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Feeling the Bern on Universal Single-Player Healthcare

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“Elephant in the living room” is an English metaphorical idiom for an obvious untruth going unaddressed. In most political platforms about healthcare and its coverage, there is a most resolutely immovable elephant in our living room. It is there with every single candidate.  But with Bernie….

You’ve just got to love Bernie Sanders.  It makes me feel like I’m 22 years old in the 1960’s and dumb as all get out about how you pay for things. But let us consider Mr. Sanders’ healthcare proposal. From his own website:

“Bernie’s plan would create a federally administered single-payer health care program.  Universal single-payer health care means comprehensive coverage for all Americans.  Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments. Patients will be able to choose a health care provider without worrying about whether that provider is in-network and will be able to get the care they need without having to read any fine print or trying to figure out how they can afford the out-of-pocket costs…[etc.].”

Bernie sure didn’t go half way on this one. All care, whenever, wherever, however. A fundamental right with no filter. OK. So he jumped in with both feet. You’ve got to admire his elan.  But what might this mean and how can he ignore what happened in his own home state?

Yes, I agree that access to quality healthcare is a fundamental human right for every man, woman and child legally in this country, and for America not to be responsibly working toward that is seriously problematic. But we have to do this with our eyes open. We don’t usually celebrate December holidays by giving the children unlimited access to Toys R Us.

Let us consider for the moment what happened in Vermont, Senator Sanders’ home state, when they attempted to implement their universal health care system called Green Mountain Care. To put it mildly, Senator Sanders was supportive of this venture. But this is not the sort of venture where you retain liberal economists to do the financial projections.  Bottom line: It never left the ground.

As the Boston Globe reported in early 2015 (plenty of time for Bernie to reconsider):

“The numbers were stunning. To implement single-payer, the analysis showed, it would cost $4.3 billion in 2017, with Vermont taxpayers picking up $2.6 billion and the federal government covering the rest. To put the figures into perspective, Vermont’s entire fiscal 2015 budget, including both state and federal funds, is about $4.9 billion.”

The Globe went on to report that the Governor’s office estimated needed tax increases on income and payroll that more than doubled existing taxes. The Governor, who ran on this issue, pulled the plug, and the predictable howls followed.

I mentioned liberal economists. Even they stead fastedly ignore the elephant in the living room. By way of example, and this is by no means atypical:

Dr. Gerald Friedman, an economics professor at UMass-Amherst and a part-time Vermonter, has worked with [Bernie Sanders] to develop and calculate the cost of his plan and says the budget wasn’t the problem for the Vermont proposal. The governor was the problem.  “On the economics, it would have been cheaper, but the governor just lost the political will,” Friedman said.

Huh?  This was not “political headwinds.”  It was economic reality.

Or as put so indelicately:

“According to critics, from the New York Times’ Paul Krugman to USA Today’s editorial board, Sanders’s single-payer plan is something between a well-intentioned fool’s errand and a political pipe dream, an unrealistic idea that has been proven not to work in the senator’s own backyard.”

And to a less spectacular extent this is also being played out in Massachusetts with Romneycare, and federally with Obamacare (don’t you love these titles?). The programs are being overwhelmed with costs, and the savings are almost nonexistent. These programs were implemented with almost complete disregard for their costs. For Obamacare, I’d refer you to Stephen Brill’s, “America’s Bitter Pill.”

So what is really going on here?  As I’ve said before when commenting on Mr. Trump’s healthcare proposal, it’s always about the claims expense. You cannot (I repeat cannot) ignore the claims expense, which as a component of overall healthcare costs, particularly when you include Medicare, approaches 90% of the total bill. And under Mr. Sanders’ plan, there is a “right” to unfettered access for all such costs without any filter of any kind.  No bean counter HMO getting between the and her doctor or pharmacist.

IF under today’s environment where there are at least some (albeit inadequate) attempts to control the rate of use of services, the total claims expense nationwide were $3 Trillion, what might it be under Berniecare?

Senator Sanders, like so many other pols and even seemingly intelligent commentators, always point to the administrative costs and profits of insurers as the whipping boy of why American healthcare costs are so high. While significant, they are a relatively small part of the bill.  Perhaps 15%. Mr. Sanders and others try to prove commercial insurer bloat by comparing their admin costs of say 12% with Medicare’s admin costs of somewhere, allegedly, under 2%. That is unfair for so many reasons that we haven’t time to list them all.  But consider, if an insurer had the economies of scale Medicare has; did as little as Medicare does on all the things regulators require the commercial insurers to do (quality of care, utilization review, managed care, wellness, population health, fraud and abuse, etc.);and only insured the elderly who have much higher claims expense,they too might approach such a low administrative charge. And insurers (unlike the government) need reserves.  I think you get my point here. Oh, and the oft-touted Medicare admin expense figure of 1.4% is just flat wrong.  See, e.g., Forbes, “The Myth of Medicare’s ‘Low Administrative Costs’.”

Could a universal healthcare system reduce administrative costs?  Sure, but at what price so to speak? The result would be virtually no controls over the rate of use of services, which (to repeat) remains the specific ill-tempered elephant in the living room.

It’s an inconvenient reality, but claims expense consists of two major elements:  price and use. Price is the fees we pay ($100/office visit) and use is the rate of use of services per person (office visits of say 3.6 per year per person). The fees we pay providers here in America far exceed those of other countries. And the fees Medicare pays providers are far less than the fees paid by commercial insurers. Commercial insurer fees are in some instances the difference between solvency and bankruptcy for physician groups and hospitals. I’m assuming we won’t move suddenly nationwide to paying doctors and hospitals something at or below the Medicare fee schedule. Imagine! But in any event, it’s not the fees that break the bank. It’s the use.

When it comes to use, Americans are (to be blunt) bellying up to the bar for the free lunch.And we are encouraged (seduced?) to do so by doctors and hospitals and big pharma and mid-afternoon ads on TV. We use services at a rate heretofore unknown to the human race. And even if the citizens of other countries were inclined to use medical services at the rate we use them, they couldn’t. Call it rationing (the “R” word) or simply delays in scheduling, but it wouldn’t happen.

And we believe we have a fundamental human right to continue this pattern. Fee increases over the last 15 years have been significantly less than 5% per year. Use increases have been double digit, on average. And our unhealthy lifestyles and failure to access the delivery system appropriately will ensure that this will continue unabated, unless something is done. I assure you, that “something” will not be Berniecare.

To lay it out plainly: We cannot with any fiscal responsibility implement universal healthcare and coverage without serious planning that addresses the nature and rate of use by Americans of medical services. The root causes are many, and if it were an easy thing to correct, we would have done it by now. Much of the problem is cultural, something very different from most other countries. And of course, what we pay for pharmaceutical drugs is truly obscene, but that is for another day and another blog.

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37 replies »

  1. I think that one time in the future we are going to move to a universal healthcare. Its only a matter of time….

  2. I usually agree with most of what Jim writes in this space, but I think we do owe Bernie some credit for raising “universal health coverage” as something toward which our society must work. If you accept health care as a human right, then the conversation turns to how best to pay for a necessity that too few people can afford. The answers are complex, but it is clearly a case for social insurance, perhaps like Medicare. Payment reform away from fee for service will re-structure the delivery system over time and address the utilization issues which Jim notes, and I believe overstates somewhat. Japan among some other industrialized nations have utilization patterns greater than those in the US. This is a good discussion that we might not be having without Bernie’s “elephant”. We simply can’t ignore or deny that the richest nation on earth somehow can’t afford something most other advanced countries already have.

  3. “I have been reading about Single Payer ever since Drs. Himmelstein and Woolhandler wrote about it in 1989. Let me share a few observations to move along our discussion.

    Dr Robert Evans of Canada defined single payer as a system where health care is paid for through taxes, not user fees and insurance premiums.

    America is never going to go that far, but here are some features of Single Payer that would be valuable:

    a. A national fee schedule for hospitals. The outrage of chargemaster bills would disabpper.

    b. Strict limits on balance billing — Medicare has had these for years.

    c. The patient is not liable if a claim is denied — again, Medicare has this.

    d. Complete portabilty and national standards for eligibility.

    Give me these things, and I can wait for full nationalzation

  4. I can’t help it, Peter, if you have difficulty with the English language. Universal means everyone and Medicare is universal for everyone over 65. If you wish to split hairs then tell me if Bernievision covers illegal immigrants. If it doesn’t then perhaps Bernievision is not universal.

    Medicare Advantage is paid for by the same singular source, Medicare, and historically it didn’t exist throughout Medicare’s history which demonstrated that despite significant cuts in prices, prices still skyrocketed.

    Peter, you better take some Valium because you need to calm down. You are out of control.

  5. Why don’t you just say Bernie’s single payer plan instead of single payer. We all know Bernie is economically illiterate so we can accept his definitions as defined by him and put them in the waste bin where they belong. After a night of intense fanciful dreaming when I awake I generally say I had a Bernie.

  6. Indeed it is Peter. There is “single payer” and then there is “generous single payer” and then there is “really generous single payer.” But they’re all single payers.

  7. The devil is in the details. I doubt many of Bernie’s supporters would support Medicaid.

  8. Yes, I think that is the reality. The modest ACA is still under attack, yet Republicans don’t say what would replace it – more prayer I guess. That certainly would be Ted Cruz’s solution.

  9. Bernie is a great person, but even if he gets elected there is not chance he is able to do something in the healthcare system. The republican senate & house wont let it. He couldn’t do it in Vermont, so on a national scale?

  10. I guess you also need, Bernie’s Plan from his web site:

    “Bernie’s plan would create a federally administered single-payer health care program. Universal single-payer health care means comprehensive coverage for all Americans. Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments. Patients will be able to choose a health care provider without worrying about whether that provider is in-network and will be able to get the care they need without having to read any fine print or trying to figure out how they can afford the out-of-pocket costs.”

  11. “However, even using your contrived definition Medicare would be considered single payer since the national healthcare system for those over 65 is universal and paid for by one entity.”

    Allan, you are splitting hairs to circumvent the discussion. UNIVERSAL, in Bernie’s proposal, which is what we are talking about, is universal for the country, not just over 65’s, which by the way also includes Medicare Advantage which is private. By your convoluted definition we are a nation of several single-pay programs.

    If you want to discuss the topic then stay on topic, or start a new discussion based on your vision (not Bernie’s) of single-pay universal.

  12. Peter questions my definition of single payer:

    “Is Blue Cross/Blue Shield then single-pay?”

    If they are the one’s that pay for everyone then they are a single payer entity. If Wellstone is another payer then neither of them could be considered single payer. Medicare acts as the central payer for almost all medical transactions so it is single payer.

    “Single-pay is the short form reference for how a country organizes it NATIONAL health care system to be universal.”

    That is your peculiar definition and you are welcome to it, but don’t expect others to adhere with definitions created based upon ideology. However, even using your contrived definition Medicare would be considered single payer since the national healthcare system for those over 65 is universal and paid for by one entity.

    I don’t know if under your definition Canada would be true single pay even though you say it is. The payments are not national as each individual province pays for their own province and there are rules that differ between the provinces. However, if we accept multiple provincial payers to be considered single payer then Canada is probably closest to that idea.

    Try not to paraphrase what I say because you seem to get it wrong. I provided you with a general economic principle that we have to work with. We don’t make up economic principles like you make up definitions to suit your needs. While RogueRad laughingly brought up Bill Clinton’s line, I prefer to stay clear of such discussions.

  13. Rogue, for discussion here, and what Bernie Sanders is proposing, hence the title: “Universal Single-Player”, and “Universal single-payer health care means comprehensive coverage for all Americans.” my definition is accurate.

    What would be your definition?

  14. Lol. This reminds me of the classic line from Bill Clinton “it depends on what the definition of “is” is.”

    The right definition of single payer for Peter is one which achieves what he thinks it should achieve.

  15. “I think most of us can agree that a single payer is one that collects the funds to be spent and distributes them.”

    Is Blue Cross/Blue Shield then single-pay?

    Single-pay is the short form reference for how a country organizes it NATIONAL health care system to be universal. There are different methods but the key is it’s a national system with the government the key player in control. Canada is a truer single-pay with the government being the only collector and distributor of funds, Germany works a bit different with 85% of residents under social health insurance.

    “We have seen quantities of inpatient care reduced many times over the decades while costs skyrocketed.”

    So your solution is to raise prices even higher to reduce spending? You advocate that patients should shoulder even more of the cost burden to lower utilization and reduce overall expenditures, no matter the affordability?

  16. Peter, without a lot of handwringing I think most of us can agree that a single payer is one that collects the funds to be spent and distributes them. Medicare both collects and distributes so it can rightfully be called single payer. If you have a definition you would like to put forth go ahead and do so while telling us what countries fit your definition.

    If you read just the first six lines of the article you referenced you will note that it points to reductions in inpatient and “certain outpatient” where the operative word is “certain” meaning only some. The sixth line says that *they* believe such reductions will continue. “They believe” is opinion not fact.

    We have seen quantities of inpatient care reduced many times over the decades while costs skyrocketed. That is proof. Consider the following. What happens to that colonoscopy that used to be done only in the hospital? What happened to the work ups that used to be done in the hospital? What happened to all those joint procedures that used to be done in the hospital. They are now being done outside the hospital in much greater quantities (utilization).

  17. James, I don’t think we have any significant disagreements. My response above was directed towards Peter not you. I agree that use far outstrips price at least in the last decade and probably a lot longer. That is super important when thinking about overall costs and the sustainability of any program.

    We have seen that proven in the single payer program Medicare where almost all physicians are in the program and prices are fixed by Medicare. Even the utilization is fixed by Medicare based upon Medicare’s own rules where doctors and other providers are severely punished if those rules are not followed. I think some commenters lack an understanding of Medicare that might provide them the insight needed to better understand the existent realities.

    Medicare has been forcefully ratcheting down prices for decades. The costs continue to rise. Why? Utilization. Economic reality tells us that everything else being equal in general if the price of a good or service falls more of it will be used. That is not me saying that, rather that is what the economics textbooks tell us. We have seen that rule followed in Medicare especially in blood and x-ray testing.

    You are also correct about our unique financing system of third party payer. It is a terrible way to do business. The patient should be in charge of his own body and have skin in the game to lessen utilization. Having the insurer such as an HMO force utilization by denying care means that they can just as easily deny necessary care as has been seen over the years documented in the many court cases filed.

    I don’t think we disagree on any of these things and I mention them to clear up any problem created by my placement of my first reply.

  18. James — That’s not how I read the Boston Globe article.

    You might look at the Michael Costa numbers prepared for Governor Shumlin. Or simply apply a common sense approach to figuring rough current costs for private insurance and Medicaid, the two big expenditures that Green Mountain would have replaced — approximately $3 billion for insurance and out-of-pocket costs, and $1.5 billion for Medicaid.

    You’ll find more details in reports from Governor Shumlin’s office — and more credible detail than in a newspaper article.

  19. You make a valid point. David Goldhill’s book, Catastrophic Care (or how American healthcare killed my father) has as his premise that it’s the involvement of insurance that creates the problem. We typically insure only against major losses. Health insurance covers almost everything. Had we started differently in the 40’s, we might have designed it much better. The question is how much dislocation can we stand while trying to “fix” the beast.

  20. Leo: I listed three after what you quoted. That should be sufficient, but to repeat: Medicare’s scale is enormous. A $10M expenditure by Medicare would mean maybe 20 cents per member; for say a small insurer with 1M members, it would be $10. Second, Medicare does virtually nothing; third, Medicare covers elderly, so the ratio of claims to expense is very different. There are other things as well. Check AHIP and others.

  21. Roger, I had a little trouble following you. I was basing my comment on numbers in the Globe article about what the Governor had announced. It was $4+Billion MORE.

  22. Allan: As I said, there are two elements of claims expense, price and use. I suppose if we REALLY want to control costs, we need to control both price and use. I get that. My point, however, was that the rate of increase of use far outstrips price over the last decade. It’s easier to control price, particularly if you are a single payer. You just mandate it. But when you do that, use skyrockets. We are saddled with a unique financing system where the payer is usually not the buyer. In that regard, I think we agree (I think).

  23. Okay, boys. Let’s let the discussion move on here and move this to another thread. There are a lot of other people who will weigh in on this one. We’ll arrange a dueling opportunity for you shortly.

  24. Well Allan, there you go again – around in circles. Saying lower prices will increase usage but then saying patients should be the ones dictating usage. Usage should be a medical necessity.

    If we were all in Medicare then that would have a real impact on prices with the ability to have them go lower. Medicare prices are driven by private provider prices and by what private insurers pay. Utilization under Medicare is partly because they are legally required to pay within 30 days and because Medicare has to operate legislatively with one hand tied behind its back. Providers are not required to be in Medicare.

    Think giving Medicare the ability to negotiate drug prices will lower those costs? Are you in favor of that, or do you think we’ll just consume more drugs?

  25. I look at Bernie and I see a lot of hand waving.

    http://rationalwiki.org/wiki/Handwave

    “It will work because everybody knows its the right thing to do” is not evidence.

    If you’re going to run for president and propose a serious thing like figuring out a workaround to nationalizing the healthcare system, you need to put out more than this.

  26. You ought to stop being rude especially when your grasp of a subject is limited.

    Firstly we shouldn’t be controlled by insurers. We should be controlled by patients. Putting that aside we have had total price control under Medicare where Medicare had total control over the prices they paid. They cut and cut, only to find that utilization increased causing increased costs.

  27. Allan, at the risk of getting sucked into another of your circular arguments, you again fail to understand that health care is not like the rest of the economy and that it’s purchase is usually not made by the user but someone else, and that using it is not like buying a TV or car. That someone else should be the gatekeeper of medically necessary utilization, which I hate to say are PROVIDERS. Medicare to some extent determines what is medically necessary and will deny payment. As well, did you not read my link which compared world systems usage?

    Establish global budgets and utilization will be controlled. Seems to be working in other countries.

  28. “The real “elephant in the room”, which you fail to understand, is PRICE CONTROLS which is necessary for SP or even the sustainability of the existing system.”

    In the realm of this discussion there are basically two things that have to be managed; prices and utilization.

    It does very little good to control prices and find that utilization has soared. Low prices themselves mean higher utilization in that more of something will be purchased at a lower price and less will be purchased at a higher price.

    Thus lowering a $100 bill to $80 does little good if utilization doubles leaving us with a $160 bill.

  29. You’re saying that SP is a flawed model and unaffordable yet say, “I agree that access to quality healthcare is a fundamental human right for every man, woman and child legally in this country”, while not explaining how the present system makes health care affordable, OR sustainable.

    The real “elephant in the room”, which you fail to understand, is PRICE CONTROLS which is necessary for SP or even the sustainability of the existing system. Our present strategy is to ignore this reality and use cost shifting by extracting higher co-pays and deductibles from patients as well as subsidies from government and employers.

    Vermont failed because it could not institute price controls on its own and still keep providers in the state. Price controls is how every other system in the world is able to do health care for about half what the U.S. does and make health care a fundamental human right. The only players in the U.S. who now have a “fundamental right” are providers and drug companies and the prices they charge.

    SP is not adding costs to the present system, SP replaces the present system by paying for it through taxes. But unless price controls are in place, affordability and sustainability will never be achieved.

    Those opposed to SP are comfortable and secure in their health care access and affordability – which usually involves a subsidy, and want others to be denied access and affordability to control THEIR costs.

    You talk about the “rate of use” being the monster in this system, yet don’t explain how other countries use health care at about the same rate or more yet spend less overall.

    http://www.commonwealthfund.org/publications/issue-briefs/2015/oct/us-health-care-from-a-global-perspective

    We are addicted to drugs, expensive technology and high prices while not getting any cost savings or better health.

    Once health care is viewed as a cost not a revenue stream will we begin to tackle sustainability and affordability – that’s the real cultural problem to solve.

  30. Jim Purcell, in trying to show how dumb Bernie Sanders’ proposal is, makes a fundamental error. In presenting the total estimated cost he seems to assume that this is additive — that the potential tax cost (for Vermont or for all of the US) is additional to current taxes, insurance premiums, and out-of-pocket expenditures. In fact the Bernie taxes would replace all these. There would — all other things being equal — be little or no increase in total healthcare expenditures.

    Fixing Jim Purcell’s misrepresentation of the Bernie plan doesn’t make single payer a good idea, however. As I’ve posted previously on THCB, two respected studies of Medicare show that our one current government single payer program (traditional Medicare) is on average more expensive than the competing insurer model (Medicare Advantage).

    That’s not all. If being hopelessly unrealistic is being dumb, Bernie’s plan of eliminating the health insurance industry is very dumb indeed. Insurers aren’t saints (LOL), but the US Congress is not about to destroy a major industry — and the livelihoods of its hundreds of thousands of workers.

    More realistically, if we want to make the health insurance system more fair, more rational, and less costly, we should be looking at http://www.rational-healthcare.com, which takes existing taxes and subsidies and redistributes them more equitably to fully fund a universal healthcare program. It’s not that hard!

  31. Bernie is last on sen roster 4 getting things done. If he couldn’t get S payer in VT, US is next?

    via TweetBot

  32. “Mr. Sanders and others try to prove commercial insurer bloat by comparing their admin costs of say 12% with Medicare’s admin costs of somewhere, allegedly, under 2%. That is unfair for so many reasons that we haven’t time to list them all. ”

    But you should list them all. Or someone should. Medicare creates enormous expense by outsourcing administrative duties. “Medicare requires us to (insert task)” generates lots of overhead for providers and drives the cost of care up. These costs, including the ocean of pet projects that CMS creates, is left off the books.

    The prices vs. utilization issue would be easy to settle: Equalize prices between the US and some single payer program and see how much is left. That difference is either over utilization or denial of care, however you would like to see it.

  33. A few points:

    * Vermont was not able to put together a single payer program. Electing to abandon a flawed multi-payer system should not be considered a failure of the single payer model.

    * Romneycare and Obamacare are defective models partly because they do not control costs. They cannot be used to discredit single payer.

    * “Unfettered access” is not a characteristic of single payer. Central planning, capacity adjustments, and queue management are used to improve resource allocation without creating excess (unfettered) capacity.

    * Mentioning only the administrative excesses of private insurers glosses over the other profound administrative excesses that would be dramatically reduced by single payer, especially the administrative burden placed on the delivery system.

    * The redo of the 1.4% Medicare administrative costs is specious. In fact, that number does include other government agency costs such as tax collection, fraud control, etc.

    * Prices are high – look at pharmaceuticals – and can be controlled under single payer, but overuse is not our problem. See Anderson and Reinhardt, “It’s the Prices, Stupid.”

    * Other nations have proven that single payer and other similar social insurance systems are effective in controlling costs while providing access to everyone. It’s not a fool’s errand.

    In looking for the elephant in the living room, it looks like Purcell is missing the gorilla in the basketball game.

  34. The post ignores the underlying insanity that governs our health care economy — the dislocation between Medicaid and Medicare providers. Chronically ill costly Medicaid patients are enrolled in programs that have no financial stake in whether they go to the hospital or have other costly services, since they aren’t exposed to the risk of those costs. Yet we take this separation for granted. Until there’s a program that places all costs and risks for a patient under a single umbrella, this misalignment between costs and service provision will continue to lead to tens of billions of dollars of unnecessary expenditures on avoidable hospital and ER use, and far poorer outcomes for the costliest and underserved populations, and one that contributes substantially to excess, avoidable use.

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