PNHP

The health law and its incentives

The health law and its incentives

By Marc H. Lavietes, M.D.
The New York Times, Letters, May 9, 2013

Re “What Health Insurance Doesn’t Do,” by Ross Douthat (column, May 5):

Ross Douthat’s statement that liberals “remain wedded to the dream of a health care bureaucracy that pays” is disingenuous. Obamacare will provide greater access to health care but will neither diminish health care costs nor provide universal care. Progressive physicians favor a single-payer health plan serving as an insurance fund, leaving physicians free to organize their own practices and patients free to choose their physicians.

“Lump” payments for a given condition (angina, asthma) rather than individual payments for each test ordered would push physicians to minimize testing rather than maximize it, and thus limit cost. A powerful single provider could negotiate reasonable drug prices, thus decreasing the exorbitant cost of prescription drugs.

Countries with a single-payer system show major reductions in their administrative costs. Pharmaceutical industry and medical insurance company profits are unconscionable. It is possible to improve health care while limiting both bureaucracy and cost.

Dr. Marc H. Lavietes, a clinical associate professor of medicine at U.M.D.N.J., is secretary of Physicians for a National Health Program, New York City chapter. He resides in Bradley Beach, N.J.

http://www.nytimes.com/2013/05/10/opinion/the-health-law-and-its-incentives.html?_r=0

CMS pushes price transparency

Administration Offers Consumers an Unprecedented Look at Hospital Charges

Centers for Medicare and Medicaid Services, May 8, 2013

New data released today show significant variation across the country and within communities in what hospitals charge for common inpatient services.

“Currently, consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Secretary Sebelius said.

These amounts can vary widely.  For example, average inpatient charges for services a hospital may provide in connection with a joint replacement range from a low of $5,300 at a hospital in Ada, Okla., to a high of $223,000 at a hospital in Monterey Park, Calif.

“Transformation of the health care delivery system cannot occur without greater price transparency,” said Risa Lavizzo-Mourey, M.D., RWJF president and CEO.

http://www.cms.gov/apps/media/press/release.asp?Counter=4596

Medicare Provider Charge Data: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/index.html

Comment:

By Don McCanne, M.D.

So now we have access to hospital chargemaster prices – meaningless numbers that nobody pays. And that is going to make us better health care shoppers?

What matters are payments, not prices. Actual payments are negotiated prospectively by private insurers, and even more effectively by Medicare. Cash paying patients usually feebly attempt to conduct negotiations retroactively, if they pay at all.

This CMS effort on hospital price transparency will have almost no impact on controlling total health care spending since chargemaster prices are a fabrication.

There is a far better way to control spending without forcing patients to make unwise health care decisions in their efforts to avoid the financial burdens of health care. Each hospital should be placed on a global budget, just as we do with our police and fire departments. That way, services are rendered simply when needed, without having an associated price tag.

Requiring price shopping as a prerequisite to health care access is anathema to health care justice.

Oregon needs single-payer health care

By Bill Whitaker
Wallowa County Chieftain (Enterprise, Ore.), May 8, 2013

Many Wallowa County families and businesses are facing financial catastrophe because of the increasing cost of health insurance and medical care. They hope that the Affordable Care Act (“Obamacare”) will cure their problems. Unfortunately it will not.

The Oregon legislature has the opportunity to pull Oregon back from the health care brink. HB 2922, The Affordable Health Care for All Oregon Plan Act, would establish a universal single-payer health care system for all of Oregon. Passing this bill would allow every family in Oregon to get the health care they need when they need it. Oregonians would spend no more on health care than they do now, probably less.

Objections to HB 2922 are not financial: at this moment single-payer systems throughout the U.S. and in Oregon provide better care to more people for less money than our private insurance industry. Almost every large business in Oregon uses its own private single-payer system (also known as “self-funded”) to finance health care for its employees. All our armed forces and veterans get their health care through single-payer systems.

Single-payer is not experimental. It provides access when needed. It costs less than private health insurance. And people who receive single-payer care are healthier than they would be with private insurance.

Oddly, the biggest objections to creating a single-payer system in Oregon are not financial. They are based on the erroneous assumption that the Affordable Care Act (“Obamacare”) will solve all our problems.

Here’s why Obamacare takes us closer to the brink of catastrophe.

Obamacare will not improve access to health care. The Congressional Budget Office (CBO) estimates the ACA will leave 60 million Americans under-insured (at risk for bankruptcy if a family member gets the wrong disease at the wrong time) or uninsured (with no access to care whatsoever). We do not yet have a study in Oregon, but we can expect 700,000 Oregonians to be left at risk for medical bankruptcy or death from a treatable disease – if the ACA works perfectly.

Obamacare will increase, not decrease, health care costs. Although government spending goes down, expenses for patients go up; the CBO estimates a $100 billion annual increase. We can expect annual costs in Oregon to increase by over $1 billion – if the ACA works perfectly.

The ACA will not improve public health. We know this because of the experience in Massachusetts. Since implementing its own version of Obamacare in 2006 (now known as “RomneyCare”), nearly 100 percent of Massachusetts residents own a health insurance policy. However, measures of public health have not improved; medical bankruptcies have increased 30 percent; and health care costs in Massachusetts are rising faster than any region in the country. (Massachusetts began with the highest health care costs in the country and still leads all other states).

What does all this mean for Oregon? After we fully implement Obamacare, we can expect health care to remain dangerously inaccessible, our health care costs and medical bankruptcies to increase, and our public health to continue to deteriorate – if the ACA works perfectly.

Obamacare is not the answer. The consequences of Obamacare will make health care reform in Oregon more urgent than ever. Oregon must act decisively now to protect our health care in the future.

Oregon needs and deserves single-payer health care. A public hearing on HB 2922 will be held in Salem on May13. Every resident of Wallowa County and eastern Oregon should ask Rep. Bob Jenson and Sen. Bill Hansell about HB 2922 and what it can do for you and your family’s health care.

For further information about how you can help bring health care to every person in Oregon, contact: Oregon Rural Action Health Care Reform Action Team, bill@oregonrural.org, 541-663-1358. See our website at oregonrural.org. You can help ensure every Oregonian gets the health care they need. Everybody in, nobody out!

Bill Whitaker is co-chair of the Oregon Rural Action Health Care Reform Action Team.

http://wallowa.com/opinion/regional_opinions/commentary-oregon-needs-single-payer-health-care/article_e4a4d1d2-b772-11e2-b173-0019bb2963f4.html

Bernie Sanders on primary care

Primary physician shortage calls for intervention

By Sen. Bernie Sanders
Politico, May 7, 2013

The American approach to primary health care is one of the more glaring failures of a dysfunctional health care system that costs almost twice as much per capita as that of any other major country — often with worse results.

Instituting major reforms in primary care and enabling people to see a doctor when they need one will save lives, ease suffering and save billions of dollars in wasteful health care costs. What should we do?

First, we need to substantially increase the number of primary-care practitioners. In most countries, about 70 percent of doctors practice primary care while 30 percent are specialists. We have it backward. Only 30 percent of doctors in America practice primary care.

Second, we must implement a major change in the culture of our medical schools. Some medical schools do an excellent job educating primary-care physicians, but too many do too little and some — believe it or not — do nothing at all. In 2011, about 17,000 doctors graduated from American medical schools. Only 7 percent of those graduates chose a primary-care career.

Third, we need to greatly expand the Federally Qualified Health Center program which today provides high quality and affordable health care, dental care, mental health treatment and low-cost prescription drugs to 22 million Americans, regardless of income. This is a program that provides some of the most cost-effective health care in the country and serves as a medical home for millions with nowhere else to go.

Finally, we should greatly expand the National Health Service Corps, which provides loan-forgiveness and scholarships to students who are prepared to provide medical, dental and mental health care in underserved areas. Like the community health center program, the health service corps has expanded in recent years. In 2012, the corps provided financial help to nearly 10,000 clinicians, nearly three times more than in 2008. That’s a good step forward, but nowhere near enough.

The bottom line is that we need a revolution in primary health care services and accessibility.

(Sen. Bernie Sanders (I-Vt.) is chairman of the Subcommittee on Primary Health Care and Aging of the Senate Health, Education, Labor and Pensions Committee.)

http://www.politico.com/story/2013/05/doctors-physician-shortage-calls-for-intervention-91024.html

Comment:

By Don McCanne, M.D.

Every expert understands the pressing need to reinforce our primary care infrastructure – a need that grows more urgent with the implementation of the Affordable Care Act. The inevitable transformation into a single payer system will be much smoother if we already have a high-performance primary care infrastructure in place.

Sen. Bernie Sanders provides us with a framework for expanding that system. It’s too bad that we don’t have a Congress that is willing to support the reforms that we need. We need to keep Sen. Sanders and his allies and replace the rest of them.

Health care in America: best of all possible worlds?

By Elena Rumiantseva
Examiner, May 6, 2013

SEATTLE – The Western Washington chapter of Physicians for a National Health Program (PNHP) held its annual public meeting on May 4 at the University of Washington’s Kane Hall. The theme was “Health care is a human right.” PNHP adheres to this philosophy and pushes for universal health coverage in the United States.

The meeting was opened by Dr. Jim Squire, president of the Western Washington chapter of PNHP, who argued that health care should be organized as a fire department. People who had fires before don’t pay a larger premium if their house sets on fire again (read, no pre-existing condition). Everybody gets the same protection in case they need the services of the fire crew. It should be this way for health care needs. When a person has to go to the doctor, he should be able to do it without thinking twice about the cost.

Dr. Andy Coates, national president of PNHP, stated that health care is tied to caregiving. It is continuous: today your neighbor needs it, and tomorrow you might need it. That is why it has to be available to everybody. Coates said, “Social solidarity is the only foundation for quality health care.” Right now our country lacks this foundation. Incomes have shrunk in real dollars since the recession began, and some families face a choice whether to buy food or necessary medications. Income inequality exacerbates the problem, creating “second class” citizens with low expectations of their basic rights of health and well-being.

Corporate ownership of health care services is also stunning. There are for-profit hospices and ambulances; private equity firms own the majority of nursing homes. Single-payer is the first step of stopping this madness. Then we need transformation of caregiving, Coates reiterated in the end of his presentation.

While Coates and Squire talked about health care from a philosophical point of view, there was an economist on the panel, who crunched the numbers for the audience. Gerald Friedman is the professor of economics at the University of Massachusetts, Amherst, and he researches questions about labor history and the economics of health care. He was the keynote speaker at PNHP’s annual meeting last October.

Statistics that Friedman offered to the people’s attention supported the general message of the meeting that health care is a human right. On average, a person pays $6,000 for health care per year and lives to 80 years old. If this number is compared to numbers of other developed nations, it turns out that for this money a person should live until 84 years. That is significant if we think in terms of the whole population in the U.S. For data from OECD, click here.

According to statistics presented by Friedman, in 1960, 7 percent of total wages went to cover medical costs. In 1970 it went up to 11 percent, in 1980 to 17 percent, in 1990 to 26 percent. In 2010 the share of wages that went to cover health care costs was 39 percent. Unfortunately, the Affordable Care Act (also known as “ObamaCare”) will not fix the problem of rising costs. The number of uninsured is also expected to rise. In 2017 it will be 29 million people, in 2023 – 30 million.

Of course, the ACA deserves some kind words. It will ultimately remove the words “pre-existing condition” from use by insurance companies and more people will receive coverage through expanded Medicaid if the states choose to have it. However, the underlying problems of inequality and high costs with ever-shrinking benefits will not go away. “Shared risk,” “consumer-directed health care” and “pay for quality” are euphemisms that mean more costs will be shifted to the consumer.

To fix these problems, this country needs to cover everybody and remove the profit motive from the equation. It can and will be done, as all the speakers at the program stressed. So, the question is, do we live in the best of all possible worlds, as Leibniz quipped, or can we improve ours to be more just, fair and equal?

http://www.examiner.com/article/health-care-america-best-of-all-possible-worlds?cid=rss

Health Affairs articles on Medicare reform options

Tackling the Cost Conundrum

Health Affairs, May 2013

Medicare Essential: An Option To Promote Better Care And Curb Spending Growth

By Karen Davis, Cathy Schoen and Stuart Guterman

We describe a new option we call Medicare Essential, which would combine Medicare’s hospital, physician, and prescription drug coverage into an integrated benefit with an annual limit on out-of-pocket expenses for covered benefits. Cost sharing would be reduced for enrollees who seek care from high-quality low-cost providers. Out-of-pocket savings from lower premiums and health care costs for a Medicare Essential enrollee could be $173 per month, compared to what an enrollee would pay with traditional Medicare, prescription drug and private supplemental coverage. Financed by a budget-neutral premium, we estimate that this new plan choice could reduce total health spending relative to current projections by $180 billion and reduce employer retiree spending by $90 billion during 2014–23. Given its potential, such an alternative should be a part of the debate over the future of Medicare.

http://content.healthaffairs.org/content/32/5/900.abstract

Supplemental Coverage Associated With More Rapid Spending Growth For Medicare Beneficiaries

By Ezra Golberstein, Kayo Walsh, Yulei He and Michael E. Chernew

Supplemental coverage makes health care more affordable for beneficiaries but also makes beneficiaries insensitive to the cost of their care, thereby increasing the demand for care. We found that supplemental insurance coverage was associated with significantly higher rates of overall spending growth. Specifically, employer-sponsored and self-purchased supplemental coverage were associated with annual total spending growth rates of 7.17 percent and 7.18 percent, respectively, compared to 6.08 percent annual growth for beneficiaries without supplemental coverage. Results for Medicare program spending were more equivocal, however. Our results are consistent with the belief that current trends away from generous employer-sponsored supplemental coverage and efforts to restrict the generosity of supplemental coverage may slow spending growth.

http://content.healthaffairs.org/content/32/5/873.abstract

Public Financing Of The Medicare Program Will Make Its Uniform Structure Increasingly Costly To Sustain

By Katherine Baicker, Mark Shepard and Jonathan Skinner

In this article we describe a model incorporating the benefits of public programs and the cost of tax financing. The model implies that the “one-size-fits-all” Medicare program, with everyone covered by the same insurance policy, will be increasingly difficult to sustain. We show that a Medicare program with guaranteed basic benefits and the option to purchase additional coverage could lead to more unequal health spending but slower growth in taxation, greater overall well-being, and more rapid growth of gross domestic product.

Our model thus helps explain the rapid growth in US health care expenditures relative to other countries. More important, the model highlights the trade-offs in different approaches to reining in public spending — from the current approach of providing a uniform benefit that increasingly crowds out other programs, to a less egalitarian model that guarantees only a basic benefit and redirects some redistribution toward other programs.

Our analysis suggests that the policy of providing a uniform benefit to all — rather than a basic benefit that higher-income residents can augment — may be increasingly untenable if health care expenditures continue to rise.

Other excerpts:

Why has the United States diverged so dramatically from its counterparts? This divergence is probably not explained by commonly cited factors such as administrative costs — already high by the 1980s — or physician salaries, which have stagnated over the past decade.

The implications of our model are not dissimilar to the idea of voucher-type premium support suggested over the years by Ezekiel Emanuel and Victor Fuchs, Henry Aaron and Robert Reischauer, and Rep. Paul Ryan (R-WI). Indeed, it may appear that this plan most closely resembles a Ryan-style premium support plan.

Our “basic” plan does not correspond so much to a high-deductible or higher-cost-sharing plan, but rather to one that covers a more limited set of treatments or providers. Unlike high-deductible plans, the basic plan need not expose poorer households to the risk of substantial cost sharing. Instead, it is designed to limit coverage to treatments with proven effectiveness at a reasonable cost. Of course, identifying which treatments are of high value — and for which patients — poses substantial challenges.

Perhaps the greatest challenge to offering this kind of plan choice more widely in Medicare is that it would require setting aside the egalitarian goals enshrined in the Medicare legislation of 1965. Publicly providing only basic coverage would implicitly recognize that higher-income households would probably elect to procure more generous coverage — and, ultimately, to obtain more health care and possibly better health outcomes.

http://content.healthaffairs.org/content/32/5/882.abstract

Background paper (40 pages): “Optimal Healthcare Spending with Redistributive Financing”

http://www.dartmouthatlas.org/downloads/papers/ShepardBaickerSkinner_OptimalHealthSpending.pdf

Three Large-Scale Changes To The Medicare Program Could Curb Its Costs But Also Reduce Enrollment

By Christine Eibner, Dana P. Goldman, Jeffrey Sullivan and Alan M. Garber

With Medicare spending projected to increase to 24 percent of all federal spending and to equal 6 percent of the gross domestic product by 2037, policy makers are again considering ways to curb the program’s spending growth. We used a microsimulation approach to estimate three scenarios: imposing a means-tested premium for Part A hospital insurance, introducing a premium support credit to purchase health insurance, and increasing the eligibility age to sixty-seven. We found that the scenarios would lead to reductions in cumulative Medicare spending in 2012–36 of 2.4–24.0 percent. However, the scenarios also would increase out-of-pocket spending for enrollees and, in some cases, cause millions of seniors not to enroll in the program and to be left without coverage.

http://content.healthaffairs.org/content/32/5/891.abstract

Additional Reductions In Medicare Spending Growth Will Likely Require Shifting Costs To Beneficiaries

By Michael E. Chernew

The Affordable Care Act created a projected trajectory for Medicare spending per beneficiary that is lower than historical growth rates. Although opportunities for one-time savings exist, any long-term savings from Medicare, beyond those already forecast, will probably require a shift in spending from taxpayers to beneficiaries via higher beneficiary premium contributions (overall or via means testing), changes in eligibility, or greater cost sharing at the point of service.

http://content.healthaffairs.org/content/32/5/859.abstract

Comment:

By Don McCanne, M.D.

At a time when our politicians have decided to open discussions on reducing government spending in Medicare, it likely is no coincidence that this cluster of articles on ways of reforming the financing of Medicare appears in the leading journal of health policy – Health Affairs. But beware; the thrust of most of the articles should raise our concerns.

The most alarming articles are the pair from Katherine Baicker and her colleagues. They support unlimited care with “better health outcomes” for higher-income households, with only “basic” care for for the rest of us, even though they note that defining basic c
are “poses substantial challenges.” Class division in health care seems to be a uniquely American concept. “It would require setting aside the egalitarian goals enshrined in the Medicare legislation of 1965.”

The article by Ezra Golberstein and his colleagues calls for diminishing the financial protection offered by supplemental Medigap and retiree health benefits “to restrict the generosity of supplemental coverage,” making beneficiaries more sensitive to the cost of their care, even though “results for Medicare program spending were more equivocal.” Feeling the pain of their health care spending seems to be the policy goal even if the total reduction in Medicare spending is only nominal.

Christine Eibner and her colleagues propose, “imposing a means-tested premium for Part A hospital insurance, introducing a premium support credit to purchase health insurance, and increasing the eligibility age to sixty-seven” as three means of reducing overall Medicare spending, even though these measures would shift costs to the beneficiaries and cause perhaps millions of them to withdraw from Medicare and remain uninsured.

Michael Chernew keeps it simple. Lowering the projected trajectory for Medicare spending “will probably require a shift in spending from taxpayers to beneficiaries via higher beneficiary premium contributions (overall or via means testing), changes in eligibility, or greater cost sharing at the point of service.” In other words, reduce the tax transfer by sticking it to the seniors.

We can thank Karen Davis, Cathy Schoen and Stuart Guterman for not causing us to lose all hope. Their proposal – “Medicare Essential” – is designed to increase the coverage and efficiency of Medicare. They would combine the hospital Part A, physician Part B, and drug Part D programs into a single program with less administrative complexity. They would also add much needed catastrophic coverage by placing a maximum on out-of-pocket expenses. They would also fold in the benefits of supplemental plans eliminating the need for wasteful, superfluous Medigap and retiree health plans. Their proposal would actually reduce spending for most Medicare beneficiaries while enhancing the benefits.

They would leave in place the flawed Medicare Advantage plans, although competing with a truly superior public plan could make them obsolete – the goal of “the public option.” They would have the deductible apply to Part A, opening the treacherous territory of a path for more cost shifting to beneficiaries. Also they do not mention that Medicare Essential could eventually be expanded to include everyone, becoming an improved Medicare for all. There are many other important features of the PNHP version of the single payer model that they do not address, and that we won’t mention here. Suffice it to say, that Medicare Essential is only a tiny though important step in the direction in which we should be headed.

For incrementalists, Medicare Essential should captivate you. For those of us who are impassioned single payer supporters, we should continue to advocate for moving the political process forward toward achieving an Improved Medicare for All single payer program as soon as possible.

PNHP leader honored for ‘extraordinary commitment’ by peers

Dr. Oliver Fein receives prestigious David R. Calkins Award at SGIM meeting

PNHP note: The following text consists of two parts: (1) a news release from the Society of General Internal Medicine, and (2) the remarks of Dr. Oliver Fein, past president of Physicians for a National Health Program, upon receiving the award.
Dr. Oliver Fein
Calkins Award Announcement

Oliver Fein, M.D., professor of clinical medicine and clinical public health at the Weill Cornell Medical College, received the David R. Calkins Award in Health Policy Advocacy at the 36th Annual Meeting of the Society of General Internal Medicine (SGIM) on April 26 in Denver.

Dr. Fein was honored for his “extraordinary commitment in health policy advocacy.”

During the 1990s, Dr. Fein founded the Health Reform Cluster of SGIM’s Health Policy Committee, which he subsequently chaired. In 1993-94, he served as a Robert Wood Johnson Health Policy fellow in the congressional office of Senate Majority Leader George Mitchell, where he championed issues related to primary care training. In 2008, he received the Robert Wood Johnson Health Policy Fellowship Alumni Award for Excellence in Promoting and Advancing Health Policy, a Lifetime Achievement Award.

In 2009, as president of Physicians for a National Health Program (PNHP), Dr. Fein attended the White House Health Care Summit, where he advocated for single-payer national health care reform.

At Weill Cornell, he is co-director of the David Rogers Health Policy Colloquium, a weekly forum for the discussion of health policy issues and directs a two-week course for internal medicine residents titled “Perspectives on the Changing Health Care System.”

At the SGIM meeting, Dr. Fein’s acceptance speech was followed by a standing ovation.

*****

Remarks upon receiving the Calkins Award

By Oliver Fein, M.D., F.A.C.P.

Wow, this is so exciting and completely unexpected.

Exciting, because it is a thrill to be recognized for doing valuable work by one’s peers.

Unexpected, because I thought some members of SGIM might not agree with aspects of my advocacy. For example:

• My passing out leaflets at the 2008 SGIM Annual meeting questioning the keynote invitation to Gail Wilensky, an economist who favors Paul Ryan’s premium support proposal to privatize Medicare by converting it into a defined contribution program.

• My efforts at the 2011 SGIM Annual meeting to organize a “white coat” demonstration attended by over 300 SGIMers at the Arizona Statehouse to protest Arizona’s anti-immigrant legislation.

• My persistent attempt to get SGIM to support single-payer national health care reform.

In 1992, anticipating the Clinton presidency, SGIM’s Health Policy Committee distributed a questionnaire on health care reform. Fifty-eight percent of SGIMers responded and over 80 percent supported universal access to health care.

In 2003-4, we repeated the questionnaire, but only got a 26 percent response rate, still with overwhelming support for universal access.

Finally, in 2009, with the election of Barack Obama, the SGIM Council adopted a statement favoring “access to affordable, comprehensive, equitable health care for all residents of the United States.” But it still didn’t include a call for single payer.

And here we are, in 2013, SGIM honors me with the David Calkins Award for health policy advocacy … in part because of my advocacy for single-payer health care reform.

What are the lessons I hope you take away from this experience:

• SGIM is a dynamic organization. SGIM not only tolerates dissent within its ranks, it rewards it!

• Advocacy for social justice issues generates respect from your peers.

• Don’t give up on single-payer Medicare-for-All. It places a priority on access to health care, can be financed fairly, and has the greatest potential to control costs. Keep the vision alive!

I have so many people to thank for this honor: First my four brothers and our immigrant parents, who in spite of being small-business Republicans, taught me social justice – to respect and value every human being equally.

Second, I thank my partner and wife of 49 years, Charlotte Phillips, and our two daughters, Kim and Jess and granddaughter Clara, for their ongoing support.

And third, I want to thank all those people, some of whom are in this room, who have supported me throughout my career: during residency at Lincoln Hospital in the South Bronx; at Columbia-Presbyterian where we tried to make the academic health center socially accountable to the community; and at Cornell, where we have tried to diversify the clinical education of our students by getting them off the island of Manhattan (particularly the Upper East Side) into the Bronx, Queens and Brooklyn, and subsequently off the continent of North America to Africa, Asia, Latin America, and Europe. Special thanks to SGIM members who served and still serve on the Health Policy Committee. I could not have done all these things without all of you. This award is your award.

I love this quote from Martin Luther King: “The arc of the moral universe is long, but it bends toward justice.”

And I love this paraphrase: “The arc of history is long, but it bends toward universal access to single-payer health care.”

Perhaps access to health care will become the civil rights movement of the 21st century.

The unhappy marriage of economics and health care

By Gerald Friedman
All Unions Committee for Single Payer Health Care–HR 676, May 6, 2013

America’s health care system is collapsing, and we can blame the economics profession.

Most economists approach health care in the wrong way, viewing it as a commodity like shoes or the laptop on which I write. Instead, health care is an idiosyncratic commodity, subject to uncertainty and “asymmetric information” leading to destructive behavior.

Trying to force health care into a box, treating it like other commodities, economists have promoted cost sharing, market competition, and insurance oversight of health care providers that have inflated the administrative burden while denying ever more Americans access.

Health care spending has been rising throughout the world as aging and more affluent populations spend on their health. Nowhere, however, has the cost of health care risen as fast as in the United States where costs soared because of rising administrative expense.

Compared with other affluent countries in the Organization for Economic Cooperation and Development (the OECD), the United States spends over twice as much per person as is spent elsewhere.

Before 1971 when Canada enacted its Medicare program, a single-payer government-funded health care system, Canada spent a higher share of its national income on health care than did the United States. Since then, however, while Canada has controlled costs, spending has soared in the United States so that we now spend over $3,000 more per person. That is $12,000 for a family of four that is not available for travel, education, housing, or food.

Elsewhere, increases in health care spending have been associated with improvements in the provision of health care and, therefore, with increasing life expectancy. In the United States, however, spending has increased because of rising administrative costs and increases in the price of prescription drugs and, therefore, has yielded relatively few benefits in improvements in care.

Comparing changes in health care spending and life expectancy between 1971 and 2008, other affluent OECD members gained a year of life expectancy for every $453 in spending; in the United States, however, life expectancy has increased less and spending has risen sharply more so that each year of increased life expectancy has cost over twice as much as in these other countries.

Health care spending in the United States has increased by $1,283 for every additional year of life expectancy. Had our spending per year of added life increased at only the rate of other countries we would be spending over $4,500 less per person, or $18,000 saved for the average family of four.

Most of the difference in relative expenditures, most of the growing waste in spending in the United States, is due to increasing administrative costs in the provision of private health insurance and in the billing and insurance operations within doctors’ offices and in hospitals.

The average physician in the United States now spends four times as much interacting with insurance companies as does the average physician in Ontario, Canada, over $80,000 per physician compared with a little over $20,000 in Ontario.

Prescription drug prices and administrative expenses have been the fastest rising costs in the United States health care system. From 1980 to 2005, administrative costs rose by 1,300 percent while drug prices rose by nearly 2,000 percent. There are now 2.5 million administrative support personnel in the American health care system – more than the number of nurses, and five times the number of physicians. We now have more health care managers than physicians and surgeons.

Rising costs drive up health insurance premiums so that a family health insurance plan now costs about 40 percent of the average family wage income, up from 7 percent in 1960. Rising costs are denying ever more Americans access to health care even while businesses and governments wrestle with rising health care spending that squeezes resources available for other purposes.

While other countries have controlled health care costs by restraining administrative expenses and drug prices, ballooning costs in the United States come from policies promoted by economists who have urged governments and providers to control costs by making consumers responsible for more of the costs even while raising administrative costs and ignoring monopolistic pricing of pharmaceuticals.

Viewing the injured, sick, and disabled as “consumers,” economists see insurance as the source of rising costs because they are not responsible for the costs of care they receive and, therefore, overuse health care. Rising copayments and deductibles are intended to discourage “consumers” from “abusing” health care, as if the victims of auto accidents or cancer should shop around for cheaper treatments. Consumers are also supposed to favor competition among insurers who limit provider services by providing more administrative supervision.

Ignoring evidence that Americans are less likely to see doctors and other health providers than are residents of other affluent countries, these economists have blamed the high cost of our health care on insurance which, they assume, leads to wasteful over-practice and the provision of unnecessary health care services. Their solution is greater cost sharing, more regulation of providers, capitation, and even the end to insurance by substituting medical savings accounts for insurance.

For 40 years, many economists have promoted increasing cost sharing through higher copayments and deductibles, the replacement of fee-for-service payment systems with capitation where providers are paid a fixed amount for patients as in Health Maintenance Organizations, and competition where multiple insurers offer a variety of plans catered to individual consumer’s interests and in competition with each other. Far from limiting health care cost increases, these practices have produced the worst of all worlds, rising costs along with restrictions on access.

Costs have risen because these recommendations have inflated the administrative burden in health care, the costs of the billing and insurance activities within provider offices as well as the cost of the health insurance industry itself. While restricting access, limiting the benefit to Americans of some of the dramatic improvements in health care practice of the last decades, these practices have not bent the cost curve or slowed health care inflation even while denying more and more Americans access to affordable health care.

The failure of price incentives and competition to control health care costs could have been predicted had economists appreciated that health insurance is not a commodity and the sick are not consumers like those shopping for the best pair of sandals or brand of peanut butter.

Producers of commodities might try to accommodate consumer wishes because they can profit by selling more. Health insurers, on the contrary, can better increase their profits by selling less, by identifying people likely to need care and driving them away (“lemon dropping”) even while attracting the lucky and healthy (“cherry picking”).

Most health care expenditures go to a relatively few people, the unlucky who develop an illness or suffer an accident. Insurers, therefore, can dramatically lower their costs by finding those who will be expensive and getting rid of their business, encouraging them to find another insurance plan or even to die.

A form of “adverse selection,” or screening of potential customers by insurance companies, can be profitable for the individual firm but it comes at the cost of raising costs for the community as a whole.

As a country, we now spend almost $200 billion administering the health insurance industry and over $800 billion in administering the
health care industry, or over a quarter of total spending. Add to this the inefficiency in delivery that comes from a fragmented finance system that inhibits coordination of care, and the inflated prices for prescription drugs, and easily a third of total spending is wasted or going to monopolistic profits.

The waste involved in the current system has a redeeming feature: it provides abundant space for an improved system that could improve access and services even while dramatically lowering costs by eliminating administrative waste.

If we lowered administrative costs and drug prices to the Canadian level, we could save nearly $600 billion dollars, more than enough to provide coverage to all of the uninsured while improving access for the millions of underinsured.

If we see past the bad recommendations of market fundamentalists, we can improve health care and save money. An outcome that even economists should favor.

Gerald Friedman, Ph.D., is professor of economics at the University of Massachusetts, Amherst. He has written extensively on single-payer health care and Rep. John Conyers’ bill, the Expanded and Improved Medicare for All Act, H.R. 676. His article in Dollars & Sense explaining the economics of single payer is available here.

Distributed by All Unions Committee for Single Payer Health Care–HR 676, c/o Nurses Professional Organization (NPO), 1169 Eastern Parkway, Suite 2218 Louisville, KY 40217. Phone: (502) 636 1551. Website: http://unionsforsinglepayer.org/

Gerald Friedman: The Unhappy Marriage of Economics and Health Care

The Unhappy Marriage of Economics and Health Care

By Gerald Friedman, Ph.D., Professor of Economics, University of Massachusetts at Amherst
Unions for Single Payer Health Care, May 6, 2013

America’s health care system is collapsing, and we can blame the Economics profession. Most economists approach health care in the wrong way, viewing it as a commodity like shoes or the laptop on which I write. Instead, health care is an idiosyncratic commodity, subject to uncertainty and “asymmetric information” leading to destructive behavior. Trying to force health care into a box, treating it like other commodities, economists have promoted cost sharing, market competition, and insurance oversight of health care providers that have inflated the administrative burden while denying ever more Americans access.

While other countries have controlled health care costs by restraining administrative expenses and drug prices, ballooning costs in the United States come from policies promoted by economists who have urged governments and providers to control costs by making consumers responsible for more of the costs even while raising administrative costs and ignoring monopolistic pricing of pharmaceuticals. Viewing the injured, sick, and disabled as “consumers,” economists see insurance as the source of rising costs because they are not responsible for the costs of care they receive and, therefore, overuse health care. Rising copayments and deductibles are intended to discourage “consumers” from “abusing” health care, as if the victims of auto accidents or cancer should shop around for cheaper, and competition among insurers while limiting provider services by providing more administrative supervision. Ignoring evidence that Americans are less likely to see doctors and other health providers than are residents of other affluent countries, these economists have blamed the high cost of our health care on insurance which, they assume, leads to wasteful over-practice and the provision of unnecessary health care services. Their solution is greater cost sharing, more regulation of providers, capitation, and even the end to insurance by substituting medical savings accounts for insurance.

For 40 years, many economists’ have promoted increasing cost sharing through higher copayments and deductibles, the replacement of fee-for-service payment systems with capitation where providers are paid a fixed amount for patients as in Health Maintenance Organizations, and competition where multiple insurers offer a variety of plans catered to individual consumer’s interests and in competition with each other. Far from limiting health care cost increases, these practices have produced the worst of all worlds, rising costs along with restrictions on access. Costs have risen because these recommendations have inflated the administrative burden in health care, the costs of the billing and insurance activities within provider offices as well as the cost of the health insurance industry itself. While restricting access, limiting the benefit to Americans of some of the dramatic improvements in health care practice of the last decades, these practices have not bent the cost curve or slowed health care inflation even while denying more and more Americans access to affordable health care.

The waste involved in the current system has a redeeming feature: it provides abundant space for an improved system that could improve access and services even while dramatically lowering costs by eliminating administrative waste. If we lowered administrative costs and drug prices to the Canadian level, we could save nearly $600 billion dollars, more than enough to provide coverage to all of the uninsured while improving access for the millions of underinsured. If we see past the bad recommendations of market-fundamentalists, we can improve health care and save money. An outcome that even economists should favor.

http://unionsforsinglepayer.org/articles/2013-05-05/the-unhappy-marriage-of-economics-and-health-care

Comment:

By Don McCanne, M.D.

Which comes first, economic theory or policy? Intuitively, it seems that a solid understanding of economics should form the basis for developing policies. The obvious flaw is that economics is not a hard science, allowing you flexibility to choose economic theory that conforms to whatever policy you favor.

In the United States we have relied heavily on economists who are market-fundamentalists. They begin with market theory, and then they establish policies that supposedly would provide us the greatest value in health care. Yet we have ended up with a profoundly expensive, highly wasteful system of mediocre-to-poor quality, while falling far short of the goals of making health care affordable and accessible for everyone.

It seems unlikely that the market-fundamentalists would contend that they choose policies first and then use market theory to reach their goals. If so, then they would have to explain to us why they wanted today’s outcomes.  So much for market fundamentalism.

Advocates of health care justice first choose policies that would ensure quality care for everyone that is affordable for society as a whole. Then they apply economic theory to achieve the goals of those policies. Other nations have shown that this works.

In his article, Massachusetts Professor Gerald Friedman explains how we can get it right – producing better health care while saving money – an outcome that all economists should favor, that is if they are pure to the art and science of their profession.

Health insurance: A painfully long wait

By the Editorial Board
The Boston Globe, May 6, 2013

One million hours. That’s how much time new Harvard research suggests psychiatrists spend each year obtaining insurance approval to hospitalize suicidal or mentally ill patients. That translates into time taken away from patient care but also, more importantly, means patients in crisis are stuck in emergency rooms for a median of 8.5 hours, more than twice the length for most other admissions. This bureaucratic roadblock needs to be streamlined.

The study, published April 23, looked at data from more than 1,000 patients, including a small sample at Cambridge Health Alliance. Unlike if they were suffering from a gunshot wound or appendicitis, privately insured patients with psychiatric illnesses generally need prior authorization for reimbursement to be admitted. Approval almost always comes, the study found, but doctors spent between less than 20 minutes and five hours on the telephone getting it. With 1.6 million psychiatric admissions per year, that adds up. One result is that emergency rooms are now being designed to ensure that waiting psychiatric patients can’t harm themselves or others in the meantime.

The study’s authors call for this extra approval step to be eliminated, suggesting the only benefit is cost-savings due to deterrence — or what they call “rationing by hassle factor.” But, given that doctors may also receive important medical history during the call, particularly for regular ER visitors, insurers should instead expedite the approval process. Right now patients’ — and doctors’ — best interest is being lost amid paperwork.

http://www.bostonglobe.com/editorials/2013/05/05/insurers-must-cut-wait-times-for-hospitalization-mental-health-patients/ESSSpzpL938LOYO6HXJkcJ/story.html

Congressional ‘Obamacare’ Issues Beg the Questions that Single-Payer Answers

By Donna Smith
CommonDreams, April 26, 2013

In recent days, many of us have read and tried to follow the reports that Congressional offices are engaged in discussions about how to make sure their health insurance coverage available under the Affordable Care Act (Obamacare) remains affordable for Congresspersons and their staff members.  If you’d like to read more about the hullabaloo, this piece from the Washington Post probably explains it as clearly as any.

Basically, a mischievous amendment drafted and inserted by Republicans and later agreed to by Democrats anxious to  pass the ACA leaves some challenging issues to be resolved regarding the employer’s (in this case the Federal government, a.k.a., you and me) contributions to paying their share of premiums for Congressional members and their staff members.  Negotiations and discussions continue, but some fear that some Congressional staff may leave their positions rather than take on the bigger financial burdens of paying more of their health insurance premiums.  Stay tuned, if you are worried about how this plays out.

For the human beings involved who have health needs and families to support just as the rest of us do, I hope a fair resolution is reached in the short term. In the longer term, this should serve as yet another reinforcement of the need to move well beyond the incredibly unaffordable Affordable Care Act to the common sense, common decency, and simplicity of a single-payer, Medicare for all for life model for our dysfunctional health care system.

If Congressional members and their staffs are having difficulties comprehending and navigating the details of the ACA, imagine the millions and millions of “average” Americans who will face incredible confusion, expense, and delays of access to needed health care as we slog through the details of the ACA.   Most of us will not have anyone to negotiate or advocate for us when we try to make decisions about health coverage.  We will have “navigators” who will explain various plans available on the exchanges but that’s vastly different from having true advocates to make sure we aren’t overburdened with costs or enrolling in coverage that really isn’t coverage at all but simply compliance with the mandate to carry the financial product that is insurance.  I am already worried, just as millions of others are.

Why would single-payer, Medicare for all for life be so much better?  Simplicity – everybody is in, nobody is out.  Vastly reduced administrative costs – strip out the profit made on misery and deception and advertising and claims denials and delays.  Incredibly improved access to providers of our choice.  No need to navigate me to one plan or another.  No need to bankrupt me with co-pays, deductibles and out-of-pocket  expenses.  No need for anyone in charge of profit-making to lemon drop (get rid of those with costly medical conditions or who are aging) or cherry pick (keep the healthy, less costly folks enrolled).  We all have one single standard of high quality care under a social insurance model, not a model aimed at maximizing profits.

Some of us will face harsh realities more quickly than Congressional members of staffers on the Hill.  In just four days, I must decide once and for all whether or not to spend more than $800 a month on my coverage for the next several months or just go bare until the exchange (more stealthily named the “marketplace”) is up and running here in Colorado in January 2014.   No matter what I, as a two time cancer survivor and 58 year old, think is possible financially for me or even wisest from a health standpoint over the next eight months, once I get to October of this year, I will be able to begin exploring what I may be able to find under the ACA for my coverage.  I am so grateful that my husband is covered under Medicare and a supplemental (as are many member of Congress, I suspect).

When my time comes to decide about my health and my life, there will be no committee convened that worries about my costs or my coverage as is the case with the current effort on behalf of the Congressional members and staffs my tax dollars cover.  I will decide alone, likely in front of my computer screen, making calculations about paying my bills and other living expenses.  And I guarantee that my coverage will be bare bones as no one will want to cover me and though under the ACA they will not be able to deny me coverage, insurance companies will be able to age-rate my premiums and make sure they factor in my health history.  My premiums will likely be so high that I will either have to opt to pay a penalty for not having coverage or I will be grossly under-insured.  

None of this is necessary.  None of it.  Under a Medicare for all for life, single-payer model, we are all in one risk pool, we all pay a fair and progressive tax or premium for our coverage, and our medical and health decisions will no longer be business calculations.  We will be free of this mess.  We must thunder forward through the confusion of this difficult transition to the unnecessary complexity of the ACA to the day when we all are covered simply as a matter of human right and public good.

Donna Smith is the Executive Director of Health Care for All Colorado and the Health Care for All Colorado Foundation.

https://www.commondreams.org/view/2013/04/26-4

Aetna favors "margin over membership"

Q1 2013 Earnings Conference Call

Mark Bertolini – Chairman, CEO and President, and Shawn Guertin – Chief Financial Officer
Aetna, April 30, 2013

Guertin:  On the individual and small group, it is not a function of irrational pricing in any way, shape or form. We’ve talked before about the importance of having solid operating margins going into 2014, and so we have continued to err on the side of caution in our pricing on that product. And as I mentioned we’ll favor sort of margin over membership on this.

Bertolini:  We are entering these exchanges very carefully. We are about two-thirds of the way contracted for our exchanges. Those tend to be narrow networks that are generally 25 to 50 percent of the size of our base networks in those marketplaces. Currently the rates we’re getting for most of those networks is between Medicare and commercial, based on the narrower networks, the closer we get to Medicare. The rates will really be based on geography and probably, more importantly, will be based on how much we get the network contracted. So our approach in the initial pricing that we’ve submitted to the exchanges has been focused on where we have rates on a document inked. We’ve included those into our cost structure. Where we do not, and we need to add providers for network sufficiency, we’re pricing those at commercial pricing until we otherwise know that we have a better rate. And, as you know, the negotiations will take place through the summer and into the fall. Obviously, at the end of all of this, we have an opportunity to pull out in September, and we continue to hold that as an option should the exchanges not develop favorably, or they ask for unreasonable rates by the time we need to close on participation.

http://investor.aetna.com/phoenix.zhtml?p=irol-eventDetails&c=110617&eventID=4889118

Comment:

By Don McCanne, M.D.

In this quarterly earnings conference call, Aetna’s Mark Bertolini and Shawn Guertin demonstrate their executive skills in guiding this large insurance corporation in the direction of providing the greatest returns for the investors. From a corporate governance perspective, that’s exactly as it should be. How well does that work from the perspective of our health care system?

Chief Financial Officer Guertin says that they will favor “margin over membership.” That is, they will sacrifice the option of bringing more people under the insurance umbrella in exchange for greater profits for the Aetna investors. Is limiting access to the payer of health benefits a policy decision that we want driving our health care system?

Chairman Bertolini says that they intend to reduce the size of their already-limited provider networks by one-half to three-fourths in order to use that leverage to squeeze payment rates for their remaining providers. So they are deliberately removing choices that patients would have in selecting their health care professionals and institutions for the purpose of increasing their margins (profits). Is impairing access by restricting choice a policy decision that we want made for our health care?

Chairman Bertolini also says that they will continue to hold onto the option of pulling out of the exchanges if they do not “develop favorably” or if “they ask for unreasonable rates.” Is this a policy to take care of patients, or one to take care of investors?

Imagine a public single payer program, such as an improved Medicare that covered everyone. “Margin over membership” would be unheard of. As a universal system, everyone would be included. It would be inconceivable that the stewards of the system would limit the numbers enrolled as a means of generating more favorable balance sheets.

It’s the model that’s wrong. We need to change it.