PNHP

Privately-run NHS hospital racks up £4.1m loss

Privately-run NHS hospital racks up £4.1m loss

Fury as first privately run NHS hospital racks up £4.1m loss

By Nick Dorman
People.co.uk, October 28, 2012
Bosses at Britain’s first privately-run NHS hospital have asked for a bailout just six months after taking over.
In a major blow to Tory plans to privatise the health service further, contractor Circle racked up losses of £4.1million at Hinchingbrooke.
Now the firm, which is run by a former Goldman Sachs banker and has expressed an interest in running other hospitals, has been forced to ask the local NHS trust for a cash advance.
The hospital has fallen 19 places from the top of a Government league table of patient ­satisfaction since it was taken over by Circle.
Last night Unison health union said this raises big questions over Tory ­privatisation plans for the NHS.
Spokesman Anne Mitchell added: “This should force a rethink. Right from the start our view was a private company would not have the experience to run a large hospital like Hinch­-ingbrooke.
“They made many claims which they are now ­failing miserably to deliver.”
Shadow health minister Jamie Reed said: “Patients are paying the price for David Cameron’s eagerness to hand the NHS to private companies.”
http://www.people.co.uk/news/uk-world-news/2012/10/28/fury-as-first-priv…
And…

Hinchingbrooke losses double Circle Health estimate

BBC News, October 25, 2012
The first NHS hospital to be run by a private company has revealed losses in the firm’s first six months in charge were almost double those forecast.
Circle Health took over management of Hinchingbrooke Hospital in Cambridgeshire in February.
The board reported that 46 nursing posts had been cut so far at the Huntingdon hospital under Circle’s management.
Karen Webb, regional director for the Royal College of Nursing (RCN) union, said: “The RCN doesn’t see how [quality care] can be achieved by removing nurses from the system.
http://www.bbc.co.uk/news/uk-england-cambridgeshire-20087078
And…

Ali Parsa: Government should not be running hospitals

By Andrew Cave
The Telegraph, August 4, 2012
“It’s all about bringing entrepreneurialism, ownership and a sense of engagement into health care,” says Parsa, pointing out that the company subsidiary delivering the health care is 49.9pc owned by hospital staff.
So, how big can Circle become? Parsa, who came to the UK by himself from Iran at the age of 16 a few years after the 1979 Islamic revolution and built up and sold a media promotions company before moving into investment banking with Credit Suisse, Merrill Lynch and Goldman Sachs, apparently sees no limit.
“I’m an entrepreneur with ambition,” he says. “And I didn’t come to run a small company in Circle. We came to create a very large organisation.
“On a 10 to 20-year view, I think the scale of private companies running NHS health care in Britain could be huge. I honestly cannot see why we should not be running many, many hospitals in the UK.
“And if we are doing a great job in the UK 10 or 20 years from now, there’s no reason why we should not be doing the same thing all over the world.”
http://www.telegraph.co.uk/finance/newsbysector/pharmaceuticalsandchemic…

Britain’s Conservative Prime Minister David Cameron has been eager to privatize their National Health Service. What a great start. Hinchingbrooke, now privately managed by former Goldman Sachs banker Ali Parsa, has racked up losses of £4.1 million and has plummeted on the Government’s new patient satisfaction league table. Apparently Cameron and his Conservatives are blind as to what has happened across the Atlantic.
Of significance is that the tendering process for this arrangement began under the Labour government. Just as the Democrats here have supported an expansion of privatization through private insurers and private managed care organizations, Labour seems to be complicit in Britain’s move toward privatization. Taking care of the one percenters seems to be an international phenomenon. Sad.

Using Canada's Health System as Model Might Cut U.S. Costs: Study

By Steven Reinberg, HealthDay Reporter
U.S. News and World Report, Oct. 30, 2012

TUESDAY, Oct. 30 (HealthDay News) — Since 1980, health care costs in the United States could have been about $2.15 trillion less if Canadian cost-saving measures had been used, according to a new study.

Over the same period, health care spending in the United States grew nearly three times faster than in Canada’s Medicare program, even though Canadian law bans co-payments and deductibles, the City University of New York researchers noted.

“Canada’s Medicare program has been much more successful in controlling costs than the U.S. Medicare program,” said Dr. Steffie Woolhandler, a professor in CUNY’s School of Public Health.

Many factors play into the difference, Woolhandler said.

“Canada’s system is a real single-payer system — our system is single-payer for only a portion of the population,” she said.

This results in higher administrative costs in the United States compared to Canada, Woolhandler said. “In the U.S., administrative costs are about 31 percent of health care costs and it’s about 16 percent in Canada,” she said.

In addition, hospitals in Canada are paid less than in the United States. Also, the Canadian government negotiates drug prices to get the lowest cost, while the U.S. government is prohibited by law from negotiating drug costs for Medicare patients, Woolhandler said.

Medical malpractice costs also are lower in Canada, she noted.

Even though costs are lower in Canada, health outcomes are akin to the those for the United States, Woolhandler said.

“Canadians’ life expectancy is longer than in the United States,” she said. “Access to care is better in Canada.”

In the United States, access to care is limited by costs, Woolhandler said. One criticism of the Canadian system is that people have to wait for care, but Woolhandler says those who have to wait are only a small minority of patients.

Woolhandler, who was a founder of Physicians for a National Health Program, is an advocate for a true single-payer system in the United States.

“The Unites States has serious problems with costs of health care generally and costs of Medicare specifically,” she said. “We need to look at the cost-control methods used in Canada that have worked rather than unproven methods proposed by politicians that are unlikely to work.”

The report was published in the Oct. 29 issue of the journal Archives of Internal Medicine.

For the study, Woolhandler and Dr. David Himmelstein, also a professor in the CUNY School of Public Health, analyzed American and Canadian Medicare spending.

They found, after adjusting for inflation, U.S. Medicare spending rose almost 200 percent from 1980 to 2009; Canada’s rose 73 percent.

Woolhandler noted that some politicians want to replace Medicare with a voucher system that seniors could use to buy health insurance. Others advocate incentives to limit care. Neither option is a proven way of cutting costs, Woolhandler said.

One critic says the analysis by Woolhandler and Himmelstein is “superficial” and doesn’t take into account the differences between the United States and Canada.

“There are a hundred other reasons for the differences, which are difficult to disentangle about how we practice medicine in the U.S.,” said Stuart Altman, a distinguished professor of national health policy at Brandeis University’s Heller School for Social Policy and Management, in Waltham, Mass.

The U.S. medical care system is more expensive to run, he said. For one thing, people in medicine in the United States make more money than in Canada, Altman said.

Altman said there is really no way to bring costs down in the United States.

“We are trying to do that,” he said. “We are trying to rearrange the delivery system to be more efficient, but once we have climbed up that ladder and created this delivery system, it’s very hard to climb back down.”

“The only hope we have is to slow the rate of growth,” Altman said. “There is no way, short of a catastrophe, to walk down that ladder and bring our health care system to look like Canada or anyone else.”

“Health care in other countries is a social service,” he said. “In the United States, it’s big business.”

More information

For more information on U.S. health care costs, visit the Kaiser Family Foundation.

Copyright © 2012 HealthDay. All rights reserved.

http://health.usnews.com/health-news/news/articles/2012/10/30/using-canadas-health-system-as-model-might-cut-us-costs-study

Using Canada’s Health System as Model Might Cut U.S. Costs: Study

By Steven Reinberg, HealthDay Reporter
U.S. News and World Report, Oct. 30, 2012

TUESDAY, Oct. 30 (HealthDay News) — Since 1980, health care costs in the United States could have been about $2.15 trillion less if Canadian cost-saving measures had been used, according to a new study.

Over the same period, health care spending in the United States grew nearly three times faster than in Canada’s Medicare program, even though Canadian law bans co-payments and deductibles, the City University of New York researchers noted.

“Canada’s Medicare program has been much more successful in controlling costs than the U.S. Medicare program,” said Dr. Steffie Woolhandler, a professor in CUNY’s School of Public Health.

Many factors play into the difference, Woolhandler said.

“Canada’s system is a real single-payer system — our system is single-payer for only a portion of the population,” she said.

This results in higher administrative costs in the United States compared to Canada, Woolhandler said. “In the U.S., administrative costs are about 31 percent of health care costs and it’s about 16 percent in Canada,” she said.

In addition, hospitals in Canada are paid less than in the United States. Also, the Canadian government negotiates drug prices to get the lowest cost, while the U.S. government is prohibited by law from negotiating drug costs for Medicare patients, Woolhandler said.

Medical malpractice costs also are lower in Canada, she noted.

Even though costs are lower in Canada, health outcomes are akin to the those for the United States, Woolhandler said.

“Canadians’ life expectancy is longer than in the United States,” she said. “Access to care is better in Canada.”

In the United States, access to care is limited by costs, Woolhandler said. One criticism of the Canadian system is that people have to wait for care, but Woolhandler says those who have to wait are only a small minority of patients.

Woolhandler, who was a founder of Physicians for a National Health Program, is an advocate for a true single-payer system in the United States.

“The Unites States has serious problems with costs of health care generally and costs of Medicare specifically,” she said. “We need to look at the cost-control methods used in Canada that have worked rather than unproven methods proposed by politicians that are unlikely to work.”

The report was published in the Oct. 29 issue of the journal Archives of Internal Medicine.

For the study, Woolhandler and Dr. David Himmelstein, also a professor in the CUNY School of Public Health, analyzed American and Canadian Medicare spending.

They found, after adjusting for inflation, U.S. Medicare spending rose almost 200 percent from 1980 to 2009; Canada’s rose 73 percent.

Woolhandler noted that some politicians want to replace Medicare with a voucher system that seniors could use to buy health insurance. Others advocate incentives to limit care. Neither option is a proven way of cutting costs, Woolhandler said.

One critic says the analysis by Woolhandler and Himmelstein is “superficial” and doesn’t take into account the differences between the United States and Canada.

“There are a hundred other reasons for the differences, which are difficult to disentangle about how we practice medicine in the U.S.,” said Stuart Altman, a distinguished professor of national health policy at Brandeis University’s Heller School for Social Policy and Management, in Waltham, Mass.

The U.S. medical care system is more expensive to run, he said. For one thing, people in medicine in the United States make more money than in Canada, Altman said.

Altman said there is really no way to bring costs down in the United States.

“We are trying to do that,” he said. “We are trying to rearrange the delivery system to be more efficient, but once we have climbed up that ladder and created this delivery system, it’s very hard to climb back down.”

“The only hope we have is to slow the rate of growth,” Altman said. “There is no way, short of a catastrophe, to walk down that ladder and bring our health care system to look like Canada or anyone else.”

“Health care in other countries is a social service,” he said. “In the United States, it’s big business.”

More information

For more information on U.S. health care costs, visit the Kaiser Family Foundation.

Copyright © 2012 HealthDay. All rights reserved.

http://health.usnews.com/health-news/news/articles/2012/10/30/using-canadas-health-system-as-model-might-cut-us-costs-study

What Canada can teach us about fixing Medicare

By Sarah Kliff
The Washington Post, Wonk Blog, Oct. 30, 2012

There are a lot of big differences between health care in the United States and Canada. But when you look at how the two countries provide care for the elderly, it’s actually pretty similar. Both countries run an insurance plan for those over 64 that covers a defined set of benefits.

Canada has managed to provide those benefits, however, for a whole lot less. In this week’s Archives of Internal Medicine, David Himmelstein and Steffie Woolhandler look at the growth of spending on the elderly in the United States and Canada. It finds that, for the over 64 population, both in government programs, Medicare spending has grown significantly faster in the United States than in Canada.

Back in 1980, Medicare spent an average of $1,215 on each beneficiary. In Canada, that number stood at $2,141. The difference largely had to do with the level of benefits: Canadian health insurance covers about 80 percent of seniors’ medical costs, whereas Medicare covers about half. (More than 40 percent of Medicare beneficiaries will spend all assets on out-of-pocket costs during the last five years of life, according to one study.)

Since then, United States per capita spending has grown three times as quickly as it has in Canada. Here’s what that looks like in graph form, using data from the Himmelstein and Woolhandler study:

Per capita health spending growth in the elderly population, 1981-2009

If American health spending on seniors had grown at the Canadian rate, Himmelstein and Woolhander estimate we would have spent $2.1 trillion less on Medicare benefits in the past three decades.

There are certain parts of the Canadian health-care system that would be pretty hard to replicate here in the United States.. One reason Canadian seniors’ coverage costs less is that they’re part of a universal coverage system, where everyone receives government-sponsored insurance. Having everyone in the same purchasing pool makes it easier for the government to negotiate lower rates. This also lowers administrative costs, as all health spending flows through one payer.

Medicare already has a lot of leverage in the United States, with over 50 million members. Getting even more leverage would mean adding more members — in other words, a more nationalized system like Canada’s.

Canada also works under a global budget for its health-care spending: It sets a finite amount that it’s willing to spend on medical care, and figures out how much it will pay doctors within those confines. The United States hasn’t usually been friendly to global budgets — there’s concern about coverage becoming too skimpy — although there is recent movement in this direction. Massachusetts recently became the first state to set a global cap on its health-care spending.

Himmelstein and Woolhandler point out that the Canadian system relies more on primary care doctors, who make up 51 percent of the physician population. In the United States, that number stands at 32 percent. “Primary care–centered health systems are,” they note, “Generally thriftier.”

That’s one change that could, theoretically, happen in the United States. It would, however, likely involve a trade-off, as fewer specialty doctors mean longer wait times to see a specialist. A Commonwealth Fund survey in 2010 found that 59 percent of respondents reported waiting more than four weeks for an appointment with a specialist, more than double the number in the United States.

This isn’t necessarily a trade-off on quality; Canada tends to do pretty well when it comes to international comparisons of health-care outcomes. It would, however, be a big change from how we deliver health care in the United States right now, with much easier access to speciality doctors.

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/30/what-canada-can-teach-us-about-fixing-medicare/

Important: We have the wrong Medicare program

Cost Control in a Parallel Universe: Medicare Spending in the United States and Canada

By David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH
Archives of Internal Medicine, October 29, 2012 (Online First)

As the United States was implementing Medicare in 1966, Canada was phasing in its own Medicare program, which covered all Canadians under provincially administered plans. While these provincial plans varied, all incorporated significant payment reforms—global budgeting of hospitals and stringent capital expenditure controls—and banned copayments and deductibles.

Before the mid-1960s, the 2 nations’ health care financing systems were similar, and health care costs were comparable. Since then, overall US costs have grown more rapidly, but no study has compared spending for the elderly—the populations covered by Medicare in both nations.

Results

US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009 (an inflation-adjusted 198.7% increase). The comparable increase for Canada was 73.0% (from $2141 to $9292). Canada’s higher base-year spending reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in US Medicare.

The Table lists actual US Medicare spending from 1980 through 2009 and projected spending and savings had US costs risen at the lower Canadian rate. Projected savings totaled $154.2 billion in 2009 and $2.156 trillion for 1980 through 2009.

For the 1971-2009 period, US costs rose 374.1% vs 126.3% for Canada, and estimated foregone savings were $2.9024 trillion.

Comment

Medicare spending has grown nearly 3 times faster in the United States than in Canada since 1980. Had US Medicare costs risen at Canadian rates, rather than a deficit of $17.1 billion in 2009, the Medicare Hospital Trust Fund would have realized a $32.3 billion surplus. Savings on Medicare Part B would have been even larger. By 2009, the $2.156 trillion in excess spending attributable to US Medicare’s faster growth was equivalent to more than one-sixth of the national debt.

Several features of Canada’s program help constrain costs. First, the single-payer system has simplified administration, holding administrative costs to 16.7% of overall spending vs 31.0% in the United States. Although US Medicare’s internal overhead costs are low, it remains one among many payers. Hence providers’ administrative costs are inflated by having to deal with a multitude of payers and track eligibility, attribute costs, and bill for individual patients and services.

Second, Canadian hospitals receive prospectively determined global operating budgets, removing incentives to provide unnecessary care while simplifying billing and administration. However, unlike accountable care organization payment schemes in the United States, capital costs are not folded into the global budgets but distributed separately through an explicit health-planning process. Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations. Hence, they cannot expand by overproviding lucrative services, gaming the payment system through upcoding, avoiding unprofitable patients, or cost shifting.

Third, 51% of Canada’s physicians are primary care practitioners vs 32% in the United States. Primary care–centered health systems are generally thriftier. Canada’s outpatient fee schedules are also less technology skewed than in the United States.

Fourth, Canada’s provincial plans have used their concentrated purchasing power to limit drug and device prices.

Finally, litigation and malpractice costs have remained relatively low in Canada.

Life expectancy at age 65 years is longer and has grown faster in Canada than in the United States since 1980 (and 1971), offering reassurance that cost control has not compromised quality. A meta-analysis suggests that clinical outcomes are, if anything, better for Canadians than for insured Americans.

To some, US Medicare’s grim financial health suggests an even grimmer conclusion: it can no longer keep its promise of all needed care for the elderly population. Some would replace it with vouchers that seniors could use to purchase private coverage. Others suggest upending the current payment system by inverting volume-based incentives, offering instead profits to organizations that limit utilization. Yet the efficacy of these drastic solutions remains unproven. Canada’s road-tested cost-containment methods offer an alternative.

http://archinte.jamanetwork.com/article.aspx?articleid=1387588

PNHP Press Release:
https://pnhp.org/news/2012/october/canada’s-health-costs-for-seniors-rising-slowly-points-way-to-medicare-solvency-ar

Comment:

By Don McCanne, MD

This study is particularly important because it compares spending in our Medicare program for beneficiaries 65 and older with Canadian Medicare spending for the same age population during the same decades studied. This apples to apples comparison reveals that there is no contest. Since 1971, we’ve spent almost $3 trillion more than we would have had we used Canada’s payment reforms. The Medicare Hospital Trust Fund would have had a huge surplus by now, and nobody would be claiming that Medicare is “going broke.”

The difference is due to economic policies that really do work. Single payer advocates already know what these are, but for those who need a reminder, they are listed in the Comment in the original article above.

Not only did Canadians more effectively control their health care cost increases, their life expectancy grew more rapidly during the same time period. They benefited more under their cost efficient Medicare model.

We have enough understanding of health policy science to predict that the current proposals to control spending in the United States will either have very little impact, or, much worse, will reduce spending by making health care access even more unaffordable.

Comparing the two Medicare programs, the Canadian system pays about 80 percent of health care costs, whereas our Medicare program pays only about half. Also, Canada has banned copayments and deductibles for physician and hospital services – a mainstay of the perverse, misguided efforts to control health spending in the United States. We can control spending without imposing financial penalties on people accessing health care that we want them to have.

It is time for all of us to express our OUTRAGE! We can no longer accept inaction by our politicians because they fear the political consequences. We have to make them understand that they face dire political consequences if they don’t act. As FDR said, “Make me do it.” It’s time to get in their faces!

Canadian Example Offers a Possible Path to Curbing US Medicare Costs

By Mike Mitka
news@JAMA, Oct. 29, 2012

While Medicare costs continue to rise and Democrats and Republicans promote various plans to curb such spending, 2 researchers suggest politicians look north to Canada for solutions.

In a Research Letter published today in the Archives of Internal Medicine, the authors compare Medicare spending from 1980 through 2009 in the United States and in Canada, which has a similar Medicare program. They found US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009, an inflation-adjusted increase of 198.7%. In Canada, spending per elderly enrollee increased from $2141 to $9292, a 73.0% increase. Canada’s higher initial spending reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs compared with about 50% in US Medicare. Had US Medicare spending grown at the same rate as in Canada, more than $2 trillion (one-sixth of the national debt) would have been saved.

Coauthor Steffie Woolhandler, MD, MPH, School of Urban Public Health at Hunter College, City University of New York, discusses her publication:

“Regardless who wins the election, we will be facing big cuts in the Medicare program, but many seniors don’t have the money to pay for their own health care plans. So we wanted to see what happened in Canada with its senior citizens. In many ways Canada’s plan looks like US Medicare; however, they have been much more successful at cost control than us, and we quantified this.

“In the United States, costs in Medicare have risen 3 times faster than in Canada’s Medicare. There are several reasons for this. Administrative costs are about 31% of overall spending in the United States [including both public and private insurance] and only 16.7% in Canada. If we look at the US Medicare program, the overhead cost is only 2% versus 14% for private insurance, but then the hospitals and doctors have extremely high paperwork costs because they have to work with various insurers, and this spills over into administrative costs in Medicare.

“Canada has health planning with teeth. They make sure facilities are built where they’re needed. There is strict control of building new buildings and buying new equipment: hospitals don’t expand willy-nilly. Canadians pay about 40% less for their medications because the government steps in and makes bulk purchases.

“And when we start talking outcomes, it looks like Canada’s health care system is delivering. Canadians do live 2 years longer than people in the United States. And if measured starting at age 65, Canadians have seen more improvement in their life expectancy than seen in the United States.

“We in the physician community need to take some leadership here and tell the politicians that we need to use these road-tested cost controls, and we cannot accept that people may be denied or will not be able to afford care.”

http://newsatjama.jama.com/2012/10/29/author-insights-canadian-example-offers-a-possible-path-to-curbing-us-medicare-costs/

Government IS good at some things

By Aaron Carroll, M.D.
The Incidental Economist, Oct. 29, 2012

I’ve written about this before, but it’s worth bringing it back to add in some numbers. Let’s recap my prior argument:

“There are plenty of things that government does poorly. Or, at least you can make that argument, and find some support for it out there. For instance, many people believe that government does a terrible job at sparking innovation. I could imagine a debate there. Some think that government does a bad job at providing choice. That’s entirely defensible. Government run systems also allow less room for profit, which can drive out entrepreneurs. Also arguable.

“But what government systems do well is hold down costs. They use central planning. They use their large market power to negotiate for reduced reimbursement (see Part 2). They buy drugs cheaper. They eliminate profit and overhead.

“This is what government does well. It’s why every other country that has more government involvement than ours spends less than we do.”

Part of our problem is that even when we allow the government into the game (i.e. Medicare), we set restrictions that hamper its ability as a government-run insurance plan. For instance, Medicare is – by law – prohibited from considering cost at all when making coverage decisions. So even though Medicare has been better than the private insurance sector at holding down costs. But how much better could it be?

There’s a new paper in Archives of Internal Medicine, “Cost Control in a Parallel Universe: Medicare Spending in the U.S. and Canada“:

“As the U.S. was implementing Medicare in 1966, Canada was phasing in its own Medicare program which covered all Canadians under provincially-administered plans. While these provincial plans varied, all incorporated significant payment reforms – global budgeting of hospitals and stringent capital expenditure controls – and ban copayments and deductibles.

“Before the mid-1960s the two nations’ health care financing systems were similar, and health costs were comparable. Since then overall U.S. costs have grown more rapidly, but no study has compared spending for the elderly – the populations covered by Medicare in both nations.”

So this study simply compared the growth of health care spending of the two programs (Canada Medicare and US Medicare) for people 65 and older from 1971 through 2009. They excluded Medicare Part D, which started in 2006, so that the new program didn’t make the US look worse. What did they find?

In 1980, US spending was $1215 per enrollee versus $2141 in Canada. Since then, US spending has grown by an inflation adjusted 198.7% versus 73% in Canada. Here are some more details:

“Per-elder Medicare hospital spending grew 44.7% in Canada vs. 81.9% in the U.S. Physician spending grew 100.7% in Canada, vs. 274.3% in the U.S. Hospital’s share of total Medicare spending fell from 49.6% to 41.5% in Canada and from 68.4% to 41.5% in the U.S. Spending for other services (e.g. home, hospice and skilled nursing facility care) rose from 3.9% to 23.6% of spending in the U.S. and from 39.7% to 44.3% in Canada.”

Here’s the kicker. If the US Medicare program had grown at the same rate as Canada’s did over this period, we would have saved more than $2.9 trillion. In 2009, the trust fund would still have been running a surplus, instead of a deficit.

I can already hear the protests of rage and bluster. You’ll argue that Canada rations, or that Canada is different, or that you have to wait a year to see the doctor once you discover you’re pregnant. I’ve covered many of these things before. They still miss the point. You know what Canada is better than us in? Keeping costs down. Period. If your main complaint these days is that the health care system, or Medicare specifically, is a entitlement we can’t afford and that we have to cut, you’d think we’d be open to recognizing that this is something other countries do better. They keep costs down. Ignoring that makes no sense.

Aaron E. Carroll, MD, MS is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine. He is also the director of the Center for Health Policy and Professionalism Research.

http://theincidentaleconomist.com/wordpress/government-is-good-at-some-things/

U.S. Bill for Senior Care Higher Than Canada's

By David Pittman, Washington Correspondent, MedPage Today
MedPage Today, Oct. 30, 2012

Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.

Spending per Medicare enrollee rose in the U.S. from $1,215 in 1980 to $9,446 in 2009. In Canada, per capita spending on elderly patients in the country’s national healthcare system grew from $2,141 to $9,292, David Himmelstein, MD, and Steffie Woolhandler, MD, at the School of Urban Public Health at City University of New York, reported online in the Archives of Internal Medicine. Adjusted for inflation, those figures translate to a 198.7% growth rate in the U.S. compared with 73% in Canada.

Canada’s higher base-year spending figure “reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in U.S. Medicare,” they noted.

As U.S. policymakers discuss ways to curb spending in the Medicare program, Himmelstein and Woolhandler looked to Canada to see how our neighbors to the north have managed to rein in costs.

“Before the mid-1960s, the two nations’ healthcare financing systems were similar, and health care costs were comparable,” they wrote in an editor’s correspondence. “Since then, overall U.S. costs have grown more rapidly, but no study has compared spending for the elderly — the populations covered by Medicare in both nations.”

For example, they found spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period. The authors suggested this might be because a higher percentage (51% vs. 32%) of Canadian doctors are primary care physicians who are generally thriftier about spending for tests and procedures.

Himmelstein and Woolhandler obtained spending data from the two countries, but generally focused on 1980 onward because those data were more detailed. They adjusted figures for inflation and government accounting procedures, and ignored Medicare Part D drug spending.

Had U.S. Medicare costs risen at Canadian rates, the U.S. would have saved $154.2 billion in 2009, they noted.

“By 2009, the $2.156 trillion in excess spending attributable to U.S. Medicare’s faster growth was equivalent to more than one-sixth of the national debt,” the authors wrote.

Himmelstein and Woolhandler pointed to several aspects of the Canadian system that helped it contain costs:

* Canada’s single-payer system has simplified administration and associated costs to 16.7% of overall spending compared with 31% in the U.S. American providers must deal with multiple payers and the hassle that comes with them.

* Hospitals in Canada also receive prospectively determined global operating budgets. The method removes incentives to provide unnecessary care and simplifies billing.

* “Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations,” the authors wrote. “Hence, they cannot expand by over-providing lucrative services, gaming the payment system through up-coding, avoiding unprofitable patients, or cost-shifting.”

* Canada’s provincial plans use purchasing power to hold down drug and device prices.

* The country’s malpractice costs have remained relatively low.

Life expectancy grew faster for Canadian elderly too, signaling the country’s cost-containment efforts had little or no impact on quality, the authors wrote. Also, some clinical outcomes suggest care is better in Canada.

Meanwhile, policymakers in the U.S. have offered to provide vouchers to Medicare beneficiaries to limit costs, or to reward providers with payments based on limiting utilization rather than using a fee-for-service system that rewards volume. Neither approach has been proven effective yet, they noted.

“Canada’s road-tested cost-containment methods offer an alternative,” the authors wrote.

****

Action Points

* Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.
* Note that the study found that spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period.

Reviewed by Robert Jasmer, MD; Associate Clinical Professor of Medicine, University of California, San Francisco. The authors did not report any conflicts of interest.

Primary source: Archives of Internal Medicine
Source reference:
Himmelstein, DU, and Woolhandler S “Cost control in a parallel universe: Medicare spending in the United States and Canada” Arch Intern Med 2012; DOI: 10.1001/2013.jamainternmed.272.

http://www.medpagetoday.com/PublicHealthPolicy/Medicare/35644

U.S. Bill for Senior Care Higher Than Canada’s

By David Pittman, Washington Correspondent, MedPage Today
MedPage Today, Oct. 30, 2012

Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.

Spending per Medicare enrollee rose in the U.S. from $1,215 in 1980 to $9,446 in 2009. In Canada, per capita spending on elderly patients in the country’s national healthcare system grew from $2,141 to $9,292, David Himmelstein, MD, and Steffie Woolhandler, MD, at the School of Urban Public Health at City University of New York, reported online in the Archives of Internal Medicine. Adjusted for inflation, those figures translate to a 198.7% growth rate in the U.S. compared with 73% in Canada.

Canada’s higher base-year spending figure “reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in U.S. Medicare,” they noted.

As U.S. policymakers discuss ways to curb spending in the Medicare program, Himmelstein and Woolhandler looked to Canada to see how our neighbors to the north have managed to rein in costs.

“Before the mid-1960s, the two nations’ healthcare financing systems were similar, and health care costs were comparable,” they wrote in an editor’s correspondence. “Since then, overall U.S. costs have grown more rapidly, but no study has compared spending for the elderly — the populations covered by Medicare in both nations.”

For example, they found spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period. The authors suggested this might be because a higher percentage (51% vs. 32%) of Canadian doctors are primary care physicians who are generally thriftier about spending for tests and procedures.

Himmelstein and Woolhandler obtained spending data from the two countries, but generally focused on 1980 onward because those data were more detailed. They adjusted figures for inflation and government accounting procedures, and ignored Medicare Part D drug spending.

Had U.S. Medicare costs risen at Canadian rates, the U.S. would have saved $154.2 billion in 2009, they noted.

“By 2009, the $2.156 trillion in excess spending attributable to U.S. Medicare’s faster growth was equivalent to more than one-sixth of the national debt,” the authors wrote.

Himmelstein and Woolhandler pointed to several aspects of the Canadian system that helped it contain costs:

* Canada’s single-payer system has simplified administration and associated costs to 16.7% of overall spending compared with 31% in the U.S. American providers must deal with multiple payers and the hassle that comes with them.

* Hospitals in Canada also receive prospectively determined global operating budgets. The method removes incentives to provide unnecessary care and simplifies billing.

* “Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations,” the authors wrote. “Hence, they cannot expand by over-providing lucrative services, gaming the payment system through up-coding, avoiding unprofitable patients, or cost-shifting.”

* Canada’s provincial plans use purchasing power to hold down drug and device prices.

* The country’s malpractice costs have remained relatively low.

Life expectancy grew faster for Canadian elderly too, signaling the country’s cost-containment efforts had little or no impact on quality, the authors wrote. Also, some clinical outcomes suggest care is better in Canada.

Meanwhile, policymakers in the U.S. have offered to provide vouchers to Medicare beneficiaries to limit costs, or to reward providers with payments based on limiting utilization rather than using a fee-for-service system that rewards volume. Neither approach has been proven effective yet, they noted.

“Canada’s road-tested cost-containment methods offer an alternative,” the authors wrote.

****

Action Points

* Medicare spending in the U.S. has grown nearly three times faster since 1980 than spending on a similar population group in Canada, a study has found.
* Note that the study found that spending on physician services grew 100.7% in Canada between 1980 and 2009, but by 274.3% in the U.S. during the same time period.

Reviewed by Robert Jasmer, MD; Associate Clinical Professor of Medicine, University of California, San Francisco. The authors did not report any conflicts of interest.

Primary source: Archives of Internal Medicine
Source reference:
Himmelstein, DU, and Woolhandler S “Cost control in a parallel universe: Medicare spending in the United States and Canada” Arch Intern Med 2012; DOI: 10.1001/2013.jamainternmed.272.

http://www.medpagetoday.com/PublicHealthPolicy/Medicare/35644

Important: We have the wrong Medicare program

Cost Control in a Parallel Universe: Medicare Spending in the United States and Canada

By David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH
Archives of Internal Medicine, October 29, 2012 (Online First)
As the United States was implementing Medicare in 1966, Canada was phasing in its own Medicare program, which covered all Canadians under provincially administered plans. While these provincial plans varied, all incorporated significant payment reforms—global budgeting of hospitals and stringent capital expenditure controls—and banned copayments and deductibles.
Before the mid-1960s, the 2 nations’ health care financing systems were similar, and health care costs were comparable. Since then, overall US costs have grown more rapidly, but no study has compared spending for the elderly—the populations covered by Medicare in both nations.
Results
US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009 (an inflation-adjusted 198.7% increase). The comparable increase for Canada was 73.0% (from $2141 to $9292). Canada’s higher base-year spending reflects its more comprehensive benefits, covering about 80% of seniors’ total health costs, vs about 50% in US Medicare.
The Table lists actual US Medicare spending from 1980 through 2009 and projected spending and savings had US costs risen at the lower Canadian rate. Projected savings totaled $154.2 billion in 2009 and $2.156 trillion for 1980 through 2009.
For the 1971-2009 period, US costs rose 374.1% vs 126.3% for Canada, and estimated foregone savings were $2.9024 trillion.
Comment
Medicare spending has grown nearly 3 times faster in the United States than in Canada since 1980. Had US Medicare costs risen at Canadian rates, rather than a deficit of $17.1 billion in 2009, the Medicare Hospital Trust Fund would have realized a $32.3 billion surplus. Savings on Medicare Part B would have been even larger. By 2009, the $2.156 trillion in excess spending attributable to US Medicare’s faster growth was equivalent to more than one-sixth of the national debt.
Several features of Canada’s program help constrain costs. First, the single-payer system has simplified administration, holding administrative costs to 16.7% of overall spending vs 31.0% in the United States. Although US Medicare’s internal overhead costs are low, it remains one among many payers. Hence providers’ administrative costs are inflated by having to deal with a multitude of payers and track eligibility, attribute costs, and bill for individual patients and services.
Second, Canadian hospitals receive prospectively determined global operating budgets, removing incentives to provide unnecessary care while simplifying billing and administration. However, unlike accountable care organization payment schemes in the United States, capital costs are not folded into the global budgets but distributed separately through an explicit health-planning process. Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations. Hence, they cannot expand by overproviding lucrative services, gaming the payment system through upcoding, avoiding unprofitable patients, or cost shifting.
Third, 51% of Canada’s physicians are primary care practitioners vs 32% in the United States. Primary care–centered health systems are generally thriftier. Canada’s outpatient fee schedules are also less technology skewed than in the United States.
Fourth, Canada’s provincial plans have used their concentrated purchasing power to limit drug and device prices.
Finally, litigation and malpractice costs have remained relatively low in Canada.
Life expectancy at age 65 years is longer and has grown faster in Canada than in the United States since 1980 (and 1971), offering reassurance that cost control has not compromised quality. A meta-analysis suggests that clinical outcomes are, if anything, better for Canadians than for insured Americans.
To some, US Medicare’s grim financial health suggests an even grimmer conclusion: it can no longer keep its promise of all needed care for the elderly population. Some would replace it with vouchers that seniors could use to purchase private coverage. Others suggest upending the current payment system by inverting volume-based incentives, offering instead profits to organizations that limit utilization. Yet the efficacy of these drastic solutions remains unproven. Canada’s road-tested cost-containment methods offer an alternative.
http://archinte.jamanetwork.com/article.aspx?articleid=1387588
PNHP Press Release:
https://pnhp.org/news/2012/october/canada’s-health-costs-for-seniors-rising-slowly-points-way-to-medicare-solvency-ar

This study is particularly important because it compares spending in our Medicare program for beneficiaries 65 and older with Canadian Medicare spending for the same age population during the same decades studied. This apples to apples comparison reveals that there is no contest. Since 1971, we’ve spent almost $3 trillion more than we would have had we used Canada’s payment reforms. The Medicare Hospital Trust Fund would have had a huge surplus by now, and nobody would be claiming that Medicare is “going broke.”
The difference is due to economic policies that really do work. Single payer advocates already know what these are, but for those who need a reminder, they are listed in the Comment in the original article above.
Not only did Canadians more effectively control their health care cost increases, their life expectancy grew more rapidly during the same time period. They benefited more under their cost efficient Medicare model.
We have enough understanding of health policy science to predict that the current proposals to control spending in the United States will either have very little impact, or, much worse, will reduce spending by making health care access even more unaffordable.
Comparing the two Medicare programs, the Canadian system pays about 80 percent of health care costs, whereas our Medicare program pays only about half. Also, Canada has banned copayments and deductibles for physician and hospital services – a mainstay of the perverse, misguided efforts to control health spending in the United States. We can control spending without imposing financial penalties on people accessing health care that we want them to have.
It is time for all of us to express our OUTRAGE! We can no longer accept inaction by our politicians because they fear the political consequences. We have to make them understand that they face dire political consequences if they don’t act. As FDR said, “Make me do it.” It’s time to get in their faces!

A national plan for the exchanges

U.S. Set to Sponsor Health Insurance

By Robert Pear
The New York Times, October 27, 2012

The Obama administration will soon take on a new role as the sponsor of at least two nationwide health insurance plans to be operated under contract with the federal government and offered to consumers in every state.

These multistate plans were included in President Obama’s health care law as a substitute for a pure government-run health insurance program — the public option sought by many liberal Democrats and reviled by Republicans. Supporters of the national plans say they will increase competition in state health insurance markets, many of which are dominated by a handful of companies.

The national plans will compete directly with other private insurers and may have some significant advantages, including a federal seal of approval. Premiums and benefits for the multistate insurance plans will be negotiated by the United States Office of Personnel Management, the agency that arranges health benefits for federal employees.

John J. O’Brien, the director of health care and insurance at the agency, said the new plans would be offered to individuals and small employers through the insurance exchanges being set up in every state under the 2010 health care law.

Under the Affordable Care Act, at least one of the nationwide plans must be offered by a nonprofit entity. Insurance experts see an obvious candidate for that role: the Government Employees Health Association, a nonprofit group that covers more than 900,000 federal employees, retirees and dependents, making it the second-largest plan for federal workers, after the Blue Cross and Blue Shield program.

Richard G. Miles, the association’s president, expressed interest in offering a multistate plan to the general public through insurance exchanges, but said no decision had been made.

“Our expertise in the Federal Employees Health Benefits Program would be useful in the private marketplace,” Mr. Miles said in an interview. “But we are concerned about the underwriting risk in providing insurance to an unknown group of customers.”

To be eligible to participate in the multistate program, insurers must be licensed in every state. The Government Employees Health Association recently bought a company that has the licenses it would need.

National insurance plans will be subject to regulation by the federal government, state insurance commissioners and state insurance exchanges. That mix could cause confusion for some consumers who have questions or complaints about their coverage.

The federal standards will pre-empt state rules in at least one respect: the national health plans will automatically be eligible to compete against other private insurers in the new exchanges, regardless of whether they have been certified as meeting the standards of those exchanges.

The administration has promised to “work cooperatively with states.” But it is unclear whether the government-sponsored plans will have to comply with all state laws and consumer protection standards; whether they will have to comply with state benefit mandates; and whether they will have to pay state fees and taxes levied on other insurers to finance exchange operations.

Robert E. Moffit, a senior fellow at the conservative Heritage Foundation, said he worried that “the nationwide health plans, operating under terms and conditions set by the federal government, will become the robust public option that liberals always wanted.”

Rules for the new program have been under review by the White House for three months, and officials said they would be issued soon.

http://www.nytimes.com/2012/10/28/health/us-to-sponsor-health-insurance-plans-nationwide.html?hpw

And…

H.R.3590, Patient Protection and Affordable Care Act (P.L.111-148)

SEC. 1323. COMMUNITY HEALTH INSURANCE OPTION.
(b) ESTABLISHMENT OF COMMUNITY HEALTH INSURANCE OPTION.—
(1) ESTABLISHMENT.—The Secretary shall establish a community health insurance option to offer, through the Exchanges established under this title (other than Exchanges in States that elect to opt out as provided for in subsection (a)(3)), health care coverage that provides value, choice, competition, and stability of affordable, high quality coverage throughout the United States.

http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf

Comment:

By Don McCanne, MD

Although the White House has not yet released the rules for federally-sponsored national health plans, we really don’t need those rules to know that this program is not an incremental step towards a single payer national health program.

At this point, consideration is being given to using the Government Employees Health Association as a national plan to be offered to individuals and small businesses through the state insurance exchanges. This plan is one already offered to government employees through the Federal Employees Health Benefits Program (FEHBP) administered by the United States Office of Personnel Management (OPM).

This is still a private plan, even if it is non-profit serving government employees. It is not and never will be a publicly-owned plan such as the traditional Medicare program. Currently it is being proposed for a rather limited market – the state insurance exchanges which will be offering coverage for only the relatively small proportion of our population that qualifies for the exchanges. It will be competing on a private market basis with other private plans within the exchanges. There is concern that it would be exposed to adverse selection – insuring more expensive patients such as those with preexisting disorders, many of whom are currently amongst the ranks of the uninsured. So it may not even be able to compete on an equal basis with the other private plans that have proven themselves quite capable of dodging adverse selection. So it still will be just another cog in our fragmented, dysfunctional system of financing health care.

It will be offered nationally, in some ways meeting the expressed desire of Republicans to offer insurance across state lines. It is unclear if this would satisfy their intent to allow the plans to escape state regulation since it is not yet known how the state and federal governments will share regulatory oversight. This aspect of the national plan could be a step backward.

Thus this national private plan currently offered to government employees will still be nothing more than a private plan in a market of other plans within the state exchanges. The single payer community should not waste its time trying to make this plan something that it is not and never can be. We cannot let up in our advocacy for a bona fide national single payer program – an improved Medicare for all.

Buying medical care is not like buying a car

By Charles V. Allen, M.D.
The Modesto (Calif.) Bee, Oct. 23, 2012

David Brooks (“It’s past time to change Medicare,” Oct. 11) is right when he says Medicare costs are too high now and will get worse unless things change.

But, no, Mr. Brooks, the solution is not in competition, free enterprise and market forces.

Buying medical care is not like buying a car. If we bought cars the way we buy health care, the car salesman would tell us when we needed a car, what kind of car we need and how much it would cost. But we wouldn’t care how much it costs because we aren’t paying for it. The more cars the manufacturer produced and sold, the more money he would lose. And because 20 percent of the customers buy 80 percent of the cars, he would know exactly whom to not sell cars to! Confused? No wonder.

Translation: The patient/customer usually has little control when illness hits, no choice of what must be done (the doctor/hospital decides) or what the cost is, but doesn’t care (insurance is paying).

Insurance companies seek to insure mostly the healthier members, knowing that 20 percent of the public will consume 80 percent of the health dollar. Avoiding that 20 percent is mandatory to remain profitable — and most non-Medicare companies are for-profit.

Medicare was designed to be available to all — healthy or sick — and so was Medicare Advantage but a funny thing happened along the way. Call it what you may — cherry-picking or skimming — but Medicare commercial insurance companies have successfully managed to insure a population healthier and less costly than average, leaving a sicker and more expensive membership for regular Medicare — and the taxpayer.

“In 2012 alone, private (Medicare) insurers are being overpaid $34.1 billion, or $2,526 per Medicare Advantage enrollee. … It’s clear that having Medicare Advantage programs compete with Medicare doesn’t save us money. In fact the opposite is the case,” says one physician economist a report to be published in the International Journal of Health Services. So much for competition, market forces, private enterprise and Medicare vouchers.

The second factor is less appreciated: We have not one but four medical care systems: the uninsured (50 million), Medicaid (50 million), Medicare (50 million) and the commercially insured, mostly for-profit, under 65 (150 million).

Each has its own set of rules, regulations, payment schedules and deficiencies. Reforming one without changing the others is not possible, and a major overhaul in today’s political environment is unthinkable.

Regardless of political belief, there no one, given the chance to redesign our system from scratch, would end up with the mess we now have.

A handful of other countries — all first world, industrial, democratic and yes, capitalistic — nations have achieved four things we have not: coverage of all citizens, costs half to two-thirds our cost, equal or better medical outcomes and a level of public support higher than ours.

How? First is the accepted principle that health care for all is a social obligation as important as public safety and education.

Second, all have a single efficient system with one set of rules and financial process, often a public/private partnership with private, independent providers. Imperfections? Of course, but none like ours.

And some of these countries make cars as well or better than we do — the old fashioned, market-based, free-enterprise way.

Allen is a semi-retired physician in Modesto and regular community column contributor.

http://www.modbee.com/2012/10/23/2426012/sure-medicare-is-imperfect-but.html

PNHP note:  This article was originally published under the title “Medicare is imperfect, but it works for U.S.”