By KIP SULLIVAN (25)
Two bills that are called “Medicare for all” bills by their supporters have just been introduced in Congress. On February 27, Representative Pramila Jayapal introduced the Medicare For All Act of 2019, HR 1384 , in the House of Representatives. On April 10, Senator Bernie Sanders introduced a bill bearing the same name in the Senate, S 1129. The cost-containment section in Representative Jayapal’s bill will cut health care costs substantially without slashing the incomes of doctors and hospitals. Senator Sanders’ bill cannot do that.
In this article, I explain the differences in the cost containment sections of the two bills and call upon Senator Sanders to correct two defects in his bill that minimize its ability to reduce costs. Defect number one: S 1129 authorizes a new form of insurance company called the “accountable care organization” (ACO). Defect number two: S 1129 fails to authorize budgets for hospitals. Representative Jayapal’s bill, on the other hand, explicitly repeals the federal law authorizing ACOs, and it authorizes budgets for individual hospitals.
I write this essay as both a long-time organizer, writer and speaker for a single-payer (the older name for “Medicare for all” system) and a strong supporter of Senator Sanders. Bernie’s enthusiastic support for a “single payer” solution to the American health care crisis has added millions of new supporters to the single-payer movement. But precisely because he is now the most recognizable face of the single-payer movement, it is extremely important that all of us, whether we’re already in the single-payer movement or we just long for a sane and humane health care system, encourage Bernie to fix the defects in his bill.
To explain the two defects in S 1129, I must first explain why a single-payer bill like Representative Jayapal’s will be effective at cutting the high cost of American health care. I begin by explaining the origin and meaning of the “single payer” label. I will then describe the two defects in S 1129 in more detail.
The origin of “single payer”
The “single payer” label entered the lexicon in 1989 to describe a universal coverage proposal published in the January 1989 edition of the New England Journal of Medicine
by Physicians for a National Health Program (PNHP). The “single payer” label was invented within months after the article’s publication to characterize the distinguishing feature of PNHP’s proposal: One government agency would reimburse doctors and hospitals directly; in other words, the payments would not flow first to insurance companies so they could take 15 to 20 percent off the top before passing on the rest to doctors and hospitals. In addition to the one-payer feature, the PNHP proposal contained three other essential features – the use of budgets for hospitals (annual lump sum payments akin to budgets for fire departments), the establishment of a uniform fee schedule for doctors, and limits on drug prices.
The advantage that PNHP’s proposed single-payer system has over other cost containment proposals is that it reduces costs primarily by reducing price of medical services (as opposed to the quantity of medical services Americans receive), and it reduces prices mainly by reducing excessive administrative costs that drive prices up. Administrative costs currently eat up about one-third of total US health care spending. Research has demonstrated that three of the four features of the PNHP proposal – one payer, budgets for hospitals, and uniform fee schedules for doctors – could reduce the share of total spending devoted to administration from over 30 percent to 15 to 20 percent. Drug price controls could reduce total spending by another 3 to 5 percent, for a total savings of somewhere between 15 to 20 percent. Fifteen to 20 percent of today’s US health care bill, which is $3.5 trillion, is an enormous sum – approximately $500 to $700 billion saved every year. Note that this does not include additional savings that might flow from reduced fraud (it’s easier to detect fraud with one payer), reductions in the compensation paid to some specialists, and more equitable distribution of hospitals and equipment. [1]
Within a few years after the publication of PNHP’s 1989 proposal, the “single payer” label had been widely adopted by health policy researchers around the world to distinguish systems like Canada’s, in which tax dollars flow directly from provincial governments to doctors and hospitals, from systems like Germany’s in which tax dollars and compulsory premium payments flow first through insurance companies.
By 1990 the modern American single-payer movement had begun to form. The first single-payer legislation was introduced in the Ohio legislature in 1990, in the US House of Representatives in 1991, and in the US Senate in 1992. Those bills all contained the four basic elements of a single-payer system as PNHP proposed it: One payer (a government agency) replaces multiple insurers (insurance companies and self-insured-employer plans), and the one payer negotiates annual budgets with hospitals, uniform fee schedules with doctors, and price ceilings with drug companies. Insurance companies could sell insurance for services not covered by the legislation, but not for services that were covered. [2]
Throughout the 1990s and early 2000s, the traditional fee-for-service (FFS) American Medicare program (to be distinguished from the Medicare Advantage program in which hundreds of insurance companies participate) was often cited as an example of a single-payer system even though it did not fit the ideal described by PNHP and other experts. The most obvious similarities: traditional FFS Medicare was the sole payer of providers (doctors and hospitals) who treated Medicare beneficiaries; and it paid providers directly – the payments did not pass first through insurance companies. Thus, strictly speaking, the FFS Medicare program qualified as a single-payer program. However, unlike the ideal single-payer system, traditional Medicare has never had the authority to negotiate annual budgets for each of America’s 5,500 hospitals, nor to negotiate limits on drug prices. And, of course, it doesn’t cover all Americans.
Because the traditional Medicare program was a single-payer program, although less than an ideal one, and because the public is familiar with Medicare, single-payer proponents often substituted “Medicare for all” for “single payer.” For example, recent iterations of HR 676 , a single-payer bill modeled on PNHP’s proposal that was introduced in the US House of Representatives between 2003 and 2018, have been entitled “Expanded and Improved Medicare for All Act.” Polling data indicate that explaining single-payer by comparing it to Medicare raises public support for (and perhaps understanding of) the concept. A 2007 AP-Yahoo poll illustrated the difference between public support for universal coverage under a “single payer” versus a program “like Medicare.” When asked whether “[t]he United States should continue the current health insurance system … or should adopt a universal health insurance program in which everyone is covered under a program like Medicare that is run by the government and financed by taxpayers,” 65 percent chose “a program like Medicare.” However, when asked if they considered themselves a single-payer supporter, only 54 percent said they did.
Adulteration of “single payer” and “Medicare for all”
Like all bumper-sticker labels designed to describe complex proposals, the phrases “single payer” and “Medicare for all” cannot by themselves convey all the elements of a complete single-payer system. The terms are therefore easily muddled by those who want to hitch significantly different proposals to the single-payer bandwagon, and by those who oppose single-payer systems.
With the rise of single-payer’s popularity in the last three years, much confusion has been visited on that term as well as “Medicare for all.” The confusion arises from two sources: “Medicare for some” advocates – people who want to expand Medicare to some but not all Americans; and universal coverage advocates who bestow the “single payer” label on bills that are missing two of the essential features of a single-payer system – one payer and budgets for hospitals. In this essay, I’m focusing on the latter problem – the introduction of bills that are labeled “single payer” or “Medicare for all” by their authors and supporters, but which are missing the one-payer feature and hospital budgets. The most prominent of these bills is S 1129, the bill Senator Sanders introduced on April 10, and its predecessor, S 1804 , which he introduced in September 2017.
S 1129 contains the clause that every true single-payer bill contains – a clause stating that on a certain date after the bill becomes law insurance companies may not sell policies that duplicate the coverage of the Medicare For All program. If you read nothing else in the bill, that clause would lead you to think S 1129 was a classic single-payer bill – a bill that replaces today’s insurance industry (about 1,000 insurance companies) with one government payer, in this case, the federal Department of Health and Human Services (HHS). But elsewhere in the bill we come upon a section that indicates insurance companies will be replaced by a hybrid of existing insurance companies plus hospital-clinic chains, a hybrid called “ACOs.” [3] There are more than 1,000 ACOs in business today.
Replacing 1,000 insurance companies with with 1,000, or more likely several thousand, ACOs cannot reduce administrative costs substantially or at all. [4] Under such a system, ACOs would generate almost the same overhead costs insurance companies generate now (15 to 20 percent of premium payments), and hospitals and clinics would incur roughly the same administrative costs billing multiple payers (i.e, the 1,000-plus ACOs).
What is an ACO?
Congress included in the Affordable Care Act of 2010 (aka Obamacare) a section (Section 3022) requiring CMS to establish an ACO program within the traditional FFS Medicare program. It is not clear why Congress did that. Congress was warned in 2008 by the Congressional Budget Office (CBO) that ACOs would not save money for Medicare. The simplest way to describe ACOs is to say they are HMOs in training. Like HMOs, they are corporations that own or contract with chains of hospitals and clinics; they have the equivalent of enrollees; they attempt to keep their “enrollees” from seeking care outside their networks; they bear insurance risk (that is, they are paid on a per-enrollee basis and in exchange are obligated to provide medically necessary services to their enrollees); and because they are risk-bearing organizations, they generate overhead costs similar to those created by traditional insurance companies.
In fact, precisely because ACOs resemble insurance companies, nearly half of them already have contracts with insurance companies to help them carry out insurance-related tasks. The largest insurance companies – Aetna Humana , and United Healthcare , for example – are already deeply embedded in the ACO industry.
The only significant differences between ACOs and HMOs are (1) ACO “enrollees” are assigned to ACOs (usually without their knowledge) whereas HMO enrollees choose to enroll, and (2) HMOs bear all insurance risk while ACOs split the risk of loss or savings with another insurer (in Medicare’s case, risk is shared with the Medicare program). [5] Both of these differences are being eroded. Many ACOs are saying they should be allowed to enroll people so they can restrict enrollee use of out-of-ACO providers, and some influential ACO proponents are proposing that ACOs be paid premiums so they can absorb total losses and keep total profits.
One other important similarity between ACOs and HMOs: ACOs have failed to cut Medicare’s costs, just as the CBO predicted. [6]
Defect 2: Absence of hospital budgets
I mentioned above that an American single-payer system could reduce total spending by 10 to 15 percent just by eliminating excess administrative costs. A large portion of that savings would come in the form of reduced administrative costs for hospitals (the rest comes from reduced administrative costs in the insurer and physician sectors). Hospitals enjoy lower overhead costs in single-payer systems for two reasons. First, they are paid with annual budgets, not on a per-patient or per-procedure basis, which means they don’t have to keep track of very pill and x-ray for every patient. Second, for the covered services, they deal with only one payer, not hundreds, each with their own hoops to jump through.
Unlike Representative Jayapal’s bill, Senator Sanders’ bill does not authorize hospital budgets. There is a reason for that: It is not possible to set premiums for 1,000 or 2,000 ACOs, which consist of hospital-clinic chains with an insurance company or department plopped on top of it, and at the same time set budgets for each of the nation’s 5,500 hospitals. One has to choose one or the other: Premium payments for ACOs, or budgets for hospitals. Sanders chose ACOs. Jayapal chose hospital budgets.
But by sacrificing hospital budgets in order to make room for ACOs, Sanders guaranteed his bill cannot reduce hospital administrative costs much or at all. Research indicates US hospitals spend 25 percent of their revenues on administration, thanks to the complexity of our multiple-payer system, while hospitals in single-payer systems that use hospital budgets devote half as much to administrative costs.
We must take into account as well the additional administrative costs for doctors in Sanders’ proposed multiple-ACO system. Like hospitals, they will have to determine, for each patient, which ACO a patient belongs to and send the bill to the right one.
Cost containment must accompany or precede universal coverage
If you happen to believe that some fine day America will find the political will to insure everyone at the high price at which health care is sold today, then you should ignore what I have said here. You should feel free to endorse any legislation that proposes to raise taxes high enough, or levy compulsory premium payments high enough, to achieve universal coverage. No need to worry about whether a bill that purports to achieve universal coverage can reduce costs. No need to ask yourself why US per capita health care costs are double those of the rest of the industrialized world. The answer is: Primarily because of our high prices, and the excessive administrative costs generated by our multiple-payer system that drive prices up, and not “overuse” of medical services.
But if you think, as I do, that cost containment must accompany or precede universal coverage, then you must support legislation that includes evidence-based, cost containment provisions, such as Representative Jayapal’s bill. I do not believe our nation will find the political will to pay for universal coverage at today’s prices. Moreover, even if the political will were there, I don’t believe it is ethical to pay more to solve any social problem than we have to. Our society has numerous other demands on our resources, ranging from hunger to crumbling infrastructure to climate change. Paying more than necessary to insure all Americans means we will have fewer resources left with which to address other problems.
Representative Jayapal’s bill, HR 1384, meets the definition of a single-payer bill as originally outlined in PNHP’s 1989 article and as most experts define the term. It contains the four elements of a single-payer system: It relies on one payer (HHS, not multiple payers called ACOs) to pay hospitals and doctors directly; and it authorizes budgets for hospitals, fee schedules for doctors, and price ceilings on prescription drugs.
Senator Sanders’ bill contains two of those four elements – fee schedules for doctors and limits on drug prices. That’s a good start. He should add the other two. He should get rid of Section 611(b), the section that authorizes ACOs, and thereby ensure HHS is the single payer. And he should add a section authorizing HHS to negotiate budgets with each of the nation’s hospitals.
Kip Sullivan is a member of the Health Care for All Minnesota Advisory Board and of the Minnesota chapter of Physicians for a National Health Program.
[1] Administrative costs in the US are generated both by the insurance sector (insurance companies, self-insured employers, and public programs like Medicare) and the provider sector (clinics, hospitals, nursing homes, etc.). Research indicating that the administrative costs generated by the insurer sector would fall under a single-payer system tends to focus on comparisons between the traditional fee-for-service Medicare program (which devotes 2 percent of its expenditures to overhead) and the private sector (insurance company overhead is on the order of 15 to 20 percent while the overhead of self-insured employers is 8 to 10 percent), as well as comparisons of the US with other countries. Research indicating that a single-payer system could cut administrative costs of providers tends to focus on comparisons of US clinics and hospitals with those of other countries, particularly Canada. Administrative costs are about 40 percent lower in Canadian hospitals and clinics than they are in the US.
[2] The former HR 676, Representative Jayapal’s new bill (HR 1384), and other single-payer legislation divides the medical sector into “institutional providers” and “individual providers,” and authorizes budgets for the former and uniform fee schedules for the latter. “Institutional providers” typically refers to hospitals and nursing homes.
[3] The section in Sanders’ bill that authorizes ACOs is Section 611(b). That section authorizes the Secretary of HHS to impose upon the non-elderly ACOs and other “payment reform” programs currently applied to the traditional FFS Medicare program. Section 611(b) reads: “Any payment reform activities or demonstrations planned or implemented with respect to such title XVIII [this is the title in the Social Security Act that created Medicare] as of the date of the enactment of this Act shall apply to benefits under this Act, including any reform activities or demonstrations planned or implemented under the provisions of, or amendments made by, the Medicare Access and CHIP Reauthorization Act of 2015 … and the Patient Protection and Affordable Care Act….” For a quick review of Medicare’s ACO programs and six other “payment reform activities” Section 611(b) would impose on the entire country, see a memo I wrote available here http://www.healthcareforallmn.org/wp-content/uploads/2018/08/op-critique-of-Section-611b-S-1804.pdf . Some of these programs are putting patients at risk https://www.nytimes.com/2019/01/18/health/medicare-hospitals-readmissions.html .
[4] It’s impossible to paint a precise picture of what S 1129 ’s multiple-ACO system would look like because Section 611(b) is so brief (see footnote 3). The big unknowns are the number of ACOs that would spring up, and whether Congress or HHS would change the rules that currently determine how people are assigned to ACOs.
Today there are over 1,000 ACOs in operation. Of these, about half hold contracts with CMS and the other half hold contracts with traditional insurance companies. We have very little information on how the ACOs with private-sector contracts assign insured people to ACOs, but what we have indicates they follow CMS’s method. CMS assigns Medicare beneficiaries to ACOs by a two-step process. First, beneficiaries are “attributed” to the primary care doctor they saw the most often over a look-back period of two or three years. Second, if the doctor to whom the beneficiary was attributed is part of an ACO, CMS’s computers sweep that person into that doctor’s ACO. Beneficiaries who had no primary care visits during the look-back period are not assigned to an ACO. By this algorithm, CMS currently assigns 12 million FFS Medicare beneficiaries, or about a third of the beneficiaries enrolled in the traditional FFS Medicare program, to Medicare ACOs. (For more details, see Table 8-2 p. 218, in the Medicare Payment Advisory Commission’s June 2018 report to Congress http://medpac.gov/docs/default-source/reports/jun18_ch8_medpacreport_sec.pdf?sfvrsn=0 )
This plurality-of-primary-care-visit method of assigning Americans to ACOs will sweep a much smaller portion of the non-elderly into ACOs because the non-elderly are far less likely to have made a visit to a primary care doctor in any given look-back period. In the event that S 1129 becomes law, would HHS alter its assignment algorithm to ensure that a much higher proportion of non-elderly Americans would be assigned to an ACO? It is more likely, in my view, that HHS would abandon the invisible, two-step assignment method entirely and allow, induce, or require Americans to enroll in an ACO. Obviously, if that happened, membership in ACOs would soar, and that in turn would induce more insurers, hospitals and clinics to band together to create ACOs.
Another unknown is how much ACOs would be paid. If they were overpaid relative to the FFS sector, as Medicare Advantage plans are overpaid vis a vis Medicare’s FFS providers, we would see more ACOs than we would if they were not overpaid.
[5] In Medicare’s case, the great majority of the 600 ACOs that currently have contracts with the Centers for Medicare and Medicaid Services (CMS) begin with exposure to upside risk only, that is, to the possibility of sharing savings with CMS, but must eventually accept two-sided risk, that is, both down- and upside risk.
I am sometimes asked how the ACOs in S 1129 can be called “insurance companies” or “risk-bearing entities” if they are paid fee-for-service. It’s true that CMS pays providers within ACOs by FFS throughout the course of the “performance year” in question, but the target for total spending by the ACO for that year is set as if the ACO were going to be paid just as an insurance company would be, that is, on a premium-per-enrollee basis. Before the performance year, CMS’s computers assign Medicare beneficiaries to an ACO (see footnote 4 above), then calculate an average per-assignee premium for the year (crudely adjusted for the health status of all the assignees), and then add up all the premium payments. That total equals the target against which the ACO’s profits or losses will be determined at the end of the year. If the ACO’s total spending exceeds the target at the end of the year, it owes CMS roughly half of the excess. Conversely, if the ACO’s total spending comes under the target at the end of the year, CMS splits the savings with the ACO. The fact that actual payment during the year is done by FFS doesn’t change the fact that risk is shifted from CMS to the ACOs. It’s the end-of-year adjustment based on the target level of annual spending that shifts risk.
This convoluted method of paying ACOs may change. Many ACO proponents, including Elliott Fisher (the “father of the ACO) have argued that ACOs should bear all insurance risk as they develop more expertise at managing risk. That would mean they would be regulated by the insurance departments of the states they operate in, they would have to set aside reserves, and they would presumably be allowed to impose financial penalties on enrollees who seek care outside their networks.
[6] The table below summarizes the performance of all four ACO programs set up by CMS over the last 14 years. The table indicates ACOs have saved almost no money for Medicare.
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Impact of CMS’s ACO programs on Medicare spending*
Physician Group Practice demonstration (10 ACOs):
2005-2010: 0.3 % **
Pioneer demonstration (32 ACOs in year one, 8 by year five):
2012: 0.2%
2013: 0.6%
2014: 0.7%
2015: 0.1%
2016: 0.7%
Medicare Shared Savings Program: (480 ACOs in 2017):
2013: -0.1%
2014: -0.1%
2015: -0.3%
2016: -0.1%
2017: 0.3%
Next Generation (45 ACOs in 2017):
2016: 0.2%
*A minus sign means the program’s net effect was to raise Medicare’s costs. “Net effect” is calculated by subtracting from gross savings the bonuses (or shared savings payments) CMS pays out to ACOs, in the case of the MSSP program. In the case of the other three programs, “net effect” is calculated by subtracting from gross savings the net of CMS’s payments to ACOs and ACOs’ payments to CMS.
**The ACOs in the PGP demo would have lost money if the PGPs had not upcoded at almost twice the rate of the groups that served as their controls.
Sources: For the PGP demo, see p. 64 of Evaluation of the Medicare Physician Group Practice Demonstration https://downloads.cms.gov/files/cmmi/medicare-demonstration/PhysicianGroupPracticeFinalReport.pdf .
For the Pioneer, MSSP and Next Generation programs, see Tables 8-6, 8-3, and 8-7 respectively of Chapter 8 http://medpac.gov/docs/default-source/reports/jun18_ch8_medpacreport_sec.pdf?sfvrsn=0 of MedPAC’s June 2018 report to Congress. The 2017 figure for the MSSP program is from slide 9 of a presentation to MedPAC at their January 2019 meeting http://medpac.gov/docs/default-source/default-document-library/aco_jan_2019_final.pdf?sfvrsn=0
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Next Tuesday the House Rules Committee will hold a hearing on Rep. Jayapal’s Medicare for All bill. Judging from the list of witnesses, the hearing will be worse than no hearing at all. https://www.huffpost.com/entry/medicare-for-all-hearing-farce_n_5cc1dfbee4b0ad77ff8164fe The committee refused to allow Dr. Adam Gaffney, a professor of medicine at Harvard and president of Physicians for a National Health Program, to testify. I discuss PNHP in this article. PNHP founded the modern single-payer movement.
At this hour, it appears that no one with any expertise in single-payer systems will testify. It does appear, though, that opponents of single-payer, including several people who support ACOs and other “value-based payment reforms,” will speak.
Hi Kip,
Thank you for your excellent breakdown of Medicare-for-all approaches. I think your final point – that cost containment is key to a workable universal plan – is the lynchpin to a successful system. I was stunned attending a Petrie-Flom talk years ago when a Massachusetts policymaker said that cost under Romneycare was not a concern, merely ensuring universal coverage was. His argued that once coverage was in place, the state could then focus on cost.
That attitude struck me as painfully naive. Further entrenching inefficient layers in healthcare delivery seems a backwards step. And there are myriad ways to ensure coverage without breaking the bank (including excellent public-private options). Hopefully, nuanced and functional ideas will come to the forefront during this electoral campaign.
You’re very welcome, Jason.
I had the identical response to Romneycare and the attitude of its supporters — that cost containment could wait, universal coverage had to come first. That’s backwards. If we’re not serious about cost containment, then we shouldn’t make members of Congress walk the plank and vote for bills that promise greater coverage but only if the coverage is shoddy (narrow networks, huge out-of-pocket costs, further loss of physician and patient autonomy, Medicaid-levels of payment to doctors and hospitals, etc.).
I felt the same about the ACA. Its complexity and its endorsement of evidence-free nostrums like ACOs guaranteed it would not only not cut costs enough to pay for coverage for 20 million more people, but wouldn’t cut costs at all.
I fear the public will give us only one more bite at the apple during my lifetime. If we screw it up again with legislation with no cost containment in it, the division over how to solve the US health care crisis may remain unresolvable for decades.
It would be awful if they let anyone with any expertise testify, because then they would find out that we could afford it after all. But I do think this is only the beginning of the fight, because we have a year of candidates on the trail talking to voters coming up, and most voters want some kind of single payer. The ultimate problem is the insurance company lobbyists. Knocking the insurance company out disrupts a big industry. Never mind that it didn’t exist when I was a kid. Now it feels like it has been there forever, and there’s the question of JOBS to think about.
I have thought since ObamaCare that we would end up with single payer some day,, but we have to look closely at systems in Europe that are beginning to falter and figure out how to avoid their mistakes.
Many things in Europe are failing… not just their healthcare systems. It is capitalism itself that is failing worldwide because of its inherent and insufferable increase in income and wealth inequality. That is one reason we MUST pass a true single-payer healthcare bill that covers 100% of the cost of every medical necessity for literally everyone in the US, at the least possible cost. It will supply one of our basic human rights/needs in a socially just manner, and will provide an example of a system/method that can be used as an example in building a more just and democratic government and economy.
Kip
Here’s my question.
To what extent do you think a private option is necessary to make a single payer system politically doable in this country?
I can’t imagine a scenario where the courts allow a ban on private insurance
what happens when people who don’t want government insurance opt out and move to the private market
and how do the states factor in here?
Those are complex questions, John. Let me address the first briefly.
The Achilles Heel of all “public option” proposals is their failure to tell us what the premium should be for the public program that will allegedly “compete” with Aetna et al. They don’t even hint at how that premium should be determined.
If the premium is “too” low, Aetna et al. will scream that the PO is just a stalking horse for a single payer system — and they will be correct. And if we know that’s coming, why screw around with grossly inadequate “reforms”?
If Congress or an administrative agency were to set the premium low enough, the PO could displace the insurance industry within a few years, and we will have a single-payer system. The original PO proposal by Jacob Hacker (he published it in 2003) would have produced that outcome. Hacker had to turn himself into a pretzel to deny that a single-payer system is what his proposal would lead to.
If that’s what PO advocates want — a single-payer system — they should say so. But of course they don’t say so because that would alert the insurance industry about what they’re up to — they really want a single-payer system but, unlike single-payer advocates, they just don’t want to admit it, and they hold the fantasy that if they pretend that’s not what they want, the insurance industry won’t figure out what they’re up to.
I have no idea what PO proponents really want. Do they imagine a system in which the PO takes over, say, half the insurance industry, and then reaches a homeostasis — leaving millions uninsured? They never tell us.
If, on the other hand, the premium is set too high, people who want to flee the insurance industry won’t be able to afford to do so. The only people who will be willing to flee the insurance industry by paying high premiums will be the wealthy and the very sick. That’s the only condition under which the insurance industry will permit a PO bill to be enacted. In that event, what PO proponents will have accomplished will be a form of “lemon socialism” — they will have taken the sickest off the hands of the insurance industry. The insurance industry might very well enthusiastically support such an outcome.
Has anyone ever read a PO proposal that claims to achieve either universal coverage or lower costs? I haven’t.
So at one point do we as a society cut the BS about POs and discuss real solutions? Do we enact yet another federal bill — this time a PO bill — that can’t solve the problem and hope the public will cut us some more slack while the problem gets worse? I view the PO as a form of enabling — it permits people addicted to the current system to pretend they really want change. No, what they really want to do is postpone change.
Here is one incremental solution I would support: Lowering the Medicare age gradually until it hits zero. By bringing in entire age cohorts — the sick and the well — we avoid the problem of determining the right premium created by PO proposals. When we add, say, every American between 55 and 64 to Medicare, or between zero and 18, we bring in not just the sick but everyone, and paying premiums is no longer an issue. We finance the new Medicare enrollees with taxes.
Kip, if you bring in age bands (e.g.,55-65) one by one starting with the oldest, you’ll surely bankrupt the system. You desperately need the “youngsters” to spread the risk. Insurers would love it if you took the 55-65ers off their hands. Their rates would drop by 20% or so. Roughly. Even though health “insurance” has morphed into something that lacks many insurance principles, it’s still based on spreading risk. I also (but given my background it’s understandable) think that the alleged benefits of wringing admin out of the system are over-inflated badly. E.g., the many hospital consolidations.
What IS real is that 1/3 of healthcare is waste and error. Governmentally run financing will exacerbate that number, because Medicare does not and cannot manage care. Unless you move to a fundamentally balanced risk sharing model that places significant risk onto providers, waste will always be a major league issue.
That being said, I slowly am coming to believe that a form of governmental or quasi governmental single payor program is inevitable. If we ever get back a federal government that can get anything done competently. But as you point out, it has to have the ability to control hospital and drug spends.
And I remain convinced that utilization is a key driver of our costs despite recent conclusions to the contrary. We are grossly chronically ill.
John, let me address your second question.
Single-payer bills don’t ban insurance companies, but they do prohibit them from selling insurance that duplicates the coverage of the state or federal universal coverage program. If the final bill that is enacted covers most medical services, that prohibition will greatly reduce the role of the insurance industry.
I suspect the insurance industry and some of the right-wing legal organizations that sprang up over the last four decades with Koch-Scaife-Bradley money will find multiple reasons to sue to impede the enactment or implementation of single-payer legislation. But I have never spent much time thinking about such lawsuits because I see them as the least of our worries.
The biggest obstacle to implementing a universal coverage system that does not enrich the insurance industry are politicians from both parties who throw more and more tax dollars down the gaping maws of the insurance companies. In 1965 when Medicare and Medicaid were enacted, it didn’t cross the mind of any reasonable person to insist that Medicare and Medicaid be privatized — that all the tax dollars spent on Medicare and Medicaid should be funneled first through the coffers of insurance companies rather than directly to docs and hospitals. After all, the insurance industry didn’t want the poor and the elderly. Why the hell should they be subsidized to do that which they didn’t want to do in the first place, and could only do at a greater cost than the government could?
But thanks to rise of managed care theology, sending tax dollars through insurance companies so they can skim off 20 percent became all the rage by the late 1980s. Now one-third of Medicare beneficiaries are in Medicare Advantage, and 80 percent of Medicaid recipients are consigned to the tender mercies of HMOs and other types of insurance companies.
My feeling is that until we reverse the privatization fad and take away all those tax dollars that feed the insurance industry, we won’t enact a true single-payer bill. We will enact instead something like Medicare Advantage, or something like Bernie’s bill which just replaces the current version of the insurance industry with a mongrel version consisting of the current insurance industry plus the big hospital-clinic chains.
And we won’t reverse the privatization fad till we debunk managed care theology. Debunking managed care theology now will serve two purposes — it will facilitate a campaign to dry up tax funding for the bloated insurance industry, and it will reduce the probability that a national single-payer bill will get turned into a national Medicare Advantage bill or a national multiple-ACO bill. The only thing worse than the current privately run, multiple-HMO/PPO, managed care system would be a government run, multiple HMO/ACO managed care system.
Kip
Kip, the last three paragraphs in your email are precisely why I no longer support Medicare for all.
I posted this today before even seeing this email thread… weird…. https://onhealthtech.blogspot.com/2019/04/the-medicare-for-all-heptagon.html
Medicare for all, if enacted in the current environment, will indeed be much worse than what we now have, and which is pretty awful in and of itself.
As to debunking managed care technology, I believe that is no longer possible. Why? Because the proponents and fiery advocates of managed care are either making mountains of $$$ from it and/or are planning to use it as a ratcheting tool for rationing services (mostly for the poor). It’s also worth noting that the entire big tech sector is firmly behind managed care, not because of health care per se, but because they want the data and they need the surveillance of managed care. There is also a lot of venture capital money flowing in support of managed care and its various tools of the trade. All government paid health care will eventually become third party administered HMOs (ACOs are just another step in that direction and so is the just announced CMMI direct contracting “initiative”).
The wealthy people leading this fully bipartisan “transformation” know perfectly well that managed care is not working as advertised, but it is working as designed, and that’s all that matters. We don’t need to “debunk” it. We need to kill it.
I’d rather not herd another 150 million people into this trap. As long as there is some commercial/private activity, there is (a tiny bit of) hope that something else will emerge….. I will renew my support for single-payer if that happens….
Best Regards,
Margalit
A private option will be, IMHO always necessary. They have it in the UK and in France and in the Netherlands. Oh, and in Canada.
I
t’s the insurance industry’s lobbying dollars that prevent single payer. Everyone knows we need it. Obama tried to thread that needle but he made a lot of bad deals.
Jim, taking a band of insurers out of the private sector would save the private insurance companies money and their insured as well. But you would continue to spread the risk of those older insured to the young. Instead of through premiums it is through taxes. The younger ones would get a 20% decrease in their private insurance premium but a 15% increase in medical taxes. The risk is still spread across all. We save minimal cost initially but as we add additional bands there should be more savings.
I enjoyed this piece. I completely agree that no universal system will work without cost containment.
ACOs? Enough said.
And the incremental addition of age groups over time is a really interesting idea. It makes sense and could allow for slow implementation.
I think there will be only one more chance to take a crack at healthcare reform so it is important to get it as close to right as possible.
Thanks
Jim, you’re forgetting that if we move any age cohort into Medicare, we lower private-sector spending by some number, say $100, and increase public sector spending by, let’s say, $95. The net effect is a cut in our $3.5 trillion health care bill. We don’t “bankrupt the system.”
I urge you not to perpetuate the illogical claim that any decline in private-sector spending (premiums, out-of-pocket costs) is irrelevant, and the only costs that matter are those financed by taxes. The right wing and the insurance industry is doing a good job of that. They need no help from you or any other sincere person. I sense you really do want to solve this mess. You’re not helping when you tell half the truth.
Thank you for being part of this discussion.
More tomorrow.
Oh, I don’t think I said that only the financed-by-tax costs are relevant. Don’t put words in my mouth that weren’t said. I’m talking systemic financing. You artificially strengthen the private sector by removing the 55-65s. The per person cost for the governmental side will be huge compared to the private sector because of the age/morbidity.
Kip: Let’s think about just one of your messages–that an emphasis on ACOs to contain costs in Medicare for All is foolhardy. I keep pinching myself wondering why noone sees what we do. The evidence shows again and again–quite painfully–that they only save or waste the government about a few tenths of a percent of Medicare costs. But the studies don’t count the ACO costs of implementation. So, it isn’t rocket science that they represent a loss to society. And I won’t even bother getting into the unintended consequences of administrative costs and harms to the poor and sick who are not wanted by any self-respecting ACO.
Then I see all my colleagues and bureaucrats drinking the coolaid!! Why if the arithmetic is so clear? No propensity scores are really required.
This morning I needed to provide feedback on a paper by a former mentee. She desperately wanted to screw up a dynamite paper on food insecurity by saying (what DHHS says) that the shared risk on patient outcomes should induce medical systems to set up food programs for low income elderly! Amazing! They really want to believe that and it includes our coauthors. Why? They have Harvard degrees, don’t they?. Don’t they see that if ACOs can’t cut costs, they can’t deliver meals to homebound elderly? Thrice removed and, besides, penalties don’t create good Samaritans!
What I think is going on is scary. Conflicts of interest. They think they will more likely publish the paper in JAMA if the findings are put in the context of the almighty ACOs. Somehow they give it power and attractiveness. “WE have to mention ACOs in para 2 of the introduction.” Literally. Similarly, why do my Harvard colleagues conduct study after study for CMS to prove each time a teensy questionable “savings.” Because, by God, we invested in it for years and it has paid back $10s of millions in research grants! And now they are the experts who must be believed! Even when my colleagues are talking teensy effects! (It always amazes me that my colleagues positively croon over the teeny savings or losses and argue in JAMA perspectives that, like the Beatles song, “It is getting better and better all the time!”
And the government has invested its time and politics of skin in the game. Why declare failure? It also has a conflict of interest.
Then there is of course the conflicts of interest among the best players in this economic game– those who win by minimizing resources for patients or who shift those codes to play unfairly. Do those few who “succeed” by volunteering to participate when they have already cut costs before the start of the ACO have a conflict? Of course. And I learned from a medical director that a large interdisciplinary practice in Boston which shall go unnamed did exactly this! “CMS is giving us money for something we already did!” 😉
Well, if Sanders’ ACOs survive, I have just one redeeming event to report. I made such a fuss that my coauthors removed the word, ACO, from the second para of that otherwise fine article. (But they did manage to leave in that “efforts” may be made to address food insecurity within risk sharing environments.) I suppose I can live with that. The argument isn’t causal….
In response to Margalit’s post, the value of Jayapal’s HR 1384 is that it spells out how to do single-payer without involving health insurance and hospital chain sabotage, and if we actually did single-payer that way, it would indeed achieve universal, comprehensive coverage at a cost comparable to other industrialized countries. All the potentials for sabotage you refer to are indeed there and will be doing everything they can to avoid implementation of Jayapal’s bill, but we now have a benchmark that enables economic studies that will show substantial savings if they analyze the actual bill, instead of an imagined compromise that preserves the role of the insurance industry. Our real enemy is the competitive insurance business model that rewards denial of care and profit at the expense of the sick. It is helpful to have a “gold standard” bill that can be used to identify and fight back against the fraudulent attacks that are surely coming.
In response to Margalit, all the forces and strategies you name will indeed be pitched against us. The great service of the Jayapal bill is that it includes all the cost saving features that enable every other industrialized country to cover all their residents with comprehensive health care that is more effective than what we have in the US, and for around half the cost. Indeed, it has more cost saving features than many of them, including Switzerland, The Netherlands, Germany, and others. If we can get an honest financial study that analyzes the actual bill, instead of a compromise they imagine we might end up with, it should show very substantial savings, and that would change the dialogue.
Please ID examples of the Accountable Care Organizations that now exist. I really don’t know which they are.