Rep Jayapal and Sen Sanders Have Introduced Medicare For All Bills: One Is a Lot Better Than the Other

Lambert here: I’ve previously posted about HR676 (Conyers) vs. S1804 (Sanders) on provider payments and phase-in, and about HR676 vs. S1804 on incentivizing institutional providers with profit (don’t). Now Kip Sullivan, a grizzled and authoritative veteran of the single payer battles from 2009-2010 and well before, looks at cost containment in HR1384 (Jayapal) and S1129 (the new Sanders bill). Sullivan’s bottom line:

I fear the public will give us only one more bite at the apple during my lifetime. If we screw it up again with legislation with no cost containment in it, the division over how to solve the US health care crisis may remain unresolvable for decades.

This is an important post.

By Kip Sullivan, a member of the Health Care for All Minnesota Advisory Board and of the Minnesota chapter of Physicians for a National Health Program. Originally published at The Deductible.

Two bills that are called “Medicare for all” bills by their supporters have just been introduced in Congress. On February 27, Representative Pramila Jayapal introduced the Medicare For All Act of 2019, HR 1384 , in the House of Representatives. On April 10, Senator Bernie Sanders introduced a bill bearing the same name in the Senate, S 1129. The cost-containment section in Representative Jayapal’s bill will cut health care costs substantially without slashing the incomes of doctors and hospitals. Senator Sanders’ bill cannot do that. 

In this article, I explain the differences in the cost containment sections of the two bills and call upon Senator Sanders to correct two defects in his bill that minimize its ability to reduce costs. Defect number one: S 1129 authorizes a new form of insurance company called the “accountable care organization” (ACO). Defect number two: S 1129 fails to authorize budgets for hospitals. Representative Jayapal’s bill, on the other hand, explicitly repeals the federal law authorizing ACOs, and it authorizes budgets for individual hospitals. 

I write this essay as both a long-time organizer, writer and speaker for a single-payer (the older name for “Medicare for all” system) and a strong supporter of Senator Sanders. Bernie’s enthusiastic support for a “single payer” solution to the American health care crisis has added millions of new supporters to the single-payer movement. But precisely because he is now the most recognizable face of the single-payer movement, it is extremely important that all of us, whether we’re already in the single-payer movement or we just long for a sane and humane health care system, encourage Bernie to fix the defects in his bill. 

To explain the two defects in S 1129, I must first explain why a single-payer bill like Representative Jayapal’s will be effective at cutting the high cost of American health care. I begin by explaining the origin and meaning of the “single payer” label. I will then describe the two defects in S 1129 in more detail.

The Origin of “Single Payer”

The “single payer” label entered the lexicon in 1989 to describe a universal coverage proposal published in the January 1989 edition of the New England Journal of Medicine  by Physicians for a National Health Program (PNHP). The “single payer” label was invented within months after the article’s publication to characterize the distinguishing feature of PNHP’s proposal: One government agency would reimburse doctors and hospitals directly; in other words, the payments would not flow first to insurance companies so they could take 15 to 20 percent off the top before passing on the rest to doctors and hospitals. In addition to the one-payer feature, the PNHP proposal contained three other essential features – the use of budgets for hospitals (annual lump sum payments akin to budgets for fire departments), the establishment of a uniform fee schedule for doctors, and limits on drug prices.

The advantage that PNHP’s proposed single-payer system has over other cost containment proposals is that it reduces costs primarily by reducing price of medical services (as opposed to the quantity of medical services Americans receive), and it reduces prices mainly by reducing excessive administrative costs that drive prices up. Administrative costs currently eat up about one-third of total US health care spending. Research has demonstrated that three of the four features of the PNHP proposal – one payer, budgets for hospitals, and uniform fee schedules for doctors – could reduce the share of total spending devoted to administration from over 30 percent to 15 to 20 percent. Drug price controls could reduce total spending by another 3 to 5 percent, for a total savings of somewhere between 15 to 20 percent. Fifteen to 20 percent of today’s US health care bill, which is $3.5 trillion, is an enormous sum – approximately $500 to $700 billion saved every year. Note that this does not include additional savings that might flow from reduced fraud (it’s easier to detect fraud with one payer), reductions in the compensation paid to some specialists, and more equitable distribution of hospitals and equipment. [1]

Within a few years after the publication of PNHP’s 1989 proposal, the “single payer” label had been widely adopted by health policy researchers around the world to distinguish systems like Canada’s, in which tax dollars flow directly from provincial governments to doctors and hospitals, from systems like Germany’s in which tax dollars and compulsory premium payments flow first through insurance companies. 

By 1990 the modern American single-payer movement had begun to form. The first single-payer legislation was introduced in the Ohio legislature in 1990, in the US House of Representatives in 1991, and in the US Senate in 1992. Those bills all contained the four basic elements of a single-payer system as PNHP proposed it: One payer (a government agency) replaces multiple insurers (insurance companies and self-insured-employer plans), and the one payer negotiates annual budgets with hospitals, uniform fee schedules with doctors, and price ceilings with drug companies. Insurance companies could sell insurance for services not covered by the legislation, but not for services that were covered. [2] 

Throughout the 1990s and early 2000s, the traditional fee-for-service (FFS) American Medicare program (to be distinguished from the Medicare Advantage program in which hundreds of insurance companies participate) was often cited as an example of a single-payer system even though it did not fit the ideal described by PNHP and other experts. The most obvious similarities: traditional FFS Medicare was the sole payer of providers (doctors and hospitals) who treated Medicare beneficiaries; and it paid providers directly – the payments did not pass first through insurance companies. Thus, strictly speaking, the FFS Medicare program qualified as a single-payer program. However, unlike the ideal single-payer system, traditional Medicare has never had the authority to negotiate annual budgets for each of America’s 5,500 hospitals, nor to negotiate limits on drug prices. And, of course, it doesn’t cover all Americans.

Because the traditional Medicare program was a single-payer program, although less than an ideal one, and because the public is familiar with Medicare, single-payer proponents often substituted “Medicare for all” for “single payer.” For example, recent iterations of HR 676 , a single-payer bill modeled on PNHP’s proposal that was introduced in the US House of Representatives between 2003 and 2018, have been entitled “Expanded and Improved Medicare for All Act.” Polling data indicate that explaining single-payer by comparing it to Medicare raises public support for (and perhaps understanding of) the concept. A 2007 AP-Yahoo poll illustrated the difference between public support for universal coverage under a “single payer” versus a program “like Medicare.” When asked whether “[t]he United States should continue the current health insurance system … or should adopt a universal health insurance program in which everyone is covered under a program like Medicare that is run by the government and financed by taxpayers,” 65 percent chose “a program like Medicare.” However, when asked if they considered themselves a single-payer supporter, only 54 percent said they did. 

Adulteration of “Single Payer” and “Medicare for All” 

Like all bumper-sticker labels designed to describe complex proposals, the phrases “single payer” and “Medicare for all” cannot by themselves convey all the elements of a complete single-payer system. The terms are therefore easily muddled by those who want to hitch significantly different proposals to the single-payer bandwagon, and by those who oppose single-payer systems.

With the rise of single-payer’s popularity in the last three years, much confusion has been visited on that term as well as “Medicare for all.” The confusion arises from two sources: “Medicare for some” advocates – people who want to expand Medicare to some but not all Americans; and universal coverage advocates who bestow the “single payer” label on bills that are missing two of the essential features of a single-payer system – one payer and budgets for hospitals. In this essay, I’m focusing on the latter problem – the introduction of bills that are labeled “single payer” or “Medicare for all” by their authors and supporters, but which are missing the one-payer feature and hospital budgets. The most prominent of these bills is S 1129, the bill Senator Sanders introduced on April 10, and its predecessor, S 1804 , which he introduced in September 2017.

S 1129 contains the clause that every true single-payer bill contains – a clause stating that on a certain date after the bill becomes law insurance companies may not sell policies that duplicate the coverage of the Medicare For All program. If you read nothing else in the bill, that clause would lead you to think S 1129 was a classic single-payer bill – a bill that replaces today’s insurance industry (about 1,000 insurance companies) with one government payer, in this case, the federal Department of Health and Human Services (HHS). But elsewhere in the bill we come upon a section that indicates insurance companies will be replaced by a hybrid of existing insurance companies plus hospital-clinic chains, a hybrid called “ACOs.” [3] There are more than 1,000 ACOs in business today. 

Defect 1: ACOs Cannot Control Costs

Replacing 1,000 insurance companies with 1,000, or more likely several thousand, ACOs cannot reduce administrative costs substantially or at all. [4] Under such a system, ACOs would generate almost the same overhead costs insurance companies generate now (15 to 20 percent of premium payments), and hospitals and clinics would incur roughly the same administrative costs billing multiple payers (i.e, the 1,000-plus ACOs).

Congress included in the Affordable Care Act of 2010 (aka Obamacare) a section (Section 3022) requiring CMS to establish an ACO program within the traditional FFS Medicare program. It is not clear why Congress did that. Congress was warned in 2008 by the Congressional Budget Office (CBO) that ACOs would not save money for Medicare. The simplest way to describe ACOs is to say they are HMOs in training. Like HMOs, they are corporations that own or contract with chains of hospitals and clinics; they have the equivalent of enrollees; they attempt to keep their “enrollees” from seeking care outside their networks; they bear insurance risk (that is, they are paid on a per-enrollee basis and in exchange are obligated to provide medically necessary services to their enrollees); and because they are risk-bearing organizations, they generate overhead costs similar to those created by traditional insurance companies. 

In fact, precisely because ACOs resemble insurance companies, nearly half of them already have contracts with insurance companies to help them carry out insurance-related tasks. The largest insurance companies – Aetna   Humana , and United Healthcare , for example – are already deeply embedded in the ACO industry. 

The only significant differences between ACOs and HMOs are (1) ACO “enrollees” are assigned to ACOs (usually without their knowledge) whereas HMO enrollees choose to enroll, and (2) HMOs bear all insurance risk while ACOs split the risk of loss or savings with another insurer (in Medicare’s case, risk is shared with the Medicare program). [5] Both of these differences are being eroded. Many ACOs are saying they should be allowed to enroll people so they can restrict enrollee use of out-of-ACO providers, and some influential ACO proponents are proposing that ACOs be paid premiums so they can absorb total losses and keep total profits.

One other important similarity between ACOs and HMOs: ACOs have failed to cut Medicare’s costs, just as the CBO predicted. [6]

Defect 2: Absence of Hospital Budgets

I mentioned above that an American single-payer system could reduce total spending by 10 to 15 percent just by eliminating excess administrative costs. A large portion of that savings would come in the form of reduced administrative costs for hospitals (the rest comes from reduced administrative costs in the insurer and physician sectors). Hospitals enjoy lower overhead costs in single-payer systems for two reasons. First, they are paid with annual budgets, not on a per-patient or per-procedure basis, which means they don’t have to keep track of very pill and x-ray for every patient. Second, for the covered services, they deal with only one payer, not hundreds, each with their own hoops to jump through.

Unlike Representative Jayapal’s bill, Senator Sanders’ bill does not authorize hospital budgets. There is a reason for that: It is not possible to set premiums for 1,000 or 2,000 ACOs, which consist of hospital-clinic chains with an insurance company or department plopped on top of it, and at the same time set budgets for each of the nation’s 5,500 hospitals. One has to choose one or the other: Premium payments for ACOs, or budgets for hospitals. Sanders chose ACOs. Jayapal chose hospital budgets.

But by sacrificing hospital budgets in order to make room for ACOs, Sanders guaranteed his bill cannot reduce hospital administrative costs much or at all. Research indicates US hospitals spend 25 percent of their revenues on administration, thanks to the complexity of our multiple-payer system, while hospitals in single-payer systems that use hospital budgets devote half as much to administrative costs.

We must take into account as well the additional administrative costs for doctors in Sanders’ proposed multiple-ACO system. Like hospitals, they will have to determine, for each patient, which ACO a patient belongs to and send the bill to the right one.

Cost Containment Must Accompany or Precede Universal Coverage

If you happen to believe that some fine day America will find the political will to insure everyone at the high price at which health care is sold today, then you should ignore what I have said here. You should feel free to endorse any legislation that proposes to raise taxes high enough, or levy compulsory premium payments high enough, to achieve universal coverage. No need to worry about whether a bill that purports to achieve universal coverage can reduce costs. No need to ask yourself why US per capita health care costs are double those of the rest of the industrialized world. The answer is: Primarily because of our high prices, and the excessive administrative costs generated by our multiple-payer system that drive prices up, and not “overuse” of medical services. 

But if you think, as I do, that cost containment must accompany or precede universal coverage, then you must support legislation that includes evidence-based, cost containment provisions, such as Representative Jayapal’s bill. I do not believe our nation will find the political will to pay for universal coverage at today’s prices. Moreover, even if the political will were there, I don’t believe it is ethical to pay more to solve any social problem than we have to. Our society has numerous other demands on our resources, ranging from hunger to crumbling infrastructure to climate change. Paying more than necessary to insure all Americans means we will have fewer resources left with which to address other problems.

Representative Jayapal’s bill, HR 1384, meets the definition of a single-payer bill as originally outlined in PNHP’s 1989 article and as most experts define the term. It contains the four elements of a single-payer system: It relies on one payer (HHS, not multiple payers called ACOs) to pay hospitals and doctors directly; and it authorizes budgets for hospitals, fee schedules for doctors, and price ceilings on prescription drugs.

Senator Sanders’ bill contains two of those four elements – fee schedules for doctors and limits on drug prices. That’s a good start. He should add the other two. He should get rid of Section 611(b), the section that authorizes ACOs, and thereby ensure HHS is the single payer. And he should add a section authorizing HHS to negotiate budgets with each of the nation’s hospitals.

NOTES

[1] Administrative costs in the US are generated both by the insurance sector (insurance companies, self-insured employers, and public programs like Medicare) and the provider sector (clinics, hospitals, nursing homes, etc.). Research indicating that the administrative costs generated by the insurer sector would fall under a single-payer system tends to focus on comparisons between the traditional fee-for-service Medicare program (which devotes 2 percent of its expenditures to overhead) and the private sector (insurance company overhead is on the order of 15 to 20 percent while the overhead of self-insured employers is 8 to 10 percent), as well as comparisons of the US with other countries. Research indicating that a single-payer system could cut administrative costs of providers tends to focus on comparisons of US clinics and hospitals with those of other countries, particularly Canada. Administrative costs are about 40 percent lower in Canadian hospitals and clinics than they are in the US. 

[2] The former HR 676, Representative Jayapal’s new bill (HR 1384), and other single-payer legislation divides the medical sector into “institutional providers” and “individual providers,” and authorizes budgets for the former and uniform fee schedules for the latter. “Institutional providers” typically refers to hospitals and nursing homes.

[3] The section in Sanders’ bill that authorizes ACOs is Section 611(b). That section authorizes the Secretary of HHS to impose upon the non-elderly ACOs and other “payment reform” programs currently applied to the traditional FFS Medicare program. Section 611(b) reads: “Any payment reform activities or demonstrations planned or implemented with respect to such title XVIII [this is the title in the Social Security Act that created Medicare] as of the date of the enactment of this Act shall apply to benefits under this Act, including any reform activities or demonstrations planned or implemented under the provisions of, or amendments made by, the Medicare Access and CHIP Reauthorization Act of 2015 … and the Patient Protection and Affordable Care Act….” For a quick review of Medicare’s ACO programs and six other “payment reform activities” Section 611(b) would impose on the entire country, see a memo I wrote available here http://www.healthcareforallmn.org/wp-content/uploads/2018/08/op-critique-of-Section-611b-S-1804.pdf . Some of these programs are putting patients at risk https://www.nytimes.com/2019/01/18/health/medicare-hospitals-readmissions.html .

[4] It’s impossible to paint a precise picture of what S 1129 ’s multiple-ACO system would look like because Section 611(b) is so brief (see footnote 3). The big unknowns are the number of ACOs that would spring up, and whether Congress or HHS would change the rules that currently determine how people are assigned to ACOs.

Today there are over 1,000 ACOs in operation. Of these, about half hold contracts with CMS and the other half hold contracts with traditional insurance companies. We have very little information on how the ACOs with private-sector contracts assign insured people to ACOs, but what we have indicates they follow CMS’s method. CMS assigns Medicare beneficiaries to ACOs by a two-step process. First, beneficiaries are “attributed” to the primary care doctor they saw the most often over a look-back period of two or three years. Second, if the doctor to whom the beneficiary was attributed is part of an ACO, CMS’s computers sweep that person into that doctor’s ACO. Beneficiaries who had no primary care visits during the look-back period are not assigned to an ACO. By this algorithm, CMS currently assigns 12 million FFS Medicare beneficiaries, or about a third of the beneficiaries enrolled in the traditional FFS Medicare program, to Medicare ACOs. (For more details, see Table 8-2 p. 218, in the Medicare Payment Advisory Commission’s June 2018 report to Congress http://medpac.gov/docs/default-source/reports/jun18_ch8_medpacreport_sec.pdf?sfvrsn=0 )

This plurality-of-primary-care-visit method of assigning Americans to ACOs will sweep a much smaller portion of the non-elderly into ACOs because the non-elderly are far less likely to have made a visit to a primary care doctor in any given look-back period. In the event that S 1129 becomes law, would HHS alter its assignment algorithm to ensure that a much higher proportion of non-elderly Americans would be assigned to an ACO? It is more likely, in my view, that HHS would abandon the invisible, two-step assignment method entirely and allow, induce, or require Americans to enroll in an ACO. Obviously, if that happened, membership in ACOs would soar, and that in turn would induce more insurers, hospitals and clinics to band together to create ACOs.

Another unknown is how much ACOs would be paid. If they were overpaid relative to the FFS sector, as Medicare Advantage plans are overpaid vis a vis Medicare’s FFS providers, we would see more ACOs than we would if they were not overpaid. 

[5] In Medicare’s case, the great majority of the 600 ACOs that currently have contracts with the Centers for Medicare and Medicaid Services (CMS) begin with exposure to upside risk only, that is, to the possibility of sharing savings with CMS, but must eventually accept two-sided risk, that is, both down- and upside risk. 

I am sometimes asked how the ACOs in S 1129 can be called “insurance companies” or “risk-bearing entities” if they are paid fee-for-service. It’s true that CMS pays providers within ACOs by FFS throughout the course of the “performance year” in question, but the target for total spending by the ACO for that year is set as if the ACO were going to be paid just as an insurance company would be, that is, on a premium-per-enrollee basis. Before the performance year, CMS’s computers assign Medicare beneficiaries to an ACO (see footnote 4 above), then calculate an average per-assignee premium for the year (crudely adjusted for the health status of all the assignees), and then add up all the premium payments. That total equals the target against which the ACO’s profits or losses will be determined at the end of the year. If the ACO’s total spending exceeds the target at the end of the year, it owes CMS roughly half of the excess. Conversely, if the ACO’s total spending comes under the target at the end of the year, CMS splits the savings with the ACO. The fact that actual payment during the year is done by FFS doesn’t change the fact that risk is shifted from CMS to the ACOs. It’s the end-of-year adjustment based on the target level of annual spending that shifts risk.

This convoluted method of paying ACOs may change. Many ACO proponents, including Elliott Fisher (the “father of the ACO) have argued that ACOs should bear all insurance risk as they develop more expertise at managing risk. That would mean they would be regulated by the insurance departments of the states they operate in, they would have to set aside reserves, and they would presumably be allowed to impose financial penalties on enrollees who seek care outside their networks. 

[6] The table below summarizes the performance of all four ACO programs set up by CMS over the last 14 years. The table indicates ACOs have saved almost no money for Medicare.

Impact of CMS’s ACO Programs on Medicare Spending*

Physician Group Practice demonstration (10 ACOs):

2005-2010: 0.3 % **

Pioneer demonstration (32 ACOs in year one, 8 by year five): 

2012: 0.2%

2013: 0.6%

2014: 0.7%

2015: 0.1%

2016: 0.7%

Medicare Shared Savings Program: (480 ACOs in 2017):

2013: -0.1%

2014: -0.1% 

2015: -0.3%

2016: -0.1%

2017:  0.3%

Next Generation (45 ACOs in 2017):

2016: 0.2%

*A minus sign means the program’s net effect was to raise Medicare’s costs. “Net effect” is calculated by subtracting from gross savings the bonuses (or shared savings payments) CMS pays out to ACOs, in the case of the MSSP program. In the case of the other three programs, “net effect” is calculated by subtracting from gross savings the net of CMS’s payments to ACOs and ACOs’ payments to CMS.

**The ACOs in the PGP demo would have lost money if the PGPs had not upcoded at almost twice the rate of the groups that served as their controls.

Sources: For the PGP demo, see p. 64 of Evaluation of the Medicare Physician Group Practice Demonstration https://downloads.cms.gov/files/cmmi/medicare-demonstration/PhysicianGroupPracticeFinalReport.pdf .

For the Pioneer, MSSP and Next Generation programs, see Tables 8-6, 8-3, and 8-7 respectively of Chapter 8 http://medpac.gov/docs/default-source/reports/jun18_ch8_medpacreport_sec.pdf?sfvrsn=0  of MedPAC’s June 2018 report to Congress. The 2017 figure for the MSSP program is from slide 9 of a presentation to MedPAC at their January 2019 meeting http://medpac.gov/docs/default-source/default-document-library/aco_jan_2019_final.pdf?sfvrsn=0 

Print Friendly, PDF & Email
This entry was posted in Health care, Politics on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

48 comments

  1. John Beech

    Fantastic compilation. A little tough to slog through on one reading, but a subsequent reading cleared up most remaining questions.

    Reply
  2. dutch

    Who is paying that $3.5 trillion healthcare bill now, and who will pay the bill if Medicare for All is adopted?

    Reply
    1. ChiGal in Carolina

      The cost will be spread out more evenly among all of us instead of being mostly borne by the sickest, and within that group, the poorest, who do not have insurance and are charged the outrageous full fare when disaster strikes. Some of the tax we pay instead of premiums will be progressive, so it is estimated that the top 5% in the income distribution will pay more than they do now and the rest of us will pay less.

      The benefit will accrue to all of us in that providing health care to everyone means in addition to less potential for contagion and epidemics, etc., we will be husbanding a resource vital to any society, its people.

      Tens of thousands of Americans are currently dying each year for want of treatment for manageable or preventable conditions.

      Reply
      1. Adam Eran

        The federal government is not provisioned by taxes. Where would people get the dollars to pay those taxes if government didn’t spend them out into the economy first?

        The idea of “PayGo” is a recipe for austerity.

        Why have taxes at all? Answer: to make the money valuable.

        Since this will be cheaper than the existing system, the government could, as you say, progressively collect a little less than what people were paying in insurance premiums, but that’s optional.

        Reply
    2. Michael

      From Bernie (PDF) https://www.sanders.senate.gov/download/options-to-finance-medicare-for-all?inline=file

      Last year the typical working family paid an average of $5,277in premiums to private health insurance companies.Under this option, a typical family of four earning $50,000, after taking the standard deduction, would pay a 4 percent income-based premium to fund Medicare for All –just $844 a year –saving that family over $4,400 a year.

      In 2016, employers paid an average of$12,865inprivate health insurance premiums for a worker with a family of four who makes $50,000 a year.Under this option, employers would pay a 7.5 percent payroll tax to help finance Medicare for All –just $3,750 –a savings of more than $9,000 a year for that employee.

      More on $Trillions inside

      Reply
    3. dutch

      My point is that we are all currently paying the $3.5 trillion healthcare bill out of our own pockets, whether through premiums or payroll taxes, etc. The total bill won’t be any higher if the government makes all the payments and could easily be lower since the insurance companies won’t be taking their cut off the top. But claiming we can’t afford Medicare for All is absurd. Once the tax and payment system is up and running, cost reduction measures can be implemented incrementally over time. Clearly the government as payor will have plenty of incentive to reduce costs and will have the leverage to do so.

      Reply
      1. Carla

        I think that the point of the post is that if we don’t insist that the legislation is designed properly (i.e., structuring it the way Jayapal’s bill is written, not Bernie’s bill), cost reduction later will impossible. We cannot allow private insurance or ACO’s to be part of Medicare for All, and we must build in a hospital budget mechanism. That’s my takeaway.

        I knew these things were true, but the author beautifully lays out the case for WHY they are true.

        This is important, folks: Jayapal’s bill is the gold standard. Bernie’s will expand coverage but not contain costs, just like Obamacare. He’d better fix it.

        Reply
    4. John Beech

      dutch,

      Good morning. The truth is I don’t know the answer to your questions. BUT, I do know we’re paying double what other 1st world nations pay. Double.

      Do the math, double!

      Worse, we screw the guy who gets sick. We take away his savings. We force him into bankruptcy. And when he dies we hound his widow. Who, incidentally, may be 70 years old and now destitute. This could be you one day, chum. Or me.

      Bottom line? It’s going to cost what it’s going to cost but take note of this. We’re already paying for it. Basically, here won’t be need for one additional hospital, one more doctor netted, or a single additional pill pressed when it happens. All we’re going to do is stop the ‘system from taking about 1/4th of it as overhead and pass the savings on.

      Take note of this also; I vote Republican. Have since 1980 and I can do the math without someone telling me how to think. And if Donald J Trump, for whom I proudly voted last time doesn’t come up with a plan and make as sincere an effort to pass as he has the wall, which I also support, then I am going to go off the reservation. How? By voting for a candidate who will address this issue.

      After all, if we can go USD$20T into debt, if we can increase the military budget when we already spend several times more than the next few nations combined on our military, and if Congressmen get to game the system with insider information and get rich, then we can damned well make it so a guy who gets sick and knows he’s going to die doesn’t commit suicide to keep from leaving his wife in the lurch with medical bills. If that means I vote for a Democrat, or a Socialist in 2020, then so be it.

      It’s time to be a man and step up to do the right thing.

      Reply
  3. ChiGal in Carolina

    Already bookmarked and shared, thanks to KB who linked it several days ago in comments. And thank you, Lambert, for highlighting it. This is a must-read.

    Reply
    1. KB

      You are very welcome, ChiGal….glad you are sharing and glad Lambert is too….Like I said I have been a proponent for “single payer” since I can remember….I know Kip, and consider him to be the top authority in this area. His research is impeccable IMHO.
      Retired Chiropractor who processed my own claims (not outsourced) for 25 years in both California and Minnesota….oh boy, the things I have seen.
      I also am on his listeserve and am happy to forward any new info he sends to us. Wrote an e mail this am, but inconclusive yet as to why the appropriate people were not invited to the last hearing….

      Reply
  4. jfleni

    UP Rep Jalapal’s bill,because she is the only one who wants to
    cut the plutocrats off at the knees; something they and the
    taxpayers, and poor folks, richly deserve.

    Reply
  5. Mark K

    This is a really illuminating article.

    Mr. Sullivan focuses on billing complexities as a source or administrative costs for hospitals. The one I always wonder about is marketing. Where I live, hospitals are advertising constantly. Heck, Northwell Health even bought the naming rights to the amphitheater on Jones Beach.

    Does any reader know what share of hospitals’ administrative costs are for marketing? I am surmising that hospital budgets would eliminate, or at least greatly reduce the incentive for hospitals to market their services.

    Hospitals didn’t used to advertise; it was considered unethical. Going back the that way of thinking would in my mind be a welcome side benefit of single payer.

    Reply
  6. doug

    I remain baffled by the stunning silence around criminal price gouging in the entire medical industry (I didn’t read past the first few sentences in the article…did I miss it?). Seems that every issue could be addressed with but a few well placed prison terms, but there is no appetite even amongst the highly engaged on this topic. Read yet another article yesterday on a $100k+ snake bite….should cost $1000 max. We continue to shield this industry as they milk us dry.

    Reply
    1. grrr

      Agreed. Why don’t the AG’s charge these systems with classic monopoly behavior described in 15 USC Ch 1?

      Reply
      1. Cal2

        Or, as I have mentioned before, “Offer and acceptance” in contract law.

        To be legal, a contract must have both. You go into the hospital, they don’t, can’t or refuse to tell you what they are going to charge.

        They bill you and expect you to pay because you have signed the contract as a patient, or now as a “guarantor” of payment.

        Imagine going into a restaurant and agreeing to pay for things on the menu without prices.

        Unless it’s all free, having been paid for by your taxes. That’s an analogy.

        Reply
  7. marym

    From Kaiser Health News 11/2018:

    Last year, hospitals nationwide spent more than $450 million on advertising overall, according to figures from Kantar Media, a firm that monitors ad spending. That comes on the heels of a surge between 2011 and 2015, during which time hospitals and health systems upped their ad spending by 41 percent, according to figures published by Advertising Age, which tracks marketing trends. By 2015, hospital ad spending accounted for close to a quarter of all health care-related advertising, according to the Advertising Age report.

    Link

    On a related note: I don’t know about other types of medical advertising in other countries, but only the US and NZ allow direct-to-consumer advertising for prescription drugs.

    (apologies if this is a duplicate)

    Reply
  8. Oh

    It looks like “medicare for all” (Sanders’ bill with ACOs) would soon morph into the version of healthcare we currently have with the middle men (ACOs) grabbing money and the hospitals raising their costs because they don’t have to negotiate any annual budgets!

    Reply
    1. jrs

      It seems to me the closest thing to what we have that it will morph into is Medicare Advantage (For All), which is what Medicare itself will largely become soon.

      Reply
      1. ChiGal in Carolina

        Only if it’s Medicare for Some, allowing the insurance cos to remain players.

        Otherwise, it will precisely stop the privatization of Medicare that is MA.

        Reply
  9. MichaelC

    Having just turned 65 and having lobbied both at the state and federal level,, I am still shocked–though not surprise–at how the insurance industry has insinuated itself into Medicare. We do need to so what Representative Jayapal’s bill will do: effectively at cut the high cost of American health care by kicking out the profiteers completely since they are vampires that will keep coming back for blood if we do not, just like they are doing in Canada and the British NIH systems at present. N=Sanders has been consistent on this fight, and he spoke about ten years ago at an event outside of the Senate Building to single-payer activists from a spectrum of groups, the National Nursed United being one (formerly California Nurses Association). For this reason, I am disappointed that his bill is weak compared to Jayapal’s. It would seem he could have better coordinated with the House version.

    Reply
    1. jrs

      Well like they say maybe supporters can pressure Sanders. And the other politicians who say they are for M4A need to take a position on what type of bill they support. Tulsi, Kamala (I know but), etc. anyone who says they are for M4A. Do they support the Jayapal bill, Sanders bill, or really when it comes down to it, nothing at all. Because we need these people on record with actual bills. With Sanders we at least have a bill we know he will support even if it can morph into Medicare Advantage For All, so it’s not entirely unknown.

      Reply
    2. a different chris

      >I am disappointed that his bill is weak compared to Jayapal’s

      I wonder if the long fight maybe has taken a hidden toll. Jayapal has the vigor of youth.

      Reply
    3. ChiGal in Carolina

      This version of the bill is more closely aligned with HR 676 than when it first came out. At that time single payer orgs were very disappointed but he did indicate he was open to making changes. Which he did, for example, by including long-term care.

      At the same time, Jayapal’s update includes lots of good stuff but takes a step backwards by allowing for-profit providers, as did and does Sanders’s bill.

      Hopefully in its next iteration, Sanders will eliminate ACOs and include global budgets for hospitals.

      A gal can dream…

      Reply
  10. JimTan

    Hmmm….Creating a single payer to health insurance companies or hospitals doesn’t sound like the best way to leverage a single payers high purchasing volumes in order to lower the cost of U.S. healthcare. A better way might be to make our government a single payer, whose mandate is to negotiate lower prices, for most items in every hospitals Chargemaster. That would definitely get U.S. healthcare costs under control.

    Reply
  11. Susan the other`

    Just based on the simple logic that what we are seeking is quality healthcare for all, hospitals should never be allowed to set their own budgets without oversight by the payer. We are looking at all sorts of new medicine due to the explosion in DNA/genetic understanding. This isn’t going to slow down. It will get more and more sophisticated, and in the process it will simplify all the medical practices heretofore. By ignoring this new efficiency and allowing hospitals, with their archaic protocols, to continue on would be an invitation to defeat quality health care, if not affordability as well. Something I regret about modern medicine is their massive pollution footprint. Hospitals and clinics alike. Mountains of plastic garbage, much of it “hazardous”, is created every day. That ultimately is a social expense as well. The transition to modern medicine will be a godsend on all fronts – but if it means the difference between easy profits and no profits it will take much, much longer. To eliminate the distraction of earning sufficient revenue for their operations during the modernization process, we should make hospital budgets fully accountable. For them and for us.

    Reply
    1. Jerry B

      ===Something I regret about modern medicine is their massive pollution footprint. Hospitals and clinics alike. Mountains of plastic garbage, much of it “hazardous”, is created every day===

      Thanks Susan. Your statement above has so much that it covers I will try to be as brief as I can. As a plastics engineer I spent a good amount of my career either working in or connected to medical devices. The massive pollution footprint is due to the explosion of plastic medical devices which started around the 1980’s. I worked at Baxter Healthcare in the late 1980’s and even then the medical device industry had exploded. IV bags are made from PVC film (maybe that has changed). When they are disposed of, the PVC is hard to dispose of as it must be incinerated which gives off hydrochloric acid gas.

      Back in the late 1980’s Europe had already banned PVC IV bags due to environmental concerns. When I worked at Baxter they were trying to come up with a PVC alternative to compete in Europe. I am not sure if that was implemented in the US as well. One of the main upsides to PVC is it is very cheap and when making large quantities of IV bags even a few cents helps.

      The medical device industry is a major part of the healthcare industrial complex. Millions of plastic medical devices are produced annually. Many large companies entire existence is dependent on the monster that is the medical device industry. It reminds me of the automotive industry in that it will produce cars/trucks even to surplus. I am not a Marxist but I believe he discussed surplus production in his writings. It would take too long to go into it here but IMHO the medical device industry is one cog in the giant crony capitalism feedback loop that is the healthcare industrial complex. Doctors and hospital systems engaging in over medicalizing, over diagnosing, revenue generating practices which keeps the drug and medical device industries happy and a lot of people rich.

      In the movie the Fugitive the Tommy Lee Jones character said of the fictitious Devlin McGregor drug company “It’s a Monster!” To deal with climate change we are going to have to shrink a lot of industrial complex monsters. And since for a lot of people those Monsters were/are the goose that laid the golden egg, they will not go quietly.

      Reply
      1. Hepativore

        Another problem is the fact that due to the nature of medical devices and medical waste, much of it has to be burned in order to dispose of it safely because of the fact that it is contaminated by potentially biohazardous materials, such as blood, tissue residue, or microorganisms.

        There are many toxic gases that are released when burning many types of plastics, yet burning biowaste is often the only safe means of disposing of it.

        Reply
  12. juliania

    Thank you, Lambert! I think this is the most important social question a new administration would face that would mark a new and stable approach to the wellbeing of the nation at large. Single payer: one government entity reimbursing doctors and hospitals directly!

    I am very much afraid that Senator Sanders will not rise to the challenge presented herein. If he did I would vote for him in a heartbeat. I very much hope it will become a major topic in the upcoming political debates.

    This is something we can fix, and need desperately to do so.

    Reply
  13. PKMKII

    In countries that have hospital budgeting as the house bill would include, how does that work as a practical matter? Does the government set a budget for a hospital based on various factors, and the hospital simply has to take it in order to receive any reimbursements? Is it something each individual hospital negotiates with the government? Or does a hospital organization negotiate en mass on behave of hospitals with the government?

    Reply
  14. Jerry B

    ===The cost-containment section in Representative Jayapal’s bill will cut health care costs substantially without slashing the incomes of doctors and hospitals.====

    At least in the beginning the idea is probably to not ruffle too many feathers and get buy in to Single Payer from doctors and hospitals which is understandable. That being said there is nothing wrong with slashing the incomes of doctors and hospitals. Many hospitals are not “hospitals” anymore but corporate healthcare systems. I live in the far northwest suburbs of Chicago and we are surrounded by corporate healthcare systems. And most of these are not poor by any means. Recently Northwestern Medicine acquired our local hospital system Centegra Health Systems. If you look at some of Northwestern Medicine’s other hospitals they are not hospitals but large healthcare industrial complex hotels. Google Northwestern Medicine Lake Forest, IL or Northwestern Medicine Central DuPage. They resemble Apple’s Cupertino headquarters more than a hospital.

    During my childhood in Lombard, IL, our local hospital was Elmhurst Hospital which was embedded in a residential neighborhood in downtown Elmhurst, IL. That was a hospital. Now? A new massive Elmhurst hospital was built which looks to be at least twice the size of the old one. And Elmhurst hospital merged with Edwards hospital in Naperville, IL to become Edward-Elmhurst Health and is one of the larger integrated health systems in Illinois.

    On to doctors. I actually have a lot of sympathy for most doctors especially the primary care doctors as they have been turned from doctors into “providers”. I recently went to see my doctor who I have had since I was in my twenties. He used to have a small doctors practice office with two other doctors. At least 10 years ago they sold the practice or were bought out by DuPage Medical Group. DuPage Medical Group is one of the largest and most successful independent multi-specialty physician groups in Illinois, with more than 700 physicians in over 100 suburban Chicago locations. Needless to say my doctor was sucked into the corporate healthcare industrial complex. When I asked him how he was doing he said he was burned out and just looking forward to retiring in two years. For these types of doctors I have sympathy. I digress.

    When I was a child in the 60’s many doctors lived in the same neighborhood as everyone else. They may have had a nicer car and slightly larger house but still modest. Now many (but not nearly all) doctors, especially the specialists live in upscale areas. My orthopedic doctor lives in the Lincoln Park neighborhood in Chicago. That area is one of the more upscale areas in Chicago.

    As I said I have more sympathy for some doctors in the healthcare industrial complex than the large hospital systems. I know there are physician groups that are fighting for Medicare for All.

    As Yves has said many times, in the fight for climate change we are going to have to engage in radical conservatism. IMO, that means everyone is going to have to learn to live with less and learn to live modestly. That includes doctors, hospital systems, college administrators/presidents, etc. etc. It is either going to happen the easy way or the hard way.

    Reply
    1. Lambert Strether Post author

      > At least in the beginning the idea is probably to not ruffle too many feathers

      You can’t make an omelette without ruffling feathers. I think Sullivan makes a strong case that if we blow this chance, we won’t see #MedicareForAll for ourselves, our children, or our grandcihldren. And not containing costs means we blow it. Of all the political problems before us, #MedicareForAll is surely the easiest layup, and necessary to do simply to put a stake in the heart of Reagan’s evil joke that “The most terrifying words in the English language are: I’m from the government and I’m here to help.” If we can’t do this, we can’t do anything.

      Reply
      1. Jerry B

        Lambert – In this comment and others I have posted on the Single Payer issue, I thought it was clear that my views are completely in line with your comment above. You do not have to sell me on the idea of cost containment. My point in the “not ruffling too many feathers” idea was Sullivan’s focus on administrative costs and stopping there:

        “”the excessive administrative costs generated by our multiple-payer system that drive prices up, and not “overuse” of medical services””

        There have been posts and comments on NC that discuss the overuse of medical services and the profit-ization of healthcare. The overprescribing of drugs, the overuse of diagnostic tests, etc. The hospitals as hotels trend, etc.

        My point in my comment was to develop an argument for reducing healthcare costs even more by reducing the incomes of doctors and hospitals, especially the corporate healthcare systems.

        ===The cost-containment section in Representative Jayapal’s bill will cut health care costs substantially without slashing the incomes of doctors and hospitals===

        I cannot interpret Sullivan’s own views from the above statement and clearly Rep Jayapal’s bill is the better of the two up for consideration. What I am saying is, as you and Sullivan mention, we are only going to get one bite at the apple, so go all the way on cost containment. Hold doctors and hospitals accountable for the overuse of medical services in the name of revenue generation and profits, the excessive administrative salaries, and the hospitals as five star hotel trend.

        Reply
  15. Cal2

    Lambert, Thank You

    Recommended this article to everyone on my mailing list.

    To get more acceptance of M4A by so called conservative voters, essential to elect Sanders, to get Single Payer passed and signed into law when he is president,
    through a reciprocal agreement,
    non-citizen’s countries of origin should be billed for their medical care in the U.S.

    What are the non-citizens going to do? Not vote for Bernie? They can’t vote.
    The U.S. would pay for it’s citizens medical care in foreign countries.

    If the foreign country refuses to pay for their nationals healthcare in the U.S., it’s taken out of foreign aid, military base rents etc.

    That provision would garner a huge number of Trump voters for Bernie who would feel like it is more fair to U.S. taxpayers.

    Bernie has to be elected president. That’s what matters first and foremost. You need the Trump voters. Covering illegals with M4A will alienate more voters from Sanders than will be gained in my opinion.

    Reply
    1. lambert strether

      That’s an interesting idea. It would help expats too, though they don’t count for anything electorally (I think).

      Reply
      1. marym

        US expatriates can vote in federal elections. State/local voting is up to the state to decide.

        There have been numerous personal stories at NC and in T.R. Reid’s The Healing of America of universal healthcare countries where US visitors are able obtain healthcare with minimal to no charge.

        Being financially able to consider it’s worth it not ever having M4A at all if someone of whose presence in the country one disapproves may benefit seems kind of …. privileged?

        Reply
    2. marym

      Holding M4A hostage to immigration or foreign policy agendas seems to add an unfortunate hurdle. In any case as far as “military base rents” for example:

      The Pentagon spends an estimated $10 billion a year on overseas bases. More than 70% of the total is spent in Japan, Germany and South Korea, where most U.S. troops abroad are permanently stationed.
      In return, the Pentagon receives various forms of compensation from the host countries, from rent-free real estate where the bases are located to actual cash payments meant to offset U.S. costs.

      Reply
  16. Schnormal

    “Paying more than necessary to insure all Americans means we will have fewer resources left with which to address other problems.”

    At the risk of winning Most Naive Comment of the Week, could Bernie’s connection with the MMT economists have influenced his reasoning for omitting the two cost-containing elements (authorizing ACOs and negotiating budgets with hospitals)?

    Maybe he thinks including all four items will make the bill unpassable, but the cost-containing elements can be added later? (FWIW as an individual I don’t see it as my place to worry about political feasibility; I will continue to scream for all four elements regardless of what Bernie does).

    Thank you for this interesting post.

    Reply
  17. Bob Hertz

    I have no doubt that putting hospitals on global budgets would save huge amounts of money…..no deductibles or co-pays to bill for, no bad debts, no claims cheating and no claims audits, no price gouging, no balance bills, no network hassles, etc. etc.

    Kip Sullivan has been a real stalwart in the single-payer movement for two decades. Other Minnesota advocates speak well of him at all times.

    However — I have never been able to imagine just how we get there from here.

    Is a CMS bureaucrat going to give Mayo Clinic its budget? Is any bureaucracy going to close near-empty rural hospitals, and put the best paid employees in the county out of work? Is anyone going to audit the doctor’s salaries in Boston academic hospitals, and tell them to cut spending by 25%?
    If a California hospital pays nurses $120,000, will that be cut in the new public budget?

    What about cities where one hospital has stable expenses, but the city’s other hospital has huge construction loans, super-expensive diagnostic equipment, million-dollar administrator salaries?

    Sticking to budgets can be painful, and I do not see where any single payer plan has the capacity to inflict pain.

    Reply
  18. PhillyPhilly

    I attended a dinner for our local Democratic Party last night, and my local US Congressperson was in attendance. I couldn’t resist asking her about Medicare for All, so I approached at the end and we had a conversation like the following:

    PhillyPhilly: So, about Medicare for All..

    Rep: Well, I don’t like to call it that. I prefer to discuss expanding coverage and improving affordability

    PhillyPhilly: So you’re not planning to co-sign Rep. Jayapal’s Medicare for All bill?

    Rep: Rep Jayapal is a great person, I work with her on the Judiciary Committee. The reason I don’t endorse her bill is because in two years it eliminates employer-based coverage. I’ve asked around, and people really like their employer-based coverage. It would be terrible for people to lose their employer-based coverage, right?

    PhillyPhilly: Actually, that sounds amazing. Health coverage is one way that employers wield enormous power over their workers. This would actually provide greater freedom to employees.

    Rep: Well, the ACA was really great, and it has done great things…

    PhillyPhilly: It was a decent start, but we have much further to go

    Rep: It sounds like we have similar goals, but I’m not willing to remove employer-based coverage…

    We ended the conversation cordially, and she mentioned something about trying to reduce Pharma prices, but it was pretty darn clear where she stands. It’s hard to imagine what it would take to flip her to supporting Jayapal’s bill. Maybe a lot of pressure from her constituents? I don’t know. I guess I’ll contact my local DSA to see if they have any ideas. Either way, it was pretty exciting to actually see in person what we are up against. As Lambert is always saying, preventing Medicare for All is a top priority of the DCCC, and they seem to have done a great job with my local Representative.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *