Administrative Costs

I take a back seat to no one in complaining about the inordinate number of bureaucrats in health care. Where I part company with many of my colleagues is that I think there are too many bureaucrats in every field. Most health policy wonks have the opposite view. They are not bothered by bureaucracy in anywhere other than health care. For example, I almost never meet anyone who complains about high administrative costs in health care who makes the same complaint about education, where the problem is much more severe.

In any event, there is no problem that cannot be made worse when legislators convene. And when Congress passed the Affordable Care Act (ObamaCare) it definitely made things worse than they otherwise would have been.

A medical loss ratio (MLR) is the percent of health insurance premiums that is spent on medical care. The popular term for the remainder is “administrative costs.” The new law mandates a minimum MLR of 80% for individual and small group insurance. That means these plans must spend at least 80% of their premium income on “medical care.” Conversely, they can spend no more than 20% on “administration.” If they fall below the MLR minimum, they must give back the amount of the deficit to enrollees in the form of premium rebates. The minimum MLR is 85% for large groups.

Here’s one immediate problem: no one knows how to define “administration.” Just as there is no line item in the federal budget called “waste fraud and abuse,” there is also no line item in any organization’s budget called “administrative costs.” Most of us think we vaguely know what it is. But pinning it down is sort of like trying to nail Jell-O to the wall.

I first became aware of this problem as head of a nonprofit organization. Since many donors don’t like to think their money is paying for fundraising and overhead, most nonprofits try to make those expenses as small as possible on their financial statements. That’s when I discovered there is a lot of discretion in deciding what to call “overhead.”

Where you really find a lot of abuse in this area is in direct mail. If you send someone a dollar in response to a mail solicitation, odds are that 90 cents will pay for stationary, envelopes and postage (i.e., the cost of the mailing) and 10 cents will pay the salaries of the people who sent it for you. Almost none of your dollar will go for the purpose for which you gave it. For accounting purposes, the organization will probably call 95% of the letter making their pitch “marketing,” and allocate to “fundraising” only the one or two lines where they actually ask you for money. Even though the whole exercise is nothing more than a fundraising operation, the organization is able to claim that 80% to 90% goes to “programs.”

Back to health care. Think about a doctor’s office and ask yourself what goes on there that you would be inclined to call “administration” or “overhead” and what you would call “medical care.” Arguably, the physical facility, the equipment, and the utilities are all overhead. The personnel who admit you and discharge you are engaged in administration, are they not? Ditto for the taking of your medical history and your vitals — and even ascertaining the nature of the complaint that brought you there. In fact, you could make a case that unless someone is actually drawing blood, giving you a shot or ordering a prescription, it’s all overhead.

Looking at this way, you could argue that about 95% of everything that goes on in a doctor’s office is administration and overhead! Conversely, a clever accountant might also be able to argue the reverse — that only 5% is really overhead.

Now if at this point anyone is wondering why we are even having this discussion, I want to second that thought. There isn’t a good reason. It really doesn’t matter how you classify these things. But when governments pass laws that create perverse incentives, these things do matter.

Okay, let’s think about insurance companies for a moment. The MLR, remember, is a ratio. Medical care spending is in the numerator and premium income is in the denominator and there are hundreds of decisions that have to be made in deciding how to measure each of these. The other thing to remember is that the minimum MLR is a constraint that potentially limits sales efforts, profit, efforts to ferret out fraud and any other non-medical expense. So insurers will view the MLR as an undesirable constraint. For that matter, sales commissions to insurance brokers who service health policies are considered overhead, so insurers can hardly afford to compensate brokers’ services. Neither can insurers afford to perform the tasks of answering enrollees’ questions since the cost of doing so is also added to administrative costs.

Of all the perverse incentives this kind of regulation creates, I want to focus on five that I think will be especially pernicious.

First, just about any payment an insurer makes to a doctor or hospital is going to count as medical care, no matter how large the administrative costs are for the provider. So both entities have an incentive to find ways of shifting administration costs from the insurer to the provider. The most obvious way of doing that is for the insurer to contract with an HMO, give the HMO a fixed fee per enrollee and let the HMO manage all the care, no questions asked. If you thought managed care in the 1990s was abusive, you haven’t seen anything yet.

Second, almost anything the insurer does that conforms to the Obama administration’s view of “improving quality” — managed care, coordinated care, integrated care, electronic medical records, etc. — will count as “medical care.” But efforts to detect and prevent fraud will not count. Doctor “credentialing” won’t count either. One way to think about this is to realize that everything insurers are doing today to hassle good doctors will be encouraged and everything they do to get rid of bad doctors will be discouraged.

Third, the days of the insurance broker are probably numbered. Since broker commissions won’t count as “medical care” and since the MLR is averaging about 70%, rather than 80%, in the individual market, insurers will cut back on commissions and brokers may leave the market completely.

Why should you care? Because in today’s bureaucratic health insurance system, employers and brokers act as advisors and protectors. They answer questions, correct mistakes, eliminate confusion, etc. If employers begin to drop insurance in large numbers and agents vanish, millions of people will be at the mercy of impersonal insurance bureaucracies.

Fourth, the minimum MLR restricts what insurers can spend to complete with each other in a way that favors larger firms and discriminates against smaller ones. We have previously noted an exodus of insurance companies from the market that is already occurring, resulting in the inevitable slide toward monopoly. The latest episode comes from Michigan, where the state’s congressmen are asking for a waiver on the grounds that only 2 of 7 companies serving the individual market can satisfy the MLR threshold.

Finally, insurers will be constrained in their ability to realize profits on their insurance business, but there will be no constraint on their profits from invested reserves. This means that in the business of insurance, the insurer will be like a regulated utility. There will be no incentive to take risks on developing new products, because the insurer will not be able to reap the rewards of successful innovation. On the other hand, the insurer can realize the full return form risky investments outside the business of insurance.

I’ll write more about this last problem in a future Alert.

Comments (75)

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  1. Art Jetter says:

    John – Thank you for another brilliant article. I’d add a sixth probable consequence. The MLR encourages insurance companies to maximize profit measured in dollars by focusing on lower deductible, higher benefit, higher premium plans.

  2. Beverly Gossage says:

    Sending this to all my broker friends.

  3. Greg Scandlen says:

    Three other points –

    1. In the employer market, employers will be saddled with many of the administrative activities insurers are doing, such as answering employee questions, sending out benefits information, maybe even EOBs. In effect, the insurer will place an administrative worker on the payroll of the employer, rather than keeping that person in house and paid for through premiums.

    2. The MLR will encourage higher, not lower, premiums. The higher the premium, the more money there will be to spend on admin. There will be no incentive whatsoever to keep premiums down.

    3. It will also discourage efficiency in medical spending. A company might save $10 in medical care by spending $1 on “administration,” but lowering medical expenses at the cost of raising admin costs will be severely punished.

    Politicians should keep their noses out of business.

  4. Paul says:

    John – I think your fifth point is the most salient and look forward to the related post.

    The MLR rule is predicated on the mythic profit-mongering insurance company controlled by a phalanx of over-compensated executives. As industries go, insurer’s profit margin is razor thin already, and the disincentive towards profit will make it more difficult to manage that margin – - by orders of magnitude.

    Besides that, state and federal regulators must now approve every premium increase and will do so not based on math but on politics, as we saw last year in Massachusetts.

    The result will be a simultaneous constriction both of revenues on the front end and the ability to manage expenses on the back end. The eventuality is not a happy one.

  5. ralph says:

    John,
    Very good points, and here are some others to consider:
    1) If company A has administrative costs of $100 a month per insured, that is 20% of $500, thus an incentive to keep the premium over $500. If they cut some mandates and increased co pays and deductibles, and reduced the premium to $400, suddenly you have 25% overhead, because I don’t think the landlord will reduce the rent, and I don’t think the underwriters will take a cut in pay.
    2) Unlike life insurance where the insurer has your money earning compound interest for 30-50 years, they only have it for exactly 15 months. If they must spend 80% in one year, then they must spend 100% in 1.25 years (simple math). Therefore, the incentive is to get you off your duff and get you to start “using” the benefits ASAP.
    I don’t have a PhD in math, but this is just common logic.

  6. Paul says:

    I should also note that state-licensed insurers are often severely restricted by state regulators in the risk level of their investment portfolios, so it becomes difficult to realize profit even through proper investment of their reserves.

    (Although, tongue-in-cheek, one might now consider government bonds to be riskier than hedge funds . . . .)

  7. James says:

    Excellent post, Dr. Goodman. I completely agree with you on excess bureaucracy, in health care or other endeavors. But don’t you think there’s an inherent conflict of interest between the primary business objective of a for-profit insurer, i.e., to make a profit, and the fiduciary duty it owes its insureds to provide unfettered access to high-quality health care? And that making a profit requires a bureaucracy whose main goal, more or less, is to try to retain or recover as much as possible of the 80% of its non-administrative costs for the company’s benefit?

  8. Greg Scandlen says:

    James,

    In my experience working for the Blues, there is absolutely no difference between not-for-profit and for-profit insurers. If anything the not-for-profits have far more admin costs because no one cares about having something left over for shareholders.

    Curious that one of Mr. Obama’s examples of insurers run amok was Alabama where one company has over 70% of the market. But that one company is a not-for-profit Blue plan.

  9. Mitchell Brooks, M.D. says:

    All great point Dr. Goodman;but what is the real message, the real kernel in these suffocating and baleful restriction?

    The message, the end game if you will, is to drive the American public to the single payer system; nothing more than that, nothing less than that. It is statism, pure and simple.

    What’s worse, and ironically laughable is that these government imposed constraints will remove a significant aspect of consumer protection- the insurance agent. What this malevolent action will do is lead to the government, in the form of its non-elected and non-confirmed payment panel, to be the sole arbiter in any case of difference regarding payment or permission.

    That my friends is slavery!

    Mitchell Brooks, M.D.
    http://www.hotnationtalk.com

  10. Don McCanne says:

    Step back. The big picture is our very high health care costs, and the profound administrative excesses that contribute to those costs.

    Not only are the administrative costs of the private insurers much higher than publicly administered programs, but the administrative burden on the providers is also much greater. An article in the current Health Affairs shows that payer-related administrative costs are four times higher for U.S. physicians than for Canadian physicians.

    Although NCPA is famous for its innovative recounts (see current Health Affairs blog), the administrative excesses in our fragmented, dysfunctional financing system are very real and very expensive.

    It is no wonder that conservatives fear that single payer would fix the problem. It would, and thus it will become the imperative, especially when considering that it would be truly universal and would finally contain costs through its power as a monopsony.

  11. Carol Little says:

    Why don’t you ask Blue Cross Blue Shield about their new policy. BCBS, is whom my husband has health insurance. We got a notice in the mail about how doctors will be providing 2 bills, one for office expense/admin expense and medical expense.
    The office / Admin expense will not be covered by BCBS only the doctor expense. Effective 9/1/2011.

    Carol Little

  12. Paul says:

    Don – Any third party payer system will fuel cost increases and foster inefficiencies because it destroys the direct cost-benefit analysis that the person obtaining the services (i.e. the patient) would ordinarily go through in a given transaction. You can build a better mousetrap, but at the end of the day it will still be a mousetrap.

  13. Brant Mittler says:

    John, you seem to be knocking capitation. Isn’t “defined contribution” the Holy Grail of conservative Republicans like Paul Ryan? And capitation is defined contribution. Those who think that Ryan’s proposed $8,000 voucher for Medicare will get them very far with the rationers at the insurance companies they will be dealing with are in for a rude and life-shortening surprise.
    And you draw a distinction between insurers and HMOs.
    Could you explain that?
    Most insurance companies have various forms of managed care products. There is no such thing as unfettered fee-for- service anymore except in small enclaves of the followers of Dr. Jane Orient.
    Lastly, could the participants in this blog give some concrete examples of how brokers are “protecting” consumers lately?

  14. Don McCanne says:

    Check the editorial in today’s on-line St.Louis Post-Dispatch:

    “Eventually, the United States will have a single-payer plan. But we’ll waste a lot of money and time getting there.”

    http://www.stltoday.com/news/opinion/editorial/article_97afa329-42f8-5f12-adb0-97fa305c3e4b.html

  15. Uwe Reinhardt says:

    Greg:

    You write “The MLR will encourage higher, not lower, premiums. The higher the premium, the more money there will be to spend on admin. There will be no incentive whatsoever to keep premiums down.”

    So market forces do not give health insurers the incentive to keep premiums down? Market forces don’t work in that market.

    Interesting thesis.

    Uwe

  16. ralph says:

    Uwe,
    Please explain to me why you feel that mandating a maximum medical loss ratio is a “market force”

  17. Uwe Reinhardt says:

    Paul:

    You write “As industries go, insurer’s profit margin is razor thin already, and the disincentive towards profit will make it more difficult to manage that margin – – by orders of magnitude.”

    How thin the profit margin of health insurers is depends on what you put into the denominator.

    If you put “premiums” there, then the argument is that insurers should earn a margin on costs they merely pass through.

    On the other hand, if you divide the profits they earn by the cost of their own production (marketing, claims processing, cost control, disease management, etc)then their margin is anything but thin.

    Look at it this way: According to AHIP, the average payment the 10 largest private health insurers made to Oregon hospitals (actual payments, not charges)for a normal, vaginal delivery rose from about $3,800 in 2005 to about $6,400 in 2009. Should insurers earn a profit on the $2,600 increase in the hospitals’ price for a normal delivery? In what way would the insurer have earned that profit the old fashioned way?

    Uwe

  18. Greg Scandlen says:

    Uwe,

    Not that hard to figure out. The regulatory incentive will be to raise premiums. The market incentive will be to lower premiums. Which will prevail?

    In a truly competitive market the latter would, despite the drag imposed by the regulations. This will NOT be a truly competitive market, other than for very large employers. Why?

    1. There will be a small number of sanctioned competitors whose primary mission will be to please the regulators who will have life or death control over them.

    2. Since nearly all customers will be subsidized, there will be no meaningful “prices.” What the insurer “charges” will be invisible to the subsidized customer.

    3. Since the benefits to be offered will be strictly controlled, it will be impossible for an innovator to enter the market with a new approach. Plus the MLR will make it impossible to fund the start-up and marketing expenses involved.

    Hence, the incentives to keep prices low to attract market share barely exist.

  19. Al says:

    Great points John G. and quite scary, more scary then I earlier had recognized.

    What Greg says about the employer becoming saddled with administrative activities is already true with Medicare. Medicare transfers a lot of their costs to the physician. It acts as our single payer plan for those over 65 so I don’t think one needs to be comparing administrative costs to those in Canada as Don M. indicates. Medicare has not controlled costs in the US and that is one of our biggest problems. I wonder if private insurers under ObamaCare will follow Medicare’s lead by transferring more costs to physicians.

  20. thomas carney says:

    John, I normally find your comments very clear, to the point, and easy to understand. But this article I found very hard to undrstand. For example your example on direct mail lost me? Your 3 points on healthcare: #1 and 2 were confusing? I got the third point. In essance it appears you tried to be overly analytic got too insider talk and not, as you usually do, straight talk to the point.

  21. Virginia says:

    A thought that came to mind: When you’re talking about delegating certain expenses to “overhead” versus “cost of care,” you have to have regulations about which is which, otherwise, the incentive is to mark everything as “cost of care.”

    But, who is going to police this and make sure insurers are correctly stating their costs? All of a sudden, you’re looking at the government funding a mini IRS that has to make rulings and enforce them. You can also bet that there will be a new department in every single insurance office that earns its keep by finding creative ways around the rules.

    No wonder we can’t control health care costs.

  22. Mark says:

    Greg, you hit the nail on the head:

    “This will NOT be a truly competitive market, other than for very large employers.”

    Third party payers enjoy a false market environment/oligopoly. It’s already not a “free market.” Introducing mandates and regulations will only bastardize the resulting end-product further.

    As a doc, I’m getting paid less every year. As an employer, I’m paying more every year. It’s not working for me. Soon, we’ll all be in the proletariat class.

  23. Don McCanne says:

    Al says, “Medicare has not controlled costs in the U.S.” Compare Medicare with the private insurers. You don’t have to take our word for it. Check out the S&P Healthcare Economic Commercial Index (private insurance) and the S&P Healthcare Economic Medicare Index (Medicare). As S&P states, “For the past several years, the trend of medical costs funded by commercial insurance plans is significantly greater than those funded by Medicare.”

  24. Paul says:

    Don McCanne wrote: “For the past several years, the trend of medical costs funded by commercial insurance plans is significantly greater than those funded by Medicare.”

    It’s well-known to anyone in the trade that providers offset Medicare shortfalls by demanding higher reimbursement on the commercial side. Did S&P account for that?

  25. Ron Docksai says:

    Right on. You are an American hero.
    Warmest,
    Ron

  26. Paul says:

    Uwe:

    I would be happy to limit the denominator as you suggest if, conversely, you agree to limit the numerator to “administrative savings” only. But I think if you do you will find the margin even thinner, and more likely negative. But that would not be a complete picture of how insurers earn money.

    Take your vaginal deliveries, for example. For a given year, actuaries sit down and calculate how many births they expect in the coming year; they multiply that by the going rate for deliveries; the result is the “premium.”

    The mere fact that the going rate for deliveries is five times what it was six years ago does not create an opportunity for savings by the insurer. If the insurer does nothing to manage the care (and all other things weighed evenly), it will spend everything it projected it would spend, and will having savings of zero.

    But suppose the insurer negotiates a creative reimbursement arrangement with the OB group – - a global fee, say, with a bonus if the group hits certain quality targets around monitoring maternal and fetal health during the pregnancy. The quality targets translate into a reduction in complications and a savings in how much the insurer would otherwise have spent on expensive NICUs for the preemies.

    Has the insurer not “earned” the money it saved? If you still say no, then it would seem your objection is really to insurers doing business as businesses and not as simple purchasing co-ops.

  27. Al says:

    Don M. writes: “Check out the S&P…”

    There are a lot of spurious comparisons being thrown about, but one doesn’t even have to look at any of them. All one has to do is take note of the fact that Medicare is the cause of greater and greater deficits that are bankrupting this nation. I don’t know how anyone can believe that those costs are so well managed if they continue to rise annually and are bankrupting the federal treasury.

  28. Patrick Skinner says:

    MLR’s are basically price fixing – but on the most efficient part of healthcare – insurance. Ins Carriers try to earn 3-6%, where as providers routinely earn 15-35%.

    Obama-Pelosi-Reid-Sebelius want more people insured, but the MLR is disincenting the sales people out of the biz. Name an industry that wants to grow that would dump the salesmen?

    MLR’s are a no win for ins carriers – earn a profit and you have to share it, lose money – eat it.

  29. Michael says:

    I think the straight forward intent of the MLR is that _anything_ that is not payment for care, i.e., reimbursement to providers, is “Administrative Cost.” So, out of their 20% comes all their operating expenses and profit. If you leave “administrative costs to be only a portion of what is not “medical care,” how can you equation it out?

  30. ralph says:

    Premium tax is also part of the “overhead”, which is as much as 6.1% in some states, but averages 2.35%

  31. Aaron Ginn says:

    I am not sure if this has been addressed:

    Won’t the MLR encourage more spending, rather than savings?

    In my head, if I had to spend 80% of my budget on a medical expenses, what happens when I am not going to meet that requirement? Do I throw a bunch of money at a doctor (aka illegal)? Do I quickly fire half of my work force and then rehire them after I meet the rule? To me, it encourages insurers to pay more, rather than cost cut.

    I talked with a friend who works at a health insurer. He said that if he could predict his MLR, he would.

    Is this right?

  32. ralph says:

    @Aaron
    “To me, it encourages insurers to pay more, rather than cost cut.”

    Exactly right. The big insurance lobby that supported this needed to get rewarded, and this was the reward.

  33. Harry Cain says:

    It’s intriguing that this topic has generated so much follow-up commentary. Maybe the MLR rules are the clearest example of how the ACA will turn insurers into public utilities, and that’s getting some reaction. Well earned.
    I have a specific question for Carol: you mentioned a practice I’ve not heard of (and I know the Blues fairly well). What Blue Cross Blue Shield Plan is it? What State do you live in, or if your husband works for a large employer, in what State is its headquarters? Thanks

  34. Patrick Skinner says:

    In Texas, the rebated by insurance carriers have to be seperate checks to the employer, the employee, the spouse, etc. Prorated for the portion of the year they were insured, prorated if there was a plan change or rate change @ the renewat date. CArriers have said it’s a nightmare and they’ll never pay a rebate due to the complexity – they’ll keep the claims paid over 80%, negating profit.

  35. Chris Ewin, MD says:

    John…
    THE DOCTOR’s OFFICE and OVERHEAD:
    You haven’t mentioned the overhead occurring b/c of the administrative hassles for staff, nurses and the office. We have to hire extra staff to deal with the regulations and hurdles.
    Physicians are spending so much time filling out forms and dealing with this mess.
    There is an exodus of physicians leaving primary care and many (including those completing their residencies) are becoming employees of hospitals, etc.
    Of course, many will like that b/c of the decrease in administrative hassles and trying to run a business in this environment.

    That is the beauty of concierge practices. No CPT or ICD-9 codes, minimal staff and hassles, and “overhead” of 25% instead of 65%…

    Patients happy….Docs happy.

  36. Patrick Skinner says:

    Ralph seems to think ‘insurance’ is the problem. IF you made all insurnace non-profit, the increasing cost of healthcare won’t even slow down – you’ll just have one option – Nancy Pelosi dictating who gets what and if YOU get anything.

  37. Chris Ewin, MD says:

    PS:
    I’ve been on the phone for 20 minutes trying to get through to the pharmacy….Kinda of a waste of time when it’s an urgent prescription that shouldn’t be sent by e-Rx….

  38. John R. Graham says:

    Mr. McCanne:

    There are severe limits on access to specialists, high-tech diagnostic equipment, and operating-room capacity in Canada.

    In the U.S, everyone gets an MRI, a CT scan, the newest medical device surgically installed, etc.

    If an orthopedic surgeon in Canada tells a patient that he must wait three or four months for an MRI, and then tells him he can’t do a knee replacement because of government policy, it is not surprising that his monetary administrative costs of dealing with the third-party payer will be much smaller than those of the U.S. surgeon, who will actually diagnose and operate.

    I have not dived deeply into the S&P indices, but they seem to contradict the CBO report noted by Linda Goodman (http://tinyurl.com/3zw3eof). Perhaps Linda will enlighten us.

  39. wanda j. jones says:

    It is so interesting that the Feds zeroed in on the MLR, which capitalizes on the public’s general inchoate hatred of Big Business,their personal experiences with big patient bills, their high cost emergencies and the union rhetoric about high CEO salaries. All this is smoke. And it fails to address more untamable reasons for high premiums:

    1. The cost shift from government programs, as stated above. As Medicaid drops its reimbursement, providers charge more to private plans. The government does not want to draw attention to that because they want to make private plans the bad guy, not a disadvantaged business.

    2. High premiums are also passing on high labor costs that have three components: union activism on salaries and benefits to employing healthcare providers, union activism with legislators to rule on staffing ratios, and premium salaries paid to workers in short supply, especially nurses. California nurses right out of school can earn $140,000. What do you think the public would feel about that, when they are either out of work or in a service job paid so poorly that they cannot afford their co-pays, even if they had a basic policy.

    3. The increases in demand for modern drugs, stimulated by Part D of Medicare. Where there is a giant pricing problem exacerbated by the Medieval reviews by the FDA, patients’ poor medication compliance, and the mark-ups of middleman pharmacies.

    The government wanted to buy-pass any discussion of what the patient care portion of the MLR contained, as it would make them appear to be interfering with the practice of medicine, which, indeed, they would be doing. And, it would bring to light the internal contradiction in the way the government looks at medical care: a) a great place to invest money for scientific advancements that would help cure disease, and b) a great place to control the resulting prices for using the fruits of that research.

    As for transferring costs from insurance, especially Federal, to physicians and hospitals, Medicare and Medicaid, for years, have been doing a “denial” dance–slowing down payment until the providers have sent more detailed justifications, so they have the use of the “float.”

    A hospital I knew in San Francisco had 7 accountants in their business office before 1965, but within 18 months after Medicare and Medicaid passed, had 35. Medicare gets an undeserved “pass” on its administrative costs because it has, since 65, passed off work to fiscal intermediaries and providers.

    The irony of all this is that the government’s actions are incenting doctors to join professionally-managed groups which will have more overhead, and which probably will reduce the productivity of doctors. If the government had any wisdom, it would really support doctors in small practices which often use family members as volunteers to cut down on expenses, and which tend to know their patients better.

    The MLR is what I would call “tortious interference” with a private corporation without compensating benefits.

    Wanda J. Jones
    President
    New Century Healthcare Institute
    San Francisco

  40. Don McCanne says:

    John Graham and I have sharply differing views on health care reform reflected in the policies supported by our respective organizations – Pacific Research Institute and Physicians for a National Health Program – though I would hope that we can agree on the facts to which our disparate ideological views would be applied.

    Queues have been a problem in Canada, though they are often exaggerated. There are no delays for emergency services – CT scans, surgeries, etc. For non-urgent services the Fraser Institute issues an annual report listing the delays. When you check the section that compares the time intervals that physicians believe are reasonable with the actual time intervals, you will see that most are fairly close, though elective orthopedics remains a problem. Ironically, the second worst is plastic surgery, a field which conservatives in the policy community like to use as an example of free markets at work.

    Mr. Graham says that in the U.S. “everyone gets an MRI, a CT scan, the newest medical device surgically installed, etc.” Based on my many years in private practice, I can state emphatically that is not true for far too many people and is the primary reason why I have dedicated my remaining productive years to health care reform.

    Regarding the lower cost trends in Medicare as opposed to private insurance, Mr. Graham cites a CBO study that seemed to show the opposite. That CBO study by Peter Orszag did not compare Medicare and Medicaid to private insurance, rather he compared them to all other health care spending. That other spending included not only payments by private insurers but also out-of-pocket payments by consumers, payments by patients who were uninsured, and health care spending by other government programs. With the very large numbers of individuals uninsured or under-insured, the “other spending” category would not be expected to grow as rapidly, especially with stagnant wages and increasing unemployment.

  41. Al says:

    Don M. We overuse MRI and CT scans. We have these facilities available all over so it is rare that one is denied these procedures. Canada has a tendency to concentrate their facilities and talent. That can lead to problems as demonstrated by the death of Natasha Richardson who had a head injury at a 5 star ski resort in Canada. I think we also have more duplication of services, expensive, but helpful with regard to quality concerns.

    I seem to have heard of longer waits then you have. Maybe John has the site for how long it takes to get to the specialist and then to get the test and then to schedule the procedure. I break up these portions of care since sometimes one is simply using the time from seeing the surgeon to having the procedure which neglects all the time wasted before that.

  42. John Goodman says:

    @ Al
    The Fraser Institute does an annual study on Canadian wait times called “Waiting Your Turn.”

    The latest version can be found on their website.

  43. Al says:

    Thank you John. That is where I saw it.

    Don M. I think this is important because I think you said you were a physician. The statistics I often see leave out a portion of the waiting process. The site John gave demonstrates this graphically.

    Example: Breaking down orthopedic surgery (median wait time 2010) 35.6 weeks. 17.1 to go from the GP to the orthopedist and another 18.5 weeks to go from the orthopedist for surgery.

    The site also demonstrates how these times are increasing and compares them to reasonable wait times and more. It also demonstrates a “Wennberg” type phenomena where there is tremendous differences in wait times (GP to specialist) between the provinces that varied from 3.1-5.2 weeks in 1993 to 6.7-24.6 weeks in 2010. I think Wennberg should take a look at that and perhaps tell us whether or not government is inducing this discrepancy.

  44. wanda j. jones says:

    Don M: Both John Graham and Sally Pipes are from Canada so have first hand experience with that health system. I have consulted for decades in Washington, where there are hospitals able to reqire $100,000 deposits for patients from Canada who do not want to wait for procedures such as bone marrow transplants. These hospitals also have on staff many physicians who preferred to practice in the US.
    We should pay attention to this, as a large reason for the waits in Canada is the shortage of specialists in comparison with the US. We are already there with primaries–want to wait for a cardiologist or brain surgeon?

    I’ve been reading extensively about international comparisons and have been appalled at how the eager commentators grasp for numbers to make the US look bad, which, when examined, are not what they appear at all.
    We don’t need comparatives like that, as we cannot turn into a European country with a homogeneous population, few guns, and a population that has a healthy lifestyle and work, so we have to work with what we have, which is pretty darn good. What our aim should be is continual improvement, and elimination of anything that blocks that improvement, such as mindless regulation from people with only a legal education.

    Wanda Jones
    New Century Healthcare Institute
    San Francisco

  45. James says:

    Ms. Jones:
    A few observations:
    1. My understanding is that when Canadians come to the USA for health care, the Canadian government pays for that care, or at least it pays what it would have cost had the Canadian citizen had that service in Canada.
    2. There is absolutely no evidence that thousands of Canadians are streaming across our northern border every day to get basic health care services, nor is there any evidence that Canadians are wait-listed for emergency procedures.
    3. Don’t think for one minute that Americans don’t participate in medical tourism. There are plenty of Americans who have their hips repaired, tummys tucked, or hearts bypassed in foreign hospitals – to save costs.
    4. Regarding waits, you seem to forget that the USA has the longest waits in the world, i.e., the 40+ million Americans (exclusive of illegal immigrants) who are waiting for basic health insurance. And if you have MediCal, good luck getting an elective colonoscopy anytime soon.
    5. Every health care sytem in the world rations health care in one way or another. Canada rations by urgency and medical necessity. We ration by income and insurance status. Which is more egregious??
    6. It is also worth noting that Canadians spend about 55% of what we do on health care, on a per capita basis. I have no doubt that if Canada financed its health system at $8,500 per capita, there wouldn’t be 10-month waits for MRIs. And if Canada spent what we did, they’d have more specialists per capita.
    7. RE: your comment, Medicare “slowing down payment until the providers have sent more detailed justifications, so they have the use of the “float.” That’s news to me. Medicare pays claims submitted by doctors within 30 days of submission more than 90% of the time, so I wouldn’t say Medicare is making lots of money on the float (unlike private insurers in the USA, who DO make doctors run the gauntlet to get paid)
    8. If international comparisons make the USA look bad, that’s because it’s true. Here’s the latest published evidence, in terms of cost-effectiveness: http://shortreports.rsmjournals.com/content/2/7/60.full

    @Al: regarding Natasha Richardson’s death at an upscale Canadian ski resort – my understanding is that she refused initial medical treatment for her head injury. So the problem was with her, not with Canada’s health care system.

  46. Patrick Skinner says:

    James, Medicare does pay quickly – it’s called pay and chase – to the tune of $60 BILLION in fraudulent claims paid in 2009. How do you feel about your tax dollars going to crooks?
    I vote for the system that those productive enough to pay for something should get it, not the wealth transfer of the gov’t deciding how much to take, who to give it to, and ‘its a God given right’. Why would healthcare be a God given right and not food, water, electricity, shelter, nursing home services, etc. Where do you draw the line? I’m not sure it matters – Medicare is fast bankrupting the US Gov’t and we’ll have to start over.

  47. James says:

    @Patrick: While we’re on the subject of crooks, let’s analyze this. If Medicare costs $500 billion per year, and the administrative costs are 3% (or $15 billion), adding the $60 Billion you say Medicare wastes in fraud & abuse means that the true non-medical costs would be about $75 billion. Divided into $500 billion leaves 15% as non-medical costs (ie, a MLR of 85%). 15% is still less than many private insurers spend on administration. No, I am not happy about my tax dollars being wasted on fraud, but the DOJ has formed a task force to combat fraud, with some early successes. Also, those convicted of Medicare fraud spend time in jail. Insurance executives spend time on the beach. So, who are the real unpunished crooks??

    As to whether health care is a right or a privilege, what do you propose as the market solution to the uninsured and unemployed father of 3 who presents to the ER with a heart attack, who can’t pay for his care? Send him home with aspirin??

    If you understand the theory of insurance, the ONLY way to keep Medicare fiscally sound, given that you can’t increase premiums, cut benefits, or expel beneficiaries with expensive conditions, is to expand the risk pool. If we expanded Medicare to cover every non-elderly and generally healthier American, the overall per-capita cost of health care should go down. And, in terms of choice, just ask any traditional Medicare beneficiary – he/she will tell you that they have the freedom to see ANY doctor who accepts Medicare (about 89% do) and go to ANY hospital, in ANY state – no need to worry about whether they are “in-network” or not.

  48. John R. Graham says:

    With reference to the plastic surgery cited by Dr. McCanne, the Fraser Institute survey covers only medically necessary plastic surgery, not cosmetic plastic surgery.

    I agree with Dr. McCanne that the category of “other spending” requries more decomposition, as I noted above. Please also note that, despite the success of consumer-driven plans in recent years, the share of privately insured patients’ health spending which is controlled by health insurers, rather than patients directly, has increased steadily for decades. This artificially increases the rate of growth of privately insured claims (http://tinyurl.com/26g9bgm).

  49. ralph says:

    @James,
    I’m not sure where you got your numbers, but according to CMS the MLR for the public plans is 88.32% while private plans have MLR’s of 87.79%. Numbers of fraud and abuse are anecdotal, if they were fact, they would prosecute the abusers.
    But medical loss ratios are misleading since private plans pay $468 per enrollee in non patient care costs, which government programs spend $1,317.
    Facts reveal more than statistics

  50. Al says:

    James writes: “@Al: regarding Natasha Richardson’s death at an upscale Canadian ski resort – my understanding is that she refused initial medical treatment for her head injury. So the problem was with her, not with Canada’s health care system.”

    Absolutely wrong. It is true that initially Richardson felt she was not injured and sent the ambulance away but she called again and based upon what had happened and what was happening at the time she was a known medical emergency. They took her locally to a clinic. There was no CT scan available anywhere near by. They transferred her by ambulance with all sorts of bureaucratic delays so that she arrived in time several hours later to be pronounced non salvageable.

    It was this tremendous delay due to bureaucracy and the centralization of care that killed her. When brought to the clinic she should have been immediately airlifted to a center or at least taken a lot quicker. Her demise occurred under their eyes and considering the fact that her death became imminent they could have taken a Black and Decker drill and released the pressure in her head even without a CT scan.

    You might say hogwash to the Black and Decker drill, but trephination is an ancient procedure done long before modern medicine. You might still have your doubts, but not long thereafter a child had a head injury after falling off his bike in Australia. The GP seeing the child in his office said there wasn’t time to get the child to the hospital and used a workman’s drill to release the pressure. The child survived.

    I attribute the death of Natasha Richardson to excessive centralization of care. I am not saying they should change their system. Nor am I making a value judgement regarding the Canadian health care, rather I am using this example as a vivid explanation as to why US health care might cost more.

  51. Al says:

    James writes: ” what do you propose as the market solution to the uninsured and unemployed father of 3 who presents to the ER with a heart attack, who can’t pay for his care? Send him home with aspirin??”

    You realize of course that in the US that man would be admitted and treated similarly to one that was insured unlike in some other western nations where the treatment might be withheld because the global limit for that disease was already reached.

  52. ralph says:

    @james, if you are uninsured in Canada you can be refused care in ER unless you pay first. That is not the case in the US

  53. Rick says:

    This is a perfect argument for creating a single payer Medicare for All financing system that eliminates the 1500 insurance companies and their 30% administrative overhead (about 400 billion/year per one Harvard Study). Medicare’s overhead is less than 5%. Financing healthcare through one entity is the most cost efficient method to provide health care for everyone and save money at the same time.

  54. ralph says:

    @Rick,
    Medicare administrative costs are higher than private insurance administrative costs. Check your facts before you quote bumper sticker slogans.

  55. Bob Deuell, M.D. says:

    There is a big difference between administration costs of those who actually provide the care and those who administer third party payment. One of the reasons health care costs are escalating is that there are more and more people taking a piece of the health care pie who do not lay a hand on a patient. Third party payment is the problem. Insurance has gone from asset protection to first dollar coverage and that has skewed the system and given control to insurance companies and taken it from the patients and their physicians.

  56. Ralph says:

    You are right bob

  57. SocialistsopposeCapitalism says:

    Margaret Thatcher once said, “The problem with socialism is that you eventually run out of other people’s money.”

  58. Rick says:

    Ralph – I have checked my facts. I suggest you read this study from the New England Journal of Medicine from 2003 which presents actual facts and statistics, not “bumper sticker slogans.”

    http://www.pnhp.org/publications/nejmadmin.pdf

  59. ralph says:

    Rick,
    Himmelstein uses stats to make a point, not facts, so I give your source ZERO credibility. Partisan studies intended to support an ideological conclusion are worthless.

    Notice that he talks about “per capita” administration costs when comparing Canada to the US. Completely useless studies.

    The comparison you need ot look at is per enrollee costs on Medicare, on Medicaid, and on private insurance. Very different facts

  60. James says:

    Oh come on, Ralph. Per-enrollee costs are higher for Medicare than for private insurance because – guess what? – Medicare enrollees are older & sicker. In terms of “useless studies” & credibility, Himmelstein is published in the New England Journal of Medicine. Have you got any stats to refute his, that have been published in the peer-reviewed medical literature? If so, please enlighten me.

  61. James says:

    @Ralph: RE: “if you are uninsured in Canada you can be refused care in ER unless you pay first.”
    Really?? I had not heard this. Please provide a credible reference for this assertion.

    @Al: Thank you for clarifying the facts on Natasha Richardson. But to say “It was this tremendous delay due to bureaucracy and the centralization of care that killed her.” – that’s a stretch. Don’t think for one minute that a tragedy like this couldn’t happen in the USA. And I am familiar with trephination; I am also familiar with 20/20 hindsight. The irony of it is that trephination with a Black & Decker drill would probably be less likely to be done in the US due to fear of malpractice suit.

  62. ralph says:

    James,
    Please explain to me why medicare administrative costs should be higher simply because as you say: “Medicare enrollees are older & sicker”
    Medicare admin costs are higher than private insurance admin costs because of government inefficiencies, not because Medicare beneficiaries are “old and sick”

  63. ralph says:

    James,
    When is the last time you went to Canada and tried to obtain care in an ER? If you had done so within the past few years, you would have seen signs like these:

  64. Al says:

    James: Natasha Richardson is an anecdote, but why that anecdote occurred is explained by looking at why she died. In part the key is centralized vs decentralized care. She was relatively close to a major trauma hospital. If she were in the US at a 5 star resort ~100 miles from a major trauma hospital this would have likely never occurred.

    The US believes in the ability to maintain a rapid response to life threatening problems. Thus we have CT scanners available in places like she was originally sent and we have air transport for those that are in outlier areas or need rapid transport. No CT or air transport was available in that area of Canada despite it being a 5 star resort. All of that costs a lot of money and doesn’t show up very well in the low quality statistics the left likes to use.

    James, a lot of your facts are questionable or wrong. Regarding those to Wanda:

    1)”when Canadians come to the USA for health care, the Canadian government pays for that care,”

    Not so and the later part of your answer seems to be made up.

    2) Canadians get basic care whatever that means. The problem is in getting non basic or more expensive care. What you consider to be a non emergency MRI might be one if a tumor is growing.

    3) What foreign hospitals are doing hips on a regular basis and how many? Curious minds need to know.

    4) “the 40+ million Americans (exclusive of illegal immigrants) who are waiting for basic health insurance. ”

    Health insurance is not health care. Most of the 40+ million can not only get, but can afford basic care.

    After discussing the first 4 it makes no sense to discuss your remaining points.

  65. Rick says:

    Your analysis is the perfect argument for why we need a single payer medicare-for-all financing system for health care. Medicare administrative overhead is no more than 5%, while the insurance companies eat up 30% in overhead administrative costs. We could save 400 billion a year (according to Harvard study) if we went to a single payer national health insurance system. Publicly funded but privately provided. See
    http://www.pnhp.org/resources/pnhp-research-the-case-for-a-national-health-program

  66. Patrick Skinner says:

    Rick, What you are really saying is you want rationing, with Nancy Pelosi dictating who gets what of a limited resource. What smart 18 year olds will do 12 years of schooling, $300k in student loans, to work for a gov’t that DICTATES your income, so low you won’t be able to pay your student loans, much less send your kids to college. Look @ Massachusetts for a doctor shortage and you’ll see why Single Payor will never work. The smart kids will become lawyers – like we don’t have too many already, and not enough doc’s.

  67. Rick says:

    Patrick – So you will understand what single payer is and not be a slave to Fox News and Insurance Company propaganda, I offer you the following Q & A on Single Payer so you can base you opinions on facts:

    FREQUENTLY ASKED QUESTIONS ABOUT SINGLE PAYER

    Is national health insurance ‘socialized medicine’?

    No. Socialized medicine is a system in which doctors and hospitals work for and draw salaries from the government. Doctors in the Veterans Administration and the Armed Services are paid this way. The health systems in Great Britain and Spain are other examples. But in most European countries, Canada, Australia and Japan they have socialized health insurance, not socialized medicine. The government pays for care that is delivered in the private (mostly not-for-profit) sector. This is similar to how Medicare works in this country. Doctors are in private practice and are paid on a fee-for-service basis from government funds. The government does not own or manage medical practices or hospitals.
    The term socialized medicine is often used to conjure up images of government bureaucratic interference in medical care. That does not describe what happens in countries with national health insurance where doctors and patients often have more clinical freedom than in the U.S., where bureaucrats attempt to direct care.

    Won’t this result in rationing like in Canada?

    The U.S. already rations care. Rationing in U.S. health care is based on income: if you can afford care, you get it; if you can’t, you don’t. A recent study by the prestigious Institute of Medicine found that 18,000 Americans die every year because they don’t have health insurance. Many more skip treatments that their insurance company refuses to cover. That’s rationing. Other countries do not ration in this way.
    If there is this much rationing, why don’t we hear about it? And if other countries ration less, why do we hear about them? The answer is that their systems are publicly accountable, and ours is not. Problems with their health care systems are aired in public; ours are not. For example, in Canada, when waits for care emerged in the 1990s, Parliament hotly debated the causes and solutions. Most provinces have also established formal reporting systems on waiting lists, with wait times for each hospital posted on the Internet. This public attention has led to recent falls in waits there.
    In U.S. health care, no one is ultimately accountable for how the system works. No one takes full responsibility. Rationing in our system is carried out covertly through financial pressure, forcing millions of individuals to forego care or to be shunted away by caregivers from services they can’t pay for.
    The rationing that takes place in U.S. health care is unnecessary. A number of studies (notably a General Accounting Office report in 1991 and a Congressional Budget Office report in 1993) show that there is more than enough money in our health care system to serve everyone if it were spent wisely. Administrative costs are at 31% of U.S. health spending, far higher than in other countries’ systems. These inflated costs are due to our failure to have a publicly financed, universal health care system. We spend about twice as much per person as Canada or most European nations, and still deny health care to many in need. A national health program could save enough on administration to assure access to care for all Americans, without rationing.

    Who will run the health care system?

    There is a myth that with national health insurance the government will make the medical decisions. But in a publicly financed, universal health care system, medical decisions are left to the patient and doctor, as they should be. This is true even in the countries like the U.K. and Spain (or in U.S. systems like the VA) that have socialized medicine.
    In a public system, the public has a say in how it’s run. Cost containment measures are publicly managed at the state level by elected and appointed agencies that represent the public. This agency decides on the benefit package and negotiates doctor fees and hospital budgets. It also is responsible for health planning and the distribution of expensive technology. Thus, the total budget for health care is set through a public, democratic process. But clinical decisions remain a private matter between doctor and patient.

    What about medical research?

    Much current medical research is publicly financed through the National Institutes of Health. Under a universal health care system this would continue. For example, a great deal of basic drug research, for example, is funded by the government. Drug companies are invited in for the later stages of “product development,” the formulation and marketing of new drugs. AZT for HIV patients is one example. The early, expensive research was conducted with government money. After the drug was found to be effective, marketing rights went to the drug company.
    Medical research does not disappear under universal health care system. Many famous discoveries have been made in countries with national health care systems. Laparoscopic gallbladder removal was pioneered in Canada. The CT scan was invented in England. The treatment for juvenile diabetes by transplanting pancreatic cells was developed in Canada.
    It is also important to note that studies show that, in the U.S., the number of clinical research grants declines in areas of high HMO penetration. This suggests that managed care increasingly threatens clinical research. Another study surveyed medical school faculty and found that it was more difficult to do research in areas where high HMO penetration has enforced a more business-oriented approach to health care.
    Finally, it appears that the increasing commercialization of research is beginning to slow innovation. Drug firms’ increasing reliance on contract research organizations (and for-profit ethical-review boards) has coincided with a sharp drop in innovative new drugs and a spate of “me-too” drugs – minor variations on old drugs that offer little benefit other than extended patent life.

    Won’t this just be another bureaucracy?

    The United States has the most bureaucratic health care system in the world. Over 31% of every health care dollar goes to paperwork, overhead, CEO salaries, profits, etc. Because the U.S. does not have a unified system that serves everyone, and instead has thousands of different insurance plans, each with its own marketing, paperwork, enrollment, premiums, and rules and regulations, our insurance system is both extremely complex and fragmented.
    The Medicare program operates with just 3% overhead, compared to 15% to 25% overhead at a typical HMO. Provincial single-payer plans in Canada have an overhead of about 1%.
    It is not necessary to have a huge bureaucracy to decide who gets care and who doesn’t when everyone is covered and has the same comprehensive benefits. With a universal health care system we would be able to cut our bureaucratic burden in half and save over $300 billion annually.

    How will we keep costs down if everyone has access to comprehensive health care?

    People will seek care earlier when chronic diseases such as hypertension and diabetes are more treatable. We know that both the uninsured and many of those with skimpy private coverage delay care because they are afraid of health care bills. This will be eliminated under such a system. Undoubtedly the costs of taking care of the medical needs of people who are currently skimping on care will cost more money in the short run. However, all of these new costs to cover the uninsured and improve coverage for the insured will be fully offset by administrative savings.
    In the long run, the best way to control costs is to improve health planning to assure appropriate investments in expensive, high-tech care, to negotiate fees and budgets with doctors, hospital and drug companies, and to set and enforce a generous but finite overall budget.

    How will we keep doctors from doing too many procedures?

    This is a problem in any system that reimburses physicians on a fee-for-service basis. In today’s health system, another problem is physicians doing too little for patients. So the real question is, “How do we discourage both overcare and undercare?”
    One approach is to carefully control new capital expenditures. Once a hospital or imaging center purchases a multimillion-dollar CT scanner, it will try to generate enough scans to pay off the fixed cost. Explicit health planning should be done to assure that expensive machines and facilities are sited where they are needed and not where they are redundant and likely to generate overuse.
    Another approach is to compare physicians’ use of tests and procedures to their peers with similar patients. A physician who is “off the curve” will stand out. A related approach is to set spending targets for each specialty. This encourages doctors to be prudent stewards and to make sure their colleagues are as well, because any doctor doing unnecessary procedures will be taking money away from colleagues.
    In addition, expert guidelines by groups like the American College of Physicians, etc., can help shape professional standards – which will certainly change over time as treatments change. This really gets to the heart of “how do you improve the quality of health care,” which is a longer topic. Suffice it to say that single-payer, universal coverage provides a framework for achieving thoughtful quality improvement.

    What will happen to physician incomes?

    On the basis of the Canadian experience under national health insurance, we expect that average physician incomes should change little. However, the income disparity between specialties is likely to shrink.
    The increase in patient visits when financial barriers fall under a single-payer system will be offset by resources freed up by a drastic reduction in administrative overhead and physicians’ paperwork. Billing would involve imprinting the patient’s national health program card on a charge slip, checking a box to indicate the complexity of the procedure or service, and sending the slip (or a computer record) to the physician-payment board.

    How will we keep drug prices under control?

    When all patients are under one system, the payer wields a lot of clout. The VA gets a 40% discount on drugs because of its buying power. This “monopsony” buying power is the main reason why other countries’ drug prices are lower than ours. This also explains the drug industry’s staunch opposition to single-payer national health insurance.

    Why shouldn’t we let people buy better health care if they can afford it?

    Whenever we allow the wealthy to buy better care or jump the queue, health care for the rest of us suffers. If the wealthy are forced to rely on the same health system as the poor, they will use their political power to assure that the health system is well funded. Conversely, programs for the poor become poor programs. For instance, because Medicaid doesn’t serve the wealthy, the payment rates are low and many physicians refuse to see Medicaid patients. Calls to improve Medicaid fall on deaf ears because the beneficiaries are not considered politically important. Moreover, when the wealthy jump the queue, it results in longer waits for others. Studies in New Zealand and Canada show that the growth of private care in parallel to the public system results in lengthening waits. Additionally, allowing the development of a parallel, private system for the wealthy means the creation of a permanent lobby for underfunding public care. Such underfunding increases the demand for private care.

    What will be covered?

    All medically necessary care would be funded through the single payer, including doctor visits, hospital care, prescriptions, mental health services, nursing home care, rehab, home care, eye care and dental care. We also advocate a sharp increase in public health funding.

    What about alternative care, will it be covered?

    Alternative care that is proven in clinical trials to be effective will be covered. For example, spinal manipulation for some lower back conditions would be covered, but not chiropractic care of the neck (which is unproven and possibly dangerous). Antioxidant vitamins would be covered for people with macular degeneration, but not for the general population (where they appear to be harmful). In general, coverage decisions will be made by the health care planning board or another public body. New kinds of treatments will be added to the benefits package over time as they are shown to be effective, including “alternative” treatments. Similarly, ineffective or harmful care can be removed from the benefits package, such as high dose epo for cancer.

    Can a business keep private insurance if they choose?

    Yes and no. Everyone has to be included in the new system for it to be able to control costs, reduce bureaucracy, and cover everyone. In Canada, businesses can purchase additional private insurance that covers things not covered by the national plan (e.g. private rooms, orthodontia, etc.). However, we support a comprehensive benefit package for the single-payer program that would eliminate the need (and most demand) for supplemental coverage.
    Insurance companies would not be allowed to offer the same benefits as the universal health care system, a restriction contained in the traditional Medicare program. Allowing such duplication of coverage weakens and eventually destabilizes the health care system. It undermines the principle of pooling the risk. Health care systems act as universal insurers. At any one time the healthy help pay for those who are ill. If private insurers are allowed to cherry-pick the healthy, leaving the public health care system with the very sick, the system will fail.
    This, in fact, is what we see happening to Medicare through the Medicare Advantage program. The government pays Medicare HMOs 13% more than it pays traditional Medicare, yet the HMOs care for a healthier mix of seniors. This is leading to privatization of Medicare and funding shortfalls for the traditional Medicare program.

    What will happen to all of the people who work for insurance companies?

    The new system will still need some people to administer claims. Administration will shrink, however, eliminating the need for many insurance workers, as well as administrative staff in hospitals, clinics and nursing homes. More health care providers, especially in the fields of long-term care, home health care, and public health, will be needed, and many insurance clerks can be retrained to enter these fields. Many people now working in the insurance industry are, in fact, already health professionals (e.g. nurses) who will be able to find work in the health care field again. But many insurance and health administrative workers will need a job retraining and placement program. We anticipate that such a program would cost about $20 billion, a small fraction of the administrative savings from the transition to national health insurance.
    PNHP has worked with labor unions and others to develop plans for a jobs conversion program with would protect the incomes of displaced clerical workers until they were retrained and transitioned to other jobs.

    How will we contain costs with the population aging?

    Studies show that aging of the population accounts for only a small fraction of the increases in health costs. Japan and Europe are already facing the problem of an aging population head-on and are doing fine. They have a much higher percentage of elderly than we do, and still spend far less on health care.
    The best way to approach this is to regard it as a societal problem, one that needs a solution with everyone in mind. Germany and Japan recently adopted single-payer long-term care systems to cover the long-term care needs of the elderly at home and in specialized housing. Germany is pioneering a program that pays family members to care for the elderly at home.

    What about ERISA? Doesn’t it stand in the way of states implementing universal health care plans?

    No. ERISA (the Employees Retirement Income Security Act) prevents a state from requiring that a self-insured employer provide certain benefits to their employees. However, a single-payer plan would not mandate the composition of employer benefit plans – it would replace them with a new system that would essentially be “Medicare for all.” The state would require employers to pay a payroll tax into the health care trust fund, which is clearly legal.

    How will the Health Planning Board operate?

    A health planning board would be a public body with representatives of patients and medical experts. The representatives would decide on what treatments, medications and services should be covered, based on community needs and medical science, and allocate capital for major new investments based on assessments of where need is greatest.

    Since we could finance a fairly good system, like the Norwegian, Danish or Swedish system, with the public money we are already spending (60% of health costs), why do we need to raise the additional 40% (from employers and individuals)?
    There are three reasons why the U.S. health care system costs more than other systems throughout the world. One, we spend two to three times as much as they do on administration. Two, we have much more excess capacity of expensive technology than they do (more CT scanners, MRI scanners, and surgery suites). Three, we pay higher prices for services than they do.
    There is no doubt that we do not need to spend more than we currently spend to cover comprehensive care for everyone. But the initial transition to a universal system would be very disruptive if we spent less. That is because we have a tremendous medical infrastructure, some of which would likely retain its excess capacity during the transition phase. Secondly, we would likely retain salaries for health professionals at their current levels. Thirdly, we would cover much more than most other countries do by including dental care, eye care, and prescriptions. And for these reasons we would need the extra 40% that we are already spending – but NOT more. We could cover all the uninsured and improve coverage for those who have skimpy coverage for the same amount we are currently spending!

    How much of the health care dollar is publicly financed?

    Over sixty percent (60.5 percent) of health spending in the U.S. is funded by government. Official figures for 2005 peg government’s share of total health expenditure at 45.4 percent, but this excludes two items:
    1. Tax subsidies for private insurance, which cost the federal treasury $188.6 billion in 2004. These predominantly benefit wealthy taxpayers.
    2. Government purchases of private health insurance for public employees such as police officers and teachers. Government paid private insurers $120.2 billion for such coverage in 2005: 24.7 percent of the total spending by U.S. employers for private insurance.
    So, government’s true share amounted to 9.7 percent of gross domestic product in 2005, 60.5 percent of total health spending, or $4,048 per capita (out of total expenditure of $6,697).
    By contrast, government health spending in Canada and the U.K. was 6.9 percent and 7.2 percent of gross domestic product respectively (or $2,337 and $2,371 per capita). Government health spending per capita in the U.S. exceeds total (public plus private) per capita health spending in every country except Norway, Switzerland and Luxembourg.
    (Source: Himmelstein and Woolhandler, “Competition in a publicly funded healthcare system” BMJ 2007; 335:1126-1129 [1 December] and Woolhandler and Himmelstein, Health Affairs, 2002, 21(4), 88, “Paying for National Health Insurance – And Not Getting It.”)

    Why not MSAs/HSAs?

    Medical savings accounts (MSAs) and similar options such as health savings accounts (HSAs) are individual accounts from which medical expenses are paid. Once the account is depleted and a deductible is met, medical expenses are covered by a catastrophic plan, usually a managed care plan.
    Individuals with significant health care needs would rapidly deplete their accounts and then be exposed to large out-of-pocket expenses; hence they would tend to select plans with more comprehensive coverage. Since only healthy individuals would be attracted to the MSAs/HSAs, higher-cost individuals would be concentrated in the more comprehensive plans, driving up premiums and threatening affordability. By placing everyone in the same pool, the cost of high-risk individuals is diluted by the larger sector of relatively healthy individuals, keeping health insurance costs affordable for everyone.
    Currently, HSAs offer substantial tax savings to people in high-income brackets, but little to families with average incomes, and thus serve as a covert tax cut for the wealthy.
    Moreover, MSA/HSA plans discourage preventive care, which generally would be paid out-of-pocket, and do nothing to restrain spending for catastrophic care, which accounts for most health costs. Finally, HSAs/MSAs discriminate against women, whose care costs, on average, $1,000 more than men’s annually. Hence, on the MSA/HAS plan, the average woman pays $1,000 more out-of-pocket than her male counterpart.

    Why not use tax subsidies to help the uninsured buy health insurance?

    The major flaw of tax subsidies is that they would be used to help purchase plans in our current fragmented system. The administrative inefficiencies and inequities that characterize our system would be left in place, and we would continue to waste valuable resources that should be going to patient care instead. Moreover, even with tax subsidies, moderate- and lower-income individuals would be unable to afford good coverage, leaving them with modest benefits and high cost-sharing that would often make health care unaffordable. Instead of perpetuating our current inequities, tax policies should be used to create equity in contributions to a system in which everyone is assured access to comprehensive beneficial services.
    If the tax subsidies are granted to individuals, employers would be motivated to drop their coverage, and most individuals covered would have merely rotated from employer coverage to individual coverage. The net reduction in the numbers of uninsured would be small. If the tax subsidies are granted to employers, a major shift in funding passes from employers to taxpayers without significant improvements efficiency or fairness. We can use the tax system to create equity in the way we fund health care, but we should also expect equity and efficiency in allocation of our health care resources. Distributing health resources according to human needs is possible only if we eliminate the private health plans and establish a publicly administered system.

    What is PNHP’s response to libertarian proposals for health savings accounts and deregulated insurance plans?

    In response to the libertarian view: 1) We are already spending more than enough to provide all necessary health care services to everyone, and 2) The majority of Americans believe that everyone should be able to obtain necessary health care without having to face financial hardship.
    The goal then is not only to have everyone covered with insurance, but also to make sure that insurance is effective in preventing the consequences of medical debt. We have a rapidly expanding epidemic of underinsurance, and the proposals of libertarians would expose the majority of us to the potential of excessive medical debt were we to develop significant medical problems. Policies with affordable premiums work for those who remain healthy, but most of health care spending is for those with major acute and chronic problems. The deregulated insurance plans and HSAs proposed by libertarians cannot ever effectively address the problem of how we are going to pay for most of the health care in this nation.
    The most efficient and effective system would be to establish a single risk pool covering everyone, and fund it equitably. The libertarians do have a problem with “equitable.” That would require a transfer from the healthy to those with greater health care needs. But the United States has an additional unique problem. Since we spend twice as much per capita as the average industrialized nation, each person’s share (national health expenditures divided by the U.S. population) is no longer affordable. For a family of four, that would be over $30,000 when median household income is about $50,000. So an equitably financed system in the United States would also require a transfer from wealthier individuals to the majority of us. Libertarians and egalitarians will never agree on the appropriate course. All other nations tend toward an egalitarian approach.
    The World Health Report 2008, published by the World Health Organization, singles out the United States for its exceptionalism – a system with “singularly high additional private expenditure” that persistently underperforms “across domains of health outcomes, quality, access, efficiency and equity.” Everyone should read this report. Very brief excerpts and a link to the full report can be found at: http://www.pnhp.org/news/2008/october/the_world_health_rep.php

    Won’t competition be impeded by a universal health care system?

    Advocates of the “free market” approach to health care claim that competition will streamline the costs of health care and make it more efficient. What is overlooked is that past competitive activities in health care under a free market system have been wasteful and expensive, and are the major cause of rising costs.
    There are two main areas where competition exists in health care: among the providers and among the payers. When, for example, hospitals compete they often duplicate expensive equipment in order to corner more of the market for lucrative procedure-oriented care. This drives up overall medical costs to pay for the equipment and encourages overtreatment. They also waste money on advertising and marketing. The preferred scenario has hospitals coordinating services and cooperating to meet the needs of their communities.
    Competition among insurers (the payers) is not effective in containing costs either. Rather, it results in competitive practices such as avoiding the sick, cherry-picking, denial of payment for expensive procedures, etc. An insurance firm that engages in these practices may reduce its own outlays, but at the expense of other payers and patients.

    Why not make people who are higher risk pay higher premiums?

    Experience-rated insurance requires higher risk people to pay higher premiums. This approach says that people who have had cancer in the past, or who have chronic conditions like diabetes and hypertension, or who have had dangerous exposures to substances like asbestos, must pay more because they are at higher risk of using health services. Experience rating allows insurance companies to cherry-pick the healthiest people and either refuse to insure the sickest or, what amounts to the same thing, charge prohibitively high rates. This approach makes no sense. The whole point of insurance is to spread the risk so that everyone is covered. If you raise premiums – and thereby exclude from coverage – those people unfortunate enough to be sick, you defeat the point of both insurance and the health care system. Genetic conditions, childhood diseases, accidents, injuries and income distribution (or how much equality there is in a society) play a much bigger role in people’s health than “individual lifestyle” factors. And we know that even for motivated patients, alcohol and tobacco cessation are difficult, and medical weight loss nearly impossible. We need public health, primary care and education programs to try to prevent disease, but punishing patients once they are ill is inhumane and counterproductive.
    Community-rated health insurance is the socially fair approach. It spreads the risks evenly among all the insured. It removes the punitive element. It does not discriminate against the very sick, nor against those of us who are at higher risk because of our age (say, over 50) or our gender (reproductive-age females have higher health expenses than men, for obvious reasons).
    Health care should be organized as a public service, like a fire department. A health system organized as a business is discriminatory and accountable to no one. At some point in our lives all of us will predictably need health care. Hence health insurance is unlike any other form of insurance; we all are involved.

    Won’t this raise my taxes?

    Currently, about 60% of our health care system is financed by public money: federal and state taxes, property taxes and tax subsidies. These funds pay for Medicare, Medicaid, the VA, coverage for public employees (including police and teachers), elected officials, military personnel, etc. There are also hefty tax subsidies to employers to help pay for their employees’ health insurance. About 20% of health care is financed by all of us individually through out-of-pocket payments, such as co-pays, deductibles, the uninsured paying directly for care, people paying privately for premiums, etc. Private employers only pay 21% of health care costs. In all, it is a very “regressive” way to finance health care, in that the poor pay a much higher percentage of their income for health care than higher income individuals do.
    A universal public system would be financed in the following way: The public funds already funneled to Medicare and Medicaid would be retained. The difference, or the gap between current public funding and what we would need for a universal health care system, would be financed by a payroll tax on employers (about 7%) and an income tax on individuals (about 2%). The payroll tax would replace all other employer expenses for employees’ health care, which would be eliminated. The income tax would take the place of all current insurance premiums, co-pays, deductibles, and other out-of-pocket payments. For the vast majority of people, a 2% income tax is less than what they now pay for insurance premiums and out-of-pocket payments such as co-pays and deductibles, particularly if a family member has a serious illness. It is also a fair and sustainable contribution.
    Currently, 47 million people have no insurance and hundreds of thousands of people with insurance are bankrupted when they have an accident or illness. Employers who currently offer no health insurance would pay more, but those who currently offer coverage would, on average, pay less. For most large employers, a payroll tax in the 7% range would mean they would pay slightly less than they currently do (about 8.5%). No employer, moreover, would gain a competitive advantage because he had scrimped on employee health benefits. And health insurance would disappear from the bargaining table between employers and employees.
    Of course, the biggest change would be that everyone would have the same comprehensive health coverage, including all medical, hospital, eye care, dental care, long-term care, and mental health services. Currently, many people and businesses are paying huge premiums for insurance so full of gaps like co-payments, deductibles and uncovered services that it would be almost worthless if they were to have a serious illness.

    Isn’t a payroll tax unfair to small businesses?

    The payroll tax means a cost increase for businesses that are not currently insuring their workers. However, it is much less than they would pay at present for adequate coverage for themselves and their workers. For most small (and large) businesses already providing coverage, the payroll tax will mean substantial savings.

    What about incremental reform of the health system?

    As a matter of policy, PNHP expressly opposes many so-called gradual steps towards single-payer. Many well-meaning supporters often push these bills as “feasible steps” to move us towards single-payer, but the history of these kinds of health reform efforts – Hawaii in 1974, Massachusetts in 1988, Oregon in 1989, Tennessee in 1992, Minnesota in 1992, Maine in 2003, etc. – shows that despite their claims of pragmatism, incremental reforms have consistently failed for more than three decades. Incremental reforms cannot garner administrative savings and redirect them to care. Hence they always founder on the shoals of cost. In addition, these reforms distract attention from the economically realistic, if politically challenging, option of single-payer reform.

    What happens to investor-owned hospitals under national health insurance (NHI)?

    “The NHI program would compensate owners of investor-owned hospitals, group/staff model HMOs, nursing homes and clinics for the loss of their clinical facilities, as well as any computers and administrative facilities needed to manage NHI. They would not be reimbursed for loss of business opportunities or for administrative capacity not used by NHI. Investor-owned providers would be converted to nonprofit status. The NHI would issue long-term bonds to amortize the one-time costs of compensating investors for the appraised value of their facilities. These conversion costs would be offset by reductions in payments for capital that are currently folded into Medicare and other reimbursements.” (Physicians’ Proposal, JAMA, August 13, 2003.)

    What proportion of health spending is for undocumented immigrants?

    Very little. All foreign-born people, including immigrant workers who have legal status and who have lived in the U.S. for years, account for somewhat less than one-quarter of the uninsured, according to the Census Bureau. We do know that foreign-born people in the U.S. are, on average, healthier and utilize little health care – about half of the health care (per capita) of U.S.-born persons. Surprisingly this is true whether or not they have insurance. Immigrant children receive very little care, 74 percent less overall than other children. So, if the foreign born are less than one-quarter of the uninsured, only one-eighth of health spending on the uninsured is going to the foreign born, which translates into a tiny fraction of all U.S. health spending. In fact, most immigrants have health insurance coverage, and 30% of immigrants use no health care at all in the course of a year. Undocumented immigrants are politically unpopular and hence a convenient target, but they are not the cause of rising health care costs.

    The insurance industry says that PNHP’s figures on administrative costs are outdated. Is this true?
    PNHP has published a series of peer-reviewed studies over the past 20 years showing a steady increase in health administrative costs. While some aspects of administrative cost estimation (e.g. physicians’ billing costs) require special studies, others, such as insurance overhead, can be easily tracked from publicly available data. These figures show no evidence of a fall in administrative costs since our most recent (2003) comprehensive estimate that administration consumes at least 31% of U.S. health care spending.
    Recently, right-wing “think tanks” have released studies claiming that Medicare’s administrative costs are far higher than the official 3% estimate. These estimates add to Medicare’s costs a share of the salaries of the President and members of Congress, the cost of running the Internal Revenue Service, etc. But none of these added costs would go away if Medicare were abolished, or up if Medicare were expanded to cover everyone. Most economists agree that such expenses should not be included in calculating Medicare’s overhead.

    How much could the states save on administrative waste by adopting a statewide single-payer program?

    Estimates of state administrative costs (a few years old, but the best available) are in an article by Drs. David Himmelstein and Steffie Woolhandler from 2003.

    What will happen to malpractice costs under national health insurance?

    They will fall dramatically, for several reasons. First, about half of all malpractice awards go to pay present and future medical costs (e.g. for infants born with serious disabilities). Single payer national health insurance will eliminate the need for these awards. Second, many claims arise from a lack of communication between doctor and patient (e.g. in the Emergency Department). Miscommunication/mistakes are heightened under the present system because physicians don’t have continuity with their patients (to know their prior medical history, establish therapeutic trust, etc) and patients aren’t allowed to choose and keep the doctors and other caregivers they know and trust (due to insurance arrangements). Single payer improves quality in many ways, but in particular by facilitating long-term, continuous relationships with caregivers. For details on how single payer can improve the quality of health care, see “A Better Quality Alternative: Single Payer National Health Insurance.” For these and other reasons, malpractice costs in three nations with single payer are much lower than in the United States, and we would expect them to fall dramatically here. For details, see “Medical Liability in Three Single-Payer Countries” paper by Clara Felice and Litsa Lambkros.

    For more info, go to http://www.pnhp.org and review the studies in their resources section.

  68. Patrick Skinner says:

    Rick,

    We’ve heard it all before.

    Let’s just agree to disagree – some people believe big government is the answer to controlling people’s lives, others believe in free enterprise and individual responsibility.

    I respect your right to your opinion, and understand that it just that – not fact.

    My opinion is that free enterprise and personal responsibility works.

  69. thomas carney says:

    Rick, there is sooo much miss information with your comments that it would take more time than I have to go question by question but let me just comment on 2 points. For you to imply that the administrative costs to private insurance is much higher, and therefore a critical cost advantage for Government plans, is to completely NOT acknowledge that Medicaire and Medicade pass on their administrative costs to the private providers. You failed to mention the incredable amount of corruption to the Medicaire and Medicade systems due inpart to their lack of administrative systems to prevent bogus treatment claims from unethical doctors that the private system employes with a far better record of prevention. There goes your cost advantages big time if you want the Gov. plan to be judged on a level playing field. Second for you to imply that life style choices like the use of tobacco, over weight eating habits, a lack of exercise, bad food choices etc. plays only a small part in an indiviguals health is to show your complete lack of understanding on our own ability to create a healthy life style that dramatically effects our ability to live a healthly relatively disease free life. Yes I know that genetics plays a big role in our health but good life style choices that you morally superior people NEVER mentions dramatically effects your indivigual chances to live a healthy life. To not penalize those that choose to live unhealthy lives is morally WRONG!!!

  70. Rick says:

    Tom – It appears you have been reading too many “studies” produced by the Heritage Foundation.
    Whenever you encounter “research” from the Heritage Foundation, you always have to bear in mind that Heritage isn’t really a think tank; it’s a propaganda shop. Everything it says is automatically suspect.

    Heritage attempts to explain away Medicare’s low administrative costs:

    “Naturally, Medicare beneficiaries need, on average, more health care services than those who are privately insured. Yet the bulk of administrative costs are incurred on a fixed program-level or a per-beneficiary basis. Expressing administrative costs as a percentage of total costs makes Medicare’s administrative costs appear lower not because Medicare is necessarily more efficient but merely because its administrative costs are spread over a larger base of actual health care costs. When administrative costs are compared on a per-person basis, the picture changes. In 2005, Medicare’s administrative costs were $509 per primary beneficiary, compared to private-sector administrative costs of $453.”

    Well, whaddya know — this is an old argument, and has been thoroughly refuted. Jacob Hacker, Director of the Institution for Social and Policy Studies and Stanley B. Resor Professor of Political Science at Yale University, states:

    “These administrative spending numbers have been challenged on the grounds that they exclude some aspects of Medicare’s administrative costs, such as the expenses of collecting Medicare premiums and payroll taxes, and because Medicare’s larger average claims because of its older enrollees make its administrative costs look smaller relative to private plan costs than they really are.”

    However, the Congressional Budget Office (CBO) has found that administrative costs under the public Medicare plan are less than 2 percent of expenditures, compared with approximately 11 percent of spending by private plans under Medicare Advantage. This is a near perfect “apples to apples” comparison of administrative costs, because the public Medicare plan and Medicare Advantage plans are operating under similar rules and treating the same population.

    (And even these numbers may unduly favor private plans: A recent General Accounting Office report found that in 2006 Medicare Advantage plans spent 83.3 percent of their revenue on medical expenses, with 10.1 percent going to non-medical expenses and 6.6 percent to profits—a 16.7 percent administrative share.)

    The CBO study suggests that even in the context of basic insurance reforms, such as guaranteed issue and renewability, private plans’ administrative costs are higher than the administrative costs of public insurance. The experience of private plans within FEHBP carries the same conclusion. Under FEHBP, the administrative costs of Preferred Provider Organizations (PPOs) average 7 percent, not counting the costs of federal agencies to administer enrollment of employees. Health Maintenance Organizations (HMOs) participating in FEHBP have administrative costs of 10 to 12 percent.

    In international perspective, the United States spends nearly six times as much per capita on health care administration as the average for Organization for Economic Cooperation and Development (OECD) nations. Nearly all of this discrepancy is due to the sales, marketing, and underwriting activities of our highly fragmented framework of private insurance, with its diverse billing and review practices.

    I invite you to learn more in this Study by ProCon.org, a non-profit non-partisan organization whose purpose is to provide resources for critical thinking and to educate without bias:

    http://healthcarereform.procon.org/view.resource.php?resourceID=004083

    This will give you the unbiased data on the comparison between medicare and private insurance.

  71. thomas carney says:

    Rick, I will check out the ProCon site. The questions you answered came right out of the Liberal hand book so please don’t through up the partisan excuss. Also CBO #’s are a joke. The CLASS feature to Obama Care is just one of so many examples of riged CBO calculations. Its garbage in garbage out!!! You still did not address the fact that Medicare and Medicade transfer many of their admin cost to the Private providers? And the fraud issue is massive! You also neglected to mention that? What needs to be done is to fix the system we now have and this system is badly flawed due to its total lack of free market principals. When you go in to get your car repaired the mechanic tells you what will be your costs and gets you to agree to the repairs before he ever opens the hood. That never happens at a doctors office, Why? An OBGYN in San Francisco has to carry hundereds of thousands of dollars of insurance to deal with legal law suites? Europe does not have these issues. Plus what a medical person gets paid in Europe is much less then what our medical personel get paid so a comparision between systems is not apples to apples. Obama Care never dealt with any of these kinds of issues and that is why it will be repealed and a single payer Big Gov. system is even a worse Idea if that is possible.

  72. Rick says:

    Thomas – To answer your questions”

    YOUR QUESTION: You still did not address the fact that Medicare and Medicaid transfer many of their admin cost to the Private providers?

    This argument completely ignores the massive administrative waste that private insurers inflict on hospitals, doctors, nursing homes etc. In fact, insurance overhead accounts for only one-quarter of total health care administrative costs in the U.S. The complexity of our current reimbursement schemes requires providers to fight with insurers for payment for every aspirin and bandaid. This requires a huge administrative staff, billing computers etc.
    In contrast, a single payer system could greatly streamline providers’ paperwork. Paying hospitals on a lump sum budget basis — e.g. as a fire department is currently paid — could cut hospital administration costs in half. Similar savings could be realized by simplifying doctors’ billing.

    The estimate that total administrative costs consume 31% of U.S. health spending is from research by Drs. David Himmelstein and Steffie Woolhandler and published in the New England Journal of Medicine in 2003. The figure would undoubtedly be higher today. Insurance overhead accounts for a minority of the overhead. Much more occurs in physicians’ offices, hospitals, and nursing homes – driven by our current fragmented payment system. The fact that insurance overhead per se accounts for a minority of the bureaucratic waste in the system explains why implementing a public option plan would not achieve most of the potential bureaucratic savings that can be realized through single payer. Even with a public option, hospitals, physicians and nursing homes would still have to maintain virtually all of their internal billing and cost tracking apparatus in order to fight with private insurers.

    YOUR QUESTION: And the fraud issue is massive! You also neglected to mention that?

    You have fraud in any system, and insurance companies are subject to it as well. Plus, a lot of the fraud is perpetrated by the investor owned health industry itself. Investor owned hospitals are profit maximizers, not cost minimizers. Strategies that bolster profitability often worsen efficiency and drive up costs. Columbia/HCA, the largest hospital firm in the United States, has paid the US government $1.7 billion in settlements for fraud, the payment of kickbacks to physicians and overbilling of Medicare. Tenet, the second largest US hospital firm, paid more than half a billion dollars to settle charges of giving kickbacks for referrals and inappropriately detaining psychiatric patients to fill beds during the 1980s, when the firm was known as NME. In March 2004, Tenet agreed to pay the US government $22.5 million to settle one of several cases; recent allegations against them have included performing cardiac procedures on healthy patients, offering kickbacks for referrals and exploiting Medicare loopholes to claim hundreds of millions in undeserved payments. Do we need to do more to combat fraud in Medicare? Of course, but that does not mean that creating a single national insurance program to fund healthcare for everyone is a bad idea or creates government control of our individual healthcare decisions. Single payer is essentially a more efficient funding system. Does your doctor really care who

    YOUR QUESTION: What needs to be done is to fix the system we now have and this system is badly flawed due to its total lack of free market principals. When you go in to get your car repaired the mechanic tells you what will be your costs and gets you to agree to the repairs before he ever opens the hood. That never happens at a doctors office, Why?

    Total lack of free market principals? That is the main problem of our current health financing system – for-profit insurance companies. The operating principle for health insurance companies is the free market principle, “how much money can we make for our shareholders?” – not “can we provide health care to all people needing it?” Health Insurance Companies make money only by denying payment for health care, not providing it.

    YOUR QUESTION: An OBGYN in San Francisco has to carry hundreds of thousands of dollars of insurance to deal with legal law suites? Europe does not have these issues.

    Europe doesn’t have these problems because malpractice suits there are rare. The reason malpractice insurance rates for doctors here is so high is because about half of all malpractice awards go to pay present and future medical costs (e.g. for infants born with serious disabilities). Single payer national health insurance will eliminate the need for these awards. Second, many claims arise from a lack of communication between doctor and patient (e.g. in the Emergency Department). Miscommunication/ mistakes are heightened under the present system because physicians don’t have continuity with their patients (to know their prior medical history, establish therapeutic trust, etc) and patients aren’t allowed to choose and keep the doctors and other caregivers they know and trust (due to insurance arrangements). Single payer improves quality in many ways, but in particular by facilitating long-term, continuous relationships with caregivers. For details on how single payer can improve the quality of health care, see “A Better Quality Alternative: Single Payer National Health Insurance.” For these and other reasons, malpractice costs in three nations with single payer are much lower than in the United States, and we would expect them to fall dramatically here. For details, see “Medical Liability in Three Single-Payer Countries” paper by Clara Felice and Litsa Lambkros.

    YOUR QUESTION: Plus what a medical person gets paid in Europe is much less then what our medical personnel get paid so a comparison between systems is not apples to apples.

    Not necessarily. Canadian physicians have done well under their single payer system – as documented in a recent, careful study. In addition, streamlined billing under single payer would save US doctors vast amounts in overhead, and free up additional physician time to see a few more patients. Hence, even if doctors’ gross incomes declined slightly (a questionable assumption if they’re freed up from insurance paperwork and able to devote more time to patient care) physicians’ average take home incomes wouldn’t change under single payer. Of course, some doctors’ incomes would go down – e.g. those who currently enjoy a particularly rich payer mix. On the other hand, some would see an increase – e.g. those currently caring for many Medicaid or uninsured patients.

    Bottomline, no system is perfect, but single payer would be a vast improvement over our current system.

  73. thomas carney says:

    Rick, I commend the time you spend on your points. Unfortunately you seem to think that a Big Gov. single payer system is the cure for the very bad monopolistic health care system that exists in most of our states. The Big Government welfair systems that exist weather here in the US or any place else NEVER work. If we can apply truely free market systems to our health care industry then and only then can we hope to insure all our people with good preventative care that lowers costs, provides a safty net and increases the supply of care givers. You will never get it as long as you beleive in a Big Gov. wealfair system that does not reward pay for performance but promotes pay for service and the more service the better.

  74. Tom Carney says:

    Rick, The OBGYN, has to carry more insurance because we as a society have not dealt with lawyers, ambulance chasers that are protected by the Democrates. If we had a system similare to Englands where the losser pays all fees then, to a great extent, only cases where there was real misconduct would be brought to court. The right guy still may loose but frivulus law suites would go away or be sharply reduced. Bottom line profits are NOT evil and i am sorry you beleive they are. but competition real competition keeps most activities fair, gives you the best results and keeps the cost down.