Health Care Reform Articles - May 17, 2019

Does Employment-Based Insurance Make the US Medical Care System Unfair and Inefficient?

by Victor Fuchs - JAMA - May 9, 2019

In the United States, the interests of high-income individuals dominate decisions about what medical care is offered and how it is financed. The result is a less efficient and less equitable medical care system than in other high-income countries. Employment-based insurance plays a key role in determining the production and financing of US medical care.
Employment-based insurance started during World War II as a way for employers to attract needed employees without violating wartime wage controls. After World War II, employment-based insurance spread quickly because group insurance is less costly to administer than individual insurance, and it is less vulnerable to adverse selection of unhealthy patients. Employment-based insurance is particularly popular with high-income employees because the contribution made by employers to the premium is exempt from the employees’ taxable income. This exemption cost the US Treasury an estimated $300 billion in 2018.¹
For many decades, employment-based insurance has set the standard for US medical care, although several features are now being questioned by health policy experts, including but not limited to giving patients a wider choice of clinicians and hospitals, generally relying on fee-for-service payment, and allowing self-referral to specialists. These cost-increasing features are especially valued by higher-income patients. Employment-based insurance covers approximately 60% (180 million of the 310 million) of insured individuals, but enrollment is highly correlated with income. In high-income households (family income >400% of the federal poverty level), 84% are enrolled in employment-based insurance. In low- and middle-income households (family income from 100% to 250% of the federal poverty level), only 35% are enrolled in employment-based insurance.² The result is a product mix of care that caters to the preferences of higher-income patients.
Emphasis is on specialty and subspecialty care, expensive technology, extra capacity to facilitate access (US hospitals have an average occupancy rate of 65% compared with an average of 76% according to the Organisation for Economic Co-operation and Development), and more and better-quality amenities, including space and privacy in the hospital.³ Architects who build in many countries suggest that design for US hospitals must also include better space for visitors and professional staff. This more costly product mix (specialty care and hospital amenities) is appreciated by patients at all income levels, but higher-income patients would and sometimes do pay extra for them. Many low- and middle-income households would be better off if medical care was less costly, and they had more money for other public and private goods and services.
An imperfect but useful analogy to the differences in product mix between the US medical care system and those of other high-income countries is the difference between Whole Foods (a chain of upscale grocery stores) and Walmart (the largest grocery retailer in the United States). Shoppers who buy their food at Whole Foods spend much more than Walmart shoppers for a more expensive mix of products (ie, by analogy, high-cost drugs, access to specialists), not more food. By analogy, if the US government subsidized the Whole Foods shopper as it does for individuals with the tax advantages of employment-based insurance, and imposed on Walmart requirements for products, personnel, and equipment, Walmart’s costs and prices would increase. Given enough subsidy for Whole Foods and cost-increasing regulations on Walmart, the low-cost alternative might disappear. Such a low-cost alternative does not exist for most of medical care. Its absence is not a problem for high-income patients, but it is for many low- and middle-income households that would rather spend less on medical care. Of note, there are more than 10 Walmart stores for every Whole Foods store. The opposite is true for medical care as most physicians and hospitals strive for high standards and very few concentrate on lowering costs.
The preference of high-income patients for a costly product mix also adversely affects the efficiency of research and development in the choice of projects because market size influences the direction of investment in innovation. Almost all private medical research and development is directed toward extending the product mix with few attempts to discover new lower-cost interventions with truly disruptive innovations. The interests of high-income patients not only result in inefficiency in medical care production and innovation, but also adversely affect the way the United States finances health care. The present system, which is a mix of employment-based insurance, other private insurance, numerous government programs, including Medicaid and Medicare, each with its own eligibility rules and payment schemes, and out-of-pocket payments, is extremely costly to administer.^4,5 The large role played by private insurance in the United States helps high-income households because the price of the insurance is the same regardless of income, whereas government plans typically require higher-income individuals to pay a larger share of the nation’s medical care bill.
In the current US system, no one knows how much the cost of care is borne by different income groups. Payment is nominally made by insurance companies and the government, but it is essential to distinguish between who nominally pays the insurance premium and who bears the true cost burden. As another example, suppose a government decides to finance medical care by implementing a tax on retail sales, as the province of Ontario, Canada, does. The law might require that stores pay the tax, or that the customer pays the tax, but the cost burden of the tax would be borne by the customer either way. If the store pays, it will raise prices by the amount of the tax. Similarly, most of the premium for employment-based insurance and half of the federal payroll tax (a portion of which goes to Medicare) are paid by employers, but economists agree that the cost burden is borne by employees in the form of lower wages.⁶ For some sources of revenue such as the corporate profits tax, the corporation pays, but economists disagree about how the cost burden is distributed among households who are shareholders, customers, or employees. The answer may vary depending on circumstances such as the competitiveness of the industry, the state of the market for capital, the supply of labor, and other factors. It is important to realize that the majority of costs are borne by households regardless of who is the payer.
How should the cost of medical care be borne by different income groups? The answer depends in large part on how medical care expenditures are viewed. If viewed as similar to other objects of consumption, such as food, clothing, or automobiles, no special financing may be required. Because many households have no medical care expenditures during a year, and 5% have 50% of the expenditures, a different financing system seems necessary. One way to think of the cost is as being similar to reparations imposed on US households by a foreign power that has defeated the United States in a war.⁷ Assume the foreign power assigns reparations of $3.5 trillion, which is the approximate total for health care expenditures in 2017, to the 126 million US households in a random and capricious manner so that many pay nothing and others pay more than $100 000. The average would be $28 000 per household. Suppose the United States wanted to offset reparations paid by each household so that the inequality of income in the United States would be the same after as before payment. A tax on income at the same percentage regardless of the level of income (a flat tax) could raise revenue for the federal government needed to compensate each household for its payment of reparations. Countries that have national health insurance come close to this solution by having a flat tax on retail sales or on value-added sales that is initially paid by business firms, but is eventually passed on to consumers.⁸
Suppose the United States had such a system in place with a tax rate set at a level that would raise the $3.5 trillion for reparations. The highest income quintile with 51.5% of US household income and 25 million households would have to pay an average of more than $72 000 per household. The lowest quintile with 3.1% of US household income would pay an average of $4300 per household. The remainder would come from the 3 middle-income quintiles that have a combined income of 45.4% of US household income. Their average equal share would be approximately $21 000 per household.⁹ The average (mean) GDP per all household in 2017 was $155 000.
The United States could save a large amount on administrative costs of care if it adopted a simpler financing system, perhaps a single-payer system. Changing the product mix (as illustrated in the comparison with product availability at Whole Foods vs Walmart) would be an even more complex proposition, and would require removal of government regulation and professional strictures that prevent emergence of a lower-cost alternative. A change in the financing system would probably distribute the burden of cost more to high-income households; this is probable but not certain because the present distribution of the cost burden is not known. A change in the method of finance and in the product mix would make US medical care more efficient and probably more fair for the majority of households. According to the media and some academic interpretations of Donald Trump’s election as President in 2016, many low- and middle-income individuals perceive that the US economy does not benefit them. Explorations of this question as applied to the US medical care system suggest that there is some basis for those perceptions.
Corresponding Author: Victor R. Fuchs, PhD, Stanford Institute for Economic Policy Research, 366 Galvez, Stanford, CA 94305
https://jamanetwork.com/journals/jama/fullarticle/2733520

‘Medicare for All’ Could Kill Two Million Jobs, and That’s O.K.

Reform has a cost. But the point of a health care system is to treat patients, not to buttress the economy. 

by Elizabeth Rosenthal - NYT - May 16, 2019

As calls for radical health reform grow louder, many on the right, in the center and in the health care industry are arguing that proposals like “Medicare for all” would cause economic ruin, decimating a sector that represents nearly 20 percent of our economy.
While exploring a presidential run, the former Starbucks chief Howard Schultz called Medicare for all “not American,” adding, “What industry are we going to abolish next — the coffee industry?” He said that it would “wipe out the insurance industry.”
A fellow at the libertarian Cato Institute wrote that it would “carpet bomb the industry.” David Wichmann, the chief executive of UnitedHealth Group, warned that it “would surely have a severe impact on the economy and jobs.”
It’s true: Any significant reform would require major realignment of the health care sector, which is now the biggest employer in at least a dozen states. Most hospitals and specialists would probably lose money. Some, like the middlemen who negotiate drug prices, could be eliminated. That would mean job losses in the millions.

Though it will be economically painful, the point is to streamline for patients a Kafka-esque health care system that makes money for industry through irrational practices. After all, shouldn’t the primary goal of a health care system be delivering efficient care at a reasonable price, not rewarding shareholders or buttressing the economy?
In 2012, the Harvard economists Katherine Baicker and Amitabh Chandra warned against “treating the health care system like a (wildly inefficient) jobs program.” They were rightly worried that the health care system was the primary engine of recovery from the Great Recession. And yet the revelation that the health care sector added more jobs last year than any other in the economy was greeted by many as good news.
It’s not surprising that those involved in the business of medicine have joined forces in a lobbying and media campaign, the Partnership for America’s Health Care Future, to ward off transformational reform, particularly Medicare for all. But fed-up voters seem ready to upend an industry that saps their finances, wastes their time and doesn’t deliver particularly good care. Few people would mourn the end of $35 million annual compensation packages for insurance executives or the downsizing of companies that have raised insulin prices to 10 times what they are in Canada — though they might miss hospitals’ valet parking and private rooms.
Well over half of Americans already say they have favorable view of Medicare for all. Though approval falls off when confronted with details such as higher taxes, it is clear that the electorate is searching for something big. Change could come in many guises: for example, some form of Medicare expansion, government negotiations on drug prices or enhancing the power of the Affordable Care Act. The more fundamental the reform, the more severe the economic effect.
The first casualties of a Medicare for all plan, said Kevin Schulman, a physician-economist at Stanford, would be the “intermediaries that add to cost, not quality.” For example, the armies of administrators, coders, billers and claims negotiators who make good middle-class salaries and have often spent years in school learning these skills. There would be far less need for drug and device sales representatives who ply their trade office to office and hospital to hospital in a single-payer system, or one in which prices are set at a national level.

Some geographic areas would be hit particularly hard. A single hospital system is by far the biggest employer in many post-manufacturing cities like Pittsburgh and Cleveland. Hospitals and hospital corporations make up the top six employers in Boston and two of the top three in Nashville. Hartford is known as the insurance capital of the world. Where would New Jersey be if drug makers took a big hit, or Minnesota if device makers vastly shrank their work force? (That may be why some Democratic representatives and senators from these left-leaning states have been quiet or inconsistent on Medicare expansion.)
Stanford researchers estimate that 5,000 community hospitals would lose more than $151 billion under a Medicare for all plan; that would translate into the loss of 860,000 to 1.5 million jobs. A Navigant study found that a typical midsize, nonprofit hospital system would have a net revenue loss of 22 percent.
Robert Pollin, an economist at the Political Economy Research Institute of the University of Massachusetts, Amherst, is frustrated not just by the doomsday predictions but also by how proponents of Medicare for all tend to gloss over the jobs issue.
“Every proponent of Medicare for all — including myself — has to recognize that the biggest source of cost saving is layoffs,” he said. He has calculated that Medicare for all would result in job losses (mostly among administrators) “somewhere in the range of two million” — about half on the insurers’ side and half employed in hospitals and doctors’ offices to argue with the former. Supporters of Medicare for all, he said, have to think about a “just transition” and “what it might look like.”
Of course, if more people get health insurance under an expanded Medicare, there will be a greater need for some workers — like nurse practitioners and physician assistants. And there is a large unmet labor need in caring for an aging population. The latter are mostly low-wage jobs, however, and neither compensates for the losses.
Dr. Pollin suggests that a transition to Medicare for all should be accompanied by a plan to give those made redundant up to three years of salary and help retraining for another profession.
Despite the short-term suffering caused by any fundamental shift in our health care delivery system, reform would ultimately redirect resources in ways that are good for the economy, many experts say.

“I’m sympathetic to the impact that changes will have on specific markets and employment — we can measure that,” Dr. Schulman said. “What we can’t quantify is the effect that high health care costs have had on non-health care industries.”
The expense of paying for employees’ health care has depressed wages and entrepreneurship, he said. He described a textile manufacturer that moved more than 1,000 jobs out of the country because it couldn’t afford to pay for insurance for its workers. Such decisions have become common in recent years.
“Yes, these are painful transitions,” said Dr. Baicker, who is now the dean of the University of Chicago’s Harris School of Public Policy. “But the answer is not to freeze the sectors where we are for all time. When agriculture improved and became more productive, no one said everyone had to stay farmers.”
https://www.nytimes.com/2019/05/16/opinion/medicare-for-all-jobs.html?smid=nytcore-ios-share

The Nightmare of Medical Care in America

by Beverly Gologorsky - Common Dreams - May 9, 2019

On this extremely hot summer day, the ear-splitting siren screaming through New York’s streets is coming from the ambulance I’m in -- on a gurney on my way to the ER. That only makes the siren, loud as it is, all the more alarming.
I fell. The pain, its location and intensity, suggests I’ve probably broken my hip.
The kind face of the emergency medical technician hovering above me asks questions softly and I confess that I’m in terrible pain. Other gentle hands are busy taking blood pressure and doing oxygen counts. These EMT workers, employees of the Fire Department, are good at what they do.
At the ER entrance, the gurney’s lifted out of the vehicle, wheels are dropped, and it’s rolled inside. Under a ceiling of bright white lights, it passes -- and so I pass -- one cubicle after another. I catch bits of voices, speaking in several languages.
My friend, who’s come with me to the ER, roots around in my purse for my insurance and then heads for the admissions office. Alone, I close my eyes to shut out the glare of the ceiling lights. I want one thing: relief from the pain. Oblivion would even be more appreciated.
My friend returns to my cubicle and asks, “Is this the only insurance you have?” I panic. Will they not accept me? But they have to! It’s the ER! That’s the reassurance I offer myself and then I tell her, “Yes, it’s all I have.”
She looks doubtful.
“What?” I ask desperately. “What?”
“Don’t you have some kind of supplemental?” And she begins to try to explain, but I can’t deal with this right now. All I want is relief from the pain. Any other moment, I’d worry about the money, but not now. I can’t! Instead, simply to remain half-calm, I remind myself that I have insurance, that I have a Health Maintenance Organization, or HMO, a plan that offers a wide range of healthcare services through a network of providers who agree to work with members.
After vital signs are taken, I’m moved to a hospital room and given pain meds that don’t offer oblivion, but do help. There, I learn what the X-rays show: a hip fracture. Surgery necessary. Operating rooms all taken. It may be two days before they can operate, the orthopedic surgeon tells me. My friend whispers that every extra day in the hospital will cost a mint. She then appeals to the staff to expedite the surgery. They can’t.
At that moment, I don’t care if the hospital costs a million dollars a day, I just want to get better. However, I, too, want the surgery to happen, within the hour if possible, since my leg is now frozen in a distinctly awkward position, thanks to the way I fell, and I realize that it won’t be straight until the operation’s over.
Two days later, after successful surgery, I develop an infection, pneumonia, and the days in the hospital begin multiplying into weeks. My doctors are so busy they can only visit once a day, if that, but the nurses, well... they’re the healers, the angels, though they themselves are desperately overworked.
Everyone’s so busy here. Hospitals have grown larger than ever in recent years as they’ve swallowed smaller hospitals and medical treatment centers. Given the overworked nature of the staff, I hire a healthcare aide to be with me several hours a day. My friend tells me that insurance won’t pick up this expense either, but I can’t worry about that now. I simply need to heal.
Finally, I’m discharged to months of physical therapy, three times a week. Fortunately, the therapy practice takes my insurance (not always a given). But on that first visit (as on every visit thereafter), they run my Visa card through their machine and I get charged a $40 co-pay. There’s nothing I can do about it. After all, my goal is to get back on my feet, literally as well as metaphorically. Still, that’s $120 a week for 16 weeks and so my out-of-pocket patient expenses begin to add up.
Back at home to recuperate, I find a stack of unopened mail, including notices from my insurance company alerting me to the bills that are to follow. Soon enough, they begin to arrive. They include out-of-pocket patient costs for the ambulance, the hospital, doctors, tests of all sorts, drugs of all sorts, and sundry other services. Those bills list both what insurance has paid for each service and the amount of money that I still owe.
And here I experience what must be common to so many Americans. I’m surprised and distressed to learn how much of the cost my insurance doesn’t pick up. The surgery, for instance, was $72,000, but my insurance only covers $67,000 of it. The other $5,000 is my co-pay. Add in the co-pays for everything from that ambulance to other medical services and my costs come to almost $13,000.
An Insurance System of Out-of-Pocket Disasters
I’m sharing my recent journey as a cautionary tale. And, yet, what am I warning against? That we are all somewhat powerless when sickness strikes, but that those of us who aren’t wealthy suffer so much more. The thought of being without insurance is frightening indeed, yet in our present system we pay in so many ways for the existence of those insurance companies. We pay in co-pay; we pay in not getting treatment we need if insurance deems it unnecessary (no matter what your doctor says); we pay yearly out-of-pocket fees whether we’re 20 or 80 years old. (For Medicare patients, a monthly payment comes out of Social Security.) For most American families with insurance, whether workplace-based or individually purchased, premiums go up regularly, if not annually. At present, we have no alternative to the existing health insurance system, yet it is actually failing us all in so many ways.
What do you do when sickness occurs, if you aren’t rich? Suffer the illness, for sure, and then suffer the out-of-pocket costs afterward. And keep in mind that tens of millions of Americans under age 65 don’t have any health insurance at all. (In the age of Trump, in fact, those numbers are on the rise.) Moreover, the persistent growth of income inequality to Gilded Age levels has had a decided effect on the health of many Americans. For low-paid wageworkers, the unemployed, and/or undocumented immigrants, getting sick or having any kind of medical mishap is a disaster of the first order. For them, paying out-of-pocket costs of any sort may simply be impossible, which means that they will often do without medical treatment or even medicine. To put this in perspective, 40% of Americans can’t afford an extra $400 even in a medical emergency. Imagine what $5,000 or $10,000 in expenses means!
After an illness, accident, or chronic disease hits, a startling number of those of us with health insurance find that we have to choose between paying for daily needs and paying our medical bills. Such expenses leave people even more impoverished and often in debt, which is tantamount to remaining unhealthy.
For the poor, Medicaid, the government program that helps those with limited or no incomes, can make a major difference, but many people don’t have Medicaid because their states don’t readily offer it. Even where it’s more easily available, many with incomes not much above the poverty line don’t qualify for it. And as Elizabeth Yuko pointed out in the New York Times recently, “Even if you are fortunate enough to have health insurance, that doesn’t mean that all of the members of your medical team -- which may include out-of-network specialists -- are covered by your plan.”
As I learned with my fractured hip, someone who is in great pain or out of it for any number of physical reasons can’t be expected to focus on that future bill. And even if you could, who would want to cancel any of the services needed to heal?
Though Barack Obama’s Affordable Care Act, aka Obamacare, helped significantly, there are still far too many people who will have to agonize over how to manage both an illness and the co-pays that go with it. Meanwhile, of course, the Trump administration and congressional Republicans are working overtime to undermine Obamacare and deprive ever more Americans of any sense of a medical safety net.
What Medicare for All Would Mean
All the talk about making insurance affordable, under the present medical circumstances in this country, adds up to just so many wasted words. Unless something changes big time, insurance companies will continue to sell us their services at ever-higher prices because we can’t do without them. Since we lack alternatives, they remain indispensable. The result: out-of-pocket costs will continue to rise, no matter what any politician promises. And if the Republicans in Congress were ever to succeed in doing away even with Obamacare, the services that insurance companies now provide would no longer be guaranteed. What then?
With a single payer system, whether called Medicare for All or universal health care, everyone would be able to access health care; health would, that is, become a right. Most likely, such programs would be covered by a tax increase, yet they would cost each person so much less than what is now being paid out to insurance companies. With single payer or Medicare for All, there would be no more co-pays, no more premiums, no more refusals of non-doctors to pay for services recommended by medical specialists, no more bills arriving at a patient’s house.
Understandably, some might be reluctant to part with a familiar healthcare system, however flawed, in exchange for a new but untested universal program. Yet once implemented, any version of Medicare for All would be likely to cost less, be so much simpler to access, and ultimately save lives.
The present Medicare system is a good indicator of not only what’s possible, but of the ways in which health care can serve people’s needs. However, Medicare is offered only to those who are over 65. Nevertheless, Medicare and Medicaid prove the positive. Those programs work well for the elderly and the poor. Even with Medicare, however, insurance companies continue to handle many aspects of your services, should you opt for a Medicare Advantage plan (an all-in-one alternative to original Medicare), in which co-pays and other costs are still the patient’s responsibility.
According to Open Secrets, insurance companies, Big Pharma, and hospitals spent a staggering $143 million in 2018 alone in their lobbying efforts against any future Medicare for All plan. Nonetheless, as the National Nurses United Association has pointed out: “There has never been this much public support and momentum for Medicare for All. Eighty-five percent of democratic voters and 70% of all voters support it.” With significant administrative setups already in place, thanks to Medicare and Medicaid, the expansion of those health systems to include everyone seems doable; nor is it hard to imagine that many of the workers now employed by insurance companies would be able to shift to working for an expanding single-payer or Medicare for All program.
Truly decent health care is a necessity for a society in which people do more than just survive. Health is not a negotiable matter. You can decide not to buy a new coat and so shiver through another winter, but you really can’t decide to ignore sickness, disease, broken bones, or chronic illness, all of which can put lives on the line. How can any society function properly without health care available to all? How can any society survive in a reasonably decent way when so many millions of people are left with the choice of either being impoverished by illness or living with an otherwise treatable one?
Health care should be as much of a right as public education -- the right to educate all children, that is -- which was only won after its own set of lengthy struggles. After all, who can now imagine making all Americans pay for the first 12 years of schooling? Yes, we know that there are people wealthy enough to pay for whatever kind of education and health care they want, but they are hardly the majority of Americans.
Good health care must not only be affordable, but also provide easy access to medical services -- to better nutrition, a healthier environment, and greater longevity. In this context, Medicare For All would be a literal lifesaver.
Finally, good health care is peace of mind, which, at present, our system does not deliver. In my case, the cost of recovery was far too high.
https://www.commondreams.org/views/2019/05/09/nightmare-medical-care-america

The Hospital Under Medicare For All

by Adam Gaffney - The Jacobin - May 14, 2019

Our goal shouldn’t be to lower hospitals’ prices, but to eliminate them entirely. Medicare for All is the way to achieve that.

More than 24 million people require hospitalization annually in the United States, and many more see their doctors or other providers, or have tests and procedures, in these institutions. Yet as the health care reform debate heats up, some have painted a grim picture of how hospitals would fare under Medicare for All — predicting slashed budgets, shuttered wards, service cuts, and mass layoffs. Especially for those who rely on hospital care, such claims may sound an alarm.
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.

Imagine if we funded public schools the way we funded hospitals. Instead of giving schools a lump sum “global” budget to take care of all their students, we required them to issue per-student bills that were to reflect each student’s unique educational needs, and the precise mix of services they received. Assume also that teachers had to issue bills for every episode of instruction provided to each pupil daily, using a complex fee schedule incorporating the length, complexity, and/or intensity of every interaction. Finally, imagine that the tsunami of resultant bills went not just to the local government, but to a welter of different “educational insurance” plans, with varying rules and requirements; that these insurers frequently contested the charges; and that schools were required to collect co-pays and deductibles from parents, which varied depending on how much education a child “consumed” and their particular insurance plan.
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.

Let’s return to the public school analogy for a moment. Assume that once schools were done billing, they could retain revenues that exceeded their costs, i.e., they could turn a profit, even if they remained legally not-for-profit. And let’s say that these profits were the source of funds for capital projects: schools could use them (together with private debt) to upgrade their facilities, construct new wings, acquire new technology, or even build whole new schools. Finally, assume that schools competed for students — especially from well-off families — and that some avoided the poor kids.
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 reasonwhy 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.”

A decade ago, the mainstream health care discourse was dominated by a concern that people were using too much hospital care: reducing costly ER visits and hospitalizations by the uninsured — by giving them a primary care doctor — was commonly cited as a justification for the Affordable Care Act. But that framing was simply false. Uninsured people actually use the hospital less (and the ER no more) than those with good coverage, while Americans overall actually use the hospital less than people in most other OECD nations.
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://popularresistance.org/the-hospital-under-medicare-for-all/ 

 

How the U.S. health-care system puts people with diabetes in danger

by Adam Gaffney - The Washington Post - May 8, 2019

The blood sugar rises, and nausea and vomiting follow. The blood acidifies, the breath hastens, dehydration and then delirium ensue: That’s how ketoacidosis, a feared complication of diabetes, progresses. Diabetic ketoacidosis, which results in nearly 190,000 hospitalizations a year, is a condition I treat frequently as an ICU physician: We infuse intravenous insulin, saline and electrolytes, while carefully tracking sugar levels and blood chemistries and vital signs. If all goes well, the sugar normalizes, acid levels fall, the breath begins to slow, the appetite returns. Not always, however: Every year, hundreds of people die of the condition.

What makes this such a tragedy is that the complication is typically preventable through the regular use of insulin. Yet the soaring price of that drug has put it beyond the reach of many — and for many of the 29 million Americans without insurance, insulin might be unaffordable at any price.

But what about ketoacidosis in a country with universal health care? I joined some colleagues at Harvard Medical School, the Cambridge Health Alliance and the City University of New York to collaborate with a team of researchers at the University of Manitoba in Canada to find out.

We compared ketoacidosis hospitalization rates in the United States and Canada, focusing on the transition from adolescence to young adulthood — a vulnerable time when many young people lose or change health coverage. Our results, published in the Journal of General Internal Medicine, were striking. Based on our analysis of two large databases of hospitalized patients — one covering the United States and the other the province of Manitoba — we found that the hospitalization rate for diabetic ketoacidosis among children and adolescents was somewhat higher in the United States than in Canada. However, as teenagers became young adults, the rate soared by 90 percent in the United States, compared with a 23 percent rise in Manitoba.

[Insulin is too expensive for many of my patients. It doesn't have to be.]

At least three major differences in the way our nations finance health care could contribute to this result. First, uninsured rates rise dramatically in young adulthood in the United States. And as numerous studies have demonstrated (to say nothing of common sense), the uninsured go without all types of needed medical care, ranging from doctors’ visits to prescription drugs. In Canada, in contrast, this is not a problem; the uninsured rate is zero.

A second factor might be Americans’ exposure to onerous out-of-pocket costs for medical care. Forty-six percent of privately insured adults have “high-deductible” health plans that require them to spend substantial amounts of money out of pocket before insurance kicks in. Such plans may be dangerous for patients with diabetes. A 2017 study, for instance, found that individuals with diabetes who were pushed by their employers into a high-deductible health plan saw specialists less but wound up in the ER with acute complications more. In Canada, in contrast, physician care and hospital care is free at the time of care; co-pays and deductibles are $0.

[Drug prices are killing diabetics. 'Walmart insulin' isn't the solution.]

The Canadian system does not universally cover prescription drugs as comprehensively as it does other care, unlike places such as Wales or Scotland, where everyone has drug coverage without co-pays or deductibles. Still, drugs are more affordable in Canada than the United States: In 2015, Bloomberg reported that one 3-milliliter pen of long-acting insulin cost $186 in the United States (accounting for rebates), three times the $67 it cost in Canada. Meanwhile, about 16.8 percent of older adults in the United States report not filling a drug prescription or skipping dosages of a medication because of cost — about double the proportion in Canada.

Finally, there is a related problem that researchers call “churn.” Most Americans have little stability in their insurance coverage: Your plan can change every time your boss says so, or whenever you (or maybe your partner or your parents) lose or change jobs. A recent analysis from Axios estimated that 2 million workers, together with their families, lose or change coverage every month. Churn is not merely inconvenient, though; it can be hazardous to your health. A 2016 study found that churners with low incomes frequently face dangerous disruptions in care: 20 percent change doctors, while 34 percent skip medications or stopped taking them because of discontinuities in coverage. In Canada, in contrast, there is no churn, because there is but one “single payer” that provides universal coverage seamlessly throughout the life span, without insurance networks or disruptive plan-switching.

[Keeping my kids with diabetes alive costs thousands of dollars a year]

Discontinuities in coverage don’t affect only the young. Take Meaghan Carter, a 47-year-old nurse with Type I diabetes who was found dead on her couch last Christmas, as USA Today recently reported. At the time of her death, the paper noted, she was temporarily uninsured because she was in between jobs, and she had $50 in the bank and no insulin left in her fridge, leading her family to attribute her death to ketoacidosis.

Making the American health-care system work for patients with chronic diseases such as diabetes requires rectifying not just one, but all three of these interconnected dysfunctions. Yet of the various health-care reform proposals under discussion today, only one — single-payer, “Medicare-for-all” — would do so: It would cover all the insured, basically eliminate financial barriers to care such as co-pays and deductibles, and bring to an end the dangerous disruptions of coverage that are so common in our fragmented system. This is one reason that I, like so many in the medical profession, support it.

Individuals with chronic illnesses such as diabetes deserve no less. Without such a transformative reform, it seems likely that we’ll still have patients with ketoacidosis coming through the doors of ICUs, breathing deep, dry as a bone, acid levels soaring — even when it might have been avoided had a better, more just health-care system been in place.

'Spoiler: Because Australia Has Universal Healthcare': Watch Ocasio-Cortez Ask Pharma CEO Why HIV Drug Costs $8 Overseas But $1,780 in the US

"We the public, we the people, developed this drug, we paid for this drug. There's no reason this should be $2,000 a month. People are dying because of it."
by Jake Johnson  - Common Dreams - May 16, 2019

During a House hearing on Thursday, Rep. Alexandria Ocasio-Cortez asked the CEO of one of America's largest pharmaceutical companies a simple but crucial question: Why does a life-saving HIV drug that costs $8 a month in Australia have a $2,000 price tag in the U.S.?
Gilead chief executive Daniel O'Day declined to comment on the low price of Truvada for PrEP in Australia, but said the reason the cost is close to $2,000—"the current list price is $1,780," he said—in the United States is because the drug has "patent protection."
As the Washington Post reported in March, the development of Truvada as a treatment for HIV was "almost fully funded by U.S. taxpayers."
The U.S. government patented the treatment in 2015, according to the Post, but has "opted not to file an infringement suit to enforce" the patent even as Gilead—which argues the government patent is invalid—rakes in billions of dollars in profits from Truvada.
Ocasio-Cortez highlighted these facts during the House Oversight and Reform Committee hearing on Thursday.
"I think it's important that we notice here that we the public, we the people, developed this drug, we paid for this drug, we led and developed all of the grounding patents to create PrEP, and then that patent has been privatized despite the fact that that patent is owned by the public," said Ocasio-Cortez. "We refuse to enforce it."
"There's no reason this should be $2,000 a month," Ocasio-Cortez added. "People are dying because of it. We own the intellectual property for it. People are dying for no reason. For no reason. We developed this drug."
In a tweet following Thursday's hearing, Ocasio Cortez answered her own question on why Truvada's price is $8 in Australia.
"Spoiler: Because Australia has universal healthcare," wrote the New York congresswoman.
The reason the United States hasn't joined the rest of the industrialized world in establishing a universal healthcare system is not individual drug company executives like O'Day, said Ocasio-Cortez.
"I don't blame you. I blame us. I blame this body," Ocasio-Cortez said during the hearing. "Because every single developed country in the world guarantees healthcare as a right except us. Except the United States. Because we can't get it together. Because we don't have the fortitude to kick pharmaceutical lobbyists [out of] our congressional offices."

.@RepAOC @AOC: "I blame us. I blame this body because every single developed country in the world guarantees health care as a right except us, except the United States, because we can't get it together." pic.twitter.com/9adUIKQlIb

— CSPAN (@cspan) May 16, 2019

 

https://www.commondreams.org/news/2019/05/16/spoiler-because-australia-has-universal-healthcare-watch-ocasio-cortez-ask-pharma 

Letter to the editor: Health care for all would cut costs

Letter to the Editor - Portland Press Herald - May 16, 2019

Workers currently spend close to 40% of their incomes on health care in return for relatively poor outcomes.

Workers currently spend close to 40% of their incomes on health care in return for relatively poor outcomes.

A Maine legislative committee recently began considering eight innovative bills aiming at health care for all.
As a longtime Mainer originally from Connecticut and New York City, with family in Germany and clients around the world, I’ve given a lot of thought to how “people from away” take care of themselves. They do a better job than we do.
It’s about time for Maine – and America – finally to start giving serious thought to universal health care.
Some conservatives like to say, “Oh, we can’t have that. It’s too expensive, and nobody wants to pay high taxes like the Europeans do.” But in reality, the vast majority of Maine employees already have private health insurance premiums automatically deducted from their paychecks.
If you look at these deductions as taxes – which they are, for all practical purposes – we pay some of the highest rates in the world, according to People’s Policy Project (close to 40 percent of our income!) while getting some of the worst health outcomes of any developed country. By contrast, in Finland, for example, which has great health care but famously “high” taxes, the rate is only 23 percent.
This is ridiculous and unfair. All we’re doing is helping rich insurance and pharmaceutical companies get even richer – at the expense of every Mainer.
Fortunately, other states are already catching on. In New York state, for example, a recent Rand Corp. report on a single-payer proposal found that the plan would cut health care costs dramatically for lower-income people – while middle-class households would save about 10 percent of their income a year.
So what are we waiting for?
The time has come. Let’s iron out the kinks and – finally – launch true health care for all. It’s good for our fellow Mainers. It’s good for our economy. And it’s the right thing to do.
George Simonson
Harpswell
https://www.pressherald.com/2019/05/16/letter-to-the-editor-health-care-for-all-would-cut-costs/