54 thoughts on “Insurers Expand Primary Care: an Argument for Obama’s Plan”

1. Capitation payment, which is what the Group Health story is really about, makes a lot of sense to me from a budgetary standpoint. It allows much more exact planning for present and future costs. I think we know from the HMO experience, though, that capitation can only work (and be fair) if the risk pool is so huge that cherry picking can’t happen and so a fair value can be assigned to the capitation payment per patient. Most importantly, there must be some way to make sure physicians don’t have a financial incentive to withhold needed care. One way to lessen the danger would be to make the insurer a nonprofit (or limit its profit margins). What I would fear are the brutal downward “negotiation” (often more like fiat) of capitation payments by the insurers to boost their profits. The Group Health physicians essentially work for the insurance company, so there’s no conflict there between two often adversarial parities. I suppose much depends upon whether you think the original Kaiser model is a good one or not.

2. The Group Health experiment is interesting, but the dearth of details leaves me wanting to know much more:
   What were the targeted versus actual patient outcomes pre- and post the experiment?
   Costs?
   Preventable errors?
   Morbidity and mortality rates pre and post?
   How were professional nurses used? Baccalaureate educated nurses are exposed to community and home health nursing principles and practice. Were they recruited and used in this capacity? Did they participate in disease and symptom management for assigned patient case loads?
   What was the satisfaction of the patients involved pre- and post? Was there a significant difference in the incidence and degree of patient compliance?
   What satisfiers and dissatisfiers were identified by the physicians, nurses, patients, insurer and the hospital?
   When the system-wide roll out occurs, will it use the identical model or will it be customized in any way to each specific site?
   What socioeconomic and cultural patient variables impacted the program?
   Etc.
   Since nurses weren’t mentioned in the story, I wonder how primary physicians were able to care for their patient case loads given that visits were not as frequent (as what – no baseline was mentioned).
   Lots of potential and lots to think about.

3. Excellent. I agree.
   I think most rational people who believe that single payer would be the best program would be satisfied to have it compete on a fair playing field with other systems. Paul Krugman in particular is an advocate of that approach.
   I am a little more sanguine about the impact of future conservative governments on any successful public health insurance plan. Conservatives have hated social security since the 1930’s and it has survived their emnity. Canada’s health system is largely intact under a conservative government, and Britain’s survived Thatcher. Successful, popular programs that provide important public benefits become impervious to attack. That is why it is so important for conservatives to strangle good health care reform before it is born. Once born, it is very hard to kill.
   The only thing I would add is that it is very important that the administration add to its rules for reform by incorporating a National Health Care Effectiveness Board. If we get universal care without a mechanism to assure that health care follows correct scientific standards and appropriately considers cost effectivenss, we will be on a path to economic disaster.
   Since Obama’s top health care advisors, Daschle and Emanuel, are advocates of that type of program, and since Baucus mentioned it in passing in his outline of principles, I am optimistic it will be included in Obama’s plan.

4. Maggie,
   Why not have community rating by age groups? Younger people make less money than older people, and younger people also require less health care spending, so wouldn’t it be just to have premiums that differed based on age? Of course I am excluding those who have reached the age of retirement who have already enrolled in Medicare and aren’t subject to the unaffordably high costs of their age group’s premiums.
   I absolutely agree that there should be no difference in premiums based on health status, but I do think that premiums adjusted by age are equitable. Thoughts?

5. Maggie said, “Insurance is about spreading risk”. Exactly, and that is why we all need to be in the largest “risk” group possible, with everyone using one set of non-discriminatory rules based on ability to pay. The transparency that would be created by having one set of rules would be the single best tool we could possibly use to help solve the other problems in the system.

6. Just do NOT see how a business is allowed to exist that profits from fear and sickness. Nor do i understand economically how a for profit system with 30%+ overhead cost can compete with medicare’s less than 10%
   Why continue to protect profits over people…
   Please find out the facts at pnhp.org
   It’s simple politics of hope over fear.

7. Uniting for the best protection at the best price with the most transparency under single payer would save the most money and the most lives in the most moral way possible.
   Shame on you Maggie for helping perpetrate more of the same old broken, amoral system by using more misleading misinformatiom. European health insurance is nothing like our broken, uniquely American profit-driven health unsurance non-system. How much more evidence do we need to see that what you are suggesting (more of the same) simply has not, does not and will not work?
   “The Truth Will Out”, and it’s not a question of “if” but “when”. You are trying to slow that process down. Please stop admiring the emperor’s robes when in fact he is naked.

8. Spoon —
   You are being unfair. Like Maggie and many others, I struggle with finding a middle ground between ideological purity and realistic, achievable political goals in healthcare reform. I think we will have single-payer healthcare several decades from now. The road to reaching that goal, however, will involve many compromises. Too much moral purity will end up getting us nothing. I think discussions such as we have on this blog help to thrash that out.

9. chris ,
   one way to avoid cherry picking is reward clinics/doctors on a risk adjusted basis , but without collecting different fees from different patients.

10. Too much moral purity, eh? Ooooh kaaaaay.
    But more on that later. Meanwhile…
    The problem with equating our private insurance companies with European private insurance companies, is that ours are investor-owned and profit-driven, while theirs are non-profit and, in essence, not much more than private companies that are hired to administer what is in most cases a de facto government-run single-payer system. The government tells them what they will cover and what they will charge people for that coverage, and most of that coverage is paid for with taxes.
    The private “insurers” that you admire here, Group Health Cooperative and Kaiser Permanente, are non-profit, true HMOs and are basically miniature versions of the National Health Systems of Spain and the UK, where the government [the taxpayers!] owns the hospitals and clinics and employs the doctors and nurses and so forth. We have that here in the US: the VA system [and no, Walter Reed is an Army hospital, not a VA hospital].
    The much-admired Cleveland Clinic and Mayo Clinic also operate this way, non-profits that own their own facilities and hire their personnel on salary.
    All of which argues that the very best way to deliver superb care *and* contain costs is to just nationalize the whole system, where the taxpayers own the hospitals and employ all the nurses and doctors.
    After a lot of study, this has become *my* preferred solution: open up the VA system to everybody in the country [we’d probably have to rename it though]. The VA even has a working electronic health records system already in place, for those of you who are turned on by that sort of thing.
    Not everybody is up for that radical a change, and besides, I’m all for promoting small and medium-sized businesses, so I’m willing to compromise here.
    Nationalizing the whole system [payers, providers, and facilities] is one far end of the spectrum of methods for providing health care [for convenience, we’ll call it the left].
    What we have right now is almost all the way at the other far end of the spectrum: totally privatized [we’ll call this the right]. We’ve essentially established Medicare as our national high-risk pool, covering the elderly and disabled, as both are rather expensive groups that the private insurers don’t want to have to pay for, but beyond that [and a few other imperfect safety nets such as Medicaid, state high-risk pools, etc], it’s pretty much market-driven competition.
    And this is where Barack Obama’s plan, Max Baucus’ plan, Jacob Hacker’s plan, Ron Wyden’s plan, Bill Clinton’s plan, Hillary Clinton’s plan, John Edwards’ plan, [I could go on] fall down. The assumption in all these plans is that providers [doctors, dentists, hospitals, pharmacies, etc] are competing with each other for customers [patients] and that payers [insurance companies, and “a new public plan like Medicare”] will all be competing with each other for customers [individuals, employers].
    The reality is that intra-group competition doesn’t happen all that much. Your employer dictates who your insurer is, your insurer limits your choice of doctors, hospitals, pharmacies, and people generally pick the closest doctor from that list and go to whichever specialist or hospital that doctor sends them to.
    Really, payers are in competition with providers, employers are in competition with payers, individuals are in competition with each other [for jobs] and with their employers [over who pays how much of the premium], and individuals who lack employer-sponsored coverage are in competition with payers.
    To help various entities in this multi-sided argument compete with various other entities, we have:
    – benefits managers [hired by employers to negotiate with insurance companies, and to explain benefits to employees]
    – pharmacy benefits managers [to negotiate three-way with insurance companies, pharmacies, and drug companies]
    – radiation benefits managers [presumably they do the same thing as PBMs but with imaging centers instead of pharmacies and drug companies]
    – denial management companies [to help providers argue with payers]
    – patient advocates [to help individuals argue with payers]
    – utilization review and utilization management companies [iirc, they’re hired by payers to check up on providers and patients both]
    Plus, you can hire auditors to check up on all of the above. It’s a terrific system for employing lots and lots of people and shoveling lots of $$$$$ throughout the economy, but it sucks at delivering health CARE.
    Getting back to the moral purity argument…
    Single payer and European-style multi-payer are right smack dab in the middle: nationalized insurance and private providers. Single payer [fully-nationalized insurance] is a bit to the left of center, and European style [mostly-nationalized insurance] is a bit to the right of center.
    Neither of these centrist positions is one of moral purity, but moving to one or the other of them is going to be essential for our survival.
    Single payer has several advantages over European style:
    – less administrative complexity means lower costs [or more money available to be spent on actual care]
    – the US is a big country with a mobile population, and one plan with every provider “in network” means fewer hassles for travelers
    – why would anybody want to choose among *plans* and *payers* when we could all have the same plan and payer and just choose our *providers*?
    As for losing groups like the Cleveland Clinic, the Mayo Clinic, Kaiser Permanente, and the Group Health Cooperative if we go to single payer, it’s my understanding that under HR 676, such non-profit provider groups would still exist. I haven’t called John Conyers’ office and asked him about it though, so I could be wrong. Any volunteers?

11. Health care justice is like slavery, women’s sufferage and Civil Rights. That’s what we lack but are fighting to achieve in America: health care justice. Some things (such as Truth and Justice) should not be compromised. Now we tolerate legal discrimination against sick people in America. (Shame on us and shame on those of us who support continuation of legal discrimination against sick people….via profit-driven health insurers.) How many MORE people’s lives will be devastated and health care dollars wasted while we fiddle? Uniting everyone together into one non-discriminatory pool with one set of non-discriminatory rules will accomplish that. That’s fair. What we have NOW is not, and should be dismantled.

12. hipparchia —
    “Nationalizing the whole system [payers, providers, and facilities]”
    I realize that you are not really arguing for a nationalized US heath care system, but it is worth noting that the main reason that a nationalized system is rarely considered in US health care reform is not ideology but rather practical consideration.
    Nationalized systems do provide some of the best and least expensive results among health care systems.
    However, no one has started a new nationalized health care system in the developed world outside communist countries since the British in the 1940’s.
    The primary reason is the tremendous potential cost involved in government purchase of existing health care infrastructure or in building a new infrastructure to replace the supplanted private infrastructure. Health care infrastructure in the US is worth 10’s of trillions of dollars. Saddling a start up of a national health care system with that kind of cost would be prohibitive.
    Meanwhile, I do agree with your summary of all the behind the scenes maneuvering that is characteristic of operation of health insurance systems today, involving providers, insurers, and paid third party consultants of various types.
    That is one of my major concerns about HR 676, which envisages funding all hospital care through prospective payment using block grants calculated once a year and allocated by regional health boards, similar to most Canadian provinces. It strikes me that this would quickly lead to a large bureaucracy on the side of the health board countered by an army of new employees and consultants on the side of each hospital to argue the case of how large each grant should be. Extending the prospective payment/block grant approach to providers other than hospitals would generate a whole new swarm of workers dedicated to maximizing grants on the side of providers and minimizing grants on the side of the health care system.
    American health care reformers often focus on fee for service as a part of the US system causing our problems. However, excluding nationalized systems, most national health plans overseas actually have chosen to pay providers other than hospitals (and in many cases hospitals as well) by fee for service, with costs controlled by a robust national program to assess appropriateness of care and costs and to direct payments to health care services that are cost effective and away from services that are not. There seems to be a broad international consensus that that is the best way to manage costs and to assure good efficient care.

13. hipparchia– and others–
    I find that many single-payer advocates know little about how European
    health care systems work.
    Some think that they are single-payer (not on the continent) or that they are non-profit (again, not true).
    In France and in Germany, the health care system includes for-profit insurers. In other countires “private sector insurers” that may or many not be for-profit operate.
    I do think that if we spent more time actually studying how Europe’s best health care systems work, we would find that the best solution are neither simple nor obvious. They tend to be complicated.
    There just isn’t a single answer for this problem.
    I’ll be back with more responses. . .

14. Maggie —
    In T. R. Reid’s PBS program “Sick Around the World,” Reid states that the German health insurance companies must be non-profit. He says the same thing on the web site for the show.
    Is he wrong?

15. Patrick–
    I double-checked Reid. He says that the sickness funds that cover 90% of the population are non-profit.
    But he also makes it clear the wealthiest 10 percent of the population has the option of buying “private for-profit insurance.”
    The for-profit private insurance is more expensive, but it includes extras like a private room in the hospital (we are unique in considering a private room a near-necessity), shorter waits for elective surgery, and other amenities that are nice, but don’t have a lot to do with medical care.
    For that reason, many affluent Germans do not take the private insurance option.
    The public sector insurance really is very good. My step-son and his wife live in Germany and just had a baby there. Although neither of them are German they were treated very well and found the care outstanding.

16. Yes, while you were doing other stuff I checked on this myself.
    The source I used was the WHO series “Health Care in Transition,” which features a series of monographs on health systems of many countries. These booklets may be of interest to other readers of this blog. They are all available in PDF format at the site:
    http://www.euro.who.int/observatory/Hits/TopPage
    I went to some other sources and here is the answer to my own question:
    The “Sickness Funds” that provide health care coverage for the overwhelming majority of Germans must be non-profit. However, like many systems, Germany allows the purchase of other coverage outside the main system. Between five and ten percent of Germans buy coverage from private insurance companies, to get a more “deluxe” coverage for health needs. The percentage who take this option varies from year to year, and some employers provide private insurance as a luxury perk.
    In France, the coverage by the non-profit insurance funds extends to all residents except certain foreigners. Foreigners who have not reached French retirement age and do not pay the social security tax that covers the French health program must buy private insurance. However, since French health care features additional charges not covered by the standard insurance, many if not most French people buy supplemental coverage, or get it as a perk from their employers (this resembles so called Medi-gap policies sold in the US to people who want insurance to cover the co-pays and deductibles in Medicare, and some other health care.) These supplemental policies may be sold by for profit companies, and in fact can be sold by foreign companies.

17. Patrick,
    Yes, I can totally see all the lobbyist rats leaving the insurance company sinking ships and moving into the lobbying-for-block-grants business [reining in the lobbying industry is just one of many reforms we need to tackle].
    But other countries manage to do a good job of delivering health care using global budgeting schemes, so we can do it too. HR 676 is vague on a number of things, financing details being one of them. Whether this was done deliberately so that bipartisanship could be fostered by letting others work out the financing, or whether it was an oversight on Conyers’ part, or whether it was some other reason [good or bad] that I would never have thought of, I don’t know.
    A further financing question I have, and it’s related to your remarks on nationalizing the infrastructure, is that HR 676 has provisions for buying out investors of for-profit providers. The stated time frame to accomplish this is 15 years, but I haven’t seen a lot on the projected costs, and the funding, iirc, would be through bond issues. Not that it’s going to change my mind on single payer, but it’s something I’d like to know more about.
    You wouldn’t be willing to call Conyers’ office and ask, and then report back to us by any chance, would you?
    As for paying for only those treatments that really work, I’m all for it. Don’t even get me started on the drug industry boondoggles [I’m a biochemist by training, I could go on at length].
    Otoh, I keep reading / hearing that this is so, that other countries ration health care this way, that they don’t pay for a lot of the things that we’d normally get here through our insurance, but I’ve never seen a side-by-side comparison of those countries and ours.
    France is relatively generous in what they pay for, and I have three friends who have played medical tourist and gone to France for treatment that they couldn’t get here. And one of my doctors has recommended that if I ever decide to get elective surgery for one of my minor niggling medical issues, I should go to Germany for the particular procedure. Other examples, for which I can’t remember the details at the moment, are treatments that are commonplace now, but once you could only get in Canada, or Norway [or maybe it was Denmark, I forget].
    Additionally, if hopelessly ill people are willing to undergo expensive, experimental, and possibly painful and miserable treatment, so that the rest of us can learn from it, I’d be willing to fund that.

18. Maggie,
    I don’t have any hard data on this, just a couple of sentences I remember running across in report somewhere on the web, but the number I recall is that for-profit insurance makes up something like 5% of health care spending in OECD countries [excluding the US, iirc]. Whether this is an aggregate figure or an average around which there is some variation, I don’t know.
    France. I am distinctly jealous of the health care that people living in France get. The doctors make house calls, even in the middle of the night. A social services-type person makes home visits [daily? several times/wk? I forget] to parents of a newborn child, to help with anything from teaching them to feed, bathe, clothe their new baby to helping with the laundry while the exhausted parents get a nap. How wonderful is that?!
    France’s tax structure is different from ours for this. Where we have Medicare taxes specifically going to fund Medicare, and Social Security taxes specifically going to fund Social Security, France’s social services tax pays for both their old age pensions and their health care. Whether this fund also pays for other social services [their free public education includes college, for instance] or whether their other social services come out of other taxes, I don’t know.
    You’re right that nothing is as simple as it ought to be, taking other countries’ risk pools as a for instance. In France, it’s roughly by occupation — if you’re a lawyer, you’ll be in this pool, if you’re a woodworker, you’ll be in that pool, etc. In Canada, it’s by geography, each province is its own risk pool [and its own single payer, really].
    Our own SSA is divided up into 12 regions [the EPA is divided into these same 12 regions, I discovered]. It’s not unreasonable to think that if we end up with Medicare for all, that it would really be a federation of 12 single payers, corresponding to those 12 already-established regions.
    Getting back up on my moral high horse now. There are so many holes where the system is leaking money, where do we start?
    My list, for starters:
    Come down hardest on the for-profit insurance companies, knock them back into the Stone Age if we can. Beyond writing the checks, when they deign to do so, they’re not actually delivering CARE. They can provide the equivalent of Medigap maybe, or like the Europeans, they can cover niceties like private rooms, but not more than that. I’d like to see Obama sign HR 676 or an equivalent in his first 100 days.
    Negotiate big-time with the drug companies on pricing. This can [and should] happen immediately. The drug companies really have been boondoggling, and deserve some heavy-handed treatment [I’d also like to see some major revisions in patent law, licensing, and research funding, but those can happen over a longer time frame].
    Make all the hospitals and clinics non-profit. This can happen over a longer time frame too. Investors are a useful way to raise capital when you need it, but not if they’re then going to turn around and suck the lifeblood out of your business because they’re too greedy to wait for a 10-15-20-year return on their investment. Rich people are a funny breed. They like making a killing on their investments, and they like the fame that comes with donating a fortune. So let them invest somewhere where lives are not at stake, and then pay to build hospitals for the name recognition alone.
    Might need to negotiate lower payments to doctors. One thing I don’t know — while it’s true that specialists generally make more than primary care physicians, are the really really high earners common, or are there just enough of them to skew the statistics? If there really aren’t a lot of them, maybe they’ll all just naturally gravitate to boutique practices catering to the people who will be buying high-end supplementary insurance.
    Lastly, and to be handled most lightly, is deciding what care is or is not “medically necessary” [and thus what care we agree to pay for, or not]. People and cars are a lot alike in this respect, take good care of them from the beginning, do the routine maintenance, fix right away any little problems that crop, and most of them will live a long and healthy and productive life.

19. hipparchia —
    “Our own SSA is divided up into 12 regions”
    Medicare is divided into 15 different regional management areas, and there are significant differences between programs in some cases. There is an article addressing this question in a recent entry in the NYTimes’ “Evidence Gap” series, talking about the CyberKnife radiation therapy device.
    “But other countries manage to do a good job of delivering health care using global budgeting schemes, so we can do it too.”
    Nationalized programs usually do global budgeting, obviously, but in Britain they have introduced “incentives” (essentially production bonuses and results bonuses) for primary care, and have adopted an elaborate “competitive” system for hospitals based on use.
    However, a surprising number of the most successful systems use fee for service as the predominant or even only payment system. Japan is the poster child, but many European social insurance systems also use fee for service as their main method of payment.
    In general, all payment systems incentivize various behaviors, some desirable, some not, and some mixed.
    Flat salaries, global budgets, and other flat payments to providers incentivize not giving care, both to stay within budget in order to increase profit and because it is often more pleasant sitting in the break room chatting than working. I have worked in these types of systems, and although the virtuous (moi , for example) perform industriously there are always people who find it more comfortable to do a lot less work, either letting overall productivity slide or letting others do the work. The most serious examples of the flaws in flat payment or prospective payment systems were the abuses documented in HMO’s in the 90’s where some providers filled up their lists with patients who they then tried to avoid providing care for or in some cases even seeing at all.
    Piece work payment, and fee for service is piecework, incentivizes doing more work, but is prone to abuses of not doing the work well or of doing work that is not necessary. Overuse of various procedures, treatments, and drugs in the US is often thought to be related to the fee for service payment system.
    Proposals to base payment incentives on outcomes are an interesting idea, but raise the concern of providers being reluctant to accept patients who are high risk or low compliance people and are less likely to produce good outcomes. There are obviously strong incentives in this type of system to cherry pick in order to get patients who will produce good results, and it risks having people who are higher risk patients having trouble finding a provider. The joke in medicine is that under this sort of program you might want to make your office door narrow enough so that fat people couldn’t get through.
    All systems of payment include potential for problems. I think the best system is to use fee for service, since it incentivizes productivity, but control for the negative effects by changing the payment system to eliminate or reduce payments for inappropriate services, as well as increase or even introduce payment for some services not strongly incentivized now — for example, keeping regular telephone contact with patients with the big six chronic illnesses to make sure that they are complying with their care programs and understand how to comply correctly (if you have congestive heart failure, a nurse might call you every other day and ask what your weight was that morning and direct changes in your medication based on weight changes.)
    By going straight at the sorts of things we want to see happen, I think we will do better than by going at them in round about way.

20. “All systems of payment include potential for problems. I think the best system is to use fee for service, since it incentivizes productivity, but control for the negative effects by changing the payment system to eliminate or reduce payments for inappropriate services, as well as increase or even introduce payment for some services not strongly incentivized now…”
    Patrick,
    I agree with this and think it gets to the heart of the matter. Not paying for inappropriate services or exposing the patient to significantly higher out-of-pocket costs to help cover the expense is the right way to go, I think. The problem is mostly one of political will. This is why I’ve suggested in the past that MedPac recommendations along these lines could provide the political cover and moral authority for private insurers to proceed in this direction even if lobbyists succeed in preventing CMS from doing the same with respect to Medicare.
    Separately, with respect to healthcare costs generally, if you look at the Massachusetts experience, you will find that both the hospital sector and the health insurance market are overwhelmingly dominated by NON-PROFIT entities. Massachusetts’ healthcare costs are higher than almost everywhere else, yet both the insurers and the most powerful hospitals like MGH and BWH claim they make a profit margin only in the very low single digits. Partners Healthcare (owner of MGH and BWH), because of its local market power, commands reimbursement rates from private insurers that are far above Medicare rates and even above what competing hospitals receive as a recent article in the Boston Globe described. If these hospitals suddenly had to accept Medicare rates from all comers (under a single payer system), their quality of care would likely be impacted significantly and their very survival would be open to question even if there were no longer any uncompensated care.
    I’ve said before that I favor a multi-payer system using vouchers and risk adjustment payments financed as visibly and transparently as possible. I prefer a payroll tax with a reasonable wage cap coupled with the integration of payroll and income taxes to insure fair burden sharing, especially among the upper part of the income distribution whether they earn their income from wages or non-wage sources.

21. Thanks for all of your comments–
    Chris–
    I think the dangers of doctors providing too little care under capitation may be exaggerated–though i’m not sure..
    During the 1990s, patients became very suspicious that they were not getting enough care as insurers managed care in various ways–including capitated payments that paid a lump sum rather than fee for service.
    But I don’t think we have any evidence that, overall, patients fared worse in the 1990s, do we?
    Patient satisifaction was down because patients tend to assume that more care is better care , and may have felt that if the doctor didn’t order an MRI
    when they thought they needed one–or see them as often as they wanted to be seen–he was skimping on their care.
    Meanwhile doctors who like the idea that their salary is always open-ended under fee-for-service encouraged this suspcion about capitation.
    But I find it hard to believe that very many doctors would consciously decide not to do something a patient needed because “I’ll be paid the same amount whether I do it or not.”
    But I agree that it is best when the insuers’ and the provders’ intersts are aligned, as at Group Cooperative or Kaiser.
    I also agree that you have to watch out for cherry-picking, either by having such a large pool that it will averge out, or by giving extra compensation to doctors who wind up with more high-risk patients.
    Annie–
    I did a little research– It’s too early for substantive data answering the questions you ask.
    Preliminary data suggets high patient satisfaction. And doctors, who at first were reluctant, are liking the system. Several who had planned to retire are going to continue working .
    I couldn’t find much about nurses except that consulting nurses take calls after hours and week-ends-so I presume they also work with the PCPs.
    Patrick–
    You write: “I am a little more sanguine about the impact of future conservative governments on any successful public health insurance plan. Conservatives have hated social security since the 1930’s and it has survived their emnity. Canada’s health system is largely intact under a conservative government, and Britain’s survived Thatcher. Successful, popular programs that provide important public benefits become impervious to attack.”
    I am afraid this isn’t quite true. Thatcher basically destroyed the NHS. She slashed its funding, demoralized its doctors– in terms of funding it’s still recovering. Each year, they try to put more money into the system.
    Social Secruity barely survived the Bush administatrion’s attempts to privatize it. My Foundation (The Century Foundation) was very involved in that fight and they saw it as a close call.
    And I myself remember how Ronald Reagan destroyed California’s state university system when he was Governor–largely because he didn’t like the free speech movement at Berkeley. Schools like Berkeley have come back, but in some places he did irreparable damage.
    On Comparative Effectiveness– yes there is already legislation in Congress (co-sponsored by Baucus) to create a Compative Effectivenes Institute, and this is part of Obama’s plan. The
    only question is how much teeth it will have and whether it will be insulated from lobbyists. ..
    Scott–
    You ask: “Why not have community rating by age groups? Younger people make less money than older people, and younger people also require less health care spending, so wouldn’t it be just to have premiums that differed based on age . . ”
    First, young people often make more than older people. A great many 30-somethings–and even 20-somethings–make more than the average 50-something.
    Secondly, the way insurance works is that the young and healthy pool their assets with the old and sick so that there is enough money to take care of the sickest. This is the way Medicare works–young people pay the same percentage of their paycheck toward Medicare as older people, knowing that , when they are older, a younger generation will be helping to provide for their care.
    Insofar as some younger people do make less than older people, they, like everyone else, will be elgibile for sliding -scale governmetn subsidies to help cover premiums.
    But we don’t want to just give all younger people a discount. Massachusetts did that, and this is a one reason why there isn’t enough money in the pool to cover all of Mass. citizens.
    spoon–
    I would like to see everyone having the same comprehensive package–and paying baesd on income.
    That doesn’t require a single-payer system, however.
    It simply requires that government regulate insuers, telling them, you all must cover what the rich public sector plan covers. And you must charge everyone in a given community the same rate–using these Federal guidelines. (You have to charge people different rates in different commuities because the cost of overhead–real estate, etc. — varies so much by region. If I were a doctor I could set up a practice in Mobile Alabama for much less than it would cost me in NYC. So, in Alabama I would charge my patients less and premiums would be lower.)
    You take care of the sliding scale by offering sliding scale subsidies to people earning below a certain amount.
    Another way to do it is to
    follow Ezekiel Emmanuel’s plan (see my recent post on his appointment and links to posts where I describe his plan.)
    Everyone gets a free voucher that entitles them to exactly the same coverage. Vouchers are funded by a VAT sales tax;
    those who earn more (whether earned income or investment income) and spend more contribute more to the tax than those who earn less and spend less.
    joe–
    yes– rewarding providers on a risk-adjusted basis is a way to avoid the problems of cherry-picking.
    hipparchia–
    Some misinformation here.
    First, “Kaiser” is not entirely non-profit.
    Kaiser Permanente is a consortium of three distinct groups of entities: the Kaiser Foundation Health Plan, Inc. and its regional operating organizations, Kaiser Foundation Hospitals, and the Permanente Medical Groups.
    The Permanente Medical Groups are for-profit.
    Secondly, you note that our current system employs:
    —pharmacy benefits managers [to negotiate three-way with insurance companies, pharmacies, and drug companies]
    – radiation benefits managers [presumably they do the same thing as PBMs but with imaging centers instead of pharmacies and drug companies]
    – utilization review and utilization management companies [iirc, they’re hired by payers to check up on providers and patients both]”
    What you ignore is that, under national health reform(whether single payer or multi-payer) we will need people to negotiate with drug-makers for discounts. (Medicare is already talking about doing this.)
    We also should have radiology benefit managers–Among the proposals for reform outlined by CBO in its most recent report is to require Medicare patients to get a referral from a primary care provider before going for diagnostic imaging (MRIs, etc.) and that Medicare hire “radiation benefit managers” to check these referrals.
    Finally, Medicare is already planning on far more ultiziation review of doctors and hospitals, locating those that are doing more tests and treatments than the average provider (without noticably better results), warning them that they are outliers and ultimately paying them less.
    What you don’t seem to realize is that the administative costs of private insurers equals only 4.5% of the $2.3 trillion we spend on health care. Eliminate them, and healhcare is still terribly expenisve.
    This is why single-payer systems (like the UK) work so hard to contain costs–
    denying care that is not “cost effective.”
    We also have to squeeze the enormous waste out of our system–especially if we are going to insure more people (as we should.)
    But you seem to ignore the reality of the cost.
    You write: “the very best way to deliver superb care *and* contain costs is to just nationalize the whole system, where the taxpayers own the hospitals and employ all the nurses and doctors.”
    Who is going to break it to all of the nation’s nurses and doctors that they are now government employees?
    Where are you going to find the money to pay off the shareholders of the for-profit hospitals (15 % of the nation’s hospitals) when you take them over?
    Where will you find the money to pay off the bondholdes of the nation’s not-for-profits?
    Are you aware that, since 2000, the VA has been badly underfunded? Very long lines and waiting times. Scandalous lack of mental health services.
    So, before you open the VA up to the whole country, where are you going to find the money to fully fund it?
    Also, the VA’s IT works only within the VA. It is not interopeable with hospitals or doctors on the outside.
    Are you aware how much more Europeans pay in taxes than we do in order to have high quality universal coverage?
    “To fund universal health care in France, workers are required to pay about 21 percent of their income into the national health care system. Employers pick up a little more than half of that. (French employers say these high taxes constrain their ability to hire more people.)”
    In addition to higher income taxes, in France you would pay inheritance taxes even on money you inherit from your husband or wife (everything over roughly $150,000 is taxed.)
    Children are allowed to inherit about $100,000 each–everything after that is taxed.
    I personally am in favor of very high inheritance taxes. But most Americans don’t share my point of view.
    Neverthless you would need find some way to collect higher taxes to pay for universal coverage equivalent to the care available in France–even if you cut doctors salaries by 2/3 (French doctors are paid 1/3 what our doctors are paid. In France, a doctor earns twice the average worker’s salary; in the u.S. a doctor earns 5 times the average worker’s salary. . . )
    Patrick– You are quite right when you point out that “Health care infrastructure in the US is worth 10’s of trillions of dollars. Saddling a start up of a national health care system with that kind of cost would be prohibitive.”
    On fee-for-service– Yes, fee-for-servce is very common in Europe. But, in contrast to the U.S., doctors are not free to provide whatever services they feel like providing–and then charging for them.
    There are many more constraints on the volume of care that health care providers can deliver in the forom of global budgets, as well as reduced supply of MRI units and other diagnostic imaging machines. (If you don’t have as much equipment, you cannot do as many tests.)
    Overall, doctors in Europe earn much less than doctors in the U.S. (IN France a doctor earns twice what the average Frenchman earns; in the U.S. the average doctor earns five times as much.)
    So doctors in Europe are not getting rich on fee-for-service.
    Hipparchia–
    I hate to break it to you, but people are not like cars.
    I dont’ know how old you are, but I would guess that you are relatively young, healthy—and lucky.
    A great many people take good care of themsleves (or their parents take good care of them) and then something goes terribly wrong.
    –A psychic break in your early twenties, diagnosed as schizophrenia
    — A brain tumor in your early twenties–death at 25.
    — MS
    — you go into the hospial for a minr procedure and a hospital error proves fatal (this doesn’t happen to cars that go into the shop for repair)
    –cancer in one part of your body spreads to another part of your body
    — early onset Alzheimer’s (we think it is hereditary, nothing to preven it, starts before 65)
    –chilhood diabetes . . .
    I could go on and on.
    Your sense that healthcare could be so simple, and so afforable, if we just followed your prescription,
    ignores, among other things, the tragedy and complexity of the human condition.
    You’re right, there is much wrong with our heatlhcare system. But if you want to undertand it, let me suggest that you start with Money-Driven Medicine. I don’t usually recommend my own book, but it’s available, used, at very low cost, on Amazon. and it will give you a good overview.
    Then take a look at Atul Gawade’s Complications.
    And Don Berwick’s Escape Fire. . .
    Patrick —
    You say that Japan is the poster child for fee-for-service.
    But do you realize that Japanese government sets in the fees (annually, I believe) and slashes fees if it sees any evidence of over-treatment?
    It has drastically cut fees for some types of diagnostic imaging.
    And it barely pays costs for surgery. (In general, there is a cultural antipahty toward surgery)
    Japan pays doctors best for talking to patients, diagnosing and prescribing.
    (Thus the Japanese are the most over-medicated people in the world. We’re #2. )
    What this proves is that financial incentives do lead to overtreatment.
    And we know that the most efficient care (better outcomes and lower costs for very similar patients) come at large multi-specialty medical centers where doctors are on salary (Mayo Clinic, etc.)
    Yes, some doctors might prove to be slackers. But then they are not invited to stay. In these multi-specialty centers everyone is looking over everyone else’s shoulder (which reduces errors, is good for patient safety, and also means that slackers are easily spotted.)
    You need strong, tough administration, a probation period before a doctor is asked to stay, and perhaps renewal, based on performance, every 10 years. . .

22. “To fund universal health care in France, workers are required to pay about 21 percent of their income into the national health care system. Employers pick up a little more than half of that. (French employers say these high taxes constrain their ability to hire more people.)”
    Maggie,
    I had no idea it was this high. I thought it was closer to 14%-15%. You, in effect, asked the question of the single payer advocates that I wanted to ask but was reluctant to. Namely, are you willing to pay European (and Canadian) level taxes as a percentage of income in exchange for a healthcare system that provides universal access but is far more restrictive in what it will pay for and much more determined to control costs?
    Interestingly, a check of the CIA’s “The World Fact Book” pegs France’s GDP per capital at $32,600 in 2007 on a Purchasing Power Parity (PPP) basis. The comparable figure for the U.S. is $46,000. That puts France’s GDP per capital at 71% of the U.S. level while the percentage of GDP that France spends on healthcare is between 60% and 65% of ours. To bring in the uninsured and in the absence of serious measures to control costs, mainly via reduced utilization of healthcare services, and finance the entire system with taxes, we would also have to pay north of 20% of our incomes in taxes one way or another. This is likely to be one mighty tough sell politically, and it also suggests that Dr. Emanuel’s 10% VAT tax won’t get the job done even if Medicare remains intact and Medicaid continues to pay for most long term care.
    Your reference to French employers’ claim that high taxes constrain their ability to hire more people is consistent with the argument that free market economists make about higher taxes, as a percentage of GDP, hurting the economy’s ability, at some point, to grow and create jobs. Nobody knows at what level of taxation the adverse growth effects kick in and some taxes like very high marginal income tax rates have more damaging economic effects than others like consumption taxes and user fees for government services.
    As I think you have pointed out in the past (and I agree), there are not enough wealthy people to tax (more heavily) to finance universal access to health insurance and health care without reining in utilization of services. Insurance company administrative costs are small in the overall scheme of things even if you include their aggregate profits which probably don’t amount to more than another $30 billion or so industrywide.
    We are going to have to get serious about eliminating wasteful and cost-ineffective utilization. We are also going to have to work on bringing Americans’ expectations around end of life care into closer alignment with people in other developed countries and give doctors more protection from lawsuits based on a failure to diagnose if they follow national evidence based standards if we want them to reduce defensive medical practice.

23. Maggie –
    I am very aware that in Japan the government health board dictates the fees in their fee for service system. I am also aware that the Japanese health system has problems of its own – TR Reid and Japanese experts he talked with said they probably actually spend too little money, by a point or two of the GDP. When I called it the poster child for fee for service I meant that it is a 100% fee for service system, without any other significant components pumping money into the health care system.
    I am also aware that in both France and Germany and indeed in most countries using fee for service as a payment system the fees are fixed in negotiations between providers, including hospitals, and the payers. In France they can be adjusted slightly if providers add “extra value” – mostly by additional training, qualification, or use of newer techniques, but even that add on is set. In Germany the fees are set pretty rigidly. In both countries hospitals get most operating budget from fees as well, although in Germany a lot of the capital budget comes from block grants.
    As long as I am at it, I should note that in both France and Germany – and probably Japan as well – doctors who work in hospitals are paid salaries. In Germany some doctors working in clinics are paid salaries too – just as people at places like Mayo here are – but all those salaries are paid out of funds collected from fee for service billing – again like Mayo. (More on Mayo and productivity issues below.)
    All this was said as a rebuttal to hipparchus’ statement that the best foreign systems use prospective payment systems. Not true.
    Review of my earlier posts would indicate that I do expect and want national supervision of payments to providers; to cut or eliminate fees for unneeded, poorly cost effective, or dangerous procedures and treatments; to encourage use of cost effective procedures and treatments; and to change fee schedules to increase fees for proven useful activities that are now undervalued or unpaid while lowering fees which may be proportionately too high.
    My goal in citing these other countries is not to say we should slavishly adopt their systems, but rather learn lessons they have arrived at the hard way over years of trying to perfect their systems. My goal is also to support the notion that despite its position as a whipping boy in the minds of US health care wonks, fee for service may actually be the best way to organize payments because, once one controls for the dangers in fee for service, the value it has in incentivising exactly the behaviors we want out of providers and hospitals is difficult to match, and because it eliminates the hospital by hospital negotiation for block grants that I think would turn a block grant based system into a nightmare.
    I am not advocating fee for service to keep doctors rich, since I would expect decreases for high paid specialists – although, as in Britain, we may wish to increase incomes for primary care doctors and other primary care practitioners.
    Unfortunately, even Mayo has doctors whose productivity is significantly below norms. In my field Mayo has developed elaborate systems to try to divide work appropriately, and there are still complaints. I know this first hand, having worked there and seen it. I have never heard of them firing a provider over productivity issues. The system just adjusts the standard salaries to a level that keeps it operating – “to each according to his need, from each according to his ability” (some of the more disgruntled high producers used to refer to it as the “Mao Clinic”.)
    As far as that other Maggie and the NHS: Thatcher damaged everything in Britain. The NHS is part of the set of everything in Britain. Therefore Thatcher damaged the NHS. But the NHS did manage to limp through the Thatcher years and come out stronger in the end. And that is one of the things that makes me feel that if an American health care program has five of six years to run before falling into the hands of Jeb Bush, it will be very hard to kill and hard to injure too badly. Reagan was able to smash the U of C system because it was seen by too many Californians as an elite system not relevant or even opposed to their values and lives. A health care system will touch everyone, and hopefully in a predominantly positive way. If we can run a health care system for 12 years (in other words elect a Democratic successor to Obama) before it falls into the hands of anti-government conservatives, it will not just be hard to kill, it will be impossible to kill and very hard to hurt too badly. It will become another “third rail.” (I think it is overstating the facts to suggest that social security barely survived Bush. In reality, I think that the attempt to attack social security following the 2004 election fell to pieces quickly and actually hurt Bush and the Republicans and contributed to their downfall. Bush was not able to wreck social security; social security helped wreck Bush. I know that out here the Democratic candidates always try hard to remind voters of the Bush follies vis-à-vis social security, and the Republican candidates go out of their way to repudiate the effort.)
    And Barry – my state FORBIDS for profit health insurance companies. They only get their nose under the tent through Medicare Advantage, Medigap, Medicare Part D, and car insurance. Interestingly, our big 4 non-profit insurers all started up for profit spin offs in order to run their divisions for the programs where profit is allowed. All the experiences I discussed earlier were with non-profit insurers.

24. “To fund universal health care in France, workers are required to pay about 21 percent of their income into the national health care system. Employers pick up a little more than half of that. (French employers say these high taxes constrain their ability to hire more people.)”
    Actually, the tax cited is the general tax for social contributions, the CSG. In addition to paying for health care, the CSG funds the social security retirement program and several other social security programs, so the cost of health care is somewhat less — probably more in the range of the numbers that Barry sites.
    Before we get too aghast at these taxes, let’s remember that the median family in the US — income around $60,000 — paid $12,400 for insurance last year, when the employer and employee portions are calculated. Social Security took another 8% of income, combining employer and employee parts.
    So looking at France vs the US, the appropriate comparison is to say that an average US working family would pay 28% of their income for health care insurance and social security in the form of personal contributions, personal taxes, employer contributions and employer taxes. The average French working family would pay 21% for coverage of the same items.
    The fact that part of the US costs are private funding and part tax is of little consolation for the people who are paying. If they actually understood what was going on, they would probably wish to pay the lower total in taxes rather than the higher total in taxes and other payments.

25. Patrick:
    You cite that the median family income is $60,000, while the average group premiums for a family is $12,400.
    With 20% of the family’s income going toward premiums, that says quite a bit.
    In the prior generation, one could qualify for a mortgage if 28% of your income went to the mortgage, with a 20% down payment.
    Now, we have 20% going to health insurance premiums, before we even add in the out of pocket costs.
    And, remember the premiums are tax-advantaged, while the out-of-pocket costs are after-tax,
    I can surmise a good portion of the after-tax medical costs for the median family would be another 8% of their income.
    In that case, they would be paying the equivalent of 2 mortgages, with their mortgage and health care costs.
    Don Levit

26. Patrick–
    Your numbers on how much U.S. families pay for healthcare are misleading.
    While the average premiuim for a family plan is now about $13,000–that includes BOTH what the employee pays AND what the employer pays.( Self-employed people pay they whole amount themselves–but get a huge tax deduction. Until recently I was self-employed and wound up saving at least 1/3 of that amount in taxes.)
    In any case, the majority of Americans under 65 have employer-based insurance–and the employer pays a large chunk of that $13,000. In the case of “Better paid workers” (earning, if memory serves, over $65,000), the employer typically pays 2/3 of the premium. And 15% of “better-paid workers” pay zero for their insurance. That’s right–their employer pays 100% of the premium.
    And the more affluent you are, the more likely it is that you have employer-based insurance.
    What this mneans is that in the U.S., on average, the wealthier you are, the less you pay for your health care.
    The poorer you are, the more you pay for your healthcare.
    This is not true in Europe where wealth is redistributed to pay for all social services. (This is why , in contrast to the U.s. there are relatively few very wealthy people and relatively few very poor people in European counties.)
    Universal coverage in the U.S. will mean redistributing wealth–the upper-class and upper-middle class (roughly the wealthiest 40%) will pay for the healthcare for the middle class and low-income families, whether through higher premiums than the 0% to 33% that they pay now, income taxes, a VAT, or some other means.
    (Today, many people suggest that the rich pay for healthcare for the poor through cost-shifting, but reserach shows that cost-shifting is exaggerated. The truth is that the poor and lower-middle class just dont’ get nearly as much healthcare as the rest of us. Under universal care,they would receive far more care, and since they cannot afford to pay for it, wealthier people would have to pay for it.)
    If we save money by cutting some of the waste in the system, the wealthy also would feel the impact because the wealthy are more likely to get unncessary diagnostic tests, elective surgeries, hospitalizations, over-priced drugs and devices, etc.
    I’m not saying this redistribution of money and services wouldn’t be fair–just that it would come as a shock to many upper-middle-cass and upper-class Americans.
    This is a major reason why many/most upper-middle-clas and upper-class Americans will not be happy with health care reform–at least not in the early years. Reform will require sacrifices and tradeoffs. When polled, upper-middle class Americans do not embrace sacrifice .
    At this point, they have one priority–they would like their OWN health care bills to be lower. And they want to get at least as much healthcare as they are getting now. Whether or not others are insured is of secondary importance. (Poll after poll shows that universal coverage becomes a priority only after you get down to the bottom half of the income ladder.)
    Botton line: under universal care, those better-paid families that pay 0 to 33% of their premiums will find themselves paying significantly more. And, under universal care, their
    care will be “managed”–co-pays will be higher for less effective treatments, and the system will cut back on diagnostic imaging, PSA tests, MRI scans for breast cancer, angioplasties for angina,
    bypass surgery, etc.
    One reaon that many reformers want private insurers included in universal coverage is so that government will not have to take all of the blame for the cutbacks that people will not like(even though these cutbacks will mean eliminating some of the ineffective care that represents more risk than benefit )
    This is a reason why, after 8 years, many Americans on the top 2 steps of a 5-step
    income ladder may be unhappy with health care reform–just as many affluent Americans have hated Social Security for many years.
    Social Security is extremely popular among Democrats and lower-income to middle-income Americans in general. Polls show, however that many Republicans still disapprove of SS.
    As Paul Starr points out: “Barry Goldwater suggested making it voluntary in 1964, and ever since the 1980s, conservative think tanks have sponsored proposals to shift from Social Security to individual retirement accounts. The opponents’ biggest resource in this effort has been public skepticism about government. When a 1981 opinion survey asked how much money out of $100 in Social Security taxes went to administration, the median answer was $52, though the real figure that year was $1.30.”
    Finally, the UK’s NHS has not recovered from Thatcher’s reign. Talk to doctors there. Policy-makers explain that is why they must continue to funnel more money into the NHS each year.
    While I was writing this, I stumbled onto a very good summary of how much European families pay for healthcare vs. American families:
    United States: In the U.S., a family of four with an employer-based PPO will have around $15,609 total this year in health care costs. Of this amount, $9,442 will be paid by the employer and the employee will contribute $3,492 in premiums and $2,675 on co-payments, equivalent to about 6 percent of average family income. [these numberes come from the OECD In theory, if employers didn’t pay so much, U.S. wages would be higher. But employers do not pay higher wages unless they must. As long as unemployment is high–or even relatively high–employers do not raise wages except for top management and executives.]
    Canada: In Canada, while the percentage of taxes used to provide health care varies, it is estimated that 22 percent of taxes collected went to the health system in 2004. Several provinces, including Quebec, Ontario, Alberta, and British Columbia, also charge additional premiums. Canadians also may spend money to receive private treatment for procedures or drugs that are not covered by the government system.
    United Kingdom: Citizens of the U.K. pay 11 percent of each pound they make in weekly income (£100 – £670) for the NHS, plus an additional 1 percent for income over £670 a week. Copayments for drugs are low, but many drugs are not covered, often because they are not considered cost efficient. In addition, anyone who uses their own money to buy powerful but expensive drugs not paid for by the NHS finds him or herself shut out of the system. According to BBC News, the NHS has imposed a policy that denies treatments to patients if they exceed £30,000 a year.
    Germany: In Germany, coverage from a public sickness fund ranges significantly in cost, from around 12.2 to 16.7 percent of income, with the employee paying a bit under half. This year, premiums are to be standardized from the federal level and health care experts anticipate that they will be set to around 15.5 percent. [so the individual pays about 8% of income for no-frils healthcare–more if he chooses privat-sector insurance.The no-frills care is medically excellent, but it does mean you don’t get a private room in the hospital, must wait for elective surgery etc. Many Americans would consider it sub-standard]
    France: According to the OECD, the French pay 20 percent more in taxes than Americans. In France, employees contribute only to 0.75 percent of their salaries towards medical care, but also pay a 7.5 percent General Social Contribution, the majority of which is earmarked for the health system.”[Patrick, this answers your comment on the GSC contribution–]
    In France ” This base coverage reimburses people for the majority of costs for doctor visits and for a portion of the costs of medications. On top of the government coverage, almost all French residents have supplementary coverage from a “mutuelle”, costing approximately 2.5 percent of salary. [so they pay .75 percent of salary, plus “the majority of 7.5,” plus 2.5– let’s say .75 plus 5 plus 2.5 =
    8.25.
    Switzerland: . The Swiss pay an average of $680 per month or around $8,167 annually for four people on the basic plan. Total health costs can add up to around 16 percent of income. Those who want supplementary coverage must pay more and costs can exceed $1,000 a month.”

27. Maggie,
    I think this issue is well settled among economists. Most believe that the employee pays for the employer’s share of healthcare costs as well as the employer’s share of FICA taxes in the form of lower wages than he or she would otherwise receive if the employer did not have to pay those costs. If the burden went away today, due to the recession, employees may not see those extra dollars in their paycheck overnight but they probably would over the intermediate term as the economy recovers and labor markets equalize. To properly calculate the cost of health insurance at the individual employee level, one should add the employee’s share of the insurance premium and the Medicare portion of the FICA tax (currently 1.45% of wages with no cap) to the employer’s share of insurance premium and the employer’s share of the Medicare piece of FICA taxes. The employer’s piece of Medicare as well as its share of the employee’s health insurance premium should also be added to wages. The employer’s share of the Social Security portion of FICA taxes (6.2% of wages up to $106,800 for 2009) should also be added to the employee’s income. To be completely accurate, all other benefits for which the employer pays cash but the employee does not pay income taxes should also be added to the wage number to determine total compensation and then calculate all tax burdens on that base.
    On the flip side, when the Tax Reform Act of 1986 was enacted, the corporate income tax fell from 52% to 35%. Within about two years, that benefit was competed away in lower prices and more service so that overall corporate profitability as measured by Earnings Before Interest and Taxes (EBIT) as a percentage of average assets reverted to its historical normalized level.
    Determining the health insurance tax burden based on the cost of family coverage ignores the fact that many people only need single coverage or coverage of two people, usually husband and wife. The working uninsured who do not have access to employer coverage and either can’t afford or choose not to purchase individual coverage currently don’t pay anything for health insurance except to the extent that they are subject to Medicare taxes. A quite significant percentage of the population will pay more for health insurance under reform whether it is in taxes for a completely taxpayer financed system or for employer coverage under a play or pay approach even if the employer is nominally paying most or even all of the premium because it will pretty quickly be reflected in lower wages or forgone or much smaller wage increases than would have otherwise prevailed. While it may make employees feel better to think that employers are covering most of the cost of their health insurance and half of their FICA taxes, the sooner they understand that they are really paying the whole cost, the better. Efficient resource allocation demands accurate information and transparency. We need more of both and a lot less obfuscation.

28. Barry, Patrick, Don Levit– thanks for your comments-
    On France, see my comment to Patrick below.(Note I didn’t say French employees pay the full 21% for healthcare–I said employers pick up about half of that.)
    On Emanuel’s 10 percent VAT tax and whether it would get the job done. Please see his book. (I’m working at home and don’t have it here.)
    The math is somewhat complicated–but it works. Let me put it this way, I have read all of the reviews of the book, and no one has said a 10% VAT isn’t enough. What they have said is that high-spending more affluent Americans do not want to pay a 10% VAT.
    To assume that all of these reviewers missed a big error in Emanuel/Fuch’s math–and that people who haven’t read the book have spotted the error–seems unlikely, yes??
    I agree that we will have to reduce utilization. But wealthier Americans (by which I mean the upper-middle-class as well as the truly rich) will have to pay more, particularly if they are now in a job where there employer now pays 66% to 100% of the cost.
    Of course, under Obama’s plan,as long as their employer continues to offer that coverage, they have the same deal (though I suspect some taxes will have to go up somehwere to help fund universal coverage.) And much will depend on how much large employers will have to “pay” if they decide not to “play.” IF they do decide to “pay” then their employees will find themselves in a market where they pay 100% of the premium–unless they are poor enough to qualify for a subsidy.
    Patrick–
    See my recent comment to you about how much American pay for healthcare vs. families in other countries.
    n a separate post on fee-for-service You write: ” “once one controls for the dangers in fee for service, the value it has in incentivising exactly the behaviors we want out of providers and hospitals is difficult to match.”
    Yes, I suppose there will always be people who work harder if paid more–and not as hard if paid less.
    But by and large, in my experience, these are people who have boring jobs. Money is the only motivator.
    If you are lucky enough to have a job that captures your interest and imagination, it really doesn’t matter how much you are paid. Over the years I’ve been paid very well (writing for for-profit financial newspapers and magazines) and not as well (as an academic and working for a not-for-profit foundation.)
    I find the pay doesn’t effect my output. The work does. when I have more freedom, I work harder. When constrained by editors wo are concerned about offending advertisers, I don’t work as hard.
    The myth that if you give a CEO the potential to earn $2 million instead of $1 million through “performance bonuses” he’ll work harder and perform better is just that, a myth.
    Research shows that he’ll simply steal more and be more likely to cook the books.
    The doctors I have talked to from Mayo never compalined about “slackers”. In fact, they have said that the culture was such that no one would want to be perceived as a slacker.
    In general, I don’t worry too much about how hard other people are working. It’s like looking into someone else’s pocket.
    Are they getting a better deal than I am?
    I only care whether I am earning enough to live comfortably while being left free to do my work.
    Don–
    Patrick’s number on how much Americans pay for insurance is mis-leading.
    The average family premium for family-based insurance is around $13,000–with the employer picking up anywehre from 40% to 100%.
    Employers pick up a larger chunk of the premium for better paid workers (eanring over %65,000). In 15% of those cases, employers pay 100%.
    The majority of Americans under 65 have employer-based insurance. On average, they pay 6% of income for their share of the premium, plus co-pays.
    This is significantly less than the average family in European countires. (See my post to Patrick dated January 02, 10:19 AM

29. Barry–
    Yes, overall Americans pay for health insurance in the form of lower wages.
    But better-paid Americans have continued to see wages rise (in real terms) while Americans on the bottom half of the income ladder have not.
    The labor market is neither a fair nor an efficient market.
    Employers pay a larger share of “better paid” employees benefits and also have been giving the best-paid employees real wage increaes.
    Most workers, on the other and, have not shared in the prosperity. Throughout the 1990s, many economists continued to predict that we would have wage-push inflation–but it never happened. Employuers and sharholders never shared the profits with most workers.
    Meanwhile, on this thread we are talking about how much Americans pay for health insurance in comparison to Europeans.
    Well-paid Americans are better-paid than relatively well-paid Europeans. And they pay a lower percentage of their income toward healthcare.
    Net, net, they are better off than their European counterparts.
    I think that we agree that under universal coverage, they will have to pay more for healthcare.

30. “Employers pay a larger share of “better paid” employees benefits”
    Maggie,
    Over the course of my nearly four decade career, I’ve worked for two very large companies with many thousands of employees, a financial publishing firm with hundreds of employees, and a money management firm with hundreds of employees. To the best of my knowledge, everyone at the money management firm and the financial publisher had the same insurance coverage while, at the two large companies, there may be (I’m not sure) an ultra gold plated plan that applies to perhaps a couple of dozen senior executives at the top, though I don’t think that’s the case at my current (large company) employer.
    Interestingly, way back in 1990, when I worked for the well known money management firm, low paid secretaries and other employees who made less than $30K paid either zero or $10 per month toward the cost of their very comprehensive health insurance. At the same time, analysts (including me), portfolio managers and executives who made $100K or more paid $250 per month toward the cost of our coverage which probably had a total premium cost of $8K. Remember, it was NYC and we had a considerable number of very elderly partners, some of whom incurred major league medical expenses. Anyway, the well paid people thought our much higher contribution compared to that of the low paid employees was perfectly fair and reasonable. I think more employers would be well served to consider this approach, at least for non-union personnel.

31. Maggie —
    I don’t want to belabor this, but unfortunately in 30 years in medicine I have never seen a practice of any type or specialty where productivity did not vary by nearly 100% from the most to the least productive, and I have worked in salaried, prospective payment, and fee for service settings. The difference is that in fee for service settings the low producers cost a lot less, while in salaried or prospective payment systems they tend to cost nearly the same.
    In a reformed US health care system, high income people will probably pay more for health care than now. But, depending on the financing model, the vast majority of people will pay considerably less, especially if you consider money paid for fringe benefits to be part of wages.
    In the end, someplace or another people in Europe are paying less as well, since in the US we have to find the money to pay for the 16% of GDP that we spend vs the 8 to 13% they pay. Part of this is because half of US health care is already paid by the government, so the charges we all pay for health care are partly masked in our taxes of various sorts.

32. Patrick and Maggie,
    Professor Uwe Reinhardt of Princeton has made the point that a wealthy society can afford to spend more for healthcare. In an earlier comment, I noted that the U.S. GDP per capita is $46,000 as compared to $32,600 in France (2007) according to the CIA’s “The World Fact Book.” If the U.S. spends 16% of GDP on healthcare, that implies $7,360 per person leaving $38,640 per person for everything else. If France spends 10% of its GDP on healthcare, that equates to $3,260 per person leaving $29,340 for everything else. While U.S. per capita healthcare spending exceeds France’s by 122.6%, per capita GDP available for everything else other than healthcare in the U.S. is still 31.7% higher than France’s.
    While I personally think the U.S. healthcare system is grossly inefficient, fragmented and poorly structured and there is much that can be done to make it more efficient and cost-effective while bringing the currently uninsured into the system, the high tax, extensive social safety net model that most European countries embraced comes at a cost. In effect, Europeans (and Canadians) opted to trade greater personal economic security and less (than the U.S.) income inequality for slower secular economic growth and less economic opportunity, including the opportunity to become wealthy or at least upper middle class.
    While Maggie and many others may think that life in Western Europe and Canada is less stressful and more enjoyable than in the U.S., our culture is what it is and theirs is different. I don’t think that’s likely to change, though I do expect the upper 30% of the income distribution will pay a higher percentage of their income in taxes going forward to not only pay for healthcare reform but to bring federal revenue into closer alignment with spending over the intermediate term.

33. Barry —
    The problem with US health care is not just its overall cost from waste, the very uneven distribution of costs in the population. A couple with one child, low health costs, and employers that pay half of their insurance costs could spend as little as $2500 per person. If the couple had the misfortune to have a significantly premature baby, they could spend as much as $900,000 in the same year, much of it their own responsibility because of co-pays and insurance payment caps. The Europeans have developed a system where there are relatively mild variations in what individuals pay, with the system bearing the costs for people stuck with very high bills. Reform proposals like Emanuel’s and Obama’s envision a system that would also distribute costs much more evenly.
    It is obvious to almost everyone on this blog that health care reform must contain significant cost control, since although our high costs can be born be the economy now, if they continue to rise to the level of 30% of GDP predicted by many observers, they will not longer be sustainable.
    Finally, in all our discussion of the costs to high income indivuduals, it is important to note that although high income people pay the same for private insurance as low income people who are fortunate enough to get it, they pay much more for the government component of health costs. The Medicare tax of 3%, split between individual and employer, covers every last dollar of wages and salary. The coverage of Medicaid and the balance of Medicare not covered by the Medicare tax comes out of federal income tax, with the state component of Medicaid paid by state taxes. SCHIP is paid by federal and state taxes. The VA, IHS, PHS, military health care, and the various scientific institutes are all paid out of federal taxes, which in turn are paid predominately by higher income taxpayers.
    In fact, Maggie’s mythical couple earning $200,000 a year and getting half their health insurance paid by employers would pay at least $7000 to $8000 dollars more for health care in their and their employers contributions to taxes. Half of the $7500 per person that health care costs in the US is paid by taxes, giving a tax burden for health care of rougly $3200 for every man, woman, and child, but paid largely by higher income people.
    The deal that high income people got from some reform proposal financing, whether VAT or income tax or employment tax would not be as good as our current system, but it would not be as bad as a superficial analysis neglecting the impact of taxes now. And high income people would get the same leveling of risk that everyone got, protecting them from the impact of that premature baby, the cancer treatment costing 100’s of thousands, the long stay in the ICU from an auto accident or an intracranial bleed, or other catastrophe that would be so expensive that it could wipe out the resources of most people in the top 5% of income as easily as those in the bottom 30%.

34. Patrick,
    I basically agree with everything you said in your last comment including both the need to drive waste out of our system to reduce costs and to protect every individual from catastrophic medical expenses. Indeed, I’ve said numerous times that if health insurance does nothing else, it must cover catastrophic medical expenses 100% above some reasonable out-of-pocket (OOP) maximum limit.
    I’ve also noted previously that way back in 1974, shortly before President Nixon resigned, we almost got national health insurance with a deductible of between $1,000 and $1,500 per person (multiply by about 5 to covert to today’s dollars) with insurance covering medical costs above that limit. Unfortunately, organized labor overreached and killed the bill. It expected a landslide win for Democrats in the post-Watergate Congressional elections and thought it could then ram a single payer system through over Nixon’s veto. Nixon resigned in August, 1974, a severe recession set in and suddenly there was no money for any new entitlement programs. While the Democrats got their landslide, in the end, they wound up with nothing on the healthcare reform front.
    The bottom line: substantive healthcare reform needs bipartisan support, and it’s not smart strategy to overreach.

35. Barry–
    When I said that well-paid employees pay less for insurance, I was not talking about better-paid vs. less-well-paid within a given firm.
    In most companies, everyone pays the asme amount for the same insurance–although there are often special health care benefits after retirement for executives.
    But what I was talking about is the government numbers which show that “better paid” employees (earning over $65,000) are a) more likely to work for a large company that offers health insurance and b) are more likely to have employers who pay 70% to 100% of their insurance.
    These tend to be large, wealthy corporations.
    On average, people who work for small companies earn lower salaries and are less likely to have benefits. If they do have health benefits their employer is less likely to pay a large chunk of the premium.
    The many white collar workers who now work for corporations and earn over $65,000 will be suprised to discover that under universal coverage they are likely to be paying more than they do now–even if we squeeze out much of the waste.
    If their employers drop employer-based coverage, some companies will make up the difference by raising wages for some employees that they don’t want to lose.
    Barry–
    On the European social safety net vs. our less economic security and more inequality in the U.S., you say our culture “is what it is” and isn’t going to change.
    I disagree. I think we are at a turning point in American history, much like 1930, when we are about to see great change.
    If this recession is as long and as deep as the economists and market-watchers who I follow think it will be, we are
    going to see redistribution of income, not only through healthcare, but in other areas.
    The Obama administration is already talking about putting large sums into public schools and public health. I suspect that we are going to see more govt’s sponsored scholarships based on need, and fewer student loans for the upper-middle class.
    In the 1920s, inequality in the U.S. reached a high–much as it did in the 1990s. If in the years to come we put money into WPA-type projects, inner cities, education, healthcare and a wide variety of social programs for the poor those gaps between the lower-middle class,the middle class and the uppper-middle class will begin to narrow.
    Ultimately, we may get back to where we were in the 1950s and 1960s when white America was largely middle-class.
    The Obama administation is not going to raise taxes next year –probably not the year after– but ultimately it will raise income taxes, inheritance taxes, capital gains taxes, etc—and I wouldn’t be too surprised to see a VAT somewhere down the road.
    I also suspect that we will raise the amount of an individual’s income that is taxed for Social Security–maybe to $250,000 or $300,000.
    See tax rates at the end of the 1930s.
    It’s time for another pendulum swing.
    Patrick–
    On fee-for-servcice, I think it comes down to this:
    Are we more concerned about some doctors making the same salary as others while not working as hard
    OR
    more concerned about many patients being over-treated becuase the financial incentives of fee-for-service encourage overtreatment (unless you have a government reducing fees every time they see an upswing in a particular treatment.)
    People are killed by overtreatment. People suffer horribly while going through that 2nd or 3rd round of futile chemo.
    (Monday I’m posting an open letter from ononcologist that will make you shudder.)
    One of the many things I like about the Mayo clinic is the fact that after the first five years everyone in a given specialty makes the same salary. And it’s significantly less that many Mayo doctors make on
    the outside.
    But the many docs who are happy at Mayo don’t mind.
    Meanwhile, medicine at Mayo is patient-centered.
    This is why it costs Medicare 50% less when a
    Medicare patient is treated at Mayo than when a very similar patient is treated at UCLA or many other prestigious medical centers where most doctors are working fee-for-service—and patients suffer the consequences.

36. I am certain that there are horror stories out there about overtreatment. However, I have to defend my fellow physicians here by saying that although overtreatment is rampant in the US and certainly harmful to patients in many circumstances and harmful economically in all, I do not think that financial incentives for providers or hospitals are the main cause of overtreatment. I think that most overtreatment occurs mostly because the people directing the overtreatment actually believe they are doing the right thing and because patients often want overtreatment ( read the NYTimes op ed piece by Susan Sontag’s son demanding that oncologists provide unnecessary and dangerous overtreatment in order to give hope to patients,) and because there is a general bias in US medicine for the high tech and spectacular, strongly encouraged by “research” performed at the behest of drug and equipment suppliers and backed by the culture in academic medicine and in scholarly journals, where it is widely known that the way to advance your career is to do things that work, not to show that things don’t work.
    Greed by providers does exist, but outside of a few places in the country where the culture of medicine has gone off the tracks, greed is rarely the reason for overtreatment.
    That said, one of the reasons that Mayo has done so well in studies of efficacy and cost effectiveness is that the culture of Mayo contains a high level of suspicion or even cynicism about following the latest fads in management or getting on board bandwagons without first checking carefully to see that things work. Part of this may be what you allude to, in that at Mayo, almost unique among high power research and referral centers, publication and research do not effect salary and rank.
    Despite the common opinion amoung health care wonks, examining the effect of fee for service in the world does not lead to any evidence that it causes overuse or overtreatment. In France, Germany, Japan, Canada, Australia, and many other places the dominant fee for service payment approach does not lead to overuse. If indeed fee for service leads to overuse in the US, it is due to something unique in the US, not to an intrinsic flaw in the system itself.
    I think an example might be useful here. Imaging services have been subject to explosive overuse in the US in the last few years. However, the people who benefit financially, the diagnostic radiologists, have no role in ordering imaging procedures. Imaging is ordered almost 100% by non-radiologists. I have first hand experience of radiologists repeatedly trying to talk clinicians out of ordering exams the radiologists believe are not needed, only to have the clinicians absolutely insist that they must have the exam. The reason seems to be first that many clinicians have been oversold on imaging by their own literature and training, and second that clinicians often find themselves dealing with patients who are insistant that they want the exam because of what they have heard in the media and by word of mouth. Although equipment manufacturers and their allies in academic medicine are responsible for a lot of publicity encouraging false reliance on imaging, they are not being rewarded by the fee for service system. The people who benefit from the fee for service for radiology are left standing on the sidelines, shaking their heads bemusedly while wondering what time they are going to get home that night.

37. Maggie — I’m actually optimistic that we will get substantive healthcare reform this time around, at least with respect to universal coverage. I’m concerned, however, about an attitude that exists among many that we can spend virtually unlimited amounts of money, at least for awhile, on anything we want because, after all, we just authorized $700 billion to fix the banking system of which half has already been committed. Hopefully, we will also get the payment reform that either stops paying for cost-ineffective drugs, devices and procedures or at least exposes patients to far more of the cost.
    I do not think we are likely to embrace other aspects of European safety nets including free college tuition, more generous social security than we have, more generous disability coverage, and more rigidity in the labor markets including far longer and more generous unemployment benefits and generally making it very difficult to lay people off during business downturns. While taxes are virtually certain to go up for the top 20%-30% of the income distribution especially, I doubt that they will approach European levels as measured by the total tax burden as a percentage of gross income. We are not likely, for example, to pay anywhere near $7-$9 per gallon for gasoline despite concerns about global warming and the need to rebuild our infrastructure. If we do get a VAT eventually, the rate probably won’t be close to the high teen percentage rates and even higher that prevail throughout Europe. So, substantive healthcare reform, probably. Will the upper half of the income distribution start singing Solidarity Forever? I doubt it.
    Patrick – I was interested to read your comments about imaging. When I think of imaging to mean non-invasive and relatively painless, though expensive, tests like MRI’s and CAT scans, I can easily picture your scenario playing out. There may also be a defensive medicine aspect among U.S. clinicians that won’t apply to clinicians in other countries, at least not as pervasively. For the patients, if insurance will pay for it and the radiation exposure risks are low, I can see them pushing for it. Normally, I think engaged (as opposed to passive) patients are a good thing but certainly not always. If imaging is extended to include such procedures as endoscopies, colonoscopy, angiography, etc., I don’t think patients are likely to be too quick to insist on those if the doctor doesn’t think they are necessary. I wonder how much more of these we do as compared to healthcare systems in other countries. Separately, the importance of publishing and research in advancing academic careers can certainly lead to aggressive treatment at the margin. I’m sure other countries have academic medical centers too. I wonder how doctors in those centers advance their careers and how do the rewards for doing so compare to here?
    It’s a fascinating discussion at any rate.

38. Barry —
    I agree that there is probably not a lot of demand on the part of patients for endoscopy. The demand for endoscopy is fueled by clinicians reacting to research findings and to some extent to malpractice fears. There is a reaction to colonoscopy going on in the literature right now, but I suspect in the end it will shake out in endoscopy’s favor, although it may be accompanied by recommendations or requirements that the doctors performing endoscopy undergo a more thorough training, have more experience, and document that training and experience in order to be paid. I also think there will be downward pressure on endoscopy fees, as the procedures have come to take much less time than they did when fees were set.
    Angiography is another story. Despite the pain and risk involved, I think there is a strong patient demand for angiography, especially in areas where it is closely related to interventions and surgery. The desire of patients to seek “curative” options is very, very high in US medicine, along with resistance to medical management of diseases as “chronic” conditions. The belief in these “curative” procedures is also very strong both in physicians performing them and in clinicians referring patients to them. There is strong resistance to information from high quality research that indicates that medical treatments may not only be equal to interventions and surgery, but actually superior. I have seen articles suggesting that changing the practice of management of coronary artery disease to comply with best scientific evidence would save as much as $70 billion a year in the US while improving results.
    Angiography and intervention are not alone in this. Experts also suggest that the diagnosis and management of back pain costs $70 billion more than it would if we used best proven approaches. A health system CEO told me recently that he and his staff were well aware of the facts about back pain management, but did not dare to take any steps, through standards or even through staff education, because patients would simply go somewhere else. This reflects the popular observation from a few years back that you did not dare become known as the HMO or insurance program that would not let people get MRI’s, because your market share would collapse.
    This is why I am so strongly in favor of a National Health Board to set practice standards — and of course why almost all foreigh systems have adopted strong standards board approaches. That approach could not only save hundreds of billions of dollars, but would give providers cover to allow practice of scientifically correct care, both in terms of patient demand and of malpractice fears.
    Block grants or other prospective payment plans are another approach to these problems, but I prefer using fee for service and practice standards. Block grants encourage general rationing of health care and do not guarentee that cuts will be applied where they are most appropriate, but rather where they are easiest to accomplish and sell. Practice standards accompanied by payment changes in a fee for service system apply the rationing directly to areas where it is most needed, helping providers and patients to make decisions that are best for health care in the long run.

39. “This is why I am so strongly in favor of a National Health Board to set practice standards — and of course why almost all foreign systems have adopted strong standards board approaches. That approach could not only save hundreds of billions of dollars, but would give providers cover to allow practice of scientifically correct care, both in terms of patient demand and of malpractice fears.”
    Patrick – I’m with you 1,000% on this one. I wonder what would happen, though, if MedPAC or a newly created Federal Health Board recommended against paying for a given procedure but the Congress, influenced by lobbyists, required CMS to continue to pay for it anyway. The FHB, in theory, should provide both the political cover and moral authority for private insurers to refuse to cover it. Ideally, the enabling legislation should probably explicitly prohibit CMS from covering and paying for anything the FHB finds not cost-effective.
    I also wonder why, under CMS’ current process, it takes so long to lower fees for procedures that come to take much less time due to both newer techniques and doctors progressing down the learning curve as they accumulate more experience than they did when first introduced.

40. Barry —
    I agree with your concerns about politicizing health care — although it already is very politicized (which is the answer to why appropriate decreases of fees are slow to happen. HCFA and its successors are pressured by politics and slow to react, and private insurers, as is their usual practice, follow Medicare.) Maggie’s concerns about the impact of an anti-government administration are another side of the same coin.
    That is why Daschle’s proposal to isolate health care from congress using a device similar to the Federal Reserve Board is so interesting. If the political will could be found to create such an entity, it would then be protected from interference in the future by its charter and structure.
    Daschle actually feels that in the end congress might prefer to get out of the business of fine tuning health care. He feels that both conservatives and liberals would prefer that solution in order to avoid being incessantly bogged down in considerations they understood poorly and which were fraught with political danger — especially if a universal health care program was established and the already heightened interest of seniors in health care politics extended to all Americans.
    Don’t know if he is right about feeling that something like that could pass, but he does have a long career of experience in understanding how congress is likely to behave.

41. Patrick–
    When you look at the explosion in diagnostic imaging, you will find a major spike among doctors who have installed imaging equipment in their offices. These doctors are both prescribing and doing the imaging–profiting from their recommendation.
    Also, someone sent me this op-ed calling for an end to fee-for-service payments by Alain Enthoven in the NYT, Dec. 27.http://www.nytimes.com/2008/12/28/opinion/28enthoven.html?_r=1&scp=2&sq=Enthoven&st=cse
    It’s quite well-argued.
    My point is not that most doctors CONSCIOUSLY “do more” in order to raise their incomes, but the fee-for-service system nevertheless creates a built-in conflict of interest. The doctor makes more if he
    does more tests and treatments–even though we know that in regions of the country where doctors practice more conservative medicine, outcomes are no worse and often are better.
    In another post on this thread you talk about doctors’ and patients’ desire for a “cure”–their resistance to the idea that a disease is chronic.
    You’re entiretly right–and this desire to cure is all wrapped up with the notion that doctors should “do something” with the fee-for-service providing the needed financial incentive. It’s difficult to separate the motives, but the end result is overtreatment.
    In other countries that use the fee-for-service model there is often a cap on how much a doctor can make: there may be a limit on how many procedures he can do in a given year; there may be a global cap that affects his hospital–in any case his income is rarely open-ended, which is why hard-working Eurpean doctors who see a great many patients stlll rarely wind up earning $3 or $4 million.
    And we know there is less overtreatment at multi-specialty medical centers where doctors work on salary–compared to clear overtreatment in places like NYC where so many doctors work solo or in small practices, seeing as many patients as they can as quickly as they can.
    (I once sat in a dermatologists waiting room for an hour while his clerical people searched for my file. I clocked him seeing a patient every 3 minutes. You undress and sit in a little room until he bursts in, with a nurse in tow–he looks at your problem, quickly diagnoses it, cuts off any questions, tells the nurse to zap you with X or Y and give you a prescription for Z–and he’s gone! White coat flying behind him.

42. The Imaging Explosion:
    My main experience with doctors owning imaging equipment is very limited, mostly with orthopedists and others owning simple x-ray machines, gynecologists with ultrasound equipment, and various primary care people installing mammogram machines. Overall, I don’t think that any of that has added much to costs, and that the installation of mammogram machines in primary care offices – if used by qualified techs and if images are interpreted by qualified readers, both of which are usually forced by regulations – has actually been a benefit in extending appropriate use of mammography.
    I have no doubt that entrepreneurial physicians can and do exploit imaging to increase their incomes, especially on the coasts and in the Sunbelt. Living in Minnesota, where Garrison Keillor would tell us that all the physicians, like all the children, are above average, I have less experience with that. This is something that obviously needs controls from payers of all sorts.
    However, I don’t think the explosion of imaging is due to entrepreneurs either in whole or even in large part. Imaging has exploded everywhere, including in places I work where the only machines are owned by health care systems, at the Mayo Clinic, at HMO’s where there is actually a disincentive to increase imaging, and just about every place else. In one hospital I know about, the demand for high tech imaging has actually driven the hospital imaging department from profitability to deficit, since although they felt forced to upgrade to costly state of the art CT and MRI equipment with 24 hour availability in order to be seen as appropriately equipped by patients and doctors, they could not get the volume out of their small town (14,500 people) to allow them to be profitable.
    The explosion of imaging is driven by the demand for imaging, which in turn is driven by changes in practice patterns of providers and by demand by patients. In fact, there is an interesting article from last week’s NEJM (“Culture Shock — Patient as Icon, Icon as Patient”) making the blog rounds right now suggesting that in the age of imaging, sophisticated labs (another cost explosion,) electronic monitoring (ditto,) and other technical innovations, the physical exam and its cousin the careful complete history are becoming obsolete. Working in departments where the cynical phrase “CT ordered in lieu of history and physical” is a frequent grim joke, I am not surprised to see others suggesting the same thing.
    Fee for service vs. salary vs. prospective payment:
    1.) Although HMO’s originally could outcompete fee for service on a cost basis, the cost saving changes they introduced became so widespread in health care that almost always they end up struggling to compete with private insurers using fee for service providers. This is true almost everywhere. They maintain market share by promoting what they advertise is superior service, not lower costs. The impact of the desire for a cure extends both to fee for service and prospective payment systems. Like I said, you cannot be the HMO that will not let people get MRI’s or you will soon lose your market share. In MRI and CT, HMO’s actually compete not by decreasing utilization, but by burning MRI and CT machines they own themselves 24/7, helped by the fact they do not have to make allowance for emergency procedures that disrupt scheduling and are dealing with a captive patient population that cannot hang up the phone and call elsewhere for an appointment at a better time. Friends of mine enrolled in HMO’s tell me about getting scheduled outpatient MRI’s at 3 AM Sunday morning.
    2.) I have spent half my career in group practices where providers were salaried and half out in private practice. The group practices almost always had higher costs than private practice because of higher overheads for office space, higher administration costs due to large and highly paid administrative staffs, a much slower and less efficient process of making changes in practice, and very inefficient billing operations with much slower times to collection and much higher error rates (one place I worked, a nationally renowned center, did a study while I was there that demonstrated that they lost 1 in 7 bills in the department I worked.) In fact, at least in this area of the country, large group practices have charges considerably higher than smaller practices, partly because they can. Large groups can and do negotiate fees with private insurers, who must negotiate because of the market penetration and control the large groups have. Small practices can’t do that. At one meeting about health care I attended a representative of one of the state’s largest private insurers lamented that one large group was insisting on a payment rate of 250% of Medicare. There are a number of news articles out there right now about the efforts of Partners Health Care in Massachusetts to use their market muscle to extract additional payments from insurers compared with other smaller players.
    3.) Unfortunately, there is overtreatment at facilities where doctors are on salary as well. The salaried physicians at health care groups in Massachusetts and in California cost a lot more than the salaried physicians at the Mayo Clinic, who in turn cost more than the fee for service physicians who compete with them in out state Minnesota and Iowa, who are also much more cost effective than fee for service or salaried physicians elsewhere. The difference is less how the physicians are paid and more in the culture of medicine they practice in. The study you are referring to actually compares mostly salaried group practices in various parts of the country (NYC and Miami being exceptions because they don’t really have any large salaried groups,) not fee for service vs. salary. The fact that Mayo tops the list for cost effectiveness is due to the fact that salaried physicians at Mayo are less likely to order some types of expensive procedures than their salaried compatriots in Boston or in Cleveland, not due to the fact that they are salaried per se. Let me say again, it is the culture, not the pay system.
    4.) I have a lot less objection to paying physicians salaries in the setting of a fee for service system than I do to paying for health care by prospective payment. Experience has led me to believe that salaried settings suffer greater expenses paying underproducers and have to make up for that with either lower salaries for everyone or higher charges, but overall they still are in the business of providing health care. Prospective payment systems are in the business of NOT providing health care; they make their profits by decreasing the amount of health care they dispense. Some of those decreases are warranted, others not so much. The problem is that while fee for service does create a potential conflict of interest causing increased health care utilization, prospective payment plans create a potential conflict of interest leading to decreased health care, and unfortunately not always in a good way. I am well aware that there are some very good HMO’s around the country, including Kaiser, Group Health of Puget Sound, Health Partners in Minneapolis, and others, that provide excellent care, but excesses of HMO’s have made the term HMO into an obscenity for many if not most Americans. The failure of HillaryCare was due, at least in part, to the fact that it envisioned putting as many Americans as possible into HMO’s, giving the opposition a rallying cry for their attacks on the program. Any health care reform proposal that starts out by suggesting that everyone should end up in HMO’s or HMO-like prospective payment systems will fail, since the public quite clearly does not want that.
    5.) The performance of Medicare Advantage has shown HMO’s cannot outcompete fee for service. (And yes, I know that for marketing purposes Medicare Advantage providers often offer gym memberships and other trinkets bought in mass purchases at low prices as incentives to join, but there is no question that for the results they can provide, Medicare Advantage providers, including almost all HMO’s and many large group practices, cost more for the same effectiveness than fee for service providers cost in Medicare A and B.)
    6.) In the end, if we got everything else on the health care wish list, including real universal coverage, offer of a public insurance alternative, and a strong independent Health Care Board to introduce and enforce appropriate practice standards, I would be willing to give up fee for service. I just think that where there is actual evidence, as opposed to well argued theoretical conjecture, fee for service backed by strong practice standards is usually shown to be cheaper, not more expensive, than the alternatives, simply because you pay only for what you get.
    Now, I will fight no more forever about fee for service vs. other payment systems, at least on this thread.

43. Patrick–
    On the “Imaging Explosion” and the role of self-referring doctors who recommend imaging and do it in their offices:
    Today, I happened to run into this while working on something else: “From 2000 to 2006 spending on diagnostic imaging doubled, from $7 billion to $14 billion. BY 2006,
    TWO-THIRDS OF DIAGNOSTIC IMAGING WAS DONE IN DOCTORS’ OFFICES.
    These doctors owned the imaging equipment and made huge profits on using it, in large part because Medicare opays for imaging in doctors’ offices assuming that the equipment is in use only 25% of the time. IN fact, reserach shows that doctors manage to keep this euqipment in use 50% to 75% of the time. (So Medicare should be paying much less)
    Perhaps the fact that you are in Minnesota skews your vision–in a very positive way, I should add.. Healthcare in Minnesota is so different from most of the nation.It might be compared to the criminal law system in Texas–also an outlier, though in a much less positive way.
    Living in NYC, I see the darker side of healthcare in America.
    More importantly, the nationwide research confirms what Alain Enthoven says in that NYT
    op-ed: by and large , when compared to large multi-specialty groups where docs are on salary, fee-for-service in the U.S. leads to more expensive, less effective care. I’m guessing you’ve read the most recent Dartmouth research–if not see http://www.dartmouthatlas.com

44. “The difference is less how the physicians are paid and more in the culture of medicine they practice in.”
    How do you change the culture of medical practice, not just within a high utilization individual practice but across an entire high utilization geographic region? An independent Federal Health Board with the power to compel payers to not cover or pay for cost-ineffective drugs, devices and procedures should be a breeze compared to changing medical practice culture, especially in the absence of coverage and payment reform.
    Separately, Patrick’s comments about higher costs (and charges) in larger group practices are consistent with a blog post I remember reading a couple of years ago from a doctor who claimed that economies of scale in the purchase of equipment and supplies, insurance, etc. and the ability to more easily afford electronic records disappeared once the practice grew beyond five or six doctors because of the need for greater administrative complexities like the need to hire a practice manager and the like. While doctors’ time can be leveraged to some extent by judicious use of techs, NP’s, PA’s and other physician extenders, the benefits from that leverage are probably not much different if the practice has six doctors or sixty or six hundred.
    The market power of the much larger groups, as he said, also gives them the ability to extract higher payments from payers which drives up costs for the healthcare system. Obviously, if the practice takes in more revenue because it has the market power to increase its charges relative to smaller competitors, it can compensate its physicians more generously whether they are working on a salaried or a fee for service basis.

45. Patrick,
    I’m quite the good little capitalist myself, of the self-employed, independent-contractor persuasion, so philosophically I prefer fee-for-service. As a practical matter too, the best care I’ve gotten — not too much, not too little — has largely come from fee-for-service providers.
    It’s true that an NHS would probably be the cheapest to run, but saving those dollars isn’t a high priority on my list, especially since, as you say, we’d have to come up with beaucoup $$ to buy up all the infrastructure.
    What I like about nationalizing the entire system is the possibility that it would be easier get more doctors and hospitals in underserved areas, it would be easier to track [and get rid of or fix] truly bad doctors and hospitals, and it would be easier to address the income disparity between specialists and generalists, in large part because it would all be on public record.
    It’s a bit more difficult and expensive to do these things in a privately-delivered system, but I haven’t got a strong preference for either way, so you don’t have to worry about me showing up on your doorstep some morning to inform you that overnight you’ve been transformed into a government employee.
    I would, however, like to see all those things addressed.

46. Maggie,
    I took the weekend to hunt down and read your book, since it was already on my list of books to read. It’s a terrific resource, thanks for writing it.
    Your book is also the single best argument I’ve run into for switching to single payer and converting all the hospitals to non-profit [this is not an isolated incidence, it’s the norm]. I’ll be using it for that when I talk to people about HR 676.

47. Hmmm, embedding links doesn’t seem to work here, trying again…
    For-profit vs NFP hospitals:
    http://www.correntewire.com/letter_port_huron_times_herald_medicare_works#comment-131059

48. Maggie —
    I will concede that being a Minnesotan may be coloring my views of medicine — a local politician who is involved in health care issues once told me that if the entire US would run health care like it is run in Minnesota it would solve the US health care crisis — and overstatement based partly on pride in his own role in Minnesota health care, but with some truth.
    I do keep in contact with many people in imaging around the country however. My discusions (and believe me we discuss this frequently) with them make me wonder about the article you cite and whether it makes a distiction between imaging occuring in places like free standing imaging centers run by radiologists (which take money out of the pockets of hospitals but otherwise function solely on referral just like hospital centers,) imaging centers owned and run by large group practices (like Mayo) and by HMO’s (which again function more like hospital centers in terms of referral and ordering patterns, and again siphon money out of hospital budgets,) and the imaging performed in offices of doctors who are not radiologists (which sometimes is planned purely as an income center for the doctors in the practice.) In Minnesota, especially in larger urban areas, choice one and choice two are common, and choice three less common although not unheard of. My conversations with imaging people from other states leads me to believe that although choice three is more common in some areas, it is less common than choice one or two or than hospital based imaging. As it happens I don’t have close contact with anyone in the NYC area or LA or Florida, so I cannot comment on those places other than to say they do have a reputation for greater entreprenuership by doctors, but I do know people in Chicago, San Francisco, Seattle, Portland, St. Louis, Kansas City, Des Moines, Arizona, Texas, Denver, Detroit,Pittsburgh, and several other places.
    In general, I would suggest that in using the term “imaging done in doctors’ offices” it is very important to make the distinction between imaging done in offices of doctors who are not imagers and who are sometimes motivated by purely profit considerations and who are in a situation where self-referral is part of the equation and imaging done at places like Kaiser, Group Health, Mayo, or large free standing imaging centers owned by hospitals, radiologists, group practices, and so on where self referral and profits for referring doctors are not a consideration.
    I suspect that if only the imaging in offices that are not imaging centers and involving self referral and profit for the doctors ordering the tests is considered, that it accounts for less than 20% of imaging spending, especially if the very limited imaging appropriately performed by some specialties such as ultrasound by gynecologists is excluded as well.
    I would certainly suggest that the self-referral imaging be carefully evaluated by payers with an eye on eliminating studies motivated by self dealing.
    I remain convinced that the imaging explosion is due to patterns of increased use of imaging independent of any financial reward for the providers ordering the exams.

49. Barry –
    “How do you change the culture of medical practice, not just within a high utilization individual practice but across an entire high utilization geographic region?”
    My response is that the best, most proven way is through the power of the government, which is a major reason I have a fondness for public insurance solutions.
    Although the government cannot change what is in the hearts and minds of men (and women,) it can change the external way they behave regardless of their hearts and minds, and over time changes in the external way they behave comes to effect their hearts and minds, or at least the hearts and minds of the next generation.
    When I was young, women were systematically excluded from most important positions in the US. Then the laws changed, and the government and the courts enforced those laws. People still have unreasonable bias against women in many situations, and women still suffer from the effects of that bias, but the landscape for women is very different than 40 years ago. More than half the seats in law school, business school, and med school are occupied by women. Women are becoming common in jobs they previously rarely if ever got, and a few women have advanced to high leadership positions. People my son and daughter’s age find this normal. People of their children’s generation will find it so normal that they will be puzzled that it used to be different, much as we are puzzled by ideas like debtors’ prison and hanging for stealing food.
    When ideas are deeply ingrained, it takes great power to overcome their effects. It will require great power to force providers to change practice patterns to more efficient and scientifically correct practices. The power of the payment system is needed, and I think that the government is in the best position to flex that power. Even if we still have a parallel private insurance system, once the government system does use its muscle for appropriate reforms of practice standards, the private insurers will fall quickly into line, as they always do.

50. Patrick, Barry and Hipparchia–
    Patrick I agree with you; government can change cultures.
    If we hadn’t had a strong push from government, discrimination against
    minorities minoritites would remain where it was in the 1950s.
    In health care, Medicare can move mountains. In the near future, it is likely to begin experimenting with paying more for teamwork and better outcomes, bundling payments to all of the doctors, nurses and hospital involved in an episode of care, and letting the virtual team
    share in the savings when
    collaboration leads to better outcomes at a lower cost.
    On the explosion in diagnostic imaging– I understand the distinction you are making. And I am talking about an epidemic of self-referral within a doctor’s office. For example: “Between 1998 and 2002, cardiologists recorded a 78% increase in the use of these frequently self-referred procedures [diagnostic imaging], compared with 2% growth for procedures performed by radiologists . . .”http://www.diagnosticimaging.com/dimag/legacy/techfocus/inreview2004/index.html.
    A California study published in Health Affairs shows that back in 2004 “Nearly 33 percent of providers who submitted bills for magnetic resonance imaging (MRI) scans, 22 percent of those who submitted bills for computed tomography (CT) scans . . were self-referrals. http://content.healthaffairs.org/cgi/content/full/26/3/w415?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&author1=Jean+Mitchell&andorexacttitle=and&andorexacttitleabs=and&andorexactfulltext=and&searchid=1&FIRSTINDEX=0&sortspec=relevance&resourcetype=HWCIT
    And the practice has soared since then.
    From MedSolutions, May 2007: ” While the total number of imaging procedures nationally grew by about 40 percent from 2000-2005, it is projected to grow by another 26 percent by 2008, when almost half a billion procedures will be done each year. MRI use will grow by 133 percent and CT use by 122 percent . . .Instances of in-office imaging continue to grow as physician groups look to expand sources of practice revenue, and in some instances physicians may order a study on virtually every patient that comes into the office. . . .Two other recent investigations showed that self-referral leads to higher imaging-related costs for outpatient care for a variety of clinical presentations.[14] These higher costs are related to the fact that self-referring physicians utilize imaging more than radiologist-referring physicians and self-referring physicians charge more than radiologists in comparable clinical settings. Of these two influences, the differences in utilization contribute most to the higher costs. However, the study confirms that physician payments also contribute to the higher costs that self-referral imposes.http://www.medsolutions.com/press34.htm.
    This is a huge national problem.
    Hipparchia–
    I’m glad you read the book!
    I agree with you that for-profit hospitals charge more, do less charity care and generally have poorer outcomes than not-for-profits.
    And Money-Driven Medicine could indeed be used as an argument for single-payer–or at the very least as an argument for non-profit healthcare.
    The major problem with single-payer is that the majority of people in this country have employer-based insurance; their employer pays a large chunk of the premium (particiularly true for more affluent employees) and they don’t want to give it up for a governement-run plan.
    There is also the danger that a bad government would do a terrible job of running healthcare. (Imagine what would have happened if we had single-payer when GWB came to office. If Congress couldn’t /wouldn’t stop him from launching a war on a lie, and destroying agencies that should have helped New Orleans, would they have stopped him from destorying a health care system? I doubt it.
    In 8 years an administrtion and a Congress controlled by conservatives did a great deal of damage. Thank god they didn’t have sole control over heatlhcare.
    But I would like to see the private sector part of healthcare be not-for-profit private sector. And I believe that if the indusrance industry is regulated and forced to compete with Medicare-for-all on a level playing field, many if not most for-profit insurers will drop out of the game, while more not-for-profit insurers may well spring up.
    Barry–
    I don’t know what you read, but there is abundant research showing that larger multi-specialty centers are sigificantly more efficient, and typically provide better outcomes at a lower cost. (See http://www.dartmouthatlas.org on this)

51. Maggie,
    Regarding the efficiency of medium size and large group practices, I was referring to economies of scale as it affects practice expenses per physician. I think you are using it to mean medical inputs (utilization) per patient relative to medical outcomes.

52. Maggie —
    I can believe the new numbers you put up for self-referral in imaging, especially factoring in behavior in the bad behavior belt that the Dartmouth Atlas shows extending across the nation coast to coast in the Sunbelt and up the East Coast to the Northeast.
    Ezra Klein posts a new link to an article by Uwe Reinhardt about “doctors who cost too much” from the NYT. It is excellent. Reinhardt suggests creation of a national EMR and then using the EMR to police orders for procedures, drugs, and supplies to seek more rational behavior. The article is great, partly because it is exactly what I think should be done. Here’s the link for everybody:
    http://economix.blogs.nytimes.com/2009/01/02/us-health-care-costs-part-vii-reining-in-doctors-who-cost-too-much/#more-681
    I think that creation and installation of a national EMR, with the requirement that the systems be able to communicate with each other across the whole of the US, would be an excellent use of economic stimulus dollars — around 50 to 60 billion of them — that would more than pay for itself once installed, and would help all sorts of good things to happen in health care, including what Reinhardt proposes.
    Meanwhile, there is news on Klein and elsewhere that Sanjay Gupta will be appointed surgeon general, and will be given special portfolio to work on health care reform issues. That’s very good news. He would be my second choice for the job, trailing Atul Gawande by a nose.

53. To go back to an earlier post: 30 minutes or more with a provider? I’m not sure I see the point of that. I’m not sure your average generalist knows that much. I would much rather have a choice of less time at a better price.
    Also, I’m troubled by the way you seem to idealize Kaiser (here and in your very interesting book). I’ve heard too many unpleasant stories of undertreatment and mistreatment there. And the fact that salaried doctors can take time to do research is no reason that they will, especially at the bottom of the market. Kaiser patients often have no other choice of provider in anywhere near that price-range.

54. Hello from France,
    what is important finaly, is the price for health paid by the nation, and the results.
    Finally , it’ allways the consumer that is paying for health :
    – paying through social fees on salaries in Europe (and through individual insurance)
    – paying through national taxes in UK for NHS or sweden
    – and in USA , when the cost is paid by companies , it’s finally lowering capacities for better salaries
    From the payement system is depending quality, and global coverage of population.
    In “beveridge” countries, they spend nearly 8% GDP and all the population is covered.
    But pharmaceutical and insurance companies make much less profits.
    so i think it’s possible to do much better, with less money, but for american health, not for bizness !
    Dr Le Flohic Y

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