July 8, 2010

Dear PNHP colleagues and friends,

Although the summer heat is upon us, there’s been no let-up in exertions for single-payer health reform on both the state and national levels.

1. PNHP leader Dr. Deb Richter reports that Vermont’s Health Care Reform Commission has selected a team headed by health economist Dr. William Hsiao of Harvard University to conduct an economic impact study of three possible state-based models of reform, one of which is a single-payer plan. The announcement was made on June 28; a story about this development appears here. Dr. Richter has played a very active role in working with state legislators; she has also warned and taken action against the outsize influence of the private insurance industry and Big Pharma on state government. The bid by Dr. Hsiao’s team beat out similar bids by Mathematica and The Lewin Group, the latter of which is owned by UnitedHealth Group.

2. California‘s Universal Health Care Act, S.B. 810, passed an important hurdle on June 30 when the Assembly Health Committee voted to approve it. A story about the committee’s action appears here. In recent years, California’s Legislature has twice passed nearly identical single-payer legislation, only to have it vetoed both times by Gov. Arnold Schwarzenegger. By the time S.B. 810 comes up for a vote, California will have a new governor, and single-payer advocates are optimistic about the bill’s prospects.

3. On June 30, Dr. Margaret Flowers, PNHP’s congressional fellow, testified before President Obama’s National Commission on Fiscal Responsibility and Reform in Washington . The title of her talk was “Improve and strengthen Medicare by expanding it to all” (below).

Dr. Flowers directly challenged the prevailing wisdom of the commission’s members (many of whom are on record supporting cuts to Medicare, Medicaid and Social Security) that cuts to the Medicare program are necessary. Instead, she argued, replacing the private insurance industry with an improved and expanded Medicare for all would be the most fiscally responsible course of action to take and, at the same time, the best way of safeguarding Medicare’s positive attributes.

Dr. Flowers said an improved Medicare for all would not only save about $400 billion annually in administrative waste – enough to provide first-dollar, quality coverage to everyone in the country for no more money than our nation is spending now – but would also permit the use of proven cost-control tools like global hospital budgeting, negotiated fees, bulk purchasing, capital budgets and health planning.

Others who testified at the June 30 commission hearing in support of single-payer health reform as the best way to protect and enhance Medicare included spokespeople from Healthcare-NOW, National Nurses United and Prosperity Agenda.

The commission hearing came on the heels of 19 “town hall meetings” conducted by America Speaks, an organization funded in part by the Peter G. Peterson Foundation. Peterson is a Wall Street billionaire who has long advocated cuts in “entitlement programs” like Medicare and Social Security.

PNHP members (including Dr. Walter Tsou) and other single-payer advocates attended the town halls and challenged the organizers’ restrictive framing of the issues, including on their initial exclusion of single payer. Audience feedback forced the organizers to put single payer back “on the table,” at least in part. (A useful background piece on the biases of America Speaks has been produced by the Center for Economic and Policy Research.)

Nonetheless, Dr. Flowers and others say the stage is being set for the Obama administration’s handpicked commission on fiscal responsibility to propose serious cuts to these essential, life-sustaining social programs. PNHP members should be on the alert.

4. Medicare, which covers approximately 47 million Americans, turns 45 on July 30. PNHP members are urged to speak out at meetings and in letters to the editor and op-eds against any efforts to undermine the program, as limited and flawed as it presently is, and to offer an improved Medicare for all – single-payer national health insurance – as the alternative. Incidentally, a very helpful article on the issue of the “doc fix” in Medicare is Bruce Vladeck’s “Fixing Medicare’s Physician Payment System” in the New England Journal of Medicine. It appears below.

We also urge you to continue speaking out about the merits of single payer at grand rounds or at meetings of civic, faith and community groups. (You can watch Dr. Oliver Fein’s June 11 grand rounds presentation at the Dartmouth-Hitchcock Medical Center titled “Health reform: What passed? What didn’t? How does it compare to single pay
er?” here.) PNHP has new slides for this purpose at www.pnhp.org/slideshows with the password fein.

5. PNHP’s Annual Meeting is not that far off: Saturday, Nov. 6, in Denver, Colo. The meeting at the Sheraton Downtown Hotel will be preceded by PNHP’s Leadership Training Institute on Friday, Nov. 5. You can register for the Annual Meeting online at www.pnhp.org/meeting. If you’re interested in the Leadership Training, contact Matt Petty at matt@pnhp.org. (By the way, PNHP’s meeting coincides with the annual meeting the American Public Health Association, also in Denver.)

Finally, Dr. Don McCanne’s single-payer “Quote of the Day” continues to be an invaluable resource for those wanting to stay on top of the latest developments regarding the new health law, health policy issues and late-breaking reports on research data. Dr. McCanne is PNHP’s senior health policy fellow. You can subscribe to his QOTD by clicking here and filling out a simple form.

Cordially,

Quentin Young
National Coordinator

Ida Hellander
Executive Director

P.S. We hope by now you’ve received our Spring 2010 PNHP newsletter in the mail. If not, let us know. And if you haven’t done so already, please take a moment now to renew your membership or to make a tax-deductible donation.

Improve and strengthen Medicare by expanding it to all

The following text is the testimony that Dr. Margaret Flowers presented to the National Commission on Fiscal Responsibility and Reform at its June 30 hearing in Washington. Dr. Flowers is congressional fellow for Physicians for a National Health Program.

I am Dr. Margaret Flowers and I am here today on behalf of Physicians for a National Health Program, the leading physician research, education and advocacy organization in support of a truly universal single-payer health system in the United States. I will speak specifically about the contribution of health care costs to our national deficit and the evidence-based remedy to control these costs.

When compared to health care in other advanced nations, the United States excels in only one area – the amount of money spent per capita per year. Despite our high spending, the U.S. leaves a third of the population either uncovered or underinsured and thus vulnerable to financial ruin.

Medical debt is a leading cause of bankruptcy and foreclosure in our nation despite the fact that most families declaring medical bankruptcy had insurance when they began incurring such debt.

Our health outcomes are relatively poor, placing us 37th in the world, and we rank the highest in preventable deaths, over 100,000 preventable deaths per year, when compared to other advanced nations. It is clear that we are getting poor value in return for our health care dollar.

Health care costs, which are rising 2.5 percent faster than our GDP, are a leading driver of our financial deficit. In fact, if our health care costs were comparable to those in other advanced nations, which provide nearly universal health care with better outcomes, we would currently experience a budget surplus.

The recent health legislation, misleadingly titled the Patient Protection and Affordable Care Act (PPACA), lacks proven cost controls and is predicted to cause U.S. health care costs to rise faster than if there had been no reform at all (Centers for Medicare and Medicaid Services, April 2010) despite continuing to leave tens of millions out.

Given the impact of health care costs, members of this commission may attempt to decrease the deficit by cutting our public health insurance programs, Medicaid and Medicare; however, doing this would be a mistake because it would increase poverty, worsen health outcomes and increase costs.

Since its enactment nearly 45 years ago, Medicare has substantially lowered poverty among the elderly. Studies show that health disparities in the U.S. start decreasing when our population reaches the age of 65. And the cost of health care per beneficiary is rising more slowly for those on Medicare than for those with private health insurance.

Medicaid and Medicare have not caused our rising health care costs but are victims of our fragmented and failed market-based model of health care financing. Shifting the cost of health care from the taxpayer to the patient will not magically make these health care costs disappear or become sustainable.

The solution to our economic crisis is to jettison the costly failed market model of health care and adopt a publicly financed and independently delivered national improved Medicare for All. This is commonly known as “single payer.” A national improved Medicare for All system has myriad benefits:

* Administrative savings of approximately $400 billion per year, which is enough to provide comprehensive high quality health care to all who are uninsured and underinsured.

* Ability to negotiate for pharmaceutical prices as a monopsony which would lower costs by about 40 percent and bring our prices in line with those of other advanced nations.

* Inherent cost controls of global budgeting for health facilities, negotiated fees, bulk purchasing and rational, rather than profit-driven, allocation of capital expenditures and health resources.

* Ability to identify outliers and develop quality improvement tools.

* Eliminate the burden of rising employee health care costs on businesses.

* Enhance the competitiveness of U.S. products in international markets.

* Liberate our population to pursue advanced education or entrepreneurial enterprises.

* Allow older workers to retire which would increase job opportunities for our younger workers.

* Stimulate the economy because families would have more money for discretionary spending.

* Improve the health, and therefore the productivity, of our workforce.

* Eliminate bankruptcy and foreclosure due to medical debt.

* Eliminate the spend-down required for those who need long-term care funded by Medicaid.

* Provide true health security to our population so that nobody has to choose between necessary medical care and other necessities such as housing, food, education and clothing.

Given these multiple economic benefits – and I have not begun to describe the ways in which national improved Medicare for All would improve patient choice and quality of health care – it is no surprise that the single payer approach is supported by the majority of those in the U.S. and the majority of American physicians. This was evident once again last Saturday in the town meetings sponsored by America Speaks when participants across the nation demanded single payer as an option to solving the health care crisis and 71 percent voted not to cut Medicaid and Medicare.

Private health insurance is rapidly becoming a thing of the past. There is a steady trend in fewer people being enrolled in employee-sponsored health plans. This is expected to increase under PPACA as businesses have an incentive to drop insurance benefits and pay the lower cost penalty.

There is a steady trend in people choosing high deductible plans which leave them financially vulnerable in their time of need. As people enter the individual market, those with health conditions will find it difficult to afford adequate insurance.

The trends for those who are uninsured and underinsured will continue upward. Under PPACA, billions of public dollars will be used to subsidize rising private insurance premiums for policies that cover fewer and fewer services. The result is a flow of patient and public dollars into the coffers of private insurance corporations with declining return in terms of health care. This trend is not sustainable.

The alternative scenario of a national improved Medicare for All will save lives and save money. National improved Medicare for All will place our nation on the path of becoming one of the best health systems in the world – something of which we can all be proud.

This commission has the ability to recommend creating a financially sustainable universal health system. I urge the members of this commission to recommend addressing the deficit through adopting this most popular approach: national improved Medicare for All. Don’t cut Medicare. Protect it, improve it and expand it to cover everyone.

Fixing Medicare’s Physician Payment System

Bruce C. Vladeck, Ph.D.
New England Journal of Medicine
May 5th, 2010

Now that Congress has completed the epochal, exhausting, and contentious task of enacting comprehensive health care reform, it must confront another health care issue that is perhaps even more politically difficult: reform of Medicare’s physician payment system. On April 15, Congress voted to postpone a 21% reduction in Medicare fees that was to have gone into effect April 1, but a longer-term solution is not yet in sight.

The problems with the Medicare physician payment system are twofold, and each dimension poses complex political difficulties. First, Medicare is captive to an arbitrary, if elegantly conceived, formula for total payments to physicians – the sustainable growth rate (SGR). In the alternate reality of the Congressional budget process, the SGR will reduce Medicare’s physician payments, which already trail those from private insurers, as far into the future as the eye can see. Second, there is widespread consensus that the relative fees in the current system are a significant cause of the growing imbalance in supply and utilization between primary care and specialty services in the U.S. health care system. That imbalance, in turn, is widely perceived as a major cause of both excessive costs and inadequate quality of care. This is not just a Medicare problem: the Medicare Resource-Based Relative Value Scale is used by most private insurers to set relative prices for physicians.

In 1997, when Congress refined the formula by which the annual change in Medicare physician fees was determined, it decided that total physician payments per beneficiary should grow no faster than the economy as a whole, as measured by the gross domestic product (GDP). Policymakers were concerned about increases in the volume of services that beneficiaries received; since total spending equals price times volume, under an aggregate cap, if volume grew more quickly, fees would grow more slowly or be reduced.1 The expectation that total physician spending could be kept to such a level was probably unrealistic, since few countries have ever attained that target, and an increasing proportion of health care services were migrating from inpatient hospitals to the lower-cost settings of outpatient facilities and physicians’ offices, which many thought would improve outcomes and save money. But the economy was growing robustly, and the SGR’s framers were pursuing a broader agenda of trying to drive the entire Medicare system away from fee for service toward private, capitated plans.

Moreover, the excessively ambitious growth target is only the beginning of the problem. The SGR is a cumulative, prospective formula; if actual spending in a given year exceeds that year’s target, the following year’s spending is supposed to be reduced proportionately, but if that reduction is insufficient, then additional reductions must come in the future. Every time Congress postpones a formula-determined fee reduction, it compounds the difference between actual and expected fees, making the (theoretical) eventual adjustment that much more severe. Thus, since the SGR was implemented in 1998, total Medicare physician expenditures have exceeded the allowed amounts by only $20 billion (on a total of almost $1 trillion), but to recoup that all in 1 year would require a 21% reduction in 1 year’s fees. And those reduced fees would then become the base for payment levels in all subsequent years.2

In a rational world, Congress would write off the $20 billion as a relatively small policy error and establish a more realistic prospective formula. But under Congressional budget rules, the cost of doing so is not $20 billion, but $20 billion per year, compounded by inflation, times 10 years. The Congressional Budget Office and the Office of Management and Budget are required to assume that someday Medicare’s physician fees will be permanently lowered to SGR levels and that anything above that amount is “extra spending.”

Of course, even $250 billion over 10 years is a rounding error relative to an annual deficit of $7 trillion, but elected officials, while steering every nickel they can to their constituents or contributors, like to pose as sworn opponents of deficit spending. Out of context, $250 billion certainly seems like a lot of money, and in today’s U.S. Senate, it takes only a handful of politicians to bring the legislative gears to a halt. In fact, early last year, the House of Representatives passed legislation that would have changed the budget rules to permit a more sensible fix for the SGR, but the proposal died in committee in the Senate.

The country’s long-term budgetary status is a serious problem, and budget discipline has to begin somewhere. But everyone seems to agree that reducing Medicare’s physician fees by 21%, in perpetuity, while private fees continue to increase might create access problems for at least some beneficiaries and might harm providers whose high volume of service to Medicare beneficiaries leaves them especially dependent on Medicare revenues.

As if that weren’t problematic enough, the basic mechanics of the Medicare Physician Fee Schedule, which was supposed to change physician payment to increase rewards for primary care services at the expense of procedural and interventional services, appears to have gone totally off track. For various reasons, the fee schedule, which originally did increase the prices of evaluation and management services relative to those of surgery or invasive procedures, turned in the other direction through the process of annual updating of relative value units.3 Surgeons, radiologists, and some medical specialists are now paid two to three times as much per hour as providers of cognitive services, which is about where we began 20 years ago; this was the situation that the fee schedule was supposed to fix.

The question of the relative virtues of primary versus specialty care can be debated ad nauseam, but in other wealthy countries that serve their populations at least as well as we do, the ratio of primary care physicians to specialists is much higher than in the United States, and the gap in compensation is much smaller or the poles even reversed.4 Young physicians, burdened by increasing educational debts, may well choose a career path on the basis of a major difference in compensation, especially when the better-compensated positions require less ongoing responsibility for patients and offer better working hours.

Under a budget constraint, however, changes to the relative fees paid to various categories of physicians give rise to zero-sum “distributio
nal politics”; there may be a theoretically correct way to determine relative fees, but that is largely irrelevant to a legislative process in which various groups are free to pursue their self-interests. The only general solution to such a political free-for-all is to increase the total pot available for distribution – as is customarily done, for instance, in the realm of agricultural policy. Last year’s House-passed health care reform bill took this approach, and the final reform law does add a modest amount of money to primary care fees.

But here the two dimensions of the problem intersect. The way to redress the imbalance between primary care and specialty compensation while shrinking the disparity between Medicare and private insurance is to add more money to primary care while leaving specialists’ fees unchanged, on average. But doing so worsens the federal deficit, providing fodder for those who pose, at least, as opponents of deficit spending. And then the pundits argue that fixing the current system isn’t really worth the bother – that fee-for-service payments are so intrinsically counterproductive that we should just scrap them in favor of something better.5 Except that no one knows what that something is.

The enactment of health care reform after many considered it irreversibly derailed by the Senate election in Massachusetts has suggested to some that perhaps the U.S. political system is not so hopelessly gridlocked after all. Health care reform, some believe, might be a harbinger of a more sensible and productive approach to solving serious policy problems. Untying the political knots enmeshing Medicare physician payment will test that optimism.

Disclosure forms provided by the author are available with the full text of this article at NEJM.org.

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Source Information

From Nexera (a health care consulting business), New York.
This article (10.1056/NEJMp1004709) was published on May 5, 2010, at NEJM.org.
References

1. The sustainable growth rate system. In: Report to the Congress: assessing alternatives to the sustainable growth rate system. Washington, DC: Medicare Payment Advisory Commission, March 2007:11-27.
2. Centers for Medicare & Medicaid Services. Estimated sustainable growth rate and conversion factor for Medicare payments to physicians in 2010. November 2009. (Accessed April 26, 2010, at http://www.cms.gov/SustainableGRatesConFact/Downloads/sgr2010f.pdf.)
3. Ginsburg PB, Berenson RA. Revising Medicare’s physician fee schedule – much activity, little change. N Engl J Med 2007;356:1201-1203.
4. Lee TH. The need for reinvention. N Engl J Med 2008;359:2085-2086.
5. Wilensky GR. Reforming Medicare’s physician payment sys