Medicare-for-All Isn’t the Solution for Universal Health Care

By Joshua Holland
The Nation, August 2, 2017

(Excerpts)

Within the broad Democratic coalition, it’s pretty clear that the discussion of health care has shifted to the left.

But that momentum is tempered by the fact that the activist left, which has a ton of energy at the moment, has for the most part failed to grapple with the difficulties of transitioning to a single-payer system. A common view is that since every other advanced country has a single-payer system, and the advantages of these schemes are pretty clear, the only real obstacles are a lack of imagination, or feckless Democrats and their donors. But the reality is more complicated.

For one thing, a near-consensus has developed around using Medicare to achieve single-payer health care, but Medicare isn’t a single-payer system in the sense that people usually think of it. This year, around a third of all enrollees purchased a private plan under the Medicare Advantage program. Around one-in-four Medicare enrollees also purchase some sort of “Medigap” policy to cover out-of-pocket costs and stuff that the program doesn’t cover, and then there are both public and private prescription drug plans.

But from a policy standpoint, Medicare-for-All is probably the hardest way to get there. In fact, a number of experts who tout the benefits of single-payer systems say that the Medicare-for-All proposals currently on the table may be virtually impossible to enact. The timing alone would cause serious shocks to the system.

Harold Pollack, a University of Chicago public-health researcher and liberal advocate for universal coverage, says, “There has not yet been a detailed single-payer bill that’s laid out the transitional issues about how to get from here to there. We’ve never actually seen that. Even if you believe everything people say about the cost savings that would result, there are still so many detailed questions about how we should finance this, how we can deal with the shock to the system, and so on.”

It’s true that every other developed country has a universal health-care system, and we should too. But make no mistake: Moving the United States to national health care would be unprecedented, simply because we spend more on this sector than any other country ever has.

“Bringing costs down is a lot harder than starting low and keeping them from getting high,” says (Dean) Baker. “We do waste money on [private] insurance, but we also pay basically twice as much for everything. We pay twice as much to doctors. Would single-payer get our doctors to accept half as much in wages? It could, but they won’t go there without a fight.

Rather than making Medicare-for-All a litmus test, we should start from the broader principle that comprehensive health care is a human right that should be guaranteed by the government—make that the litmus test—and then have an open debate about how best to get there. Maybe Medicaid is a better vehicle. Perhaps a long phase-in period to Medicare-for-All might help minimize the inevitable shocks. There are lots of ways to skin this cat.

An obvious alternative to moving everyone into Medicare is to simply open up the program and allow individuals and employers to buy into it.

Yale political scientist Jacob Hacker’s “Health Care for America” proposal… would have left employment-based insurance—and Medicare coverage for the elderly—intact, and created a large new Medicare-like public insurance program that would have been far more robust than anything contemplated during the development of the ACA.

We shouldn’t make promises that we aren’t going to be able to keep. “It’s not going to be easy to do,” Jacob Hacker says, “and anyone who tells you that the most expensive health-care system in the world is going to undergo a sudden shift to highly efficient and low-price medicine has not been studying American medicine.”

https://www.thenation.com…

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Can Medicare for All Succeed?

By Steffie Woolhandler, David U. Himmelstein, Ida Hellander and Joshua Holland
The Nation, August 16, 2017

To the editors:

Joshua Holland’s anti–single payer screed (“Medicare for All Isn’t the Solution for Universal Health Care”) is so riddled with misinformation and outright errors that it makes one wonder whether The Nation has laid off its fact-checkers.

Just one example: In arguing the impossibility of a health-care transformation in a high-spending nation, Holland claims that Switzerland’s health expenditures in 1996 amounted to only 5 percent of GDP. The correct figure is 9.2 percent. [Editor’s Note: This has been corrected in Holland’s article.]

He suggests that cost control under single payer requires halving doctors’ incomes, a serious political problem if it were true. But Canadian doctors make about 80 percent what their US counterparts do, and, taking into account their lower educational debt and post-retirement health expenses (more than $250,000 per couple in the United States), they’re about as well off financially as their US counterparts. Moreover, most US single-payer projections foresee increased spending on physician visits once copayments are abolished, and simplified billing would reduce the bite that office overhead takes out of doctors’ take-home pay.

Holland falsely claims that no one has provided guidance on the transition to single payer. We, and our colleagues in Physicians for a National Program have published in the Journal of the American Medical Association, The American Journal of Public Health, and the New England Journal of Medicine several quite detailed proposals laying out transition plans for acute-care financing, long-term care, and quality monitoring; another, on prescription-drug regulation and financing, is in the works. We’ve analyzed in detail the likely shifts in administrative costs and employment, and the federal single-payer legislative proposals include funding for job retraining and placement and income support to transition the million or so insurance and administrative workers who currently do useless bureaucratic work and whose jobs would be eliminated under single payer. While the transition would be disruptive for some administrative workers, it would be simple for hospitals (they’d stop billing for each patient, Band-Aid, and aspirin tablet and instead be paid lump-sum budgets), and a welcome relief for doctors and nurses, who suffer record high burnout rates in the current medical-industrial complex. That’s why recent polls show that around half of doctors favor single payer (and 21,000 of them have joined Physicians for a National Health Program), and National Nurses United, the leading nurses’ union, is the nation’s strongest single-payer proponent.

Most egregiously, Holland misrepresents the single-payer legislation that’s actually been proposed, citing Medicare’s deficiencies to smear reform proposals. As the title of John Conyers’s bill HR676, the Expanded & Improved Medicare for All Act, makes clear, that legislation would upgrade Medicare coverage, eliminating copayments and deductibles, and fix its other flaws. Holland suggests that, since many Medicare recipients supplement their coverage with private policies, such legislation would boost out-of-pocket costs for millions who currently have employer-paid coverage or Medigap policies. In fact, virtually no one would face increased copayments or deductibles under HR 676 (or Bernie Sanders’s forthcoming legislation, or the many state bills), although wealthy Americans’ taxes would rise. And few people would complain about being freed from insurers’ narrow provider networks; not one of the Medicare Advantage plans, without out-of-pocket benefits, covers care at New York’s Memorial Sloan Kettering Cancer Center. Under single payer patients could, as in Canada, choose any hospital or doctor.

Holland’s scare-mongering about the chaos likely to ensue during a transition to single payer echoes The Wall Street Journal’s dire predictions of “patient pileups” and other disasters at the dawn of Medicare in 1965. It didn’t happen then and wouldn’t happen now. Medicare, sans computers, enrolled 18.9 million seniors (displacing private insurance for many of them) within 11 months of its passage.

The real enemies of single payer aren’t the disgruntled patients or doctors whom Holland features but the insurance and pharmaceutical firms that he barely mentions. That powerful opposition is the real problem we have to overcome, not the imagined chaos of the transition or the phony fear that patients would revolt against better coverage.

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

The authors are primary-care physicians, distinguished professors of public health at the City University of New York at Hunter College, and lecturers in Medicine at Harvard. They founded Physicians for a National Health Program and served as health-policy advisers during Bernie Sanders’s presidential campaign.

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To the editors:

Liberals have created a new single-payer bogeyman to justify their renewed pursuit of failed incremental policies for health reform, as in Joshua Holland’s recent article. It used to be that single payer was not “politically feasible.” Now, according to the likes of Holland, Harold Pollack, and Dean Baker, the problem is that single-payer advocates haven’t worked out a plan to “implement” single payer, or the “brass tacks.”

In fact, implementation is the easy part of health reform. The Canada Health Act is less than 14 pages long, and is only that long because it is also printed in French. Taiwan, which had 40 percent of its population uninsured, installed a universal single-payer system ahead of schedule in less than a year in 1995. The ease of adoption of the American Medicare program also bodes well for single payer, as Holland admits. Indeed, nearly every implementation issue Holland raises is already addressed in the Physicians Proposal for Single Payer National Health Insurance (2015) and Representative John Conyers’s bill, HR 676, the “gold standard” for single-payer legislation.

The “single payer” envisioned in these proposals is not today’s Medicare, of course, but an improved version of Medicare, with more comprehensive benefits, and greater ability to control costs. HR 676 may not specify an exact financing plan, but gives specific enough parameters so that whatever financing plan is adopted (one possible plan is here) it will shift the burden from the sick and poor to the healthy and wealthy, and make care free at the point of delivery. Private employers only pay a paltry 20 percent of the current health care tab, which can be recouped with a small payroll tax or tax on corporate revenues (as recently proposed by Robert Pollin for California). According to a study by David Himmelstein and Steffie Woolhandler in the American Journal of Public Health, taxes already fund over 64 percent of health care in the United States, so moving to a publicly-funded plan is a shift, not a radical change.

Holland asserts that physicians will have to be paid less under single payer, which is false. There are many advantages to a single-payer system, not least of which is the saving of $500 billion annually currently wasted on insurance overhead and excess provider bureaucracy—more than enough money to cover the extra costs of clinical care for the uninsured and underinsured, and to eliminate copays and deductibles for everyone, without cutting physician pay. Having said that, the single payer system will have the ability to shift more funding towards primary care over time, which would help with both access and costs down the road.

Bizarrely, Holland tries to revive Jacob Hacker’s discredited proposal for a “public option” that would compete with private insurers. The premise for Hacker’s proposal is that Americans are “stubbornly attached,” in Hacker’s words, to employer-based insurance and don’t want to give it up, refuted by Kip Sullivan in this blog post. But polls show that over two-thirds of Americans favor Medicare for All. Adding one more insurance company to our fragmented and failing health system will not cover everyone or control costs.

Proposals for incremental reform to “fix” rather than “repeal” the ACA are now on the congressional agenda, but much more fundamental reform is needed. If Congress passed single payer today, we could implement it within a year and save tens of thousands of lives. Time to get to work.

Ida Hellander, M.D.

Ida Hellander, M.D., is a former executive director and director of national health policy (1992–2017) at Physicians for a National Health Program.

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JOSHUA HOLLAND REPLIES

Himmelstein and Woolhandler aren’t alone in accusing me of dishonestly failing to note that Representative John Conyers’s Medicare-for-All bill would “fix” the current program’s “flaws,” including the fact that Medicare is not currently structured as a single-payer program. But I wrote quite clearly that, “if we were to turn Medicare into a single-payer program, as some advocates envision, then we’d also be asking a third of all seniors to give up the heavily subsidized Medicare Advantage plans that they chose to purchase. Consider the political ramifications of that move alone.”

Like other critics, Ida Hellander simply wishes away what I see as the central issue of loss aversion, citing a 2009 blog post by Kip Sullivan which asserts that “two-thirds of Americans support Medicare-for-all.” Sullivan cites a number of conflicting polls conducted in the early 2000s. We have more recent indications of how the American public feels about government involvement in health-care provision now, seven years after the Affordable Care Act was enacted: Pew’s oft-cited poll from June of this year found that, while a record high 60 percent of respondents say that it’s the government’s responsibility to cover everyone, only 33 percent said that should be accomplished through a “single national government program,” and the remainder offered that it should be done through a mix of public and private programs or were unsure.

Loss aversion is a very well documented phenomenon, and it is entirely irrational. In one famous study, one set of participants were given $50 and offered a choice between keeping $30 or taking a 50/50 all-or-nothing bet. Another group were offered the same terms, but this time the choice was phrased as losing $20 or taking the bet. Just changing the wording from “keeping $30” to “losing $20” resulted in a significant increase in those willing to roll the dice—such is our distaste for losing something we have.

Status-quo bias is another very real, and not entirely rational phenomenon—people tend to wary of change, especially sudden or radical change. And of course, the next debate over health-care reform won’t be conducted honestly, as we’ve seen from the opposition to the Affordable Care Act. It’s telling in that arguing that “implementation is the easy part of health reform,” Dr. Hellander cites the experience of Taiwan, which in 1994 was a country of 21 million that was still transitioning from a military dictatorship and spent 5 percent of its GDP on health care.

Unfortunately, these writers and other critics confirm my worry that a single, extremely difficult route to universal coverage is fast becoming a litmus test for progressives. All have attempted to excommunicate me from the left, framing my piece as part of an attack, perhaps a concerted one, on single payer by “liberal” opponents. The reality is that I have long been, and will continue to be, an advocate of establishing a universal health-care system that might be called “single payer.” But I continue to think that rapidly moving much of the population into a single program—without first either creating a model at the state level or delivering some tangible benefits through more modest Medicare expansions—is a recipe for failure.

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Reader Comment:

By Don McCanne, M.D.
The Nation, August 17, 2017, submitted at 11:13am
 
Since Joshua Holland has had both the first and last word, this addendum is appropriate.

Holland mentions loss aversion and status quo bias and offers the example of some seniors giving up their Medicare Advantage plans, but that would not be all that bad. The proposed Medicare-for-All benefits would be greater, and patients would have free choice of their physicians and hospitals instead of being limited to the provider networks of the insurer. Also, Medicare Advantage plans have been wasting taxpayer dollars through favorable selection (marketing to the lower-cost healthier beneficiaries) and by gaming risk adjustment, not to mention diverting taxpayer funds to passive investors.

Holland seems to dismiss the evidence of a surge in support for single payer by citing the Pew poll reporting that only 33 percent supported “a single national government program.” If he had checked the topline of the Pew poll he would find that only 60 percent were asked this question. The 33 percent was the portion of the total population polled, including those not asked the question, but it was 55 percent of those who were asked – a number closer to other polls on single payer. (Yes, they had filtered out the remaining based on a question about government responsibility for making sure all Americans had coverage, but that is not dissimilar to earlier poll results showing that Americans support the Affordable Care Act but oppose Obamacare. It is a glitch that limits the interpretation of the results.)

But the fundamental problem presented by Holland, Baker, Pollack, Hacker and others is that they support a universal, public health care financing program, regardless of the single payer label, yet they insist on taking at least two steps over the chasm. There is no dispute about policy. Single payer is much more effective, efficient, equitable and affordable than other comprehensive models, except for a national health service. The debate seems to be over negotiating the political barriers to reform.

In supporting various incremental reforms, they would leave in place the most expensive and least efficient model of financing health care – our current fragmented, dysfunctional multi-payer system composed of a multitude of private and public programs.

Once you get down to designing a public option or modifying Medicare for individual purchase, you end up with only one or two more options in our dysfunctional market of private plans. You gain almost none of the efficiencies of a single payer system, and you can be sure that the insurers will be there to see that the design will prevent “unfair competition” by the public insurer (ironic considering that their gaming has given their private Medicare Advantage plans an unfair financial advantage over the traditional Medicare program, at taxpayer expense).

Holland, Pelosi and many others suggest that we enact single payer on a state level first, but that would require comprehensive federal legislation to free up funds to be used by states – simple waivers will not do it since they are very limited by law in what they can accomplish. Also there is risk that conservative state administrations would not provide a program that would adequately serve their residents (think of the refusal to accept federal funds for Medicaid).

The single payer policies are the moral imperative – affordable health care for absolutely everyone. Incremental measures leave the current botched up policies in place. Instead of trying to compromise on policy, we need to fix the politics. Hopefully Holland and the rest will work with us on that.

Don McCanne, M.D. is senior health policy fellow for Physicians for a National Health Program.

https://www.thenation.com…

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Adam Gaffney and Margaret Flowers have also provided excellent responses to Joshua Holland’s article in The Nation:

Adam Gaffney, Jacobin, “Medicare for All Should Be a Litmus Test”:
https://www.jacobinmag.com…

Margaret Flowers, Health Over Profit, “Response to Nation Article on Single Payer: Improved Medicare for All is the Solution”:
http://healthoverprofit.org…

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

Doctors Warm To Single-Payer Health Care

By Rachel Bluth
Kaiser Health News, August 16, 2017

Single-payer health care is still a controversial idea in the U.S., but a majority of physicians are moving to support it, a new survey finds.

Fifty-six percent of doctors registered either strong support or were somewhat supportive of a single-payer health system, according to the survey by Merritt Hawkins, a physician recruitment firm. In its 2008 survey, opinions ran the opposite way — 58 percent opposed single-payer. What’s changed?

Red tape, doctors tell Merritt Hawkins. Phillip Miller, the firm’s vice president of communications, said that in the thousands of conversations its employees have with doctors each year, physicians often say they are tired of dealing with billing and paperwork, which takes time away from patients.

“Physicians long for the relative clarity and simplicity of single-payer. In their minds, it would create less distractions, taking care of patients — not reimbursement,” Miller said.

In a single-payer system, a public entity, such as the government, would pay all the medical bills for a certain population, rather than insurance companies doing that work.

A long-term trend away from physicians owning their practices may be another reason that single-payer is winning some over. Last year was the first in which fewer than half of practicing physicians owned their practice — 47.1 percent — according to the American Medical Association’s surveys in 2012, 2014 and 2016. Many doctors are today employed by hospitals or health care institutions, rather than working for themselves in traditional solo or small-group private practices. Those doctors might be less invested in who pays the invoices, Miller said.

There’s also a growing sense of inevitability, Miller said, as more doctors assume single-payer is on the horizon.

“I would say there is a sense of frustration, a sense of maybe resignation that we’re moving in that direction, let’s go there and get it over with,” he said.

Merritt Hawkins emailed its survey Aug. 3 and received responses from 1,003 doctors. The margin of sampling error is plus or minus 3.1 percentage points.

The Affordable Care Act established the principle that everyone deserves health coverage, said Shawn Martin, senior vice president for advocacy at the American Academy of Family Physicians. Inside the medical profession, the conversation has changed to how best to provide universal coverage, he said.

“That’s the debate we’re moving into, that’s why you’re seeing a renewed interest in single-payer,” Martin said.

Dr. Steven Schroeder, who chaired a national commission in 2013 that studied how physicians are paid, said the attitude of medical students is also shifting.

Schroeder has taught medicine at the University of California-San Francisco Medical Center since 1971 and has noticed students’ increasing support for a single-payer system, an attitude they likely carry into their professional careers.

“Most of the medical students here don’t understand why the rest of the country doesn’t support it,” said Schroeder.

The Merritt Hawkins’ findings follow two similar surveys this year.

In February, a LinkedIn survey of 500 doctors found that 48 percent supported a “Medicare for all” type of system, and 32 percent opposed the idea.

The second, released by the Chicago Medical Society in June, reported that 56 percent of doctors in that area picked single-payer as the “best care to the greatest number of people.” More than 1,000 doctors were surveyed.

Since June 2016, more than 2,500 doctors have endorsed a proposal published in the American Journal of Public Health calling for a single-payer to replace the Affordable Care Act. The plan was drafted by the Physicians for a National Health Program (PNHP), which says it represents 21,600 doctors, medical students and health professionals who support single-payer.

Clare Fauke, a communications specialist for the organization, said the group added 1,065 members in the past year and membership is now the highest since PNHP began in 1987.

http://khn.org…

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Comment:

By Don McCanne, M.D.

As people learned about single payer and seemed to think it was a good idea, opponents started dragging out the old discredited arguments against the concept. More recently, health reform advocates who claim to be single payer supporters “in an ideal world” have been pushing pablum – incremental measures that fall far short of reform goals. Thus it is refreshing to digest a dose of reality: physicians really are supporting single payer.

And, why? (Borrowing from James Carville) it’s about the patients, stupid!

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

Survey: 42% of Physicians Strongly Support a Single Payer Healthcare System, 35% are Strongly Opposed

By Phillip Miller
Merritt Hawkins, August 14, 2017

A plurality of physicians strongly support a single payer healthcare system, according to a new survey by Merritt Hawkins.

The survey of 1,033 physicians indicates that 42 percent strongly support a single payer health care system while 14 percent are somewhat supportive. Over one-third (35 percent) strongly oppose a single payer system while six percent are somewhat against it. The remaining three percent neither support nor oppose single payer.

The results contrast with a national survey of physicians Merritt Hawkins conducted in 2008, which indicated that 58 percent of physicians opposed single payer at that time while 42 percent supported it.

In Merritt Hawkins’ experience, there are four reasons why a growing number of physicians are in favor of single payer. First, they are seeking clarity and stability. The fits and starts of health reform and the growing complexity of our current hybrid system are a daily strain on most doctors. Many of them believe that a single payer healthcare system will reduce the distractions and allow them to focus on what they have paid a high price to do: care for patients.

Second, it’s a generational issue. The various surveys that Merritt Hawkins has conducted for The Physicians Foundation in the past show that younger doctors are more accepting of Obamacare, ACOs, EHR, and change in general than are older physicians As the new generation of physicians comes up, there is less resistance among doctors to single payer.

Third, there is a feeling of resignation rather than enthusiasm among some physicians about single payer. These physicians believe we are drifting toward single payer and would just as soon get it over with. The 14% of physicians surveyed who said they “somewhat” support single payer are probably in this group.

Fourth, there is a philosophical change among physicians that I think the public and political leaders on both sides of the aisle now share, which is that we should make an effort to cover as many people as possible.

However, while single payer has gained acceptance among some physicians, it remains strongly opposed by over one third and strongly or somewhat opposed by over 40 percent. It is still a polarizing issue among physicians and is likely to remain so for the foreseeable future.

Phillip Miller is Vice President of Corporate Communications for Merritt Hawkins.

https://www.merritthawkins.com…

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Kaiser Health Tracking Poll – August 2017: The Politics of ACA Repeal and Replace Efforts

Kaiser Family Foundation

READ TO ALL: As you may know, the 2010 Affordable Care Act created health insurance exchanges or marketplaces where people who don’t get coverage through their employers can shop for insurance and compare prices and benefits.

Q12. Thinking about President Trump and Republicans’ next steps on health care, which of the following do you think is more important for them to work on now? Should they work on (READ LIST)? (rotate response options 1-2/2-1)

69% – Fixing the remaining problems with the Affordable Care Act in order to help the marketplaces work better

29% – Continuing plans to repeal and replace the Affordable Care Act

2% – Something else (VOL.)

1% – Don’t know/Refused

http://files.kff.org…

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Comment:

By Don McCanne, M.D.

This Merritt Hawkins survey adds to the accumulated data that shows that a majority of physicians support a single payer system – 56 percent in this survey, with a 42 percent plurality strongly so. This demonstrates a significant increase in support compared to their last physician poll a decade ago.

Phillip Miller, Vice President of Corporate Communications for Merritt Hawkins, expresses the view that “there is a feeling of resignation rather than enthusiasm among some physicians about single payer.”

The current Kaiser Foundation Tracking Poll showed that, given a choice, 69 percent of the general public would prefer to fix “the remaining problems with the Affordable Care Act in order to help the marketplaces work better,” whereas 29 percent would prefer to continue plans “to repeal and replace the Affordable Care Act.” Only 2 percent volunteered “something else,” presumably including single payer. It appears that the current surge in support of single payer is not strong enough for those polled to voluntarily cite single payer as a preference to the options of either fixing ACA or repealing and replacing it.

Our physician colleagues and the public at large need to continue to hear our three messages until they become steadfast believers and activists for the cause: 1) In spite of the improvements, patching the Affordable Care Act will still leave us far short of an efficient, equitable, affordable health care system that is truly universal, 2) current repeal and replace proposals would make health care even less accessible and less affordable, and 3) single payer – an improved Medicare for all – would finally bring affordable care to absolutely everyone.

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

NBER Working Paper 23668: Subsidizing Health Insurance for Low-Income Adults: Evidence from Massachusetts

By Amy Finkelstein, Nathaniel Hendren, and Mark Shepard
National Bureau of Economic Research, August 2017

Abstract

How much are low-income individuals willing to pay for health insurance, and what are the implications for insurance markets? Using administrative data from Massachusetts’ subsidized insurance exchange, we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults. As subsidies decline, insurance take-up falls rapidly, dropping about 25% for each $40 increase in monthly enrollee premiums. Marginal enrollees tend to be lower-cost, consistent with adverse selection into insurance. But across the entire distribution we can observe – approximately the bottom 70% of the willingness to pay distribution – enrollee willingness to pay is always less than half of own expected costs. As a result, we estimate that take-up will be highly incomplete even with generous subsidies: if enrollee premiums were 25% of insurers’ average costs, at most half of potential enrollees would buy insurance; even premiums subsidized to 10% of average costs would still leave at least 20% uninsured. We suggest an important role for uncompensated care for the uninsured in explaining these findings and explore normative implications.

From the Introduction

Governments spend an enormous amount of money on health insurance for low-income individuals. For instance, the U.S. Medicaid program (at $550 billion in 2015) dwarfs the size of the next largest means-tested programs – food stamps and the EITC ($70 billion each). Perhaps because of these high and rising costs, public programs increasingly offer partial subsidies for health insurance, requiring enrollees to pay premiums to help cover costs. Partial subsidies are a key feature of market-based programs such as Medicare Part D and the Affordable Care Act (ACA) exchanges, and even traditional low-income programs like Medicaid and the Children’s Health Insurance Program (CHIP) increasingly require premiums for some enrollees. Partial subsidies are also a textbook policy response to adverse selection if a full coverage mandate may not be efficient.

In this paper, we estimate low-income individuals’ willingness to pay (WTP) for health insurance, assess how it compares to the cost they impose on the insurer, and discuss the positive and normative implications for subsidized health insurance programs. We do so in the context of Massachusetts’ pioneer health insurance exchange for low-income individuals, known as “Commonwealth Care” or “CommCare.” Established in the state’s 2006 health care reform, CommCare offered heavily-subsidized private plans to non-elderly adults below 300% of poverty who did not have access to insurance through an employer or another public program.

We first document two main descriptive patterns. First, enrollee demand is highly sensitive to premiums. With each discrete increase in enrollee premiums, enrollment in CommCare falls by about 25%, or a 20-24 percentage point fall in the take-up rate. Second, we find that despite the presence of a coverage mandate, the market is characterized by adverse selection: as enrollee premiums rise, lower-cost enrollees disproportionately drop out, raising the average cost of the remaining insured population.

We use a simple model to analyze the implications of these descriptive patterns.

The model allows us to translate the descriptive patterns into two main results about willingness to pay and costs for these plans. First, even large insurance subsidies are insufficient to generate near-complete take-up of insurance by low-income adults.

These findings suggest that even modest enrollee premiums can be a major deterrent to universal coverage among low-income people. This deterrent is likely to be even larger in the ACA exchanges, in which income-specific premiums are significantly higher than in CommCare.

Second, although adverse selection exists, it is not the primary driver of low take-up. The cost of marginal consumers who enroll when premiums decline is less than the average costs of those already enrolled, implying that plans are adversely selected. But across the in-sample distribution – which spans the 6th to the 70th percentile of the willingness to pay distribution – the willingness to pay of marginal enrollees still lies far below their own expected costs imposed on insurers for either the H or L plans. For example, for the median willingness to pay individual, the gap between the costs of the marginal enrollee and average costs of enrollees explains only one-third of the $300 gap between willingness to pay and average costs. This suggests individuals would not enroll even if prices were subsidized to reflect the expected cost of marginal enrollees. Enrollment is low not simply because of adverse selection, but because people are not willing to pay their own cost imposed on the insurer.

In the final section of the paper, we briefly explore potential explanations for our findings and analyze their normative implications. Back-of-the-envelope calculations using estimates from the prior literature suggest that moral hazard effects of health insurance cannot explain much of the gap between willingness to pay and costs. However, an estimate of the uncompensated care available to the uninsured suggests that this can account for nearly all of our estimated gap between willingness to pay and costs of insurance.

If we interpret our willingness to pay estimates normatively as individuals’ value of insurance, they suggest that most low-income enrollees would prefer being uninsured to having to pay the cost they impose on the insurer. This suggests that subsidies in this market cannot be justified simply as a response to adverse selection. Our results suggest two potential such justifications for subsidies: as an offset to the externalities resulting from uncompensated care (i.e., the Samaritan’s dilemma (Buchanan, 1975; Coate, 1995)), or as a means of redistribution to low-income households.

5.1 Why Is WTP so Low?

We estimate that willingness to pay is less than one-third of average costs. This cannot be fully explained by adverse selection driving a wedge between average costs and costs for marginal enrollees. We estimate that willingness to pay is also always less than half of marginal enrollees’ own expected costs. This stylized fact runs counter to a standard assumption in textbook models of insurance demand – that willingness to pay for insurance equals expected costs plus a value of risk protection.

In principle, moral hazard offers a potential explanation. If the provision of health insurance leads individuals to consume care they wouldn’t have consumed when uninsured (“moral hazard”), their willingness to pay for this additional care will be less than the cost they would have had to pay for it when uninsured. In practice, however, moral hazard is unlikely to be large enough to explain the results. Insurance would have to increase costs by a factor of at least 200% to explain the estimated gap between willingness to pay (Wj) and own costs (Cj). This seems well outside the plausible range of estimates.

By contrast, uncompensated care for the low-income uninsured is large enough to rationalize their low willingness to pay for CommCare. Uncompensated care for the uninsured reduces willingness to pay relative to the gross cost of this insurance, since some share of those costs pays for care that, if uninsured, would have been paid for by third parties. Estimates suggest that the uninsured pay only about 20% to 35% of their cost of care, which is remarkably similar to our estimated ratio of WTP to own costs for the H plan. Not surprisingly therefore, a simple back-of-the-envelope calculation suggests that the magnitude of uncompensated care for the low-income uninsured could close most of the gap between willingness to pay (WH) and own expected cost (CH).

A large role for uncompensated care also can potentially explain differential take-up findings for low- vs. high-income populations. The low willingness to pay we find for the low-income population in Massachusetts contrasts with the findings for higher-income individuals in Massachusetts: Hackmann, Kolstad, and Kowalski (2015) estimate that individuals above 300% of the federal poverty line in Massachusetts are willing to pay the (gross) cost they impose on the insurer. One parsimonious way to rationalize these findings is that only low-income individuals are able to obtain substantial uncompensated care, and this uncompensated care when uninsured reduces the willingness to pay for formal insurance.

From the Conclusion

This paper estimates willingness to pay and costs for health insurance among low-income adults using data from Massachusetts’ pioneer subsidized insurance exchange. For at least 70% of the low-income eligible population, we find that willingness to pay for insurance is far below insurers’ average costs. Adverse selection exists, despite the presence of the coverage mandate, but is not the driving force behind low take up. We estimate that willingness to pay is less than half of enrollees’ own expected costs; thus, even if insurers could set prices conditional on an individual’s willingness to pay, at least 70% of the market would be uninsured.

From a positive economics perspective, our results point to substantial challenges in getting to universal coverage via partially subsidized insurance programs like the ACA’s exchanges. For example, we estimate that even subsidizing premiums down to 10% of insurer costs would generate only 80% coverage. This reality may underlie the incomplete take-up of insurance under the ACA, despite a coverage mandate and generous subsidies. We provide suggestive evidence of an important role for uncompensated care in explaining why willingness to pay is substantially below (gross) insurance costs. This in turn suggests a potential economic rationale for subsidies as a response to the “Samaritan’s dilemma” to offset the implicit tax that uncompensated care imposes on formal insurance (Coate, 1995).

http://www.nber.org…

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Altruism, the Samaritan’s Dilemma, and Government Transfer Policy

By Stephen Coate
American Economic Review, 1995, vol. 85, issue 1, 46-57

Abstract

This paper shows that altruism provides an efficiency rationale for public provision of insurance to the poor. The framework is one in which there are rich altruists and risk-averse poor who face some possibility of loss. The government represents the rich and makes transfers on their behalf. With unconditional transfers, the poor may forgo insurance and rely on private charity to bail them out in the event of loss. This reliance on private charity has adverse efficiency effects. These may be avoided if the government makes in-kind transfers of insurance.

http://econpapers.repec.org…

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Distribution of the Nonelderly Uninsured by Federal Poverty Level (FPL) in 2015

Kaiser Family Foundation

26% – Under 100%

27% – 100%-199%

28% – 200%-399%

19% – 400%+

http://www.kff.org…

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Comment:

By Don McCanne, M.D.

Wading through this technical 56 page paper, the following understated observation may be the most important: “our results point to substantial challenges in getting to universal coverage via partially subsidized insurance programs like the ACA’s exchanges.” That is, using income related premium tax credits for plans in the ACA exchanges, even with an individual mandate, is a grave design defect because it can never get us to universal coverage.

This study looked at low-income individuals and showed that, not only did adverse selection result in individuals remaining uninsured, but a much greater factor was that the willingness to pay for a percentage of the premium is far below the insurers’ average costs. Even with 90% of the premium subsidized, 20% of the individuals would remain uninsured, and the percent insured dropped off rapidly as the individuals’ share increased.

The authors cite a reference that indicates that higher-income individuals are willing to pay the cost they impose on insurers. But lest we think that avoiding the purchase of insurance due to cost is limited to lower income individuals, that is refuted by the Kaiser Foundation report that shows that the uninsured are distributed throughout all income levels – 19% of them having incomes over 400% of the federal poverty level. Any proposed policy correction should not be limited to lower-income individuals.

The authors suggest that “only low-income individuals are able to obtain substantial uncompensated care, and this uncompensated care when uninsured reduces the willingness to pay for formal insurance.” The authors cite Coate in regard to the “Samaritan’s dilemma” as a rationale for subsidies, but Coate states, “The government represents the rich and makes transfers on their behalf. With unconditional transfers, the poor may forgo insurance and rely on private charity to bail them out in the event of loss. This reliance on private charity has adverse efficiency effects. These may be avoided if the government makes in-kind transfers of insurance.”

Providing highly technical studies such as this one from NBER advances the science on which we base our policy decisions, but it does not take an MIT economist to come to the conclusion that when a policy is not working, you need to change it. Even generous premium tax credits for ACA exchange plans can never get us to universal coverage, yet government making in-kind transfers of insurance will, providing we include all income levels and fund the program with income transfers through progressive taxation.

Again, subsidizing health insurance cannot ever get us to universal coverage. Single payer will.

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Out-of-Pocket Costs, Financial Distress, and Underinsurance in Cancer Care

By Fumiko Chino, MD; Jeffrey M. Peppercorn, MD, MPH; Christel Rushing, MS; S. Yousuf Zafar, MD, MHS; et al
JAMA Oncology, August 10, 2017

The financial burden of cancer treatment is a well-established concern. Owing to cost sharing, even insured patients face financial burden and are at risk for worsened quality of life and increased mortality. Underinsured patients (those spending more than 10% of their income on health care costs) are a growing population, and are at risk given the looming heath policy and coverage changes on the horizon.

From the Discussion

More than one-third of insured cancer patients receiving anticancer therapy faced out-of-pocket costs that were greater than expected, and patients with the most distress were underinsured, paying almost one-third of their income in health care-related costs. Patients at risk for unexpected costs had less household income and faced higher out-of-pocket costs.

http://jamanetwork.com…

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Widowed Early, A Cancer Doctor Writes About The Harm Of Medical Debt

By Alison Kodjak
NPR, August 10, 2017

Ten years ago, Fumiko Chino was the art director at a television production company in Houston, engaged to be married to a young Ph.D. candidate.

Today, she’s a radiation oncologist at Duke University, studying the effects of financial strain on cancer patients. And she’s a widow.

“I think of him every day,” Chino says of her late husband, Andrew Ladd. “It drives me to do the type of research that I do — that’s looking at the financial toxicity of cancer care.”

Chino is co-author of a research letter, published Thursday in JAMA Oncology, that shows that some cancer patients, even with insurance, spend about a third of their household income on out-of-pocket health care costs outside of insurance premiums.

In 2005, before they were married, Chino and Ladd were living together in Houston. She was working in entertainment, and he was on the verge of earning his doctorate in robotics at Rice University. Each had medical insurance – she through her job, he through the school.

Then he started to vomit and lose weight.

He was diagnosed with neuroendocrine carcinoma, an aggressive cancer of endocrine cells that can strike in a variety of places in the body and can be hard to treat.

It was a huge blow for the young couple, still in their 20s, with promising careers ahead of them. Still, they looked to the future and decided to go ahead with their wedding.

But as Ladd’s treatment moved forward, a harsh reality hit. His student insurance didn’t cover much.

Soon, his medical costs surpassed his insurance policy’s $500,000 lifetime limit (before ACA). But the bills kept coming.

Even as insurance coverage has expanded (under ACA), deductibles and copays on many policies have risen, leaving patients to shoulder more of the financial burden for their health care.

“The stress and overwhelming crushing defeat of these bills that would come in every week — it had an effect on our quality of life,” Chino says.

Despite his illness, Ladd landed a job as a professor at the University of Michigan. It came with health insurance, and he continued treatment there.

But he never moved into his office. Three months into his time at Michigan, he died.

Chino was left with an ocean of debt. She estimates it’s in the hundreds of thousands of dollars.

That’s when she found a new mission in life. She enrolled in Duke’s medical school and teamed up with Dr. Yousuf Zafar, who has made a specialty out of studying and writing about “financial toxicity,” which he describes as the toxic effects of financial strain from health care costs. He’s lead author on the JAMA Oncology study that Chino worked on.

“Patients are frustrated,” Zafar says. “They believe they’ve got insurance. They believe they paid for insurance and that insurance should fully cover their cancer care.”

“We need to do a better job explaining to our patients how much benefit they can get from treatment,” he says. “But also how much harm they can face, whether that harm is physical toxicity or financial toxicity.”

Ten years after Ladd’s death, Chino is still dealing with the aftereffects.

“I still owe the debt,” she says. “I stopped answering phone calls from debt collectors.”

http://www.npr.org…

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Comment:

By Don McCanne, M.D.

Health care professionals who are health reform activists can certainly identify with the plight of radiation oncologist Fumiko Chino. Not only did she face the almost unbearable tragedy of her husband’s lethal cancer, she has been left with overwhelming medical debt in spite of insurance coverage.

Helping all of us to better understand the financial impact of cancer, Dr. Chino has co-authored an article in JAMA Oncology, “Out-of-Pocket Costs, Financial Distress, and Underinsurance in Cancer Care.” Her lead co-author, Dr. Yousuf Zafar, acknowledges what a problem “financial toxicity” is and suggests that we need to do a better job of explaining to patients not only the physical toxicity of cancer therapy but also the financial toxicity. (Pause…)

We certainly admire Dr. Zafar for his efforts to educate us on financial toxicity, but we really do need to move beyond just talking about it. Our health care financing system needs to be redesigned to remove financial barriers to care, and, further, when an individual is already suffering from impaired health, the last thing we need to do is to add financial hardship through medical debt.

It is no secret that a well designed single payer program would remove financial barriers to care and prevent medical debt. People would just get health care when they need it and not have to worry about how they would pay for it.

It will be a breakthrough when medical journal editors who publish articles on the problems of financing health care begin to request that the authors include a remedy for financial toxicity – one that has been proven beyond any doubt to be fully effective – a single payer national health program.

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California talks big on health, but so few docs take Medi-Cal that it violates civil rights

By Bill Lann Lee
The Sacramento Bee, August 9, 2017

California draws praise for leading the country in many ways, but our state is faltering badly in an area that is vital to millions: healthcare for our most vulnerable residents.

Fully one-third of our population, including seniors, people with disabilities and children, depend on Medi-Cal, the Medicaid health insurance program for low-income Californians. While there is wide coverage, Medi-Cal recipients have worse access to healthcare than Medicaid recipients in almost every other state, judged by the percentage of physicians who accept Medicaid patients.

This means suffering for people who have health coverage but, in fact, can’t get care. Too often, Medi-Cal patients are told no doctors will treat them, must endure long delays in scheduling appointments, and are forced to travel long distances for care. Poor, disproportionately Latino Medi-Cal patients often are unable to access care they would receive if covered by other health insurance.

Our state’s payments are so low that they deter many providers from treating more than a few, if any, Medi-Cal patients, with physicians saying that Medi-Cal payments are far below their costs of providing care, whether in fee-for-service or managed care.

This not only endangers the health of millions of Californians, but as our state officials should know, it violates health and civil rights laws.

Why?

Today, Latinos are more than half of all Medi-Cal enrollees statewide. As Latino enrollment in the program surged, Medi-Cal’s relative reimbursement rates plummeted.

In 2000, Medi-Cal rates were about two-thirds of Medicare’s, but they have fallen to about half what Medicare pays. Meanwhile, the number of Latinos in Medi-Cal climbed from 2.3 million in 2000 to 7.2 million in 2016. California’s politicians cannot blame financial shortfall; this alarming trend of disinvestment continued whether the state budget was tight or flush.

Civil rights and healthcare laws require that Medi-Cal recipients have access to healthcare equal to people with other insurance, such as Medicare and employer-sponsored insurance. Our state health officials have been so resistant to improving this situation that my organization, the Civil Rights Education and Enforcement Center, joined the Mexican American Legal Defense and Educational Fund to challenge this inequality.

Making sure that Medi-Cal provides the access to health care for those it covers is simple justice.

Bill Lann Lee, former Assistant Attorney General for Civil Rights with the U.S. Department of Justice, is senior counsel at the Civil Rights Education and Enforcement Center.

http://www.sacbee.com…

Los Angeles Times editorial: Does state funding for Medi-Cal discriminate against the Latinos it serves?
http://www.latimes.com…

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Comment:

By Don McCanne, M.D.

Many proclaim that the greatest success of the Affordable Care Act was the 30 percent increase in Medicaid enrollment – now 74 million individuals. But Medicaid is a chronically underfunded welfare program, critically so in states like California.

One-third of Californians are enrolled in Medi-Cal (California’s Medicaid), and over half – 7.2 million – are Latinos. Access is impaired because of a lack of willing providers due to payments that are well below the costs of providing health care. Unequal access to care violates the civil rights of the Latinos enrolled in this program. More broadly, it establishes the principle that lower income individuals on Medicaid are not entitled to the same level of access to care as those with higher incomes covered by more traditional health insurance.

A single payer system would be much more egalitarian, ensuring as much as possible that care would be there for anyone who needs it.

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