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More on the financial burden of medical care

More on the financial burden of medical care

Financial Burden of Medical Care: Early Release of Estimates From the National Health Interview Survey, January–June 2011

By Robin A. Cohen, Ph.D.; Renee M. Gindi, Ph.D.; and Whitney K. Kirzinger, M.P.H.
CDC, National Center for Health Statistics, March 2012

Previous work has shown that in 2010, more than one in five Americans were in families reporting problems paying medical bills. In 2011, three new questions addressing financial burden of medical care were added to the National Health Interview Survey (NHIS) Family component. These questions addressed problems paying medical bills, paying medical bills over time, and having medical bills that cannot be paid at all.

In the first 6 months of 2011, one in three persons was in a family experiencing financial burden of medical care. One in 5 persons was in a family having problems paying medical bills, 1 in 4 persons was in a family paying medical bills over time, and 1 in 10 persons was in a family that had medical bills they were unable to pay at all.

http://www.cdc.gov/nchs/data/nhis/earlyrelease/financial_burden_of_medical_care_032012.pdf

Comment: 

By Don McCanne, MD

This new report adds to the profusion of policy studies confirming that Americans continue to experience financial burdens in paying their medical bills. Unfortunately, this problem will not go away after the Affordable Care Act is fully implemented.

Well over 20 million people will remain uninsured, and perhaps a third or more of our population will be under-insured, due to the low actuarial value plans to be offered in the exchanges, and especially due to the increasing prevalence of high-deductibles in employer-sponsored plans. In fact, under-insurance likely will soon be the norm.

Contrast that with John Conyers’ HR 676, the “Expanded and Improved Medicare for All Act,” which states, “The health care benefits under this Act cover all medically necessary services… No deductibles, copayments, coinsurance, or other cost-sharing shall be imposed with respect to covered benefits.”

For those who say we can’t afford this, many other nations provide all of their people comprehensive care with no out-of-pocket expenses, at an average cost of only half of what we are spending on health care.

We can’t afford not to do it.

More on the financial burden of medical care

Financial Burden of Medical Care: Early Release of Estimates From the National Health Interview Survey, January–June 2011

By Robin A. Cohen, Ph.D.; Renee M. Gindi, Ph.D.; and Whitney K. Kirzinger, M.P.H.
CDC, National Center for Health Statistics, March 2012
Previous work has shown that in 2010, more than one in five Americans were in families reporting problems paying medical bills. In 2011, three new questions addressing financial burden of medical care were added to the National Health Interview Survey (NHIS) Family component. These questions addressed problems paying medical bills, paying medical bills over time, and having medical bills that cannot be paid at all.
In the first 6 months of 2011, one in three persons was in a family experiencing financial burden of medical care. One in 5 persons was in a family having problems paying medical bills, 1 in 4 persons was in a family paying medical bills over time, and 1 in 10 persons was in a family that had medical bills they were unable to pay at all.
http://www.cdc.gov/nchs/data/nhis/earlyrelease/financial_burden_of_medical_care_032012.pdf

This new report adds to the profusion of policy studies confirming that Americans continue to experience financial burdens in paying their medical bills. Unfortunately, this problem will not go away after the Affordable Care Act is fully implemented.
Well over 20 million people will remain uninsured, and perhaps a third or more of our population will be under-insured, due to the low actuarial value plans to be offered in the exchanges, and especially due to the increasing prevalence of high-deductibles in employer-sponsored plans. In fact, under-insurance likely will soon be the norm.
Contrast that with John Conyers’ HR 676, the “Expanded and Improved Medicare for All Act,” which states, “The health care benefits under this Act cover all medically necessary services… No deductibles, copayments, coinsurance, or other cost-sharing shall be imposed with respect to covered benefits.”
For those who say we can’t afford this, many other nations provide all of their people comprehensive care with no out-of-pocket expenses, at an average cost of only half of what we are spending on health care.
We can’t afford not to do it.

Doctors may order more — not fewer — imaging tests with electronic access to results, study finds

By Chelsea Conaboy
The Boston Globe, March 6, 2012

Electronic health records may not be as effective as expected at reducing the number of costly and unnecessary tests doctors order for their patients, a study published Monday in Health Affairs found. Among a national sampling of more than 1,100 doctors surveyed in 2008, those who had electronic access to results of imaging tests such as CT scans and MRIs ordered more tests, not fewer.

Experts have long thought that electronic health records would save money by preventing duplicate tests through better tracking of patient care, and by providing doctors with tools to decide who would benefit from certain tests.

The most advanced records systems may be able to do that, but the ones that had been rolled out nationally when the study was done didn’t appear to be functioning well enough to do that, said lead author Dr. Danny McCormick, director of the Division of Social and Community Medicine at Cambridge Health Alliance.

The study “doesn’t say, for sure, that we would never get there with even greater resources expended. We don’t know,” he said. “But I think it raises a caution.”

The authors looked at surveys completed by doctors after 28,741 patient visits in 2008. After using statistical methods to adjust the data for variations between physician practices, researchers found that those doctors who had electronic access to imaging results were 40 percent more likely to order tests than those who had no electronic access to results.

McCormick said that electronic records have undoubtedly improved health care quality for patients and that, in his own practice, he would never choose to go back to the old way of doing things. However, he said, the nation has dedicated a lot of money to improvements in health IT — the 2009 stimulus bill set aside about $27 billion in incentives for hospitals and doctors to adopt electronic records — and policymakers must be realistic about the financial outcomes of that investment.

“If this study is right, then it’s better to know about that now, so that we can perhaps start to implement other more fundamental reforms,” he said.

He and his co-authors are advocates for a national single-payer health plan.

Dr. David Bates, chief quality officer for Brigham and Women’s Hospital, said electronic health records have come a long way since 2008, and past studies have shown that it is harder to change doctor’s habits in using imaging tests than in other things, such as ordering blood work.

But Bates said the authors are right that simply giving doctors access to information is not enough. These tools must be linked with financial incentives, he said, “so that providers are on the hook for providing more cost-effective care.”

The authors note in the study that they did not look at whether doctors’ systems included “decision support” tools, which may help physicians decide whether to order a test by providing them information about national radiology guidelines, for example, or send them an alert if they are ordering a duplicate test.

Electronic records “are not a solution,” said Dr. David Blumenthal, chief health information and innovation officer at Partners HealthCare, who served two years as President Obama’s national health IT coordinator. “They are a facilitator.”

Decision support tools are the most powerful components, he said, and the biggest benefits in cost savings and improvements in care will come when they become more widely available to doctors.

http://bostonglobe.com/lifestyle/health-wellness/2012/03/05/doctors-may-order-more-not-fewer-imaging-tests-with-electronic-access-results-study-finds/7pdhMQY8XeVVnpJoArdzrJ/story.html

For more coverage of the study, see the following:
The New York Times: Digital Records May Not Cut Health Costs, Study Cautions
PBS NewsHour: New Study Challenges Whether Electronic Records Cut Health Costs
CNN: Could electronic medical records actually add costs?
The Washington Post: Doctors order more X-rays, not fewer, with computer access
The Wall Street Journal: Study: Electronic Access to Imaging Tests Doesn’t Curb Use
Kaiser Health News: Study: E-Health Records Don’t Deter Testing, Spending
Health Affairs blog: Electronic Access For Physicians To Prior Tests Did Not Reduce Costs

Digital Records May Not Cut Health Costs, Study Cautions

By Steve Lohr
The New York Times, March 5, 2012

Computerized patient records are unlikely to cut health care costs and may actually encourage doctors to order expensive tests more often, a study published on Monday concludes.

Modern electronic health records are meant to give doctors an integrated view of a patient’s care, including medical history, treatments, medications and past tests.

Industry experts have said that electronic health records could generate huge savings — as much as $80 billion a year, according to a RAND Corporation estimate. The promise of cost savings has been a major justification for billions of dollars in federal spending to encourage doctors to embrace digital health records.

But research published Monday in the journal Health Affairs found that doctors using computers to track tests, like X-rays and magnetic resonance imaging, ordered far more tests than doctors relying on paper records.

The use of costly image-taking tests has increased sharply in recent years. Many experts contend that electronic health records will help reduce unnecessary and duplicative tests by giving doctors more comprehensive and up-to-date information when making diagnoses.

The study showed, however, that doctors with computerized access to a patient’s previous image results ordered tests on 18 percent of the visits, while those without the tracking technology ordered tests on 12.9 percent of visits. That is a 40 percent higher rate of image testing by doctors using electronic technology instead of paper records.

The gap, according to the study, was even greater — a 70 percent higher rate — for more advanced and expensive image tests, including M.R.I. tests and CT, or computerized tomography, scans.

“Our research raises real concerns about whether health information technology is going to be the answer to reducing costs,” said Dr. Danny McCormick, the lead author of the study, who is an assistant professor at the Harvard Medical School and a member of the department of medicine at the Cambridge Health Alliance, a health system north of Boston.

Dr. McCormick had three co-authors: Dr. David H. Bor, chief of medicine at the Cambridge Health Alliance; and Dr. Stephanie Woolhandler and Dr. David U. Himmelstein, both professors at the City University of New York School of Public Health at Hunter College.

The research was based on a survey conducted by the National Center for Health Statistics, which collected data from more than 28,000 patient visits to more than 1,100 doctors in 2008.

Health policy experts who have championed the adoption of electronic health records were critical of the study. They noted that the data came from the National Ambulatory Medical Care Survey, which is intended mainly for another purpose — to assess how medical care is practiced.

The study, they noted, included any kind of computer access to tracking images, no matter how old or isolated the function.

By contrast, modern electronic health records are meant to give doctors an integrated view of a patient’s care, including medical history, treatments, medications and past tests. The 2008 data predates federal incentive payments for doctors and standards for the “meaningful use” of electronic health records that began last year.

The new study, they said, was also at odds with previous research. It is “one of a small minority of studies” that have doubted the value of health information technology, said Dr. David Blumenthal, a professor at the Harvard Medical School.

Dr. Blumenthal, the former national coordinator for health information technology in the Obama administration, was co-author of a study, published last year in Health Affairs, that surveyed articles in professional journals in recent years on electronic health records.

It found that 92 percent of those articles were “positive over all” about the prospect that technology would improve the efficiency and quality of care.

But Dr. McCormick said the previous research had been primarily statistical models of expected savings, like the RAND study, or research that looked at the use of electronic health records at a relatively small number of flagship health systems.

“We looked at not just a few cutting-edge institutions, but a nationally representative sample,” Dr. McCormick said.

Dr. David J. Brailer, who was the national coordinator for health information technology in the administration of George W. Bush, said he was unconvinced by the study’s conclusions because they were based on a correlation in the data and were not the result of a controlled test.

The study did not explore why physicians in computerized offices ordered more tests. Dr. McCormick speculated that digital technology might simply make ordering tests easier.

Dr. McCormick said he hoped the study would damp any inflated expectations about electronic records. But he added that the technology can improve the actual practice of medicine.

The Cambridge Health Alliance, where he practices, made the switch to electronic records in 2005.

“I’m a primary care doctor,” Dr. McCormick said, “and I would never go back.”

http://www.nytimes.com/2012/03/06/business/digital-records-may-not-cut-health-costs-study-cautions.html

For more coverage of the study, see the following:
The Boston Globe: Doctors may order more — not fewer — imaging tests with electronic access to results, study finds
PBS NewsHour: New Study Challenges Whether Electronic Records Cut Health Costs
CNN: Could electronic medical records actually add costs?
The Washington Post: Doctors order more X-rays, not fewer, with computer access
The Wall Street Journal: Study: Electronic Access to Imaging Tests Doesn’t Curb Use

Kaiser Health News: Study: E-Health Records Don’t Deter Testing, Spending
Health Affairs blog: Electronic Access For Physicians To Prior Tests Did Not Reduce Costs

Wishing electronic access to patients' records would reduce testing

Giving Office-Based Physicians Electronic Access To Patients’ Prior Imaging And Lab Results Did Not Deter Ordering Of Tests

By Danny McCormick, David H. Bor, Stephanie Woolhandler and David U. Himmelstein
Health Affairs, March 2012

Abstract

Policy-based incentives for health care providers to adopt health information technology are predicated on the assumption that, among other things, electronic access to patient test results and medical records will reduce diagnostic testing and save money. To test the generalizability of findings that support this assumption, we analyzed the records of 28,741 patient visits to a nationally representative sample of 1,187 office-based physicians in 2008. Physicians’ access to computerized imaging results (sometimes, but not necessarily, through an electronic health record) was associated with a 40–70 percent greater likelihood of an imaging test being ordered. The electronic availability of lab test results was also associated with ordering of additional blood tests. The availability of an electronic health record in itself had no apparent impact on ordering; the electronic access to test results appears to have been the key. These findings raise the possibility that, as currently implemented, electronic access does not decrease test ordering in the office setting and may even increase it, possibly because of system features that are enticements to ordering. We conclude that use of these health information technologies, whatever their other benefits, remains unproven as an effective cost-control strategy with respect to reducing the ordering of unnecessary tests.

http://content.healthaffairs.org/content/31/3/488.abstract

Comment: 

By Don McCanne, MD

Through the Affordable Care Act and through the Health Information Technology for Economic and Clinical Health (HITECH) provisions of the the American Recovery and Reinvestment Act of 2009, Congress wished to bring under control the ever escalating costs of health care in the United States. This study of physicians’ electronic access to prior imaging and lab results adds to other data that indicates that the cost containment measures were merely a wish list that have failed to improve value in our health care purchasing.

As an another example, a recent report of the Congressional Budget Office on Medicare’s demonstration projects on disease management, care coordination, and value-based payment revealed that “the evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program.”

Instead of simply wishing that these ideas would control costs, we should adopt policies that we already know are effective. We know that the financing model of the Affordable Care Act – building on our fragmented system of private plans and public programs – is the most expensive model of financing health care, and yet a model that falls far short on universality, comprehensiveness and equity.

In contrast, single payer and health service models are the least expensive, and are the most successful in achieving universality, comprehensiveness and equity. Establishing a health service model through government takeover of our entire health care delivery system is not a model that is likely to gain political traction in the foreseeable future. On the other hand, improving Medicare and converting it into a single payer national health program is much more consistent with American views of equity, justice, and choice.

We should certainly encourage the continued evaluation and development of potentially beneficial measures such as the use of health information technology. Improvement in quality and efficiency should always be our goals. But in the overall picture, such efforts would amount to mere tweaks compared to a comprehensive overhaul of the health care financing system. Let’s move forward with an improved Medicare for all.

Wishing electronic access to patients’ records would reduce testing

Giving Office-Based Physicians Electronic Access To Patients’ Prior Imaging And Lab Results Did Not Deter Ordering Of Tests

By Danny McCormick, David H. Bor, Stephanie Woolhandler and David U. Himmelstein
Health Affairs, March 2012

Abstract

Policy-based incentives for health care providers to adopt health information technology are predicated on the assumption that, among other things, electronic access to patient test results and medical records will reduce diagnostic testing and save money. To test the generalizability of findings that support this assumption, we analyzed the records of 28,741 patient visits to a nationally representative sample of 1,187 office-based physicians in 2008. Physicians’ access to computerized imaging results (sometimes, but not necessarily, through an electronic health record) was associated with a 40–70 percent greater likelihood of an imaging test being ordered. The electronic availability of lab test results was also associated with ordering of additional blood tests. The availability of an electronic health record in itself had no apparent impact on ordering; the electronic access to test results appears to have been the key. These findings raise the possibility that, as currently implemented, electronic access does not decrease test ordering in the office setting and may even increase it, possibly because of system features that are enticements to ordering. We conclude that use of these health information technologies, whatever their other benefits, remains unproven as an effective cost-control strategy with respect to reducing the ordering of unnecessary tests.

http://content.healthaffairs.org/content/31/3/488.abstract

Comment: 

By Don McCanne, MD

Through the Affordable Care Act and through the Health Information Technology for Economic and Clinical Health (HITECH) provisions of the the American Recovery and Reinvestment Act of 2009, Congress wished to bring under control the ever escalating costs of health care in the United States. This study of physicians’ electronic access to prior imaging and lab results adds to other data that indicates that the cost containment measures were merely a wish list that have failed to improve value in our health care purchasing.

As an another example, a recent report of the Congressional Budget Office on Medicare’s demonstration projects on disease management, care coordination, and value-based payment revealed that “the evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program.”

Instead of simply wishing that these ideas would control costs, we should adopt policies that we already know are effective. We know that the financing model of the Affordable Care Act – building on our fragmented system of private plans and public programs – is the most expensive model of financing health care, and yet a model that falls far short on universality, comprehensiveness and equity.

In contrast, single payer and health service models are the least expensive, and are the most successful in achieving universality, comprehensiveness and equity. Establishing a health service model through government takeover of our entire health care delivery system is not a model that is likely to gain political traction in the foreseeable future. On the other hand, improving Medicare and converting it into a single payer national health program is much more consistent with American views of equity, justice, and choice.

We should certainly encourage the continued evaluation and development of potentially beneficial measures such as the use of health information technology. Improvement in quality and efficiency should always be our goals. But in the overall picture, such efforts would amount to mere tweaks compared to a comprehensive overhaul of the health care financing system. Let’s move forward with an improved Medicare for all.

Wishing electronic access to patients' records would reduce testing

Giving Office-Based Physicians Electronic Access To Patients’ Prior Imaging And Lab Results Did Not Deter Ordering Of Tests

By Danny McCormick, David H. Bor, Stephanie Woolhandler and David U. Himmelstein
Health Affairs, March 2012
Abstract
Policy-based incentives for health care providers to adopt health information technology are predicated on the assumption that, among other things, electronic access to patient test results and medical records will reduce diagnostic testing and save money. To test the generalizability of findings that support this assumption, we analyzed the records of 28,741 patient visits to a nationally representative sample of 1,187 office-based physicians in 2008. Physicians’ access to computerized imaging results (sometimes, but not necessarily, through an electronic health record) was associated with a 40–70 percent greater likelihood of an imaging test being ordered. The electronic availability of lab test results was also associated with ordering of additional blood tests. The availability of an electronic health record in itself had no apparent impact on ordering; the electronic access to test results appears to have been the key. These findings raise the possibility that, as currently implemented, electronic access does not decrease test ordering in the office setting and may even increase it, possibly because of system features that are enticements to ordering. We conclude that use of these health information technologies, whatever their other benefits, remains unproven as an effective cost-control strategy with respect to reducing the ordering of unnecessary tests.
http://content.healthaffairs.org/content/31/3/488.abstract

Through the Affordable Care Act and through the Health Information Technology for Economic and Clinical Health (HITECH) provisions of the the American Recovery and Reinvestment Act of 2009, Congress wished to bring under control the ever escalating costs of health care in the United States. This study of physicians’ electronic access to prior imaging and lab results adds to other data that indicates that the cost containment measures were merely a wish list that have failed to improve value in our health care purchasing.
As an another example, a recent report of the Congressional Budget Office on Medicare’s demonstration projects on disease management, care coordination, and value-based payment revealed that “the evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program.”
Instead of simply wishing that these ideas would control costs, we should adopt policies that we already know are effective. We know that the financing model of the Affordable Care Act – building on our fragmented system of private plans and public programs – is the most expensive model of financing health care, and yet a model that falls far short on universality, comprehensiveness and equity.
In contrast, single payer and health service models are the least expensive, and are the most successful in achieving universality, comprehensiveness and equity. Establishing a health service model through government takeover of our entire health care delivery system is not a model that is likely to gain political traction in the foreseeable future. On the other hand, improving Medicare and converting it into a single payer national health program is much more consistent with American views of equity, justice, and choice.
We should certainly encourage the continued evaluation and development of potentially beneficial measures such as the use of health information technology. Improvement in quality and efficiency should always be our goals. But in the overall picture, such efforts would amount to mere tweaks compared to a comprehensive overhaul of the health care financing system. Let’s move forward with an improved Medicare for all.

Houston labor and immigrant-rights group endorses H.R. 676

By Single Payer News
March 5, 2012

Hope Sanford, a spokesperson for Houston United/Unido, reports that her coalition of 16 union and community organizations has endorsed H.R. 676, “because we believe that health care for everyone in the U.S., regardless of citizenship or employment status, ensures a better quality of life for us all and greatly reduces the well-documented ill effects of economic disparity within a nation.”

The group’s resolution states: “Houston United/Unido will work with unions and community groups to build a groundswell of popular support and action for single-payer universal health care and H.R. 676 until we make what is morally right for our nation into what is also politically possible.”

Don McCanne, M.D., senior health policy fellow for Physicians for a National Health Program (PNHP), has summarized what will happen to immigrants under the health care reform act that was passed in 2010 (ACA).

He writes: “Everyone should have health care. How well will the Affordable Care Act (ACA) work for our immigrant population? It depends partly on immigration status.

“The ACA provisions apply to naturalized citizens just as they would for native-born citizens. Thus their barriers will be the same as for most of the rest of us. They will face the same issues of whether or not the subsidies will be adequate to purchase private plans, and whether or not they will be exposed to excessive cost sharing with inadequate subsidies when accessing care.

“Non-citizen immigrants are faced with the additional problem of having household incomes that average only half that of the U.S. median. Those who are lawfully present also must wait for five years before they are eligible for the Medicaid program. They will be eligible to purchase programs in the new exchanges, though the subsidies will likely be inadequate for those with incomes that already don’t cover other essential needs.

“For immigrants who are undocumented, Congress decided to yield to the forces of anti-immigrant politics, and not only make them ineligible for tax credits for the exchange plans, but also to prohibit them from purchasing the plans with their own funds, even at full cost. It is very unfortunate that Congress co-mingled heath care justice with immigration policy. The sanctity of human life should always prevail over the politics of ideology.

“Yes, some will receive excellent care from our safety-net providers, but many will not. Community health centers cannot possibly fill in the full void in coverage.

“Most undocumented workers are productive individuals, just like our citizens, and there is no reason that they should not contribute to and participate in a single payer national health program that covers everyone – absolutely everyone.”

https://pnhp.org/news/2012/february/immigrant-coverage-under-health-reform

PNHP has a fact sheet on immigrants and health care. It includes the following item:

It is estimated that immigrants will pay, on average, $80,000 more in taxes than they will use in government services over their lifetimes (The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, National Academy Press, 1997).

PNHP Fact sheet: https://pnhp.org/immigrants/Immigrant_Fact_Sheet.pdf

****

H.R. 676 would institute a single-payer health care system by expanding a greatly improved Medicare system to everyone residing in the U. S.

H.R. 676 would cover every person for all necessary medical care including prescription drugs, hospital, surgical, outpatient services, primary and preventive care, emergency services, dental (including oral surgery, periodontics, endodontics), mental health, home health, physical therapy, rehabilitation (including for substance abuse), vision care and correction, hearing services including hearing aids, chiropractic, durable medical equipment, palliative care, podiatric care, and long term care.

H.R. 676 ends deductibles and co-payments. H.R. 676 would save hundreds of billions annually by eliminating the high overhead and profits of the private health insurance industry and HMOs.

In the current Congress, H.R. 676 has 76 co-sponsors in addition to Conyers.

H.R. 676 has been endorsed by 587 union organizations including 139 Central Labor Councils and Area Labor Federations and 40 state AFL-CIO’s (KY, PA, CT, OH, DE, ND, WA, SC, WY, VT, FL, WI, WV, SD, NC, MO, MN, ME, AR, MD-DC, TX, IA, AZ, TN, OR, GA, OK, KS, CO, IN, AL, CA, AK, MI, MT, NE, NJ, NY, NV & MA).

For further information, a list of union endorsers, or a sample endorsement resolution, contact:

Kay Tillow All Unions Committee For Single Payer Health Care—H.R. 676 c/o Nurses Professional Organization (NPO) 1169 Eastern Parkway, Suite 2218 Louisville, KY 40217 (502) 636 1551 Email: nursenpo@aol.com, http://unionsforsinglepayer.org

Vermont adjusts path toward universal coverage

But state leaders remain committed to obtaining a federal health reform waiver by 2017 that would allow a single payer-type plan.

By Doug Trapp
Amednews, March 2, 2012

Vermont is making significant progress toward implementing its own health insurance exchange, but transforming that marketplace into a truly universal health care program could prove to be very difficult, judging by recent compromises on the issue by Gov. Peter Shumlin.

The Vermont House of Representatives on Feb. 24 adopted a measure to implement a state health insurance exchange. The bill passed by a 2-1 ratio and heads next to the Vermont Senate for consideration. Shumlin has announced his support for the measure.

Also, the five-member body that state lawmakers created last year to implement the state’s universal health care program soon is expected to choose mandatory minimum health benefits for insurers operating in its exchange as well as for many plans outside the exchange.

The national health system reform law requires states to operate their own health insurance exchanges by 2014. If a state does not establish such an insurance marketplace, the federal government will operate an exchange in the state. Employees offered inadequate or too costly health coverage through their jobs will have the option to purchase health insurance in the exchanges. These people will be eligible for federal subsidies if they earn 400% or less of the federal poverty level.

Shumlin and legislative leaders in early February signaled that they would implement the state’s universal health care program — Green Mountain Care — more slowly than previously expected. The decision represents a compromise of Shumlin’s earlier support for requiring as many people as possible to buy coverage through the exchange as soon as possible.

The governor and state lawmakers said they would exempt employers with 51 to 100 workers from mandatory participation in the state’s health insurance exchange through 2016. Employers with 50 or fewer workers still would be required to participate in the exchange. Companies with more than 100 employees are exempt.

Shumlin administration officials have said the state’s individual and small group insurance markets are so small — Vermont’s population is about 630,000 — that requiring people in these markets to purchase health insurance in the exchange should reduce waste in the health system. However, mandating exchange participation for everyone starting in 2014 would have reduced businesses’ choice of coverage.

Shumlin also offered new flexibility to businesses by supporting the inclusion in the exchange of the lowest-value plans permitted by the national health system reform law. These so-called bronze plans will pay 60% of a subscriber’s health care costs. However, this means that most employees offered this coverage will not qualify for federal subsidies to purchase other coverage in the exchange.

“Our goal is to build an exchange that offers consumers maximum flexibility as allowed under federal law,” Shumlin said in a statement.

His long-term goal still is to require everyone to purchase coverage through the exchange and transition to a single payer-style health system by 2017. “We feel strongly that the exchange is not the answer to all of Vermont’s health care problems,” Shumlin said. Moving to another system in 2017 would require the approval of the federal government.

Shumlin’s recent health exchange decisions disappointed some universal health care advocates but drew praise from the Vermont Chamber of Commerce, which had requested the compromises.

The Vermont Medical Society supports expanding health insurance coverage to all Vermonters, but the society is concerned that the supply of physicians in the state may be inadequate to care for the newly covered, said Paul Harrington, the organization’s executive vice president.

Several obstacles stand in the way of Shumlin’s goal to implement universal health coverage in Vermont by 2017. The state needs new revenue streams to support Green Mountain Care, possibly including a payroll or income tax. The state also must make the program work with Medicare and self-insured employers, who generally are exempt from state coverage mandates. “Those are some pretty high hurdles to get over,” Harrington said.

Vermont Republicans, who are in the minority in both legislative houses, are calling for Shumlin, a Democrat, to release a Green Mountain Care funding proposal in September, ahead of the November elections. But Shumlin probably won’t begin working on a financing plan with state lawmakers until early 2013, said David Mannis, a spokesman for the Vermont Dept. of Banking, Insurance, Securities and Health Care Administration.

“Everything is on the table,” Mannis said. “The idea is to come up with a coherent financing plan.”

http://www.ama-assn.org/amednews/2012/02/27/gvse0302.htm

So it's the prices, but what do we do?

High health-care costs: It’s all in the pricing

By Ezra Klein
The Washington Post, March 2, 2012

There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher.

There are many possible explanations for why Americans pay so much more. It could be that we’re sicker. Or that we go to the doctor more frequently. But health researchers have largely discarded these theories. As Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan put it in the title of their influential 2003 study on international health-care costs, “it’s the prices, stupid.”

“The United States spends more on health care than any of the other OECD countries spend, without providing more services than the other countries do,” they concluded. “This suggests that the difference in spending is mostly attributable to higher prices of goods and services.”

On Friday, the International Federation of Health Plans — a global insurance trade association that includes more than 100 insurers in 25 countries — released more direct evidence. It surveyed its members on the prices paid for 23 medical services and products in different countries, asking after everything from a routine doctor’s visit to a dose of Lipitor to coronary bypass surgery. And in 22 of 23 cases, Americans are paying higher prices than residents of other developed countries. Usually, we’re paying quite a bit more.

“Other countries negotiate very aggressively with the providers and set rates that are much lower than we do,” Anderson says. They do this in one of two ways. In countries such as Canada and Britain, prices are set by the government. In others, such as Germany and Japan, they’re set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail.

“In my view, health is a business in the United States in quite a different way than it is elsewhere,” says Tom Sackville, who served in Margaret Thatcher’s government and now directs the IFHP. “It’s very much something people make money out of. There isn’t too much embarrassment about that compared to Europe and elsewhere.”

And others point out that you also need to account for the innovations and investments that our spending on health care is squeezing out. “There are opportunity costs,” says Reinhardt, an economist at Princeton. “The money we spend on health care is money we don’t spend educating our children, or investing in infrastructure, scientific research and defense spending. So if what this means is we ultimately have overmedicalized, poorly educated Americans competing with China, that’s not a very good investment.”

http://www.washingtonpost.com/business/high-health-care-costs-its-all-in-the-pricing/2012/02/28/gIQAtbhimR_story.html

And…

It’s The Prices, Stupid: Why The United States Is So Different From Other Countries

By Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan
Health Affairs, May/June 2003

The data show that the United States spends more on health care than any other country. However, on most measures of health services use, the United States is below the OECD median. These facts suggest that the difference in spending is caused mostly by higher prices for health care goods and services in the United States.

https://pnhp.org/docs/Its-The-Prices-Stupid.pdf

And…

International Federation of Health Plans iFHP 2011 Comparative Price Report

The study aims to help plans better understand why health care costs are so much higher in some countries than others. The survey data showed that average US prices were once again the highest of those in the countries surveyed for nearly all of the common services and procedures reviewed.

http://www.ifhp.com/news97.html

And…

Determining the Level of Payments in Health Care

By Uwe E. Reinhardt
The New York Times, Economix Blog, March 2, 2012

In my previous post, I presented the following menu of payment systems for health care and discussed the various bases (the columns in the chart) upon which payment could be made. Now I’d like to discuss the rows in this chart – the methods by which the level of payments are determined. (The chart is available at the link below.)

Free-Market Determination:

The first row represents what one might call the free-market method, with payment levels negotiated between individual health insurers or self-paying patients on the one hand, and individual providers of health care (doctors, hospitals, and so on) on the other. It is the system long used in the private insurance sector and for uninsured patients.

As I have pointed out in a paper, “The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy,” and in several earlier posts on this blog, however, this approach to setting prices for health care has had several consequences:

1. On average, the prices for health care goods and services negotiated by private health insurers in the United States tend to higher — about double or more — than prices for identical services and goods in other countries of the Organization of Economic Cooperation and Development.

2. It is in good part so because insurers do not seem to have sufficient market power, especially vis à vis hospitals, to resist very rapid price increases.

3. The varying degrees of market power among private insurers in the United States have led to pervasive price discrimination among payers, with prices for identical goods or services varying among payers by factors as high as 10.

Price-Setting in Quasi-Markets:

To avoid these consequences of individual negotiations over prices, I had recommended in a recent post a so-called “all-payer” system for health care in the United States.

Under such a system, associations of health insurers within a region (e.g., states) would negotiate with corresponding associations of hospitals, doctors and of other providers of health care uniform fee schedules (whether fee for service or bundled payments) that then would apply to all payers and providers in that region.

Unilateral Administrative Price-Setting:

Unilateral price-setting by government is the third distinct method of determining the level of the prices paid for health care. It typically is used by tax-financed, government-run, single-payer health-insurance systems, such as those of Taiwan, South Korea, Japan, Canada and the Medicare and Medicaid programs in the United States.

Unilateral, administrative price-setting shares with an all-payer system the advantage of simplicity in claims processing and, thus, lower administrative costs. Both methods furnish the ideal platform for common claims forms and electronic billing.

A major disadvantage of unilateral price-setting is clear from its name: providers may feel that they do not have sufficient say in determining the level of prices at which they are compensated for their services or products, even though they may be able to influence those fee levels by lobbying Congress.

A further disadvantage is that any administrative mechanism operated by government tends to be less flexible than would be negotiations among insurers and providers. It is not that people working in government agencies are inherently less capable than are their private-sector counterparts. It is so because governments must above all seem fair to all
parties in its decisions and also fully transparent. Private parties do not labor under these constraints.

While I am on record as favoring the quasi-market approach to setting fee levels on health care, I recognize that honorable people can differ honorably in their evaluation of these approaches.

I am persuaded, however, that the opaque, price-discriminatory and administratively unwieldy – and hence very expensive – payment system of individual negotiations over fees has not served Americans well during in the last few decades.

http://economix.blogs.nytimes.com/2012/03/02/determining-the-level-of-payments-in-health-care/

Response:

Johnathon Ross
Toledo Ohio
March 3, 2012

“Single-payer” means one fund, administered by a non-profit entity accountable to the public would make payment for all medical services.

The private health insurance bureaucracies disappear as middle men. The choice of provider and decisions about care would be made by you and your doctor, not an insurer interested only in the bottom line. Medicare is one example of a functioning successful single-payer plan.

Hospitals receive monthly operating budgets creating huge administrative savings as no individual bills are necessary. Capital budgets cover new buildings and equipment, etc. New capital spending requires approval by local and state oversight boards avoiding duplicate expensive technology. Care givers jointly negotiate a single fee schedule for services lowering their billing overhead and eliminating bad debt. Malpractice costs drop as medical expenses would no longer be part of legal settlements.

Single-payer is about empathy, the soul of democracy, caring for, protecting and empowering each other including freedom to receive lifetime, comprehensive health care and to choose your own caregivers, freedom from fear of denied care, causing unnecessary suffering and death, freedom from worrying about payment if you are a health care provider, freedom to focus on preventive care and well-being, freedom from financial ruin due to medical expenses and freedom to choose any employer, or be your own employer, because everyone receives care. Let’s just do it.

http://economix.blogs.nytimes.com/2012/03/02/determining-the-level-of-payments-in-health-care/

Comment: 

By Don McCanne, MD

Yes, it is the prices, but why, and what do we do about it?

As to why, it is often said that health care prices are high in wealthier nations, and with our great wealth in the United states, we do have the highest prices. But that really isn’t so much of an explanation as it is an observation. In fact, much of the wealth is at the top, and median incomes are quite modest and are no longer able to support our very high health care prices. We are not spending a lot more on health care simply because that’s where we want to spend it.

So why are our prices higher? As Uwe Reinhardt explains, much of the pricing decision process has remained under control of the private insurance industry – classed as “free-market determination” in that the government has had little input in influencing these prices. As he states, “the opaque, price-discriminatory and administratively unwieldy – and hence very expensive – payment system of individual (private insurer) negotiations over fees has not served Americans well during in the last few decades.”

Besides “free-market determination,” other options for pricing include “quasi-markets” and “unilateral administrative price setting.”

Within quasi-markets prices are set by negotiations between associations of insurers and associations of providers, such as with all-payer systems. Although this can improve fairness of pricing and provide nominal administrative savings, it still leaves in place the most expensive model of financing health care – a combination of a multitude of private plans with public programs.

Unilateral publicly-administered price-setting is by far the most effective method achieving fair prices. It is used by single payer systems through different bases such as fee-for-service, evidence-based bundling, capitation, and institutional budgets with salaried personnel. Again quoting Uwe Reinhardt, “… governments must above all seem fair to all parties in its decisions and also fully transparent. Private parties do not labor under these constraints.”

The reason that publicly-administered price-setting is vastly superior is not simply because prices are more fair, but it is because of the innumerable other advantages of the single payer model of health care financing and delivery.

Former PNHP president Johnathon Ross, in his response to Uwe Reinhardt’s blog (posted above), explains precisely why we should use the single payer model to get our pricing right – not only achieving fair prices, but achieving that previously elusive goal of health care justice for all.

So it’s the prices, but what do we do?

High health-care costs: It’s all in the pricing

By Ezra Klein
The Washington Post, March 2, 2012

There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher.

There are many possible explanations for why Americans pay so much more. It could be that we’re sicker. Or that we go to the doctor more frequently. But health researchers have largely discarded these theories. As Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan put it in the title of their influential 2003 study on international health-care costs, “it’s the prices, stupid.”

“The United States spends more on health care than any of the other OECD countries spend, without providing more services than the other countries do,” they concluded. “This suggests that the difference in spending is mostly attributable to higher prices of goods and services.”

On Friday, the International Federation of Health Plans — a global insurance trade association that includes more than 100 insurers in 25 countries — released more direct evidence. It surveyed its members on the prices paid for 23 medical services and products in different countries, asking after everything from a routine doctor’s visit to a dose of Lipitor to coronary bypass surgery. And in 22 of 23 cases, Americans are paying higher prices than residents of other developed countries. Usually, we’re paying quite a bit more.

“Other countries negotiate very aggressively with the providers and set rates that are much lower than we do,” Anderson says. They do this in one of two ways. In countries such as Canada and Britain, prices are set by the government. In others, such as Germany and Japan, they’re set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail.

“In my view, health is a business in the United States in quite a different way than it is elsewhere,” says Tom Sackville, who served in Margaret Thatcher’s government and now directs the IFHP. “It’s very much something people make money out of. There isn’t too much embarrassment about that compared to Europe and elsewhere.”

And others point out that you also need to account for the innovations and investments that our spending on health care is squeezing out. “There are opportunity costs,” says Reinhardt, an economist at Princeton. “The money we spend on health care is money we don’t spend educating our children, or investing in infrastructure, scientific research and defense spending. So if what this means is we ultimately have overmedicalized, poorly educated Americans competing with China, that’s not a very good investment.”

http://www.washingtonpost.com/business/high-health-care-costs-its-all-in-the-pricing/2012/02/28/gIQAtbhimR_story.html

And…

It’s The Prices, Stupid: Why The United States Is So Different From Other Countries

By Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan
Health Affairs, May/June 2003

The data show that the United States spends more on health care than any other country. However, on most measures of health services use, the United States is below the OECD median. These facts suggest that the difference in spending is caused mostly by higher prices for health care goods and services in the United States.

https://www.pnhp.org/sites/default/files/docs/Its-The-Prices-Stupid.pdf

And…

International Federation of Health Plans iFHP 2011 Comparative Price Report

The study aims to help plans better understand why health care costs are so much higher in some countries than others. The survey data showed that average US prices were once again the highest of those in the countries surveyed for nearly all of the common services and procedures reviewed.

http://www.ifhp.com/news97.html

And…

Determining the Level of Payments in Health Care

By Uwe E. Reinhardt
The New York Times, Economix Blog, March 2, 2012

In my previous post, I presented the following menu of payment systems for health care and discussed the various bases (the columns in the chart) upon which payment could be made. Now I’d like to discuss the rows in this chart – the methods by which the level of payments are determined. (The chart is available at the link below.)

Free-Market Determination:

The first row represents what one might call the free-market method, with payment levels negotiated between individual health insurers or self-paying patients on the one hand, and individual providers of health care (doctors, hospitals, and so on) on the other. It is the system long used in the private insurance sector and for uninsured patients.

As I have pointed out in a paper, “The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy,” and in several earlier posts on this blog, however, this approach to setting prices for health care has had several consequences:

1. On average, the prices for health care goods and services negotiated by private health insurers in the United States tend to higher — about double or more — than prices for identical services and goods in other countries of the Organization of Economic Cooperation and Development.

2. It is in good part so because insurers do not seem to have sufficient market power, especially vis à vis hospitals, to resist very rapid price increases.

3. The varying degrees of market power among private insurers in the United States have led to pervasive price discrimination among payers, with prices for identical goods or services varying among payers by factors as high as 10.

Price-Setting in Quasi-Markets:

To avoid these consequences of individual negotiations over prices, I had recommended in a recent post a so-called “all-payer” system for health care in the United States.

Under such a system, associations of health insurers within a region (e.g., states) would negotiate with corresponding associations of hospitals, doctors and of other providers of health care uniform fee schedules (whether fee for service or bundled payments) that then would apply to all payers and providers in that region.

Unilateral Administrative Price-Setting:

Unilateral price-setting by government is the third distinct method of determining the level of the prices paid for health care. It typically is used by tax-financed, government-run, single-payer health-insurance systems, such as those of Taiwan, South Korea, Japan, Canada and the Medicare and Medicaid programs in the United States.

Unilateral, administrative price-setting shares with an all-payer system the advantage of simplicity in claims processing and, thus, lower administrative costs. Both methods furnish the ideal platform for common claims forms and electronic billing.

A major disadvantage of unilateral price-setting is clear from its name: providers may feel that they do not have sufficient say in determining the level of prices at which they are compensated for their services or products, even though they may be able to influence those fee levels by lobbying Congress.

A further disadvantage is that any administrative mechanism operated by government tends to be less flexible than would be negotiations among insurers and providers. It is not that people working in government agencies are inherently less capable than are their private-sector counterparts. It is so because governments must above all seem fair to all parties in its decisions and also fully transparent. Private parties do not labor under these constraints.

While I am on record as favoring the quasi-market approach to setting fee levels on health care, I recognize that honorable people can differ honorably in their evaluation of these approaches.

I am persuaded, however, that the opaque, price-discriminatory and administratively unwieldy – and hence very expensive – payment system of individual negotiations over fees has not served Americans well during in the last few decades.

http://economix.blogs.nytimes.com/2012/03/02/determining-the-level-of-payments-in-health-care/

Response:

Johnathon Ross
Toledo Ohio
March 3, 2012

“Single-payer” means one fund, administered by a non-profit entity accountable to the public would make payment for all medical services.

The private health insurance bureaucracies disappear as middle men. The choice of provider and decisions about care would be made by you and your doctor, not an insurer interested only in the bottom line. Medicare is one example of a functioning successful single-payer plan.

Hospitals receive monthly operating budgets creating huge administrative savings as no individual bills are necessary. Capital budgets cover new buildings and equipment, etc. New capital spending requires approval by local and state oversight boards avoiding duplicate expensive technology. Care givers jointly negotiate a single fee schedule for services lowering their billing overhead and eliminating bad debt. Malpractice costs drop as medical expenses would no longer be part of legal settlements.

Single-payer is about empathy, the soul of democracy, caring for, protecting and empowering each other including freedom to receive lifetime, comprehensive health care and to choose your own caregivers, freedom from fear of denied care, causing unnecessary suffering and death, freedom from worrying about payment if you are a health care provider, freedom to focus on preventive care and well-being, freedom from financial ruin due to medical expenses and freedom to choose any employer, or be your own employer, because everyone receives care. Let’s just do it.

http://economix.blogs.nytimes.com/2012/03/02/determining-the-level-of-payments-in-health-care/

Comment: 

By Don McCanne, MD

Yes, it is the prices, but why, and what do we do about it?

As to why, it is often said that health care prices are high in wealthier nations, and with our great wealth in the United states, we do have the highest prices. But that really isn’t so much of an explanation as it is an observation. In fact, much of the wealth is at the top, and median incomes are quite modest and are no longer able to support our very high health care prices. We are not spending a lot more on health care simply because that’s where we want to spend it.

So why are our prices higher? As Uwe Reinhardt explains, much of the pricing decision process has remained under control of the private insurance industry – classed as “free-market determination” in that the government has had little input in influencing these prices. As he states, “the opaque, price-discriminatory and administratively unwieldy – and hence very expensive – payment system of individual (private insurer) negotiations over fees has not served Americans well during in the last few decades.”

Besides “free-market determination,” other options for pricing include “quasi-markets” and “unilateral administrative price setting.”

Within quasi-markets prices are set by negotiations between associations of insurers and associations of providers, such as with all-payer systems. Although this can improve fairness of pricing and provide nominal administrative savings, it still leaves in place the most expensive model of financing health care – a combination of a multitude of private plans with public programs.

Unilateral publicly-administered price-setting is by far the most effective method achieving fair prices. It is used by single payer systems through different bases such as fee-for-service, evidence-based bundling, capitation, and institutional budgets with salaried personnel. Again quoting Uwe Reinhardt, “… governments must above all seem fair to all parties in its decisions and also fully transparent. Private parties do not labor under these constraints.”

The reason that publicly-administered price-setting is vastly superior is not simply because prices are more fair, but it is because of the innumerable other advantages of the single payer model of health care financing and delivery.

Former PNHP president Johnathon Ross, in his response to Uwe Reinhardt’s blog (posted above), explains precisely why we should use the single payer model to get our pricing right – not only achieving fair prices, but achieving that previously elusive goal of health care justice for all.

So it's the prices, but what do we do?

High health-care costs: It’s all in the pricing

By Ezra Klein
The Washington Post, March 2, 2012
There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher.
There are many possible explanations for why Americans pay so much more. It could be that we’re sicker. Or that we go to the doctor more frequently. But health researchers have largely discarded these theories. As Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan put it in the title of their influential 2003 study on international health-care costs, “it’s the prices, stupid.”
“The United States spends more on health care than any of the other OECD countries spend, without providing more services than the other countries do,” they concluded. “This suggests that the difference in spending is mostly attributable to higher prices of goods and services.”
On Friday, the International Federation of Health Plans — a global insurance trade association that includes more than 100 insurers in 25 countries — released more direct evidence. It surveyed its members on the prices paid for 23 medical services and products in different countries, asking after everything from a routine doctor’s visit to a dose of Lipitor to coronary bypass surgery. And in 22 of 23 cases, Americans are paying higher prices than residents of other developed countries. Usually, we’re paying quite a bit more.
“Other countries negotiate very aggressively with the providers and set rates that are much lower than we do,” Anderson says. They do this in one of two ways. In countries such as Canada and Britain, prices are set by the government. In others, such as Germany and Japan, they’re set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail.
“In my view, health is a business in the United States in quite a different way than it is elsewhere,” says Tom Sackville, who served in Margaret Thatcher’s government and now directs the IFHP. “It’s very much something people make money out of. There isn’t too much embarrassment about that compared to Europe and elsewhere.”
And others point out that you also need to account for the innovations and investments that our spending on health care is squeezing out. “There are opportunity costs,” says Reinhardt, an economist at Princeton. “The money we spend on health care is money we don’t spend educating our children, or investing in infrastructure, scientific research and defense spending. So if what this means is we ultimately have overmedicalized, poorly educated Americans competing with China, that’s not a very good investment.”
http://www.washingtonpost.com/business/high-health-care-costs-its-all-in-the-pricing/2012/02/28/gIQAtbhimR_story.html

And…

It’s The Prices, Stupid: Why The United States Is So Different From Other Countries

By Gerard F. Anderson, Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan
Health Affairs, May/June 2003
The data show that the United States spends more on health care than any other country. However, on most measures of health services use, the United States is below the OECD median. These facts suggest that the difference in spending is caused mostly by higher prices for health care goods and services in the United States.
https://pnhp.org/system/assets/drupal/docs/Its-The-Prices-Stupid.pdf

And…

International Federation of Health Plans iFHP 2011 Comparative Price Report

The study aims to help plans better understand why health care costs are so much higher in some countries than others. The survey data showed that average US prices were once again the highest of those in the countries surveyed for nearly all of the common services and procedures reviewed.
http://www.ifhp.com/news97.html

And…

Determining the Level of Payments in Health Care

By Uwe E. Reinhardt
The New York Times, Economix Blog, March 2, 2012
In my previous post, I presented the following menu of payment systems for health care and discussed the various bases (the columns in the chart) upon which payment could be made. Now I’d like to discuss the rows in this chart – the methods by which the level of payments are determined. (The chart is available at the link below.)
Free-Market Determination:
The first row represents what one might call the free-market method, with payment levels negotiated between individual health insurers or self-paying patients on the one hand, and individual providers of health care (doctors, hospitals, and so on) on the other. It is the system long used in the private insurance sector and for uninsured patients.
As I have pointed out in a paper, “The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy,” and in several earlier posts on this blog, however, this approach to setting prices for health care has had several consequences:
1. On average, the prices for health care goods and services negotiated by private health insurers in the United States tend to higher — about double or more — than prices for identical services and goods in other countries of the Organization of Economic Cooperation and Development.
2. It is in good part so because insurers do not seem to have sufficient market power, especially vis à vis hospitals, to resist very rapid price increases.
3. The varying degrees of market power among private insurers in the United States have led to pervasive price discrimination among payers, with prices for identical goods or services varying among payers by factors as high as 10.
Price-Setting in Quasi-Markets:
To avoid these consequences of individual negotiations over prices, I had recommended in a recent post a so-called “all-payer” system for health care in the United States.
Under such a system, associations of health insurers within a region (e.g., states) would negotiate with corresponding associations of hospitals, doctors and of other providers of health care uniform fee schedules (whether fee for service or bundled payments) that then would apply to all payers and providers in that region.
Unilateral Administrative Price-Setting:
Unilateral price-setting by government is the third distinct method of determining the level of the prices paid for health care. It typically is used by tax-financed, government-run, single-payer health-insurance systems, such as those of Taiwan, South Korea, Japan, Canada and the Medicare and Medicaid programs in the United States.
Unilateral, administrative price-setting shares with an all-payer system the advantage of simplicity in claims processing and, thus, lower administrative costs. Both methods furnish the ideal platform for common claims forms and electronic billing.
A major disadvantage of unilateral price-setting is clear from its name: providers may feel that they do not have sufficient say in determining the level of prices at which they are compensated for their services or products, even though they may be able to influence those fee levels by lobbying Congress.
A further disadvantage is that any administrative mechanism operated by government tends to be less flexible than would be negotiations among insurers and providers. It is not that people working in government agencies are inherently less capable than are their private-sector counterparts. It is so because governments must above all seem fair to all parties in its decisions and also fully transparent. Private parties do not labor under these constraints.
While I am on record as favoring the quasi-market approach to setting fee levels on health care, I recognize that honorable people can differ honorably in their evaluation of these approaches.
I am persuaded, however, that the opaque, price-discriminatory and administratively unwieldy – and hence very expensive – payment system of individual negotiations over fees has not served Americans well during in the last few decades.
http://economix.blogs.nytimes.com/2012/03/02/determining-the-level-of-payments-in-health-care/
Response:
Johnathon Ross
Toledo Ohio
March 3, 2012
“Single-payer” means one fund, administered by a non-profit entity accountable to the public would make payment for all medical services.
The private health insurance bureaucracies disappear as middle men. The choice of provider and decisions about care would be made by you and your doctor, not an insurer interested only in the bottom line. Medicare is one example of a functioning successful single-payer plan.
Hospitals receive monthly operating budgets creating huge administrative savings as no individual bills are necessary. Capital budgets cover new buildings and equipment, etc. New capital spending requires approval by local and state oversight boards avoiding duplicate expensive technology. Care givers jointly negotiate a single fee schedule for services lowering their billing overhead and eliminating bad debt. Malpractice costs drop as medical expenses would no longer be part of legal settlements.
Single-payer is about empathy, the soul of democracy, caring for, protecting and empowering each other including freedom to receive lifetime, comprehensive health care and to choose your own caregivers, freedom from fear of denied care, causing unnecessary suffering and death, freedom from worrying about payment if you are a health care provider, freedom to focus on preventive care and well-being, freedom from financial ruin due to medical expenses and freedom to choose any employer, or be your own employer, because everyone receives care. Let’s just do it.
http://economix.blogs.nytimes.com/2012/03/02/determining-the-level-of-payments-in-health-care/

Yes, it is the prices, but why, and what do we do about it?
As to why, it is often said that health care prices are high in wealthier nations, and with our great wealth in the United states, we do have the highest prices. But that really isn’t so much of an explanation as it is an observation. In fact, much of the wealth is at the top, and median incomes are quite modest and are no longer able to support our very high health care prices. We are not spending a lot more on health care simply because that’s where we want to spend it.
So why are our prices higher? As Uwe Reinhardt explains, much of the pricing decision process has remained under control of the private insurance industry – classed as “free-market determination” in that the government has had little input in influencing these prices. As he states, “the opaque, price-discriminatory and administratively unwieldy – and hence very expensive – payment system of individual (private insurer) negotiations over fees has not served Americans well during in the last few decades.”
Besides “free-market determination,” other options for pricing include “quasi-markets” and “unilateral administrative price setting.”
Within quasi-markets prices are set by negotiations between associations of insurers and associations of providers, such as with all-payer systems. Although this can improve fairness of pricing and provide nominal administrative savings, it still leaves in place the most expensive model of financing health care – a combination of a multitude of private plans with public programs.
Unilateral publicly-administered price-setting is by far the most effective method achieving fair prices. It is used by single payer systems through different bases such as fee-for-service, evidence-based bundling, capitation, and institutional budgets with salaried personnel. Again quoting Uwe Reinhardt, “… governments must above all seem fair to all parties in its decisions and also fully transparent. Private parties do not labor under these constraints.”
The reason that publicly-administered price-setting is vastly superior is not simply because prices are more fair, but it is because of the innumerable other advantages of the single payer model of health care financing and delivery.
Former PNHP president Johnathon Ross, in his response to Uwe Reinhardt’s blog (posted above), explains precisely why we should use the single payer model to get our pricing right – not only achieving fair prices, but achieving that previously elusive goal of health care justice for all.