82 thoughts on “Ezekiel Emanuel Appointed as Healthcare Advisor”

1. Maggie-
   I too am very excited about this growing health care team in the White House. People like Emanuel,Orsag,Lambrew are creative thinkers. My only provisos are that-
   -we/they really need to focus more on efficacy(does it work?) and safety (does it harm?) of al medical interventions before we start funding more into a bloated overused system.(at least by the insured)
   -we/they must incentivize more individual (health behaviors) and, more importantly, institutional(public health) prevention.
   Start by replacing heads of FDA and CDC.That’s a quick fix which begins to rebuild lost trust in our health agencies.
   Also JOBS is my own latest “health care plan”
   It’s all connected!
   Dr. Rick Lippin
   Southampton,PA

2. But when will he get a TV character modeled after him like his two brothers?

3. Not all of us share your enthusiasm for the Emanuel/Fuchs model, which uses VAT-financed vouchers to purchase private plans. Private plans are a very expensive method of administering health care spending. The European social insurance models that depend on private plans are amongst the most expensive (except for our dysfunctional, fragmented system of health care financing). Also, since health care spending is much higher in the United States, no longer affordable for working families, we need to have a revenue source that is considerably more progressive than a consumption tax (VAT). We need a larger transfer from the wealthy than a VAT would accomplish.
   In the past you have questioned the adequacy of the administrative savings of the single payer model, especially the reduction of the administrative excesses of the private insurers. The administrative burden on the delivery system due to multi-payer financing is also quite significant and would be reduced as well in a single payer system. You have stated that this is a one-time savings, but, in fact, it results in a permanent lowering of the cost growth trajectory. Those savings are very significant over time (Reinhardt, Lewin Group, and others).
   Also, a single payer system establishes a much more effective monopsony than does a multi-payer system, even if highly regulated. As such, single payer administrators could demand much greater value in our health care purchasing, including instituting some of the changes recommended by Emanuel and Fuchs that would improve quality and efficiency in our delivery system.
   Single payer really needs to be back on the table, but that will be very difficult considering the actors that are lining up in Congress and in the White House.

4. Ezekiel Emanuel’s plan suffers from the same defects that all supplement plans suffer from, in that it still pays private insurers for their high overhead, for profits, and for the exorbitant salaries of their executives.
   In order to make his voucher plan work, a huge bureaucracy would be required to rule and review the value of each voucher in order to fairly cover both low risk and high risk people. This would cost billions of dollars to perform a service that would not be needed in a more rational approach.
   Emanuel’s plan suffers an additional defect with its dependence on a regressive tax. Low income and middle income people will be forced to pay a larger fraction of their income for this tax than high income people. Also, a 10% VAT would leave health care significantly underfunded unless very drastic cuts were made, especially once he plows Medicare and Medicaid into this plan.
   Emanuel’s plan is certainly better than our existing system because it offers universal care and a plan for creating practice guidelines to control cost and improve quality, but bad because it preserves one of the major weaknesses of the current system and creates at least two new problems before it even starts.
   Daschle’s plan is better. It incorporates the best parts of Emanuel’s plan, eliminates the worst parts, and by adding a public insurer to compete with private insurance it offers a path to a more rational system.
   Of course, we in the US are being silly about health care reform. The solutions — either single payer or a very strictly regulated non-profit social insurance system — are right in front of us. We need to follow the example of Taiwan in the 90’s. They eliminated their dog eat dog private payer system by examining the approaches that were working elsewhere, then chose the system they thought was the best. As a result, their quality of health care skyrocketed and their system continues to work.
   As a further note: anyone who doubts the superior efficiency and cost effectiveness of single payer just needs to look at Medicare Advantage, where having private programs manage care costs between 20 and 30% more than the conventional single payer fee for service Medicare part A and B, and does not provide superior results.
   The answers are all in front of us. We just need to open our eyes.

5. Patrick & Don-
   You both advocate single-payer (though Patrick is also open to a government plan competing with private insurers.)
   I have no objection to single-payer. But the vast majority of Americans who have employer-sponsored insurance do not want to give it up for an unknown government plan.
   . And since Congressmen don’t want to be voted out of office, I think in this case, the majority will rule. Single payer won’t happen in the near future.
   If a government plan competes with tightly regulated private insurers ,and the govt plan is successful, over time, we might wind up with single payer–or something close to it.
   As I said I have nothing against single-payer, but I am WEARY OF SINGLE-PAYER SUPPORTERS WHO CANNOT BE BOTHERED READING WHAT THEY ARE ARGUING AGAINST.
   If you took the time to read my two posts on Emanuel’s plan, you would realize that in this context, HIS VAT TAX IS NOT AT ALL REGRESSIVE. QUITE THE OPPOSITE IT IS PROGRESSIVE. (For years, I wrote about taxes, among other topics, for Barron’s. I know what a regressive tax is.)
   Secondly, if you actually look at the publcly-available numbers on insurers’ admininstrative costs (marketing, advertising, lobbying, exec salaries and bonuses, underwriting, profits for shareholders, etc.) you would find that if you add up the administrative costs for all health insurers in America, you find that it equals 4.5 percent of the $2.3 trillion that we spend on healthcare.
   This is a nice chunk of change–roughly $100 billion dollars. But thanks to healthcare inflation, the $2.3 trillion national health care bill is growing at a rate of 6% to 7% annually.
   In other words, if I were elected czarina, and eliminated the private healh insurance industry tomorrow, the savings (4.5% of $2.3 trillion) would be wiped out in less than one year by health care inflation.
   What drives health care inflation? Not insurers’ administrative costs (which are relatively stable) but the spiraling cost of advanced medical technologies which we overuse. (Over-priced cutting edge, often unproven devices, drugs, diagnostic tests,new surgical treatments)
   You may say– “but I have heard that insurers administrative costs eat up 20% of our health care dollars.”
   NO. While it is true that any SINGLE insurer keeps 15% to 20% of your premiums to cover his administive costs, when you add all of the 20 percents together, you find that the health insurance industry as a whole spends roughly $100 billion on administration– or 4.5 percent of the $2.3 trillion that we spend oon care.
   (Keep in mind that well less than half of the $2.3 trillion that we spend on healthcare goes through the private insurers’ hands–governmetn pays for roughly half of the $2.3 trillion thorugh Medicare Medicaid SCHIP, the VA, the Defense Dept, etc.) and a signigificant chunk of the $2.3 trillion is paid, out of pocket, by individual patients.
   When you think of it that way, you put the insurers’ administrative costs in perspective, and realize this is not The Big Problem.
   Moreover, our fragmented system has other administrative expenses that it would have even if we had single-payer-. These are the expenses of so many solo practictioners and small practices filling out paper-work to get reimbursement, along with so many small hospitals in the suburbs, surgical centers etc. filling out paperwork to get reimbursements.
   If we had a system where all of the doctors and hospitals were consolidated into very large hospitals and very large multi-specialty units, all of them working for the government, their administrative costs would be much lower. We could have just 3 or 4 huge regional back offices doing all of the paper work.
   Also, if we offered only one type of insurance policy for everyone, there would be just one reimubursement form, and our administrative costs would be lowered again.
   But many Americans think they want a menu of insurance plans, and many patients and doctors like very small practices and small hospitals close to home–so until that changes we are going to have admnistrative expenses that are much higher than most other countires, even if we went to single payer.
   Patrick– On Medicare advantage– yes it is unnecessarily expensive. But some of that 20% to 30% goes to additional benefits that patients don’t get under Medicare (eyeglasses, prescripton benefits, free gym memberships–only part of it goes to the insurers’ adminstrative expenses.
   And no, Emanuel’s plan would not require a huge bureaucracy to look at each and every voucher.
   He devised the plan with highly-esteemed health care economist Victor Fuchs– who understands the economics of the plan very well. Try reading the book before jumping to unfounded assumptions.
   Finally on TAIWAN– Yes, the system works well–though it’s a much smaller country.
   More importantly, the Taiwanese accept 10% co-pays for all inpatietn care (a $30,000 hospital bill translates into a $3,000 copay) and 20% co-pays for doctors visits and outpaients surgery (a $34 co-pay for a $170 doctor visit and a $2,400 co-pay for $12,000 out-patient surgery.)
   They also must fork over even higher co-pays if they try to go to a specialist without a referral form a gate-keeper primary care provider.
   And because Taiwan doesn’t have enough money in its healthcare budget to do research on new technology it is very, very slow to adopt new drugs, devices, equipiment and procedures that are being used in other countries.
   This is probably all to the good, but not what Americans are accusomted to. What if you heard that France, German adn Canada all were using a new cancer drug that we didn’t have here?
   Also, in Taiwan doctors incomes are set by the government and are much, much lower than they are here. (This is another reason why they can provide care for a much, much lower percentage of GDP)
   Taiwan also limits how many procedures a doctor can do in a year.
   And Taiwan curbs how much medical care you receive. If you go to the doctor more than a certain numbr of times over a certain number of months, you will get a visit from the government.
   I don’t know what the govt’ rep says, but after such a visit, health care utlization by people who have been visited goes down by an average of 35 to 60 percent.
   (All of this is in an earlier HealthBeat post -here)http://www.healthbeatblog.org/2008/09/health-care-in.html#more
   So while Taiwan has a very good health care system, I am not at all sure that American patietns or doctors would accept the rules that make it affordable.
   When it comes to healthcare reform, nothing is “obvious” or “simple.”
   This, I’m afraid, is another example of the single-payer movement spreading partial information that is, in fact, misinformation.
   AT a community healthcare meeting that I attended recently, single-payer people who came to the meeting kept talking about “Taiwan.”
   It seemed that some had been sent to the meeting, by a single-payer organization that provides them with information.
   (Reportedly, this has been happening at community health meetings all around the country.
   Of course there is nothing wrong with single-payer advocates making their voices heard at these meetings, but it is troubling when they have been given mis-information (20%-35% of our healthcare dollars go to private insurers) or Taiwan has this wonderful high quality system that is really inexpensive.
   No, Taiwan has a system with 20% co-pay s, less advanced technology, serious caps on doctors’ salaries, gate-keepers, and limits on how much health care you can receive and how many procedures a doctor can do.
   In many ways, this sounds to me much better than our current system. But I doubt that he majority of Americans would be happy with it.

6. Here we go again falling into the trap of debating how to finance a fundamentally broken and bloated “disease care” system that needs a major overhaul lest it bankrupts the nation i its present form.
   Today I put this below comment in the Boston Globe
   “Kudos to Massachusetts for jumping in first. But we can learn from their mistakes also. And there is a glaring one!
   Mass,(especially Boston) being one the hubs of the excesses of a high-tech-high-cost treatment driven “disease care” system does NOT have an economically sustainable “health care” system.
   I’m a Doc from Philly which has the exact same problem.
   In cities like Boston, Philly, New York, Houston, LA and many others we need to transform medicine. Much of the excess has got to go and move toward primary care, prevention, home care and hospice.
   It will be painful but it is an economic imperative. Because, if we don’t, the current approach will bankrupt the economies of these cities and states and the nation as a whole
   Believe it!”
   Dr. Rick Lippin
   Southampton,Pa

7. Matthew & Dr. Rick–
   Matthew–
   Good to hear from you.
   Now I know you want a TV series about a dashing British blogger who comes to the U.S., makes good, marries, and becomes a billionaire (a tasteful billionaire, I might add.
   But you should try not be envious of the Rahm brothers.
   Dr. Rick—
   Thanks for the comments.
   I’m very hopeful the administration will focus on safety and benefits. At least both Orszag and
   Emanuel have stressed this in their writings.
   I also think this administraton is likely to emphasize public healht care. Obama has talked a about rebuildiing delapidated schools, and in the process, I hope that would mean installing gymns and safe playgrounds.
   And I agree, we need to put less of a emphasis on acute care (especially when so much of its is marginally effective or even harmful) and more on
   managing chronic disease, preventive care and helping patients help themselves.

8. Maggie —
   I have read the book, cover to cover. I have not read your reviews.
   First, your technique for calculating overhead costs in insurance is flawed, since the result is clearly wrong. In fact, if you read the financial reports and analyses of reports of the operations of private insurance companies you will find that if they spend more than 80% of their collected revenue on paying for medical care they are considered to be making mistakes. That is the industry standard — 80% for medical care, 20% for other activity and profit. If you define overhead as income not spent on medical care, the standard overhead — including profits, sales, advertising, underwriting, salaries and profits is 20%. Since not all insurance companies succeed in meeting that goal, the real number for private insurance is around 18-19%. That does not include the costs providers spend on dealing with billing overhead. The average for physicians is 11%.
   In fact, I am certain that most physicians and hospitals would be deleriously happy if their overhead for billing — not the combined overhead with insurers — was as low as 4.5%. The overhead for Medicare, when providers’ and Medicare’s components are combined is over 4.5%. In my own practice, billing overhead was around 6% just for my side, and I was very low compared to many of my peers.
   In his book Emanuel promises that he will adjust the health voucher values to reflect the risk for the insured, to make cherry picking by insurers not profitable. He does not say how he will do that, but to rate every American for how much he or she should get to pay for coverage is going to require a lot of work by someone. Re-rating everyone every year to compensate for changes in health status will require more work. Since this is a public program we can assume that there will be a certain number of appeals, which will require more work. This has got to be done by someone. Even the income tax system, where the customers do most of the work, has a large overhead.
   On the issue of regressive vs progressive taxes. Unless there are huge exclusions of large areas of goods and services, sales taxes and VAT actually collect a larger percentage of the incomes of low income and middle income people. The high income people, unless they live a lifestyles of the rich and famous life, do pay more tax but they pay a smaller percentage of their total income to the tax, because high income people do not spend all of their income on goods and services. A large part of their incomes goes into investments and savings. Households at or below the median income level do not put a lot of money into savings, since they have to spend almost all their income on living expenses. The VAT applies to a lot of those expenses, or if it exempts things like food, clothing, automobiles, energy, and so on it will collect even less money or have to be raised. If the proposed VAT applied to 100% of the GDP it would collect about $1.2-$1.3 billion, which would be just over 50% of health spending, which is unlikely to be enough to finance the proposed system. I would define a tax that collects a higher percentage of the income of low income people than high income people as regressive. You may define that differently.
   I am very aware of Professor Fuchs credentials as a health economist. However, he is not the pope of health economists. There is a list of health economists as long as your arm who disagree with him and with this proposal.
   The fact that the Wall Street Journal editorialists agree with the Emanuel/Fuchs proposal is good evidence that it probably does not benefit most people. These are the people who denied that our financial system was in trouble as late as 8 months ago, and derided those who said it was.
   Taiwan: I am not saying we should adopt Taiwan’s health plan. I gave Taiwan as an example of a rational way of creating a new health plan, instead of the political dueling and trying to create a program from whole cloth that we are stuck with here. Foreign health systems work, and work much better than our system does here. Let’s look at those systems and get one of our own. We may want to take items from several systems, but the idea that we have to invent health care reform when in fact we are coming to it BEHIND everyone else is silly.
   BTW — Taiwan does have circuit breaker programs for low income people, so many people do not pay the entire deductible.
   Now if the czarina were me, I would probably recommend a program more like Germany and France and less like Taiwan. Mandate insurance for everyone. End for profit health insurance and health care. Continue private insurers but regulate them very tightly in terms of price, benefits,payments to executives, and access. Create a central program for analysis of scientific information about health care standards and allow that organization to implement controls on payments to keep spending on useless, harmful, or wasteful procedures and treatments down and to mandate safety and quality programs. Use a national electronic medical record system, put in by the government as part of the fiscal stimulus plan, to keep records easily obtainable by all providers,to collect data, do billing automatically, and to help providers make appropriate choices. Negotiate aggressively on a national basis with drug and equipment vendors for the best prices. Have people pay for their own insurance up to some part of income unless they are near the poverty level, with supplements from the government to help low income people and people whose expenses go too high. For most people I would use the income tax system with refundable income tax credits as the tool for keeping payments affordable, although some system for very poor people to get money to pay for insurance before their tax refunds the arrive following year would be necessary.
   But I am not czarina, so the two things I want to see in a reform program are 1.) a National Health Board that does the work of providing data on effectiveness and cost-effectiveness of procedures and treatments and 2.) a public insurance plan open to everyone in order to offer the opportunity to enroll in a public plan if desired and to compete with private plans in terms of costs and benefits. This will answer the question of competing costs of overhead and other questions about private vs public insurance once and for all on an empirical basis, since if the private plans cannot match the public plan they will fail in the competition.
   Emanuel, regardless of what you think of his financing system, offers the first of these but explicitly rejects the second. Therefore I do not like his plan as well as others — say Tom Daschle’s as outlined in his book.

9. Maggie,
   Please accept my apologies for not communicating well, and especially for making you angry (as your shouting would suggest). My intent was to discuss policy, but not to argue ideology.
   I’m not sure why you say that we can’t be bothered with reading what we’re arguing against. I have read Emanuel’s “Healthcare, Guaranteed,” and your previous posts about it. In fact, I’ve even debated Victor Fuchs at Stanford University on their voucher model versus our single payer model.
   Regarding whether a VAT is progressive or regressive is not the important point. Most would define it as regressive since wealthier individuals pay a lower percentage of their income as a VAT than do individuals with less income, even though the dollar amount increases with income (Emanuel’s basis for saying it is progressive). The important point is that our health care spending is now so high that a large transfer from the wealthy would be required, much more than a VAT would enable. Milliman has shown that average health care spending for a family of four is now $15,600, with a family income typically around $60,000. That bill for average families can no longer be paid without a very largee transfer from the wealthy to the majority. A VAT won’t do it.
   Regarding the administrative costs of private insurers, medical loss ratios are typically around 82 percent (range 70 to 91), leaving about 18 percent for administrative costs and profits. Kahn and Kronick have also shown that the administrative burden that private insurers place on hospitals and physicians combined consumes about 12 percent of the private insurance premiums. So about 30 percent of private insurance premiums are used for administration. Not all of that is recoverable, but much is. There are other administrative savings in the single payer model such as the much lower administrative costs of financing hospitals through global budgets rather than based on specific services rendered.
   According to Uwe Reinhardt’s application of the McKinsey Global data, the excess spending (recoverable) on health administration and insurance for 2008 is about $150 billion, and it grows every year. (Other credible estimates have been even greater.) Reducing administrative waste is only one of the benefits of single payer financing, but it shouldn’t be dismissed merely because, when it is expressed as a percent of our NHE, it is a relatively small number. Recovering this large amount of waste is an argument for, not against, the single payer model.
   Regarding Taiwan, at our last PNHP meeting Tsung Mei Cheng presented a review of single payer reform in Taiwan. I also assisted her in a workshop on this topic. Although, as you mention, it is not a perfect system, the overall perspective is that it is a dramatic improvement over what they had before. Again, this is an argument for, not against, a single payer system.
   We make every effort to avoid spreading “partial information that is, in fact, misinformation.” It is our mission to educate our colleagues and the public on the single payer model, using the most complete and accurate data available. The issues are complex and sometimes can be misunderstood. Any deficiencies in our communication shouldn’t be allowed to detract from the ultimate goal of adopting reform that would provide everyone with affordable access to a high-performance health care delivery system.

10. Dr McCanne says”The issues are complex and sometimes can be misunderstood. Any deficiencies in our communication shouldn’t be allowed to detract from the ultimate goal of adopting reform that would provide everyone with affordable access to a high-performance health care delivery system”
    (although I respectfully reject Dr McCanne’s “high performance medicine” language personally=too expensive)
    His statement is an excellent sensitive statement about complexity and emotionality of communications and correctly concludes with the hope that all of us are moving toward some common goal.
    However,I would like to hear from both him and Dr. Schoenfelder on some of the economic projections that Mssrs Peter Orszag(CBO-now OMB) and David Walker (former GAO head) make about escalating health care costs being THE central threat to the economy of this nation.
    Not knowing other nations’ economies (Taiwan, France, Germany,others etc)that well I personlly suspect that if they are economies with an aging demographic they face the same deep future economic troubles we face
    It is time to get serious about two issues in my opinion- 1)some coverage for all but 2)creative and bold plans to implement major cost cutting (always as fairly and compassionately as is possible)
    The “single payer crowd” (and of course they are not monolithic),in my opinion, has not yet understood the magnitude of cost cutting that we need in US Health Care(“yesterday”)
    Dr. Rick Lippin
    Southampton,Pa

11. Dr. Lippin doesn’t like my use of the term “high performance” health care system, but it didn’t originate with me; it has appeared in publications from the Commonwealth Fund and other sources. Our ranking of 37th on the 2000 World Health Report was on “performance.” My use of high performance should not be equated in any way with high tech, which is a mix of high performance and very lousy performance. In fact, as you are aware, the Dartmouth studies of Wennberg, Fisher and others have confirmed that high tech excesses are a major contributor to our very high health care costs.
    The projections of David Walker and then Peter Orszag are certainly disturbing, but I have some faith in our incoming and future stewards. There is a point where those paying the bills will no longer tolerate a shift from other priorities to health care. That is not a wall that all of us will hit at once. The level of financial hardship tolerated for any of us as individuals and for society collectively varies depending on circumstances and timing, amongst other factors. Those with health care needs who are uninsured or underinsured are already there. They need relief now. As we move forward with reform that improves affordability of health insurance, the problem of affordability of care will become even greater. (See this week’s brief, “Living on the Edge,” from the Center for Studying Health System Change.) We really do have to do something now.
    Probably the single most important measure to control spending and improve value would be to realign incentives to promote a strong primary care infrastructure under the medical home model, while reducing incentives for non-beneficial high-tech excesses. That would be most easily accomplished through the purchasing power of a single payer monopsony. For those who say that we can’t do that, Medicare has already starting shifting funds from imaging services (a prime example of high-tech excess) to primary care services. Unfortunately, Medicare covers only about 15 percent of our population, and, as a result, is a relatively weak monopsony, and therefore has only a limited impact on changing our health delivery infrastructure.
    We do need to improve planning and budgeting of capital improvements, which is easier under a single payer monopsony. Excess capacity does result in excess utilization. Global budgets for hospitals improve value. Negotiated rates covering legitimate costs and fair profits can improve value (eliminating inappropriate marketing, excess profits, etc.). Administrative efficiency has been discussed and is a potential source of very significant savings. More information (Cochrane Reviews, NICE, etc., etc.) combined with an integrated information technology system can guide higher quality care, again reducing waste in non-beneficial or detrimental services. (Incidentally, aging is not a significant contributor to health care costs, but is a modest factor in transfer because of the declining ratio of workers to retirees.)
    Some of this can be accomplished through a social insurance model of private plans such as the Emanuel/Fuchs model. But it is a more expensive model than single payer, and the fragmentation of using multiple insurers makes public oversight more difficult, and creates unnecessary equity issues. It also limits choice since the insurers sequester providers.
    Anyway, we already are spending enough to provide high quality care for everyone. We simply need to reform the financing system so that we can use our resources more effectively to improve our health care delivery system.

12. Dr. Rick –
    “However, I would like to hear from both him and Dr. Schoenfelder on some of the economic projections that Mssrs. Peter Orszag (CBO-now OMB) and David Walker (former GAO head) make about escalating health care costs being THE central threat to the economy of this nation.”
    I couldn’t agree with you more that we face the danger of the economy being destroyed by health care. We now (2006) pay 16% of GDP for health care. With the recession that number will rise by at least 1 or 2 more points. By 2015 it is projected to be at least 20% of GDP, and by 2030 as much as 30%. We will not be able to afford health care and continue to live as we do now.
    Far from being an argument against development of a single payer system or a social insurance system, this is an argument that we cannot afford to NOT adopt those systems or something very like it.
    There are clearly three things wrong with US health care. One is that too many people are excluded from the system, with 47,000,000 uninsured (a number rising with the recession) and at least that many underinsured to the point that they don’t seek health care or follow health care instructions because of cost. The second is that health care is destroying the economy. The third is that US health care is not as effective, measured by statistical data, as health care in most developed countries.
    Our spending as a percentage of GDP is one third higher than the second most expensive system (Switzerland) and from 50% to 100% higher than most systems.
    If we are going to try to reduce costs to closer to world norms, there are some obvious ways to start.
    The first and most attractive, since it has no impact at all on health care itself, is overhead related to the payment system, both on the side of the providers and on the side of the payers. Maggie says $100 billion potential savings. Health care economist Uve Reinhardt says $150 billion. Estimates from the famous NEJM article are as high as $300 billion. Regardless of the level, saving this amount on a year in year out basis is a nice piece of change. As the late Senator Everett Dirksen said, “a billion here, a billion there, and pretty soon you’rer talking about real money.”
    Reducing costs for pharmaceuticals and equipment is another attractive way to reduce cost without hurting care. Paul Krugman says that if we lowered drug prices for the public to the levels paid by the US VA system (prices obtained by negotiation and bidding) we would save $70 billion.
    The next step is a little tougher. We need to scientifically examine US health care and discover what is useful and what is not. It is clear that our high tech approach is not the best system, based on comparison with results in other countries on a condition by condition basis. Estimates for savings here range as high as $600 billion a year. There are over $60 billion a year available by changing management of coronary artery disease to comply with scientific standards, and another $60 billion from changing diagnosis and treatment patterns in back pain to reflect best available evidence. Headache evaluation, blood pressure management, and many other areas also offer large potential savings. Simple quality steps to cut infections, drug administration and prescription accidents, and injuries in hospital would save billions for very little cost. Getting people insured so they stop using ER’s for primary care is another cost savings. All this is obtainable not by rationing health care but by improving health care.
    There are savings to be made by installing an electronic medical record system throughout the US. The system MUST allow free transfer of data from service point to service point, and could also be useful in collecting data for further assessment of quality and effectiveness issues. Using the system to prompt providers to use the most effective medical practice is another potential use. Undertaking this project as part of the stimulus plan for economic recovery would be an investment that would yield dividends in the future.
    Experiments increasing intensity and frequency of contact between providers and patients with chronic conditions and assigning those patients a coordinating provider is an experiment worth trying in an effort to reduce costs for management of patients with diabetes, COPD, coronary disease, congestive failure, depression, asthma, and some other conditions. Much of this could be done by non-physicians either by telephone or with very short visits at low cost.
    Finally, we need to address the problem of pay scales within medical care. Some of this will require increased compensation for primary care and for time spent working directly with patients in cognitive areas, but some change (and as a highly paid specialist I grit my teeth here) needs to involve decreasing compensation for specialist procedures. CT, MRI, joint replacement, arthroscopy, endoscopy, routine laparoscopic surgery, and several other procedures all have compensation based on the procedures being novel, technically challenging, and time consuming, but have all now become routine and often very quick. Fees need to be lowered.
    The big question then is how to arrive at these necessary reforms and save the economy. I believe that reaching these points will require a powerful central structure to offset the power of interests that now profit from all this. Tom Daschle and Ezekiel Emanuel both strongly suggest the formation of a national board to examine these issues, to make them policy for public insurance programs (Daschle), and to strongly urge their adoption by private insurers as well as using the power of the marketplace to push private insurers in that direction.
    That is why I believe that the MINIMAL reforms needed (in addition to covering the uninsured) are first expansion of public insurance as an optional competitor to private programs to help put teeth in this prescription by creating an “honest broker” that will work for these programs without reference to profit and with the power of the government behind them, and second creation of a National Health Board charged with collection of data on effectiveness and promulgating the results of those studies as practice standards backed by insurance sanctions.
    It is important to note that this type of activity is characteristic of social insurance, single payer, and government owned health care systems in other countries. Britain’s NICE is the best known system in the US (cousins across the Atlantic and all that,) but every national health system has this feature. Every national health system is also able to reduce overhead costs and reduce drug and equipment prices compared to the US. Well organized national health systems with a degree of centralized power are very good at cost control and encouraging effective practice standards.
    As I have said repeatedly, despite all the talk, health system reform is not rocket science. It has already happened in many other countries, using many different approaches. Instead of trying to reinvent the wheel, we should spend our time looking at systems in other countries and stealing what we see that works and that we like. Come to think of it, that’s how rocket science started over here as well.

13. Drs McCanne and Schoenfelder seem to agree on the imperative of cost control. Thanks for your insightful responses.
    I believe Dr McCanne heads PNHP so he in particular needs to drive home the compassionate cost control message to those in his organization.
    We are all in “whitewater” right now and so much has changed even since the campaign.
    But the morality of providing some health to all citizens is a constant in my mind.
    But so is the economic viability of our nation?
    How to balance and time those dynamics is a complex conundrum?
    I hope Drs McCanne and Schoenfelder get a front row seat at the Obama/Biden/Daschle planning table
    And I hope that Maggie Mahar plays a key role in helping to steer our nation to sensible long ovedue health care reform.
    Dr. Rick Lippin
    Southampton,Pa

14. Interesting exchange of info.
    My two cents, although there are a plethora of issues on the table: administrative costs and public plan.
    Although the 3% number gets mentioned frequently, and is dogma (like “47 million uninsured”), having read oodles about it, I am not convinced it is enough. Have you ever tried getting phone service from Mcare/Mcaid related entities? Not that MCOs are great, in fact many are atrocious, but the publics’ are worse.
    The privates will also skin you alive and leverage every opportunity to keep a nickel; but I witness it daily and fraud and abuse is rife in our public plans. Pick up the NYT on a monthly basis to get up to speed on that front (as most of you read I am sure), although they are far from the last word on this issue. That needs a step up as well–and these plans are underpoliced and gauged excessively. Also, many point out that with the support of other US agencies, public plans get a financial leg up. While the percentages are debated, I believe this.
    By economies of scale, a public plan will be cheaper for sure. But while the MCOs may gouge excessively in one direction, the public plans will need to up there ante and wont be as cheap as touted. International comparisons and the cost of their systems are helpful, but not entirely relevant. You must factor free market/US flavorings into our model–they are not going to go away, try as you may.
    Brad

15. I would like to throw a few comments into the mix here, though I’m not a doctor. My expertise is in finance and economics.
    First, with respect to the potential for administrative savings from a single payer system, it is important to note that insurance company administrative costs are materially overstated. Slightly more than half of the population that receives its health insurance through an employer is in self-funded plans. The medical claims of self-funded members do not flow through the insurer’s income statement but all of the administrative fees (claims processing, disease management, etc.) do. UnitedHealth Group, for example, pays approximately $30 billion of claims on behalf of self-funded employers, none of which flows through its income statement. Administrative costs associated with these medical claims are in the mid-single digits. Moreover, while 80% is the target medical cost ratio for commercial risk based (as opposed to fee based) business, the target MCR for Medicare business is in the mid to high 80’s with a sustainable pretax profit margin of 3%-5% because average spending per member is 2-3 times higher.
    Regarding drug price negotiation, the VA has a highly restrictive formulary. If CMS opted to embrace the VA’s approach for Medicare Part D beneficiaries, it is questionable how accepting beneficiaries will be if half to two thirds of the drugs they previously had access to are no longer available to them. A significant percentage of VA clients are also Medicare eligible, so they can easily go outside the VA system if they are not satisfied with the VA’s limited formulary or any other aspects of the VA system for that matter.
    I’m pleased to see that the need to reduce wasteful healthcare utilization (spending) is finally starting to get the attention it deserves. At the same time, it’s disheartening that lobbyists were able to stop CMS from pursuing an obvious money saving strategy like putting durable medical equipment out for bid. The Congress also will not allow CMS to take cost into account in determining what drugs, devices and procedures to pay for or not pay for. While I’m all for unbiased comparative effectiveness and cost-effectiveness research performed by an independent board, it’s hard to be confident that CMS will actually be allowed to use those findings to make coverage and payment decisions. By contrast, an independent board of experts could provide the political cover and moral authority to allow private insurers to incorporate the board’s findings into the insurers’ coverage and payment decisions even if CMS can’t or won’t.
    On the subject of global budgets for hospitals, this is what Canada does. If I were a hospital CEO, I think it would be very hard to accurately forecast costs a year in advance especially if my service territory were growing in population or was subject to an unusual outbreak of sickness or, God forbid, a terrorist attack. Even under normal conditions, what happens if the hospital burns through its budget by the end of October? It sounds like a recipe for rationing to me.
    On the other hand, one idea that I would like to see us copy from Taiwan is the smart card that each individual carries. As I understand it, there is a chip included that incorporates at least some of the holder’s medical records, it facilitates payment for services and keeps track of utilization at the individual level. All of those are good things.
    Maggie has written extensively about the differences in expectations among Americans with respect to end of life care as compared to people in other countries. Some of this is religion based, some is cultural but it results in much higher costs here. Our litigation environment and doctors’ perceived need to practice defensive medicine also drives up costs. So does the prevalence of many solo and very small group practitioners. None of these realities have anything to do with how the system is financed or whether providers and insurers are for profit or non-profit entities.
    Ezikiel Emanuel, in his book, opposed a single payer system because it would likely stifle both innovation and competition. Medicare was around for 41 years before it finally offered a prescription drug plan which private insurers had offered for decades. While we should be perfectly willing to incorporate good ideas wherever we can find them, the reforms we ultimately enact must be consistent with our culture and our values. One of those values, I think, is choice. Another is competition, even if it costs a bit more on the administrative side. A single payer system may be perfectly fine for the UK and Canada, but I don’t think it’s a good fit for the U.S.

16. Medical innovation and government health care: Opponents of government based health care like to bring up the notion that government based programs would stifle innovation. This is another sad example of American ignorance of the world.
    In fact, a large share of the innovation in medicine in terms of procedures, equipment, and pharmaceuticals comes to us directly from countries with national health programs. Modern angiography was developed in Sweden. The MRI and CT machines were developed in Britain. The modern mammogram machine is from France. High speed CT and CT angiography are from Germany. Endoscopy, endoscopic surgery, laparoscopy and laparoscopic surgery come from Japan. Japan, Switzerland, and Germany lead in orthopedic surgery innovations. Vascular interventional procedures and the stents used in them are European inventions. Many if not most pharmaceuticals are developed in countries with national health care.
    The US leads in use and overuse of high tech medicine, but is usually not the site of innovative changes.
    Second, fraud. The problems with fraud in Medicare and Medicaid are widely publicized. Unfortunately, fraud is just as much a problem in private insurance. It gets much less attention because of a number of reasons. First, when private insurers cite fraud they are often accused of trying to exclude people from benefits. Because of this and because of business reasons, private insurers publicize fraud much less, while public programs must report fraud. Second, remember that when you read about fraud in public programs, you are reading about it because they caught it. Public insurers are charged by congress and legislatures with detecting and reporting fraud and are armed with the power of government in investigating fraud, so they find and punish a lot more of it.
    A lot of Medicaid “fraud” is about people who are not eligible for Medicaid trying to get it. Usually these people are poor people who are just above the level for qualifying. A conservative economist told the NY Times that NY Medicaid should stop paying as much attention to that problem, since policing for it was both costly to the system (a large part of the cost of many state Medicaid systems is devoted to the qualification and re-qualification process) and acted as an impediment to legitimate claimees seeking coverage. “The worse thing that would happen is that people would get health care.”
    Since Medicare fraud always involves lying by using faked documentation, there is no reason to think that people are not faking documentation to defraud private insurers as well, since their systems are no better prepared to detect the faked documents than Medicare processors. In fact, many of the Medicare processors that are being defrauded are in fact the same private insurance companies we are talking about.

17. Pat
    My allegations of fraud in public system have nothing to do with enrollees. I agree, whatever, dollars attributed to that payer segment is small. Pharma, devices, hospitals and big ticket items are the culprits.
    Health Affairs and NEJM have written a number of pieces in the past referencing the high relative amounts of absolute dollars lost from public programs. The attribution is usually underfunding (even relative to private sector). This is not a negative, it just needs more attention and is fixable. Regardless, I would be interested in seeing references from peer review journals looking at public vs private fraud and their respective contributions. Please reference any credible links looking at the data if you have them.
    As far as innovation, arguments play on both sides. Frankly, I dont know the right answer, but it is not as simple as you describe. Anecdotes are helpful, but given the thousands of interventions used in medicine, and the many emanating from US even on a per capita basis, we are still the world’s leader. The root cause of innovation- private vs public dollars, industry vs AMC’s and the like, etc., is something that we can debate. My guess it will come down to both ideology and data. Too much free market or government control are probably both limiters. If you disagree, lets agree to disagree.
    Thanks
    brad

18. Brad F and Barry
    Thanks for jumping in.
    A few reactions.
    Brad(nice to meet you)- I agree that the manangement of public plans is anything but free of problems. I work for DoD Medicine and it is NOT pretty.
    Barry-Yes American values are important like choice and competition but the last 30 years of the excesses of worshiping to the “god of competition” has brought us to the current economic brink. Furthermore health care is NOT a commodity despite Uwe Reinhardt comparing it to purchasing cars, toothbrushes or cell phones.
    Also as I have said before on this blog- Americans will finally mature, both individually and as a nation, when we deal with the death and dying issue.
    It is actually central to defining what we as a nation really believe in and will highly influence what our health care delivery system will ultimately look like.
    But we need to talk about it!
    Dr. Rick Lippin
    Southampton,Pa

19. Rick
    Same here. You are a gentleman and a class act. The board is lucky to have your input.
    Brad

20. Brad F and Barry;
    Thanks for your comments.
    A few thoughts from me.
    Brad F (nice to meet you:))
    I agree that public sector health care administration needs vast improvement also.I work in DoD Medicine and the bureaucracy and resultant waste is not a pretty picture.
    Barry- Of course American values are important but “worshiping at the alter of excessive competition” over the past 30 years in this country has brought this nation to an economic brink. And health care is NOT a commodity despite Uwe Reinhardt comparing the purchasing of health care to purchasing of a car, toothbrushes,or cell phones.
    Finally, on this blog, I have agreed with Maggie Mahar that when we as a nation finally deal with the death and dying issue we will begin to grow up. And our national views toward death and dying will actually be central in ultimately shaping what our health care system will look like.But we MUST talk about it more in our deliberations!
    Dr. Rick Lippin
    Southampton,Pa

21. More on innovation:
    First, the US is the world leader in cancer care. You can look it up. Innovations in cancer care usually come out of the NCI and its programs.
    Second, in terms of revolutionary “big bang” innovation, the US is a follower, not a leader. In 34 years in medicine I have trouble thinking of a high profile change in medicine outside of oncology that originated in the US.
    Third, the US is the world leader in modifying and improving innovational changes once they become available. US companies in technology and pharma excel at tinkering with existing products to improve them and to capture market share.
    Therefore I do not doubt that US tech and pharma companies hold the largest number of patents on products per capita or even on an absolute basis.
    Finally, US basic research in biology and related fields is the best in the world (just look at the Nobel’s,) but this has little to do with our health care system or our capitalist system,and a lot to do with our huge public or publicly financed higher education and research system.
    So if you are looking for the next wow!! in medical advances, on the basis of odds you should look to Europe and Asia. If you are looking for grinding out improvements in existing tech and pharma look to the US. If you are watching for innovations in oncology, the US will be most productive. And if you are looking for basic science research, the US is the leader.
    But I don’t think this establishes that government health care stifles innovation, which is what we are talking about. In fact,just look at the contribution of the VA system in the US to medical research and innovation over the years.

22. On innovation:
    Almost five years ago I participated in a panel debate that included Milton Friedman. The conservative moderator asked me how I expected innovation to occur under “top-down command and control.” After mentioning the British contribution to imaging technology and their sharing of the Nobel Prizes, in spite of the modest financing of the British health care system, I added, “There’s no way the drug industry is going to walk away from $1.6 trillion, period,” (our NHE at that time). Although the libertarian organization sponsoring the event included this comment in their transcript, the conservative moderator deleted this, and only this comment from the transcript he posted on his website.
    When one-sixth of our economy is health care, innovators will always be there to try to get a piece of the action. Ideologues can can debate the implications of public versus private sources of funds, as if there was much of a difference, but true innovators will always be there to try to plug into the money stream. Of course, public stewards, if they are doing their job, will demand value before they let the innovators plug in.

23. Don and Patrick–
    Thank you for responding
    .
    Don– thanks for your 1st response. I’m sorry that the CAPS feel like shouting–I don’t know how to insert italics (which are indeed quieter) in this “comment” format.
    I’m just frustrated because some single-payer advocates do respond to posts without reading them.
    (for example, Patrick’s comment, just below yours, he makes it clear that he didn’t read what I tried to explain in the posts about Emanuel’s plan.)
    I shouldn’t have tried to repond to you and Patrick in one comment.
    So let me just respond to your points, one by one. (Then I will respond to Patrick in the same way.)
    On the VAT in Emanuel’s plan, you write: “Most would define it as regressive since wealthier individuals pay a lower percentage of their income as a VAT than do individuals with less income, even though the dollar amount increases with income (Emanuel’s basis for saying it is progressive). ”
    Emanuels’ “basis for saying his VAT is progressive” is Not that the dollar amount increases with income.
    His argument turns on what lower-income people get in return for the VAT.
    Even if a median income family spends every penny of their income (say an income of $60,000–which is roughly joint median income) their 10% VAT tax would be just $6,000.
    In return they would get family insurance worth roughly $13,000 (the price for family insurance in today’s market) –at NO COST.
    A family earning $200,000–and spending every penny– would pay 10% VAT taxes of $20,000–in return for a family policy worth roughly $13,000. (Net cost: $7,000. )
    The wealthier family is paying $7,000 into the universal coverage program. In their income bracket, this is affordable, though no doubt some families would feel that this is an unfair the burden.
    But what Emanuel is proposing is that wealthier families pay for a program that subsidizes the median income family that gets a $13,000 policy for $6,0000
    This is a progressive tax.
    Secondly, on the administrative costs that private insurers impose on the health care economy,
    you write:
    “Regarding the administrative costs of private insurers, medical loss ratios are typically around 82 percent (range 70 to 91), leaving about 18 percent for administrative costs and profits.”
    Exactly. The number I used when talking about administrative costs for any Single insurer was “15-20 percent”–which is to say that they pay out 80 to 85 percent of premiums on reimbursements for care. And I’m happy to use 20% as closer to the average of how much they keep. Here we are in complete agreement.
    But this is the important point: what does that mean in terms of how much of our health care dollars go to cover private insurers’ administrative costs?
    In your reply, you skip over the fact that, as I pointed out in my response, to your comment: “when you add up the 20% of premiums that individual insurers keep, the total, for the Whole Industry equals roughly $100 billion–or just 4.5 percent of the $2.3 trillion that we, as a nation, spend on health care each year.
    As I said in my reply –Since our $2.3 trillion health care bill is growing by 6-7 percent a year, saving 4.5 percent won’t do us much good.
    The savings would be wiped out in 9 months of inflation.
    You didn’t engage with this argument probably because, there is not much for single-payer advocates to say. The truth is that if if you eliminate the private insurance industry and its administrative costs tomorrow, you don’t begin to solve the problem of runaway health care inflation.
    Instead of responding to this point, you write: “Kahn and Kronick have also shown that the administrative burden that private insurers PLACE ON hospitals and physicians combined consumes about 12 percent of the private insurance premiums. ”
    But in truth, private insuers don’t “impose” or “place” these administrative costs on doctors and hospitals.
    If doctors and hospitals want to be paid, they have to file for reimbursements with someone–whether its the government or private insurers.
    It’s true that Medicare and Medicaid forms for reimbursement ae generally less complicated than private insurers’ forms.
    But as long as we have a menu of policies and paitents have different choices, there will be many different forms, and more paperwork than in a country where everyone has exactly the same coverage.
    And even if we had a single payer system, the fact that we have so many solo practioners, small practices and small suburban hospitals means that we would have much higher administrative costs than in coutries where health care is less fragmented and there are few or no small practices and small hospitals.
    If all doctors worked for the government, and all hospitals were run by the government, you would need just one large back office filing for reimbursments.
    But the U.s. single-payer proposals I’ve seen don’t make all doctors government employees and
    they don’t have gov’t take
    over the hospitals. . .
    And so many small providers just cannot enjoy the same economies of scale.
    Private insurers are not “imposing” this cost on anyone. Private insurers are not insisting that doctors work in small practices, or that we have so many small hospitals.
    On what Reinhardt has said: A few months ago, I spoke at a conference with Uwe Reinhardt where he made it clear that insurers’ adminsistrative costs are not the problem driving health care inflation.
    On Taiwan: I also have heard Tsung Mei Cheng’s presentation on Taiwan.
    I personally think that Taiwan’s system sounds rational, fair and effective.
    But what makes it so much less expensive than ours is not because it is single-payer. There are many restrictions on the amount of healthcare a patient receives–that’s what makes the difference—not who is paying.
    What I said in my comment (and what Niko pointed out in an earlier HealthBeat post)- is that the Taiwan system involves trade-offs that most Americans would not be willing to make, at least not at this point:
    — 20% co-pays for out-patient surgery and doctors’ visits for middle-class Americans;
    –having to pay a significantly higher co-pay to see a specialist unless a primary care proivder “gate-keeper” ;
    –receiving a home visit from somone from the government if you have gone to the
    doctor “too often” in the past 6 months;
    –caps on doctors’ incomes that keep them much, much lower than most doctors’ incomes in the U.S.
    — caps on how many procedures doctors can perform without losing income;
    –very slow introduction of any new, cutting edge drugs, devices or procedures . . .
    I didn’t suggest Taiwan’s system isn’t good–just that it wouldn’t fly here.
    And, let me repeat: what makes Taiwan’s system So Much Less Expensive Is Not That It is Single-Payer But the High Co-Pays and
    Many Restrictions.
    Don–I respect your commitment to healthcare
    But I continue to be frustrated by
    the fact that so many single-payer advocates just ignore the arguments that they cannot easily respond to –and continue to use numbers in a way that makes insurers’ contribution to the high cost of U.S. heatlhcare seem much larger than it is.
    For exampleen Healthcare NOW (a single-payer advocate) tells people that by switching to single-payer we will be able to cover eveyone, giving them effective comprehensive care at no extra cost because under single-payer, we will save 35% of what we are spending now, they are simply lying to the public.
    Such lies lead people to think that if we have a single-payer system, everyone can have all the healthcare they want–at no cost.
    I just don’t understand this. Many single-payer advocates are very intelligent, honest people. But they seem to be wearing blinders–and stuck on one point of view as the cure-all.
    There is no single cure-all for the problems in our extremely complicated and wasteful healthcare system.

24. Rick–
    Yes–what drives healthcare inflation is not insurers’ administrative cost–(which remain quite stable year to year) it is the waste and the overuse of over-priced, often ineffective advanced medical technologies which focus (often futiley) on acute care–rather than wellness and prevention.
    It doesn’t matter who is paying the bills. they will continue to skyrocket until we squeeze the waste out of the system.

25. The historic unravelling of human genome was touted as bio-medicine’s next revolutiion.Stem cell research also enjoys this appelation.So far it seems that these pronouncements were either wrong or premature?
    Now I am not an anti-technology Luddite but several academics have written on the possibility that we may be on that part of bio-medicine’s technology curve where more research $ investment doesn’t yield justifiable ROI?
    But I suppose it is “anti-american” to believe that more technology may not save us or worse actually backfire! (See Tenner)
    As for me the real revolution in US Medicine will come not out of bio-medical science but out of the field of bio-medical and social policy ethics.
    In these latter fields I welcome the innovators we need now!
    Dr. Rick Lippin
    Southampton,Pa

26. Patrick–
    See my responses to Don about 10 minutes ago on
    Emanuel’s VAT, insurers’ administrative costs,
    and Taiwan.
    You misunderstand the numbers: INdividual insurers run an overhead of 20% (i.e. they take 20% of premiums to cover their overhead and profits.) Add all of those 20 percents up together and you get $100 billion or 4.5 percent of the nation’s annual $2.3 trillion health care bill. Since that bill is growing by 6 to 7 percent a year, even if you elminated the insurers’ overhead, your savings (4.5 percent of $2.3 trillion) would wiped out in less than one year.
    No reason why Emanuel’s plan couldnt’ include a public sector option. As he told me, it could be incl wuded, he just didn’t think it would be necessary.
    As to who does or doesn’t like Emanuel’s plan: The American Prospect’s Ezra Klein has called it the best plan he’s seen–so smart that probably we’ll never do it. (too smart for Congress to understand.0
    And Ezra doesn’t have much in common with the WSJ’s editorial board. That type of “guilt by association” argument is just never very convincing.
    The U.S. is not “first in
    cancer care” if by “first” you mean “best at reducing mortalities and saving lives” (the only sensible defintion of first.)
    We are first in terms of having more people live 3 years or 5 years after being diagnosed but that is only because we tend to diagnose much earlier (thanks to all of the diagnotic imaging.)
    So, here if you have prostate cancer, you might be diagnosed at age 57. In the U.K. your twin brother might be diagnosed at age 62. You would both die at age 64. (As the National Cancer Institute points out we have no medical evidence that early detection and treatment of prostate cancer “in any way alters the course of the disease or reduces mortalities.”
    The diseaes progreses just as rapidly whether or not detected early–and we have no evidence that any of the treatments that we now have give the average patient one extra day of life.
    But we are “first” in this sense: the American gets to walk around for 7 years knwoing that he has prostate cancer, and trying treatments that can make him incontinent, importent or both. His twin in the U.K. carries the burden of knowing he has the cancer for only two years.

27. Don–
    You write:
    “Probably the single most important measure to control spending and improve value would be to realign incentives to promote a strong primary care infrastructure under the medical home model, while reducing incentives for non-beneficial high-tech excesses. That would be most easily accomplished through the purchasing power of a single payer monopsony. For those who say that we can’t do that, Medicare has already starting shifting funds from imaging services (a prime example of high-tech excess) to primary care services. Unfortunately, Medicare covers only about 15 percent of our population, and, as a result, is a relatively weak monopsony, and therefore has only a limited impact on changing our health delivery infrastructure.”
    If you do a search on my blog you’ll find a number of posts that I have written about primary care and the medical home.
    I too favor trying to expand primary care, in part by raising fees.
    But if you look at what medical students, residents and primary care providers say, the problem is not just the fees.
    It is working conditions.
    This has less to do with insurers than with the way primary care physicians are trained in academic medical centers which place little value on primary care. (As Christine Cassel points out, at these Centers those training in primary care are usually in the basement, working without records or support while treating poor patients and Medicaid patients who come to the clnic where the residents work.)
    Then, when they get out in the world, many try to be solo practioners, or join a small private practice where they find the demands of being a primary care provider and trying to provide a medical home overwhelming.
    They’re trying to co-ordinate care with the 5 or 6 phsyicians that most older patients see, trying to get the patient to participate in his or her own chronic disease management, while having only 20 minutes for each patient (If fees are raised by a third–now they have only 15 minutes if they want to pay their rent and keep the ligts on)
    And they are supposed to be available 24/7 in some fashion or other (one of the requirements for medical homes.) They also probably cannot afford electronic medical records–even if they could, the current state of the art that HIT vendors are peddling is way too complicated and too expensive to work well for small primary care practices in our fragmented health care system. (See my recent post on electronic medical records.
    Single payer won’t change these problems.
    A very, very dedicated small practice might be able to provide a medical home,, but it would have to be made up of people who are not concenred with being home with their own families . .
    The most likely way to expand primary care is by providing financial incentives for more primary care providers to work in very large multi-specialty health care centers where primary care providers work regular hours, on salary, and have support in the form of many other doctors and the electronic medical records which work relatively well in these closed systems.
    Medicare is already talking about doing this.
    You suggest that Medicare doesn’t have much power.
    To the contrary: when it comes to fee schedules and deciding what to cover,and how to try to pay for value,private insurers have been following Medicare’s lead ever since managed care collapsed at the end of the 1990s.
    MedPac tells me that private insuers have been begging Medicare to crack down on waste–so that they can follow suit without taking the heat alone.
    Private insurers may pay slightly more than Medicare up and down the fee schedule, but if Medicare raised primary care fees and cut fee for diagnostic imaging, they would too.
    Btw — the last I read, Medicare is not cutting diagnostic imaging fees– at least not right now. Congress caved to GE and other lobbyists.
    This is an example of one of the problems with public sector health plans that people rarely talk about is that Congress is the ultimate CEO–and when influenced by lobbyists, politicians can do some very foolish things.
    An example: Medicare recently decided that it was unwilling to continue paying a very high price for a drug that combines two other drugs. Sold separately, the total cost of the two drugs was much less. So Medicare said that it would pay that amount, and patients could either buy the two drugs separately, or if they wanted the combination, they could buy it and make up the difference themselve. (I’m simplifying this somewhat, but that’s the gist of the story.)
    The drug-maker took the case to court. A Federal judge ruled in the drug-maker’s favor saying it was up to Congress to decide how much Medicare pays for drugs, not up to Medicare.
    Medicare said it might appeal, but if it goes to the Supreme Court, given the composition of the current court, it’s likely the drug-maker would again win.
    Neither a court nor Congress can tell a private insurer how much it must pay for a drug.
    Imagine what could happen if we had a single-payer system, and 8 years from now, in a backlash against Obama, the country elected Jed Bush president, and a conservative Republican Congress.
    At this point,our only healthcare alternative is the govt single-payer plan. Imagine what Jed Bush and a compliant Congress might do to that plan– a three-tier system, perhaps, with everyone free to buy (or forced to buy) the healthcare they can afford?
    Medicaid for all except the very rich who would have Health Savings Accounts, high-deductible plans, and the best tax shelter ever invented?
    No coverage for abortions?
    Think of what Margaret Thatcher did to the NHS.
    This is one reason why I like the idea of having a choice between public sector and private sector insurers. In times of truly bad government (and U.S. history suggests that there will always be such times)people will have an out. And insurers like Kaiser will step up to the plate to try to provide a good alternative.
    Finally Zeke Emanuel’s plan does a beautiful job of insulating healthcare from Congress and the lobbyists by stipulating that it will be funded by a dedicated VAT tax –and only the VAT tax.
    Revenues on a VAT will go up automatically with regular inflation; and the heatlh care system will not have to go to Congress for annual allocations.
    Meanwhile, the VAT puts a cap on total health care spending so that it runs more or less in tandem with growth in the economy.
    I haven’t seen a better plan for insulating healthcare from the industry’s lobbyists, and this is a major reason why I like Emanuel’s proposal.
    Anyone who says that a National Health Board that resembles the Federal Reserve will be insulated from politics didn’t pay much attention to what the Fed was doing during Alan Greespan’s tenure.
    The maestro was the ultimate political synchophant, raising rates or lowering them at the President’s bidding, while knowing that he was building bubble after bubble– first stocks, then real estate– while papering over excesses that would lead to the current melt-down.
    He just wanted to make sure that the meltdown happpened on somene else’s watch.

28. First point…
    Saying that the insurance industry only has medical loss ratios of 80%, give or take, doesn’t really tell the whole story on how much they’re costing us.
    First, all those layers of bureaucracy we’ve got: insurance companies, benefits designers, benefits managers, pharmacy benefits managers, radiation benefits managers, denial management services, billing services, coding services, utilization review, utilization management … [did I miss any?]. And you can hire auditors to check on each one of these layers too.
    None of these people are providing actual care.
    How many people are we talking about here? How much are we paying them? Are we getting our money’s worth from all these layers? My educated guess is: No, we are not getting our money’s worth, but real data is hard to come by if you’re just a blogger like me, sitting at the dining room table surfing the internet.
    Do countries with single payer, or even those with non-profit multi-payer, have this much bureaucracy?
    Just looking at insurance companies now, and setting aside for the moment all those others, how many employees per beneficiary are there in our system, and how many would there be if we went to single payer? Hard to find this information just surfing the internet, but from digging around in SEC filings and the Fortune 1000 list, it looks like UnitedHealth Group, WellPoint, and maybe a few other biggies have 1 employee per 400-800 beneficiaries. Canada, otoh, appears to have approximately 1.5 employees per 10,000 beneficiaries. That’s a huge difference. So, even though insurance companies are only operating with a 15-20% overhead, the fact that it takes 10-20 times more employees to run our system adds up.
    These are questions I haven’t got the resources to answer [a lot of the information is out there, but behind paywalls; no way can I afford to spend $10-$40 per journal article to research this stuff], but presumably groups like the Century Foundation do.

29. Second…
    If we need a National Health Board, why does it have to be tied to a VAT and to a for-profit, multi-payer system? Couldn’t you achieve the same goal of cutting out lobbyists with the same kind of board, dedicated funding from payroll taxes [along the lines of what John Conyers proposes], and a non-profit, single-payer system?

30. Third…
    On monopsonies, It’s my understanding [and I could be wrong so please correct me if I am] that in other countries with multi-payer systems, the government generally negotiates the prices, leaving the insurance companies to mostly just write the checks.
    Here in the US, otoh, we have zillions of payers negotiating with zillions of providers, with the result being that whoever is the best negotiator gets their preferred price. As far as I can tell, Emanuel’s plan leaves this structure in place, and just gazing into my admittedly faulty crystal ball here, I can foresee the insurance companies that ‘lose’ their negotiations with providers are going to try to make up for it by denying care.
    Patients are the ones with the least negotiating power of all — are they going to have the safety valve of leaving a bad plan in the middle of expensive cancer treatment to move to a better-managed plan, or are they going to be stuck with a company that might kill them before the next open enrollment rolls around?
    You mention Margaret Thatcher and the NHS, but at least everyone in the country is in the same boat if the national system makes bad choices, and better, more responsive politicians can be elected the next time around. And just to underscore the power of a pissed-off electorate, we can always point to the outcry over the recently defeated cuts in physician payments.
    As for the assertion that switching to single payer will only bring us one-time savings, that’s not entirely borne out by the experiences of other countries. In the early 1970s, Canada and the US both had the same for-profit, multi-payer system we’ve got now, and both were spending roughly 7% of GDP on health care. But Canda made the switch to single payer, while we continued on with the insurance industry. Fast forward to 30+ years later, and we’re spending 16% of our GDP while they’re only spending about 10% of their GDP. The pattern is similar in other OECD countries.

31. Last…
    This business about Americans being afraid to give up their insurance for an untested government program appears to be at best a profound misunderstanding and at worst an outright lie.
    Medicare is NOT an untested program, it’s been around, and working, for more than 40 years. And repeated polling, over many years, demonstrates that when you ACCURATELY describe single payer, ordinary everyday American citizens — voters! — prefer that option roughly 2:1 over the insurance system.

32. hipparchia–
    Medicare-for-all is an unkown program because no one knows the following:
    — how much it would cost Americans under 65.
    It wouldn’t be free-unless we hiked income taxes for people earning roughly $40,000 to $55,000 by 10 prcent or so, taxes for people earnign over $70,000 by 15%, taxes for people earning $100,000 by 20% . . .
    There just are not enough very very wealthy people to pay for universal coverage by simply raising their taxes. The middle-class and the upper-middle class would have to take a real hit–and pay European style taxes. In this economy, many middle and upper-middle class people really cannot afford to do that.
    — how many doctors would take it? (Right now, 30% of Medicare beneficiaries who are looking for a new doctor have a difficult time trying to find someone who is willing to take new Medicare patientt. Mecdicare fees for doctors are generally lower than what private insurers pay. If we moved to single-payer, and fees were equivalent to Medicare’s, many doctors would retire or set up “concierge: practices where they take no insurance and only see wealthy patients )
    –How high would the co-pays and deductibles be? (Both have skyrocketed for patients on traditional Medicare in recent years.)
    What would Medicare for all refuse to cover? (Traditional Medicare is planning to cut back on what it covers in areas like MRIs, marginally effective treatments, etc. It has no choice: Medicare is running out of money.
    But people who have employer-based insurance are fearful that Medicare-f0r-all might not cover the durgs they are taking (and it might not), or the treatments and tests they think they need (like PSA tests for average risk men, which the National Cancer Institute no longer recommends)
    You write: “You mention Margaret Thatcher and the NHS, but at least everyone in the country is in the same boat if the national system makes bad choices, and better, more responsive politicians can be elected the next time around . . .
    “If the political system makes bad choices, beter , more reponsive politicians will be elected . . .”
    Just the way we elected a better president after GWB’s first term?
    Just the way we elected a better, more responsive preisdent after Ronald Reagan slashed taxes for the very wealthy and made it clear that we would never have universal heatlh care?
    Just the way we elected a better, more responsive Congress after Congress blocked Clinton’s efforts at health care reform?
    Just the way we elected a more effective, reponsive and honest Congress after Watergate?
    As I explained, administrative costs in Canada are so low because the doctors work for the government and the hospitals are part of the government. There are no bills. No one has to file for reimbursements. Healthcare is largely paid for by taxes (which are significantly higher than they are here–as they are in all European countires.)
    Do you think that next year, we can simply tell U.S. doctors that they are now all governmetn employees, and their salaries have been cut by 3/4 (at the very top– the most expensive) to 1/10 (the least expensive– to fall in line with doctor’s salaries in Canada?)
    How well do you think that would play with their patient? (Many Americans don’t like doctors in general, but they like and trust their own doctor– just as they think that most of Congress is corrupt but like their own Congressmen )
    Fifteen percent of employees earning $70,000 or more pay Nothing toward their employer-based insurance.
    The remainder pay an average of 30% of the cost of their employer-based insurance.
    Do you really think that they haven’t figured out that Medicare for all would cost them more than zero to 30% of the actual cost of the insurance?
    The polls all show that the majority of people in this country are concerned about how expensive their own healthcare is. The majority are not concerned about the uninsured–even though they might become uninsured. (This is called Denial.) Things will have to get much, much worse for the upper-middle class (roughly, people earning over $70,000) for this to change.
    I think we may go to 10% unemployment, but even if the pain is evenly distributed among classes, 90% of upper-middle class people will still have a job and insurance, with their insure paying 75% to 100% of the coast. Why would they want to give that up??
    People earning over $70,000 are more likely to vote and to contribute to their Congressmen?
    Obviously, this gives them more clout with Congress.
    You seem to think that if we didn’t have private insurers, lower administrative costs would make health care much less expensive.
    Hare are some actual numbers: In both Germany and SWitzerland the average family pays $9,000
    a year in insurance premiums. (This is from Frontline’s recent report on Healthcare around teh World–http://pbs.gen.in/wgbh/pages/frontline/sickaroundtheworld/countries/
    And the average family income in Germany or Switzerland is less than average family income in the U.S
    Meanwhile, the average family in the U.S. who has employer-based insurance pays far less than $9,000 a year toward the premium.
    (Average family premiums about 13,000— even lower-paid workers with employer-sponored insurance pay only about half, or $6500,
    while higher paid workers pay something between 0 and $4500.)
    Families in Germany get high quality effective care, but they don’t get MRIs at the drop of a hat.
    They rarely get private rooms in a hospital. (Their hospitals are much more spartan than ours– not the same hotel-like amenities, and many fewer private rooms.)
    They receive fewer procedures, fewer tests and less expensive medication. They do not receive the same amount of end-of-life care. This is all to the good, but Americans would have a hard time adapting to the idea that the hospital is not going to do “everything possible” –whatever the cost–for your mother.
    In Taiwan, the average family pays $7700 in premiums (again Frontline) plus 20% co-pays for outpatient care; 10% co-pays for inpatient care, and many restriction on how much care you receive–
    see my response to Don.
    What this should tell you is that neither Taiwan’s single-payer system nor the largely public-sector program in Germany (only 10% of population earns enough to qualify for private sector insurance if they want it ) save huge amounts of money by being public sector.
    The answer to making heathcare affordable is not
    reducing administrative costs (which remain relatively stable, year to year) it is reducing health care inflation of 6% to 7% a year.
    That runaway inflation is the elephant in the middle of the room –and it is killing is. That inflation is driven by the fact that we consume more cutting- edge drugs, tests and treatments each year, and pay more for them each year. Meanwhile, about 1/3 of these drugs, devices tests and treatments provide no benefit –and in many caes, hurt us by exposing us to the risks of side-effects without benefit.
    This is what happens in a profit-driven health care system. The problem is not just for-profit insurers. They eat up a fairly small slice of the pie, and They could be regulated as they are in Europe.
    The problem is for-profit
    healthcare providers, drug-makers, device-makers, equipment makers. . . .all of them selling, and selling hard.

33. Maggie Mahar says-
    “That runaway (Medical) inflation is the elephant in the middle of the room –and it is killing is. That inflation is driven by the fact that we consume more cutting- edge drugs, tests and treatments each year, and pay more for them each year. Meanwhile, about 1/3 of these drugs, devices tests and treatments provide no benefit –and in many caes, hurt us by exposing us to the risks of side-effects without benefit”
    MAGGIE IS CORRECT!- MAGGIE -KEEP SAYING IT!OVER AND OVER AGAIN!
    Also you understand the politics in play right now
    Let’s hope Oobama/Biden/Daschle and health care team listen to you.
    Dr. Rick Lippin
    Southampton,Pa

34. “But I continue to be frustrated by the fact that so many single-payer advocates just ignore the arguments that they cannot easily respond to — and continue to use numbers in a way that makes insurers’ contribution to the high cost of U.S. healthcare seem much larger than it is.”
    Maggie, my respect for you just went up ten-fold.
    Kevin

35. In order to have a meaningful national health care system, it is incumbent upon the Federal government to incorporate workers’ compensation benefits into the plan. The co-ordination of benefits and the dispute over coverage and medical causal relation are fruitless burdens that stagnant the delivery of medical care.
    Jon L. Gelman
    Wayne NJ
    http://workers-compensation.blogspot.com/

36. I’ll agree with you that the drug makers are costing us a bundle [just one example: prilosec/nexium] and that among other things we’re probably going to have to have to either make drastic changes in intellectual property law, or just leave the me-too blockbuster drugs off the national formulary until after they go off patent.
    I know less about the device makers and equipment makers, but just going by the experiences of a few acquaintances, I can believe the same problems exist there too.
    But this all adds to the indirect evidence that the thousand or 1500 or howevermany payers we’ve got haven’t got the muscle to negotiate with the however many providers we’ve got.
    Alternatively, it suggests that some, maybe more than some, of them are in cahoots with each other. CVS-Caremark, now there’s a good example of a finely-tuned mechanism [not]. PBMs supposedly save money by, among other things, negotiating prices with pharmacies, but when the largest pharmacy chain buys up the largest [or one of the largest, I forget which] PBMs, that doesn’t exactly suggest that pharmacy benefits management was working. And if that’s an unnecessary layer after, might radiation benefits managers be useless money-sucking layers too?
    Not to mention the PBMs that acquire the exclusive rights to distribute a specialty drug and jack up the prices.
    The various layers I mentioned before, PBMs and denial management being just 2 examples, have sprung up in response to rising insurance premiums, and my thesis is not only have they not managed to rein in prices, they’ve actually added to the overall costs. The question that I asked, and that you elided [and to be fair, I haven’t gotten answers from anyone else either], is how much $$$ is siphoned off into the ancillary industries that exist [in large part] because of our stupid payer system, and how many of them would disappear if we went to single payer?
    I suspect it’s a lot of money, and that we could save that money by going to single payer, but we dining-room-table bloggers don’t have easy access to a lot of this information. I would have thought that an organization like yours would be able to take this on, but perhaps I’m presuming too much there.
    Nobody knows how much the under-65s would cost?
    Well, if we can’t easily get data on how much the insurance and associated industries are needlessly costing us and subtract that out, we could go at it from another direction.
    It’s not hugely difficult to predict what percentage of the under-65 population is going have a heart attack, or get cancer, or _____________ [insert expensive illness of your choice]. Actuaries live and breathe this stuff. From there it’s not hugely difficult to calculate number of hospital beds, number of doctors, nurses, chemotherapy doses, etc needed.
    There’s an even easier way — looking at countries similar to ours in standard of living, GDP per capita, number of doctors / hospitals / nurses / MRIs etc per capita, with a health infrastructure similar to ours as it stands now, and with benefits similar to what we [mostly] get now. What % of their GDP do they spend on health care? So we choose that number, maybe go 0.5%-1% higher, just to be generous.
    Germany, Switzerland, France, Australia, Canada come to mind. IIRC, they’re all spending in the neighborhood of 10-11% of their GDP on health care. Germany, Switzerland, and France all have tightly regulated multi-payer systems and are at the high end of that scale, while Canada and Australia have single payer systems and are spending a bit less. Even factoring in a generous % inflation I come up with $1.5-1.8 trillion for next year, or anywhere from about 20% to 35% less than this year’s spending. I know an awful lot of people who would happily pay 10-15% more in taxes in exchange for for a 20% or more cut in their medical expenses + insurance premiums, especially if it meant no copays, no deductibles, and no fighting with insurance companies.
    You say a lot of people in higher-paying jobs would balk at this arrangement, but has anybody ever actually asked them? Among other things, I can remember seeing at least one poll where people were willing to pay $50 more per month in taxes if that’s what it would take to insure the uninsured.
    Speaking of Canada [and France, Germany, Switzerland, Australia too] the doctors are in private practice, just like here in the US. Would doctors be willing to take a noticeable cut in pay in exchange for the very simplified payment system that Canada has? You say no, but has anybody ever asked them? In my jaunts around the medical and insurance parts of the blogosphere, indications are that many of them would gladly do so.
    Another question — these very highly paid specialists who might not want to take a big cut, are they ordinary doctors that all of us go to, or are they already in boutique practices catering to the very wealthy?
    Hard to find a doctor if you’re a new patient on Medicare? Don’t know about where you live, but where I live it’s hard to find a doctor taking new patients, no matter what the payment method.
    Medicare for all might not pay for drugs that people are taking now? Yes, it’s a possibility, but parts ABCD all evolved over time, we could fairly easily meld all those together into one working system. Eliminating Medicare Advantage, in which private insurers rather arbitrarily decide to stop covering drugs, and eliminating part D, with the dreaded doughnut hole, would go a long way towards eliminating those fears.
    Heh. Bad government. My congressperson is a far right Republican, voting like a good far right Republican should, but even he can be swayed by the old folks lobby. So Margaret Thatcher notwithstanding, there’s actually less to fear from bad government on Medicare than there is from insurance companies behaving badly. Unfortunately, people don’t really know just how much the insurance companies are getting away with. They are starting to find out though. There’s a reason why “murder by spreadsheet” gets a lot of Google hits.

37. This is great news!

38. Healthcare expenditures follow the laws of thermodynamics:
    1. You can’t get more than what you pay for.
    2. Don’t expect to get your money’s worth.

39. Agree with Jon Gelman’s comments below on workers compensation inclusion in a total health care reform package.
    I have been following Gelman’s writings for years and his ideas make a lot of sense.
    The waste and fraud in the “workers comp industry” is a travesty with most of the $ being diverted AWAY from patient care.
    Dr. Rick Lippin
    Southampton,Pa

40. Maggie,
    Because this is a blog, it would be inappropriate to post an adequate reponse to each issue addressed here (far too much material).
    When you say that we single payer advocates don’t have the answers, let me assure you that we do. When you point out that some of our responses are inadequate or miss the point, again we do have much, much more to say.
    Single payer advocates reading this blog can easily identify our points of disagreement, but I didn’t want others to think that we walked away with nothing more to say about the benefits of the single payer model, and about the deficiencies of the framing used to support other models (or more on the great many points on which we do agree).
    Our passion for health care justice is solidly supported by health policy science. Though we can’t provide an encyclopedic response here, we do have many resources posted at http://www.pnhp.org. I hope that everyone will continue to make a personal effort to be well informed on all views. I try to; that’s why I’m here now.

41. I also agree with including worker’s comp…however as we see our new health care plan develop it’s possible worker’s comp “coverage” could be a moot point. (with regard to medical care.) Here in Texas WC is more of an insurance policy for the employer to remove their liability (when a worker is injured during the course of employment.) I also agree with the ridiculous waste and “disputes regarding coverage” that develop from worker’s comp claims. My husband suffered an extensive injury at work and as a result I’m very familiar with how worker’s comp “works”….further once discharged from the hospital it was difficult to impossible to get any medical care for him through the WC system by any type of physician other than a chiropractor.

42. Dr. McCanne,
    Nothing personal to you, but I’ve had the same experiences as Maggie with regard to single payor enthusiasts, particularly in the wake of the movie “Sicko.” I’ll ask you the same question I posed to the Single Payor’s, and it’s one they couldn’t provide an answer to: How does single payor improve the quality and safety of healthcare? Although HB 676 did catch my attention…in fact I think I tried to get discussion on this blog regarding HB 676…there’s too many Single Payor enthusiasts that just aren’t credible and do more harm than good.

43. Dr.Emanuel’s Voucher/VAT plan would be highly acceptable if it took into account that upwards of 80% of the $2.3 trillion spent on medical care pay for non-value-added costs.
    · Why does he not speak for eliminating profits and administrative costs in this basic package of medical care rather than permitting insurance companies to further destroy the patient-physician relationship with vertical integration?
    · Why is he not paying due attention to producing a “hybrid” system incorporating the best components of the American system with the brilliant concepts of Taiwan, Germany and Switzerland; has he not viewed the PBS Frontline documentary “Sick around the World”?
    · Why has he not placed tort reform on the table?
    · We need a system that not only is universal, but also channels resources to care rather than non-value-added administrative games, corporate profit, defense fees for bogus malpractice claims, ridiculous pain and suffering awards and the rest of the world’s pharmaceutical R&D.
    · He also needs to factor into the plan the wealth that national health will bring to our GDP.
    Ethical policy supports the concept that it is as unconscionable for our society to continue without universal healthcare as it is to continue to waste resources on non-value costs.

44. Dr. McCanne, Al Cossar, Lisa, Kevin M.D. Dr. Rick
    Thanks for your comments.
    Dr.MCCanne–
    I am disappointed in you.
    To say “we have the answers” to your numbers, evidence and arguments, but just don’t have the space to provide those answers is
    simply absurd, especially
    since you are writing in the blogosphere.
    And particularly on this blog where, as you can see, I put no limit on comments, or on the amount of time and space that I am willing to devote to those comments, your excuse seems especially lame.
    I am reminded of an excellent book by Greg Anrig titled “The Conservatives Have No Clothes: Why Right Wing Ideas Keep Failing” which reveals that, when you scratch the surface, you find that conservatives usually have no real evidence or arguments behind their sound-bites and bumper stickers.
    This is one reason why some conservative think tank blogs do not allow reader comments. Readers might ask pointed questions that would pierce their carefully “framed” reallying cries.
    No surprise, the PNHP website offers no opporturnity for comments, cricism or questions.
    Just
    opportunties to sign up to endore the plan–and, oh yes, “Frequently Asked Questions and Answers” carefully constructed questions with canned answers designed to to cover all holes in the argument.
    I am afraid that you have exposed the fact that the single-payer advocates, too, are emperors without clothes –they have no real asnswers when presented with facts, numbers and evidence.
    I urge you to read the two new reports from CBO which demonstrate that Medicare cannot, at present, cover the people that it is trying to cover. It is spending more than it is taking in in taxes.
    , CBO shows that, in the very near future we will have to begin cutting back on what Medicare covers and/or raise Medicare payolls taxes (by 1/3) and/or hike co-pays and deducitbles and/or limt how much Medigap policies are allowed to cover and/or
    reduce consumption of healthcare by Medicare patients.
    Cutting back on what Medicare covers is not necessariy a bad thing. About 1/3 of Medicare dollars are wasted on unncessary MRI scans for breast cancer; unnecessary PSA tests; unnecessary angioplasties and bypasses;
    unnecessary diagnostic imaging of many kinds; unnecessary knee and hip surgery when physical therapy might well solve the problem; futile rounds of radiaton thearpy for people dying of cancer, grosly over-priced cancer drugs and over-priced drugs, medical devices and surgeries of may kinds.
    But Americans are accustomed to a great deal fo unnecessary over-priced care. A long process of education will be needed to convince them that more care is not better care–and can, in fact be hazardous to your health.
    I wish that PNHP would joint in that process to a much greater degree. It won’t make you popular, but it would make you more useful.
    On universal coverage, CBO
    is blunt: A universal mandate requiring that everyone buy insurance plus subsidies from the government will not do it.
    The only way we can have universal coverage is if we reduce how much health care Americans consume by “tight mangatment” of care (Saying No to treatments, tests, drugs unless there is solid medical evidence that it is effective) and/or require higher cost sharing from enrollees.
    Taiwan’s single-payer plan–the one that single-payer advocates point to as a model–does both.
    20% co-pays for all outpaient care. 10% co-pays for all in-patient care, plus annual premiums of $7,700 for the average family.
    Services are limited; if you see a doctor too many times over the course of a year, you will receive a visit from the government.
    Docotor’s salaries are much lower, and fall lower still if they perform too many services.
    You cannot see a specialist unless you pay a co-pay that is higher than 20%–or go through a gate-keeper primary-care physician.
    This is why Taiwan can offer good care to everyone at a lower cost.
    It has virtually nothing to do with the fact that they avoid private insurers’ administrative costs.
    But of course single-payer advocates never mention the high cost to the individual or the restrictions on care in Taiwan. . .
    I challenge you to post these facts about Taiwan’s plan prominently on hyour website under the heading: “Trade-Offs.”
    I actually think Taiwan’s plan is a pretty good one.
    But most Americans do not recognize the trade-offs they would have to make to cover everyone. And PNHP is not telling them.
    As I have said repeatedly, I don’t have a major problem with the concept of single-payer; I just know that most Americans are not ready to give up their employer-sponosred insurance and unless everyone joins the single-payer plan, we could not afford it.
    But I do have a major problem with single-payer advoccates because so many of them (certainly not all, but many) are not truth-tellers. The do not tell the public about the trade-offs.
    Al Cossari-
    Thanks for your comment.
    You’ll find all of the answers to your questions if you take the time to read his book–or at least to read my two posts on it
    (see links in my post).
    if you take the time to read this thread, you would discover that Emanuel has said that there would be no problem in having a public-sector
    Medicare for all insurance option included in his plan.
    Lisa, Dr. Rick, Kevin M.D.-
    Thanks!

45. John Gelman–
    Welcome–and thnks for your comment
    Unfortunately, I don’t know as much about worker’s comp as I should–I’ll have to begin reading your blog.
    But I trust others on this thread when they confirm that what you are saying is true.

46. OK. Now, in addition to reading everything said on this blog thread and the book “Healthcare Guaranteed,” I have now gone into Maggie’s archives and read both the articles on Emanuel’s plan she wrote last May.
    I still have some major problems with the Emanuel/Fuchs plan.
    The money:
    The plan proposes a 10% VAT. Imagining that it will apply to every dollar in the GDP that would raise $1.3 – $1.4 trillion, assuming no decline in GDP for recession and that VAT would actually cover every expense, military, education, medical care itself, and so on. A more reasonable estimate, based on granting exemptions for military activities, some education activities, some other service activities and so on, would be lower, perhaps as much as 15% lower. However, let’s stick with $1.4 trillion.
    Health spending in the US is now about $2.2 trillion and rising.
    Medicare accounts for slightly less than $500 billion.
    Spending for care of active duty military and qualified retirees is $40 billion.
    That leaves about $1.66 trillion of health care costs not covered by Medicare or military programs.
    Medicare premiums now are set at $96.40 a month. Deductible for Part A is $1024 for the first 60 days, and rises after that until it reaches 100% of costs at day 150. Co-pays for Part B are 20% after a deductible of $120.
    Based on this and the promise of no premiums, no deductibles, and “very limited” co-pays, and on the very high level of attention to cost issues by retirees, I would expect that at least 30% of Medicare enrollees to join the new program and opt out of Medicare. I would not be surprised, depending on the actual dollar numbers, it the Medicare drop out rate was as high as 70%, but let’s stick to 30% to be conservative.
    That means we should add $150 billion back into the costs of the program for a total of $1.81 trillion.
    Medicaid costs around $270 billion a year counting both federal and state shares. SCHIP costs $7 billion a year. Medicaid is a very unpleasant experience for most enrollees, with recurring need to certify eligibility, problems with proving eligibility, and with many health care providers refusing Medicaid patients in some areas of the country. Let’s guess that 75% of people now on Medicaid will join the new program and 50% of SCHIP members will join. That reduces the spending of the new program by about $70 billion, for a total of $1.74 trillion.
    Let’s go crazy and accept Maggie’s estimate of $100 billion in yearly administrative costs and say that the new program will eliminate $30 billion of that by savings for underwriting. That leaves us with $1.71 trillion.
    $150 billion a year is spent on nursing home care in the US. Since Emanuel does not specifically cite this as a benefit and since the federal employees programs he cites as his model for coverage do not usually cover nursing home care, let’s reduce the total cost of health care to be provided to $1.56 trillion.
    Finally, there would be the cost of providing health care for the 47 million uninsured and the 30 to 50 million underinsured, paying the costs of their coverage that are not included in current health care numbers. Let’s just apply the portion of the current cost they represent as a percentage of the population – about 15% for uninsured and about 10% for underinsured – or about $250 billion, then knock down the number by about half, to around $125 billion, in order to allow for reduced costs for low risk people and for payments already being received for them from other sources.. That is a very conservative estimate of added costs. Please note that a recent study demonstrates that previously uninsured people who become eligible for Medicare actually cost substantially more for the first two to three years than new Medicare patients who have been insured.
    This would make a total cost of $1.68 trillion.
    Somehow, Emanuel comes up with an estimate of $1.002 billion for the estimate of the cost involved in his program providing medical care for all people not insured by Medicare. I am mystified as to how this squares with the estimates and real dollar figures for health care in the US. I am suspicious that he is actually reporting the cost of all health care paid by non-government sources, since that number is fairly close to his.
    However, if the estimated cost of care in the US that I have worked out above is anywhere near correct, there is a shortfall of $280 billion between a very optimistic estimate of yields from a value added tax and the actual cost that will have to be covered. He could bridge a large part of the gap if he were to transfer a large part of the $200 billion a year the government would save by canceling the tax deduction for health care or if he kept the current Medicare tax and transferred large parts of the collections to the new program. But since Emanuel states that the VAT will cover all of expenses, there is a shortfall which would have to be made up.
    That is a lot of money to wring out of the health care system, and it has to be done before the program even starts, so that it remains fiscally sound. It would amount to 40% of the highest estimates of total waste in the US system being eliminated instantly, or it would result in the private insurance companies operating the system eliminating almost 10% of reimbursement.
    This is not an insurmountable dollar gap to close, but it would be a big job. This job would worsen if recession reduced total VAT collections or if health care costs rose.
    Costs of operation:
    None of the estimates of cost above include any cost for collection of the VAT, operation of the various national boards that Emanuel proposes, including providing funding for the data collection needed to create cost cutting steps and the costs of the medical injury/provider failure board.
    And in particular, it does not include the costs of calculating the rate at which private insurance companies would be reimbursed for each voucher collected. On page 88 of his book, Emanuel notes that “payment will be adjusted for age, sex, smoking status, pre-existing conditions, and other factors (I assume this includes regional variation in costs), as determined by the National Health Board.” I assume this adjustment will be done by the board itself, since the plan already proposes eliminating underwriting costs for the insurers. This will obviously require data collection from all Americans covered by the plan, and re-collection of data every year or so to provide for changes in health status.
    While these costs will not by huge by health cost standards, they will not be small either. We are guessing that the insurers are spending around $20 to $30 billion. Adjusting the costs closely enough to prevent insurers from being motivated to cherry pick may cost even more. There is no way to guess the costs of collecting scientific data and commissioning scientific studies to create valid practice standards to direct decisions about determining necessary care. There is no way to estimate the costs of operating the medical injury boards and policing function of millions of health care workers at all levels.
    The VAT:
    We have already argued about whether VAT is a progressive, regressive, or flat tax.
    Maggie argued that the VAT was not regressive because of the value of the services that people would receive for their tax payment. In fact, the way a tax is spent has nothing to do with whether it is regressive or not. This is because the value each person gains from the program funded is the same regardless of the source of funding. For example, the value of the health care voucher here is the same regardless of whether it is funded by income tax, a payroll tax, a VAT, or any other tax. The regressiveness of VAT stems from the fact that payment to it is dependent on spending, and that low income people spend a much larger portion of their incomes (often over 100%) on costs related directly to staying alive and having minimal luxuries, while higher income people are able to save or invest a part of their income, thus escaping VAT on that income. Very high income people are often able to save large fractions of their income. In fact, in the example Maggie cites in her articles last May, the higher income couple does not spend $30,000 of their income. They reduce their effective VAT from 10% to 8.5% of their income. This reduction would tend to rise with income. Maggie rejects the traditional conservative argument that a tax should be evaluated based on total dollar amount paid, not on percentage of income. I spent a bit of time looking up the definition of regressive tax on several web sites. Every source defined a regressive tax as a tax in which the tax percentage of income decreases as income rises. VAT, like its sister the sales tax, are classic examples of regressive taxes. You can argue that it does not matter that the tax is regressive, but you cannot argue the it IS regressive.

47. You say that you put no limits on the time or space that you are willing to devote to the comments, yet my comment on the inappropriateness of providing long responses was posted after you had already deleted most of my prior comments. I was only trying to be compliant with what seemed to be your wishes, and certainly your right as moderator.

48. Dr. McCanne & Patrick
    Dr. Mcanne–
    No one deleted any part of any of your posts. I would be the only person who would have the authority to do that, and I didn’t.
    Either you are very, very confused, or you are cornsciously lying in an effort to discredit HealthBeat because you have no way to argue against true facts.
    Patrick- Good for you!
    I can see, from your questions, that you did read everything.
    But I’m afraid that, when doing the arithmetic at the beginning of your comment, you added a zero.
    You write: “let’s stick with $1.4 trillion ] as the amount of money the VAT raises
    “Health spending in the US is now about $2.2 trillion and rising.”
    Okay — stop here: $2.2 trillion minus the $1.4 trillion that the VAT rasies leaves you with a shortfall of $800 billion
    Then you write: “Medicare accounts for slightly less than $500 billion.
    Spending for care of active duty military and qualified retirees is $40 billion.
    “That leaves about $1.66 trillion of health care costs not covered by Medicare or military programs.”
    How did you get back into the trillions? You added a zero.
    It should be $2.2 trillon minus $1.4 trillion = $800 billion.
    $800 billion minus $540 billion (Emanuel’s plan is not trying to cover Medicare or the military ) equals $160 billion.
    The existing Medicare fund and tax structure would contue to cover Medicare
    Over time more people migiht switch from Medicare to the new plan, as they become familiar with it,and then Medicare wou be phased out.)
    So the shortfal is about $160 billion, with $100 billion covered by savings in administrative costs.
    I don’t have the book at home, but if I recall correctly, the plan also saves the governmet the money it now spends on buying private insurance for all federal employees–which substracts a chunk from the $40 billion.
    Bottom line: the numbers work. This book (and the jounal article that prcded it ) have been read by a great many professional economists. No one questions whether the numbers work.
    The main objection is a)
    that Americans are not willing to accept a new
    tax with a European pedigree b) that Americans do not want to be taxed on our consumption—we like to consume. And afflunt retirees, in particua would resent having to pay taxes on luxury vacatoins, cruises automobiles when the already paid taxes on these dollars when earning them and c) there is no public-sector option in this plan. All coverage is devlivered by tightly regulated private insurers.
    If there were big holes in the numbers the books critics would have pointed it out by now.
    You also make assumptions about people switching from Medicare, Medicaid and SCHIP that ignore past experience.
    People don’t like change. This is especially true of older people. Even with Medicare Advantage insuers offering all sorts of freebies (eyeglasses, gym memberships) and spending hundreds of millions on advertising, it has taken them a lot of time to move some people into Medicare Advantage.
    Medicaid and SCHIP patients will be even slower to move. Poor people have less time to pour over plans, fewer resources to help them understand the plans, etc.
    But if they did, we could phase Medicare, Mediciad and SCHIP out more quickly, and move the funds into the new program.
    Insurers will do the work of compiling data on how risky their customers are–as they do now– and the state boards will simply have to double-check the data to make sure they are not cheating. (Probably they would spot-check).
    ON regressive taxes vs. progressive taxes.
    Normally, you do not get something specific In Return for paying a tax.
    With Emanuel’s tax you do.
    Moroever, everyone gets something of equal value–no matter how little or how much tax they pay.
    A regressive tax is traditionally defined as one that “TAKES a larger percentage of income from low-income people than from high -income people”
    But the definitoin never says anything about what the TAX Gives to lower-and higher-income people because most taxes don’t GIVE something specific in return..
    In my example, the middle-income family spends all of their income, pays $6,000 in VAT taxes and get $13,000 worth of insurance, free, in return.
    Do you honestly think they would be better off if they paid no VAT tax and had to buy $13,000 worth of insurance themselves?
    Or pay $8,0000 toward employer-based insurance (in their income bracket, the employer would pay about 1/3)
    Manwhile, let’s say a high-income family earns $200,000 and as you suggest, saves a good chunck, say, $50,000, pay s VAT taxes of $15,000 on the $150,000 that they spend.
    In return they get insurance worth $13,000 free–and are out $2,000.
    Under the current system, people in this tax bracket probably have employer-based insurance with their employer paying 100% to 70% of the total, and the family paying 0 to $3,500.
    The fact that the tax takes a smaller percentage of their total income has nothing to do with anything.
    In the context of what they Each Receive, he middle-income family comes out much better off financially while, for the upper class family, the new system is close to a wash (depending on what share of the employer-based premium they paid under the old system).

49. I will exit this post since it appears that I’m not welcome here, but I can’t leave without responding to the comment in which I’ve been accused of being demented or a liar. The fact is that colleagues of mine who wanted to read this exchange found only one relatively insignificant comment of mine. When I rechecked, I found that to be the case. The comments of mine that I believed contributed constructively are no longer present.

50. Maggie —
    Before I get started, I think the thing that is confusing Dr. McCanne about what happened to his comments is the fact that comments roll off the bottom of the page as more comments are posted, and they then become hard to find. The site is not completely clear about how to get to them.
    “How did you get back into the trillions? You added a zero.”
    No, I don’t subtract the money raised by the tax until the end part of the equation. I start by figuring out how much money we will have to pay for the program.
    So, $2.2 trillion minus $540 billion equals $1.66 trillion. We get down to the subtraction of the tax at the end of the calculations.
    “So the shortfal is about $160 billion,”
    The shortfall is about $160 billion if you do not figure any cost added to health care by bringing in all the uninsured. Estimates on the cost of that, depending on source, range from $100 billion – optimistic claims by people like PNHP – to as high as $210 billion (47 million uninsured times an projected average annual contract cost of $4000 apiece.) The underinsured, of which there at least 25 million — and perhaps as many as the 37 to 40% of the population that the Pew Trust, the Kaiser Foundation, and the AFL-CIO found in polling — will take an uncertain amount of money to revise their high deductible/high co-pay/low maximum payout coverage to conform to the federal employees program standard with “no deductibles, no premiums, and very minimal co-pays” that Emanuel promises. In my projection I estimated that cost for the uninsured and underinsured on the conservative end, and that added $125 billion to the costs, bringing the total shortfall to the $285 billion that I cited. Curiously, Emanuel never does estimate the amount of cost the new program will pay for coverage of the uninsured. Zero is an illogical number to choose for that cost, so something has to be added to the $2.2 trillion to pay for their coverage. I think the $125 billion I choose is a very very conservative estimate of the cost. I am open to suggestion as to what that estimate should be.
    “with $100 billion covered by savings in administrative costs.”
    Now here you are contradicting yourself. You had a long thread excoriating supporters of other health plans for overestimating administrative costs. You assured us that the TOTAL administrative cost for insurance in the US outside Medicare was clearly only $100 billion. Now you seem to suggest that the savings from the new plan will reduce administrative costs to zero. Since the plan only changes administrative costs for underwriting, not for claims processing, sales, reserves, and profits, I estimated that the savings to administrative costs would be about 30%, which is near the cost of underwriting in the current system. In reality, of course, the underwriting cost would not be reduced to zero, since insurers would undoubtedly be busy figuring out their risk exposures and either asking for appeals to the Health Board or lobbying – or more likely both – for higher fees for their particular risk exposure. But for the time being, let’s accept 30%. That 30% was already subtracted before I got to the $285 billion shortfall.
    “the plan also saves the governmet the money it now spends on buying private insurance for all federal employees–which substracts a chunk from the $40 billion.”
    No. It shouldn’t unless you are assuming some sort of volume discount. Since the program uses the benefit package from the federal employees coverage package as its model, there is no reason to assume it will be substantially cheaper to buy private insurance for federal employees than it is now. It will just be changed from one program to another, and financed in a different way.
    “Over time more people migiht switch from Medicare to the new plan, as they become familiar with it,and then Medicare wou be phased out.”
    True. But since the plan will both be superior to Medicare in terms of coverage and cheaper for the insured, and since Emanuel says that it will be open to current Medicare enrollees immediately, I am betting that all those retirees who spend half the day watching their pennies will switch immediately, especially if the program is well publicized – which it will have to be – and easy to understand – which it should be. I figured in my discussion that 30% of Medicare enrollees (eager to save the $1150 a year they pay in premiums, the 20% co-pay in Part B, and get superior benefits including a drug benefit) will switch right away. I would not be surprised if even more switched.
    For that reason I add another $150 billion to the cost of the plan to cover these people. The best thing for the program would be if everyone switched immediately, so the program could recapture all of the money in the Medicare tax, but if the switch is not 100% they may be able to claim part of it. However, as we know, the Medicare tax does not cover all of Medicare now, and likely will cover an even smaller percentage of the costs of health care in the future.
    Medicaid should be even more striking. Being a Medicaid patient is not fun. I cannot believe that anyone with even a little common sense would stay in Medicaid if they could choose this program instead. The only question would be how Emanuel plans to deal with nursing home care. If that is covered, I would expect everyone would change. If nursing home care is not covered, then Medicaid people who are in nursing home care would stay with the program. Emanuel doesn’t talk about nursing home care at all and there are no entries for “nursing home” or “long term care” in the index of the book, although his total estimate of the cost of health care does include the nursing home component. If you ever talk with him or Prof. Fuchs, ask about that.
    “In the context of what they Each Receive, he middle-income family comes out much better off financially while, for the upper class family, the new system is close to a wash (depending on what share of the employer-based premium they paid under the old system).
    Yes, yes, yes. But – this is still a regressive tax. What people get from the tax system is independent of whether it is regressive or not. Certainly the middle income family will get more bang for the buck, but they would be even better off if the tax were progressive, like income tax, and THEY paid the 8.5% tax and the high income family paid the 10%. They would even be better off with a true flat tax, like a payroll tax, where they both paid 10%, because then there would be more money in the program. You are arguing that it doesn’t make any difference if it is regressive if people get their money’s worth.
    Actually, the main argument in favor of using VAT, instead of a progressive or flat tax, is that conservatives love regressive taxes and many conservatives like VAT. In fact, conservatives like VAT so much that there are several conservative proposals to replace income tax with VAT. The other arguments in favor of using VAT are that it is a completely new tax in the US and therefore would be easier to sequester, and that it is a tax that is invisible to most of the end payers, thereby reducing annoyance with the tax. BTW, it is important to note that it is highly unlikely that the navy is going to pay a VAT on their next aircraft carrier, so there will be exemptions from VAT for many types of activity. In all countries where VAT is used, there are many exemptions from the tax. In reality we will be lucky if the tax applies to 75% of the economy, and therefore the amount raised will be more like $1 trillion or even less. That is before any allowance for the cost of the actual operation of the program, which will take a lot of effort in collecting taxes from every business in the country.
    “Bottom line: the numbers work. This book (and the jounal article that prcded it ) have been read by a great many professional economists. No one questions whether the numbers work.”
    Actually, some economists do question this program, both from the left and from the right.
    Maybe Emanuel has a more complete version of the plan that does show numbers that work that he has shared with more sophisticated audiences than his little book was aimed at. Maybe he has told those people what he expects to spend for figuring out the value of each voucher to insurance companies for each individual. Maybe he has come up with a reasonable estimate about costs for the Health Board and the malpractice mediation boards and so on. Maybe he has explained that he plans to include the yearly savings from ending tax deductions for health care and the budgets for Medicare and Medicaid in the funding for the program in addition to the VAT. Maybe he thinks that when people start crunching numbers they will raise the VAT above 10% before the program starts. Maybe he has a plan to begin the Health Board activity a couple years before the voucher system goes into effect, so that they can work aggressively to lower costs before the program begins.
    I am not saying this program cannot be salvaged, and I am not saying it would not be a great improvement on the current state of affairs, and I am not even saying that in a political context it might not be the easiest program to pass – after all, conservatives love VAT. However, I am saying that there is no way that the numbers add up as they are outlined in his little book.

51. 1) I came to this blog looking for comments posted by Dr. Don McCanne. I was unable to find his original comments, even though Maggie Mahar’s responses are still posted.
    2) Insurer overhead is only one, relatively small, component of administrative costs in the U.S. health system. If you combine Medicare’s low overhead (about 3 percent) with private insurers high overhead (average 14 percent), the total only amounts to about 7 percent of national health expenditures. Cutting insurer overhead is only one (and a relatively small one at that) component of administrative waste that is reduced by single payer. The larger sources of waste are the overhead in physicians’ offices and hospitals necessary to deal with so many different insurance plans. Uwe Reinhardt at Princeton had a great quote about this in his testimony before the Senate Finance Committee recently, where he noted that a 900 bed hospital he was on the Board of had one billing clerk per bed! The administrative costs imposed on providers are much higher as a share of total health spending, and raise the total from a seemingly minor 7 percent of NHE (not nearly enough to cover all the uninsured)to something closer to 31 percent (Himmelstein and Woolhandler, NEJM, 2003), 34 percent (Kahn, Health Affairs, 2005), or more. Reducing overhead to Canadian levels would save about 15 percent of NHE, more than enough to cover all the uninsured (and with enough leftover to make a large downpayment on EMR’s and other quality-improving measures).
    3) I previously have not been a reader of HealthBeat and hope it improves.

52. Why doesn’t Don McCanne simply re-post his comments?

53. I do not personally know if any comments disappeared?
    I will state my full support for the integrity of Maggie Mahar.I have never witnessed such a responsive and fair blogger in my life.
    But even the most technically savy and technically staffed blogs occassionaly have technical glitches.
    I am reminded of Kubrick’s movie 2001 where “HAL” the spaceship computer not only has a mind of his own but threatens to take over.(“Quick- get the screwdriver”)
    This blogging technology is a mircle communications breakthrough but not 100% reliable in the best of hands.
    If comments vanish into cyberspace on HealthBeat I am absolutely certain there is no intent for it to happen?
    Maggie Mahar welcomes all serious dialogue
    The many apathetic about health care reform remain all of our challenge.
    Dr. Rick Lippin
    Soouthampton,Pa

54. I personally do not know if comments disappeared from this great HealthBeat thread?
    What I do endorse is the impeccable integrity of Maggie Mahar. In my years of blogging(4),I have never witnessed such a responsive and fair blogger as Ms. Mahar.
    I do believe also that even the most technically savy and staffed blogs are not 100% reliable.
    I am reminded of Kubrick’s movie 2001 where “HAL” the spaceship computer, not only has a mind of his own, but tries to takeover the spaceship. (“Quick- get the screwdriver”)
    So if comments on HealthBeat are out there lost in cyberspace I am certain that this is in no way intentional.To suggest the opposite is wrong and unfair.
    A major challenge in health care reform is to inform and energize the many apathetic.
    Dr. Rick Lippin
    Southampton, Pa

55. Dr. McCanne, I’m sorry to see you are reinforcing the “no credibility” stigma that has attached itself to Single Payer advocates. C’mon…teach us something, please! PS We are having our healthcare reform discussion in Houston on December 30th at the Community Medical Foundation from 6-9 pm. Have a Merry Christmas everybody!!

56. I like Patrick’s analysis.
    A couple of years ago, the Donald and Paula Smith Foundation sponsored a debate in NYC about the FAIR Tax. The FAIR Tax was billed by proponents as a 23% national sales tax that could raise enough money to replace all other taxation at the federal level. The speaker in opposition to the tax was, if I remember correctly, Gary Becker and he did a very good job, I thought. A conservative radio talk show host whose name I can’t remember argued in favor of it.
    Proponents claimed the tax was 23% because an item costing $0.77 would retail for $1.00 including the tax (23% of $1.00). The more traditional way of calculating sales taxes, however, is adding a percentage to the base price. So, a $0.23 tax on a $0.77 item works out to a 29.9% tax rate, not 23%. Moreover, Becker claimed that the tax, as proposed, would apply to 83% of GDP. At the same time, the broadest based VAT’s in Europe apply to only 42% of GDP after exemptions for a variety of necessities and other items. A 10% VAT in the U.S., if it applied to 42% of a roughly $14 trillion GDP would raise only $588 billion or far less than needed to replace employer provided health insurance, insurance purchased by individuals, and to cover the uninsured even if Medicare remained intact and nursing home care were still covered by Medicaid. The VAT rate would have to be much higher than advertised to get the job done. I have challenged Emanuel’s numbers before, but, as Maggie knows, I don’t qualify as an expert in this area.
    Low income people, for their part, cannot afford the additional burden of paying a VAT even if they received health insurance worth far more than the taxes they pay. We would probably have to find a way to refund the VAT they pay by expanding the Earned Income Tax Credit and/or exempting most of the necessities lower income people spend most of their money on. As Maggie points out, middle and upper middle income elderly retired people, who paid taxes on their income while they were working, will resent paying a VAT on luxury vacations, new cars or a new home in Florida or Arizona as they begin to spend their accumulated savings to see them through their golden years. The upside of a VAT, in my opinion, is that it would capture tax revenue from the underground economy which currently goes largely untaxed.
    As I’ve said before, I like the voucher approach with risk adjustment payments to insurers who wind up with a sicker than average population, and I would prefer to pay for it via a payroll tax, though I think the payroll tax rate would need to be about 15% or perhaps even more. To make sure that wages earners are not significantly overtaxed relative to those who earn their income from interest, dividends, capital gains, rent and other non-wage sources, we would have to integrate the payroll and income tax so that people who earn approximately the same income from whatever source pay approximately the same overall tax burden.

57. I posted this comment on AlterNet this AM for your condideration.
    The economic sustainablity of our US Health care system (and most other developed nations with an aging demographic) will require nothing short of the boldness and creativity that we are applying to the global environmental crisis.
    In this nation the uninsured have been immorally denied basic services- sacrificed at the alter of the free market-while the insured (most of us)have been both duped and swindled into purchasing medicines and medical services that we do not need at best and harm us at worst.
    We need a sustainable prevention based health care system-both individual(health behaviors)and more importantly institutional(public health) to replace our bloated and corrupt “disease care” system
    We need to begin to dismantle a $2.2 trillion dollar,and growing, disease care industry that, if not checked very soon could be the financial ruin of this nation.
    It will be painful but it must be done
    Dr. Rick Lippin
    Southampton,Pa

58. Lisa:
    I live in Sugar Land. Can you provide some more information about the event?
    My E-mail is donaldlevit@aol.com.
    Thanks.
    Don Levit

59. Anon–
    You make a good point. Since I said that I did not delete Dr. McCanne’s comments (making it clear that they were welcome), I
    wonder why he didn’t repost them?
    I also wonder why he never replied to my numbers and specific argument about how, in fact, insurers’ administrative costs are only a small part of the total cost of healthcare?
    As we can see from the example of Taiwan (an example single-payers often cite) a single-payer system is not cheap– see the facts in my comments on premiums,co-pays and deductibles in Taiwan as well as contraints on access. . .
    That said, I went back to typepad to see if I could figure out what happened to Dr. McCanne’s comments.
    It turns out that there is a default setting that limits the number of comments that you can see on a given thread
    I changed the setting to the maximum– 50– see Dr. McCanne’s comments should now be visible.

60. Everyone–
    Thanks for your comments.
    Today I’m stuffing a turkey, wrapping final presents adn getting ready for Christmas Eve dinner with my family.
    (We celebrate on Christmas Eve.)
    Tomorrow I plan to go to movies all day (probably see two.) I haven’t seen a film in months–too busy working. And I love movies, so this will be a treat.
    I may not get back to blog until Friday, but will reply to comments then.
    Best, Maggie

61. Maggie,
    Happy Holiday’s. I’m glad to see you’ll be unwinding the next few days. Take Friday off too. (We all should) I know there is much to do, but it will keep till Monday. You’ve certainly earned it. Enjoy, and we will renew the debate on Monday

62. I just wanted to wish you a happy holiday season, and hope that neither of us find ourselves screaming in the new year, like one of the Beatles on “Helter Skelter” (was it John? was it Ringo?) “I’ve got blisters on my fingers!”
    best wishes,
    Merrill
    http://www.gooznews.com

63. It bothers me that Dr. McCanne and Ida Hellander seem to be suggesting the Maggie is not acting in good faith running this blog and is removing posts she disagrees with. I think those who are saying this do not understand how the mechanics of the blog work.
    First, the original article we are all commenting on stays at the top of the page permanently.
    Second, as the page fills up (and this thread is now 62 entries long with some very long entries) the older comments gradually roll off the bottom of the page and, as far as I can tell, are no longer accessible.
    That rule applies to everyone’s comments, including Maggie’s. The only thing of Maggie’s that gets preferred treatment is the original article, which makes sense since that is what everyone is talking about.
    There may be a way to get at older comments, but I can’t find it. I am uncertain if it necessary to be able to find them, since blog comments, by their very nature, are ephemoral. If you believe your comments are so important that they should be preserved, as some people have already said you should repost them. If they are that important you certainly kept copies.
    Some blogs do have a way of paging to previous pages to see old comments, but this policy is probably not Maggie’s policy but the policy of her host, which is probably trying to conserve bandwidth and associated costs.
    I think that the operation of this blog is fair to everyone, regardless of their position in relation to Maggie’s ideas.

64. “Second, as the page fills up (and this thread is now 62 entries long with some very long entries) the older comments gradually roll off the bottom of the page and, as far as I can tell, are no longer accessible.”
    I never realized this before, and I think it’s unfortunate. Other blogs that I read from time to time which attract numerous comments including The Healthcare Blog and Ezra Klein’s blog maintain access to all comments both while the thread is fresh and in the archives. From time to time, I like to go back to the archives and reread an entire discussion of a thread of interest to me, and I suspect others may do the same. Considering the very knowledgeable people who comment on Health Beat, (especially doctors and Maggie) I think it would be useful and helpful if all comments were maintained and archived, at least if it is not cost prohibitive.

65. Patrick & Barry–
    Patrick–Thanks for your support and understanding.
    Barry– I understand your concern. Typepad (the platform that the Century Foundation chose when we started this blog) allows a maximum of 50 comments.
    I’ve put it on that setting; beyond that, there is nothing I can do.
    The good news it aht this blog tends to attract thoughtful, lengthy comments, so we rarely get more than 50 on a post

66. Merrill–
    My vote is Ringo, and I know how he felt!
    Merry Christmas to you too.
    Best, Maggie

67. Although I’m reluctant to add this one last post because it will knock someone else’s message off the bottom, I feel that it is important to express my profound respect for Maggie Mahar and her work. I subscribe to her messages and find them all to be highly credible – the same level of credibility that we attempt to maintain at PNHP. Although I’m usually already familiar with the topics she discusses, I find that her perspective often adds to an understanding of the issues.
    As far as reposting my prior comments, I didn’t keep copies of my postings since I assumed that they would be archived on this website (and I now understand why they aren’t). But, very briefly, a couple of my points: 1) regardless of how many hundred billion dollars the recoverable administrative waste is (between one hundred billion and four hundred billion), we should attempt to recover it and spend it on health care, 2) a VAT alone is not adequate for financing health care because we will require a much greater transfer from the wealthy than a VAT would enable, 3) basing reform on a social insurance model of European-style private plans that are designed to help people pay medical bills would be very different than the current proposals to base reform on U.S.-style private plans that are designed to enhance business performance by reducing access to health care (just ask institutional investors why they invest in U.S. plans), and 4) since single payer is the least expensive, and most effective and equitable model of ensuring that everyone has affordable access to all necessary health care it is premature to abandon it merely because AHIP, PhRMA, USCOC, and conservative Republicans are opposed. Their opposition to providing a public option within a market of private plans will be (and already is) just as intense as is their opposition to single payer.
    Anyway, we’re all on the right side in our fundamental goal: we want high quality, affordable health care for everyone. Let’s hope that all of our efforts together will bring it to us in 2009.
    Peace.

68. Thought about this off and on over the holiday.
    Here is a proposal that I think could strengthen the Emanuel plan.
    Adopt the plan as he has conceived it, except:
    Create a national public insurance option, either as a direct buy in to Medicare or as a seperate program to be co-administered through the Medicare administration system. Bring the program and Medicare itself into compliance with Emanuel’s standards (no premiums, no deductibles, very low co-pays, use of the national health board and the medical injury and malpractice board.)
    Set the values of the vouchers at the level of the cost of the public option based on the same actuarial assesment of costs that Emanuel advocates for setting his values. Enrollees would get the public insurance for no cost. Private insurers who can match the costs of Medicare will compete on an even field based on the attractiveness of their programs. Private insurers who cannot match that price or who wish to offer premium coverage will have to charge enrollees an extra premium but the voucher will cover a large part of the cost. Private insurers who can beat the cost of Medicare will be allowed to collect the surplus money and use it as they wish, including refunding part of it to customers as an incentive to choose their coverage.
    Cherry picking would be prevented by Emanuel’s “no rejected applications” rules and by accurate setting of the value of the vouchers.
    Allow the public and private entities to compete for market share. If one or the other is more successful at reducing costs while improving care, in the long run they will dominate the market and the others will fade away.
    This allows us to answer the question of single payer vs private plans and their application in the US in an empirical way using the marketplace as the judge.
    May the best system win.

69. Patrick,
    I think insurers would be perfectly willing to compete with a public option under the following conditions:
    1. There can be no cost shifting to the private sector as there is with Medicare and Medicaid.
    2. Doctors, hospitals and other providers can refuse to accept the public option insurance if the reimbursement rates are deemed inadequate while continuing to accept Medicare patients if they want to.
    3. The public option must cover its costs out of premium revenues alone with no subsidies from general tax revenues.
    4. There would need to be a mechanism for redress if any of these conditions are violated.
    The only inherent costs that private insurers incur but Medicare and a public option doesn’t are for medical underwriting, which would disappear under community rating and guaranteed issue, broker commissions, marketing and advertising. If private insurers are subject to state premium taxes, the public option should be as well.
    Insurers probably do a better job of mitigating provider fraud. Insurers could put durable medical equipment out for bid whereas Congress will not currently let CMS do the same despite a successful pilot project which suggested potential savings of at least $1 billion per year nationally.
    If the Medicare Payment Advisory Commission (MEDPAC) issues recommendations against payment for certain drugs, devices and procedures based on cost-effectiveness, it could provide the political cover and moral authority to allow private insurers to refuse to cover them even if lobbyists prevail upon Congress to force CMS and/or a public option to continue to pay for them. Private insurers may also be able to outperform Medicare or the public option on providing care coordination for chronically ill people with multiple co-morbidities.
    All things considered, I think it is quite likely that private insurers could compete effectively with a public option if the playing field were truly level. If the Congress is determined to put them out of business, however, it wouldn’t be hard to deliberately under price the product, perhaps significantly, and make up the difference with general revenue. If that happens, what’s the industry’s recourse? Under those circumstances, their opposition is understandable.

70. Barry —
    1.) Conservatives always like to talk about “cost shifting in Medicare and Medicaid” since the lion’s share of the cost shifting is actually due to Medicaid. Medicaid would effectively cease to exist under this program, since no enrollee in their right mind would choose Medicaid with all its hassles and humiliations over the voucher system. “Cost shifting” in Medicare is much less of a factor since today most insurers mirror Medicare rates. (In my practice private insurers never have paid us more than 10% more than Medicare and some actually paid less. The difference in payments is almost completely swallowed by the fact that dealing with private insurers costs us SEVEN times as much per bill on average as dealing with Medicare. I would REALLY like a reform that would make private insurers get their acts together in their claims offices.) Some large health care providers do collect a lot more from private insurers because they are powerful enough to force the insurers to negotiate. Medicare never negotiates, but many health providers do not have the power to negotiate with private companies either.
    2.) Doctors and other providers can refuse to accept Medicare now and some do. Some providers bargain away that right in exchange for other trinkets, but only if they see it to be to their advantage. True emergency care is an exception to this of course, but I do not foresee anyone staking out the position that people with life threatening conditions can be thrown out the door because of insurance coverage. I see nothing in Emanuel’s plan that changes that.
    3.)Coverage of all costs by the voucher is implied by what I propose. The value of the voucher will be SET to the cost of the public program, at least when the voucher program begins. If the private insurers can actually undersell Medicare then Medicare would probably go out of business eventually because the value of the voucher would tend to be reduced over time to below their costs.
    4.) I assume that the system would include a method for redress of complaints. The only proviso I would add to this is that if an insurer filed a complaint and it turned out to be unfounded, they should have to bear the expense of the investigation process and pay some penalty for the economic burden to the system of their frivilous complaint.
    In my mind, bidding for drug prices and for equipment prices is implied in this system or any rational system, and will almost certainly be extended to existing federal health programs as soon as George Bush and his veto pen leave the White House.
    The expenses for private insurers you are not mentioning are profit and very high payments for executives. Private insurance will have to find ways to improve their efficiency enough to cover those costs.
    As far as fraud and so on, I have never really seen anything either in my own experience or in the media to suggest that private insurers are better at preventing fraud than public insurers. The public insurers are charged with pursuing fraud and with publicizing the results. Private insurers tend to be secretive if they are doing anything. Certainly in my experience I never saw the private insurers doing anything to be more aggressive about fraud, and if I were to speculate I would suggest that private insures are actually “cost shifting” fraud investigation to the public programs, which of course do have the advantage of having the power of the government behind them when they launch investigations.
    Care coordination is usually in the hands of provider systems, with HMO’s clearly a big player as well as actually an insurer. Public and private systems both would be responsible for mandating various cost savings, and a public system would have a power advantage in doing so because of its huge size.
    If as I suggested the value of the voucher were set to the cost of the Medicare system, it would be impossible for congress to enter into a conspiracy to destroy the private insurance industry. Such a conspiracy would be unlikely anyhow, since even in the new congress “friends” of the insurance industry will outnumber its “enemies.” Important Democrats, some very high in the leadership, are closely allied with insurance industry.
    Supporters of public insurance would probably be paranoid that some private insurers would use reserves or borrowed money to engage in predatory pricing in order to gain advantage over public insurance and other private insurers, planning to make up the losses once they attain a strong market position and drive competitors out. Obviously all such bad behavior, whether from public or private insurers would have to be prevented, probably by extending audit rights to the National Health Board.
    I totally agree that for my proposal to work it cannot be stacked against the insurers any more than the lower operating costs and superior power of Medicare stacks it naturally, nor can the insurance industry be offered the chance to muddy the waters with false issues and claims or by predatory pricing. If private insurers can provide better health care for less money they should and will win out. If not they won’t. That’s what I mean about an “empirical” answer to the question.
    I am talking about pure Adam Smith here — may the best player win.

71. Patrick,
    Thanks for the detailed response. I always learn the most from the doctors on the blog. A voucher system is my preferred reform approach, and I’m a believer in choice and competition, even if it means that administrative costs are somewhat higher than under a single payer system. At the very least, it’s reassuring to know that you have someplace else to go during the next open enrollment period if you are not satisfied with your current insurer whether it’s public or private.
    I do agree with you that there is much more that insurers could do to streamline and simplify their product offerings. Hopefully, real time claims adjudication technology will continue to develop and mitigate much of the administrative burden that you currently face. Large self-funded plans probably contribute to the current confusion as they pick and choose what they are willing to cover and pay for. On the plus side, since large employers are not paying for medical underwriting, broker commissions, marketing, advertising, and state premium taxes, their administrative costs are quite low as they only reflect the cost of claims processing and, if they choose to buy it, disease management, health coaches, nurse hotlines and the like.
    If I remember correctly, the commission formed to study Medicare when Bill Clinton was President recommended a voucher or defined contribution approach which they called “Premium Support.” Opponents feared that, over time, the value of the voucher would not keep pace with the growth in healthcare costs due to budget constraints. That implies that consumers would either bear steadily increasing out-of-pocket costs or benefits would have to be scaled back. I expect that argument to resurface during the upcoming debate.
    I also want to make one point on executive compensation. While I agree that CEO’s across corporate America are paid more than they need to be, driven mainly by the value of stock options and other stock based compensation, if the top five executives from all of these companies worked for $1 per year and the savings were passed through in lower insurance premiums, the impact would be a small fraction of 1% at most. So, while it makes a nice soundbite, sharply cutting the CEO’s compensation won’t have any impact in mitigating our excessively high healthcare costs.

72. When Patrick writes about private insurers and public insurers, we need to take into account that the 2 insurers do not recognize assets and liabilities similarly.
    Medicare uses a cost basis, and private insurers use an accrual basis.
    Liabilities extending beyond one year are not considered liabilities to Medicare, while they are considered liabilities to private insurers.
    “Reserves” in the Medicare trust fund cannot be converted into cash, while the reserves in a private insurer, can be converted into cash.
    At least from an accounting perspective, public insurers have many advantages over private insurers.
    Don Levit

73. Perhaps Maggie could ask TypePad if its hosting technology could be enhanced to allow more than 50 comments. It would be nice, and potentially quite useful to researchers and others, if the Archives contained a complete record of comments, along with the original posts.

74. Barry and Don —
    I agree that compensation of execs is a very small part of overhead for private insurers. But profit, payment for sales people, advertising, and higher costs of claims management are not. I have read that actuarial expenses and underwriting account for only 30% of the total overhead.
    I also agree that the cost of retaining assets for fiscal reserves to assure future financial solvency for paying claims is an expense that private insurers are forced to carry but that public insurers do not have to , since they are backed by the full faith and credit of the government. I can’t say how to deal with that, or even if it can be changed.
    As you can probably tell, I am a bit frustrated with the claim programs of private insurers. There are a few things they could do to improve things:
    1.) create industry wide standards for claim documentation and filing so that each company does not require providers to re-invent the wheel.
    2.)Electronic submission of bills and requests for reconsideration would be useful, especially again if it were uniform throughout the industry.
    3.) Much greater clarity in the communications sent to patients regarding their bills would help a lot too. A large number of patients who do not understand their bills call or come to the provider for explaination rather than wade through the swamp of insurance company claims offices. The explaination is often quite simple for people who understand the system, but it costs time and money and leads to unfortunate situations dealing with people who are very frustrated not with us but with the insurance company, but have only us to complain to.
    4.) Finally, and very important, the companies need to work on being much quicker at processing, paying, or challenging bills. Medicare takes about half as much time to pay a bill as private insurers. Prompt payment is not only gratifying to providers, but also helps clarify the situation for patients and prevent confusion. I am very suspicious that this is a habit companies fell into back when interest rates were very high and it was very profitable to delay payment, but continue to follow today out of habit. As a person who works in a field where there is a constant daily stream of new work and who learned long ago that delaying today’s work until tomorrow does not make the work load lighter but just frustrates the people we are serving, I have to say that I cannot understand a system that does not have a policy of dealing with all of each day’s work today, since if you don’t it just gets in the way of tomorrow’s work.

75. Patrick:
    I think it is a good idea to provide competition with private insurers through a government-run program.
    If that is done, however, it needs to be a fairly level playing field.
    The way the federal government can use the “reserves” of the “trust funds” for general government expenses has no equal in the private sector.
    Here is some especially frank verbage from a recent GAO report entitled “The Complete Fiscal Year 2008 Financial Report.”
    “The Government does not set aside assets to pay future benefits associated with earmarked funds (such as Medicare). The cash receipts for an earmarked fund are deposited in the Treasury, which uses the cash for general Government purposes. Treasury securities are an asset to the Federal agencies and a liability to the Treasury, and therefore, do not represent an asset or a liability.”
    So, when the government borrows from itself, it is a wash for accounting purposes.
    That sounds like the type of manipulation of the numbers in which private sector entities placed themselves in financial jeopardy.
    Don Levit

76. Dr. McCanne-
    Thanks for coming back to the blog –and thank you for the kind words.
    I suspect that you and I do agree in our ultimate goals.
    As I have said many times, I am not opposed to single-payer (though recent experience with the Bush administration does make me somewhat wary of having no alternative to
    public-sector care–see my recent post “Insurers Expand Primary Care–An Argument For Obama’s Plan.” )
    Nevertheless, what I like about the Obama plan–which offers both private sector and public sector insurance– is that I think it offers a back door to single-payer. If Medicare-for-All is as good as it could be,
    people will choose it and the for-profit insurance industry would wither away.
    That said, let me address a few specific points.
    You write: “Regardless of how many hundred billion dollars the recoverable administrative waste is (between one hundred billion and four hundred billion), we should attempt to recover it and spend it on health care,
    Since rougly $700 billion is wasted, I would guess that at least $400 billion is recoverable, and I’m not convinced it should all be spent on health care.
    Certainly not on the kind of health care we have today. I would invest much of it in pubic health– gyms and gym teachers in all public schools, safe playgrounds, safe parks in poor neighborhoods, subsidized greenmarkets in poor neighborhoods; free smoking cessation clinics; more, fully funded drug rehab clinics; bus children from poor neighborhoods to suburban schools, where they are spread out among classrooms, 4 or 5 to a class (this is alread working in some cities).
    In other words, I think that adressing poverty, and education would do more to improve the nation’s health than pouring more money into acute care.
    You write: ” a VAT alone is not adequate for financing health care because we will require a much greater transfer from the wealthy than a VAT would enable.”
    Having read Emanuel’s book I am not persuaded that is true. Keep in mind this is a 10 percent VAT on everything– no exclusions. And he is not trying to cover Medicare or other govt programs that have separate funding (the VA, etc.)
    You write:” basing reform on a social insurance model of European-style private plans that are designed to help people pay medical bills would be very different than the current proposals to base reform on U.S.-style private plans that are designed to enhance business performance by reducing access to health care (just ask institutional investors why they invest in U.S. plans)”
    Germany, France and other European countries also have for-profit insurers–but they are tightly regulated. That is the difference.
    We could tightly regulate our private insurers the way we once regulated utilities. (See recent post I mentioned above.)
    Like utilities, insurers are providing a necessity, and thus the interests of their shareholders cannot be allowed to interfere with the interests of their customers.
    If we did that, manly for-profit insurers would drop out of the business. But some of the best would stay–which includes not-for-profits.

77. Patick, Barry, Don Levit and Nate–
    Thanks for your comments.
    Patrick-
    I, too, like the idea of adding a public sector option to Emanuel’s plan– and having it compete on a level playing field–same regulations, no co-pays, etc.
    Barry–
    If insurers were not able to make money by “cherry-picking”–and by selling Swiss cheese policies filled with hidden holes, or high-deductible polices that most people cannot afford to use (because deuctibles so high) they probably would not be able to pay health care providers any more than the public sector plan pays.
    Though both the public sector plan and private sector insurers need to redistribute their reimbursment dollars, paying doctors at the bottom of the ladder more and some at the top less, with all changes in payments based on just how much the patient benefits from the treatment.
    Private insurers do have much bigger costs in a few areas: marketing, advertising and lobbying Congress.
    When it comes to lobbying the health insurance industry is second only to Pharma in the amount it spends.
    Also, it is not just top excecutive salaries, but many upper-management salaries that are much higher than the salaries civil servants earn.
    And under our current system, insurers spend a fortune marketing themselves to thousands of employers–even in those cases where employers are self-insured and the insurance company provides on administrative servcics.
    There is no evidence that private insurers do a better job of investigating fraud. Most of the biggest, most successful investigations have been done by the FBI.
    There is some evidence that some private-sector insurers simply close thier eyes to fraud, knowing they can pass the cost along in the form of higher premiums. (See the story I quote from my book and the WSJ in my comment to Patrick below)
    Finally, as for-profit companies, insurers have costs in addition to providing profits to investors. They also must court them (investor relations) and in some cases wine & dine them.
    “Lobbying” Wall Street is not cheap.
    Some very good insurers could compete against Medicare, but not most. It would be interesting to see what happened.
    Patrick–
    You are right about cost-shifting, Medicare and Medicaid.
    Medicaid pays about 30% less than Medicare, and it often costs providers significantly more than Medicaid pays to provide the services. So they must shift the costs to someone else.
    What you say about Medicare paying about 10% less than private insurers squares with national figures. The difference varies regionally and based on the service, but overall Medicare pays somewhat less.
    On the other hand, doctors confirm what you say about Medicare being Much Less Hassle. For one, Medicare pays in 30 days–it doesn’t try to play the float with your money.
    Secondly, Medicare’s reimbursement forms are not filled with tricks that make it easy to make a mistake.
    Third, with Medicare you are dealing with one set of forms, not 12 different insurers.
    Fourth– you don’t have to call Medicare to get permission; you don’t have to have lenghty conversations with Medicare’s clerks to get paid.
    On fraud–you are right. I, too, have never seen any evidence that private insurers are better.
    In fact, in Money-Driven medicine, I quote a Wall Street Journal story which asked the question: “Why didn’t private insurers act sooner against NME, a company that had bilked them out of hundreds of millions?”.
    Insurers sued NME only after the FBI raided the company.
    Louis Parisi, director of the New Jersey insurance dept. fraud division told Congress that “health insurance companies, with some exceptions, are content to pass the cost associated with fraud along to their customers in the form of higher premiums. In the testimony, quoted in the Journal, he explained that workers who process claims often are paid on vollume. This gives them an incentive to let questions slide, some even take to “plugging things in to make the claims fly.”
    Robert STuckey, former medical director at a NME hospital backed the story, saying that when he informed The Prudential Company of possible insurance fraud, company executives merely laughed, saying that for them, large bills meant large premiums and big bonuses.”
    Barry–
    On the argument that the value of vouchers wouldn’t keep up with rising healthcare expenses . .
    A voucher system funded solely by VAT taxes would find its funding rising in tandem with the economy as a whole. But no faster. This would allow for growth while putting a cap on health care spending–it wouldn’t be able to grow faster than GDP.
    You are right about CEO compensation–But I wonder if one added up compensation, bonuses, options for all executives,from mid-management on up, and compared it to civil servant salaries in Medicare, from mid-level management on up, wouldn’t the difference be large enough to put private sector insurers at a disadvantage?
    I honestly don’t know the answer, but it would be interesting to find out. In general, those enormous CEO salaries do create a culture where many others are overpaid.
    Don Levit– You make good
    points about differences in accounting, though I’m not sure how they effect the competition for customers . . . .though if private sector insurers carry liabilities, that would affect what they could spend on networks that would attract customers. .
    One other difference occurs to me: Insurers are free to invest premiums as they please. There are serious constraints on what Medicare can do with its money. Wouldn’t insurers’ profits from investment sometimes give them deep pockets that Medicare lacks . . .
    Nate–
    Please see my comments above, covering many of your points, particuarly on fraud and how much Medicare pays vis a vis private insurers.
    I’m not sure where your numbers are coming from.
    Also, on this blog we try to avoid saying things like “You have absolutely no idea what you are talking about . .”
    .

78. Maggie:
    You asked if the insurers’ profits from investments give them deep pockets that Medicare lacks?
    Actually, Medicare’s pockets are deeper than any private sector insurer, for the government can continue issuing debt, borrowing from itself, and, for accounting purposes a corresponding asset is created.
    Doesn’t that sound a bit farfetched, particularly when even the loan interest is not being paid back? Or, is this a real loan, just like the trust fund is not a real trust fund, and the reserves are not real reserves, as we know them in the private sector?
    From the same recent GAO report I quoted which speaks of the intragovernmental borrowing to fund Medicare:”Intragovernmental transfers arise in the form of borrowing/lending between the Government accounts. Interest credited to the trust fund arises when the excess of program income over expenses is loaned to the General Fund. The General Fund has to credit interest on the loans from the trust fund programs just as if it borrowed the money from the public. The credits lead to future obligations for the General Fund. The credits increase trust fund income exactly as much as they increase credits (future obligations) in the General Fund. From the standpoint of the Government as a whole, at least in an accounting sense, these interest credits are a wash.”
    It is important to note these are all notional accounts, filled with IOUs.
    How can private insurers compete with this?
    Don Levit

79. Thanks Maggie.
    One last note on doctors and private insurers.
    Polls show that 55% of doctors nation wide support adoption of a national single payer plan. In my own state the state Medical Society did a poll and found that 65% of doctors in the state supported single payer, including majorities of every specialty except general surgery.
    I would like to believe that this is because doctors have an altruistic concern for their patients and for the uninsured as well as concerns about the economy, and to some extent that is true. But I have never talked to a doctor for or against single payer who did not mention that a significant advantage would be being able to stop dealing with private insurers.

80. Don–
    You write: “Actually, Medicare’s pockets are deeper than any private sector insurer, for the government can continue issuing debt, borrowing from itself, and, for accounting purposes a corresponding asset is created.”
    I think those days are coming to an end. We’ll no doubt need some deficit spending to get through this recession/depression to pay for extended unemployment coverage, Iraq, infrastructure, creating jobs etc.
    But once we get unemployment down–and some economic growth–we’re going to have to re-think the whole idea of printing money.
    The dollar is no longer viewed as a totally”safe haven” by the rest of the world. We’re on a slipper slope and the fact we are the the world’s larger debtor will catch up with us before long. If the rest of the world cuts its purchase of our Treasuries, we are in deep trouble. Inflation, a dollar worth signficantly less than it is today, oil no longer priced in dollars (and so much more expensive for us) and a lower standard of living throughout the U.S.
    Those who say the deficit doesn’t matter are living in a dream world.

81. Nate,
    Thanks for the detailed discussion of insurer administrative costs. My employer has something over 20,000 active employees in the U.S. and north of 70,000 retirees. We pay between $15-$20 per month for the actives including claims processing, wellness and disease management.
    I wonder if you can provide a reasonable “all-in” administrative cost estimate per member for Medicare which includes applying for benefits upon age in at 65, which is currently done through the Social Security Administration, raising capital to fund their operations which is done for them by the IRS and Treasury, and office occupancy costs which may be provided by the General Services Administration as well as any other administrative services that may be provided by other government agencies and are not reflected in CMS’ budget.
    Also, perhaps you could provide us with an update on the status of private sector real time claims adjudication technology that allows providers to both verify coverage at the time of service and determine the patient’s responsibility amount, if any, based on contract rates, not list price.
    Finally, I’ve mentioned in the past that the best and most thorough discussion of administrative costs throughout the entire healthcare system that I’ve ever seen was a paper published in Health Affairs by Ken Thorpe of Emory University back in the early 1990’s. It was titled: “Inside The Black Box of Administrative Costs.”

82. Nate,
    I just want to clarify my earlier comment about my employer’s administrative costs. My reference to $15-$20 per month for claims processing, wellness and disease management was per member per month (PMPM), not per employee per month (PEPM) and only applies to the active employees. The charges for the retirees are at least twice as high because of the higher medical costs they incur and the more numerous claims they generate, along with, probably, their greater need for disease management. Nevertheless, the basic point remains that our plan’s administrative costs are quite low – about 5% or so of combined healthcare claims costs plus associated administrative costs.
    I work on the investment side for a large corporate pension fund. Part of my responsibility includes covering the publicly traded managed care insurers, the PBM’s and the drug retailers.

Comments are closed.