This is the first in a series of Issue Briefs focused on prominent healthcare policy proposals surfacing in the 2016 Presidential campaigns. Each is intended as a non-partisan, easy-to-digest summation of the issue based on a thorough analysis of industry and government white papers, studies and peer reviewed research.
The campaigns of Senator Bernie Sanders and Donald Trump have to date attracted large numbers of so-called “outsiders” who think the political system is fundamentally flawed. Prominent in the platforms of their candidacies is a promise to provide health insurance for everyone: Sanders references “Medicare for All” while Trump says the government will pay for the coverage without offering details of how.
Background
The Affordable Care Act had as one of its fundamental goals increased insurance coverage for those without, based on data showing those lacking coverage are more susceptible to diseases and health problems because they lack access to providers, opting instead for a patchwork of public health clinics and hospital emergency rooms. In many cases, their conditions go untreated leading to expensive, avoidable hospitalizations and/or medication therapies. Studies by the Kaiser Family Foundation, Commonwealth Fund, Urban Institute and others have shown a positive correlation between health insurance coverage and health status, lending to a consensus that increased coverage is beneficial. What’s debated is how it should be achieved.
Per the Center for Medicare and Medicaid Services report issued last week, more than 20 million previously uninsured have gained coverage through three programs in the ACA: coverage for young adults under 26 on a parent’s plan if not eligible for coverage otherwise, coverage purchased through the state insurance marketplaces including Healthcare.gov (12.7 million of which 85% are likely to pay their premiums and receive coverage), and expansion of Medicaid enrollment in the 31 states that opted to do so.
Nonetheless, there remain 32 million in our society (10% of our population) including 4.8 million children under 18 who are without coverage (National Center for Health Statistics), and many more who go without on a temporary basis due to loss of a job, relocation or their inability to afford private coverage or qualify for Medicaid in a state. The majority of these are in working families with incomes below 200% of the Federal Poverty Level who do not qualify for Medicaid and 11 million are undocumented immigrants who work in the U.S. These groups receive their healthcare through public health programs and in hospital emergency rooms. And it’s notable that the uninsured rate is highest in states like Texas (14%), California (12%) and Florida (9%) so it’s likely to be an issue in the campaigns.
The costs of providing healthcare services for the uninsured are borne by taxpayers directly in the form of public health programs and indirectly as hospitals, physicians and others who provide their care mark-up their charges to make up for some of these costs. For example, bad debt in hospitals can be up to 20% of charges in communities where insurance coverage is low, and hospital emergency rooms are crowded by the uninsured seeking basic care. The government does not reimburse hospitals for uncollectable bills, and Medicare and Medicaid reimbursements do not cover costs, so those with private insurance—employer sponsored group coverage and individuals who purchase coverage for themselves—pay more in their premiums and co-payments to offset the costs for the uninsured and underpayments by the government. And, since private health insurance premiums are increasing faster than wages and overall economic growth, fewer and fewer employers and individuals are able to afford coverage.
What is “Medicare for All”?
The concept of “Medicare for All” aka a single payer system is simple: the federal government would become the insurer for the entire population, contracting with privately owned and operated providers for preventive, chronic, acute and post-acute services. Thus, building on the success of the Medicare program, a single payer program for America’s seniors (47 million) and our disabled (9 million), proponents seek its expansion to all adults who would pay premiums based on their income.
It is not a new idea in the U.S. Since 2002, legislation has been introduced annually to enact “Medicare for All”, including H.R. 676 most recently (“The Expanded and Improved Medicare for All Act “ Act proposed by Physicians for a National Health Program introduced February, 2015). Unlike the systems in the U.K., Spain and others or our Veteran’s Health Administration program, the proposed U.S. single payer model would not employ physicians directly or operate hospitals and other facilities. Rather, it would set payment rates to private providers similar to the way Medicare operates today.
The Medicare for All proposal offered by Sen. Sanders would replace private insurers with a government run insurance program; specifics from the Trump website are unavailable. But common features of single payer programs passed in states like Vermont and others include:
- Funding through individual and/or corporate taxes
- Budgeting tied to medical inflation and utilization rates
- Contracting with privately operated hospitals, medical practitioners
- Reporting of standardized quality, access, safety and patient experience measures
- Increased emphasis on preventive health and primary care
The Arguments for and against Medicare for All
Proponents point to four measurable advantages relative to the status quo:
Administrative cost reduction: Studies show that the administrative cost burden in our system for interacting with multiple private insurers with each offering multiple plans PLUS dealing with the increasingly complicated Medicare programs (Parts A, B, C, and D), PLUS wildly variable constraints around state-run Medicaid programs adds up to 20% or more to healthcare costs. A United Healthgroup study estimated the costs per physician at $31,000 per year. Presumably, Medicare for All would quickly facilitate standardization and simplification of administrative processes and procedures resulting in substantial savings. The Physicians for a National Health Program estimates annual administrative cost savings of more than $400 billion—enough, they say, to cover fully the cost of healthcare for those who are uninsured.
Reduced costs by increasing access to preventive and primary care: Bending the cost curve long-term requires care coordination led by teams of primary care providers who maintain an ongoing relationship with individuals as their health coaches and navigators. Thus, the Affordable Care Act’s Section 3022 “Medicare Shared Savings Program” aka Accountable Care Organizations is a template wherein social services programs are mainstreamed into care management for vulnerable, underserved populations where there’s no continuity today. Proponents of Medicare for All espouse that the foundation of its programs willbe population health management wherein primary care and preventive health get more funding and emphasis. Thus, in the long-term, the health cost spiral for all including the uninsured would slow.
Controlled utilization: A Medicare for All program would have more muscle in directing that medically unnecessary procedures and tests would be limited, and step therapies applied by providers in their treatment plans aligned more with scientific evidence. If followed, providers could be immune to liability concerns via a “no fault” system where victims of inappropriate behavior are compensated and complaints expeditiously adjudicated. In other developed single payer systems of the world, for instance, mechanisms are in place to assure that treatments are medically necessary and accessible to patients who observe its procedures for qualification.
Predictable and controllable costs: The compound rate of growth of health expenditures—historically at 2% above the overall GDP or higher—would over time be reduced to 1% or less of the GDP by controlling what’s paid to providers and how it’s paid. The fundamental assumption is that global capitation will be applied, and providers will contract on a multi-year basis. Thus Medicare for All would slow healthcare spending, which now constitutes 18% of our GDP and 28% of total federal spending.
Proponents base their view on a belief that healthcare is a fundamental right, pointing to widening discrepancies in the quality of care accessible to those with insurance coverage, and those without. Opponents acknowledge the gap, but suspect these benefits would not be realized and unintended negative consequences result:
Erosion of “quality”: By far, the biggest unintended consequence of a Medicare for All platform raised by antagonists is its potential to stunt access to novel therapies, latest technologies, the most modern facilities and specialized services to which Americans are accustomed. These innovations are distinctly advantages in the U.S. system and a significant reason our system is the most expensive in the world by a longshot. This fear stoked largely by industry interests is that “Medicare for All” would mean payments to providers are less, margins across the industry’s supply chain for drugs and devices would be lower, equipment and facilities would age, capital budgets would shrink and the American appetite for the “the latest and best” would erode. Notably, data comparing other systems of care in the world show our utilization rates (visit rates to clinicians, surgical rates, et al) are similar to other developed systems and the technologies and training of professionals in these systems comparable, but our unit costs—what we pay for our “stuff”—are dramatically higher. Their quality in acute and specialty care is comparable to ours in all but the most specialized services, but their preventive and primary care results significantly better.
Public distrust: Opponents seize on the public’s distrust in the federal government’s ability to run an efficient and effective Medicare for All program. They point to polls showing the majority lack confidence in the federal government, citing its ineptitude in management of Veteran’s Health, public education, post services and more as illustrative. What’s missed is the public is not happy with the status quo. The majority view the current system as expensive, complicated and profit driven. Ironically, Medicare enrollees are the most satisfied cohort in our population compared to those with privately coverage or Medicaid(Deloitte). By contrast, Brits dedicated their 2012 Olympic opening ceremony to their National Treasure, the National Health Services. The French, Swiss, Dutch and others rate their systems of health better than we rate ours. Those who oppose Medicare for All believe the public will simply not support a larger role for the federal government in healthcare.
Cost: Estimates of the costs for implementing a single payer model vary wildly depending on how and how fast it’s implemented. No one knows for sure, for instance, how increased access to preventive and primary care services for those lacking coverage will pay off how much less the federal government will spend on drugs, technologies and services as it leverages its buying clout or exactly how much administrative simplification will save. What’s suspicioned is that Medicare for All will be expensive, and the more fortunate in our society will shoulder a higher tax burden for its funding at least in the near term until its long-term impact is felt on a cost curve that bent downward.
What’s Ahead for the Medicare for All Debate?
The U.S. healthcare industry is a money machine. In Standard and Poor’s latest assessment, two companies (Gilead, Johnson and Johnson) were among the 28 companies that produced 50% of total profits for the entire S&P 500. And prominent names on the same list—JPMorgan Chase, Citibank, Microsoft, IBM and several others—operate major businesses in healthcare. The U.S. market is half the global market for drugs, technologies and information systems, and healthcare stocks have been productive parts of most retirement plans and investment portfolios. So the profitability of the U.S. health system overall looms as a constraint to a single payer policy.
By contrast, in growing numbers, the public’s inclined to support expanded coverage for the uninsured: there’s no consensus on how it should be done. And a Medicare for All program, that replaces private insurers while maintaining private hospitals and physicians, is plausible, especially to Millennials who fear the healthcare system will bankrupt itself. Though not keen to its intricacies nor perceptive about is long-term consequences, the majority in our population is frustrated by insurance premiums that are inexplicably high, policies that are incomprehensible, and compensation packages and profits for insurance execs who make more by providing less. In the last 12 years, average household income has increased 26% while medical costs have increased 51%, so healthcare is a growing pocketbook issue (NerdWallet).
My take
It’s my view that Medicare for All will not pass in this elective cycle, but a version will pass in 2020 integrating elements of the Affordable Care Act (i.e. Accountable Care, Bundled Payments, Value-based Purchasing) with a new Pre- Medicare program for those between the ages of 45-and 64. In tandem, fully integrated systems of health that have the capabilities to manage large populations on a fully capitated basis while operating at less than current Medicare rates will replace much of the private insurance market, and the federal government will contract with these directly. The public is fearful about changes that give federal lawmakers more control and corporate interests in healthcare will fight against fiscal policies that constrain their profitability. Nonetheless, the public’s not satisfied with the status quo and is increasingly hard-pressed to absorb rapidly escalating out of pocket costs for its drugs, co-pays, premiums and services.
Medicare for All is an important concept that deserves closer study. It is not explained by soundbites nor prone to simple math. It certainly means dramatic changes in the insurance industry: their customers will be the government and upper income individuals who’ll purchase private coverage, with employers playing a lesser role. It means every sector in healthcare can expect closer scrutiny of business practices that drive avoidable costs and unnecessary care. It means hospitals and their physicians will bear financial risk in capitated contracts with the government setting rates and terms of engagement. And it means some portion of those who are uninsured are likely to see coverage options…at least that’s the goal!
Paul
P.S. Campaign Issue Brief #2: Reducing High Drug Costs will be the focus in the March 14, 2016 Keckley Report.
