represented by the primary sponsor, as was done throughout the study with the other provisions of M4A.  I was very pleased to receive and incorporate their input.

Even using Blahous’s numbers — which may be off by roughly $15 trillion according to Himmelstein and Woolhandler’s estimates  — the conclusion is plain: “Medicare for All” would cover more people, increase the quality of coverage, and cost less than is currently being spent on health care. “Blahous admits that covering the uninsured and upgrading coverage for most others could be achieved at virtually no additional cost through a single payer reform,” Himmelstein and Woolhandler conclude.”Altogether, the increase in federal health spending is dramatic and certainly significant, but the change in projected national health expenditures really isn’t,” he told The Intercept. Especially given the source of the report, that’s news.

https://theintercept.com…

Even Libertarians Admit Medicare for All Would Save Billions

A new study from a libertarian think tank admits that Medicare for All would save a whopping $300 billion.

By Matt Bruenig
Jacobin, July 30, 2018

The US could insure 30 million more Americans and virtually eliminate out-of-pocket health care expenses while saving $300 billion in the process, according to a new report about Medicare for All released by the libertarian Mercatus Center.

In the report, Charles Blahous attempts to roughly score Bernie Sanders’s most recent Medicare-for-All bill and reaches the somewhat surprising (for Mercatus) conclusion that, if the bill were enacted, the new costs it creates would be more than offset by the new savings it generates through administrative efficiencies and reductions in unit prices.

The report’s methods are pretty straightforward. Blahous starts with current projections about how much the country will spend on health care between 2022 and 2031. From there, he adds the costs associated with higher utilization of medical services and then subtracts the savings from lower administrative costs, lower reimbursements for medical services, and lower drug prices. After this bit of arithmetic, Blahous finds that health expenditures would be lower for every year during the first decade of implementation. The net change across the whole ten-year period is a savings of $303 billion.

When talking about Medicare for All, it is important to distinguish between two concepts: national health expenditures and federal health expenditures. National health expenditures refer to all health spending from any source whether made by private employers, state Medicaid programs, or the federal government. It is national health expenditures that, according to the report, will decline by $303 billion.

Federal health expenditures refer to health spending from the federal government in particular. Since the federal government takes on nearly all health spending under Medicare for All, federal health expenditures will necessarily go up a lot, $32.6 trillion over the ten-year period according to Blahous. But this is more of an accounting thing than anything else: rather than paying premiums, deductibles, and co-pays for health care, people will instead pay a tax that is, on average, a bit less than they currently pay into the health care system and, for those on lower incomes, a lot less.

At first glance, it is strange that the Mercatus center, which is libertarian in its orientation and heavily funded by the libertarian Koch family, would publish a report this positive about Medicare for All. The claim that “even the Koch organizations say it will save money while covering everyone” provides a useful bit of rhetoric for proponents of the policy.

But the real game here for Mercatus is to bury the money-saving finding in the report’s tables while headlining the incomprehensibly large $32.6 trillion number in order to trick dim reporters into splashing that number everywhere and freaking out. This is a strategy that already appears to be working, as the Associated Press headline reads: “Study: ‘Medicare for all’ projected to cost $32.6 trillion.”

Messaging strategy aside, there is room to quibble with Blahous’s positive findings. He assumes administrative costs will only drop from 13 percent to 6 percent for those currently privately insured. But, according to the Kaiser Family Foundation, Medicare’s administrative costs have consistently been below 2 percent. He assumes utilization of health services will increase by 11 percent, but aggregate health service utilization is ultimately dependent on the capacity to provide services, meaning utilization could hit a hard limit below the level he projects.

But even if you take the report’s headline figures at face value, the picture it paints is that of an enormous bargain. We get to insure every single person in the country, virtually eliminate cost-sharing, and save everyone from the hell of constantly changing health insurance all while saving money. You would have to be a fool to pass that offer up.

Matt Bruenig is the founder of People’s Policy Project.

https://jacobinmag.com…

Why the Healthcare Justice Movement is Just Getting Started in California and Beyond

By Paul Y. Song, M.D.
Medium, July 29, 2018

As the sun begins to set on California’s two-year legislative session, it will officially signal the death of the Healthy California Act better known as SB562. After Assembly Speaker Anthony Rendon called SB562 “woefully incomplete” and banished it into legislative purgatory, it became quite obvious when none of its original co-sponsors or any other elected official emerged to fight on its behalf, that this would be its ultimate fate.

For all the “woefully incomplete” arguments made against 562 of it not having a funding mechanism, being dependent on federal waivers, and costing too much, Sacramento needs to explain its own hypocrisy. Why did the same assembly take up AB 1184 without providing any funding mechanism? Why did Sacramento rubber stamp Governor Brown’s fiscally irresponsible and grossly over-budget bullet train project and initiate construction without the guaranteed federal dollars and waivers that are desperately needed to complete it? How can Sacramento continue to call SB562 too expensive while ignoring the fact that our state already spends $368 Billion a year on healthcare of which 71 cents is already paid for by California taxpayers? And how can Sacramento continue to ignore and fail to address State Controller Betty Yee’s latest report of a $91.5 Billion unfunded healthcare retiree liability which increased $14 Billion from the year before, or our states’ $24 Billion annual school retiree healthcare liability?

Despite the empty talk by elected officials of being open to single payer, what was “woefully incomplete” in Sacramento was their political will. When the original Cap and Trade Bill (AB 398) died in the California Assembly, it was only through the sheer political will of the Governor, Speaker, and Senate Pro Temp to carry out a “gut and amend” which led to its ultimate passage. Sadly SB562 was not fortunate enough to be offered an honest legislative effort to address legitimate criticisms and concerns or be afforded a similar fate.

As bold as California has been on so many issues, Sacramento has failed to seize this opportunity to lead on real healthcare justice, and would like nothing more than for this movement to dissolve so they can get back to preserving the corporate status quo. They incorrectly assume that like prior single payer efforts, which fizzled without any political retribution from the electorate, that they can continue to ignore the will of their constituents and the harm and frustration many Californians face each day from our existing dysfunctional healthcare system. But, this healthcare movement is very different than before and is only growing stronger and at a far faster rate than insurance premiums.

While Sacramento sweeps SB562 under its legislative rug, it cannot hide from the following facts:

California’s Medicaid system, which currently covers roughly one-out-of-three Californians, remains extremely vulnerable to a heartless Congress hell bent on greatly reducing its Federal funding obligation.

Nearly 3 million Californians, including 250K kids remain uninsured.

With no insurance rate regulation, insurance premiums in CA have increased approximately 250% since 2002, while inflation has gone up 40% and wages for most Californians have remained stagnant. It is no wonder that the number of people who have difficulty paying their monthly premiums has increased from 27% to 37% in 2015 to 2017. Meanwhile, 53% of Californians worry they cannot pay their medical bill if they get sick, and 60% report that it is too difficult for them to afford healthcare in general.

For those who continually confuse universal coverage with actual access to care, they fail to grasp the prevalence of underinsurance. The number of people who report having difficulty with deductibles has increased from 34 to 43% during the last two years. And 44% of people with high deductible expenses will actually delay seeking care.

Coupled with the fact that 37% of people WITH insurance who had medical problems reported borrowing money from family and friends, 34% reported being unable to pay for food or rent, 63% used up all their savings, and 28% recently had a medical bill turned over to an agency, more Americans are afraid of paying for care than they are of getting seriously ill.

And for all the success of Covered California relative to the rest of the US, premiums will go up another 9% this year while 66,000 Californians will only have access to one plan and 216,000 will have access to just two. At the same time, 75% of all Covered California plans continue to have narrow networks.

While there is no perfect healthcare system, most agnostic experts agree that a single payer system, unlike our current system that continually increases cost while decreasing access to care, would indeed save money while increasing coverage and overall access.

As SB562 dies a cowardice death, rather than become dejected or disillusioned, activists should find great solace in what was accomplished. For the first time we had an unprecedented collection of new and lifelong activists of all ages, nationalities, religions, vocations, and socioeconomic groups, come together to demand something far better. This translated into advocacy, organizing, and canvassing in every single assembly district in California and has forever elevated single payer into the public consciousness. In the process, it has ultimately helped both statewide and federal efforts.

Recent attempts to have single payer removed from the California Democratic Party platform were soundly defeated, and due to an overwhelming groundswell of support created by SB562, Kamala Harris listened to the majority of her constituents and was emboldened to be the very first US Senator to co-sponsor Senator Bernie Sanders Medicare-for-all bill S.1804.

With a sustained majority of Americans supporting a single payer Medicare-for-all plan and 74% among Democrats, it has even become a litmus test in most democratic primaries. And in fact, a new Health Tracking Poll by the Kaiser Family Foundation now finds that three-quarters of voters say that a single government plan or Medicare-for-all should be considered, is very important, or the single most important factor in the upcoming election.

So rather than hide from it or view it as a political liability, more elected officials are boldly embracing it and more candidates are proudly running as Medicare-for-all candidates. For the very first time, we now have a Medicare-for-all congressional caucus with 72 members along with 123 co-sponsors of HR676 (the House Medicare-for-all bill), and one-third of Democratic senators who support S.1804.

Still, many view corporate Democrats, not Republicans, as the real obstacle to making this a reality. Max Fine, who helped to create Medicare as a member of John F. Kennedy’s Medicare task force recalls how Democrats moved away from Ted Kennedy’s bill to cover all Americans with government health insurance towards a private insurance solution with absolutely no interest in Medicare-for-all. Fine went on to say “Single payer is the only answer and some day I believe the Republicans will leap ahead of Democrats and lead in its enactment, just as Bismarck in Germany and David Lloyd George and Churchill in the UK.” In fact, some Republicans have already begun to make the case for single payer and even question if our current profligate spending on health care is a conservative value.

For those in Sacramento and beyond who behave like climate change deniers when it comes to healthcare, it is simply getting harder for them to continue to justify a broken and unsustainable system.

But due to the obscene financial resources that are spent by the for-profit medical-industrial-complex (led by the pharmaceutical and insurance industries) to buy our elected officials, relentless organizing and electoral pressure is the only way we will ever break this vicious hold.

To my fellow activists, now is not the time to let up. If anything, we must utilize the organizing success created by SB562 to serve as an unbreakable foundation from which to continue to educate, advocate, mobilize, and eventually translate into undeniable political capital both in Sacramento and D.C.

And if our next Governor is truly committed to keeping California fifth largest economy golden, it would be wise to acknowledge the tremendous burden healthcare costs place on employers and employees alike. As businesses spend more and more on healthcare for their employees and less on wages, capital improvements, and R&D, their employees have begun to feel the brunt as well. In 2018, the average worker will contribute $4200 towards their employer sponsored plan. It is no wonder that Charlie Munger has referred to our “cockamamie” current system as the “tapeworm of American competitiveness.”

We must do everything to ensure that our next Governor’s previously stated commitment towards single payer is not “woefully incomplete”. And we must do everything we can to ensure that each of our state and congressional representatives (especially Democrats) come to support single payer as well.

And as the Centers for Medicare and Medicaid Services Administrator, Seema Verma, has repeatedly labeled single payer as “socialized medicine” and vowed to reject any state waivers for such a plan, it is one more reason for us to do everything we can to wake up and mobilize an apathetic electorate to end this presidential reign of horror.

The harm that countless Californians and Americans face each day at the hands of our broken and immoral system is sadly not going away and neither are we. Sacramento may be able to ignore it, but we simply cannot.

Like our nation’s evolution on marriage equality that had a dramatic sea change in less than a decade, a similar sea change is happening with regard to single payer. So keep up the fight and continue to make your voices heard while spreading the single payer gospel.

We are on the right side, the moral side, and ultimately the winning side.

Dr. Paul Song is a national board member of Physicians for a National Health Program and co-chair of the Campaign for a Healthy California.

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