New CBO Report on Medicare for All Is a Serious and Positive Contribution
by Robert Pollin - Common Dreams - May 4, 2019
The Congressional Budget Office issued a report on May 1, 2019 titled "Key Design Components and Considerations for Establishing a Single-Payer Health Care System." This report reviews a range of considerations as regards the design and implementation of a single- payer system as applied to the United States. The Medicare for All bills currently before both the U.S. House of Representatives and Senate, as introduced by Representative Pramila Jayapal and Senator Bernie Sanders respectively, both advocate the adoption of a single-payer system for the U.S.The CBO report (pdf) properly examines both the positive potential as well as matters of concern in establishing a single-payer system in the U.S. As the report states, "A single-payer system would present both opportunities and risks for the health care system."
Overall, the CBO report, as with all such analyses, needs to address two fundamental issues with respect to the establishment of a single-payer system for the U.S. These are: 1) Is a single-payer system capable of providing good-quality care to all U.S. residents; and 2) Is a single-payer system capable of significantly reducing overall U.S. health care costs while still delivering universal good-quality care? The report does not provide explicit answers, yes or no, to these questions. But it does present a framework for understanding how the U.S. could, in fact, establish a successful single-payer system.
"A single-payer system would provide coverage for the 114 million U.S. residents who are presently either uninsured or underinsured. Healthcare outcomes for these 114 million people—35 percent of the U.S. population—will therefore almost certainly improve under a single-payer system."
It is crucial to provide some context for recognizing the potential of a U.S. single- payer system as presented within the CBO report. It is especially illuminating to consider some basic indicators on the operations of the current U.S. health care system in comparison with those of other high-income economies. Thus, as of 2017, the U.S. spent $3.3 trillion on health care. This equaled 17 percent of US GDP, with average spending at about $10,000 per person. By contrast, Germany, France, Japan, Canada, the UK, Australia, Spain and Italy spent between 9 – 11 percent of GDP on health care, averaging between $3,400 - $5,700 per person. Yet, by most measures—including those based on the “amenable mortality rate,” which tracks medically preventable deaths—average health outcomes in all of these countries are superior to those in the UnitedStates.
The most basic cause of this poor U.S. performance is inadequate access to good- quality care. Roughly 9 percent of the U.S. population, 28 million people, are uninsured. Another 26 percent, 86 million people, are underinsured—i.e. they have insurance but are unable to access medical care because their deductibles or co-pays are prohibitively high. A large share of the remaining 65 percent of the population who are adequately insured still face high costs as well as anxiety over whether they could manage financially when they face any serious health issue.
Within this context, how, then, does the CBO assess the
prospects for a U.S. single-payer system delivering good-quality
universal coverage as well as significantly reduced overall health-care
spending? We can summarize their perspectives briefly.
Good-quality universal coverage
The CBO is clear, first of all, that a single-payer system would achieve universal coverage, in dramatic contrast with our present system. The report states, "People who are currently uninsured would receive coverage and some people who are currently insured could receive additional benefits under the single-payer system, depending on its design." In other words, a single-payer system would provide coverage for the 114 million U.S. residents who are presently either uninsured or underinsured. Healthcare outcomes for these 114 million people—35 percent of the U.S. population—will therefore almost certainly improve under a single-payer system.
The CBO does not take an explicit position as to whether a single-payer system will also deliver benefits for the 65 percent of the population which presently has full health-insurance coverage. On the one hand, the report does note both the prospects for both improved outcomes as well as reduced costs as regards this population cohort, observing that:
More specifically, the single-payer system will need to be capable of establishing measures through which the provision of provider services can increase to match the increased demand resulting from universal coverage. I examined this question in depth in a 200-page peer-reviewed study with co-authors released last November, "Economic Analysis of Medicare for All." In our study, we conclude that a single-payer system will produce major reductions in the administrative burdens throughout the whole health-care system. The CBO report also recognizes this prospect for major reductions in administrative burdens under single-payer. These dramatic cuts in administration will then mean significantly less paperwork for doctors and nurses, freeing them to spend more time treating patients. On balance, our study concluded that this effective increase in the providers’ available time to treat patients should roughly match the increased demand for their services resulting from universal coverage.
Good-quality universal coverage
The CBO is clear, first of all, that a single-payer system would achieve universal coverage, in dramatic contrast with our present system. The report states, "People who are currently uninsured would receive coverage and some people who are currently insured could receive additional benefits under the single-payer system, depending on its design." In other words, a single-payer system would provide coverage for the 114 million U.S. residents who are presently either uninsured or underinsured. Healthcare outcomes for these 114 million people—35 percent of the U.S. population—will therefore almost certainly improve under a single-payer system.
The CBO does not take an explicit position as to whether a single-payer system will also deliver benefits for the 65 percent of the population which presently has full health-insurance coverage. On the one hand, the report does note both the prospects for both improved outcomes as well as reduced costs as regards this population cohort, observing that:
Unlike private insurers, which can experience substantial enrollee turnover over time, a single-payer system without that turnover would have a greater incentive to invest in measures to improve people’s health and in preventive measures that have been shown to reduce costs.It is also the case that both the Jayapal and Sanders bills offer more extensive coverage than is currently provided under a typical employer-sponsored policy, including significant support for long-term care. Expanding coverage in such ways should further improve overall health outcomes for those already insured. But the CBO also recognizes that the expansion of coverage to the uninsured and underinsured will entail increased overall demands on the country’s supply of health care resources. It is therefore possible, as the report notes, that this could produce shortages in terms of availability of providers, which, in turn, could mean reductions in quality of care. This is a legitimate issue which the CBO has properly highlighted.
More specifically, the single-payer system will need to be capable of establishing measures through which the provision of provider services can increase to match the increased demand resulting from universal coverage. I examined this question in depth in a 200-page peer-reviewed study with co-authors released last November, "Economic Analysis of Medicare for All." In our study, we conclude that a single-payer system will produce major reductions in the administrative burdens throughout the whole health-care system. The CBO report also recognizes this prospect for major reductions in administrative burdens under single-payer. These dramatic cuts in administration will then mean significantly less paperwork for doctors and nurses, freeing them to spend more time treating patients. On balance, our study concluded that this effective increase in the providers’ available time to treat patients should roughly match the increased demand for their services resulting from universal coverage.
Reducing Health-Care Costs
Much of the CBO report is focused around specific issues in designing the payment system. These include: provider payment methods; global budgets; capitated payments; payment rates for providers; and the setting of prescription drug prices. These are all critical concerns, and the CBO report is now a valuable resource in summarizing them. But the report does not take a position as to whether a U.S. single-payer system will be able to successfully control costs. Rather, the study concludes that:
The CBO study is therefore to be commended for describing a range of measures through which a U.S. single-payer system can successfully implement significant cost savings while still delivering good-quality care for all residents. As such, the CBO study makes a positive contribution toward understanding the possibilities for creating a fair and workable health care system in the United States.
https://www.commondreams.org/views/2019/05/04/new-cbo-report-medicare-all-serious-and-positive-contribution
Much of the CBO report is focused around specific issues in designing the payment system. These include: provider payment methods; global budgets; capitated payments; payment rates for providers; and the setting of prescription drug prices. These are all critical concerns, and the CBO report is now a valuable resource in summarizing them. But the report does not take a position as to whether a U.S. single-payer system will be able to successfully control costs. Rather, the study concludes that:
The cost of a single-payer system would depend on various design choices such as the services covered, cost-sharing requirements, and provider payment rates.
In addition to those design choices, policymakers could consider using two other techniques to contain the growth of government spending on the single-payer plan and total health care spending: global budgets and utilization management. (p.26)The CBO assessment here is indisputable. It is therefore incumbent on the designers of a single-payer system to consider the range of design choices with great care, to achieve the potential cost savings that are available through a well-designed system. It is evident from comparing the U.S. health care system with those of other high-income economies that there is massive potential for cost savings in the U.S. system, with, as noted above, the comparison countries spending between 9 – 11 percent of GDP on health care while the U.S. spends 17 percent. Within the present U.S. economy, every percentage point of GDP amounts to roughly $200 billion. Thus, even reducing our current health care spending by 2 percentage points relative to GDP would yield an astronomical $400 billion in savings, even while our healthcare system budget, as a share of GDP, would remain far above those of other advanced economics.
The CBO study is therefore to be commended for describing a range of measures through which a U.S. single-payer system can successfully implement significant cost savings while still delivering good-quality care for all residents. As such, the CBO study makes a positive contribution toward understanding the possibilities for creating a fair and workable health care system in the United States.
https://www.commondreams.org/views/2019/05/04/new-cbo-report-medicare-all-serious-and-positive-contribution
And never the twain shall meet—the example of cystic fibrosis
by Henry Broeska - May 5, 2019
In my frequent travels between Canada and the US, I discovered that I really had to adjust my thinking when it came to any matter concerning the way medicine is practiced and how healthcare is regarded generally. The fact is that the same values or ethics can’t be applied to healthcare when comparing the United States to any other similar country. Things that are common healthcare-related business practices in the US might be unlawful in Canada, and if practiced by a physician could even mean the loss of a medical license.
There are many examples that demonstrate how Canadians regard healthcare differently than their American neighbors. But the different applied ethics and social values of each healthcare system have real consequences for the people of a nation. In this exposition I’ll offer a good illustration of how chronic diseases are better able to be managed in a single payer system, in the favor of patient health—and how conflicts of interest that originate from perverse financial incentives cost years in patient lives even though they are legal...and accepted as normal.
Cystic fibrosis (CF) is a progressive genetic disease that is associated with high rates of premature death. It’s a multi-system disease that is characterized by persistent lung infection due to the inability of the body to move salt and water through the cells. A build-up of mucus in the pancreas and other organs also prevents the release of digestive enzymes that allow the body to break down food and absorb nutrients. Over time this takes a toll and sometimes a lung transplant remains the last hope for a longer life.
The problem with coming up for good treatments for diseases like CF is because the number of patients are low. Diseases that have trouble attracting research funding are called ‘orphan diseases.’ With fewer clinical researchers working on CF than say, cancer or Alzheimer’s disease, the ‘bench’ or laboratory research needed to understand the basic pathology and etiology of the disease takes longer to establish.
Different countries also fund their research much differently. Oftentimes important research is duplicated because a lot of it goes on in random silos without one set of researchers in one country knowing what’s going on elsewhere until publication in a medical journal, which can take years. Just as often, different hypotheses as to a cause and potential a cure are researched and there are many dead ends. The result is that progress towards cures takes much longer than hoped for with diseases like CF. This is the case with CF research in both Canada and the US where each country has followed a completely different investigational path. Let’s compare these two divergent research approaches as they are put into real-world practice.
Doing the right thing because it's what you believe
In less than 20 years there has been a remarkable spike in the life expectancy of Canadian CF patients. A 2017 study found that Canadians with cystic fibrosis survive to 51 years on average while Americans with CF live only to an average age of 40 years (Stephenson, 2017). Canada has the highest rate of CF survival world-wide. In terms of treating a disease, finding 10 years of life in middle age is on par with discovering a medical cure. So why isn’t this finding for Canadian CF patients being hailed by Americans as a true medical breakthrough and an all-out effort being taken to reproduce its therapeutic results for the benefit of all American CF patients? And why aren’t we hearing talk of Nobel Prizes for these amazing Canadian researchers who developed this miracle treatment?
Well, because it didn’t happen because of any actual ‘breakthrough’ discovery or ‘Eureka moment.’ There are no ‘heroes’ here outside of a healthcare system that looks after its patients. In fact, it took some thought and analysis to really understand it. Over the last decade it was noticed that Canadian CF patients were surviving well into middle-age although only traditional therapies were being practiced. In the Canadian study there were 3 potential reasons cited for this large difference in life expectancy between Canada and the US in CF patients. Through the research, all three differences are known to have a beneficial effect on Canadian patient outcomes. In the study comparison, none of these differences were being practiced in the US.
The first is nutritional recommendations for CF patients that are different in Canada than the US. Secondly, there are policy differences with respect to who gets lung transplants. But cited as the most likely major contributor to the difference was equitable and timely access to continuous healthcare in Canada. The Canadian patients were simply being intensely managed with greater precision. Compared to the US, with its patchwork of tiered insurance schemes and uneven programs for the chronically ill, Canada provides unbroken care for all CF patients, including access to necessary medications. In other words, the Canadian healthcare system with its impressive commitment to management and treatment of the chronically ill is the greatest benefit to CF patients. Conversely, the American health insurance system with its hallmark bureaucracy is destroying any value in advanced care methods through huge time delays that are critical for the survival of CF patients. As it turns out, the US healthcare system itself is actually the greatest risk to CF patients living that extra 10 years.
Because CF is expensive to treat (medication needs are enormous, admission to hospital is frequent and personal health crises arise regularly), American patients often have to navigate tricky insurance rules and policies that delay and deny certain expensive drugs and lung transplants at critical times (I will note here that lung transplants are only necessary in relatively few cases so the superior Canadian outcomes were not reliant on lung transplants as a last resort treatment that improved the data. However, lung transplants were more accessible to Canadian CF patients compared to American CF patients requiring lung transplants). In order to see improved survivability for American CF patients, the US would have to transition to a healthcare system that would make the patient, not financial profitability its main concern. That prospect is a non-starter in the fragmented US market-based system. Basically, the Canadian findings that more equitable health policies would be a major benefit for American CF patients must be set aside and ignored. ‘Ignored’ is perhaps the wrong word. Under current health policies, replication of the Canadian system for the benefit of CF patients is unimaginable to Americans.
“The biggest myth in medicine is the idea that all we need are more medical breakthroughs and then all of our problems will be solved.” — Quyen Nguyen
Now let’s look at the American approach to advancing progress in the treatment of CF. In 2014 the Cystic Fibrosis Foundation in the United States sold its rights to the drug ‘ivacaftor,’ patented by Vertex Pharmaceuticals under the trade name of Kalydeco. They cashed in with a $3.3 billion windfall earning on their partnered investment of $150 million after Vertex’s medication for CF was given a ‘breakthrough therapy’ designation by the FDA. Kalydeco’s annual cost for CF patients is currently anywhere from $307,000 to as high as $373,000 per year for two pills each day that must be taken from middle childhood for decades at a cost of many millions before it will have potential efficacy. Although it’s the first drug to actually treat the underlying cause of CF by changing the specific instructions for chloride ions to pass into specific cells (to make the essential CFTR protein), it is only effective for about 4% of individuals with CF (1,200 patients) who have that particular gene coding dysfunction. It has no benefit for 96% of the CF population (30,000 in the US). According to the clinical study by which the FDA licensed the drug, there was also a 24% rate of serious adverse events in the drug group vs the placebo group, so it cannot be taken without significant risk. (Wainwright, 2015)
At over $300,000 annually per patient, Kalydeco was at the time called the most expensive drug in the world (in the years since there are some newly licenced contenders that are now selling well over $1mil annually). Vertex says that the years of research and the small market justifies the high price. But even though the patient’s insurance may make the drug affordable, someone must pay that high price, whether it’s tax funding through Medicaid (that’s you and me) or private insurance (again, you and me).
Kalydeco was developed in a way that has changed the marketplace for private investing in drug research. The Cystic Fibrosis Foundation (CFF) led the entire industry as the first major ‘non-profit’ (501(c) 3), Charitable Organization), to invest in a private drug company and it opened the doors to the new field of ‘Venture Philanthropy’ for drug development in a big way. CFF’s successful investment started a clamor in the financial industry with a land rush of new investors, all looking to make the same kinds of quick, humongous profits from other new drugs (focusing mainly on humanized monoclonal antibodies). These new ‘mab’ drugs are highly specific, generally formulated (or re-purposed) for ‘orphan diseases’ like CF and most have marginal efficacy or work for only a small number of people with certain genetic attributes (number needed to treat—‘NNT’—is very high). That doesn’t deter investors since the FDA has shown that they will license marginal drugs with sketchy safety profiles where there are no other treatments for chronic diseases. Although this type of ‘impact investing’ is positioned as being for altruistic investors interested in social causes, let’s not kid anyone—it’s really all about the money. Ultimately, you and I will end up paying for more and more of these new exorbitantly priced drugs with marginal efficacy while investors, supposedly with social consciences, get rich. According to the website Investopia, “Impact investing is experiencing explosive growth. Assets in the sector are expected to grow to $500 billion by 2019, up from $50 billion in 2009, and some predict assets ultimately will hit as high as $3 trillion.”
In the meantime, American physicians treating sick CF patients who don’t qualify for receiving subsidies for the drugs or can’t afford the co-pays are crying foul as executives from both Vertex and CFF, the non-profit foundation lavished themselves with multi-million dollar bonuses. Dr. Lisa Schwartz, a professor at Dartmouth Medical School correctly pointed out that the money made by the non-profit foundation should have been put towards the treatment of underprivileged cystic fibrosis patients, not bonuses for executives saying, “Financial entanglement with industry, even with the best of intentions, creates a conflict of interest.” (Fauber, 2013)
A word about conflict of interest and where that leads. In 1999 the Cystic Fibrosis Foundation took a risk investing in an unproven therapy that could potentially address the underlying cause of CF. That sounds quite appropriate and altruistic on its face. The CFF took an equity stake in the private drug company and a percentage of future royalties in exchange for an unlikely investment score. Eventually, $150 million turned into a $3.3 bil windfall. Few are willing to criticize such an investment after its success. But the CFF became completely invested in an approach that could potentially turn a profit even though it was always clear that only a very small percentage of CF patients could be successfully treated—and only in the unlikely event that the research was successful. But what about the other 96% of the patients their foundation represented?
What would have happened had they taken that $150 mil and invested it in research in a broad spectrum of treatment modalities and clinical care? Well, we know the answer to that question because that’s exactly what Cystic Fibrosis Canada did with exactly the same amount of money over that same time period—a great control comparison.
The US approach to treating CF makes billions for investors and they get to call it a ‘breakthrough therapy’—yet it works for only 4% of patients. But for all that investment and all of the profits it’s generated, the needle hasn’t moved as far as increased life expectancy overall for US CF patients because it advantages so very few. Meanwhile the Canadian approach to effective CF therapy doesn’t register so much as a raised eyebrow of interest in the US because it doesn’t generate patents and it doesn’t make money—but it adds an average of 10 years of healthy life without major health risks for all Canadian CF patients. And it only requires equitable access to current conventional treatments (albeit discovered by Canadian researchers and turned into ‘best practices’ in Canada). From an ethical perspective, shouldn’t we be looking for solutions that benefit every patient? We can backfill with the latest innovations in pharmacy once the foundations for treatment are in place. But that’s not how healthcare works in the US. Lest we ever forget, the measure of success in US healthcare is profit. For a treatment to qualify as a ‘breakthrough’ it needs to be monetized through a profitable business model. America is unique in that favorable patient outcomes, improved quality of lives, higher life expectancies or cures are not really part of that equation. In the US healthcare system, profit is the only metric that matters to the major stakeholders.
A healthcare system exists to care for the sick, not to generate profits for shareholders. Only when we accept this premise can we rein in healthcare-related costs to a sustainable level.
When resources are limited, as they are with all orphan diseases, who decides how to spend that funding? Should advocacy organizations spend meagre resources on gene-specific research that can only benefit relatively few patients, or concentrate on preventive and active therapies that can benefit each and every CF patient?
The lure of the profit siren even distracts non-profit entities who are supposed to be working in an unbiased way in the interests of all of the patients they represent. The executives at the Cystic Fibrosis Foundation congratulated themselves and cashed million dollar bonus checks. Somehow, everybody thought this was ok. Except maybe the under-represented families of the young CF patients who needlessly died much sooner than necessary had they been able to use some of that money towards timely medications and hospitalization when it their conditions became acute.
It’s not that Kalydeco is an ineffective treatment that shouldn’t have been researched and marketed. It truly is an effective breakthrough for the lucky 4%. But I think that the investment by CFF should be looked at differently in light of the Canadian finding that longer life is available for all CF patients through better patient management. Rather than having given potentially longer survivability to 1,200 CF patients, 28,800 American CF patients lose their battles to survive—on average, 10 years earlier than necessary as determined by the new Canadian benchmark for success in treating CF. That’s 288,000 years of loss of human life that could have been restored through similar practices—an astounding figure that expands with each passing year. Is it possible to put a monetary value on those years to those patients and their families? Although this is a small fragment of the reason life expectancy gaps are getting wider between the US and other countries, as an example it represents the US healthcare ‘commodity vs rights’ dialectic quite plainly.
Without systemic change away from the profit motive in healthcare, not only will healthcare costs continue their unsustainable rise, but Americans shouldn’t expect that anything other than more expensive pills or new medical devices will ever be promoted as medical breakthroughs. Even though these new marginal drug treatments may not be safe or particularly effective, the greater satisfaction for Americans seems to be in knowing the healthcare system is making profits for investors. I recognize that many Americans agree with this ‘commoditized’ approach. And if that’s what you agree with, I suggest you probably don’t agree any of my viewpoints on health policy. But perhaps you haven’t had the experience of any failure of the US healthcare system in your life, or of a family member who has needlessly suffered with a chronic disease.
Conclusion
I note that the Cystic Fibrosis Foundation in the US has never acknowledged the Canadian results, instead insisting that Kalydeco might be effective for more CF patients. The foundation has bought into the drug company business philosophy completely. Even though there does not seem to be good evidence for their claim, it certainly sells a lot more drugs. Their web page clearly indicates they are still heavily involved in finding drug cures. Where it states on their web page that they are “attacking CF from every angle,” they in fact, mean every angle having to do with drug solutions.
With respect to conflict of interest, nobody would argue that pharmaceutical companies aren’t entitled to fair profits based on their cost of research, production, marketing and administration. Until the last few decades, that’s how drugs were priced. But so-called ‘impact investing’ in drug research through ‘venture philanthropy,’ looking for quick profits adds enormous cost to the US healthcare system. The FDA has shown their willingness to licence marginal drugs that target specific diseases based on their safety profiles alone and the pharmaceutical companies are free to charge what they want. There is no US government agency to either regulate or negotiate the prices of these newly licenced drugs when they come onto the market. With a surge of new expensive drugs flooding the market, the cost of everyone’s health plans are going up each year. And each year we’re digging deeper into our pockets for the money to pay for them. For many people, these drugs are simply beyond their ability to afford them, even with a good health plan.
Healthcare systems world-wide are struggling to afford new ‘targeted drug’ therapies. Under enormous pressure from drug companies to approve an increasing number of drug applications that come up for licencing, decision-makers in every country must remain inscrutable and review the evidence. For this reason, all other countries have extra levels of scrutiny that significantly benefit patients and keep costs lower in the bargain. When applying for licencing, Canada requires pharmaceutical companies to make the case for their product’s value. In other words new drugs must be demonstrated as more effective than what is already available. Five separate agencies must agree that the drug meets cost and risk benefit thresholds. They will often refuse to licence drugs and include them in the national formulary if they don’t believe they will meet those thresholds. That can be tricky when the full benefits or risks of new drug applications aren't yet known.
The ability to hold the hammer over the pharmaceutical companies gives Canada a lot of leverage to negotiate lower prices on behalf of all citizens. Normally it would mean that drugs like Kalydeco would not be available for purchase in Canada. But because Kalydeco has been proven effective for 4% of the CF patient population, it is indeed covered and in fact paid for by the governments in most provinces, just for those handful of cases. The Canadian government is also responsible for negotiating the lowest possible price for the drug in their mandate to responsibly protect taxpayers. Having removed profit motive from the care equation, Canada has found a way to strike a balance for both solutions while the US depends primarily on expensive magic bullets.
Through conditioning of our culture, Americans seem to prefer ‘magic bullet’ solutions for complex health problems. A single pill will never be a cure for cancer or neurodegenerative diseases like Alzheimer’s as some would have us believe. Yet our bias is to favor the prospect of single pill over a range of treatment modalities that together are the best option for treating complex diseases like CF. One reason is because the drug company business model focuses on the monetization of drug solutions. It does not pursue research that investigates other possible disease causes. Similarly, the health insurance industry is averse to solutions that require continuous, intensely-managed care models for chronic diseases because they are expensive. From their perspective a pill is better than weeks in the hospital, which is the nexus where the insurance companies and the pharmaceutical companies come together in agreement.
We should take a lesson from the example of CF. There will not be one simple solution for America’s most complex industry, healthcare, in the passage of one act of legislation. It will take a synthesis of many solutions working together and many pieces of legislation to convert the fragmented systems we have now to one system that has a single payer. What is clear is that the profit motive must be taken out of healthcare where it conflicts with patients’ and the nation’s best interest.
Thanks for reading…I hope you can use it.
Henry B.
History shows that enacting universal health care in Maine faces long odds
by Michael Shepherd - Bangor Daily News - May 9, 2019
Maine legislative committees will hold Thursday hearings on
several Democratic proposals aimed at ensuring universal health care
coverage through a variety of different methods — from single-payer
systems to public options.
Universal coverage is something that Maine — one of at least 19 states
considering single-payer bills this year — has discussed more than most
states. The idea is having a moment in the national spotlight amid
high-level Democratic support for a “Medicare for all” concept.
But it is a difficult issue and likely to be only studied
more in the short term: Maine’s 2003 try at universal coverage fell far
short of that goal for reasons including expensive premiums and
unpopular funding methods. Vermont ended a more ambitious try at a single-payer system in 2014.
Maine has pursued universal coverage in the past and
continued to study it in a restrained manner during the LePage
administration. Single-payer bills have been a perennial
discussion among progressives in the Legislature, but they have never
gotten far because of the complexity of implementing such a system and
Republican opposition to the concept. Still, Maine has probably gotten
farther than any state but California and Vermont.
A 2002 study for the Legislature
said a single-payer system “appears to be economically feasible for
Maine,” giving several scenarios under which administrative savings
could be found while also warning that the challenges of implementing
one “should not be overlooked.”
This helped lead to the 2003 formation of the Dirigo Health
program, which was seen as a step toward universal coverage with a goal
of covering 130,000 uninsured people. It covered 40,000 by the time it
was phased out in 2013 on the heels of the federal Affordable Care Act.
The list of reasons for that are long. The program —
designed to give individuals, employees of small businesses and
self-employed people affordable coverage — was voluntary, unlike the
Affordable Care Act. The New York Times reported in 2007 that the comprehensive benefits weren’t affordable and under Gov. John Baldacci, the state had trouble gaining support for funding mechanisms that included a beverage tax rejected soundly by voters in 2008.
When Gov. Paul LePage took over in 2011 alongside fellow Republicans, they passed a health care law
that allowed Mainers to purchase insurance across state lines, let
small businesses band together to purchase coverage and create a
high-risk pool for expensive claims.
This law was also short-lived because of the Affordable Care Act, but an actuarial analysis for the state in 2011
found it would lower premiums for 80 percent of people in the first
year, though older people and those who lived in more rural areas would
pay more.
Universal coverage continued to be studied in the Legislature during the LePage administration, but a report last year from a bipartisan task force was a tepid one that only included actions with wide support. It did, however, ask lawmakers to authorize the task force again.
There is progressive momentum behind the idea, but
it is late in the 2019 legislative session and expect the Democratic
governor to be cautious. The nine proposals
up for public hearings before a legislative committee on Thursday would
take a variety of approaches, from setting up new single-payer systems
to allowing people to buy coverage from existing public programs and
implement the recommendations of last year’s task force. Still,
lawmakers are unlikely to do much on this topic in 2019 except for
authorizing more specific study.
There is barely a month left in the legislative session. While Gov. Janet Mills moved quickly to implement the voter-approved Medicaid expansion that LePage let languish and has called health care a “human right,” she hasn’t advocated for a single-payer system and listed more incremental health care goals on her 2018 campaign site.
More people are struggling with high drug prices. So Maine and other states are taking action.
by Michael Ollive - Stateline - May 7, 2019
For “big pharma,” a lion’s den might seem more hospitable than the Maine Legislature this year.
The animus begins at the top, in the office of Senate
President Troy Jackson, a fifth-generation logger from Aroostook County
on the Canadian border. Jackson isn’t shy about much, and that includes
his feelings about drug companies and the prices they charge his Maine
constituents.
Drugmakers have been gouging “people since Christ,” Jackson,
a Democrat, said — using a more colorful verb — during an interview
last month. He openly refers to the drug industry as “the anti-Christ.”
Jackson’s language is lively, but many in both political
parties, at both the state and the federal level, share his sentiments.
From President Donald Trump on down, there is increasing frustration
that Americans pay more for prescription drugs than people do in other countries, where prescription drugs often are subject to government price controls.
Tiffany Haverly, director of public affairs for the
Pharmaceutical Research and Manufacturers of America, said in an email
to Stateline that “it’s too bad that Sen. Jackson would say such a thing
about the millions of people across the country, including more than
24,000 Mainers, whose jobs are supported by biopharmaceutical companies,
and the patients and families whose lives have been impacted by the
work these people do.”
“Their stories are more powerful than his rhetoric.”
But many of Jackson’s Maine colleagues have joined him in
supporting a package of bills designed to curb drug prices. Some of the
bills have Republican as well as Democratic sponsors. Other Republicans,
however, remain skeptical.
A February poll from the Kaiser Family Foundation found that
63 percent of U.S. adults — including 53 percent of Republicans and 72
percent of Democrats — think there isn’t as much regulation as there should be of drug industry prices.
Though many other states besides Maine are taking targeted
actions, few if any are seeking to tackle the issue in such a
comprehensive way.
State Sen. Heather Sanborn, chairwoman of a joint
legislative committee working on the bills and author of one of them,
said bundling the measures will make it harder for opponents to pick
them off one by one.
Another reason for combining them, said Sanborn, a
Democrat, is to blunt the drug industry’s common complaint that
legislators tinkering with only part of the drug supply chain will
inadvertently make the situation worse.
“We want to find every lever we have available to us as a
state,” Sanborn said. “If you pull on just one lever, you may have
unintended consequences.”
Maine’s legislative package aims to attack high drug prices in several ways.
One measure would establish a board that could cap drug
prices for health plans in Maine. Another would require pharmacy benefit
managers, the companies that negotiate with drug manufacturers on
behalf of government health plans and private and employer-based
insurance plans, to pass on all savings to consumers.
Montana lawmakers recently approved a similar bill, which is awaiting the governor’s signature.
Jackson and his allies also want to allow the importation
of prescription drugs from overseas. Vermont last year became the first
state to adopt that measure, which requires federal approval, and
Colorado, Florida and Illinois may follow suit.
Haverly’s colleague Priscilla VanderVeer, deputy vice
president for public affairs at the Pharmaceutical Research and
Manufacturers of America, said in an interview with Stateline that state
legislators are “simply trying to make political points with weak
legislative tools” that won’t help patients afford their medicines.
She said lawmakers in Maine and elsewhere are pursuing a
strategy she describes as, “We’re going to throw all of this on the
wall. We don’t know if it’s going to stick, but we want pharma to
suffer.”
Taken together, the measures that Maine and other states
are pursuing represent an increasingly assertive approach into
regulatory territory that they used to be content to leave to the
federal government.
“Congress and the president aren’t doing anything for
whatever reason, so the states are stepping in,” Jackson said. “What
else are we going to do? I’m just tired of telling people I can’t help
them.”
Jackson’s constituents aren’t the only ones who are
struggling with high drug prices. Like all states, Maine itself is a
major purchaser of prescription drugs — for its public employee health
plans, its Medicaid program and prison inmates. MaineCare, the state’s
Medicaid program, said its spending on prescription drugs increased by
more than 7 percent between 2016 and 2018.
“Unlike the federal government, states have to balance
their budgets,” said Trish Riley, executive director of the National
Academy for State Health Policy, which has advised legislators in Maine
and many other states on prescription drug policy. “They have every
reason to be involved on this issue.”
Filing for bankruptcy
According to a Kaiser Family Foundation survey earlier this year, about 1 in 4 Americans say they have difficulty
affording their prescription drugs. For those who consider themselves
in fair or poor health, the percentage jumps up to nearly 50 percent.
Christina Raymond, 39, is one of those people. Last month,
she traveled to Augusta from her home on the Canadian border to ask
legislators to help keep her alive.
Having learned at age 36 that she had breast cancer,
Raymond began chemotherapy three years ago. To protect her immune system
during treatment, her doctor prescribed injections of the drug Neulasta
every couple of weeks during March and April 2016.
Each dose cost $6,000. Raymond is on Medicare because of a
disability, but the program only covered 80 percent of her costs,
leaving her with a bill of $4,800. That was more than she and her
husband, who works at a job-training center, could afford on their
$30,000 a year income.
Luckily, a woman at the Cary Medical Center in Caribou,
where Raymond received treatment, connected her to a charity that
offered to foot half her bill.
Not so luckily, Raymond needs to take other medications for
her cancer and for lupus, which means hundreds of dollars of
out-of-pocket medical expenses. “I’ve had to refinance my car, refinance
my house,” she said in a telephone interview. “We went through my
husband’s 401(k) and I’m in the process of filing for bankruptcy now.
And I still have to be on these medicines for two more years.”
She paused before summing up. “These medicines aren’t a
luxury for me. They’re lifesaving. If I can’t afford them, it’s the
difference between life and death.”
Tired of finger-pointing
Drugmakers and pharmacy benefit managers often paint the other as the villain in the drug chain.
Sanborn said she and her fellow legislators are tired of
the finger-pointing. “We keep hearing from pharma that it’s all about
the [pharmacy benefit managers],” Sanborn said, “and the [pharmacy
benefit managers] say it’s all about the manufacturers. This package [of
bills] is saying it’s about all of you.”
The bills are a Democratic package, but certain measures
have attracted some Republican sponsors, including state Sen. Robert
Foley. Like other Republicans, Foley sounds a bit more cautious than his
Democratic colleagues.
“I’m very concerned and want to try to achieve the goals of
the bills to reduce costs,” he said during a break from a committee
work session last week. “But we want to make sure we don’t impact the
availability of drugs or the development of new drugs.”
Other Republicans sounded wary of the package of bills.
“This is probably the most complicated issue we’ll deal with here,”
state Rep. Gregory Swallow said. “It’s a delicate balance, and you don’t
want to discourage product development.”
Last year, the Legislature directed the Maine Health Data
Organization to publish lists of the 25 most expensive drugs sold in the
state, the 25 most prescribed medicines and the 25 medicines that had
experienced the greatest price increase in a year.
Building on that legislation, one of the bills in this
year’s package would require manufacturers of those drugs to disclose
how they set the price, and to detail costs associated with research and
development, production, wholesale acquisition, advertising and
marketing, and payments to pharmacies or direct purchasers.
“We want to know why these steep increases are happening,” said Sen. Eloise Vitelli, a Democrat and the bill’s Senate sponsor.
Jackson has authored a bill that would add an enforcement
mechanism, creating a board to determine whether a drug’s price is
affordable to Maine and its residents. If not, the board could set a
price for the medicine, beyond which no state program, commercial health
plan, wholesaler or pharmacy would be required to pay.
Maryland last month became the first legislature to approve a prescription drug affordability board, a first step toward giving the state authority to put a ceiling on drug prices. The bill is awaiting the governor’s signature.
Sanborn’s bill is aimed at pharmacy benefit managers using a
strategy Montana devised. States have limited authority to regulate
them, but they do regulate health plans operating in their states.
Following Montana’s tactic, Sanborn’s bill would use that authority to
require health plans to force their pharmacy benefit managers to pass on
any savings to consumers.
Sanborn argues that “in the current system, we have
misaligned financial incentives” because pharmacy benefit managers that
extract lower prices from manufacturers get lower rebates from them.
The Pharmaceutical Care Management Association, which
represents pharmacy benefit managers, suggested in an email that some
provisions of Maine’s proposal might increase drug costs.
The final piece of the legislative package is Jackson’s
bill allowing the importation of foreign drugs. That can only happen
with the approval of the U.S. Health and Human Services secretary.
Earlier this year, the current secretary, once opposed to such
importation, established a group in his agency to explore the possibility.
The pharmaceutical industry says price controls could
result in some medicines becoming unavailable, if the manufacturer isn’t
willing to sell the drug at the reduced price, and less investment in
research and development. Drugmakers also argue that importing drugs
from overseas would endanger Americans by exposing them to inferior
safety practices.
One advantage that the sponsors of the bill say they have
living in Maine is the state’s Clean Election Act, which provides public
financing to candidates who forgo most kinds of private campaign
donations. According to FollowtheMoney.org, a nonpartisan organization
that collects campaign finance data, while the pharmaceutical industry
contributed $9.7 million to state legislative races in 2018, in Maine it
contributed a paltry $7,400.
Drug company lobbyists were visible during legislative
hearings in Augusta last month. But others had their say too: Hordes of
red-shirted activists from the Maine chapter of the AARP, which has made
prescription drugs its top legislative issue in Augusta this year,
visited the capital to talk with lawmakers as well.
“We believe the public has spoken, and leaders should listen to them,” said Lori Parham, AARP Maine’s state director.
Dozens call on lawmakers to pass universal healthcare coverage in Maine
by WGME - May 9, 2019
AUGUSTA (WGME) -- At the State House Thursday, dozens of people called on lawmakers to pass universal healthcare coverage in Maine.Simone Maline says medical bills started piling up after her husband suffered a brain injury six years ago, and it got worse when she was twice diagnosed with breast cancer.
"So we had to liquidate any retirement, sold our home," Maline said.
Despite that, Maline says she and her husband still owe thousands of dollars.
"We're paying $220 a month to hospitals in Boston and Maine," Maline said. "We're drowning in debt. And we're not unique."
She supports universal healthcare coverage for all Mainers.
She says what happened to them, could happen to anyone.
"We need to cover people,” Maline said. “And people need to not be going into debt and choosing between food and medicine."
Thursday, the Insurance and Financial Committee heard testimony on several reform measures.
The specific details of what a bill might look like would still need to be worked out in committee.
Supporters of universal healthcare coverage in Maine say it would be less costly than private health insurers.
"You can't design a more expensive system than what we have right now," Phil Bailey of Maine All Care said.
"We need to join the rest of the developed world and have healthcare for all," former hospital coder Joey Clove said.
Republican lawmakers say they'll keep an open mind, but say their constituents have concerns.
"A lot of people are concerned about their choices, etc. in healthcare,” Rep. Gregory Swallow said. “How much power would the government have over their health and their choices? So there's two sides of the spectrum on this."
But Maline says universal healthcare coverage is the best option.
"Mainers are dying,” Maline said. “They're struggling. They're going bankrupt. And we can do better."
With only six weeks left in this legislative session, it doesn't give lawmakers much time to pass comprehensive universal healthcare coverage, but the conversation has started.
https://fox23maine.com/news/local/dozens-call-on-lawmakers-to-pass-universal-healthcare-coverage-in-maine
The Hospital Under Medicare for All
by Adam Gaffney - The Jacobin - May 10, 2019
A recent commentary in the Journal of the American Medical Association predicted that Medicare for All would put hospitals deep in the red, forcing them to shed up to 1.5 million jobs. An article in the New York Times last month gave voice to similar concerns that hospitals, especially vulnerable ones, would close “virtually overnight” under Medicare for All, or would abandon “lower-paying services like mental health” altogether.
An editorial from the Washington Post warned that single payer could “shutter smaller or regional facilities whose margins are already low.” Even some progressives have given credence to such claims, predicting — or even calling for — deep reductions in “prices,” i.e., insurance payments to hospitals, under Medicare for All, or under other reforms.
These claims have a common, flawed underpinning. For one thing, they fail to appreciate a key cost baked into the “prices” paid by insurers today: the billing-related cost forced on hospitals by our dysfunctional multi-payer system, and so they discount the potential savings for hospitals under Medicare for All.
More fundamentally, however, the focus on hospital “prices” fails to recognize that a properly structured single-payer reform would not merely change what hospitals are paid, but how they are paid. Indeed, it could move us away from a system where hospitals have prices at all.
Among other issues, the waste would be colossal: large bureaucracies would be needed to issue and process the bills, and the paperwork would suck up large amounts of teachers’ time, taking them away from, say, teaching. That’s exactly what plays out in hospitals. At one large academic medical center, 25 percent of all payments to the hospital for an ER visit were consumed simply by the cost of processing the bill. Overall, approximately one-quarter of American hospitals’ total revenues is consumed by administrative and billing expenses.
In contrast, Canadian and Scottish hospitals receive global lump sum budgets, similar to public schools, which allows them to eschew “per patient” billing altogether, and spend only 12 percent of revenue on administration. Single payer, in other words, could cut US hospitals’ administrative spending by half, an enormous saving since hospital spending accounts for about one-third of our $3.5 trillion health bill.
This has two implications. Because hospitals’ wasteful administrative costs are baked into prices, single payer would allow us to reduce payments to providers without shrinking the resources they have available to take care of patients. More likely, as demand for care rises once everyone is covered and financial barriers to care like co-pays and deductibles are eliminated, hospitals could increase the amount of care they provide within their existing budgets.
Single-payer financing, in other words, can cover the cost of true health care universalism in the short run. And in the long run, it provides a second critical tool to control hospital cost growth.
In this scenario, highly profitable school systems would, predictably, enter a self-perpetuating cycle of expansion, upgrades, more business, more profits, more growth, hence rising operating costs. In contrast, unprofitable schools would fall behind, and could even go bankrupt, resulting in entire districts (especially poor ones) being left without a single school. (Obviously, large inequities exist among schools today — but they would be massively exacerbated by this financing system).
This is, again, a reasonable description of how hospitals are paid. As Public Citizens’ Sidney Wolfe and Physicians for a National Health Program co-founders (and colleagues) Steffie Woolhandler and David Himmelstein argued last year, hospitals’ profits are the source of funds for capital expenditures, like new wings, major new equipment, sumptuous atrium lobbies, or even the construction of new hospitals. Over the long term, this cycle of profit- and debt-funded capital expansion leads to rapidly escalating operating costs, and hence overall health spending, a key reason why US health care spending diverged so sharply from those of other nations in the second half of the twentieth century. In the 1970s, for instance, hospital spending soared, not because people used the hospital more, but because of an enormous expansion in hospital capital.
The problem is not capital expansion per se (nobody wants dilapidated hospitals), but inequitable and unregulated capital expansion tethered to profitability, rather than community health needs. Today, hospitals in well-served areas often relentlessly expand and upgrade, even as needed hospitals shutter in poorer areas, as seen with the recent epidemic of rural hospital closures. This system of hospital capital financing leads to what British general practitioner and epidemiologist Julian Tudor Hart called the “inverse care law,”: the “availability of good medical care,” as he put it, “tends to vary inversely with the need for it in the population served.”
Moreover, unconstrained capital investments can sometimes actually lead to worse care. For complex procedures like transplants, hospitals that treat only a small number of patients cannot develop (or maintain) the expertise needed to achieve the best outcomes.
Bloated costs, in other words, go hand in hand with inequity, and can even compromise quality. The solution is simple. Under Physicians for a National Health Program’s single-payer proposal, similar to the House Medicare for All bill recently launched by Representative Pramila Jayapal, hospitals’ global budgets could only be spent on operating costs. None of the budget could be retained as “operating margins” (i.e., profits), or spent on expansion. Instead, a separate, dedicated stream of federal funds would pay for hospital capital expansion, based on community need and not profitability, as is done in many countries.
Such policy tools are essential to control costs and ensure an equitable and efficient distribution of health care resources moving forward. Achieving this, though, means a paradigm shift in our conceptualization of health care “prices.”
Analysts then concluded that if the quantity of care we use isn’t the problem, high prices must be the explanation for our high health care costs. Consequently, in more recent years, mainstream health care discourse has swung behind an emphasis on lowering health care “prices,” whether by market mechanisms or regulation.
This shift is mostly a step in the right direction. But a simplistic conceptualization of “prices” will, invariably, fail us too.
There are three problems with centering our health care reform efforts on the “prices” paid by insurers.1 First, health care “prices” lump together a wide variety of items. As I’ve argued, insurance payments to hospitals pay for things we care about deeply (i.e., the delivery of quality hospital care), things we couldn’t care less about (i.e., the cost of processing hospitals bill), and things that are often valuable but need to be controlled in an equitable fashion (i.e., capital expansion). Single payer uniquely allows us to extract administrative waste — and thereby cover the cost of providing more care to the previously uninsured and underinsured — while controlling capital spending and directing the investments to what’s needed rather than what’s profitable.
If instead, as some propose, we were to indiscriminately slash hospital “prices” (while retaining current financing mechanisms), we would have no control over where the axe would fall. Hospitals would drop unprofitable service lines like mental health and intensify efforts to avoid unprofitable patients (e.g., the homeless); staffing ratios might rise; attacks on labor would likely intensify, even as executive pay and spending on advertising was maintained — or even increased! And in such a system, of course, unprofitable hospitals would still shutter.
The second problem is more epistemological. Quite simply, hospitals shouldn’t have prices, any more than public schools, parks, or libraries. For one thing, the very meaning of per-user “prices” in social institutions is murky. We could attempt to attribute the costs of maintaining Central Park to distinct visitors, I suppose, based on how long they spent lounging on the Great Lawn, whether they circle the reservoir once or twice, whether or not they ask for directions from park staff, and so forth. But it would be a very crude, and perhaps intrinsically fraudulent, effort. Regardless, it would necessitate a major diversion of park resources into a bookkeeping apparatus with zero social value.
Per-patient hospital bills may be somewhat more meaningful, but at the end of the day, a hospitalization, like a park visit or a year in school, is not analogous to mass-produced commodities churned out on assembly lines. A hospitalization for pneumonia may involve a few doses of intravenous antibiotics followed by discharge home after one or two nights, or it may lead to months in the ICU, requiring the services of nearly every specialist in the hospital. What is the meaning of the price of pneumonia?
The third problem with focusing on prices, however, is the most serious. It is not merely that the administrative effort needed to bill individual users of a park, school, or hospital is extravagantly wasteful, or that these prices have questionable meaning and validity. More fundamentally, allowing social institutions to bill individual users, and then use the resultant profits to expand and grow and modernize, invariably means that these institutions have their quality, technological prowess, and beauty — indeed their very existence — determined by profitability, by the logic of the market.
And they are too important for that.
https://jacobinmag.com/2019/05/medicare-for-all-hospital-financing-costs
House Rules Committee holds first Medicare for all hearing
by Diane Archer - Just Care - May 8, 2019
On Tuesday, April 3o, the US House of Representatives House Rules Committee held the first ever Congressional hearing on Medicare for all. The panel of speakers spoke largely to the costs of Medicare for all, though two speakers Ady Barkan, an advocate with ALS, and Farzon Nahvi, MD, an emergency medicine physician, addressed the critical need to overhaul our broken health care system and improve people’s access to care.Barkan explained how hard it is to afford needed care and how he had to resort to a gofundme campaign to pay for his $9,000 a month home care he needs that his insurance does not cover. He also has had to battle his insurer to pay for care it should be covering. In his words, “We [Our family] have so little time left together, and yet our system forces us to waste it dealing with bills and bureaucracy. That is why I am here today, urging you to build a more rational, fair, efficient, and effective system. I am here today to urge you to enact Medicare-for-all.”
Nahvi told the committee how many of his patients choose to leave the hospital “AMA” against medical advice because of the costs. They put their health and lives in jeopardy rather than put themselves and their families in tremendous debt.
Dean Baker, a health economist and co-founder for the Center for Economic and Policy Research, said that Medicare for all is both affordable and achievable. He spoke to the need for strengthening traditional Medicare as soon as possible so that it is on a level playing field with Medicare Advantage. Like Medicare Advantage, commercial health plans that contract with the government to deliver Medicare benefits, it should have a limit on out-of-pocket costs. Also, like Medicare Advantage, the prescription drug benefit should be included in the traditional Medicare package of benefits, in order to rein in costs and save people the effort of having to buy separate prescription drug insurance.
Baker also explained that Medicare Advantage plans “upcode” the health status of their members as a way to get paid tens of billions more a year, about 13 percent, than they are due from the federal government. That needs to end to save taxpayers money.
I submitted a letter to the Rules Committee that picked up on Baker’s points. It also lays out a number of ways that Medicare Advantage plans are threatening the health and safety of their members, according to government and independent researcher studies. You can read my written testimony here.
Congresswoman Shalala, suggested that if we ever were to get to Medicare for All, it could be Medicare Advantage for All. Since the hearing did not cover the obstacles to building a high quality health care system with Medicare Advantage plans, it was not clear whether she was aware of them.
Congressman Neal, who chairs the House Budget Committee, said his Committee would be holding another hearing on Medicare for all shortly.https://justcareusa.org/house-rules-committee-holds-first-medicare-for-all-hearing/?link_id=9&can_id=044f92a3c83fd93141b3d1d7e582acde&source=email-could-health-insurers-be-regulated-to-deliver-high-value-care&email_referrer=email_544764&email_subject=could-health-insurers-be-regulated-to-deliver-high-value-care
New Study Finds Maine Patients With Private Insurance Pay Nearly 3x What Medicare Patients Would Pay
by Patty Wight - Maine Public - May 10, 2019
A new study on hospital prices from the RAND corporation finds that patients with private insurance in Maine pay nearly three times what Medicare would pay for the same service.
The nonprofit think tank is urging employers to use the findings to push for lower costs in their health plans, but the Maine Hospital Association says the study findings come with caveats.
The RAND study evaluated hospital claims data in 25 states.
Senior Policy Researcher Chapin White says that in 2017, the prices paid to hospitals overall averaged about 241 percent of what Medicare would have paid. In Maine, the average price was even more: 283 percent.
"Maine is definitely on the higher end among the states we looked at," White says.
States on the lower end, like Pennsylvania and New York, paid average prices that were between 150 to 200 percent of Medicare payments.
White says it is difficult to say what is a reasonable price for private insurers to pay compared to Medicare. The benefit of the study, he says, is that employers — who have historically been kept in the dark about prices — can use it as a reference point to start asking their health plans how much they are paying for services.
"The second takeaway is, I think, employers should be asking their health plans not just what prices are we paying, but how are we paying for hospital services?" says White.
Most private health plans negotiate complicated discount rates for services. But another option is to base payments on a set percentage of what Medicare pays — a method that White says typically elicits lower costs.
"Paying multiples of Medicare is a simple approach to contracting that enables shopping."
But Jeff Austin of the Maine Hospital Association cautions against that approach.
"Moving towards Medicare rates — I can understand why commercial folks and the industry would want to do that. We would have a hard time making it, if that were to happen, though."
Austin says Medicare reimbursement rates in Maine cover only about 85 to 90 percent of the cost of services. Medicaid rates are even lower. Commercial plans help cover those losses. Even then, he says, the average operating margin for hospitals in Maine is one percent.
"At the end of the day, out of every dollar, there's one penny left. And that's an average,” Austin says. “As you know, about 16, 17 hospitals are in the red. They actually walk away with a deficit."
Trevor Putnoky of the nonprofit Healthcare Purchaser Alliance of Maine, recognizes that rural hospitals are struggling, and says that his organization is not currently pushing for health plans to negotiate prices based on Medicare rates.
"But that being said, we do know employers are looking at this as a means to control costs and get more transparency into their health care spend," Putnoky says.
And the prices unveiled in the RAND report, he says, should be used to help steer Maine toward lower health costs.
https://www.mainepublic.org/post/new-study-finds-maine-patients-private-insurance-pay-nearly-3x-what-medicare-patients-would-pay
Editor's Note -
Somebody should be asking why the prices at hospitals are so high in the first place. Why are the prices of their inputs so high?
Duh!
-SPC
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