Medicare for All-Good Idea or Political Death?

Several Democratic presidential candidates have pushed the idea of “Medicare for All” and a “Medicare for All” bill has been introduced into the US house with over 100 sponsors. A recent Medpage Today editorial by Milton Packer asks whether this will benefit patients or physicians (1). Below are our views on “Medicare for All” with the caveat that we do not speak for the American Thoracic Society nor any of its chapters.

It has been repeatedly pointed out that medical care in the US costs too much. US health care spending grew 3.9 percent in 2017, reaching $3.5 trillion or $10,739 per person, and 17.9% of the gross domestic product (GDP) (2). This is more than any industrialized country. Furthermore, our expenditures continue to rise faster than most other comparable countries such as Japan, Germany, England, Australia and Canada (2).

Despite the high costs, the US does not provide access to healthcare for all of its citizens. In 2017, 8.8 percent of people, or 28.5 million, did not have health insurance at any point during the year (3). In contrast, other comparable industrialized countries provide at least some care for everyone.

Furthermore, our outcomes are worse. Infant mortality is higher than any similar country (4). US life expectancy is shorter at 78.6 years compared to just about any comparable industrialized company with Japan leading the way at 84.1 years. All the Western European countries (such as Germany, France, England, etc.), as well as Australia and Canada have a longer life expectancy than the US (range 81.8-83.7 years).

Our high infant mortality and lagging life expectancy was not always so. In 1980, the US had similar infant mortality and life expectancy when compared to other industrialized countries. Why did we lose ground over the last 40 years? Beginning in about 1980, there have been increasing business pressures on our healthcare system. In his editorial, Packer called our system "financialized" to an extreme (1). Hospitals, pharmaceutical and device companies, insurance companies, pharmacies and sadly,  even some physicians often price their products and services not according to what is fair or good for patients but to maximize profit. By incentivizing procedures that often do not benefit patients but benefit the businessmen’s’ pockets, these practices likely account for the high costs and for our worsening outcomes.

Packer points out that in the US, intermediaries (insurers and pharmacy benefit managers) exert considerable control of payment while unnecessarily adding to the administrative costs of healthcare. Congress has been pressured to forbid Medicare from negotiating prices with pharmaceutical companies benefitting only the drug manufacturers and those that benefit from the high drug prices. Consequently, administrative costs are four times higher and pharmaceuticals three times greater in the U.S. than in other countries.

If “Medicare for All” could reduce healthcare costs and improve outcomes, it might seem like a good idea. It has the potential for reducing administrative costs and assuming the power to negotiate drug prices was restored, pharmaceutical costs. However, it will be opposed by those who financially benefit from the present system including administrators, hospitals, pharmaceutical companies, pharmacy benefit managers, insurance companies, etc. Furthermore, there is a libertarian segment of the population that opposes any Government interference in healthcare, even those that would strengthen the free market principles that so many libertarians tout. There are already TV adds opposing “Medicare for All.” It seems likely that any “Medicare for All” or any similar plan will meet with considerable political opposition. 

One solution might be to have both Government and non-Government plans. Assuming transparency in both services covered and costs, it leaves the choice in healthcare plans where it belongs-with those paying for the care. It also makes it much harder for those with financial or political interests to convincingly argue against a Government plan (although we are sure they will try). It will force insurance companies to reduce their prices and/or offer more coverage, which is not a bad thing for patients and ultimately, the healthcare system as a whole. However, it does impose a risk, i.e., that profit-driven insurance companies and those who benefit from the current infrastructure will be  replaced by bureaucrats who are primarily concerned with administrative procedure rather than patient care. Present day examples include the VA, Medicare and Medicaid systems. Close public and medical oversight of such a system would be needed.

Ideally, a healthcare system should ensure that citizens can access at least a basic level of health services without incurring financial hardship and with the goal of improving health outcomes. Such a system, would provide a middle path between the extremes of paying for nothing and paying for everything such as unwarranted chemotherapy, stem cell therapy, or unnecessary diagnostic procedures. Determining what services are covered, and how much of the cost is covered are not easy questions to answer, but promises to deliver better health for less money than our current system. Physicians, by dint of their training, and responsibility to uphold their profession and protect their patients, understand that healthcare is not a mere commodity. If we are to protect what little autonomy we have left, we need to be a part of the discussion which should not be driven solely by those in the insurance, the hospital and the pharmaceutical industries.

Richard A. Robbins, MD¹

Angela C. Wang, MD²

¹Phoenix Pulmonary and Critical Care Research and Education Foundation, Gilbert, AZ USA

²Scripps Clinic Torrey Pines, La Jolla, CA USA

References

1. Packer M. Medicare for All: Would Patients and Physicians Benefit or Lose? Medpage Today. July 10, 2019. Available at: https://www.medpagetoday.com/blogs/revolutionandrevelation/80926?xid=nl_mpt_blog2019-07-10&eun=g1127723d0r&utm_source=Sailthru&utm_medium=email&utm_campaign=Packer_071019&utm_term=NL_Gen_Int_Milton_Packer (accessed 7/10/19).
2. CMS. National Healthcare Expenditure Data. Available at: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountshistorical.html (accessed 7/11/19).
3. Berchick ER, Hood E, Barnett JC. Health Insurance Coverage in the United States: 2017. September 12, 2018. United States Census Bureau Report Number P60-264. Available at: https://www.census.gov/library/publications/2018/demo/p60-264.html (accessed 7/11/19).
4. Gonzales S,  Sawyer  B.  How does infant mortality in the U.S. compare to other countries? Peterson-Kaiser Health System Tracker. July 7, 2017. Available at: https://www.healthsystemtracker.org/chart-collection/infant-mortality-u-s-compare-countries/#item-start (accessed 7/11/19).
5. Gonzales S, Ramirez M, Sawyer B.  How does U.S. life expectancy compare to other countries? Peterson-Kaiser Health System Tracker. April 4, 2019. Available at: https://www.healthsystemtracker.org/chart-collection/u-s-life-expectancy-compare-countries/#item-start (accessed 7/11/19).

Cite as: Robbins RA, Wang AC. Medicare for all-good idea or political death? Southwest J Pulm Crit Care. 2019;19(1):18-20. doi: https://doi.org/10.13175/swjpcc051-19 PDF

Capture Market Share, Raise Prices

Two principles in medical economics central to the Affordable Care Act (ACA) were dealt blows by recently published studies. The first principle is the belief that economies of scale will result in lower prices. The theory is that larger insurers will have lower prices because they are more administratively efficient. The second principle is that provider-owned health plans, usually hospitals, will reduce premiums. The theory is that  by controlling doctors over charging health plans in a fee-for-service model will lower prices.

The first study published in Technology Science found that the largest insurer in each of the states served by HealthCare.gov raised their prices in 2015 by an average of over 10 per cent compared to smaller competitors in the same market (1). Those steeper price hikes for monthly premiums did not seem warranted by the level of health claims which did not significantly differ as a percentage of premiums in 2014.

The second study published by HealthPocket compared the lowest monthly premiums for provider-owned to nonprovider-owned plans within twelve counties across the US (2). The counties analyzed were spread across the eastern, central, and western regions of the U.S. Premiums were based on a 40-year-old, non-smoker profile. Insurance offered by health-care providers such as hospitals, was on average 12% more expensive compared to  traditional insurers. The data were also analyzed by the type of plan under the ACA: bronze, silver and gold. There were too few platinum plans to perform an analysis. Table 1 shows the local results in the three western states analyzed.

Table 1. Monthly premiums for Provider and Non-Provider Health Plans Under the ACA (2).

Silver plans account for two-thirds of plan selections on the ACA marketplaces during the 2015 annual enrollment period (3). Only the premiums for the bronze and silver provider-owned health plans in Arizona cheaper. Both in New Mexico and Utah all the provider-owned health plans and the more frequently selected silver plan in Arizona were all more expensive.

The premises of economies of scale and elimination of the fee-for-service reimbursement are both central to the ACA. Both appear to be myths. The results of these studies illustrate the sobering reality that the best intentions in reforming American healthcare do not necessarily produce the intent imagined. Despite the theoretical promise of reducing expenses by eliminating waste, both studies show an increase in healthcare costs, opposite the direction that traditional economics predict. Both larger companies and provider-owned health plans have a profit motive with numerous conflicts which likely accounts for these increases in premiums. Rather than allowing mergers and focusing on controlling physician behavior as strategies in reducing costs, it is time to focus on the insurers. Their strategy appears to be "capture market share, raise prices" and therefore their profits. This later premise agrees more with the data. Most of us who work in healthcare know this, it is time for those in Washington to pay attention to what is going on rather than their prejudices and political beliefs. 

Richard A. Robbins, MD*

Editor

Southwest Journal of Pulmonary and Critical Care

References 

1. Wang E, Gee G. Larger Issuers, Larger Premium Increases: Health insurance issuer competition post-ACA. Technology Science. 2015081104. August 11, 2015. Available at: http://techscience.org/a/2015081104 (accessed 8/31/15).
2. Colemen K, Gleeson J. Cheapest healthcare provider-owned insurance plans still 12% more expensive than cheapest insurance plans not owned by providers. HealthPocket. August 20, 2015. Available at: https://www.healthpocket.com/healthcare-research/infostat/fee-for-service-and-provider-health-plans#.VeRqLPlVhBd (accessed 8/31/15).
3. Health Insurance Marketplaces 2015 Open Enrollment Period: March Enrollment Report. ASPE Issue Brief. (March 10, 2015).

*The views expressed are those of the author and do not necessarily represent those of the Southwest Journal of Pulmonary and Critical Care, the American Thoracic Society or the Arizona, New Mexico, Colorado or California Thoracic Societies.

Cite as: Robbins RA. Capture market share, raise prices. Southwest J Pulm Crit Care. 2015;11(2):88-9. doi: http://dx.doi.org/10.13175/swjpcc115-15 PDF

Follow the Money

Many years ago there was a Federal whistleblower, Deep Throat, who leaked confidential Government information about the Nixon White House to reporters from the Washington Post. Fans of the book and movie will remember that his famous line was, “Follow the money.” That line came to mind when an article appeared in Health Affairs summarizing the US health care expenditures for 2010 (1). The main gist of the article is that the rate of growth in health care expenditures had slowed to only 3.9% and approximated the slowed growth from 2009 which was 3.8%. Previously the growth had been much larger averaging 7.2% from 2000-8 (2). The article points out that during recession expenditures usually slow but the expected decline in healthcare expenditures usually occurs far after the beginning of the recession. The authors state that the “lagged slowdown in health spending growth from the recent recession occurred more quickly than was the case in previous recessions. This was the result of a combination of factors, including the highest unemployment rate in twenty-seven years, a substantial loss of private health insurance coverage, employers’ increased caution about hiring and investing during the recovery, and the lowest median inflation adjusted household income since 1996.”

Following Deep Throat’s suggestion to follow the money, healthcare expenditures are listed below in Table 1.  

Table 1. Cost, growth and increase of health care expenditures 2010 compared to 2009 arranged from greatest to least percent growth.

*Calculated as the product of cost X percent growth.

The categories accounting for the largest dollar increase in expenditures appear to be net cost of health insurance, hospital costs and physician and clinical services. Although the article in Health Affairs has a fairly comprehensive discussion of each expenditure, the exact definitions of these categories were unclear. A little searching revealed that net cost of health insurance is calculated as the difference between calendar-year incurred premiums earned and benefits paid for private health insurance (2). This includes expenses such as personnel, executive bonuses, marketing, advertising, etc., but also includes profit. Health insurers average about 20% of their premiums going for expenses and profit (3). It is estimated that about 1-10% of the health insurance premiums go to profit (3). This would translate to about 10-50% of the net cost of health insurance going for profit or about 1.2-6.1 billion in costs during 2010.

A second cost was hospital care costs which accounted for nearly 40% of the increase in expenditures. “Hospital care is a summation of incurred benefits for inpatient hospital care, outpatient hospital care, and hospital-based hospice, hospital-based nursing home care and hospital-based home health care. Also included in hospital care are estimated ’combined billing’ amounts for services of hospital-based physicians…” (2). Examining this definition, administrative costs are glaringly missing. In 1999, administrative costs accounted for 24.3% of hospital expenses and were increasing (4). Conservatively assuming that the same percentage of administrative costs account for the increase in expenditures, this 24.7% would translate to about 9.7 billion in 2010.

Physician and clinical services includes offices of physicians and outpatient care centers, plus the portion of medical and diagnostic laboratories services that are billed independently by laboratories. Physician services account for 81% of these expenditures, but this portion of the physician and clinical services grew only 1.8% in 2010. Recalculating using 81% of the 515.5 billion for physician and clinical services and a 1.8% increase, the increase in expenditures for physician services accounted for 7.5 billion. According to the article in Health Affairs, 2010 was a year when people decided to forgo care, slowing growth in elective hospital procedures, the number of prescriptions dispensed, and physician office visits (1). In other words, less healthcare led to a slowing of expenses.

The above data suggest that physicians account for only about 16% of the healthcare costs and their portion of the healthcare pie seems to be decreasing compared to other healthcare expenditures. To control healthcare costs but not decrease healthcare, policymakers need to focus on those areas of expenditures that account for much of the increase in cost, and especially those that provide no healthcare product. Cuts in the net cost of health insurance and hospital administrative costs would seem two areas where considerable cost savings could be achieved with little to no reduction in patient care.

Richard A. Robbins, MD

Editor, Southwest Journal of Pulmonary and Critical Care

References

1. Martin AB, Lassman D, Washington B, Catlin A; the National Health Expenditure Accounts Team. Growth In US Health Spending Remained Slow In 2010; Health Share Of Gross Domestic Product Was Unchanged From 2009. Health Aff (Millwood) 2012;31:208-219.
2. https://www.cms.gov/NationalHealthExpendData/downloads/dsm-10.pdf (accessed 1-17-12).
3. http://thinkprogress.org/health/2009/08/05/170897/are-health-insurers-making-too-much-money/?mobile=nc (accessed 1-17-12).
4. Woolhandler S, Campbell T, Himmelstein DU. Costs of health care administration in the United States and Canada. N Engl J Med 2003;349:768-75.

Reference as: Robbins RA. Follow the money. Southwest J Pulm Crit Care 2012;4:19-21. (Click here for a PDF version of the editorial)