OP-ED

Bernie May Have a Point …

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It doesn’t seem likely that Senator Bernie Sanders will be our next president, but the current primary election campaign is throwing some pretty startling curveballs. With substantial popular support for one candidate with a fondness for the bankruptcy courts, and another who believes the pyramids were grain silos, a “democratic socialist” can’t be counted out.

In this world of the politically unexpected, Senator Sanders’ “Medicare for All” proposal for restructuring our healthcare system seems like something we should take seriously.

It’s a great slogan – a lot zippier than “Patient Protection and Affordable Care Act” — although the specifics are a little hazy. Senator Sanders has been promising since July to provide more details, but so far has provided only some tantalizing sound bites, like this one from his spokesman a week ago: “At a time when we are the only major country on earth that does not guarantee health care for all and when we spend far more per person that any other country, the time is long overdue for us to pass a Medicare for All, single-payer program. Medicare for All would save the average family thousands of dollars a year in health care costs…”

Most liberals would agree that one of the disappointments of the Affordable Care Act is its failure to assure universal coverage. We still have millions of uninsured and, with coverage increasingly expensive and deductibles skyrocketing, the number seems more likely to grow than decrease. In comparison, a totally tax-supported (as Senator Sanders has proposed in the past) Medicare for All model would bring the United States into line with other nations and protect millions from healthcare financial crises.

However, the claim that “single-payer… Medicare for All would save the average family thousands of dollars a year” is a lot more questionable.

While we can’t know what an undefined future single-payer program might really cost, we can look at comparisons between our existing single-payer traditional Medicare program and the alternative Medicare Advantage program. Unfortunately for Senator Sanders’ government-managed Medicare for All concept, it turns out that the much-maligned private sector insurers actually do a better job of controlling costs.

Two studies demonstrate this, one by the Congressional Budget Office, the other by the Kaiser Family Foundation. Both focused on premium support models in which there would be open competition between traditional Medicare and private plans. Both concluded that Medicare costs would be reduced in a “level playing field” model, in which the traditional program payments would be limited to competing private plan bids (and vice versa). Even more telling, the Kaiser study provided cost comparisons for the sixty most populous US counties. For some eighty percent of beneficiaries in these counties, private plans offered lower costs than traditional Medicare.

Senator Sanders’ proposal does have some merit. In addition to guaranteeing coverage, it’s a much simpler structure than what we have now, it would eliminate the “second-class” Medicaid program, and it would be a lot fairer to those with lower and middle incomes. It’s too bad that in proposing a totally government-managed system (one that’s all too vulnerable to industry lobbying), the senator’s socialist principles are overriding financial realities. If the senator were to look more closely at what does seem to work in Medicare, he might produce a healthcare proposal that more of us could get behind.

Roger Collier is the founder of the Campaign for a Rational Healthcare System (www.rational-healthcare.com). He was formerly CEO of a national healthcare consulting firm.

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52 replies »

  1. “initiated huge changes in the world of finance.”

    Yes, but did they initiate huge changes for workers?
    http://www.huffingtonpost.com/david-callahan/401k-a-perfect-failure_b_1574834.html

    “….but a trigger for all health system players to compete to better serve patients with higher quality and lower cost.”

    When have you noticed that ever to happen in health care. Given the trend to hospital amalgamation, and larger less numerous insurance options, I think you’re trying to live in a pipe dream that the market can save us.

    The fact that no other industrialized country has chosen to go your route shows a reality of the uniqueness of health delivery – except in the U.S. where ideology trumps sanity.

  2. Peter,
    My point was that 401ks had huge advantages over traditional defined benefit pensions….and that their introduction (as an option vs. defined benefit plans) initiated huge changes in the world of finance. I in no way suggested they replace social security.

    Similarly, if we adopted suggestions as suggested in the Chen and Capretta WSJ article (expanded HSA’s, tax credits for those without employer coverage, Medicare reform where people either stay with the current system or choose a new one etc) people could choose if they wanted to enter an ACO capitated plan or purchase a high deductible plan linked to an HSA….no requirement for sophistication….but a trigger for all health system players to compete to better serve patients with higher quality and lower cost.

  3. Paul, did you read the part about 401ks only being meant to supplement retirement. I’d argue that SS is much more successful than 401ks in it’s paternalistic way.

    As well should those seeking health coverage be obliged to became “quite sophisticated” in order to make the right decision.

  4. Peter, Thanks for the link.
    I didn’t say they can’t be improved….and the author is right to point out that many corporate administrators have not done a good job of selecting low cost mutual fund options for workers….like those of Vanguard. But note the author states “True, 401(k)s have encouraged workers to save.” Our factory work force loved their 401k’s….and in every department there were some guys who became quite sophisticated and mentored others. We had some who took out loans and withdrawals foolishly….and we tried to talk them out of it….but on balance the introduction of 401k plans has been hugely positive…..and set off a transformation of the finance industry toward lower costs and more transparency. Yes, you can find some critics who prefer a more paternalistic approach….I emphatically disagree.

  5. Interesting. That’s the first I’ve heard of this shift within retirement benefits. I’ll have to look into it.

    I guess on the surface, my reaction would be that most consumers still aren’t rational or knowledgeable enough to make particularly good investing decisions. An interested and educated minority are, but most simply pop a pile o’ money into a mutual fund and let somebody else manage it.

    More concerning, the majority are not saving enough for retirement. While there are many reasons for that, on the surface it seems like a pretty widespread and major mistake.

    What do you think we could do to make healthcare simple enough that the majority of people (not just us fools who work in healthcare) could and would make wise decisions?

  6. Ted,
    Re your comment: “My concern would be that healthcare is complicated enough and personal enough that consumers aren’t in a position to make rational decisions about it.” An excellent point.
    Here is an industry transformation that looked very similar: In the 1970’s almost all pensions were defined benefit…..and then along came (almost by mistake) a portion of a law called 401k…..introducing defined contribution. Most observers claimed workers were incapable of managing their money….and that it would be a terrible thing to give workers control over their money….What happened? A transformational reorientation of the finance industry to help and support what are called “retail” investors…….and what happened to costs?…..stock trade costs that used to cost $200 dollars now can be done for $8……and mutual fund companies have dramatically cut expense ratios in an effort to attract increasingly savy factory workers investment dollars. Did some workers make mistakes? Sure….but this change transformed an entire industry with hugely beneficial results. Could a similar transformation happen in health care?…..I think it deserves serious consideration.

  7. Why did I know this was your comment Paul when it came through in my email.

    “What’s needed is a credible plan to reorient federal policy across the board toward markets and the preferences of consumers and patients”

    Obviously you’ve always had some form of subsidized private health care and never known what the real market is for the un/under insured patient.

    When have patients been able to, “call the shots”?

    What would be the “preference” of an un/under insured person trying to get care in the “market” you’d like to go back to, whatever that would be, as you throw out more platitudes?

  8. Hmmm… what does that actually mean? What does “preferences of consumers and patients” mean?

    My concern would be that healthcare is complicated enough and personal enough that consumers aren’t in a position to make rational decisions about it.

    See this from JAMA earlier this week on comparison shopping as one of many studies demonstrating that we as consumers just aren’t equipped to make good decisions about healthcare.

    http://archinte.jamanetwork.com/article.aspx?articleid=2482348

    We buy policies based solely on premiums, scale back preventive and necessary care when we have to pay for it, and demand super expensive treatments that aren’t cost-effective at all.

    I may be missing your point (if so, my apologies – please do clarify), but there’s nothing I’ve seen that suggests the preferences of consumers are going to get healthcare working. We just ain’t that rational.

  9. Yup, complete agreement. To my mind, drugs (and devices) and hospitals are the obvious first step – which is why I sometimes get frustrated at all the negativity towards insurers. They really aren’t the biggest problem.

    My biggest question on the political side is who is able to get something done. If we assume fixes are going to be incremental, who is going to make the most progress?

  10. From todays WSJ commentary by Chen and Capretta (not linking it because it requires a subscription). The problems of single payer are…as mentioned by others….monopsony….are very very problematic….the alternative is to go back to patients and docs calling the shots…..here is an excerpt from Chen and Capretta’s piece:

    “The country has been drifting toward full federal control of health care for decades. What’s needed is a credible plan to reorient federal policy across the board toward markets and the preferences of consumers and patients, and away from one-size-fits-all bureaucratic micromanagement.”

  11. Giving Medicare more powers would help, but docs don’t have to take Medicare patients. This is why it’s so hard to make this work at this stage in history when there’s so much money at stake. It may be easier with drugs and hospitals first – that’s where the bulk of the costs are.

    We’ll have to whittle away for a long time. Bernie won’t be king even if he does win. We’ve seen this with Obama when the sole purpose of Mitch McConnell and Republicans was to deny any success, no matter if it would have benefited the country.

  12. No disagreement here, Peter. Just not terribly optimistic. The ACA was such a monumental struggle to take such a tiny step.

    Long-term, I just can’t see any viable solution beyond some manifestation of single payer. But near-term… hard to see the appetite. Would love to see some incremental fixes (like allowing Medicare to negotiate). Still hard. But perhaps not quite as impossible?

  13. “There is not a snowball’s chance in Washington that the drug and hospital lobbies let single payer fly.”

    All the more reason to vote Bernie, then at least you won’t be part of the problem.

  14. I agree with Devon – this seems like a pretty critical element.

    The biggest folks can negotiate the best deals and nobody is bigger than a government monopoly.

    It’s for this reason exactly I love single payer and at the same time can’t see it as politically viable. We don’t even allow Medicare to negotiate prices. There is not a snowball’s chance in Washington that the drug and hospital lobbies let single payer fly.

    Of course, Washington does have two feet on the ground today, so who knows…

  15. The key word there is “NON” emergency. Ever try to get service in a U.S. ER?

    I don’t think the Hoover Institute would ever support any thing even remotely connected to SP, even if it turned out to work better.

  16. “When considering non-emergency surgery, evidence indicates that there are far lower waiting times in the US than other countries.” Scott Atlas, page 172 In Excellent Health.
    There are dozens of examples of other areas re how other countries ration care.

  17. “Imagine how much utilization would rise with no cost-sharing and care that’s free at the point of service!”

    Wonder how all the other SP countries provide health care at about half the cost – with all that “free” stuff.

  18. The way single-payers (SP) lower cost isn’t merely by lowering administrative costs. That’s a drop in the bucket. SP use monopsony power to assign global budgets to hospitals, set provider fees using monopsony power and use price controls on drugs, medical devices, medical equipment and so on. If that’s Bernie’s intention, he’s been quiet about it.

    Imagine how much utilization would rise with no cost-sharing and care that’s free at the point of service! The Rand HI found patients exposed to significant cost-sharing reduced medical expenditure by about 30%. In other words, utilization would go up much more than the savings from lower administration. Any system has to use some type of rationing of scarce resources. There’s nothing wrong with that (a market economy uses price rationing). Bernie hasn’t spelled out how his system would ration. With weak rationing, costs would rise.

    If the SP didn’t assign global budgets to hospitals, would it continue to require Medicare cost reports to reimburse for capital and overhead? If so, there goes some of the administrative savings. My point is that it’s not nearly as simple as saying “let’s just have Medicare for All.” There are a lot of unanswered questions.

  19. How about traditional Medicare? Why go looking for weird stuff when we have a pertinent example that only needs a little tweaking (or unshackling)?

  20. “Peter likes community hospitals as the local providers….I have been on the Board of one….lots of services that were expensive and inefficient….lots of expenditures on marble lobbies….and in an adjacent community there was one hospital with monopoly power….even worse.”

    Paul, where are there NOT marble lobbies? There is an arms race for patients who are hoodwinked into thinking marble lobbies mean better care. Get the blotted payment system down to human levels through global budgets and the marble will disappear.

  21. “The VA is different than single-payer.”

    Yes Margalit, that is an important point. Although the VA might have specialized care needed by vets that no other provider could provide.

  22. Yes, that is a valid point….but I do think the VA is a good point to look for how the government would do. Here is another one if you like: how about defense contracting….waste, billions of dollars of over budget items, inefficiency, and substantial consolidation of suppliers. Companies like EPIC would have their way. Single payer may seem like a magic wand….but I don’t think so. Docs (especially) and patients and taxpayers would bear the brunt.

    Peter likes community hospitals as the local providers….I have been on the Board of one….lots of services that were expensive and inefficient….lots of expenditures on marble lobbies….and in an adjacent community there was one hospital with monopoly power….even worse.

  23. Let’s do this: when referencing an existing example of single payer, let’s talk about traditional Medicare++, not the VA and not even Medicaid. Neither one is single payer. The ++ is for inclusion of Medigap out of the box, and for ability to negotiate prices with suppliers.

  24. President Obama had a brief opportunity early on to do the right thing. Either he squandered it, or the Democrats in Congress are as corrupt as the Republicans. I suspect the latter….

  25. The VA is different than single-payer. The VA is single provider. Nobody is suggesting that the government owns and operates the delivery system. Hospitals and most importantly physician practices should be private. The government just pays for services.

  26. It wasn’t sloganeering Peter…..an attempt at humor with a couple kernels of truth.

  27. “I’m leery of central control.”

    You don’t think amalgamated health delivery corporations are central control?

    Single-pay run by the states through community hospitals would bring local control.

  28. I’m leery of central control. It seems to give rise to clinically unplugged administrators that know what’s best for me and my patient. Also the idea single payer would save money overall (taxes do go up to pay for this) is a leap of faith. Lastly, I thought the last eight years of being the change we want to be was going to fix the robber baron problem. They seem stronger than ever 😉

  29. “with co pays and deductibles common in the current high deductible plans……patient keeps in the HSA what he/she doesn’t spend.”

    Which patients are you talking about Paul? The ones who can afford the high deductibles with an income high enough to actually be able to save anything? Deductibles are the ticking time bomb that put people with coverage into financial problems. Deductibles are a ruse that tries to convince people they’re getting a better price, where actually their getting higher risk.

    And instead of throwing VA bombs why don’t you put some substance in those hip shots.

    “Power to the people.”

    Which people? What power? Sloganeering won’t solve heath care.

  30. Hi Peter,

    Catastrophic coverage included….as seen in the popular high deductible plans many employers currently cover….

    Premium support would be at a level enough to include visits for the intermittent ambulatory services…..with co pays and deductibles common in the current high deductible plans……patient keeps in the HSA what he/she doesn’t spend. If the person wants coverage for chiropractic etc they can pay fee for service or choose an insurance offering that includes it.

    I know you will hate it….but it is far better than VA coverage for all….the inevitable sclerosis of government bureaucrats in charge of it all. Power to the People! Power to the Doctors! Peace!

  31. “Allowing people to choose what kind of coverage they want (i.e. rolling back mandates) is a key”

    As usual Paul you have no grasp of reality. People chose what coverage they can afford, not what they want or need. Getting a better price from takeaways is what car salesmen do, not what health care should do.

    “whether it be quality, luxury, low prices or whatever ”

    What comes with the low price package Paul? How much would the low quality package cost us, and who gets to chose that – poor people?

  32. Dr. Palmer,

    There are at least two sources to the byzantine complexity of 487 page manuals and high transaction costs from insurers. For most of the country we have only 2 or 3 insurers….resulting in one insurer playing the role of the health system czar (hospitals and provider groups respond to this by buying each other to create a monopoly to get some protection/negotiating power over the dominant insurer/czar)…this is because of fragmented markets due to the difficulty of crossing state lines. Secondly, each state creates another huge area of complexity with their own version of mandates and rules and regulations (state legislators love this as all providers…chiropractors, social workers, psychologists hire lobbyists who throw money at the legislators to mandate the providers services are included in plans)…this is a racket (nod to Margalit).

    There are much better ways to deal with this than going to a single payor system….unless one likes the VA as the model. Allowing people to choose what kind of coverage they want (i.e. rolling back mandates) is a key….and premium support linked to HSA’s puts the power where it belongs ….with patients…..and freeing up doctors to attract patients by innovative service packages emphasizing things patients want…..whether it be quality, luxury, low prices or whatever combinations of these factors.

  33. Why don’t you expand on that Paul instead of throwing the “guvmnt can’t do anything right” one liner grenade over the fence as you scurry away.

  34. The Veterans Administration prototype should give pause to those who advocate a system with the government takes over the health care system.

  35. “…Second, Bernie eliminates the stranglehold robber barons have on our democracy. Third, Medicare for all becomes politically feasible. Just like that….”

    “Just like that”, with a Republican congress and senate? Obama found that out when Republicans laser focus was on his defeat and not on what’s best for the country.

  36. Roger suggests we redirect current taxes
    We already do that
    Medicare taxes are redirected from the Medicare trust fund to the Treasury’s general fund where they are spent on General appropriations
    No FICA taxes are paid directly to the Medicare trust fund
    Is that how a single payer insurer should operate – with no premiums and no reserves?

  37. I wonder if health care might be a natural monopoly…not at the doctor level where competition between procedures, interventions and diagnostic efforts seems natural and facile. Maybe not at the outpatient clinic level where several such facilities in a community might not waste resources excessively. But surely having too many hospitals competing in one region–each with a yearly revenue of billions of dollars and exquisite imaging machines and laboratory instruments worth many millions together with enormous nursing, hospitalist, and other expert staff labor costs–leads one to conclude that these expensive resources should not be duplicated very often in one market area, just to enhance competition.

    But the feature that most suggests a natural monopoly is the presence of dozens of insurers and payers. These are akin to glue getting in the synapses of every participant in the sector. They add astonishing transaction costs to all patients and providers and payers and insurers. They gum up the very nervous system of health care. Competition between these financial tools is not, per se, harmful, but this activity causes a penumbra of frictional transaction costs amongst everyone in sight. For example:

    United Health Care takes over Blue Shield (within Calpers plans) and thousands of subscribers receive 487 page manuals describing Benefit Highlighs, Formulary, Additional Drug Coverage, Pharmacy Directory, Provider Directory, Acupuncture Directory, Chiropractic Directory, Vision Directory, Evidence of Coverage, Certificate of Coverage. This just happened in the Bay Area, effective Jan.1, 2016.

    Think of the demands this simple competitive change caused: Patients must locate new providers, providers must learn their new fee schedules and coverage limits, pharmacies must review coverage for all customers and probably re-order and change inventories,, physician office billers must learn new codes and new phone numbers and addresses….on and on.

    Competing plans and competing payers and insurers performing such hijinx is simply too much for the patient and the provider to take. It benefits only part of the market, but not that part benefitting the patient or the overall health care market. It is causing a deadening patient and provider ennui. People are giving up.

    But if we go to a single payer, I hope we can keep it at a level of the State, or County or hospital district. Monopolies at a federal level, I fear, might bring far worse hassles than those described above.

  38. Hmmm…..so the solution to government corruption in health care is to give the government total control of health care. Yeah, right.

  39. Bernie does have a point, the only point worth making actually. Medicare for all, traditional Medicare FFS, not the ripoff known as Medicare Advantage, and not the private, for-profit, HMO reincarnation. known as ACO.
    What works in Medicare is the low administrative costs (prior to the Obamacare bureaucratic fest). What works for Medicare is what Congress has prohibited when it comes to drug prices negotiation. But before we can do any of that, we need to fix the main problem, the one Bernie is running to fix – government corruption in all its forms.

    Premium support (vouchers) is great for rich people who don’t need premium support. Premium support is nothing more than reducing overall expenditures by denying care based on ability to pay. Premium support is dumping grandma in the predatory Obamacare exchanges. Premium support is fixed rent to the slumlords of our health care system.

    Here is the 3 step plan: First, we elect Bernie. Second, Bernie eliminates the stranglehold robber barons have on our democracy. Third, Medicare for all becomes politically feasible. Just like that….

  40. “we can look at comparisons between our existing single-payer traditional Medicare program”

    A mistake to call Medicare “single-pay”. It’s no more single pay than BCBS because if you have BCBS they’re the only payer.

    “While we can’t know what an undefined future single-payer program might really cost, we can look at comparisons between our existing single-payer traditional Medicare program and the alternative Medicare Advantage program.”

    A false premise right from the beginning. You’re trying to compare two programs operating in the same price toxic system all of us are stuck with.

    “it turns out that the much-maligned private sector insurers actually do a better job of controlling costs.”

    Really, those private sector insurers who continue to raise prices 5-10% yearly? The ones that locked out (through price) millions of low(er) income people needing coverage? The ones who threw pre-exists to the gutter? The ones who imposed a cap? As well Medicare is muzzled by legislation such as not being able to negotiate drug prices and not being able to spend any money lobbying their reps to keep the cash coming. It’s a knife in a gun fight.

    “Medicare for All would save the average family thousands of dollars a year” is a lot more questionable.”

    If you call the rest of the industrialized world “single-pay”, in which they spend about half what we do, why wouldn’t it save all of us – I’ll tell you, it’s because you want to exist in this high price environment and pretend we can cut costs without price controls. You still want to pay the same prices but also have lower costs – you’re in willful denial.

    Yes, there would be winners and losers, premium payers being the traditional losers may actually be winners. You’d exchange some costs from employer to universal portable coverage, but spread the load over the entire tax system. Employers could pay their people more but the money would go to taxes to support a “much simpler structure”.

    But you’d actually want to bend the cost curve instead of just talking about it, so “single-pay” is the only way as it blends universal coverage with price negotiation and controls. The states would run and administer their own local system with the feds helping with some binding universal legislation of core values and rules, and federal money.

  41. As a patient, it might be OK, after all I’ll be eligible in about 7 years. As a doc?
    If the requirements keep up like they have been, no way.

  42. I agree that ditching employer sponsored insurance is a big deal. However, employers would just love, love, love to get off the hook for being responsible for employee health care…so I don’t think they would be a significant point of resistance….but most voters have little confidence that whatever gets proposed to replace employer sponsored health insurance would be anything less than a disaster.

  43. Single payer? Like the one Vermont nearly passed?

    You have to deal with the elephant in the room known as Employer Sponsored Insurance. I challenge any Republican or Democrat to threaten ESI & see what their respective constituency thinks.

  44. The problem with premium support is that it gives control to the patients and takes it away from the bureaucrats/system designers/think tankers.

  45. I agree with with Anishkoka, the current Medicare Advantage model isn’t it — that’s why the Kaiser and CBO studies are so telling.

    I confess: I’m no rigid conservative, but I am a fan of premium support, both for Medicare and for the overall healthcare system. While Bernie Sanders would finance Medicare for All with a whole series of new taxes on employers and individuals, a reasonably generous premium support system for every American could be funded simply by redirecting current taxes and subsidies (as described in http://www.rational-healthcare.com).

  46. I am a friend of single payer, and a friend of Bernie’s, but I am a skeptical friend.

    And so I really discourage statements like “single payer will save the average family thousands of dollars.”

    The public does not hear the word “average.” Instead they hear the word “every family”, and it sure ain’t so.

    Almost every new federal program creates winners and losers. Single payer will also have losers, including:

    -persons in the insurance industry who lose their jobs

    – persons in medical billing firms who lose their jobs

    -providers who get less income when a Medicare-like fee schedule is installed

    – small business owners who do not offer health insurance (assuming we use a payroll tax to fund at least part of single payer)

    – high income families, (assuming an income tax is also used)

    That comes to millions of potential losers. This is not going to be easy.

    Remember all the trouble that Obama got into with his statement that the ACA would save the average family $2500 in premiums.

    I have read that he got that number from Jon Gruber, who took the total projected savings of the ACA over ten years and then just divided that by the total number of American families….and even then the $2500 was just Washington-talk about saving $2500 versus what would have happened without the ACA.

  47. There is such confusion about this…while it may be true that Medicare advantage plans pay out less, they only took off when the govt. started paying more per enrollee than traditional Medicare. I do love the free markets, but not at all clear the current Medicare advantage model Is it..

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