In my last post, I discussed whether the U.S. needs universal coverage. In this post, I examine the candidate's proposals concerning how universal coverage can be achieved. A key strategy involves the deployment of new and expanded public insurance programs, which includes a heated debate about a government run single-payer system.
All the Democrats propose universal healthcare (coverage for all Americans). Only Kucinich supports HR 676, which is a single-payer, "Medicare for All" plan that gives everyone comprehensive coverage. Gravel also proposes a single-payer solution, but through use of federally funded vouchers. All the other Democrats propose a public Federal Employees Health Benefits Program (FEHBP) type program and/or Medicare, Medicaid, SCHIP, which are supported by subsidies (e.g., through tax credits or vouchers) to low income persons.
Republicans, on the other hand, do not propose new public programs, the expansion of existing public programs, nor universal coverage. Instead, they all propose market-based private insurance solutions through tax deduction/credit subsidies to lower insurance premiums and deduct medical expenses from the taxes of lower income persons. Other strategies include increasing competition, tort reform, and payment changes to providers.
New and Expanded Public Programs
All Democrats (and no Republicans) propose new public programs.
v Comments about Public Insurance in General
Consider the following:
Public insurance programs offer the greatest potential for automatic and continuous enrollment and the ability to cover everyone. Enrollment could be facilitated through local Medicare or Social Security offices. Those failing to enroll could be signed up when they seek health care services or coverage could be verified as part of income tax filing. With everyone eventually enrolled at birth in an expanded Medicare, people would automatically be enrolled and stay enrolled across their lifespans. Most proposals would establish a minimum standard benefit package modeled on the typical plan offered to members of Congress or to employees of large firms. For those proposals requiring enrollees to pay cost-sharing or a portion of premiums, a ceiling on out-of-pocket costs and premiums as a percentage of income would be established to ensure affordability. Some proposals modeled on the Canadian health system, for example, would not include patient cost-sharing for basic services and would be financed by federal and state taxes.
Given Medicare's low administrative costs and broad risk pooling, substantial savings could accrue in an expanded Medicare approach through a reduction in administrative costs. Other sources of savings would likely arise from paying providers Medicare rates that are lower, on average, than private rates.
The proposals modeled on the current Medicare program would provide choice of plans, including the private plan options currently available to Medicare beneficiaries and the program's self-insured plan.
The public insurance approaches to health insurance reform would create dislocation, with people moving from their current coverage to coverage through Medicare or another public plan. However, people would still likely keep their same set of providers. Proposals that would allow employers to continue offering coverage would be less disruptive initially, although it is anticipated that most employers would ultimately prefer to pay a part of the Medicare premium rather than private coverage premiums, which would probably be higher.
These proposals would allow the nation to develop and utilize common quality metrics, gather data on the health care outcomes of the full population, and evaluate and improve the performance of providers based on a large pool of patients not fragmented by insurance type. They also would allow for the creation of uniform provider payment systems that reward high-quality care, standardization in health information technology, and the creation of universal processes to improve safety systematically across health care institutions.
Financing is likely to come largely from federal income and payroll taxes or new taxes, such as a value-added tax or consumption tax. This would be less administratively complex than providing premium subsidies based on income. The distribution of financing is most likely to be more progressively related to income than either individual insurance market or mixed private–public group insurance proposals. [Reference]
Single-Payer Government-Run System
Kucinich is the only candidate proposing a single-payer government run system (HR 676), which gives each person their own healthcare card.
v Comments about Single-Payer Government Run System
The case for universal healthcare was discussed above. But should it be a government run single-payer system?
The primary arguments in favor of a single-payer system center on cost control issues.
Here are views about how it would reduce administrative costs:
The most obvious difference between [European] health care systems and ours — that their governments provide universal insurance — certainly plays a big role in the cost differences. Look behind the receptionist at your doctor's office, and you will very likely see a staff of people filing claims to different insurance companies. The insurance companies, meanwhile, employ a small army charged with figuring out how to avoid covering the unhealthy. The administrative costs of our patchwork bureaucracy eat up about 25 percent of health spending… Even in Europe's single-payer systems, administrative costs account for about 15 percent of health spending [italics added], once everything is included, according to the Lewin Group, a consulting firm…. Medicare, which has administrative costs roughly as low as those of other countries' universal plans. Younger Americans, by contrast, have private insurance, with all its inefficiencies. Yet elderly Americans' share of national health spending is similar to that of the elderly in other countries, as Arnold Kling, an economist, has noted [source].
Private insurers spend large sums fighting adverse selection, trying to identify and screen out high-cost customers. Systems such as Medicare, which covers every American sixty-five or older, or the Canadian single-payer system, which covers everyone, avoid these costs. In 2003 Medicare spent less than 2 percent of its resources on administration, while private insurance companies spent more than 13 percent … Although it's rarely described this way, Medicare is a single-payer system covering many of the health costs of older Americans. (Canada's universal single-payer system is, in fact, also called Medicare.) And it has some though not all the advantages of broader single-payer systems, notably low administrative costs. [source].
Here's a discussion of how a single-payer system would control healthcare delivery costs:
…the evidence clearly shows that the key problem with the US health care system is its fragmentation. A history of failed attempts to introduce universal health insurance has left us with a system in which the government pays directly or indirectly for more than half of the nation's health care, but the actual delivery both of insurance and of care is undertaken by a crazy quilt of private insurers, for-profit hospitals, and other players who add cost without adding value. A Canadian-style single-payer system, in which the government directly provides insurance, would almost surely be both cheaper and more effective than what we now have. And we could do even better if we learned from "integrated" systems, like the Veterans Administration, that directly provide some health care as well as medical insurance. …
[Another] source of savings in a system of public health insurance is the ability to bargain with suppliers, especially drug companies, for lower prices. Residents of the United States notoriously pay much higher prices for prescription drugs than residents of other advanced countries, including Canada. What is less known is that both Medicaid and, to an even greater extent, the Veterans' Administration, get discounts similar to or greater than those received by the Canadian health system.
We're talking about large cost savings. Indeed, the available evidence suggests that if the United States were to replace its current complex mix of health insurance systems with standardized, universal coverage, the savings would be so large that we could cover all those currently uninsured, yet end up spending less overall. That's what happened in Taiwan, which adopted a single-payer system in 1995: the percentage of the population with health insurance soared from 57 percent to 97 percent, yet health care costs actually grew more slowly than one would have predicted from trends before the change in system [source].
And the following argues that a single-payer system is the only way sensible solution:
A mere shift of power from Republicans to Democrats would not, in itself, be enough to give us sensible health care reform. While Democrats would have written a less perverse drug bill, it's not clear that they are ready to embrace a single-payer system. Even liberal economists and scholars at progressive think tanks tend to shy away from proposing a straightforward system of national health insurance. Instead, they propose fairly complex compromise plans. Typically, such plans try to achieve universal coverage by requiring everyone to buy health insurance, the way everyone is forced to buy car insurance, and deal with those who can't afford to purchase insurance through a system of subsidies. Proponents of such plans make a few arguments for their superiority to a single-payer system, mainly the (dubious) claim that single-payer would reduce medical innovation. But the main reason for not proposing single-payer is political fear: reformers believe that private insurers are too powerful to cut out of the loop, and that a single-payer plan would be too easily demonized by business and political propagandists as "big government."
These are the same political calculations that led Bill Clinton to reject a single-payer system in 1993, even though his advisers believed that a single-payer system would be the least expensive way to provide universal coverage. Instead, he proposed a complex plan designed to preserve a role for private health insurers. But the plan backfired. The insurers opposed it anyway, most famously with their "Harry and Louise" ads. And the plan's complexity left the public baffled.
We believe that the compromise plans being proposed by the cautious reformers would run into the same political problems, and that it would be politically smarter as well as economically superior to go for broke: to propose a straightforward single-payer system, and try to sell voters on the huge advantages such a sys-tem would bring. But this would mean taking on the drug and insurance companies rather than trying to co-opt them, and even progressive policy wonks, let alone Democratic politicians, still seem too timid to do that [source].
Two important lessons can be learned [from the Massachusetts Health Reform Law]. First, we need to sever the connection between healthcare and employment. People need continuous, portable coverage that is affordable, comprehensive, and equitable. Second, we cannot depend on the private insurance industry to provide this for us.
Piece-meal reform such as the new law will not work. Both employers and the public support the concept of single-payer healthcare. Big business is starting to realize that a single payer system will be the only affordable way to cover everyone. When will our politicians understand that their political futures will depend on supporting this kind of comprehensive reform? [source]
The reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans' health dollars.
Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $350 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do.
Under a single-payer system, all Americans would be covered for all medically necessary services, including: doctor, hospital, long-term care, mental health, dental, vision, prescription drug and medical supply costs. Patients would regain free choice of doctor and hospital, and doctors would regain autonomy over patient care.
Physicians would be paid fee-for-service according to a negotiated formulary or receive salary from a hospital or nonprofit HMO / group practice. Hospitals would receive a global budget for operating expenses. Health facilities and expensive equipment purchases would be managed by regional health planning boards.
A single-payer system would be financed by eliminating private insurers and recapturing their administrative waste. Modest new taxes would replace premiums and out-of-pocket payments currently paid by individuals and business. Costs would be controlled through negotiated fees, global budgeting and bulk purchasing [source].
Single payer, universal health care administered by a state public health system would be much more democratic and much less intrusive than our current system. Consumers and providers would have a voice in determining benefits, rates and taxes. Problems with free choice, confidentiality and medical decision making would be resolved [source].
The primary arguments against a single-payer system center on concerns about:
- Loss of options or increased expense to those who currently have employer-paid plans
- Rationing of care
- Stifling of innovation
- Long wait for care.
Regarding the first two bullets, consider the following:
Most lucky Americans with good insurance are doubly isolated from financial reality. They don't pay for their health care and they don't even pay for most of their insurance—their employers or the government pays. …[With a single-payer system, the government would have to start] saving money by simply not providing effective treatments that cost too much. …Should people be allowed to opt out of [such] rationing if they can afford it? That is, if the system (private or single-payer) won't pay for the $100,000 pill, should you be able to pay for it yourself? …There are the makings of a deal here. Better-off or better-insured people could be told, individually or as a group: Give up your health-care subsidy [i.e., buy insurance or healthcare with your own money] and you may opt out of any rationing-type restrictions that the system imposes [source].
In a Single-Payer system, everyone has an EQUAL access to insurance coverage. But it doesn't mean that everyone is able to access all the care that they want or even believe they need. …Since users of the system don't pay for care directly, the only way to control costs is to limit utilization & access to medical technology. A single-payer system's economic success is …to limit access to services, as well as access to the most sophisticated and expensive types of medical treatment and services. …Significant savings in single-payer systems come from limiting the supply of medical services to curb demand (rationing of treatment and technology)…
Residents in countries with single-payer systems pay significantly higher taxes…Canadians are currently paying 40 percent more taxes than Americans, and Europeans are paying 60 percent more than we are! [source]
A counter argument is that our system needs to
increase value to the consumer, so that everyone gets the safest, most cost-effective care possible. That will only happen when (a) we know what care gets the best results for the least cost for each person (which is
a problem in its own right) and (b) there are mandated rewards for delivering such high-value care and punishments for not. Single-payer system countries are working diligently to identify the most cost-effective tests, treatments and prevention methods, and to minimize over-testing, over-treating and use of expensive drugs and procedures when more cost-effective options exist. The U.S. healthcare system, on the other hand, does just the opposite: More profits go to providers, pharmaceutical companies and medical device manufacturers when patients get sick, receive more tests and treatments, especially when they're expensive; this does not bring high value to the consumer [see
this link]. This means that we've got to transition from "pay-for-volume" to "pay-for-value"—instead of arguing that waste is "a benefit" private insurance allows—and a single-payer system can help drive such value.
Nevertheless, what if certain consumers want to throw their money away for expensive care with little evidence of efficacy? Or what if they want to pay more than is necessary for care when there are less costly options that are just as good? If they are willing to pay for it out of their own pocket for it—through costly private insurance or cash—then shouldn't they have that option? Should our government refuse them access to overly expensive or ineffective care? Well, this depends on whether allowing people to opt out of the single-payer system drains so much money from the system that it cannot survive. This issue is discussed later in the mandates section.
Anyway, here's a discussion of why rationing makes sense:
Americans seem to be less willing [than Europeans] to take no for an answer and more willing to try almost anything, no matter how expensive or how slim the odds, to prolong life. … It has made us obsessed with medical advances and turned this country into the world's research laboratory. …But much of it is simply wasteful. Expensive procedures…are often no more effective than basic ones, according to research. Yet doctors can keep on getting reimbursed for the expensive ones. "Basically, anything that doesn't kill patients is paid for by Medicare and insurance companies," said Jonathan Skinner, a health care researcher at Dartmouth College. …We Americans tend to treat any rejection of a health claim as some conspiracy by insurance companies, the government, doctors and the pharmaceutical industry. In other countries, people have arrived at a better understanding that health care necessarily involves economic triage [reference].
The argument that switching to a single-payer system would stifle innovation is based on the fact that since the U.S. spends so much more on healthcare than other nations, it enables researchers to obtain superior financial compensation, which leads to more medical discoveries in our innovation-rich environment. The counter-argument states that there isn't any proof:
…that it is the difference in health care systems that has caused the agglomeration of research facilities in the U. S. Even if the U.S. were a single-payer system, drug companies, etc. would still do research and it is likely that much of it would be carried out in the U.S. just as it is now. In addition…much of the research that is done here is funded directly or indirectly by the government. [And,] given that European countries can free ride on this research, comparing the amount spent in the two countries may not accurately reflect European willingness to fund health care research since the two figures may not be independent. If the U.S. spent less, European countries might be induced to spend more [source].
When it comes to waiting for care--while people in the US go without needed healthcare because of cost more often than people do in the other countries--waiting time for specialized healthcare services (e.g., elective surgery) is typically shorter in America than in other countries, at least for insured Americans. However, the US ranks low when it comes to the prompt accessibility of appointments with primary care physicians, often waiting six or more days for an appointment, and having trouble making an appointment on weekends and evenings [
reference ]. So, waiting time for non-emergency care is an issue in countries with universal healthcare. Nevertheless, things are improving in many of them [
reference ]. In other words, there are problems with both systems and the question is whether access to excellent primary and specialist care, even if there's a longer wait for elective surgery, is a better option than not being able to afford excellent care.
Federal Employees Health Benefits Program (FEHBP)
Biden, Clinton, Dodd, Obama and
Richardson want the new program to be based on the Federal Employees Health Benefits Program (FEHBP).
v Comments about FEHBP Model
Biden, Clinton, Dodd, Obama and Richardson want insurance coverage to be modeled after the FEHBP, but this may not be realistic. The least expensive FEHBP coverage for a family appears to cost at least $10,000 per year, and most plans cost $12,000 or more. The government (taxpayers) pay only 75% of that amount on behalf of employees leaving the employee to cover 25% of the premium plus copays and deductibles out of his or her own resources. It is highly unlikely that low income people would be able to afford that much. At the same time, to provide an adequate subsidy or limit the individual's out of pocket exposure for premiums, deductibles and copays to some acceptable percentage of income (6.5% has been suggested) would likely be a tough sell when the staff and Congressional Budget Office try to estimate the overall cost to taxpayers. While less than perfect, defining minimum creditable coverage as a high deductible insurance plan would be considerably less costly and more feasible. If we can develop ways to save money by safely driving down utilization of healthcare services, we could always expand coverage later.
Vouchers
Gravel proposes the federal government issue annual vouchers to individuals based on projected health care needs, which they would use to pay for their care.
In the next blog post, I will discuss the thorny issues of allowing private insurance, mandating that everyone has access to coverage through individual and/or employer based requirements, and the use of insurance pools.
