POLICY: Clinton and Edwards Open the Back Door

POLICY: Clinton and Edwards Open the Back Door

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Frequent THCB contributor and healthcare rockstar Maggie Mahar is back today with her reaction to the health care plans recently released by the Clinton and Edwards campaigns. What does Maggie think? Read on, but the title should give you a very good idea of the general drift of her logic about what’s really going on behind the scenes. If you want more of Maggie head over to her new blog at The Century Foundation for your fix. You’ll also be well advised to pick up a copy of “Money Driven Medicine: The Real Reason Healthcare costs so much”  one of the most incisive and comprehensive books to be written on this topic in the past 20 years, in my (admittedly slightly biased) opinion, if you haven’t yet done so.  Thanks Maggie! – John.

In Thursday’s Wall Street Journal former Massachusetts governor Mitt Romney underlined what is most exciting about Hillary Clinton’s new health care plan. Okay, Romney didn’t use the word “exciting.” But he did recognize the vital differences between Clinton’s new plan and the one she proposed to the nation in the early 1990s:

First, under the proposal rolled out last week, if people like the employer-sponsored insurance they have, they can keep it. Fine—but this is not what caught Romney’s attention. It’s the alternatives: “people who don’t obtain insurance through their employer are invited to buy a government-run, Medicare-like plan or enroll in the Federal Employees Health Benefits Program (FEHBP). And so, more Americans will end up in government-run insurance. . . . It’s the gentle slope to a single payer, socialized medicine model,” Romney warned.. [my emphasis.]”

Quite simply, Clinton has opened the door to the single-payer model—if people want it. The beauty of her plan is that no one is forced into a government plan. Americans will wind up in a Medicare-like plan only if they choose it over a private insurer.

Clinton is not alone. Last spring John Edwards unfurled a proposal that would force private insurers to compete with a public plan that he calls “Medicare-Plus.” Today, in a web-cast sponsored by the Kaiser Family Foundation, he reiterated his goal “to give consumers a choice; they could gravitate in either direction.”

One journalist on the panel was blunt: “Is this a back-door to single payer?”

Edwards liked the question. “That’s partly right and partly wrong,” he said, with a big smile. “It’s not intended to take us to single-payer. It’s designed to let Americans decide whether or not they want single payer.”

“If I wanted to go [directly] to single payer, there are ways to do it,” he continued. “The benefit of single payer is lower administrative costs . . .. Over time, we will see in which direction this system gravitates. There are benefits in the private system. There are benefits in the public system. The question is: which will be more attractive in the real world?”

To make it a fair contest, public and private systems would need to be operating on a level playing field, and both Clinton and Edwards seem determined to do that. First, private insurers would not be allowed to “cherry pick,” as they do now in most states, either by refusing to insure individuals who are sick—or by charging them exorbitant rates.

(This is one difference between the Clinton and Edwards plans, on the one hand, and Mitt Romney’s Massachusetts plan, on the other. In the Commonwealth, while insurers cannot discriminate against those who are sick, they can charge older customers twice the premiums that they charge younger citizens of the state. As a result, some of Massachusetts’ elderly cannot afford to participate in the state’s plan. They’re not poor enough to qualify for state subsidies, but they’re not wealthy enough to pay sky-high premiums. To “solve” the problem Massachusetts is “exempting” some 60,000 individuals from the mandate that everyone in the state must have insurance. So much for universal coverage. )

Clinton and Edwards, by contrast, are mandating that every American must have insurance, while pledging that the government will offer subsidies that make that coverage affordable for everyone. Today, Edwards promised subsidies for everyone earning up to $100,000, while last week Clinton stated that premiums (minus subsidies) will not exceed a certain percentage of a family’s income (She has not specified the percentage, nor whether the number would be the same for a family earning $35,000 as for a household earning $95,000.) Employers also will help cover the cost either by “playing” (providing coverage to their employees) or “paying” (into a large fund that helps pay for the subsidies and government plans.)

Both candidates insist that private insurers must offer full, comprehensive coverage that will be, as Clinton puts it, “equal to what Congressmen receive under the Federal employees’ plan.”

At the same time, while Clinton isn’t putting an explicit cap on insurance company premiums, she does seems to be putting an implicit cap on how much they can charge by saying that premiums (minus subsidies) cannot exceed a certain percentage of family income. This suggests that insurers cannot raise premiums past a certain point unless the government is willing to boost subsidies—and it seems unlikely that Clinton is setting up a system where insurers can keep raising the bar for government subsidies. As for Edwards, he has declared that under his plan, an insurers’ profits and administrative costs cannot exceed 15% of total premiums.

Think about it: if insurers can’t cherry-pick young, healthy patients, if they are required to provide full, comprehensive coverage, and if their premiums cannot rise above the government’s willingness to expand subsidies . . . won’t some just drop out of the insurance business?

Meanwhile those that remain will have to compete with a public sector insurer that should be able to provide more coverage for less. “Medicare-plus,” after all, won’t need to generate profits for shareholders and will have lower administrative costs (both because it won’t need to advertise nearly as much, and because it won’t be paying its executives salaries that resemble telephone numbers). I don’t see how private insurers could win the competition.

Of course there is always a difference between with candidates propose and the legislation a president signs. If elected, would either of these candidates stick to their guns or would they compromise with private insurers?

On the other hand, I wonder, how could for-profit insurers force a compromise? What could they say: “We don’t want to compete with Medicare-plus on a level playing field.? It’s just not fair!? We’re really not more efficient than government.” But I’m sure they would find an argument.

Still, today, Edwards declared that he would not compromise on making coverage universal—which means that it must be affordable, which in turn, puts a brake on insurers’ earnings growth.. Moreover, he went on to say that if he doesn’t get the full support he needs from Congress, he will go directly to the American people: “If Congressmen are reticent, I will go to their districts. This is what happened with Iraq. Republicans are shifting their positions, [not because of what is happening in Washington,] but because of what is happening [in their districts].

Clinton has said that she wants to draw the lobbyists who represent the for-profit health care industry into the discussion, but Edwards rejects this notion. “”Her lesson is, give them a seat at the table,” Mr Edwards said recently. “I think if you give the drug companies, insurance companies and their lobbyists a seat at the table, they’ll eat all the food.” (Financial Times, Sept. 19)

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24 Comments on "POLICY: Clinton and Edwards Open the Back Door"


Guest
Peter
Oct 1, 2007

Barry, if single pay were the reason for too many primary care visits creating a doctor shortage then would also the over use of the (free) ED be a condition of single pay? The research I have been able to see shows Americans and Canadians visit the Ed at about the same rate (11% CA to 13% U.S.)
This doctor shortage started with you quoting a Quebec doctor about 800K PQ’ers without a primary doctor. I will put forward another possible reason for this shortage in PQ other than single pay. It’s the necessity for PQ docs to speak French. I would submit that this possibly gives Quebec a smaller pool of docs to draw from. In fact Quebec is the only province that is able to control immigration into the province using French as a determining factor.

Guest
Barry Carol
Sep 30, 2007

This sounds like the repetition of an urban myth the RAND Institute manufactured years ago to support the insurance industry. Let’s get real. If you have a problem that will just get better in a day or two are you really going to stop working for two hours (lost wages $100 – $200), or leave a sick bed (discomfort $200 – $500), arrange childcare (hassle factor ($50 – $100), tick off your boss (yipes, $1000 to ????) because, there is no $20 copay and you can get in sometime in the next four hours rather than tomorrow?
Urgent care clinics are open in the evening and on weekends. I don’t need to take time off from work or tick of my boss. My kids are grown, so childcare is not an issue. Even if I had young children, my wife would be there to look after them in the evening.
Too many primary care visits are not the main contributor to higher healthcare costs, but it could be a contributor to the shortage of primary care doctors. With no responsibility for payment of copays under a single payer system with that feature, I have absolutely no incentive to care about costs. If my doc refers me to a specialist or for tests, off I go knowing that it will all be paid for by taxpayers. Sounds like a recipe for excess utilization to me.

Guest
EdSmith
Sep 30, 2007

“If I don’t feel well and I can access a doctor quickly without any payment responsibility at the point of service, I’m more likely to have my problem checked out rather than wait a day or two in the hope that it will resolve itself, as it does most of the time.”
This sounds like the repetition of an urban myth the RAND Institute manufactured years ago to support the insurance industry. Let’s get real. If you have a problem that will just get better in a day or two are you really going to stop working for two hours (lost wages $100 – $200), or leave a sick bed (discomfort $200 – $500), arrange childcare (hassle factor ($50 – $100), tick off your boss (yipes, $1000 to ????) because, there is no $20 copay and you can get in sometime in the next four hours rather than tomorrow?
I don’t think so. David Lawrence, former CEO of Kaiser Permanente, says people hate going to the doctor and any model based on patients avariciously seeking care is doomed for failure.
All copays do is keep people for whom $20 is a big deal from going to the doctor. Fear of a $150 bill keeps the same people away, even when they or there kids are really sick. Neglected problems cost us big bucks. Bob Lebow confirms this in his book.
I don’t think the reason U.S. health care is an abject failure is because we can’t handle the minuscule number of patients going to doctors for a one- or two-day problem. Copays or long wait times are not a solution, assuming we even have a problem here.

Guest
Peter
Sep 29, 2007

“Unless the U.S. moves strictly to a true single-payer system, I am pretty dubious that any future supply-side techniques will due much to slow healthcare growth.”
My point all along.

Guest
MG
Sep 28, 2007

While some supply-side techniques have been effective at controlling healthcare costs in other industrialized countries, they have been generally ineffective or an overwhelming failure in the U.S. Some great examples are Certificate of Need programs and the Nixon price controls on healthcare during the 70s.
Unless the U.S. moves strictly to a true single-payer system, I am pretty dubious that any future supply-side techniques will due much to slow healthcare growth.

Guest
MG
Sep 28, 2007

Peter,
I think you are missing the point on some of what Barry is trying to convey. It is really a societal choice on how much we spend on healthcare in the U.S. Americans generally have pushed their politicians to spend ever increasing amounts on healthcare. This started with the passage of the Hill-Burton Act in 1946 and has continued through this day.
The real important question to ask about healthcare spending in the U.S. is what is the incremental value of these investments. It is a difficult question to answer and can vary considerably but work by David Cutler at Harvard and Mark Pauly at Wharton have shown the these investments have generally been economically positive for American society through decreased mortality and increased productivity/quality of life.
However, in the past 10 years or so, Americans are generally getting “less bang for their buck” on healthcare spending. There are several important factors why this is occurring but I think the most important question is two-fold:
1. Should some healthcare spending be redirected to ensure that all Americans enjoy at least some level of adequate access to the American healthcare system?
2. As Maggie alluded to earlier, what type of healthcare resources should we invest in and who decides on this issue?

Guest
Barry Carol
Sep 28, 2007

That would be about 3%, the same as Canada’s. I don’t think possible with your mild “solutions”
No, I was referring to GDP in nominal dollars, not real (inflation adjusted) dollars. So, assuming 3% long term annual secular growth in real terms and 2%-3% inflation, nominal dollar GDP growth would be 5%-6%. Medical cost growth this year, according to the major managed care companies, is 7.5% plus or minus 50 basis points. I think the goal is quite achievable, though not immediately.
It is also important to note that approximately 50% of total healthcare costs in the U.S. are attributable to the 65 and older population. We already have a single payer system for this subset of the population, though Medicare, to date, has not been very effective at controlling costs. Medicaid, which covers long term care costs for the poor, has not done a good job either, though the issue is starting to get more attention. I think there is a lot of gold to be mined here with more focus on sensible end of life care, better care coordination for the chronically ill, recent focus by hospitals to reduce infection rates and other preventable errors, electronic records to reduce duplicate testing and adverse drug interactions, and emerging interest at CMS to make better payment decisions based on comparative effectiveness of new drugs and devices as well as making a greater effort reduce the wide regional variations in practice patterns across the country.
Bottom line: on this issue I’m an optimist (at least over the intermediate to longer term).

Guest
Peter
Sep 28, 2007

Well Barry the U.S. also “decide at a political level how much of the society’s resources to devote to healthcare.” It seems THAT cost is about double other industrialized countries. If U.S. politics does not determine healthcare costs then you’d have to deny the role of lobbyists and political contributions. Political inaction is also political policy.
“I would be more than satisfied if we could eliminate enough waste to pay to cover the uninsured while holding our spending as a percentage of GDP to its current level and reducing future medical cost growth to a level in line with the growth of our economy.”
That would be about 3%, the same as Canada’s. I don’t think possible with your mild “solutions”.

Guest
Barry Carol
Sep 28, 2007

Peter,
I wouldn’t expect doctors to complain about over utilization because, for them, utilization translates directly into income (except for salaried docs). Besides, as I’ve said numerous times before, doctors drive virtually all healthcare utilization by admitting patients to hospitals, prescribing drugs, ordering tests, consulting with patients and doing procedures themselves. I put forth my ideas about how to safely reduce utilization in the U.S. by changing the incentives in the system related to how doctors and hospitals are paid and greatly improving access to and availability of information that will foster more cost-effective medical decision making.
With respect to Canada and other countries with national health insurance, I indicated previously that these countries decide at a political level how much of the society’s resources to devote to healthcare. As you know far better than I do, Canada uses numerous strategies to control costs including limiting the number of doctors turned out by the medical education system, restricting the supply of hospital beds and expensive technologies which results in longer than optimal wait times for elective and non-life threatening procedures, and requiring hospitals to operate under a global budget approach. None of these strategies are used in the U.S., at least not yet except for the limit on medical school slots, though we make up for some of that through immigration. If Canada does, in fact, have a shortage of primary care doctors, it could alleviate it over time by opening more slots in the medical schools, but that costs money. They could further reduce wait times by increasing the supply of MRI machines, hospital beds, etc., but that costs money too, and their tax burden already exceeds 50% of gross income for middle class and upper income people. Their administrative costs are lower, they pay less for drugs, and their specialists are paid less than here. While I don’t know (and perhaps you do), but I suspect that all three of those factors taken together accounts for a smaller piece of Canada’s lower healthcare costs than the cumulative effect of the country’s various strategies to deliberately restrict the supply of doctors, hospital beds, and expensive medical technology. Differences in approach to end of life care, combined with a more sensible legal environment in Canada and greater use of electronic medical records are legitimate cost advantages that we, in the U.S. will, hopefully, emulate sooner rather than later. Even with significant healthcare reform along the lines that I would like to see, I think the U.S. will still spend more than any other country as a percentage of GDP because, at the end of the day, that is probably our societal preference. I would be more than satisfied if we could eliminate enough waste to pay to cover the uninsured while holding our spending as a percentage of GDP to its current level and reducing future medical cost growth to a level in line with the growth of our economy.

Guest
Peter
Sep 28, 2007

“At the same time, a single payer system like Canada’s that insulates patients from the cost of care and often does not even require copays in order to save on administrative costs, the undesirable unintended consequence is to increase utilization of healthcare services from what it would otherwise be.”
Barry, if that were the case then Canada’s, and other single pay countries, would be showing higher healthcare costs than the U.S. when in fact their costs are about 1/2. If you are arguing that the reason there are too few primary care docs in Canada is because the system does not control access through cost then you also can’t argue that Canada has too few primary care docs to attempt to prove single-pay is a failure. I have seen no evidence that over utilization of primary care is the reason people can’t get doctors, but I guess if co-pays were instituted to impede access then the docs would be crying as well because they couldn’t get enough patients. I have never seen a doctor concerned about over utilization any more than a car sales person thinks there are too many customers. In the comparison (article link I gave) of Canada to other single-pay countries in the access to primary care most other single-pay countries were doing better. Only the U.S. did worse than Canada. In the past you have proposed that the U.S. system is over utilized – I guess even with co-pays and deductibles in place. Would you say the U.S. needs to increase co-pays even further to reduce utilization? That seems to be your argument. With affordability the issue in the U.S. I’d like to see political leaders advocate higher access fees to lower costs and see if the voters (patients) buy that equation.

Guest
Barry Carol
Sep 28, 2007

Peter,
On the subject of pay and benefits, it doesn’t matter if we are talking about doctors, nurses, teachers, truck drivers, journalists, securities analysts or whatever. I always believed that pay and benefits should be sufficient to attract and hold employees who can perform their jobs in a competent and professional manner. To the extent that an employer can make the job more attractive through such intangibles as flexible hours, work-life balance, and creating a culture that treats everyone with respect and dignity, that is all to the good. For medical personnel, if higher pay is required to attract doctors to under served and less desirable (from a lifestyle standpoint) rural areas, so be it. If there is a shortage of nurses, I always advocate higher pay as a first response.
At the same time, a single payer system like Canada’s that insulates patients from the cost of care and often does not even require copays in order to save on administrative costs, the undesirable unintended consequence is to increase utilization of healthcare services from what it would otherwise be. This is a particular problem in a primary care context. If I don’t feel well and I can access a doctor quickly without any payment responsibility at the point of service, I’m more likely to have my problem checked out rather than wait a day or two in the hope that it will resolve itself, as it does most of the time.
The key to better controlling healthcare costs over the longer term rests on better information and different incentives. Information includes everything from price and quality transparency to help both patients and referring doctors make more cost-effective healthcare decisions, to Senator Clinton’s proposed Best Practices Institute to help determine whether or not we should pay for new drugs and devices, to electronic medical records that can sharply reduce duplicate testing and adverse drug interactions, especially in hospitals. On the incentive side, we need things like package pricing for an entire episode of care instead of paying doctors and hospitals more money for more procedures, including procedures necessary to fix mistakes. We should not pay for preventable medical errors at all. We need a more sensible medical dispute resolution system so doctors will not feel compelled to practice defensive medicine. We need more widespread use of living wills so doctors and hospitals know what care patients want and don’t want in an end of life situation. The list goes on. It will be much more productive, I think, to focus our efforts in this direction rather than trying to drive down either doctors’ salaries (for those who work on salary) or reimbursement rates for individual procedures.

Guest
Peter
Sep 28, 2007

Barry, I did some more research on the PQ primary care doctor shortage and indeed it does appear that there are not enough physicians. That said is this because of single pay and salaries. I don’t think it is that simple. The U.S. also has a doctor and specialist shortage, particularily in rural areas. Pay is not necessarily the cause or the answer, but I will agree that it is a factor.
http://www.cbc.ca/health/story/2006/11/02/quebec-familydoctors.html
You will notice in the link below the cost of U.S. med. school has prevented many low to moderate income students from being docs. The result is that the proportion of docs coming from affluent families has increased and as a result they will have higher expectations as to what they need to earn and where and how they practise.
http://www.amsa.org/meded/studentdebt.cfm
The John Hokins newsletter article below also discusses the U.S. doctor shortage.
http://media.www.jhunewsletter.com/media/storage/paper932/news/2004/02/27/Science/Doctor.Shortage.Facing.U.s-2245498.shtml
I don’t think that the rest of the world should use the U.S. as a model of either physician pay (even if doctors want to) or allocation of doctors. We need doctors, everywhere and strategies to get them. But everytime the shortage is mentioned PAY is put forward as the solution. It is interesting that the same people who push for higher docs salaries to solve that problem do not advocate for higher nurse salaries to solve that shortage or higher nurse educator salaries for that shortage either. Balancing cost to the system and adequate supply is tricky for every country and always in flux.
Barry, you have said that poverty is a matter of preception not reality. Is doctor pay also a matter of perception?

Guest
jd
Sep 27, 2007

Maggie,
I’m not sure I understand the thrust of your response to me. There may be no disagreement at all. Just to be clear, by “cadillac” I meant by it not simply a health care system that offers full coverage, but one that does so in an a relatively inefficient manner. So, much as the car (historically) gets poor mileage and has low reliability compared to better-made alternatives, so too does our healthcare system when “fully loaded” result in massive waste, error, etc. We have a healthcare system with tailfins.
I of course completely agree with you that “the highest-quality healthcare is LESS EXPENSIVE than what we have now.”
I do disagree slightly with your take on the health insurance industry. The facts about increasing margins since around 1999 are all in the public domain and I don’t question what you write. However, those margins have been increasing from almost nothing to what is still less than average for an American Industry. They are not “fat” in that sense, though they are certainly fatter than would be the case in a single payer system.
Barry Carol and I have posted numerous times on how small a percentage of the total health care dollar goes towards health insurer profits. You cited $11.4 billion in profits in 2004. I believe total spending was just under $2 trillion that year. That’s less than 1% of total spending for insurer profits.
This is not where you’re going to be getting a lot of the savings from a single payer system. You’d get just as much, by the way, from getting rid of hospital profit and creating publicly-run systems like the VA. You’d also get about as much from getting rid of drug company profits (they contribute only 10-15% of total spending, but have profit margins 3-4 times that of hospitals and health insurers).

Guest
MG
Sep 27, 2007

Great response as usual Maggie. I actually have to pick up your book and read it when I have some time.
I still think the real action in health care policy has been and will continue at the state-level for the next several years. The Mass. health plan will be interesting to watch but I am truly fascinated by what is happening in CA. If Schwarzenegger can get his health care reform passed, it would be a major accomplishment because it will require both Republicans and Democrats to compromise on some difficult issues. I am willing to bet that it would likely serve as a blue print for federal reform.
States have clearly taken the lead in the Health IT space too. Not only have they more been more serious about resolving some of the outstanding issues around Health IT (e.g. reexamining state privacy laws) but several states have committed to investing tens of millions of dollars to build a statewide Health IT infrastructure. The commitment by a larger state, such as Minnesota, to build a statewide RHIO is particularly encouraging.
If the NHIN is ever going to be built, it is going to be the states that get anything accomplished. The federal gov’t has just been unwilling to commit any kind of real funds and unable to push through real legislation on this topic.

Guest
Maggie Mahar
Sep 27, 2007

Thank you for your comments.
Let me begin by responding to MG, David, Barry and j.d.
MG and Barry and j.d. –You are absolutely right that it is essential to rein in future health care inflation. The way to do that is to cut the waste in our system.
Research done by Dartmouth’s Dr. Jack Wennberg (who j.d. refers to) shows that $1 out of every $3 that we spend on healthcare in this country is wasted on unncessary, often redundant tests, over-priced, often unproven drugs, devices and procedures, and unnecessary hospitalizations. I’ve written about Wennberg’s work here. http://dartmed.dartmouth.edu/spring07/html/atlas.php.
(I don’tt mean to be flogging this article, but it’s probably the best thing I’ve written, aside from the book, and if you understand the Dartmouth research you understand a lot about what’s wrong with our healthcare system.)
Both Clinton and Edwards have made it clear that they plan to cut waste out of our system. (Hillary was up at Dartmouth talking to Wennberg just a couple of weeks ago. She has known him for a long time.) If you read their plans carefully (including the first 2/3 of Hillary’s) you’ll find that both candidates (and Obama, too, I think) plan to set up an independent institute or panel to compare the effectiveness of various drugs, devices and treatments.
This is something other countries do, but in the U.S. manufactures have managed to resist head-to-head comparisons. (They know there would be losers.) So when the FDA approves a product, it only requires that the manufacturer show that it is better than a placebo (i.e. better than nothing.) No one has to prove that their product or procedure is better than existing products (which are almost always much cheaper.) See my post on “bespoke knees” on my website–www.healthbeatblog.com.
Once the FDA approves something, Medicare almost always agrees to cover it–again without asking about comparative-effectiveness or cost-effectivness. Then private insurers follow Medicare’s lead, passing on the cost of the more expensive product in the form of higher premiums.
Clinton and Edwards plan to use the independent comparative effectiveness research to determine what universal healthcare should cover. (This is something Medicare aleady has been talking about doing.)
None of the candidates are going to talk about their plans to cut waste, ineffective treatments, etc. on the campaign trail. To many Americans that would sound like rationing. Though, in fact, what they plan to cut is unncessary treatment and overtreatment that can be hazarous to your health. For exammple, we now know that we have been doing thousands of unncessary angioplasties with no benefit–while putting patients at real risk.
j.d.–You express concern that the Democrats want to give everyone the “cadillac” of health care. You’re right they do. And what those who have read WEnnberg’s reserach understand is that the highest-quality healthcare is LESS EXPENSIVE than what we have now. For example, when Medicare reimburses the Mayo Clinc, it spends about half as much as it spends when reimbursing UCLA hospital for treating very similar patients. Why?
For one, the patient at Mayo sees about half as many specialists. Yet outcomes at Mayo are better–as is patient satisfaction and doctor satisfaction.
What’s wrong with UCLA? They have many more doctors than they need–and doctors like to keep busy. They also have more hospital beds than they need, and supply drives demand. (“Build the beds adn they will come.)
Doctors at UCLA also seem to make more mistakes; they have more re-admissions.
And Mayo is not the only benchmark for higher quality, lower cost and greater efficiency. Cleveland Clinic is also very good while some of the most prestigious academic medical centers in the U.S. are not. (See http://www.dartmouthatlas.org for the research.)
This is why countries that spend half as much as we do on care often have better outcomes in many areas.
David and Barry–
On Medicare’s costs vs. private insurers. We have hard numbers on this. 4.5 percent of the more than $2 trillion that we spend on healthcare goes to cover private insuers’ administrative costs and profits. Administrative costs for all govt’ healthcare programs equal about half as much, or 2.2% of the total.
In the meantime, private insuers pay for only about 30 percent of the $2 trillion-worth of healthcare while the govt’ pays for 51 percent. (See pie charts at the beginning of my book, Money-Driven medicine)
On the question of why and how Medicare is less expensive, let me repeat part of an earlier post on this blog:
” In contrast to private insurers Medicare doesn’t have to spend millions on marketing, advertising, and Washington lobbyists. On top of that, private insurers must generate profits for their shareholders. In 2003, the HMO industry as a whole reported total earnings of $5.5 billion—up 83 percent from $3 million in 2002 , according to Weiss Ratings, a firm that assesses the financial strength of banks and insurance companies.
“In 2004 the industry’s profits jumped another 10.7 percent to $11.4 billion, and in the summer of 2005 industry leader WellPoint told investors that it expected its profits to continue to levitate by an average of 15 percent a year for the next five years. That same week Wellpoint announced its plans to boost average premiums by 16.6 percent in 2006.
“In my 2006 book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, I quote Weiss vice-president Melissa Gannon, who is remarkably candid about the impact the insurance industry’s fat profit margins have on society:
“While this bodes well for the industry’s overall health, rising premiums have forced many consumers to select more restrictive health plans or opt not to purchase insurance entirely.”
It’s remarkable that Weiss, a for-profit business, would point this out.
Barry,
Regarding the Toronto doctor’s comment, have you ever noticed that it is usually Canadian doctors–and not Canadian patients–who complain about their health care system? Do you think this has anything to do with the fact that while Canadian specialists make good money (I’d like to make $150,000, after taxes), they don’t make nearly as much as specialists in the U.S. who often take home a million or more.
As I may have mentioned in the past, my daughter went to McGill U. in Montreal. There, most of her friends were Canadian, many of them from fairly affluent families (McGill attracts a lot of kids from private schools) and during the four years she never heard anyone–none of her friends, none of their parents or relatives–complain about their health care system. Quite the reverse; they were very proud of it. But when they heard about our croweded emergency rooms, they were appalled. (On more than one occasion Emily wound up escorting a room-mate who had had too much to drink to a Montreal ER in the middle of the night and she was amazed to see how empty they were. The explanation? Since people in Canada have doctors, they don’t need to go to an ER for primary care.