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Drug companies using tax windfall to benefit shareholders, not patients

Drug companies using tax windfall to benefit shareholders, not patients

With New Tax Savings, Drug Companies Start by Rewarding Shareholders, Not Patients Struggling with Skyrocketing Prices

The Office of U.S. Senator Cory A. Booker, April 9, 2018
 
In December 2017, President Trump and the Republican-led Congress enacted the Tax Cuts and Jobs Act, a $1.5 trillion bill that delivers massive tax cuts to the nation’s largest corporations and wealthiest families. The legislation cuts the corporate tax rate permanently from 35 percent to 21 percent, repeals the corporate alternative minimum tax, moves toward a territorial tax system that largely exempts future foreign profits from taxation, and sets a 15.5 percent repatriation rate for cash held overseas.

In anticipation of tax savings, companies have responded mainly by forecasting significant benefits for their shareholders. Over the course of three months, public companies announced more than $200 billion in stock buybacks, doubling the pace of the previous year. All told, companies are expected to spend some $450 billion of their tax savings on stock buybacks. A recent Morgan Stanley survey further projects that 43 percent of companies’ savings from the new tax law will be devoted to buying back stock and issuing dividends, actions that help companies and their predominantly wealthy shareholders.

The nation’s largest drug companies in particular are poised to reap tremendous gains from the new tax law, including through lower effective tax rates and through repatriation of billions of dollars stored overseas. The critical question that this report endeavors to answer is: how will pharmaceutical companies spend this tax windfall?

Findings: So Far, Drug Companies Are Passing Tax Savings Along to Shareholders, and Are Not Using That Money To Help Working Families Afford Medications

From January to March 2018, the office of Senator Booker reviewed the quarterly shareholder calls the first since the passage of the Tax Cuts and Jobs Act of each of the 10 largest pharmaceutical companies headquartered in the United States.

Finding 1: Shareholder Payouts

On the fourth-quarter 2017 earnings calls, the companies highlighted plans to increase the return of capital to shareholders through share repurchases and corporate dividends. Pfizer and Merck each announced $10 billion in buybacks shortly before the tax law was passed, and, in the wake of the law’s final passage, AbbVie and Amgen each announced their own $10 billion buyback plans. Those four programs, at $10 billion apiece, are among the largest new buyback plans across the entire U.S. economy. Only five other companies (Cisco, Wells Fargo, Home Depot, PepsiCo, and Oracle) have revealed larger new buyback authorizations during this period. Another pharmaceutical company, Celgene, has announced a $5 billion  buyback plan that is also among the largest so far across all industries. Other pharmaceutical companies suggested that more buyback plans were forthcoming.

The recent buyback announcements by these pharmaceutical companies total $45 billion — 21 percent of the more than $200 billion in buyback announcements made over the initial three months during and after final passage of the tax law. In other words: just five pharmaceutical companies were responsible for about one-fifth of the value of all the new buyback announcements made across the economy.

Finding 2: Drug Price Changes

None of the reviewed pharmaceutical companies announced or forecast lowering prescription drug  prices as a result of anticipated tax savings. Instead, some companies discussed pricing concerns at a general level during their earning calls, expressed caution about providing specific pricing guidance, or acknowledged that patients struggle with affordability. None indicated that the massive tax windfall would  prompt them to lower prices and ease the heavy cost burden on patients. In fact, many companies have actually instituted drug price increases for 2018.

Finding 3: Other Projects

On their most recent quarterly shareholder calls, many of the top pharmaceutical companies highlighted the substantial benefits they have received, and will receive, from the new tax legislation. They detailed their plans for spending those savings with varying degrees of specificity. Stock buybacks, as noted, were a major focus of many companies. But they also announced various other projects, including capital investments, research and development, one-time benefits to workers, charitable contributions, and  business development. Still, for many of the announcements, it is unclear how much of the outlays are actually attributable to the tax cuts, and how much would have been spent independent of the tax cuts.

From the Conclusion

Recent earnings calls provided top drug companies their first significant opportunity to demonstrate how they would spend their windfall from the Tax Cuts and Jobs Act. So far, the influx of tax benefits from the new law has been associated mainly with a slew of stock buyback announcements — with $45 billion in new buyback programs by just five pharmaceutical companies. They are some of the largest buyback plans announced during this initial period across all industries, amounting to approximately one-fifth of the cumulative economy-wide total. Aside from stock buybacks, which predominantly benefit executives and company shareholders, some pharmaceutical companies did announce other initiatives that could help  patients and workers, such as expansions of research and development, employee pay and benefit support, capital projects, and charitable contributions.

On the earnings calls, while some pharmaceutical companies did acknowledge that many patients struggle to afford the high prices of essential prescription medications, no company announced plans to specifically use its tax savings to reduce drug prices.

https://www.scribd.com…

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Comment:

By Don McCanne, M.D.

The tax reductions enacted last December went primarily to the wealthy and their corporations. Since there has been considerable concern about the increase in drug prices that have made them unaffordable for far too many patients, it was hoped that the pharmaceutical industry would pass some of their tax windfall down to patients in the form of lower drug prices.

No. They spent much of the windfall on buying back stocks and issuing dividends, benefiting their wealthy shareholders. “None indicated that the massive tax windfall would  prompt them to lower prices and ease the heavy cost burden on patients. In fact, many companies have actually instituted drug price increases for 2018.”

This should come as no surprise since Congress and the President, as an ideological goal, have been striving to reduce public funding of health care benefits. It seems that the politicians in control and their wealthy benefactors do not care about the health of the people nearly as much as they care about further increasing the wealth of those already wealthy.

It’s about policy, but we won’t get it right until we fix the politics.

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Support for ‘a single government plan’ is increasing

A slim majority of Americans support a national government-run health care program

The Washington Post, April 12, 2018

Washington Post-Kaiser Family Foundation Poll

Q: Do you support or oppose having a national health plan–or a single-payer plan–in which all Americans would get their insurance from a single government plan?

51% – Support
43% – Oppose
4% – Don’t know
2% – Refused

https://www.washingtonpost.com…

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Comment:

By Don McCanne, M.D.

Previous polls on single payer Medicare for all have indicated that there is majority support for the concept but that the support is malleable and declines when referred to as a government plan. This poll question referred to “a national health plan,” “a single-payer plan,” while stating “Americans would get their insurance from a single government plan,” without any mention of Medicare for all. So the opposition to having a “government plan” seems to be subsiding, though we still have a long way to go in educating our fellow Americans on the vast superiority of the model.

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Real fix for health care mess: Medicare for all

By Elizabeth Carson, A.P.R.N.
The Baltimore Sun, April 12, 2018

Congress has managed to mess up our complicated, dysfunctional health care system so badly that states are left to come up with temporary patches to stave off disaster (“Maryland’s year of health care,” April 6), (“New tax on insurers to help stabilize Obamacare market,” April 5).

Meanwhile, we are still being held hostage by private insurance companies. Our money is being wasted on high administrative costs, high executive salaries and advertising. Health care providers spend time and money dealing with multiple insurance companies. We now pay premiums, co-pays and co-insurance, yet we are left to argue with insurance companies who try to deny payment for needed care. When will we say “enough”?

We need a single-payer system that provides quality health care for everyone. We need a system that costs less, with no out of pocket expenses, gives us freedom to choose health care providers and allows providers and patients to make care decisions. We know that other countries have done this for less money and with better health care outcomes than the U.S. People say it can’t be done here. But Congress already has a detailed plan that meets these requirements: HR 676, Expanded and Improved Medicare for All Act, currently with 122 co-sponsors.

Look it up and be prepared to be impressed. When will we treat health care as a human right? When will we demand more?

http://www.baltimoresun.com…

Spending tax refunds on health care

New Tax Refund Data: Earliest Filers Get Largest Refunds, Spend More on Healthcare

JPMorgan Chase & Co., April 10, 2018

Today the JPMorgan Chase Institute released the first analysis since the 1980s of American’s tax refunds by income and other demographic characteristics. The research, Who Files Early and Who Defers Healthcare: Insights from 1.2 Million Tax Refunds, also includes a first-ever analysis of the impact of tax refunds on healthcare spending for different income and other demographic groups. The research finds Americans in all income groups who were owed larger refunds filed their taxes earlier, and those who filed their taxes earlier also spent more of their annual tax refund on healthcare services they had been deferring.

The earliest filers, those who received refunds in February, responded more sharply to the tax refund with a 38 percent increase in healthcare spending over 76 days, compared to a 22 percent increase for those who received refunds in March and an 11 percent increase for those who received refunds in April or May. Among the earliest filers, 64 percent of their healthcare spending response to the refund went to deferred healthcare services (spending represented by payments that were made in-person at healthcare providers), compared with just over 55 percent for accounts held by the latest filers. Almost all of the remaining healthcare spending response in all groups went to paying deferred medical bills; only a tiny fraction went to paying for healthcare goods that could be stockpiled.

“It’s increasingly clear that families are using their tax refunds as a zero-interest savings vehicle. If consumers have a health need at some other time of the year, they might have to delay treatment until cash arrives during tax time,” said Diana Farrell, President and CEO, JPMorgan Chase Institute. “These consumers would benefit from alternative savings vehicles or a more flexible refund system so they can access savings for healthcare whenever they need it.”

In January 2018, the JPMorgan Chase Institute released new findings identifying a 60 percent increase in deferred healthcare spending during the week a tax refund arrives in checking accounts.

The report found the overall level of healthcare spending is 60 percent higher in the week after receiving a tax refund payment than in a typical week over the 100 days before. In the week after receiving a tax refund, out-of-pocket healthcare spending on debit cards increased by 83 percent, while there was no offsetting change to credit card spending—suggesting the cash infusion provided by the tax refund was a major determining factor driving changes in healthcare spending behavior. Moreover, 62 percent of the additional healthcare spending triggered by the tax refund was paid in person at healthcare providers. This means that cash flow dynamics influenced not just when consumers paid for healthcare but also when they received it.

The reports leverage data on daily healthcare spending for 1.2 million checking account holders in the JPMorgan Chase Institute Healthcare Out-of-Pocket Spending Panel (JPMCI HOSP) who received a tax refund in 2016. The HOSP data asset was first constructed in September 2017. The asset follows a sample of 2.3 million de-identified regular Chase customers aged 18 to 64 from January 2013 until December 2016. The Institute defined out-of-pocket healthcare spending as any observed payments to healthcare providers and drugstores, including co-payments, co-insurance, deductibles and other point-of-service medical, dental, or drug spending.

https://www.jpmorganchase.com…

Filing Taxes Early, Getting Healthcare Late: Insights from 1.2 Million Households
https://www.jpmorganchase.com…

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Comment:

By Don McCanne, M.D.

Directly related to our dysfunctional health care financing system, this study shows that many people depend on their income tax refund to determine not only the timing of their payment for health care but also the timing of when they receive their health care – often deferred because of waiting for the tax refund.

Although some care can be deferred without untoward outcomes, deferral can be hazardous because conditions can deteriorate, not to mention that symptoms may be prolonged unnecessarily.

The JPMorgan Chase report suggests that alternate methods of cash management be considered rather than having to wait for tax season to receive the cash infusion needed for health care. Obviously those who do not receive a tax refund and do not have cash reserves may be out of luck and not receive the deferred care that they should have.

There is a far better way. A well designed single payer national health program without deductibles, copayments, or coinsurance removes financial barriers to health care access so there is no need to defer care. Also there is no concern about needing a tax refund to pay prior medical bills since health care has already been prepaid painlessly through equitable taxes.

Prepaid health care is one of the more important improvements in an Improved Medicare for All. What are we waiting for?

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Are ACOs going to transition into Medicare Advantage plans?

Long-term issues confronting Medicare Accountable Care Organizations (ACOs)

By David Glass, Sydney McClendon, and Jeff Stensland
MedPAC, April 6, 2018

Slide 3:

Medicare ACOs

Groups of providers held accountable for the cost and quality of care for a group of beneficiaries

Goals of ACOs:

* Improve provider accountability
* Increase quality of care and patient experience
* Lower costs

If ACOs are successful, they are rewarded with shared savings.

Slide 16:

Are ACOs only a transition step to Medicare Advantage plans?

* Eventually ACOs will want to be MA plans because that is the most efficient model
* MA plans require beneficiary enrollment and have higher administrative costs
* We found in some markets ACOs were the low-cost model
     * Lower administrative cost
     * If ACO dominant, may get benefits of limited network without ‘lock-in’

http://www.medpac.gov…

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Comment:

By Don McCanne, M.D.

We really do need to listen to what MedPAC (Medicare Payment Advisory Committee) has to say since it is the source of much of the legislative changes in Medicare financing, and we have to live with what the committee members produce once it is sanctioned by Congress.

SGR (sustainable growth rate) was a failure in trying to control Medicare spending and thus was replaced by MIPs (Merit-based Incentive Payment System) and APMs (Alternative Payment Models). Although the Trump administration is moving forward with MIPS, MedPAC has recognized that it is already a failure and has recommended that it be terminated and that transition into APMs be accelerated.

Although concepts of APMs are not settled it looks like ACOs (accountable care organizations) are going to be the primary model of APMs, and they are already being pushed heavily as a means of paying for value instead of volume.

Although ACOs have some vague similarities to HMOs, there are ill-defined features that remain a problem. Patients do not enroll in ACOs, so who is accountable for their care? It is difficult enough to decide who is providing their primary care when there are so many other sources of care, and it is especially difficult to assign specialists to specific ACOs. Although most ACOs are currently one-sided (upside risk only), there is an effort to push them into two-sided models (upside and downside risk), supposedly with the promise of greater savings for Medicare.

ACO managers understandably are hesitant to accept downside risk since it requires them to reduce their spending (reduce their revenues) which really means reducing health care services for patients. Cold hearted businessmen may not have problems with that if they can convert some of the savings into profits, but most health care professionals would resent being continually hounded to cut back on the amount of care they are delivering.

It appears that, instead of abandoning the ACO concept, our policymakers want to move forward with the concept because it would reduce volume by reducing patient care services, and supposedly increase value by being able to care for more patients with reduced services without increasing net costs.

But to move forward, the ACO model must be better defined. It has been suggested that an ACO must define which primary care practitioners, specialists and hospitals are in the ACO, i.e., networks must be established. Also patients must be specifically assigned to a given ACO, i.e., enrolled, even if by default. Specific financing arrangements must be made whether capitation, bundling, or even fee-for-service for those services that do not fit into a neat package. It’s astonishing how these geniuses in health policy come up with these innovative ideas. Little does it matter that their concept of ACOs is remarkably like HMOs and PPOs of the past.

So where does that put us? Well, Medicare already has something like that in place – the private Medicare Advantage plans. So it has been suggested that Medicare providers form two-sided ACOs as APMs and then transition them into Medicare Advantage plans in which eventually all Medicare patients are enrolled. Talk about a devious way of setting up premium support (vouchers for privatized Medicare).

Apparently it is such a sure thing that House Speaker Paul Ryan, for whom Medicare premium support has been his career dream, today announced his retirement. Well, maybe not quite that sure of a thing, but defensive posturing is not enough. We need to take the offensive on behalf of a well designed single payer national health program – an Improved Medicare for All.

Reform must put patients first, not the medical-industrial complex. Create the system to serve patients well, and it will work just fine for those legitimately employed in the health care delivery system.

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Trump administration undermining ACA coverage

CMS issues final 2019 Payment Notice Rule to increase access to affordable health plans for Americans suffering from high Obamacare premiums

CMS.gov, April 9, 2018

Today, the Centers for Medicare & Medicaid Services (CMS) issued the HHS Notice of Benefit and Payment Parameters for 2019. The final rule will mitigate the harmful impacts of Obamacare and empower states to regulate their insurance market. The rule will do this by advancing the Administration’s goals to increase state flexibility, improve affordability, strengthen program integrity, empower consumers, promote stability, and reduce unnecessary regulatory burdens imposed by the Patient Protection and Affordable Care Act.

“Too many Americans are facing skyrocketing premiums that they can’t afford and every year consumers are faced with the threat of fewer choices. This rule gives states new tools to stabilize their health insurance markets and empower citizens to find coverage that fits their families’ needs and budgets,” said CMS Administrator Seema Verma.

The final rule issued today includes the following key provisions:

Increasing Flexibility

* Essential Health Benefits (EHB)
* States will also now be able to build their own set of benefits
* Qualified Health Plan (QHP) Certification Standards

Improving Affordability

* Exemptions

Strengthening Program Integrity

* Risk Adjustment
* Advanced Premium Tax Credit (APTC) Program Integrity

Empowering Consumers

* Special Enrollment Periods (SEPs)

Promoting Stability

* Medical Loss Ratio (MLR)

Reducing Unnecessary Regulatory Burden

* Small Business Health Options Program (SHOP)
* Rate Review

https://www.cms.gov…

Final Rule (523 pages):
https://s3.amazonaws.com…

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Comment:

By Don McCanne, M.D.

The Trump administration is continuing its efforts to undermine the policies established by the Affordable Care Act. That would not be so bad if they were replacing it with a much better program such as an Improved Medicare for All. But no, just the opposite. They are doing what Congress failed to do and that is inflict as much damage as they can administratively. What is particularly offensive is their glowing rhetoric using terms that dishonestly imply that they are greatly improving the program.

The provisions that are being changed are listed above, and they are briefly described in the press release available at the link. A couple of examples can give you an idea of what they are doing.

ACA requires ten specific essential health benefits in the exchange plans, but the rule released allows much more flexibility in selecting the essential benefits. In a press call, CMS Administrator Seema Verma said that they wanted to allow insurers leeway to “create plans that more directly address the needs of citizens and not a one-size-fits-all D.C. mandate.” Of course, the problem with a menu of benefits is that nobody really knows what their medical needs will be next year. Benefits need to be comprehensive for everyone.

They say they would improve affordability by allowing an exemption when it is determined that coverage is not affordable based on projected income using a higher metal level plan when no bronze plan is available in the service area. Maybe it is sort of true that not buying insurance improves affordability of the exchange plans, but it sure plays havoc with affordability of health care when you are uninsured.

They are changing risk adjustment to reduce the burden on issuers, providing states “with the flexibility to request a reduction to the otherwise applicable risk adjustment transfers in the individual, small group or merged market by up to 50 percent beginning with the 2020 benefit year, which may be helpful in attracting and retaining insurers and more precisely accounting for relative risk differences in the state market.” They continue to take good care of the private insurers, but when insurers benefit financially, patients lose.

The medical loss ratio (MLR) represents the percentage of premium dollars that are paid out for health care. The new rule “allows states to request reasonable adjustments to the MLR standard for the individual market if the state shows a lower MLR standard could help stabilize its individual insurance market.” Again, this takes good care of the insurers by allowing them to spend even less than the current 80 percent requirement on health care, and, again, the patients lose.

Currently insurance premium rate increases over 10 percent must be submitted for review. The new rule changes the threshold to 15 percent. Allowing unchallenged premium increases of 15 percent year after year also takes good care of the insurers, but not so good for those paying the premiums, whether directly or through taxes.

The winners? Insurers and conservatives who want to reduce the role of government in the financing of our health care. The losers? Patients and taxpayers. That’s not good.

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Single-Payer or Bust

By providing a single tier of coverage to all, with automatic enrollment, comprehensive benefits, and no cost-sharing, single-payer provides a distinct—and more egalitarian—vision of universality.

By Adam Gaffney, M.D.
Dissent, Spring 2018

In the 1960s, a struggle took place over the fate of healthcare in Canada. On one side, there were the proponents of the single-payer program called Medicare, like the stubborn Scottish-born socialist Tommy Douglas. Medicare was modeled on a program passed in the province of Saskatchewan in 1961 under Douglas’s leadership, which provided universal coverage of physicians’ services (the province’s 1947 plan for universal hospital coverage had already been federalized in the late 1950s). And on the other side there were those who advocated a more gradual approach, such as Ernest Manning, the premier of Alberta, who went on television in 1965 to ask the nation to “look before we leap.” After all, the Saskatchewan program—funded by premiums and a slew of new taxes—had been implemented only after a bruising physicians’ strike, which ended only after twenty-three bitter, dangerous days that made international headlines. And that was just in one snowy, sparsely populated province—this was what Douglas was now demanding for the entire nation.

It wasn’t that Manning was opposed to expanding healthcare access. On the contrary, he reassured listeners that he was “100 percent in support of the proposition that high quality comprehensive medical services should be available to every citizen whether his income be large or small.” But, as a 1995 article in Alberta History described, he had philosophical differences with Douglas’s approach: he thought it neglected the importance of personal responsibility. Manning also foresaw practical problems with the Saskatchewan model. It would necessitate unpopular new taxes for all of Canada, while its lack of cost-sharing (that is, co-payments) would, he feared, encourage excess healthcare use. Its implementation would also require that existing medical insurance programs and the companies providing them be eliminated, a move he considered “unwise and unwarranted.”

Nor was single-payer the only option. In 1963, Manning had introduced a more incremental healthcare reform in Alberta, dubbed “Manningcare,” that achieved results, and which he thought could serve as a better, less disruptive model for the nation. “Like Obamacare,” wrote Canadian healthcare expert Greg Marchildon in 2016, “[Manningcare] . . . involved multiple tiers of coverage above a basic plan . . . and eschewed single-payer financing in favour of multi-payer administration through numerous private insurance carriers.” Private insurance would be expanded via public subsidization, while out-of-pocket payments—like co-payments—would be retained. Alberta had notable success in broadening coverage this way—achieving 80 percent coverage of the population—as Marchildon and Nicole O’Byrne note in Making Medicare: New Perspectives on the History of Medicare in Canada (2012).

Of course, the Canadian healthcare debate of the 1960s bears a striking resemblance to discussions in the United States today. The argument over “universal coverage” is basically over: there is now a broad consensus among liberals, leftists, and even some conservatives that expanding coverage is imperative. Yet a new debate has been brewing regarding the necessity of the Saskatchewan model—of single-payer healthcare.

“Single-payer is not, in itself, a principle,” declared scholar Harold Pollack last fall in Democracy. “It is one way to organize health-care financing.” An alternative way would be like Obamacare—a regulated and subsidized system of private insurance combined with an individual mandate to be covered—something he argued needed improvement. But Pollack asserted that regardless of which approach we embrace, both paths are tactics, or “means to an end”: the ultimate goal—and the one we all share—is not a particular financing arrangement, but universal coverage.

Others have made similar points, such as the economist Paul Krugman. Although a “commitment to universal health coverage” should “definitely be a litmus test” for Democratic candidates, he opined in the New York Times last August, “single-payer . . . isn’t the only way to get there.” The Netherlands, for instance, had what he called “Obamacare done right.” Other progressives (and also some conservatives) have similarly noted that it is not only the Netherlands but also nations such as Germany and Switzerland that have achieved universal coverage without single-payer.

This debate is a highly consequential one, and will only heat up as we head into the 2018 and 2020 elections. The question at its core is simple: should the Saskatchewan model be the standard progressive healthcare position—the one we demand of candidates seeking support from the left? Or, should we embrace alternative multi-payer models, perhaps a German or Dutch one? In other words, might Manningcare have been good enough?

Many roads to universal coverage?

A central argument for the multi-payer model of universal coverage—and today, the German, Swiss, and Dutch systems are typical examples—is that it offers a more gentle road to universality than single-payer. For instance, Pollack argued, the healthcare systems of these three nations look “surprisingly similar to America’s ACA marketplaces.” Krugman similarly noted that “the Dutch system works, which suggests that a lot could be accomplished via incremental improvements in the ACA, rather than radical change.”

On the one hand, they are right: nations with a range of healthcare systems—including many that do not exactly fit the single-payer mold—have universal coverage, or something close to it. On the other hand, would importing these other models actually be much less of a leap than single-payer?

Take Germany. According to a 2017 report by the Commonwealth Fund, 86 percent of the German population is covered through one of 118 not-for-profit social health insurance (SHI) sickness funds, which have boards that are controlled by workers and employers. Other Germans—such as the self-employed and civil servants—are mostly covered by insurance companies, both profit and not-for-profit. Under SHI, there is no co-payment for doctors’ visits, and no more than a €10 co-pay for a prescription or a day in the hospital. Consider, then, what a transition to the German system would entail in the United States. We would have to ask the health-insurance industry to graciously agree to mostly being replaced by a system of not-for-profit funds that would be partially controlled by elected workers’ representatives. Insurer shareholders would thus be largely wiped out. This would be a shiv only slightly less sharp than single-payer to the industry.

Or consider the Dutch model (itself partially based on the Swiss), which is perhaps the most frequently invoked alternative to single-payer. Traditionally, the Dutch had a system that resembled the German model: a majority of its citizens were automatically enrolled into a SHI fund, while the remainder, with higher incomes, could buy private plans. Through this system, it achieved near-universal coverage. In 2006, however, the nation passed a law replacing SHI with a mandate to buy highly regulated, highly subsidized private health insurance, similar to Switzerland; hence the frequent allusions to the Dutch system as an Obamacare-like model that we might follow. The analogy, however, is strained. Far from ushering in universal coverage, the 2006 proto-Obamacare Dutch law may have, at least at first, decreased coverage relative to the SHI system it replaced. “The process of implementing the new insurance regime has been complicated and difficult,” Kieke Okma and Luca Crivelli wrote in Health Policy in 2013. They note that following passage of the law, the percentage of those who were either uninsured or delinquent in their premium payments at first “went up sharply.”

The Dutch, in other words, achieved universal coverage with a German “Bismarck” model, and then partially privatized it through an Obamacare-like reform in 2006. At the end of the day, they still had a system close to universal coverage. But that’s an awfully complicated path to follow—and not a convincingly easier one than expanding Medicare, a popular program, to the whole nation.

Then again this is probably all beside the point. Those pointing to the healthcare systems of these nations are not actually arguing that these models should be transplanted to the United States—changes that could be as (or almost as) disruptive as single-payer. Rather, what they are mostly talking about is retaining the architecture of the Obamacare system, and building on it—with a public option, for instance, or a Medicare buy-in—so as to less disruptively reach the goal that we all share: universal coverage.

To be clear, advocates of European models are not contending that single-payer is wrong-headed in theory. They are, however, suggesting that a universal public program that replaced all existing private insurance arrangements would cause a riot in the United States. Joshua Holland, writing in the Nation, worried about the “loss aversion” that a solid chunk of the population would have about their “decent coverage” being replaced by Medicare for All. Krugman, sociologist Paul Starr, political scientist Jacob Hacker, and others have made more or less the same point: more than 150 million people get plans through their employer, and some of them won’t want that coverage replaced, not even by something better, or so the argument goes. Moreover, as Hacker noted in the American Prospect, although new taxes to fund single-payer would replace employers’ premium contributions (which effectively come out of employees’ wages), the former would be far more visible to workers than the latter. The GOP and fellow travelers would pounce, “hammering Democrats for wanting to raise taxes steeply while taking away Americans’ health care.”

These predictions indeed sound frightful. Fortunately, they are far off the mark, both in terms of politics and policy. For instance, what are we to make of the apprehension about “loss aversion,” of asking people to give up their current private plan for improved Medicare? The best response to this concern comes from policy writer Matt Bruenig, who points out that Americans are constantly being forced to change their healthcare plans. People change plans when they get a new job, lose a job, or whenever employers decide to change the options they provide. They transition into and out of Medicaid as their incomes rise or fall. Those buying plans on the Obamacare marketplaces switch plans as frequently as once a year (indeed, they are encouraged to “shop around” every enrollment period to avoid being ripped off). But most importantly, essentially every single American will transition to Medicare upon turning sixty-five years old. Implementing Medicare for All, Bruenig notes, would simply expedite this process: everybody would gain Medicare today, rather than however many years in the future, and would never have to change again.

Meanwhile, the idea that invisible healthcare costs (that is, employer premium contributions) would be replaced with visible costs (new taxes) and thereby lead to popular outrage is dependent on how we design the program, and thus can be easily avoided. For instance, Medicare for All could be financed (at least in part) by imposing employer-side payroll taxes to replace today’s employer-side premium contributions, a point made by Josh Mound in this issue. One “hidden” cost would hence be replaced by another. Moreover, Medicare for All, by eliminating out-of-pocket payments (like co-payments and deductibles), would make using the new coverage far less financially onerous, something that would be warmly welcomed by the 42.9 percent of privately insured Americans under sixty-five who have high-deductible health plans. Care that is free at point-of-use is an incredibly powerful selling point for single-payer, particularly as the high-deductible health plan becomes the new normal.

But political considerations aside, there are also critical policy advantages to achieving universality via a single-payer, as opposed to multi-payer models. Public health scholars David Himmelstein and Steffie Woolhandler have studied the issue of comparative administrative spending over many years and estimate that a single-payer transition could save some $500 billion a year, savings that could cover the costs of expanded coverage without requiring an overall increase in national healthcare spending. Multi-payer reforms, by contrast, offer no such savings, at least not on a comparable scale.

Moreover, ensuring that nobody falls through the cracks—that 100 percent coverage is actually achieved—would not be easy without automatic enrollment of all the uninsured, something that is not offered by the currently discussed incremental reforms (Hacker’s proposal for a sort of automatic public option based on Medicare is an exception). Consider, for instance, that the Congressional Budget Office (CBO) estimated that an old iteration of the public option would not significantly increase coverage at all. We don’t have a CBO estimate for Paul Starr’s proposed optional Medicare buy-in for those aged fifty-five to sixty-four who also lack employer coverage (a minimalist reform if there ever was one), but it’s safe to assume it would leave the majority of the uninsured still uninsured.

In sum, the political road to Germany and the Netherlands could prove just as steep as the one to Saskatchewan. Meanwhile, it is unclear if the path to Alberta would take us to the destination of universal coverage at all. But even if it did—even if we can and do achieve universal coverage through an improved Obamacare system—what sort of universality would it be?

The two souls of universal healthcare

A central issue in this debate, mostly side-stepped by advocates of a non-single-payer approach to expanding healthcare coverage, is the meaning of healthcare universality. It is not a simple binary of whether or not people are “covered.” Poor-quality coverage—which so many of us today have—is only incrementally better than no coverage at all. The World Health Organization, for instance, sketches out the three dimensions of universal coverage: the percentage of the population “covered,” the degree of cost-sharing (that is, out-of-pocket payments like co-pays or deductibles), and finally, the comprehensiveness of benefits. To these I would add a fourth element, of equity: to what extent does the nation offer a similar level of access to providers, hospitals, and other healthcare goods and services to all, regardless of economic means?

It seems very unlikely that non-single-payer roads to universal coverage would, at least in the American context, achieve universality in all four of these domains. For instance, incremental reforms of the Obamacare system that further decrease the number of uninsured would probably do little to turn the tide of growing “underinsurance.” Some 41 million people between the ages of eighteen and sixty-four were underinsured (that is, had insurance, but with onerous out-of-pocket costs on things like co-payments or deductibles) in 2016 according to a recent report from the Commonwealth Fund—up from 16 million in 2003. These underinsured individuals are less likely to obtain healthcare when they need it: they skip doctors visits and avoid filling prescriptions, and are more likely to end up in medical debt.

Single-payer, on the other hand, could eradicate underinsurance, by doing what Saskatchewan did, and making coverage “first-dollar”—that is to say, without co-pays or deductibles—for everyone. This was something strongly advocated by Tommy Douglas (and resisted by Manning), and which was made universal by the Canada Health Act of 1984. In the United States today, it is reflected in the single-payer bills in Congress, both of which lack cost-sharing (with the exception of limited co-pays on some prescription drugs in the Sanders bill).

Now, some will argue that eliminating cost-sharing in this fashion is unnecessary, pointing to various European nations that have co-payments or deductibles but also universal coverage. This is true, but there are important caveats. First, European cost-sharing is generally much lower than that of the United States; for instance, as mentioned, there are no co-pays for doctors’ visits in Germany. Second, when cost-sharing is more than nominal in those nations, it may very well be doing harm. In the Netherlands, for instance, the standard medical deductible has been raised to the equivalent of $465, which sounds like a bargain by American standards, but which has nonetheless raised concerns that “greater numbers of people [are] abstaining from or postponing needed medical care,” as was noted by the Commonwealth Fund.

Third, Europe has a far better-developed social-safety net than the United States, which makes relatively modest co-payments less harmful. Underinsurance is a particularly pernicious problem in the United States because we already face staggering (and climbing) income inequality, together with enormous social and racial disparities in wealth. Perhaps high co-payments can work to a degree (although I am not convinced) in a nation like Switzerland, which has the highest median wealth levels of any country in the world. In the United States, however, the situation is rather different: for instance, a November study from the Kaiser Family Foundation found that less than half of American families owned enough liquid assets to cover a $4,000 medical deductible. Perhaps via a massive, historic redistribution of wealth, we could all afford $4,000 deductibles. (I’d still be against deductibles, given their deterrent effects on the use of needed healthcare.) But regardless, that’s going to be a far steeper climb.

In other words, although it is true that nations like the Netherlands or Germany provide, for the most part, equal access to healthcare for their citizens, this is less due to the specific architecture of their systems and more because of their political economies. Historically, European nations have more developed welfare states, stronger unions, and less inequality, all of which are the products of more potent left-wing parties and labor movements that succeeded in reforming capitalism in the post–Second World War period. But this never happened here. The United States therefore needs a healthcare system that has universalism—and equity—built into its very foundation.

Consider also that non-single-payer models would mostly not advance us toward universality along the third axis of universal coverage, that of the comprehensiveness of covered benefits. For instance, there is a massive gap in dental access in this nation (as explored by Mary Otto in her article in this section), in part because dental care is covered by few health plans, especially among adults. Meanwhile, outside of Medicaid, coverage of long-term care is largely non-existent. Universality must mean not just universal “coverage,” but coverage without financial barriers and with comprehensive benefits. Major U.S. single-payer proposals, like that of my organization, Physicians for a National Health Program, and the bills in Congress, envision (for the most part) such a broadening of benefits; non-single-payer proposals typically do not.

There is a final way in which multi-payer models would fall short of meaningful universality in the U.S. context. There is a hierarchy of health plans in the United States, with narrower or broader access to networks of doctors or hospitals depending on whether one has Medicaid, Obamacare, a high-quality or low-quality employer plan, or Medicare. Single-payer does not merely mean a unitary financing source, but an equitable, single tier of access: one big network to replace the hierarchy of smaller, fragmented, and inequitable ones, which are often divided by race and class.

Pollack is thus wrong. Single-payer is not, as he asserts, simply one tactic among many to achieve universality. For there are two souls of universal healthcare in the American context, to repurpose Hal Draper’s famous framing about the dueling souls of socialism. By providing a single tier of coverage to all, regardless of wealth or station, with automatic enrollment, comprehensive benefits, and no cost-sharing, single-payer provides a distinct—and more egalitarian—vision of universality. Although the analogy is loose, this can be seen as a sort of universal healthcare “from below.” In contrast, a patchwork approach to universal coverage, which incorporates a privatized hierarchy of different levels of coverage, without comprehensive benefits, with varying degrees of cost-sharing, perhaps undergirded by a restored government “mandate” to buy insurance, can be seen as a type of universal healthcare “from above.” And it constitutes a far narrower vision of universal coverage that falls short of the full universality that our fractured and increasingly unequal society urgently requires.

Lessons from Canada

As Americans looking back at the Canadian healthcare debate of the 1960s and considering our own way forward, it may seem unlikely that it was the reform model championed by Tommy Douglas, and not Ernest Manning, that was victorious. “In the early 1960s,” Marchildon wrote in Making Medicare, “it was far from a foregone conclusion that Saskatchewan’s version of Medicare would become the model for the rest of the country. Medicare could just as easily have taken the form of Manningcare, which had been supported by the majority of provinces, the medical profession, and the business establishment.”

So why did Douglas’s vision prevail? In part, because single-payer advocates were successful in the field of ideas. Early in the debate, in 1961, a Royal Commission on Health Services, the so-called “Hall Commission,” was called to weigh the opposing options. According to Marchildon, writing in the Journal of Canadian Studies, the Hall Commission ultimately recommended the Saskatchewan model over Manningcare for two familiar reasons: first, because single-payer would produce more administrative savings; and second, because of “the benefits associated with first-dollar coverage of the entire Canadian population on the same terms and conditions.” The Hall report, he notes, raised hopes; pressure from the public—and from Douglas, who was then a leading opposition figure in the national parliament—succeeded in pushing the Liberal government to pass a national physician care bill in the Saskatchewan mold in 1966. As a result, private insurers were pushed out of the physician care markets where they were operating, and within a few years, all the Canadian provinces had universal healthcare programs.

Consider, for a moment, that if Manningcare had instead been the winning model, the Canadian healthcare system would today look vastly different—and probably a lot more like ours. The costs of healthcare would probably be much higher, some Canadians would likely still be uninsured for physicians’ services, and cost-sharing might have persisted, such that class would remain an important determinant of who has access to physician care and who does not. “While it might have been politically easier for Canadians to subsidize private health insurance to expand coverage,” Marchildon told me by email, “the result for generations after would have been far more expensive and inequitable.”

None of which is to say that the Canadian model is perfect. Although it is quite universal from the perspective of population coverage (100 percent) as well as the depth of coverage (no cost-sharing for medically necessary physicians’ services, diagnostic tests, or hospital care), it has failed to achieve universalism in terms of the breadth of coverage (outpatient prescription drugs and long-term care are not universally covered services, a point acknowledged by Marchildon in a 2014 article).

Yet these are shortcomings for Canadian progressives to remedy—not mistakes for American progressives to replicate. What we should instead emulate is Douglas’s egalitarian healthcare vision.

As a child in Scotland, goes an oft-told tale he narrated to journalist Chris Higginbotham in 1958, Douglas one day tripped and fell on his knee, an injury that injected bacteria deep into his bone, causing a chronic infection called osteomyelitis. After multiple primitive surgeries performed by country doctors in Scotland, the infection was thought to have been cured, but after the Douglas family moved to Canada, it came back with a vengeance—and Douglas was told the leg would have to go. Fortunately, a prominent orthopedic surgeon at the children’s specialty hospital in Winnipeg agreed to take a stab at the infection—and, miraculously, succeeded in saving the child’s leg. Douglas would note that though he was grateful to this man, he also knew that had the prestigious physician not offered to perform the procedure for free, he would have lost his limb, for his family was strapped for cash. And he felt that no child should ever be put in such a position. “[O]ut of this experience,” Douglas said to Higginbotham, “I came to believe that health services ought not to have a price-tag on them, and that people should be able to get whatever health services they required irrespective of their individual capacity to pay.”

The story of Douglas’s rescued leg—and how it inspired him—is now a chestnut of Canadian lore. Manningcare, on the other hand, barely amounts to a minor historical footnote—and the nation has a far better healthcare system for it. It is a lesson we would be wise to heed today when deciding which path to follow.

Dr. Adam Gaffney is a physician, healthcare researcher, universal healthcare advocate, and writer. He is the author of “To Heal Humankind: The Right to Health in History” (Routledge, 2017).

https://www.dissentmagazine.org…

Wherewith public health advocacy?

Public Health Advocacy in the Tumultuous Times of the Trump Administration

By David N. Sundwall M.D.
AJPH, April 2018 (published online March 7, 2018)

Excerpts

The election of Donald J. Trump as president of the United States was an unexpected and extraordinary event in the history of our nation. His presidency has resulted in dramatic changes in our politics and our policies and unease in much of our population. Those of us committed to public health and ensuring that government programs devoted to the well-being of our citizens be sustained have been perplexed, confused, and frustrated, to say the least. We are not alone—this situation applies to much of the federal government’s agencies, the federal workforce, organizations representing the public’s interests, and our fellow Americans.

Notwithstanding this uncomfortable uncertainty…regardless of who is in the White House, we (in public health) have important and essential work to do, and we must continue to do it with the budget provided and at the direction of our elected officials. We need to do our work as well as we can with the resources provided and within the scope of the laws authorizing our activities. This does not mean, however, that those of us in public health positions, or for that matter any person or group with an interest in public health, should not advocate to sustain and strengthen our nation’s public health enterprise. An important exception is those federal employees constrained by Hatch Act, which prohibits them from engaging in political activities. (This federal law, which was passed in 1939, limits certain political activities of federal employees, as well as some state, District of Columbia, and local government employees who work in connection with federally funded programs. The law’s purposes are to ensure that federal programs are administered in a nonpartisan fashion, to protect federal employees from political coercion in the workplace, and to ensure that federal employees are advanced on the basis of merit and not on the basis of political affiliation.)

So, accepting that these are difficult times when nothing seems to be done as it previously was, how do we go about advocating public health? The following are just a few of the principles I identified that I think are especially relevant to our current circumstance:

* The importance of being honest, informed, and evidence-based—earnest advocacy will not likely get very far without data and information to support a proposal.

* The importance of not judging a book by its cover—the confirmation process for US Surgeon General C. Everett Koop. Yet, once confirmed, he proved to be an effective leader and champion of public health for all, especially those infected with HIV as this epidemic unfolded during his tenure. Could our new Surgeon General, Jerome Adams, also become an outstanding advocate for public health in this position?

* The importance of building bridges—unlikely allies in working together for reauthorization of the Maternal and Child Health Care Block Grant. The Children’s Defense Fund, a liberal Washington, DC–based organization, came together with a group in South Carolina affiliated with the Southern Baptist Coalition, a staunchly conservative organization, to advocate together for the maternal and child health programs.

* The importance of science-driven policy—the National Organ Transplant Act of 1984: Notwithstanding evidence that some of our elected officials seem to be “anti-science” and do not want to be “confused by the facts,” I contend that a significant majority are not. It is essential that we use current scientific knowledge to bolster our case for new and better public health policies.

* The importance of regulations and rules in addressing policy issues—how to achieve administrative simplification, efficiency, and effectiveness by changing the rules, not the law: The opportunity to achieve policy objectives through modifying existing rules and regulations of public health laws is often overlooked. The Trump Administration is committed to such administrative simplification, deregulation, and therefore is likely to support such proposals for constructive changes.

* The importance of understanding and respecting “who’s in charge” and of nonpartisan advocacy, for public health—cultivating relationships with key elected officials: I think it is fair to generalize that, historically, most advocates for public health have favored a strong federal government role in funding public health initiatives, and have favored regulations holding states and grantees accountable to achieve improved health outcomes. The current Administration and the majority in Congress favor a more limited government role, less spending, and less regulation. The most pressing challenge for public health advocates now is to ensure adequate federal funding for public health programs. So, regardless of personal political views, we must invest time and effort to know those currently in charge—our elected officials and their staffs—to seek compromise in funding levels and regulations to sustain our public health enterprise. Our collective efforts to educate and inform key elected officials will be essential to counter harmful proposals in President Trump’s 2018 budget and also to prevent harmful provisions in the Congress’s budget proposal. We will also need to work together to correct potential problems in the recently passed tax reform legislation.

To successfully advocate sustaining and strengthening our nation’s public health enterprise, I recommend we rely on these six time-proven principles.

https://ajph.aphapublications.org…

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Woolhandler and Himmelstein Respond

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

Who could disagree with Sundwall’s advice to be honest, open-minded, optimistic, and inclusive? But the Trump administration’s authoritarian, antihealth drift demands a stronger response.

Even before Trump, public health was lagging. Funding has been drifting down and death rates creeping up, driven by widening inequality and unrelenting oppression of those at the bottom of the income scale. Although President Obama may be faulted for inadequate responses, his successor has unleashed an all-out assault on the nonrich, non-Christian, nonmale, non-White, non-American—as well as on nature itself. Even George Orwell might flinch at the Centers for Disease Control and Prevention leadership’s ban on words like “science-based,” “evidence-based,” “vulnerable,” “transgender,” and “fetus.”

Yet, the defeat of frontal attacks on the Affordable Care Act (ACA) indicates that health is perilous terrain for Trumpism. The fight against repeal called out legions who packed town hall meetings, disability and other activists who braved arrest, and scholars, journal editors, and journalists who spread the word of mortal and financial consequences from uninsurance. Republicans could only sliver off the Obamacare mandate under cover of a tax bill.

But defensive efforts like those that fended off ACA repeal are not enough. Medicaid—as well as Medicare, SNAP (food stamps [Supplemental Nutrition Assistance Program]), and TANF (welfare [Temporary Assistance for Needy Families])—are also in Congress’s crosshairs. They’ll claim that the ballooning deficits ensured by the new tax law compel cuts.

During the 2016 presidential campaign, Trump’s racist and nativist appeals found fertile ground among beleaguered White working-class voters eager for scapegoats, while the wealthy and powerful needed no dog whistle to understand what Trump could do for them. In response, mainstream Democrats proffered little to ameliorate working-class pain, nor did they threaten to discomfit the wealthy.

The promise—and reality—of sweeping social changes offers the only effective antidote to the president’s reactionary populism. A full turn away from capitalism is not currently on the agenda. Yet experience in other nations—and in ours in the past—shows that redistributing income through taxes and social programs and attending to the environment can do much to improve health, while sustaining, and even spurring, overall prosperity.

Seven decades back, AJPH’s Editor Charles-Edward Winslow called for massive social investments to end the physical and emotional toll exacted “by malnutrition, by slum dwelling, by lack of medical care, by social insecurity” and urged “those who do not agree with me to mend their ways; and those who do agree with me to go forward with hope and courage.”

Such courage is now urgently needed. Public health professionals must put policies to the test of science and raise their voices to decry health-threatening ones. But we must go beyond that, joining others to organize for health-improving reforms and protest harmful initiatives.

As Sundwall notes, for many public employees (including us), politicking for candidates at work and using our employers’ resources, such as computers and e-mail addresses, are verboten. And running for office or soliciting campaign contributions may be off-limits. But while off-duty, we’re free to vote, contribute money, express our views, and protest.

The contrast between our nation’s spectacular wealth and sorry record on health and social indicators gives reason for hope as well as shame. We can readily afford to house, feed, educate, and heal all who are on our soil.

What’s needed is a new New Deal. For medical care, that means single-payer health care, not just defending Obamacare. We can find housing for the 3.5 million homeless in the 18.3 million vacant housing units; food from our abundant harvests can provide for the 41.2 million who suffer food insecurity; and funds can be diverted from the more than $800 billion our governments spend on prisons, policing, and defense to schools, mass transit, and social needs.

Politics, not economics, keeps us from ensuring that our water and air are clean, that carbon is kept from our skies, and that every community enjoys the full measure of prevention in homes, neighborhoods, workplaces, and medical offices. Envisioning what’s possible and fighting for what’s needed are not tangential to public health work. They are our core mission.

https://ajph.aphapublications.org…

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Comment:

By Don McCanne, M.D.

Public health funding in the United States has always been a challenge as have the policy positions of our government leaders. Under the Trump administration the issues are even more difficult because of the anti-spending and anti-regulation ideology which forms a barricade to the public health spending and infrastructure that we need.

The fact that we spend so much on health care yet achieve on average only mediocrity is a sure sign that our government does not have the right policies in place. This applies not only to the health care system directly but to other elements that are essential in maintaining the health of the people. A prime example is that 3.5 million people are homeless when we have 18 million vacant housing units, just as The New York Times this week is reporting on 83 million eviction records. This is not just a failure of our public health system but a failure of our government at large.

The policies that would work are not difficult to understand, but the politics remain a barrier, which is even greater under the current administration. We would already have a single payer, improved Medicare for all if it weren’t for the politics.

David Sundwall I know personally to be a very dedicated, sincere advocate of public health policies. But he represents the all-too-prevalent view that we can do this within the political environment we have, by using his six principles. That approach alone is far too feeble, as our nation’s history demonstrates.

Steffie Woolhandler and David Himmelstein explain why we need much more than that. We need sweeping social change – a new New Deal. We have the resources. It is the politics, not the economics, that keeps us from our goals. We have to fight for what’s needed to make public health work. That must be our core mission.

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

Dr. Ed Weisbart at Drury University

PNHP-MO chair Dr. Ed Weisbart participated in a single-payer debate at Drury University (Springfield, Mo.) on April 9, 2018. His opponent, John C. Goodman, is a proponent of market-based health care and is known as the “father of health savings accounts.” The two considered the question, “Should the U.S. adopt a single-payer health care system?”

Transaction prices under hospital and health insurance market concentration

Hospital and Health Insurance Markets Concentration and Inpatient Hospital Transaction Prices in the U.S. Health Care Market

By Seidu Dauda, Ph.D.
HSR, April 2018 (first published May 11, 2017)

Abstract

Objective:
To examine the effects of hospital and insurer markets concentration on transaction prices for inpatient hospital services.

Data Sources:
Measures of hospital and insurer markets concentration derived from American Hospital Association and HealthLeaders‐InterStudy data are linked to 2005–2008 inpatient administrative data from Truven Health MarketScan Databases.

Study Design:
Uses a reduced‐form price equation, controlling for cost and demand shifters and accounting for possible endogeneity of market concentration using instrumental variables (IV) technique.

Principal Findings:
The findings suggest that greater hospital concentration raises prices, whereas greater insurer concentration depresses prices. A hypothetical merger between two of five equally sized hospitals is estimated to increase hospital prices by about 9 percent (p < .001). A similar merger of insurers would depress prices by about 15.3 percent (p < .001). Over the 2003–2008 periods, the estimates imply that hospital consolidation likely raised prices by about 2.6 percent, while insurer consolidation depressed prices by about 10.8 percent. Additional analysis using longer panel data and applying hospital fixed effects confirms the impact of hospital concentration on prices.

Conclusion:
The findings provide support for strong antitrust enforcement to curb rising hospital service prices and health care costs.

From the Conclusion

This study examines the price effects of hospital and insurer concentrations using a large data set with actual transaction prices. I find that hospitals in more concentrated markets are able to use their market power to secure significantly higher prices from insurers and insurers in more concentrated markets are able to exercise a countervailing power and offer significantly lower prices to hospitals.

https://onlinelibrary.wiley.com…

Kenneth Arrow; “Uncertainty and the Welfare Economics of Medical Care,” The American Economic Review, December 1963:
http://web.pdx.edu…

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Comment:

By Don McCanne, M.D.

This study shows what other studies have already demonstrated. When hospitals become concentrated, prices go up. When insurers become concentrated, prices go down. These concentrations are often a result of mergers or acquisitions in either the hospital or insurer markets.

It is instructive to note that this was a very large study of the private commercial insurance market, not of government programs such as Medicare. Why should that matter?

The United States is still trying to pretend that we can depend on the marketplace to bring us higher quality health care at a lower cost. Little does it seem to matter than Nobel laureate Kenneth Arrow demonstrated the fallacy of that concept half a century ago.

The government must be involved. The author of this study states that the results “provide support for strong antitrust enforcement to curb rising hospital service prices and health care costs.” But we have had decades of antitrust activity and yet prices have remained far higher than in all other systems. Although supposedly insurer concentration has provided a countervailing downward pressure on prices, obviously it has not been effective since we pay more, per capita, than twice the average of all other wealthy nations.

Private insurers provide the wrong model for health care financing. In sharp contrast is our Medicare program which depends on publicly administered pricing. Now we have a contest between a health care delivery oligopoly and a private insurance industry that tries to capture the market of financing health care, locking horns over what part of the medical-industrial complex reaps the spoils while the patients end up on the short end.

What we need is a benevolent public steward who works with the health care professionals and institutions to optimize quality, access, and value for all patients. Of course, that is what a well designed single payer system – an improved Medicare for all – is precisely designed to do. Let’s quit pretending that the markets will take care of it for us, and that we can keep the government out of it. We can’t.

If you need a reminder why, read Kenneth Arrow’s “Uncertainty and the Welfare Economics of Medical Care” (link above – long, with economist’s jargon).

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

CMS is giving unfair competitive advantage to private Medicare Advantage plans

Medicare Advantage Plans Cleared To Go Beyond Medical Coverage — Even Groceries

By Susan Jaffe
Kaiser Health News, April 3, 2018

Air conditioners for people with asthma, healthy groceries, rides to medical appointments and home-delivered meals may be among the new benefits added to Medicare Advantage coverage when new federal rules take effect next year.

On Monday, the Centers for Medicare & Medicaid Services (CMS) expanded how it defines the “primarily health-related” benefits that insurers are allowed to include in their Medicare Advantage policies. And insurers would include these extras on top of providing the benefits traditional Medicare offers.

“Medicare Advantage beneficiaries will have more supplemental benefits making it easier for them to lead healthier, more independent lives,” said CMS Administrator Seema Verma.

Many Medicare Advantage plans already offer some health benefits not covered by traditional Medicare, such as eyeglasses, hearing aids, dental care and gym memberships. But the new rules, which the industry sought, will expand that significantly to items and services that may not be directly considered medical treatment.

CMS said the insurers will be permitted to provide care and devices that prevent or treat illness or injuries, compensate for physical impairments, address the psychological effects of illness or injuries, or reduce emergency medical care.

Although insurers are still in the early stages of designing their 2019 policies, some companies have ideas about what they might include. In addition to transportation to doctors’ offices or better food options, some health insurance experts said additional benefits could include simple modifications in beneficiaries’ homes, such as installing grab bars in the bathroom, or aides to help with daily activities, including dressing, eating and other personal care needs.

But patient advocates including David Lipschutz. senior policy attorney at the Center for Medicare Advocacy, are concerned about those who may be left behind. “It’s great for the people in Medicare Advantage plans, but what about the majority of the people who are in traditional Medicare?” he asked. “As we tip the scales more in favor of Medicare Advantage, it’s to the detriment of people in traditional Medicare.”

https://khn.org…

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Fact Sheet: 2019 Medicare Advantage and Part D Rate Announcement and Call Letter

CMS.gov, April 2, 2018

CMS is committed to unleashing and strengthening the Medicare Advantage and Part D programs by giving Medicare beneficiaries flexibility so that they can make informed healthcare choices. The policies adopted through the Rate Announcement and Call Letter provide more choices for beneficiaries, a greater number of affordable options, and new benefits to meet their unique health needs.

Expected Average Change in Revenue

* Per February 1, 2018 Advance Notice: 1.84%
* Per April 2, 2018 Rate Announcement: 3.40%

The Expected Average Change in Revenue reported above does not include an adjustment for underlying coding trend. For 2019, CMS expects the underlying coding trend to increase risk scores, on average, by 3.1%.

2019 Part C Risk Adjustment Model

CMS proposed changes to the CMS-HCC Risk Adjustment model that is used to pay for beneficiaries enrolled in Medicare Advantage plans. For 2019, CMS is finalizing an updated model that incorporates most of the proposed changes to the Part C risk adjustment model, such as adding mental health, substance use disorder, and chronic kidney disease conditions to the risk adjustment model, as well as a variety of additional technical updates.

Using Encounter Data

As noted above, the risk adjustment model we are finalizing makes technical updates, including calibrating the model with more recent data, selecting diagnoses with the same method used for encounter data, and supplementing encounter data used in payment with inpatient data submitted to the historical risk adjustment data collection system (the Risk Adjustment Processing System (RAPS)).

Historically, CMS has used Medicare Advantage diagnoses submitted into CMS’s RAPS. In recent years, CMS began collecting encounter data from Medicare Advantage organizations, which also includes diagnostic information. In 2016, CMS used diagnoses from encounter data to calculate risk scores, by blending 10% of the encounter data-based risk scores with 90% of the RAPS-based risk scores. For 2017 and 2018, CMS continued to use a blend to calculate risk scores, by calculating risk scores with 25% encounter data and 75% RAPS in 2017, and 15% encounter data and 85% RAPS in 2018. For 2019, CMS is finalizing the proposal to calculate risk scores by adding 25% of the risk score calculated using diagnoses from encounter data and FFS diagnoses with 75% of the risk score calculated with diagnoses from RAPS and FFS diagnoses. Since the quality of the encounter data has improved, CMS believes it is appropriate to move forward with the proposed increased percentage of encounter data in the blend. CMS will also calculate the encounter data-based risk scores exclusively with the new risk adjustment model, as proposed, while maintaining use of the current risk adjustment model for calculating risk scores with RAPS data.

Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between Medicare Advantage organizations and FFS providers. In CY 2019, CMS is finalizing the proposal to apply a coding pattern adjustment of 5.90 percent.

Fostering Innovation in Benefit Design: Expanding Health Related Supplemental Benefits  
The policy change announced in the Call Letter will help drive patient access to types of services they do not have today. Some Medicare Advantage plans offer supplemental benefits so that enrollees have more healthcare benefits and options than what they would receive under the Medicare FFS Program. Medicare Advantage plans use rebate dollars and plan premiums to fund supplemental benefit offerings. The statute limits supplemental benefits to health care benefits; CMS interprets “supplemental healthcare benefit” as an item or service (1) not covered by Original Medicare, (2) that is primarily health related, and (3) for which the Medicare Advantage plan must incur a direct medical cost.

Previously, CMS has not allowed an item or service to be eligible as a supplemental benefit if the primary purpose includes daily maintenance. However, in the final Call Letter, CMS discusses a reinterpretation of the statute to expand the scope of the primarily health-related supplemental benefit standard. Under this reinterpretation, CMS would allow supplemental benefits if they are used to diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization. This expansion will effectively increase the number of allowable supplemental benefit options and provide patients with benefits and services that may improve their quality of life and health outcomes.

Uniformity Flexibility
 
The final Call Letter reminds plans that CMS has determined that plans can provide certain enrollees with access to different benefits and services. Specifically, Medicare Advantage plans can offer targeted cost sharing and supplemental benefits for specific enrollee populations based on health status or disease state in a manner that ensures that similarly situated individuals are treated uniformly. This flexibility helps Medicare Advantage plans better manage health care services.

https://www.cms.gov…

CMS Final Call Letter 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies (270pages):
https://www.cms.gov…

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Fact Sheet: CMS Finalizes Policy Changes and Updates for Medicare Advantage and the Prescription Drug Benefit Program for Contract Year 2019 (CMS-4182-F)

CMS.gov, April 2, 2018

On April 2, 2018, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that updates Medicare Advantage (MA) and the prescription drug benefit program (Part D) by promoting innovation and empowering MA and Part D sponsors with new tools to improve quality of care and provide more plan choices for MA and Part D enrollees.

Unnecessary Limits on Medicare Advantage Plan Variety

Current regulations place unnecessary limits (called “meaningful difference” requirements) on the variety of plans an MA organization can offer in the same county. Beginning in CY 2019, CMS is eliminating the requirement that MA plans offered by the same organization in the same county comply with unnecessary limits requiring differences among the organization’s plans beginning with CY 2019 MA bid submissions. CMS is concerned the current requirement may result in organizations reducing the value of certain benefit offerings in order to make their benefit packages comply with these unnecessary limits. This may include instances where differences in benefit packages exist but are not incorporated in the agency’s evaluation (e.g., unique benefit packages based on enrollee health conditions). CMS expects that eliminating the meaningful difference requirement will improve the plan options available for beneficiaries. New flexibilities in benefit design and more sophisticated approaches to consumer engagement and decision-making should help beneficiaries, caregivers, and family members make more informed plan choices.

Flexibility in the Medicare Advantage Uniformity Requirements

CMS has reinterpreted uniformity requirements for Part C benefits offered to MA enrollees. These changes give MA plans new tools to improve care and outcomes for enrollees by allowing MA plans the ability to reduce cost sharing for certain covered benefits, offer specific tailored supplemental benefits, and offer different deductibles for beneficiaries that meet specific medical criteria. This final rule highlights how the new benefit design will be an option for all MA plans.

Updates to the Definition of Marketing

Currently, a variety of materials that are not intended to steer a beneficiary into a particular plan fall under the regulatory definition of marketing and its related requirements, including a statutory requirement that these materials be subject to CMS review. CMS is changing the definition to include only materials that are most likely to lead to a beneficiary to make an enrollment decision. This will allow CMS to focus its oversight efforts on these materials to help ensure that beneficiaries are making the right decisions for their health care needs.

This change lessens the burden of marketing submission on plans and CMS reviewers. To account for those materials that will now fall outside of the new marketing definition, CMS is adopting more appropriate requirements and oversight for a new category of materials and activities called “communications.”

Maximum Out-of-Pocket and Cost Sharing Limits

CMS is revising the regulations controlling maximum out-of-pocket (MOOP) limits, to enable future changes to CMS’s existing methodology of using the 85th and 95th percentiles of projected beneficiary out-of-pocket Medicare Fee-For-Service (FFS) spending beginning no earlier than in CY 2020. CMS will then have authority to change and implement additional levels of MOOP limits, as well as provide flexibility to encourage plan offerings with lower MOOP limits. In addition, CMS will be able to update discriminatory cost sharing standards using a new standard beginning no earlier than in CY 2020.

Default Enrollment

CMS is codifying changes to a current enrollment mechanism that allows MA organizations to provide seamless continuation of coverage for their beneficiaries once they become Medicare eligible.

Restoration of the Medicare Advantage Open Enrollment Period

The 21st Century Cures Act eliminates the existing MA disenrollment period that currently takes place from January 1st through February 14th of every year and, effective for 2019, replaces it with a new Medicare Advantage open enrollment period (OEP) that will take place from January 1st through March 31st annually.

Reducing Unnecessary Paperwork Burden: Medical Loss Ratio

CMS is finalizing the proposal to significantly reduce the amount of MLR data that MA organizations and Part D sponsors submit to CMS on an annual basis. Under these new rules, MA organizations and Part D sponsors will only report the MLR percentage and amount of any remittance owed to CMS for each contract. CMS is also finalizing our proposal to revise the MLR calculation to include in the MLR numerator all expenditures related to fraud reduction activities (including fraud prevention, fraud detection, and fraud recovery) and Medication Therapy Management (MTM) programs.

https://www.cms.gov…

CMS Final Rule CMS-4182-F (1156 pages):
https://www.cms.gov…

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Comment:

By Don McCanne, M.D.

Each year the Centers for Medicare & Medicaid Services (CMS) has used a variety of gimmicks to provide the private Medicare Advantage plans with greater reimbursement rates than their costs and what they are statutorily entitled to. This year the padding of the payments is egregiously obscene. In addition, CMS is providing the private plans with much greater flexibility in benefits and out-of-pocket spending for patients. These changes are designed to make the private Medicare Advantage plans much more attractive than the traditional Medicare program, providing them with an unfair competitive advantage.

By spending more on the private plans, their goal is to move a critical threshold of patients out of traditional Medicare wherein they can begin to sharply reduce federal payments to the traditional program, thus privatizing Medicare through the private Medicare Advantage plans. Once the traditional program is destroyed they will move forward with their premium support model (vouchers) which over time will underfund the private plans, gradually shifting much more of the costs to the beneficiaries, but by then it will be too late to abort their scheme. As Speaker Paul Ryan has explained, budget demands will “require” that these reductions be made (in order to accommodate the tax cuts for the rich).

For details, you can read the combined 1462 pages of the Final Rule and the Final Call Letter (I didn’t this time), though the Fact Sheets at the links above can give you the flavor of these actions. You do have to be careful in following their rhetoric. As examples, “reducing unnecessary paperwork” is code language for allowing the insurers to fudge their medical loss ratios, or wasteful marketing materials are relabeled as “communications.”

What is really offensive is that they are taking our tax dollars and giving them to the private insurers so that they can increase benefits and reduce cost sharing for those enrolled in the private plans while they are denying those same benefits and reduced premiums, deductibles, coinsurance, and stop loss coverage for those of us enrolled in the traditional Medicare program. That is patently unfair. If they were honest about wanting true competition between the private plans and the traditional public program they would fund them at the same risk-adjusted level. Instead they are starving the traditional program – a process that will accelerate – while they are enriching the private insurers, though only temporarily until the traditional program is wiped out (then premium support).

Imagine if we improved the benefits in the traditional Medicare program while eliminating premiums and cost sharing, and instead funding it with equitable taxes; then it would be a great program for all of us. It would also get rid of the limited provider networks that are characteristic of the private Medicare Advantage plans, and it would save the costs of their profoundly wasteful administrative excesses and the administrative burden they placed the delivery system. But we will never see this health care nirvana if we sit back and allow our traditional Medicare program to be put through the grinder while the private plans are nurtured with our taxes, only to eventually be cut loose when we no longer have a viable public program.

Think about this. Most of us in the traditional Medicare program who do not have a retiree health plan or who are not qualified for dual Medi-Medi coverage end up having to buy a Medigap plan, which is not cheap considering the relatively meager benefits. Yet those enrolled in the private Medicare Advantage plans have sufficient enough benefits that they do not need a Medigap plan. The tax burden for all of us is essentially the same whether enrolled in the traditional program or in the private Medicare Advantage plans, yet those enrolled in the traditional program are penalized because they have to pay in addition the Medigap premium plus they receive fewer benefits. If Congress were responsible (an oxymoron?) they would distribute our taxes equitably. That means that preferably they should roll Medigap benefits into the traditional Medicare program, or at least they should stop overpaying the private insurers, giving those enrolled in the private plans an extra free ride at the expense of all of us.

Yes, these technical reports are boring, but we cannot ignore what they really represent – a nefarious attempt to destroy our traditional Medicare program. Remember, we’re entering midterm election season. Let your members of Congress know what you think about this injustice.

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