EDITORIAL
The World Wakes Up to the Danger of Superbugs
Editorial Board - NYT
Tuberculosis. Malaria. Syphilis. Gonorrhea. The microbes that cause these diseases are increasingly resistant, and sometimes even impervious, to antibiotics that worked in the past. Last week, amid other pressing business, 193 nations at the United Nations General Assembly signed a declaration summoning each of them to a war against a powerful and resourceful enemy: superbugs that have learned to evade science’s last remaining defenses.
These bacteria, viruses and other microbes are responsible for 700,000 deaths a year, according to a 2014 British study. In the United States alone, says the Centers for Disease Control and Prevention, at least 23,000 people die annually from drug-resistant infections that could once be easily cured. Given current trends, these numbers are likely to rise.
Two forces are at work. Excessive and improper use of existing drugs by doctors, patients and farmers has hastened the natural process through which microbes develop immunity. And scientists and pharmaceutical companies are not developing new medicines fast enough to replace ineffective treatments.
A successful counterattack will involve multiple strategies. Through regulation and educational campaigns, doctors need to be instructed in the dangers of prescribing antibiotics for viral flus and other common infections for which they are largely useless. The C.D.C. estimates that at least 30 percent of antibiotic prescriptions in the United States are unnecessary.
In addition, doctors and nurses need to take practices like hand washing and equipment sterilization much more seriously to reduce widespread drug-resistant infections in hospitals. Consumers must make sure they and their children are vaccinated, which helps prevent infections in the first place.
More than 70 percent of the antibiotics used in the United States are given to livestock. Because the indiscriminate use of drugs in animals can destroy the drugs’ effectiveness for humans, the Food and Drug Administration has issued regulations that it says will reduce antibiotic use in livestock. The agency will need to monitor farms closely to make sure the rules are working.
Increasing the supply of new drugs and vaccines is another challenge. Many companies find it more profitable to produce drugs for cancer and other chronic diseases that patients battle for months or years at a time. Just two new classes of antibiotics have been brought to market in the last 50 years, Dr. Margaret Chan, the director-general of the World Health Organization, told the U.N.
This puts a burden on governments to invest more in research and development. Governments could also offer incentives — prizes have been suggested, for instance — to companies that develop new vaccines and antibiotics, and they could contractually agree to buy medicines to assure companies that they will have a market for their products. The United Nations was right to ring the alarm about superbugs, a growing danger that requires a global response.
by David Lazarus - LA Times
Heather Bresch, chief executive of pharmaceutical heavyweight Mylan, testified before lawmakers Wednesday that her company acted ethically and fairly when it jacked up the price of life-saving EpiPens by more than 500%.
While saying she was troubled “that the EpiPen product has become a source of controversy,” Bresch told skeptical members of the House Committee on Oversight and Government Reform that “price and access exist in a balance, and we believe we have struck that balance.”
Video: Doubling upward on drug prices
That’s a bold stance considering that each $300 EpiPen contains about a dollar’s worth of epinephrine and Mylan didn’t even invent the plastic injector that delivers the drug. It purchased rights to manufacture and sell EpiPens in 2007 as part of a $6.6-billion acquisition of Merck’s generic-drug operations.
At the time of the merger, people were able to buy EpiPens for about $50 each. Mylan now sells EpiPens in packs of two for more than $600.
It’s easy to assume that greed is solely to blame for runaway drug prices — and companies like Mylan do nothing to challenge that perception.
The reality, however, is more complicated.
When Bresch talked about drug prices and access existing “in a balance,” she was referring to what the pharmaceutical industry calls value-based pricing.
This is what you get when you price a drug not just commensurate with its research and development, production and marketing, but also reflecting the drug’s importance to patients. And that’s a very slippery concept.
What a pharmaceutical company is basically saying with value-based pricing is that a patient’s life would be a whole lot worse without their drug, so that should be worth something, right? Maybe a big something.
“There are a lot of moral and ethical issues that come up when you talk about value-based pricing of drugs,” said Robert L. Stein, a professor of pharmacy law and ethics at Claremont’s Keck Graduate Institute.
“Most other consumer products are discretionary or there are alternative sources,” he said. “When you talk about pharmaceuticals, especially newer pharmaceuticals, there aren’t a lot of options.”
The poster child in this regard is Gilead’s hepatitis C drug Sovaldi, which carried a list price of about $1,000 a pill when it was introduced in 2014. A second-generation version of the drug, Harvoni, cost more than $1,100 a pill. The latest version, Epclusa, sells for closer to $900 a pill.
These are astonishing numbers. But Gilead’s drugs effectively cure patients of hepatitis C, so who’s to say they’re not worth every penny? More than 3 million Americans are estimated to have hepatitis C.
“We believe the price of Harvoni reflects the value of the medicine,” Gilead said in a 2014 statement defending its pricing. “Unlike long-term or indefinite treatments for other chronic diseases, Harvoni offers a cure at a price that will significantly reduce hepatitis C treatment costs now and deliver significant health care savings to the health care system over the long term.”
That’s one way of looking at it. Another is that Gilead justifies its crazy-high prices by arguing that because it would be more expensive to treat hepatitis on an ongoing basis, they can charge whatever they please as long as it’s less than that amount.
This is a problem.
“Value is one thing, but another consideration is whether society can afford that value,” said Gerard Anderson, a professor of health policy and management at Johns Hopkins University. “If you charge more than people can afford, people die.”
He compared lifesaving prescription meds to water.
“If a water company charged the value of water, they could charge whatever they like, an infinite amount,” Anderson said. “We couldn’t exist without water. That’s why we don’t allow the water company to charge the value of water.”
It’s a tricky business. There’s almost no limit to the value of a drug to someone who’s sick. So with value-based pricing, the door is wide open to abusing patients.
At the same time, we’re all better off if drug companies are financially motivated to do the costly research and development necessary to innovate and come up with new cures and treatments.
Stein at the Keck Graduate Institute said the only way to deal with the problem might be to approach every drug on a case-by-case basis, rather than imposing price caps across the entire industry.
“When is a drug price unconscionable?” he said. “It’s like Supreme Court Justice Potter Stewart said about pornography: You know it when you see it.”
Jason Doctor, director of health informatics at USC’s Schaeffer Center for Health Policy and Economics, said Mylan’s Bresch crossed that line when she raised the price of EpiPens more than a dozen times since 2008.
“She operated from an oversimplified model that did not account for the value people place on protecting children from harm,” he said. “This is a treasured societal norm. When the price she set for EpiPens violated that norm, people got angry, even though the price was legal.”
Bresch made nearly $19 million last year. She told lawmakers that this was “in the middle” of what drug-industry CEOs make.
On the other hand, most other top-tier pharmaceutical CEOs haven’t been subjected to sitting before lawmakers as their company is pilloried for being "sickening," "disgusting" and showing "blatant disrespect" for the needs of families.
Bresch seems decidedly overvalued.
Football Team at the Buffet: Why Obamacare Markets Are in Crisis
by Margot Sanger-Katz - NYT
You may have noticed that Obamacare’s health insurance markets are in trouble.
Insurers have announced that they are sharply raising prices or pulling out entirely. Many consumers will have fewer choices of insurance plans, and many insurance plans will include fewer doctors and hospitals.
The turmoil can’t be explained by one factor alone. But many of the most important problems can be understood if you think of an Obamacare marketplace as a particular kind of restaurant: an all-you-can-eat buffet. It can be a solid business, but it’s hard to get the pricing right.
Consider how difficult it is to accurately estimate. You know how much it costs to make a portion of potato salad or beets or fried chicken. But how many portions will your customers eat? The appeal of your business — and the risk — is that all people pay the same price, whatever their appetite. That is fine if you charge $15 and feeding the average customer costs $10.
But you can be in deep trouble if your buffet suddenly becomes the favorite hangout of the high school football team. Once a bunch of growing teenage athletes start dropping by after practice, they can ruin your business. Those very hungry customers will pay $15, while eating $40 worth of food.
Unless you make major adjustments, you will quickly lose money. That may be what has happened to some of the companies selling health insurance. Economists have a term for describing the problems that afflict all-you-can-eat buffets. They call it adverse selection.
“Who you serve influences how much it costs to serve them,” said David Cutler, an economist at Harvard who has studied adverse selection in health insurance. “That’s the biggest difference between insurance and every other market.” Or every market that isn’t an all-you-can-eat buffet.
Like a restaurant owner, insurance companies set prices based on their best guess of who will buy their product. If a company gets a lot of sick customers who go to the doctor often and require expensive services, its costs will balloon. If the company attracts a lot of healthy customers who rarely require care, costs will shrink. Such a health care plan is like a buffet frequented by dieters. Economists use the word “adverse” because, in general, hungry people tend to be more enthusiastic about buffets.
Insurance companies used to get around these problems by excluding patients with serious illnesses — or by charging those patients much higher prices. Those strategies made health insurance resemble an à la carte restaurant: Customers who wanted a porterhouse steak and a bottle of Bordeaux could buy them while providing the owner with a rich profit.
But Obamacare banned such practices. Insurance companies now must charge all customers of the same age the same price for insurance, regardless of whether they are healthy or sick. And that means that the companies must engage in more guesswork and cope with more risk.
These problems were anticipated, at least to a certain extent, and the Affordable Care Act contains features that were intended to mitigate them. That is why Obamacare offers subsidies meant to make insurance less expensive for people on tight budgets, encouraging healthy people to buy insurance. The law says most people can buy only during a set time period, discouraging people from waiting to buy insurance until they are sick and absolutely need health care. It also contains the notorious “individual mandate,” which imposes a fee on those who can afford to buy insurance but fail to do so.
Those policies probably helped encourage healthy people to buy insurance, but many experts are now saying the incentives weren’t strong enough. Many insurance companies lost money, because they set their prices hoping for a lot of dieters and ended up with the football team. That is why we have been seeing headlines about prices going up. If the average Obamacare customer costs more than the companies anticipated, they won’t make the money they expected without charging more for insurance.
In addition, another kind of adverse selection problem may be plaguing the Obamacare marketplaces, and it is harder to fix. The companies say it is not just that consumers were generally sicker than expected, but also that insurance companies offering access to a wider variety of doctors and hospitals ended up with costlier patients. In other words, insurers with national brand names like Aetna and UnitedHealthcare appeared to be losing more money than lesser-known companies with a history of covering patients on Medicaid.
The restaurant analogy is useful here, too. Imagine two all-you-can-eat buffets. One offers iceberg lettuce, chicken wings and macaroni. Its competitor offers the usual fare, plus lobster, and it charges a bit more. Guess which buffet will attract lobster lovers?
Executives from Aetna and UnitedHealthcare charged more for their insurance products than competitors that excluded high-end specialists and hospitals. They may have attracted customers who preferred expensive institutions and doctors and planned to use them.
That sort of problem can get worse over time. As the companies increase prices to compensate for having sicker patients, fewer healthy people will buy the insurance.
There are policy levers to address this problem, too. Provisions in the law require insurance plans with healthier patients to pay competitors with sicker patients a fee, but getting the formula right is difficult. Currently, insurers on both sides are complaining. Plans with healthier patients say their competitors are just better at making patients look sick. And plans with sicker patients say the payments are too low and unpredictable to make a difference.
In the meantime, insurers are reacting in two ways that diverge from what the law’s authors hoped.
Some are giving up on the new Obamacare markets, deciding that they like the à la carte business better. Those that remain are increasingly clearing their menus of anything that looks like a luxury item. Obamacare was intended to offer a variety of insurance plans with different features, catering to different kinds of people with different needs. The remaining plans may be adequate for basic health care. But their offerings look more and more the same.
Health Care Deserves More Attention on the Campaign Trail
by Editorial Board - NYT
The reaction to opening a medical bill these days is often shock and confusion — for the insured and the uninsured. Prices and deductibles keep rising, policies are drowning in fine print, and doctors are jumping on and off networks. So why hasn’t the growing burden of health care gotten more attention in the presidential campaign?
One reason may be the sheer complexity of the system. Yet Hillary Clinton, if you look closer at her proposals, has a range of interesting ideas on how to tackle costs and improve care. Donald Trump, meanwhile, rarely ventures beyond his “end Obamacare” slogan.
With incomes for most Americans stagnant, individuals and families insured under the Affordable Care Act or through employers are bearing more of the cost of medical treatment.
Deductibles for individual coverage increased 63 percent on average, to $1,221 per year, from 2011 to 2016 for people who get health insurance through their employers, according to a report released last week by the Kaiser Family Foundation and the Health Research and Educational Trust. Workers’ contributions to premiums grew more slowly than in previous five-year periods but still jumped 23 percent, to $1,129 a year. By contrast, average incomes were up just 11 percent, which means many people are being forced to cut back elsewhere to pay for care. And some people are choosing to forgo or delay going to doctors and hospitals when they are sick.
The cost of prescription drugs is another big problem for people with or without coverage. The average price of brand-name medicines jumped 164 percent from 2008 to 2015, according to Express Scripts. And 24 percent of Americans find it very or somewhat difficult to afford prescription drugs, according to a 2015 Kaiser Family Foundation survey.
Mr. Trump seems oblivious to these trends. His sparse health care proposal is built around a repeal of the Affordable Care Act, without any regard for the millions of people who would be hurt by that change. Twenty million Americans have gained health care coverage in the six years since the law was passed, bringing the uninsured rate to a record low. The law has problems — for example, there are too few insurers offering coverage on the health exchanges in rural and suburban areas — that the next president and Congress will need to fix. But it is generally working effectively and has cost the government less than expected, according to the Congressional Budget Office and the staff of the Joint Committee on Taxation.
Mr. Trump says he would replace the law’s subsidies and Medicaid expansion with tax deductions for health insurance premiums paid by individuals and families. But that would primarily benefit the rich, not the millions of low-income and middle-class people who would lose coverage if the law were dismantled. Mr. Trump’s plan also includes several vague ideas for lowering costs. One of them is to increase competition among pharmaceutical companies, but Mr. Trump does not say how he would do that.
Mrs. Clinton clearly understands the issues and has some plans that could help. Deductibles and other out-of-pocket costs have risen for workers covered by employer-based plans as businesses have shifted more costs onto employees. Mrs. Clinton wants to provide a tax credit of up to $5,000 to help people pay out-of-pocket costs, including for prescription drugs. That’s a good idea, but it would be even better if people received assistance when they faced expenses rather than when they filed their tax returns.
Another proposal from Mrs. Clinton would lower prescription drug costs by allowing Medicare to negotiate with pharmaceutical companies. Drug makers, of course, hate this idea because it would reduce their revenue, and they would surely lobby Congress to defeat a bill. She has also suggested ways to lower costs by hastening the arrival of generic medicines. And she has promised to provide detailed policies to reduce needless medical procedures and to root out fraud and inefficiencies, moves that could prove effective in the longer run.
Health care is just the kind of difficult subject that presidential candidates ought to talk about more. If Mrs. Clinton were to speak regularly and in more detail about her health ideas, she could start building support for them with lawmakers and the public. She would also further expose the shallowness of Mr. Trump’s agenda.
Soaring Premiums
Since 1999, premiums for family health plans have grown much faster than inflation and wages.
Workers’ contribution
to premiums
Health
insurance
premiums
Workers’
earnings
Deductibles Rise Even Faster
+302%
Increase in
deductibles for
individual plans
since 2006
Reviving House Calls by Doctors
b7 Tina Rosenberg - NYT
Surah Grumet used to be a family doctor at a clinic in the Bronx. “It always felt like I was trying to catch up,” she said. “I was always falling behind, and it was so stressful. And it was really hard to bring up my two girls, to be there for them, and still be able to practice medicine the way that I wanted to.”
Now, she lives in a suburb of Raleigh, N.C. She still practices medicine, but has no office or clinic. Instead, she works with a Durham-based practice called Doctors Making House Calls.
Grumet puts her girls on the school bus and gets in the car just before nine. Her patients are frail elderly people with multiple chronic illnesses: memory loss, heart and blood pressure problems, arthritis that makes mobility difficult.
Grumet works full time, but on her own schedule. She can spend 15 minutes with a patient, or nearly two hours. She’s home before the school bus and completes her patient notes and paperwork while her girls do homework. She makes $70,000 more than she did when she worked in the Bronx.
How is this possible? In a world where many doctors struggle to make money seeing four patients an hour, how can they run a successful practice driving to patients’ homes and spending all the time their patients need?
Before 1950, nearly half of all doctors’ visits in America were house calls. But then the country began building big hospitals and luxurious doctors’ offices, and doctors acquired sophisticated equipment they couldn’t put in a medical bag. Medicare and Medicaid reimbursement systems made home visits untenable.
But the house call is now a better idea than ever.
To cut America’s health care costs, it helps to look at the most expensive patients. Medicare spends a third of its budget caring for chronically ill people in their last two years of life. This group is growing fast, and growth will accelerate; the first baby boomers are now turning 70.
The expense largely comes from hospitalizations, at an average cost of $12,000. So whatever keeps these patients out of the hospital (or out of expensive nursing homes) will save money — and also, of course, greatly improve the patient’s quality of life.
For a frail elderly person, going to a doctor may mean that a relative takes a half-day off from work. An ambulette must be hired. The wheelchair may not fit in the doctor’s office. As a result, old people often don’t get routine care — and eventually land in the emergency room.
House calls provide that care. One studyfrom 2014 found that for frail elderly people, house calls saved Medicare $4,200 per person per year.
Medicare, then, has a big incentive to use house calls. So do hospital systems that can capture the savings. One is Sutter Health in Northern California, which runs the successful Advanced Illness Managementprogram. Another is the Veterans Affairs system, which established Home Based Primary Care in 1972. The program has the highest patient satisfaction rate of any Veterans Affairs service, has cut overall costs for patients in the program by nearly 12 percent and reduced hospitalization of them by one quarter.
But most hospitals are fee-for-service: they benefit from having more patients, not fewer. Today two-thirds of doctors are employed by hospitals, which buy practices in part to require doctors to send them patients. And that percentage is growing fast.
For house calls to spread, they must be feasible in a fee-for-service universe.
That’s the purpose of Independence at Home, an experiment of the federal Center for Medicare and Medicaid Services. (It’s one of numerous Obamacare experiments in paying for quality of care, not quantity.) Independence worked with 15 medical practices to give them part of the money saved by house calls. Over all, it has saved Medicare $25 million in its first year and $10 million in its second. (A bill in the Senate would make the program permanent.)
About half the participating practices did well enough on quality and savings to earn a share of the funds not spent. One is the Medical House Call Program at MedStar Washington Hospital Center. K. Eric De Jonge, its founder (and incoming president of the American Academy of Home Care Medicine), said the program ran at a loss until Independence at Home’s first year, when earnings from the pilot made up 40 percent of the entire program’s revenues. “This converted us from operating at a loss to being close to a break-even operation,” he said.
Shohreh Taavoni is a co-founder and chief medical officer of Grumet’s group, Doctors Making House Calls. “I had a patient who, before I took care of her, was in the hospital every two months,” Taavoni said. “She has congestive heart failure and labile blood pressure. Her daughter emails me saying ‘her breathing is abnormal’ or ‘her blood pressure is up, or down.’ I go over within 24 hours, adjust her medicines a little, and we manage to take care of it. Since I started taking care of her 10 years ago, she hasn’t gone to the hospital at all.”
A home visit can be better medicine in other ways as well. “Falls are the single most concerning problem of the frail elderly population,” said Taavoni’s husband, Alan Kronhaus, the group’s other co-founder and chief executive. “You can see hazards in the house. What the refrigerator is filled with. What the pill bottles are filled with — or not.
“Patients in their own environment are far more relaxed and forthcoming with meaningful information,” he said. “You get a lot closer to the reality of the situation, and you spend the time.”
De Jonge argues that seeing a patient at home is crucial for understanding her important nonmedical needs, and getting her the right social support and daily personal help. A study of the Mount Sinai Visiting Doctors Program in New York, for example, found that it reduced patients’ pain, anxiety, depression and fatigue.
Time is another advantage. House calls eliminate no-shows. So doctors don’t have to do the double- and triple-booking that can lead to seeing 30 patients per day. “We say, ‘the doctor will be there Tuesday morning,’” said Kronhaus. “If the first patient is more needy, you can just spend more time. The other patients are there in their homes doing what they normally do. They’re not sitting in a cold waiting room reading Highlights for Children and getting pissed off.”
That sophisticated equipment that helped put an end to house calls? Now most of it is mobile, too. Doctors Making House Calls contracts with companies to bring X-raymachines or phlebotomists to patient’s homes. “The only thing we can’t do is a CT scan or M.R.I.,” said Taavoni. “But neither can doctors’ offices.”
For some patients, especially those with dementia, going to the doctor — or far worse, the hospital — is itself a medical issue. They can get disoriented and upset. Some patients find themselves discharged from the hospital into a nursing home — where no one wants to be — purely to be able to see a doctor. And, of course, hospitals and doctors’ offices harbor germs especially dangerous to someone frail. House calls solve these problems.
House calls have some disadvantages for doctors. One is driving. When Grumet first started, she might spend hours in the car each day. But now that the practice has 75 clinicians — and she has seniority — she can focus on a small area. “Most of my home visits are within five miles of my house,” she said.
Grumet, like other Doctors Making House Calls physicians, is an independent contractor and can work as much she wants, within limits. She pays the practice half her earnings for overhead. She earns considerably more than she did as an office doctor in part because Medicare reimburses home visits at a slightly higher rate. And because the practice was built around house calls, there is little infrastructure. So Grumet’s 50 percent is far less than the 64 percent the average family doctor spends on overhead.
Doctors Making House Calls is one of the few house call practices that was profitable before the Independence at Home pilot. The lower overhead was crucial. Another advantage has been that most of its patients are in assisted living facilities, where a doctor can visit 15 patients at home in one building. (Traveling from patient to patient makes it much harder to show a profit.)
Also, the group charges patients seen in individual homes a $95 visit fee. (There’s no visit charge for patients in assisted living, or for services like X-rays.)
Medicare doesn’t cover the visit fee — so that cuts out poor people. But many middle class families choose to pay it. “We’re not Rockefellers, but this was a nonissue,” said Juliette Dais, who took care of her mother, Adeline W. Dais. “We didn’t have to wait, didn’t have to go out when there were issues in the middle of the winter and she didn’t feel like going. This made a huge difference in the quality and longevity of my mother’s life.”
One common criticism of house calls is that America is desperately short of primary care doctors — so why cut in half the number of patients they can serve? The answer: If physicians could make more money, control their schedules better and spend a satisfying amount of time with patients, more might choose that life.
”We can do X-rays, blood tests, ultrasounds and fancy medical care,” said De Jonge. “But also the humane and compassionate care people need when they’re in their most vulnerable stage of life. It’s the kind of care you’d want for your loved one and your family.”
The Health Care ‘Public Option’ Is Back. Can It Help Obamacare?
by Reed Abelson and Margot Sanger-Katz - NYT
On the campaign trail and in the halls of policy wonks, the health care term of the moment is “the public option.” The idea is to create a government-run health care plan that would be an alternative to the private insurance plans offered under the Affordable Care Act, or provide a fallback in markets where insurers have been pulling out. In an article in The New England Journal of Medicine published on Wednesday, Hillary Clinton reiterated her support for such a measure. Margot Sanger-Katz and Reed Abelson, two New York Times reporters who have been covering Obamacare, discuss the public option and the questions it raises.
Margot: A few months ago, we said that the so-called public option was having its moment. But perhaps we were premature. With all the recent turbulence in the Obamacare markets, liberals seem eager to champion an idea that might help settle things down, and we’ve seen a lot of people coming forward to say some kind of public option is just the thing. Thirty-three Democratic senators introduced a resolution calling for the introduction of a public insurer. California’s insurance commissioner, Dave Jones, recently said that the state should think about setting up its own public option. And the Urban Institute just put out a paper analyzing a few public option proposals. (And, of course, both President Obama and Mrs. Clintonhave signaled support.)
We’ve identified many of Obamacare’s problems. Which of them do you think the public option advocates are trying to solve?
Reed: The original idea was to give people an alternative to the plans offered by the private insurance companies, but some Senate Democrats said: No, that would sabotage the private insurers. The compromise was the creation of about two dozen co-ops, the consumer-led, nonprofit insurers backed by government, but most of them have failed. In the last few months, the decision by some major insurers to leave the Obamacare market has left some areas with little or no competition. The public option is seen as a possible fallback if the insurers leave.
But the concept, both then and now, seems pretty vague, and I’m curious if you’ve heard any real discussion about what this would look like.
Margot: I didn’t cover the public option back in 2009, so I’ve been trying to get caught up. I’ve learned that when advocates talk about the public option, they don’t all mean the same thing. Basically, “public option” means government-run. But there are a few versions that get talked about: One is something like a Medicare expansion, where younger people can buy into the existing public program. One is just a new insurance plan, structured like its competitors, that is run by the government. Another is some sort of hybrid, where the insurance company might be separate from Medicare, but might have the ability to force doctors to accept low, set prices. The common thread appears to be the idea that the government, which lacks a profit motive, will be able to provide lower-cost, higher-quality health insurance than the private companies. Am I missing anything?
Reed: It does sound suspiciously like the reasoning behind the co-ops. The structure depends on what you want to achieve — is this a plan that is basically a fallback option? Or are you trying to use the government’s negotiating clout to introduce lower-cost plans?
A public option could also be a way to stabilize the exchanges because a government-run plan could be used to enroll the people with the most expensive medical conditions. The private insurers would be more enthusiastic about selling policies because they might have to worry less about losses.
Linda Blumberg, one of the authors of the Urban Institute analysis, says the public option could serve as an alternative to the plans that offer inexpensive policies with very narrow networks of health providers. She also thinks having a public option could allow private insurers to negotiate better deals by letting them pay hospitals and doctors rates that are closer to Medicare but well below what they are paying now. Do you think any of these ideas sounds promising?
Margot: I think the public option seems like a weird match with the market structure of the Affordable Care Act. Imagine this scenario: The public option can get every doctor and hospital to accept Medicare prices, and it’s able to achieve really low administrative costs. In that case, it’s an insurance plan with a lot of structural advantages over the competition. The existing insurance companies, mostly, are already losing money in this market, and several of them are already leaving or going under. Why would they stick around longer if they can’t get many customers, and they can’t make money on the ones they keep? In another version, the public option doesn’t have any special advantages, and is just another insurance plan in the marketplace. In that case, do you think the government will do a better job of running an insurance company than the insurance industry? We’re learning that this is a hard business. I guess, in that case, it would operate as another choice.
Reed: This is where the advocates point to Medicare as an example of the government’s ability to run an insurance program, and they also like to point to Medicare Advantage as proof that you can have it both ways — people have a choice of the government-run program or a choice of a private plan.
But it seems to me the real debate is whether the only way to make care affordable is for the government essentially to dictate prices. The hospitals and doctors are none too happy about that prospect.
Margot: Maybe. There is, of course, some sort of utopian health insurance plan that is able to be affordable because it manages care so well and keeps people really healthy without requiring a lot of medical services. But the government Medicare program is not really like that. It gets most of its cost advantages through price controls. Of course, Medicare is changing a lot. The Obama administration has been experimenting with new ways to pay doctors and hospitals, designed to improve quality and squeeze out wasteful care. But, so far, those experiments aren’t making a big difference to the bottom line. Realistically, I think the best chance for a public option plan to compete with insurers right away is probably just to pay doctors and hospitals less — and maybe spend less on overhead and profits. That could change over time.
Reed: Another idea, floated by Donald Trump — who would do away with the exchanges in any event — is to induce competition by allowing insurers to sell across state lines. But, as you’ve written, that may not work any better to give people a wider choice of plans at better prices. If Hillary Clinton wins, what do you think the political odds are for adopting something like the public option? Do you think Congress would go along? Would state legislatures?
Margot: Maybe state legislatures in some states, but then we’re not talking a Medicare-like program. Remember there are states — Vermont, Colorado, California — where there is an active and somewhat mainstream movement to get to a single-payer health care system. This is not exactly that, but it is a way of socializing more of health care, and I could see political support for the idea, especially if things get worse in the marketplaces. Of course, ironically, the most receptive states tend to be the ones with the most stable exchanges. If I were a legislator in California, I might think twice about voting for something with the potential to destabilize a functional market.
In terms of Congress, it seems really unlikely, given that it was a no-go even with Democratic control of both branches in 2010.
Are there other ways you could see this new push shaping the future debate about health reform?
Reed: The threat of price controls, and Congress is looking at you, too, pharma companies, could finally get people talking about the underlying medical costs that make insurance so expensive. My guess is there is going to be more pressure on hospitals, doctors and the drug and device makers to lower prices.
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