Why the Left and the Right Can’t Talk to Each Other About Health Care

Josh Barro is the latest in a long line of left-of-center critics who fault Republicans for not being real partners in the health care debate. He writes:

Liberals are tired of being lectured by conservatives about what’s wrong with their approach to health policy because conservatives haven’t been a productive partner in seeking a fix.

Josh is half right. Yes, the left gave us a “fix” in the form of ObamaCare. But I believe it’s fair to say that no serious effort was made to work with Republicans. Remember: ObamaCare didn’t get one Republican vote on final passage. That’s not surprising. A few years back, when the Republicans pushed through the Part D drug benefit under Medicare, I don’t think a single Democrat offered to help with the legislation.

I’ve been a close observer of health care politics for a quarter of a century and in all that time I have seen very little productive interchange between the left and the right on this subject. And this is not just true of Washington. It’s true generally across the country.

Why is that?

At the most fundamental level, the left and the right approach the subject from completely opposite directions. The left invariably focuses on benefits. The right invariably focuses on costs. The left is concerned about what people are going to get. The right is concerned about how we are going to pay for it. You can find left wing health reform plans that barely mention how the reform will be paid for — or who will pay what for anything. You can find right wing reform plans that don’t even mention what medical care anyone will actually receive.

This, of course, is part of a larger division. In general, the left focuses on spending. The right focuses on taxes. But in health care the division is more pronounced. In fact, in health care the two sides don’t appear to be talking about the same subject.

 Don’t take me half the way.

On the left, Zeke Emanuel and Victor Fuchs published a health plan in the New England Journal of Medicine a few years back. They proposed to replace all private and public insurance with a universal health insurance voucher, funded by a value-added tax (VAT). Yet the two did not even do a back of the envelope calculation of what kind of VAT tax would be required or whether there is any country in the world that successfully collects a VAT tax of that magnitude.

On the right, Marty Feldstein has proposed a universal scheme under which every family would receive a voucher sufficient to buy an insurance plan that would cover all medical expenses above 15% of the family’s income. True to form, Feldstein tells us almost nothing about the benefit side. (What expenses count in arriving at the 15%, for example?) But he tells us quite a lot about how the financing works:

A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family’s health bills in excess of $7,500 a year.

The family could give this $3,500 voucher to any insurance company or health maintenance organization, including the provider of the individual’s current employer-based insurance plan. Some families would choose the simple option of paying out of pocket for the care up to that 15 percent threshold. Others would want to reduce the maximum potential out-of-pocket cost to less than 15 percent of income and would pay a premium to the insurance company to expand their coverage. Some families might want to use the voucher to pay for membership in a health maintenance organization. Each option would provide a discipline on demand that would help to limit the rise in health-care costs.

Now here is the interesting thing, and I can’t believe I am the first person to have noticed this: THERE IS NO INCONSISTENCY BETWEEN THESE TWO PLANS!

Hard to believe, but true. If you want to fill in the missing details on how the Emanuel/Fuchs plan would actually be financed, one way to do it would be to turn to Marty Feldstein. If you want to fill in the missing information about the benefit side of the Feldstein plan, one way to do it would be to turn to the Emanuel/Fuchs proposal. I am not saying that you have to complete the proposals this way. But it is possible.

Economists have long known that specialization and comparative advantage create opportunities for gains from trade. So why not let the left specialize in designing the benefit side of things and let the right specialize in designing the financing side?

[There is one possible impasse I am glossing over here. The left believes in defined benefits. The right believes in defined contributions. That is, the left wants to fix the benefits that it wants everyone to have and then leave it up to the political system to somehow find the money to pay for them. The right wants to fix the amount of money each family has to spend and then let competition in the marketplace determine what the buying options are. I'm not entirely sure how serious this impasse is.]

Let’s go back to Congress for a moment. In the 2008 presidential election, the most important domestic policy issue was health care. Barack Obama had a vision of benefits that he wanted everyone to have, but he had no clear explanation of how they would be paid for. John McCain had a very clear vision of how to reform our system of paying for health insurance, but he had no clear vision of what the product would finally look like or how people would get it. I would argue that these two visions are not inherently at odds. It seems possible that the two approaches could have been merged in a way that left both sides satisfied.

What if President Obama had asked John McCain and Max Baucus to jointly propose a health reform plan? What then? It would have been much better than what we got.

Since the Republicans were completely left out, we got something that should have been predictable. On the benefit side, everyone is more or less equal. The whole country is being pushed toward a standard benefit package, ultimately defined in Washington. On the financing side, however, we have a Rube Goldberg contraption that is creating havoc in the labor market and that defies all common sense.

Ah, what might have been.

P.S.: Megan McArdle has a reform plan that is superficially similar to Marty Feldstein’s and which she describes this way:

[T]he McArdle Plan…eliminates the tax subsidy for employer-sponsored insurance, zeros out coverage mandates, gets rid of Medicare and Medicaid, and has the government provide 100% insurance for all expenditures above 20% of income. Simple, efficient, and keeps the incentives where they belong.

Well not quite. This sounds more like national health insurance with a high deductible. And if that is what is it, the pressure to lower the deductible would be enormous.

Comments (43)

Trackback URL | Comments RSS Feed

  1. Rick says:

    Your basic premise is correct – both sides don’t talk to each other (although I have addressed a Tea Party group about single payer), but it is incorrect to say that the “the left gave us a “fix” in the form of ObamaCare.” The left (and even educated people on the right) (62% of Americans polled) support single payer expanded Medicare for All. The left was shut out of the debate by the Baucus committee’s refusal to even put single payer on the table for discussion. Obamacare was given to us by the insurance companies (it was written by the lobbyists for Wellpoint) for their benefit since it gives them a forced clientele through the mandate. Until we rid ourselves of the cancer of for-profit insurance companies controlling our access to health care, we will never solve the problems of cost and universal coverage. Visit http://www.pnhp.org for more information.

  2. Lloyd says:

    More evidence of the great need for bipartisanship to return to government. If the left and right worked together, they may not get what they individually wanted, but actually get the best result.

  3. Jordan says:

    The polarizing is a relatively new thing. Defined benefits is a terrible idea. Governments shouldn’t pick winners, let markets do that.

  4. Pete says:

    @Rick
    So you’re saying that our representatives aren’t actually representing us? Go figure.

  5. Rick says:

    @Pete – Most are owned lock stock & barrel by the insurance companies, big pharma,the oil companies, wall street, the NRA and other large corporations and special interests. Many Reps go to DC with all good intentions of representing the people but soon realize that their ability to stay there depends on the money it takes. Even good Reps vote out of fear that these special interests will fund their oppponents in the next primary or election. The system is horribly broken and getting worse after Citizens United. We need fundamental reform in how we finance our elections. Citizens United needs to be repealed. As one wonk said, “I’ll believe corporations are people when Texas executes one.”

  6. Vicki says:

    Great song pairing.

  7. Patrick Skinner says:

    Rick, You very obviously left out UNIONS, but very subtly said ‘special interests’ as though there are only conservative ‘special interests’. Not very objective?

  8. Gabriel Odom says:

    “Economists have long known that specialization and comparative advantage create opportunities for gains from trade. So why not let the left specialize in designing the benefit side of things and let the right specialize in designing the financing side?”

    While I agree with the general premise of working together, I believe that the fundamental forces behind these two parties are completely at odds. This is why the two-party system is broken. The founding fathers knew that in order to have a balance of power, we needed three branches of government. I believe that the House and Senate need three major parties as well.

  9. Gatsby says:

    Politics is a crazy animal. There will needs to be an incentive for cooperation. One would think successful healthcare reform would be enough.

  10. Buster says:

    Left and Right are coming from two ideologically opposing perspectives. It’s hard to discuss the perverse incentives of Socialized Medicine with Liberals when they don’t view the perverse incentives as perverse.

  11. Keshal says:

    I have a question that has been plaguing me since the whole health hot mess, is there any other OECD countries that have been successful in providing health care through free market forces. Where consumer interact directly with the provider and there is no insurance to mess up the process.

  12. Jack McHugh says:

    There’s a more fundamental right/left divide which is implicit in much of what is written here: The right, or at least the economically-literate wing of it, believes that incentives are what matter most of all. Whatever the policy area, get the incentives right and the rest takes care of itself. Get them wrong, and no solution is possible. This is why Obamacare is as doomed as the Soviet economy was – bad incentives.

    I don’t know if the left’s base is as deluded as their elites on this, but those elites at least pretend that incentives don’t really matter much. Which accounts for 90 percent of the current health care system’s dysfunctions. Especially since politicians on both sides of the aisle have been willing to go along with this conceit.

  13. John says:

    Ok, can’t we just all see that all social and economic systems are utterly incompetent? I feel this whole “ideological” war is quite silly when both sides champion inept systems.

  14. Tim says:

    Politics in this country is at an all-time low. But so is in other countries around the world. I think the economic and political systems are starting to be more challenged as people become more knowledgeable and informed.

  15. Z says:

    “Yes, the left gave us a “fix” in the form of ObamaCare”

    I think they just further demolished something that already broken.

  16. Greg Scandlen says:

    John,

    Fascinating post. There is a book in here.

    Michael Novak wrote that “the left” (socialists) believe the greatest threat to society is inequality, while “the right” (capitalists) believe the greatest threat is tyranny. The way I usually put it is as a dichotomy between security and liberty. It is possible to place most proposals on a continuum between the two points. Each side tries to push any proposal closer to their preferred side.

    Compromise should be possible, except people figure in our country things seem pretty good just the way they are, so why compromise? That’s why people don’t get serious until there is a crisis.

    You are right about McCain and Obama. There wasn’t a whole lot of difference between their proposals. I really expected after the 2008 election that Obama would invite McCain to the White House to work out a joint proposal. Each could have told their respective former CBO directors (Holtz-Eakin and Orszag) to take a day and flesh it out. The thing would have passed in a month with huge majorities. We would be living in a very different world today is that had happened.

  17. Greg Scandlen says:

    Rick — you do realize (I hope) that Medicare is a very poor health insurance program, one that could never be sold on the private market. It is baffling with separate deductibles, benefit limits, and coinsurance for Parts A and B, and no limit at all on OOP costs. It is so bad that most people have to buy a supplemental policy for it.

  18. Lauren says:

    Great discussion but let’s be clear that what we are talking about here is health insurance reform not health or health care. Eat a little less sugar today but stay sweet!

  19. Benjamin Cutler says:

    John, this finally makes some sense!! If you can pull this off and get the two sides really putting their heads together on a coherent and sensible approach addressing both the benefits and the payment mechanisms-you will have made a great contribution to the American people.

  20. Rick says:

    @Greg – I agree that Medicare, as it is currently structured, is not perfect, but Americans with Medicare are far happier than those with private insurance. Medicare has been a leader in keeping costs down. (And its overhead costs are less than 5%, compared to 30% for private insurance). And keep in mind that Medicare insures people with the greatest health care needs: people over 65 and the disabled. We should improve and expand Medicare to cover everyone for all medical services which would eliminate the need for supplemental insurance.

    • Single-payer legislation like “The Expanded and Improved Medicare for All Act,” H.R. 676, sponsored by Rep. John Conyers Jr., would (1) automatically enroll everyone in the plan, (2) provide comprehensive services covering all medically necessary care and drugs, (3) allow free choice of doctor and hospital, (4) eliminate all co-pays and deductibles, and the need for supplemental insurance, (5) create a public, nonprofit agency to pay all the bills, simplifying administration, paperwork and bureaucracy, (6) finance care through progressive taxation, with people paying less than what they are paying now for premiums and out-of-pocket expenses, (7) boost job growth and the entire U.S. economy by reducing the burden of health costs on businesses, (8) provide everyone with first-dollar coverage without spending any more than we are now, thanks to the administrative savings, estimated at $400 billion annually, (9) provide powerful cost control tools like bulk purchasing and global budgeting (JAMA) for long-term, sustainable savings.

    • A single-payer Medicare-for-all system would not be “socialized medicine,” since physicians and other providers would remain in private practice. Only the financing would change. In essence, it would be a single national insurance program covering everyone (as opposed to the 1300 separate insurance companies we now have with all of their inefficiencies). It would not introduce “government rationing” (as opposed to the rationing we have now based on ability to pay), but would restore the doctor-patient relationship by removing meddlesome private insurer bureaucrats. It would be transparent and publicly accountable, fair and efficient. It would be humane.

    I urge you to educate yourself on the benefits of Medicare for All at http://www.pnhp.org.

  21. Politics Debunked says:

    Free market advocates need to learn to do a better job of learning to “speak the same language” to appeal to things liberals are concerned about rather than preaching to the choir. The policy approach doesn’t need to change, merely the way it is presented. One of the major things liberals are concerned about is corporate influence over politics, though they don’t usually use the terms we do of “regulatory capture” or “crony capitalism”.

    They don’t grasp that most of the healthcare mess is driven by a vast amount of favors for special interest groups that limit competition and remove incentives to keep prices under control. We know this, and it is implicit in the writings of free market advocates, but that isn’t the main focus in the way it is usually presented. This page:

    http://www.politicsdebunked.com/article-list/healthcare

    is written to focus mostly on the healthcare problem as being driven by special interest favors. It uses the right concepts to appeal to the left, though it might not use their buzzwords well enough and is too long and detailed, but it should provide ammunition to people wishing to spin things in this way to try to appeal to them.

    Polls from Pew and other places show that like 70-75% or so of the public tends to have a favorable view of small businesses and tech businesses, while more than that have an *unfavorable* view of both the federal government and big businesses. So it seems they can appreciate the value that comes from competition. We know that the big business issue is likely due to crony capitalist businesses. We need to get their attention by focusing on the corporate influence liberals dislike, and then explain that this isn’t like the tech companies they approve of because government limits competition. Then focus on the idea a free market approach will yield results more like the tech industry.

  22. John Fembup says:

    Rick you’ve outlined PNHP’s proposal that envisions a massive new Medicare-for-all federal agency “to pay all the bills, simplifying administration, paperwork and bureaucracy” for 315 million people.

    I have a hard time believing the claims you make for the benefits of this super-agency.

    For example, how is it that such an agency would not introduce government rationing, when every other government single-payer program on the planet has introduced rationing? (And ObamaCare has also done so, thru IPAB.)

    How would this new Medicare-for-all colossus of itself restore the doctor-patient relationship?

    How would it remove meddlesome private insurer bureaucrats while not employing ANY meddlesome government bureaucrats?

    How realistic is it to expect such a super-agency would more transparent than Medicare is now? More publicly-accountable? More humane?

    Sorry, but it all seems to me wishful thinking.

    You also expressed the belief that “Most [senators and representatives] are owned lock stock & barrel by the insurance companies, big pharma, the oil companies, wall street, the NRA and other large corporations and special interests.”

    None of that would change with a Medicare-for-all colossus.

    You and PNHP seem to be advocating a national single–payer plan that would be governed ultimately by the same Congress you believe is thoroughly corrupt.

    Doesn’t work for me.

  23. Wanda J. Jones says:

    John and Colleagues:

    This is, indeed, a terribly important topic, and does need to be a book-length explanation of how we got to this terrible bill. I feel it is also important to deeply reject the idea of Medicare for All or single payer. Under such arrange-ments the United States Congress would be the de facto board of trustees for the entire health sector. The President would be the de facto CEO. There is no comfort in this scenario. The mere fact that all of these people can be so influenced by individuals and organizations that can fund their elections is tantamount to a labeling them as hopelessly conflicted: a huge clue that there would be little or no objectivity in their rulings.

    Moreover, the idea that healthcare would not be rationed under such an arrangement flies in the face of sequester, improbable national budgets, unplanned international military adventures and frequent political cycles of the culture. Finally, once done, there is no option to go back to as the private insurers are gone, the private insurance brokers are gone, the company personnel benefits officers are gone, and each citizen is on their own to get the care they need for the amount that the government is willing to pay.

    Rick: You are utterly wrong about the administrative efficiency of Medicare. You ignore the huge amount of administration passed on to insurers and providers. And you do not credit private insurers for picking up the uncovered costs that Medicare and Medicaid do not cover through the cost shift from providers, that produces those inflated bills. Too, the price to the public of a public insurance plan is longer delays for care (all national insurance plans) fewer doctors, and less technical innovation. Again, once you get to this point, you are stuck.

    I’d like to have a platform to help liberals understand the breadth and depth of the safety net, and to appreciate the benefit of vigorous capitalist incentives.
    And to see the natural evolution of the healthcare system into one that diag-noses more accurately and rapidly, that continually moves people to the lowest cost setting for their conditions. and that bears a staggering regulatory burden with few complaints. The left continually expresses horror at the heqlthcare system’s failures, but does not have a single word to say about the fact that we re the world champion at saving low birthweight babies (over 90%) while other countries don’t even treat those under a pound. Plus the highest survival rate for cancer and heart disease, the greatest share of new medicines, the most sophisticated use of new medical devices, and the most citizens made healthy through immunizations in the entire world.

    I wrote a paper about 8 years ago about the delusions of single payer, and will be glad to send it on request. 65 pages. California once had such a bill….

    Finally, note the appalling additional costs to states of implementing the PPACA provision for more people under Medicaid. The Federal government says they will subsidize this provision at 100% for the next few years, and 90% thereafter. This is believable? Our country is financially too fragile for Single Payer, for Obamacare, and even for Medicaid as it is now, when it causes states to cut education and other social programs.

    Wake up, Liberals–you are living in a pink sugar Easter Egg–not in reality.

    Wanda J. Jones, MPH
    President
    New Century Healthcare Institute
    San Francisco

  24. Underwriterguy says:

    I would like to hear docs opine about “Medicare for all” assuming Medicare reimbursement rates at the same levels as today. Wouldn’t we end up with fewer provider participants and more private insurance for those who can afford it?
    And if it is price fixing you want, mandate that all provider participants in today’s Medicare accept Medicare levels of reimbursement from any and all insurers. More docs in Medicare or fewer?

  25. John Fembup says:

    Wanda you may like this. Rick, if you are hanging around, I’m sure you won’t. It’s a rough assessment of the relativity between the admin overhead margins of “original” Medicare (Part A and Part B) vs. private, self-funded, large-group plans. The admin overheads are expressed relative to enrollments, yielding an approximate per person, per month overhead figure for both populations.

    By large-group, I mean plans covering more than 20,000 persons; large, but nowhere near so large as Medicare.

    A. Original Medicare Projected 2013 Admin Cost
    Based on CBO projections of Medicare benefit costs for 2013, a 4% admin cost for original Medicare is equivalent to about $40-$41 per month, per enrolled person.

    Here are the calculations:

    1. CBO Part A and Part B benefit costs $528 bn
    2. Less M’Care Advantage benefit costs $145 bn
    3. Net Part A and Part B benefit costs $383 bn

    4. Allowance for admin @4% (divide by:) 0.96
    5. Cost of benefits + admin $399 bn

    6. Base administration cost ($399-$383) $ 16 bn
    7. Plus CBO mandatory admin add-ons $ 2 bn
    (ACA mandated e.g. quality, fraud, others)

    8. Total admin cost $18 bn

    9. CBO Medicare enrollment 51 mn
    10. Less M’Care Advtge enrollment 14 mn
    11. Net Medicare enrollment 37 mn

    The monthly per person admin cost is therefore $40-$41
    $18 bn / (37 mn x 12)

    B. Private large-group admin costs. Current admin costs for large groups generally run in the range of $15 to $25 per month, per enrolled person. I’ve seen lower and I’ve seen higher, but most fall in this range.

    Note 1: The CBO 2013 projection of Medicare cost can be found here:

    https://docs.google.com/file/d/0B2z-o3wSHJvDaWc5LU9XT3lRcDg/edit?usp=sharing

    Note 2: The range of private admin costs I’ve used for comparison is drawn from my experience as a senior group underwriting officer at three large insurers – one a not-for-profit – and as a VP of employee benefits at a major consulting firm in NYC. Additionally, I’ve tapped my consultant network to verify the up-to-date range of admin overhead margins for private-sector plans. I’ve also drawn on my experience running the medical benefits office at the New York HQs of a major U.S. employer – where it was my business to keep close track of market comparisons between insurance company fees and overhead margins.

  26. John Fembup says:

    Why does the rough assessment above make sense?

    1. The senior population experiences much higher medical costs than the working-age population because of chronic conditions related to age. That’s why Medicare premiums are so much higher than premiums for working-age people. But it is a fallacy to assume that higher medical costs mean proportionally higher admin expenses; it does not cost 100X’s as much to adjudicate a $10,000 claim vs. a $100 claim.

    2. When the Medicare admin ratio is expressed as (%) of premiums, the much higher Medicare premiums go into the denominator. This higher denominator gives a much lower answer. But that lower answer reflects high Medicare benefit payments, not low admin cost. It does not demonstrate any particular Medicare “efficiency” and is therefore misleading. Comparing Medicare admin cost to private insurance admin cost as (%) of premiums is similarly misleading.

    3. Comparison of admin cost to the number of persons enrolled eliminates the distortion that arises from the use of high Medicare premiums. When this is done, Medicare overhead comes out at around $40-$41 per person per month. Private coverage (groups that self-fund whose overheads like Medicare include no risk or tax loads – but which do include the administering insurance company’s profit margins) run $15-$25 per person per month. That’s a significant difference – and Medicare is higher.

    4. Keep in mind that private insurance companies administer original Medicare under contract with HHS. Their admin charges are not 5X’s to 10X’s higher for their large private groups vs. their Medicare contracts. (The admin overhead for the plan I managed came to about 5% of our total medical benefit cost per year – this figure included the profit margins of the two insurance companies we hired to administer our plans.)

    5. The present Medicare bureaucracy is not regarded as a model of efficiency. Expanding Medicare enrollment from 50 million to 315 million would not of itself make Medicare efficient.

    6. There are certain things that Medicare does not do at all – or does not do well – compared with private insurance companies. In either case, Medicare arguably spends less for admin, and private insurers spend more. Does that make Medicare “efficient”? I say no. Medicare has been slow to adopt modern disease-management and utilization-management techniques that private insurers have used and refined for more 20 years. Because it does not use these administrative programs, Medicare pays more questionable or fraudulent claims than private insurers do. The monthly per-person admin cost estimated in my above comment includes the cost of these administrative programs for insurance companies but not for Medicare – yet the insurance companies’ per-person cost is still less. Medicare’s decision not to adopt such programs may hold down its admin costs but by no means results in “efficiency”.

    7. Other government agencies provide Medicare with support services that don’t appear in Medicare costs. For example, IRS collects the taxes that fund the program; SSA assists by collecting some of the premiums beneficiaries pay (i.e., deducted from Social Security checks); HHS helps to manage Medicare accounting, auditing, and fraud investigation and pays for certain marketing and building costs. Private insurers don’t have this kind of off-budget support. Although such off-budget support clearly understates Medicare admin costs, I’ve made no adjustment for it. Despite these differences, the admin for private group insurance still comes out significantly less than Medicare, per person, month.

    8. HHS rules under ACA require that insurance premiums be set – or adjusted after the fact – to produce an MLR no less than 85% for large groups (80% for small groups and individual policies). This minimum MLR permits large-group insurance companies a total margin of no more than 15%, or roughly 8% for admin, 2% for state and federal taxes, and 5% for profit. Were current large-group insurance company overheads as much as 30% – or even 20% – the HHS rule limiting overheads to 15% would long ago have wrecked their stock prices. That did not happen because investors expect insurers can adjust to the 85% MLR minimum with little impact on their profits. Or, in other words, it’s just more evidence that claiming private insurance admin overheads are 30% is a fairy tale.

    In summary, I think it is a mistake bordering on urban legend to believe that Medicare is more efficient than private insurers. In fact the reverse is almost certainly true. Medicare’s admin cost ratio of “less than 5%” may be narrowly, arithmetically correct – but is grossly misleading, and deserves to be disregarded. The assertion that private insurance overhead is “30%” is simply wrong, and also deserves to be disregarded.

  27. Wanda J. Jones says:

    John F: I do love it. Have never seen this analysis. Liberals spout many things that amount to urban myths–they are just repeated until they become universal truths. But people who create public policy should have the integrity and competent staff sufficient to look under these slogans and see what is truthful. Liberals do not seem anguished by loss of current coverage, loss of paid work hours, a ceiling on new jobs in small companies, or the other early effects of the PPACA. Now–add to this the government’s 51 page application for Medicaid, Medicare’s current “claw-back” auditing program set (7 versions) to recover supposedly fraudulent Medicare claims without having any concrete indicator that there was fraud, necessitating massive administrative investment to recover payments for work already done, and other such tricks. Believe me, I have a bushel of them. Government regulation? Look at Fannie Mae, The SEC regarding bank fraud, the Attorney General regarding deliberate gun running into Mexico, the IRS investigating organizations with Progressive in their names, Congress attempting to exempt themselves from Obamacare, and you see not just a single bill, but a society not able to govern itself fairly and with true ethics. My work brings me in contact with hospitals, doctors and other healthcare organizations daily. I am deeply worried at how many of them believe they should prepare to sign Accountable Care Organization risk-bearing contracts with HHS. I do not trust for a minute HHS’s ability to fulfill its end of any such contract.

    I also see an attempt to blame healthcare systems for high costs just because the members banded together to have a stronger balance sheet when they are being asked to share risk with the government. Who wouldn’t be afraid? One sign of sanity is that unions that originally supported Obamacare and becoming are that it leads directly to heart-stopping premium increases.

    There is a set of fresh bills in the House for flat repeal. Maucus, the author, says the law is a train wreck. Maybe liberals will see that if they continue with implementation, they will have the full blame for the results, as Republicans can truthfully say–we had nothing to do with this. The commentators on the morning talk shows will once again try to blame the Republicans for not proposing their own bill, even though Nancy was so determined to get the law passed that she excluded Republicans from committee meetings and ignored their drafts.

    As a health professional, with 5 decades of experience in watching public policy be parceled out from Washington, I have never seen the level of ignorance, incompetence, mendacity, and political corruption that is manifested in this law and supported by its advocates. Doctors area walking out daily. The narrow vision of advocates prevents them from realizing that passing a law means you not only get to brag about its benefits, but you now own all, repeat, all of the problems.

    On Thursday, the House is voting. Let your representatives know what you want. With Obama on the defensive about so many things, and with very little political capital left, this seems like a good time to hand him a pen.

    Wanda J. Jones, MPH
    President
    New Century Healthcare Institute
    San Francisco.

  28. John Fembup says:

    “Maucus, the author,”

    Would you be referring to Bax Maucus?

  29. Dr. Mike says:

    Underwriterguy – there are a number of docs who believe as I do – everyone should have cradle to grave Medicare part A and everyone should have an HSA (subsidized HSA for low income) to cover outpatient costs. I have yet to see any logical objection to this sort of program (other than the knee jerk nonsensical “only the rich can have HSA’s”) The direct pay model works best for outpatient services and has been proven to reduce costs and utilization of health care services. A managed medicare model works best for inpatient.
    But of course the insurers hate this proposal as it severely limits their role, possibly even eliminating it, thus it will never become a part of the health care reform conversation.

  30. Stuart Butler says:

    John,

    Good piece. As we both know, this issue could have been solved. By the way the Emanuel-Fuchs proposal was first unveiled at a Hamilton Project event where I laid out our non-mandate tax credit proposal http://www.brookings.edu/~/media/events/2007/7/17health%20care/20070717.pdf I remember a lively conversation with Zeke about the similarity and differences between our plans and the positive prospects for achieving a bipartisan approach that didn’t violate each other’s core principles. Ah, it seems so long ago.

  31. Raymond Wooldridge says:

    John,

    Right on!! Perhaps this is the tack we should focus on. Finding ways the opposite sides can communicate.

  32. John Fembup says:

    Dr. Mike, you know full well who administers Medicare Part A for CMS. I suppose you also know full well that Part A coverage is just awful. Still the idea of limited insurance for hospital care – or catastrophic care – is not a bad place to start.

    As to outpatient care, unless you are advocating making it against the law to purchase insurance, your idea for outpatient costs is a non-starter. That’s because people will expect to have the right (not the obligation) to purchase insurance for costs not otherwise covered by your proposal or by their own HSA.

    In fact, that’s nearly the same sort of system which is in place France; and in Switzerland, in Chile and other countries. Those nations’ programs are much more successful than the so-called “single payer” programs, or the government-owned programs such as in the U.K. It’s no coincidence that a prominent insurance company role is present in France, Switzerland and Chile.

    You have the core of a very good idea. I think it needs more work.

  33. Vince says:

    Rick continues to make points for a single government payer plan and tries to say that providers will still be privately owned businesses. What he does not take into account is the fact that there will be no competition for that payer. They are then left with the ability to reduce payment to providers as they see fit. What give us, the providers incentive to assume risk to open up new practices, hire new staff, invest in new equipment when one entity that control our payment can just decide to reduce our funds. Single payer plans will reduce all providers to employees of that plan. Instead plans such as those which are proposed here an other areas that include tax incentives, vouchers, rebates etc that allow for individual purchases, portability and competition will allow for the providers to continue to provide quality care independent from the fear being put out of business by one stroke of a pen.

  34. Rick says:

    JohnF – A new, authoritative study of Medicare’s administrative costs (Austin Frakt of The Incidental Economist cites it as definitive, something echoed elsewhere) is Kip Sullivan’s paper described here:

    “The traditional Medicare program allocates only 1 percent of total spending to overhead
    compared with 6 percent when the privatized portion of Medicare, known as Medicare Advantage, is included, according to a study in the June 2013 issue of the Journal of Health Politics, Policy and Law.

    The 1 percent figure includes all types of non-medical spending by the Centers for Medicare and Medicaid Services plus other federal agencies, such as the IRS, that support the Medicare program, and is based on data contained in the latest report of the Medicare trustees. The 6 percent figure, on the other hand, is based on data contained in the latest National Health Expenditure Accounts (NHEA) report.

    The journal article, written by Minneapolis-based researcher Kip Sullivan, finds that the gap between the two measures has been growing over the last two decades as enrollment in private Medicare plans has risen.

    “The high administrative costs of the privatized portion of Medicare are no surprise,” says Sullivan. “What’s surprising is that the high administrative costs of the Medicare private insurance companies haven’t provoked a debate about whether spending more money on insurance industry overhead is a good use of scarce tax revenues.”

    According to Sullivan, the low attention given to this issue is caused in part by confusion
    about Medicare’s overhead costs.

    “The confusion is due partly to the existence of two government reports,” says Sullivan, “and partly to claims by critics of Medicare that the government fails to report all of Medicare’s overhead costs.” The paper addresses both sources of confusion.

    The article explains the difference between the yardstick used by the trustees and the one used by the NHEA and concludes both are accurate. The trustees’ measure counts as overhead only those administrative expenditures that support the traditional fee-for-service Medicare program, in which approximately three-fourths of all Medicare beneficiaries are enrolled. The NHEA measure takes the trustees’ measure and adds to it the overhead of insurance companies that participate in Medicare Advantage and that sell stand-alone Part D drug coverage.

    “The issue isn’t whether one yardstick is more accurate than the other,” Sullivan explains.

    “The issue is when it’s appropriate to use one measure instead of the other.”

    The 1 percent figure is the one that should be used to analyze several hotly debated health reform issues, including whether to expand traditional Medicare to all Americans and whether to turn Medicare over to the insurance industry, either by expanding the Medicare Advantage program or by converting Medicare to a voucher program as Rep. Paul Ryan has proposed.

    “Total spending for any type of insurer, public or private, consists of medical and administrative expenditures,” explains Sullivan. “If you want to know whether Medicare would cost more or less if it were turned over to insurance companies, you first have to determine what Medicare spends on medical care and administration and you have to do the same for the health insurance industry.”

    The proper yardstick to use to measure Medicare’s overhead in analyses of issues such as these would be the trustees’ measure – 1 percent. The average overhead of the health insurance industry is approximately 20 percent, he said.

    The large difference between traditional Medicare’s overhead and that of the insurance industry has caused some conservative critics of Medicare to assert that the federal government is ignoring numerous administrative expenditures incurred by various federal agencies that should be attributed to Medicare.

    Sullivan’s paper, “How to think clearly about Medicare administrative costs: Data sources and measurement,” describes this criticism as the second major source of confusion about Medicare’s overhead. Sullivan’s study reports that the 1 percent figure includes all appropriate administrative expenses incurred on Medicare’s behalf, including those by the IRS, the Social Security Administration, and the FBI, as well as the cost of numerous pilot projects that Congress orders CMS to conduct.

    Sullivan’s notes that many liberals are also confused about what Medicare’s overhead costs are. “With so much confusion on both sides of the political spectrum, it’s fair to say a useful debate about whether to expand or contract the traditional Medicare program has yet to take place in this country,” he said.

    Sullivan is a lawyer and member of the Minnesota chapter of Physicians for a National Health Program, which had no role in funding the study.”

    “How to think clearly about Medicare administrative costs: Data sources and measurement,” Kip Sullivan, J.D., Journal of Health Politics, Policy and Law, Vol. 38, No. 3, June 2013. Advance version published online Feb. 15, 2013. DOI 10.1215/03616878-2079523.

    On your point re 31 percent administrative costs (“a fairy tale,” you say), it’s important to point out that the 31 percent figure represents both the insurers’ overhead (which can run 12-15 percent for some large plans, as high as the 25+ range for smaller plans on the individual market) plus the extra administrative load placed on doctors, hospitals and other providers. The basic framework for this analysis is provided in this paper in NEJM by Woolhandler, Himmelstein et al.
    http://www.pnhp.org/publications/nejmadmin.pdf

    The whole point of expanded and improved Medicare for All is to broaden its coverage so ALL medically necessary treatment is covered, eliminating the problems of denied coverage for certain procedures (a regular feature of most private insurance plans)

    As for Vince’s concern about reduced payments, under the plan set out in Conyer’s bill, HR 676, the provider payments would be negotiated between doctors & hospital. Furthermore, Vince sounds like he is a health provider. How much is your practice’s administrative overhead? If you are like most doctor’s I know, you have 3 to 5 people on your staff just to handle the paperwork of filing claims with the hundreds of insurance companies out there. With single payer, there is just one entity to which claims must be filed and HR 676 sets that up to be done electronically so your administrative overhead is cut drastically. That savings alone could either fund more profit for yourself or allow you to expand your practice. Also, how much of your day is spent arguing with insurance companies over whether they will pay for a certain procedure? That time could better be utilized seeing patients.

  35. Peter Ferrara says:

    John, Truly brilliant post. Only one flaw. Obamacare is not a fix in any way. Even CBO says that after 10 years there will be more than 30 million uninsured. I think that is a woeful underestimate, and there will be more uninsured under Obamacare than before.

    Kind of like “single payer” advocated by Rick. A government monopoly for health care in my opinion is not an adult contribution to the discussion, and the fevered persistence for such a transparently foolish idea on the far left is exhibit A of what is wrong with our politics. Don’t you know Rick that Medicare is already hopelessly bankrupt, with a $100 trillion unfunded liability? Can anyone on the Left even count to 10?

  36. Rick says:

    Also, lest the posters here all think single payer is a leftist idea, I invite your attention to this article by a Republican doctor:

    I Am A Republican … Can We Talk About A Single Payer System?

    By David May, M.D.
    American College of Cardiology Touch Blog, April 23, 2013

    I am a Republican. For those who know me that is not a surprise. I live in a red state. I have never voted for a Democratic presidential candidate. I can field strip, clean and reassemble a Remington 12-gauge pump blindfolded. And on top of it, I think we should talk about having a single payer national health care plan. The reason is quite simple. In my view, we already have one; we just don’t take advantage of it.

    Firstly, Medicare and the Center for Medicare and Medicaid Services (CMS) are de facto setting all of the rules now. They are a single payer system. When we go to lobby the Hill, we lobby Congress and CMS. Talking to Blue Cross, Aetna, Cigna and United Health care is essentially a waste of time. All the third party payers do is play off the Medicare rules to their advantage and profit. They have higher premiums, pay a somewhat higher benefit and have a significantly higher level of regulation which impedes the care of their customers. This is no longer consumer choice but effectively extortion, a less than hidden shake down in which the “choice” for a family of four is company A at $900 per month or company B at $1100 per month. The payers are simply taking advantage of the system, playing both ends against the middle.

    Secondly, in order to move forward with true health care finance we need complete transparency in cost and expense … and we need it now. As was noted in a recent Time magazine piece on the hidden cost of health care, our current system is a vulgar, less than honorable construct more akin to used car sales than medical care, cloaked under the guise of generally accepted accounting principles and hospital cost shifting.

    Thirdly, with a single payer system would potentially come real utilization data, real quality metrics and real accountability. The promise of ICD-10 with all of its difficulties is that of a much more granular claims-made data. We could use some granularity in health care data and we will never achieve it in big data quantities without a single payer system.

    Lastly, I think that the physicians should be in charge of health care and not the insurance companies and hospital systems. With a single price structure, it becomes all about medical decision making, efficiency, the provision of care to our patients, and shared decision making, all of which we do well.

    How, you might say, could a Republican come to such a position? The simple answer is I really think it is quite Republican. Oh, I know there will be many raised eyebrows and many critics. I accept that. I understand the fact that no single payer system is perfect, that it is “socialist,” that it is “un-American.”

    I would submit to you, however, that it is un-American to allow many of our citizens to be uninsured, that it is un-American to shunt money away from a strong military in order to support a bloated, inefficient and fraud-laden health care system, that it is un-American not to be open and above board with the cost of what we do, the expense of that service and the profit that we make. Mostly, it is un-American to let this outrageous health care injustice continue.

    David May, M.D., Ph.D., F.A.C.C., began as the chair of the Board of Governors of the American College of Cardiology in March 2013. Dr. May currently works as a managing partner at his private practice, Cardiovascular Specialists, PA (CVS) in Lewisville, Texas.

  37. Vince says:

    It truly does not matter if the single payer system is a leftist idea or a rightist idea – it is a BAD idea. Dr. May makes this point himself in his 2nd paragraph when he laments about the lack of choice. Without the freedom of choice to acquire the health insurance and healthcare we want, providers and patients will be subject to the rules and regulations put forth by a single entity. Healthcare and any other business – yes health care is a business and functions better when operated as a business – is best regulated by choice and competition. True, pragmatic solutions are out there. Solutions that offer the ability for the individual to select insurance that best fits their needs and paid partially via tax credits, vouchers for those who need it. It is always best to not always look at ideas through a partisan prism. Look closer at the ideas presented in the research by Dr. Goodman, Greg Scandlen et al. Put away the right/left labels and look at it in a real life, real business way.

  38. Rick says:

    Vince – The “choice” people are looking for is not a choice between who will pay for their health care when they have to see a doctor. Doctors don’t care who writes the check that pays their bill – they just want it to clear the bank. The choice that people want is the choice of doctor or hospital. With Medicare now – and with a universal Medicare system – each person would have the choice of which doctor they want to see and what hospital they want to be treated in.

    In the final analysis, what we are talking about is how do we finance our health care system? Single-payer is one methodology that has proved successful in one form or another in every industrialized country in the world and is able to provide everyone with healthcare, not just those who can afford it – and with better health outcomes. Lower mortality and higher birth rates, for example, and cheaper too (we spend twice as much per capita in this country as the rest of the covilized world. Health care is a right, it is not a commodity to be sold or to be rationed based upon your ability to pay. Obamacare will not solve the problem of access because it still leaves 25 million people uninsured. That is obscene and immoral. As for left and right, we all want the same thing – affordable health care for all our citizens – we just differ on the methodology for achieving it. I agree that we should take the partisenship out of it and have an adult conversation about what works in the world and what doesn’t and try to forge a consensus. I firmly believe that when we do that – the benefits of a single payer system will outweigh the other methodologies.

  39. Vince says:

    Rick – Who writes the check is part of the choice people should have. This adds to the ability to choose the Dr, Physical Therapist such as I am, or hospital. Right now people really do not have the choice of their insurance plan. It is basically decided on by the employer who makes that call based on many factors not all are what is best for the employee – As an employer I am willing attest to that. This can be changed from year to year based on the rates we get from the insurance companies who underwrite the programs. The Dr’s etc they want may or may not be on that plan so they may need to change based on the decision of the employer. What if the choice was taken away from the employer and placed on the employee. They could decide based on who accepts that insurance, what the rates are, what other provisions they may have in that policy which company to place their business with. That policy could then be totally portable so that the individual could take it where ever they worked. These companies would then compete to provide the best services at the best prices so that they could attract and retain clients.
    As for outcomes. I am proud to be a health care provider and believe we have the best services in the world. What we also have is a horrible lifestyle that adds to costs and poor outcome data. Right now there are no true incentives for insurance companies to truly offer wellness services. People change plans frequently based on the employers contracts and if they change jobs. With this fact there is no real long term savings to the insurance company. What if this company knew it could retain customers for longer terms because it was not employer based. They could then concentrate on lower cost wellness services that would save them huge monies in the long term. Reward people for being healthy with lower costs, lower deductibles, other incentives for things such as being active, having low cholesterol, controlling blood sugars.
    Sometimes the correct, moral decision is giving the tools to be able to do something independently not just trying to take care of someone.

  40. Peter Ferrara says:

    The NCPA study I wrote with John Goodman, Health Care for All Without the Affordable Care Act, Issue Brief No. 116, National Center for Policy Analysis, Dallas, Texas, October 17, 2012, described a much better system than either Obamacare, or “single payer.” For one thing, unlike Obamacare, it would be universal. Under the Single Payer government monopoly, the patient will have no health care choices. The bureaucracy, as a government monopoly, will decide what health care the patient will get, and when. The only alternative choice the patient will have is to forego all health care and just die. The argument for single payer is the same as the argument that Cuba has a better economic system than the U.S. The argument that “for profit” insurance companies are the problem is adolescent. Profit is not the problem, it is the solution. For profit entities are motivated to serve the public, to maximize their profits. Non-profits have no incentive to serve, and so do not do as well.

  41. Bob Hertz says:

    In terms of health insurance, the American people are roughly divided as follows:

    - About 60-65 per cent have decent insurance for which they pay very little. This includes government employees, full time workers in large corporations, Medicare recipients, active and retired military, members of strong unions, etc.

    - About 30% receive few if any subsidies — the self employed, part timers, the unemployed, etc. They either pay through the nose or are uninsured.

    The left does feel the pain of this latter group, but their solutions tend to be impractical. A fully funded single payer system would require a payroll tax of at least 15 per cent, (as it does in Germany, France, et al), and this kind of tax increase could start a Great Depression. The ACA was intended to help this latter group, and it will, but its sloppiness may cause other parts of health care to implode.

    The right has (with some exceptions) basically ignored the unsubsidized group.
    This is part from fiscal conservatism, which I can respect, and in part from unadmitted social darwinism, which I do not respect. The uninsured (like the unemployed) are basically people that the American economy does not need (if we needed them, we would insure them.)

    The other factor is that the self insured and the uninsured do not vote in a block of any kind. Governors in red states can get elected with ease even if many of their constituents are uninsured. The people who actually vote are generally well insured.

    A few Republicans have had plans to improve the fate of those without subsidies.
    That is what needs to be publicized.

  42. John Fembup says:

    Notice Rick first said Medicare costs “less than 5%.” When confronted by data he cannot refute he decided that Medicare costs “only 1%”. Double dribble, Rick.

    PNHP is a small organization of mostly left-leaning physicians who propose national single-payer medical insurance loosely “based on Medicare.” Fewer than 2% of all U.S. physicians belong to PNHP; it’s a fringe group. Rick summarizes PNHP’s proposal with reasonable clarity, and his remarks illustrate perfectly John Goodman’s thesis “The left is concerned about what people are going to get.”

    Goodman’s thesis also holds that “the right is concerned about how we are going to pay for it.”

    Simple question: how can you have something you can’t pay for?

    Of course PNHP wants you to believe its proposal can be paid for. Rick cites one economist who supports PNHP’s thinking. But it’s wishful thinking.

    Primarily, that’s because the $400 billion PNHP always says is inside insurance company overheads – - isn’t there. It’s a figment of arithmetic sleight-of-hand that results from playing games with percentages.

    Asking “percent of what?” and “compared to what?” reveals the truth. And the truth is, Medicare generates per person, per month costs that are consistent with, or higher than, those of private insurers particularly the larger group plans that account for more than 60% of the privately-covered population.

    I’m not the only one who has reached this conlcusion; I just happen to present it in a way that you may not have seen before. PNHP’s assertion that there is 400 billion excess admin costs in private insurance has been thoroughly debunked elsewhere. But that does not stop PNHP from waving their assertion around every chance it gets. However once PNHP’s assertion is recognized for the mirage it is, the rest of PNHP’s proposals collapse because they are not financially practical.

    Sadly, PNHP does not provide the health policy leadership that our country needs.

  43. Bob Hertz says:

    Look, I think the world of Don McCanne, but I have to agree with John above that the figure of $400 billion for insurance overhead is too high.

    And let me add a couple of points on this.

    A. The overhead that exists would logically go to the employees of health insurance companies, and to the stockholders of the stock companies.

    I think there are about a million employees. They are certainly not getting annual bonuses of $400,000 each.
    The CEO’s are paid a lot, but even if 30 CEO’s got $20 million each it would not add up to all that much.

    B. But just for the heck of it, let us say that overhead is enormous. Now tell me, if we go to a single payer system, how does the government recapture this overhead to pay for more care?

    Let’s say that corporation X is paying $1 million on health insurance for its 2000 employees.

    Now let’s say that this $1 million premium is bloated up by the greedy insurance company by $200,000.

    How does the single payer system capture the $200,000?

    I assume that Corporation X would have to pay $1 million in taxes toward the single payer budget.

    That is NOT what the public or even liberal CEO’s have in mind when they contemplate single payer.
    The businesses that now pay the largest premiums are assuming that their costs will go down.