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Universal Single Payer Health Care Coverage: An Economic Stimulus Plan
By Stephen Lendman
The Institute for Health & Socio-Economic Policy (IHSP) is “non-profit policy and research group and is the exclusive research arm of the California Nurses Association/National Nurses Organizing Committee, (focusing on) current political/economic policy analysis in health care and other Industries….to enhance, promote and defend the quality of life for all.”
In January, it released a “First-of-Its Kind Study” titled, “Single Payer/Medicare for All: An Economic Stimulus Plan for the Nation” to reform the system by providing universal care, adding productive new jobs, billions in public and private revenues, billions more in employee compensation, and added tax revenues. More on that below.
IHSP calls its study an “econometric,” not an “arithmetical” health care system analysis, covering both their costs and economic benefits to the nation. Its methodology drew on:
“widely-used and accessible data bases and econometric models which are capable of showing how changes in one economic variable (such as health demand, pricing of services, or taxation of consumers and employers) will affect not only the health care sectors directly, but also their suppliers….their employees and their households, and the generation of federal, state, and local taxes.”
Elements of its comprehensive coverage include:
- universal eligibility; everybody in, no one excluded;
- everyone under a uniform single standard similar to Medicare Parts A, B, and D; and
- all enrollees having “the same health services, costs, eligibility requirements, and administrative cost burden.
These occur when providers buy services or supplies to deliver care:
- in America, $2.1 trillion in expenditures generates an additional $1.37 trillion in indirect transactions;
- manufacturing with $307.6 billion benefits most; and
- in 2006, health care totaled 9.2% of GDP.
These are health care worker household consumption transactions, and the indirect sector spending their income:
- they total an estimated $2.3 trillion; and
- again, manufacturing benefits most with another $442.8 billion, for an indirect $750.4 billion total.
Total Revenue Generation
IHSP “calculated the economic multiplier to be 2.78, nearly three times the revenues generated within the industry proper.” Total direct and indirect health care revenue is $5.856 trillion.
Tax Revenues Generated
- federal: $538.3 in 2006; and
- state and local: $826 billion.
- 18 million health care workers;
- another 26 million jobs in other industries for a 45 million total; and
- nationwide, “health care value added generated 12.1% of employee compensation, and 10.5% of total employment.”
Health service industries include 511 occupations, 43% in management, administration, finance, physical plant operations, and many other non-health related fields. Registered nurses number about 2.1 million, about 25% of health care professionals. Nursing aides, orderlies, attendants and home health aides comprise another 25%. Doctors are 3% of the total.
Medicare for all, including Part D will generate:
- $317 billion in increased public and private revenues;
- 2.6 million new permanent jobs at an average income of $38,262 annually;
- $100 billion in worker compensation;
- $44 billion in new tax revenue – “exclusive of the funding changes to replace employer insurance contributions;”
- Medicare Part B coverage for 2.6 million Medicare enrollees;
- Part D coverage for 15 million more;
- full coverage for the 50 million or more uninsured and millions more underinsured;
- elimination of the uninsured’s uncompensated demands on providers;
- 27.7 million Medicaid recipients will get the same coverage as others, not the inconsistent kind now offered;
- elimination of $134.9 billion in state and local expenditures and $175.7 billion for the federal government;
- for the privately insured, ending problems of eligibility, exclusions, family coverage, premium costs, high out-of-pocket ones, and likelihood to be uninsured if lose employment;
- for employers, replacing their administrative and financial burden under a shared universal approach;
- for taxpayers, a reduction of $56 billion in unnecessary, unproductive insurance costs; and
- for the nation, joining the rest of the industrialized world that provides universal coverage.
Enhanced Medicare for All
- adding 2.6 million Part A only enrollees and 15 million without Part D will cost about $59 billion, 62% publicly borne;
- the added expense will generate an additional $154.7 billion in total economic activity, about one million new jobs earning $43.2 billion, and new tax revenues of about $21.2 billion.
Covering the Uninsured
For a net total spending increase (net of the eliminated costs for the uninsured) of $44 billion “in 2006 values,” a $120 billion in economic impact will be generated, 945,600 new jobs will be created earning $36.5 billion, and $16.5 billion in taxes will be raised. In addition, the formerly uninsured will pay a small premium above their current expense, but will get greatly enhanced care. Providers will also reduce losses because of non-payments, and emergency rooms will function as intended.
The current system is fragmented, inconsistent, expensive, and fails to provide the full range of preventive and routine care. Discontinuing it at the federal and state levels will generate a “total net direct economic impact” of $16.2 billion dollars breaking down as follows:
- total new expenditures of $88.9 billion; and
- discontinuance of $72.7 billion in costs.
Total economic activity will increase by $43 billion. About 336,900 new jobs will be created generating $14.3 billion annually, and tax revenue increases of $6.3 billion.
Medicare Coverage for the Privately Insured
It will bring 196.1 million new enrollees into the new program, standardize their coverage, replace the above enumerated problems, and eliminate an onerous burden on employers that paid (in 2006) 71% of insurance premiums, or $510 billion annually. Burdensome administrative costs will also be eliminated, an estimated $56 billion.
The net effect will shift an employer obligation to public funding and not increase national health costs. It will require more public administrative capacity, and possibly a new or revised tax structure to replace the current privately-financed system.
An Overview of the Health Care Industry
Providers include hospitals, physicians and other health care professionals, nursing care, home health care, ambulatory health services, laboratories and testing facilities, and others. They’re closely linked to pharmaceutical, medical equipment, and other producers and suppliers.
Employer-provided coverage is the largest funding source. Privately insured households pay deductibles, or co-pays, and often part of the insurance premium. Taxpayers are the second largest funding source, through federal, state, and local health care programs, including Medicare, Medicaid, and others.
IHSP’s report includes a detailed analysis of US health care in 2006, including the composition of the industry, its share of the economy, and the full, direct and indirect, impact that health care activities have on other economic sectors.
IHSP’s study concludes that:
“a comprehensive Medicare based Single Payer system can make significant contributions to access of quality care for all US residents and in the process generate a much needed and very substantial economic stimulus in the form of jobs, enhanced business and public revenues and increased wages for the population at large.” All this for a small net $63 billion increase yielding much more in benefits.
According to Geri Jenkins, co-president of the National Nurses Organizing Committee/California Nurses Association (NNOC/CNA):
IHSP’s analysis shows “for the first time that a single-payer system could not only solve our healthcare crisis, but also substantially contribute to putting America back to work and assisting the economic recovery.”
The study’s lead author and director of the Institute for Health and Socio-Economic Policy (the NNOC/CNA research arm), Don DeMoro, added:
“If we were to expand our present Medicare system to cover all Americans, the economic stimulus alone would create an immense engine that would help drive our national economy for decades to come.”
All for a tiny fraction of the Wall Street bailouts that looted the federal Treasury, gravely harmed the country, and delayed for a future time a far more serious day of reckoning.
Physicians for a National Health Program (PNHP) Support for Universal Single-Payer Coverage
PNHP calls the current system “outrageously expensive, yet inadequate” because of the 50 million or more uninsured and another 30 million or more underinsured. It spends more and delivers less through:
“a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things (unrelated to care): overhead, underwriting, billing, sales and marketing (plus) huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy (consuming nearly one-third) of Americans’ health dollars.” The potential savings from single-payer financing is “more than $350 billion per year….enough to” cover everyone at no more than the current cost and perhaps less depending on services provided and if government negotiates lower drug prices the way other countries do.
Consider the benefits – single-payer will cover “all medically necessary services, including: doctor, hospital, preventive, long-term care, mental health, reproductive health care, dental, vision, prescription drug and medical supply costs. Patients” will have free choice of providers, and doctors will “regain autonomy over patient care,” no longer restricted by insurance company gatekeepers. Overall, health care in America will achieve a quantum leap improvement compared to the dysfuntional state it’s now in, worse still if Obamacare passes.
“HR 3962: Affordable Health Care for America Act” – The Public Betrayal Act to Enrich the Insurance, Drug, and Large Hospital Chain Cartels
On November 7, by a narrow 51 – 49% majority, the House passed legislation former CIGNA executive, now critic, Wendall Potter calls “the Insurance Company Profit Protection and Enhancement Act.” Add the drug and hospital chain cartels that will profit hugely if it’s enacted.
Voting for it – 219 Democrats and one Republican. Against it were the remaining Republicans and 39 Democrats.
Among its supporters were cosponsors of “HR 676: United States National Health Care Act or the Expanded and Improved Medicare for All Act,” including universal single-payer advocates:
- Anthony Weiner (D. NY);
- Danny Davis (D. IL), this writer’s representative;
- Jesse Jackson, Jr. (D. IL);
- Barney Frank (D. MA); and
- Barbara Lee (D. CA).
Dennis Kucinich (D. OH) explained “Why I Voted No,” saying:
The current “for-profit insurance system….makes money (by denying) health care.” HR 3962 strengthens the source of the problem. “Clearly, the insurance companies are the problem, not the solution. They are driving up the cost of health care.” They’re the reason why “31 cents of every health care dollar goes to administrative costs, not toward providing care. Even those with insurance are at risk. The single biggest cause of bankruptcies in the US is health policies that do not cover you when you get sick.”
Instead of fixing the problem, HR 3962 “accelerate(s) the privatization of health care. (It) inevitably will lead to even more costs, more subsidies, and higher profits for insurance companies – a bailout under a blue cross. (The bill) continues the redistribution of wealth to Wall Street at the expense of” Americans getting the kind of health care they deserve and badly need.
Former president of Physicians for a National Health Program, Dr. John Geyman, cited HR 3962 saying “No Bill is Better Than a Bad Bill” in enumerating its negatives, including:
- enriching providers “on the backs of patients and their families;”
- having “no effective cost containment mechanisms;”
- a public option available only to about six million people or 2% of the population, and in 2013 will cost more than private programs for sicker people because insurers are unrestricted on what they can charge;
- health care will be more, not less expensive; and
- will still leave millions uninsured and millions more underinsured.
“In sum, this (monster won’t) fix the major problems of cost and affordable access. (It) will add new layers of bureaucracy and complexity, is not fiscally responsible, and is not sustainable.”
Debate now shifts to the Senate where the best outcome will be killing Obamacare because “no bill is better than a bad” one.
The California Nurses Association (NSA) said the following:
“This Bill Fails to Control Costs.” While providing “limited assistance for some, the inconvenient truth is (it falls) far short in effective controls on skyrocketing insurance, pharmaceutical and hospital costs, (does) little to stop insurance companies from denying needed medical care recommended by doctors, and (provides) little relief for Americans with employer-sponsored insurance worried about health security for themselves and their families.” And the Senate legislation is even worse.
The National Organization for Women said the “Bill Obliterates Women’s Fundamental Right to Choose” that became law in the landmark 1973 Roe v. Wade decision, and is still the law of the land. The Court held that a woman may abort her pregnancy for any reason, up to when “the fetus becomes viable.”
HR 3962 violates that right. Except in cases of rape, incest, or if a woman faces death, the Stupak (D. MI) amendment prohibits using federal money for insurance covering abortion. It prevents women participating in insurance exchanges from using their own money to buy abortion coverage. It denies low-income women access to it entirely.
According to the Congressional Budget Office (CBO), it:
- will cost $1.055 trillion over the next decade, netting out at $894 billion after revenue enhancements;
- mandates coverage and penalizes those without it up to 2.5% of their income;
- insurance for individuals earning $44,000 pre-tax will be $5,300, plus another $2,000 in out-of-pocket expenses for an annual $7,300 total, or 17% of their annual income; families earning $102,000 pre-tax will pay $15,000 in premiums plus another $5,300 in out-of-pocket costs for a total annual $20,300 cost, or 20% of their annual income; those earning below these amounts will be eligible for subsidies, based on a sliding scale, paid directly to insurers;
- includes a watered-down public option by setting up insurance exchanges through which low income households are subsidized to make coverage more affordable; the plan is so weak, only an estimated 6 million or fewer will qualify; Physicians for a National Health Program (PNHP) lists myths and facts about it below;
- expands eligibility for Medicaid;
- lowers the federal deficit by $104 billion by 2019 and even more in the following ten years;
- “substantially reduce(s) the growth of Medicare’s payment rates for most services” by cutting over $400 billion in costs; the true figure is much higher; more on that below; and
- leaves 18 million uninsured by 2019, including about six million undocumented immigrants; the Senate Finance Committee’s bill leaves 25 million uninsured.Pre-existing condition exclusions will be prohibited, but insurers may charge what they wish, so effectively nothing changes. Endorsing the bill:
- the drug cartel;
- the American Medical Association;
- the US Conference of Catholic Bishops because of the anti-abortion provision; and
- the AARP, an insurance/financial broker masquerading as an advocacy group for anyone aged 50 or older.
The Centers for Medicare & Medicaid Services’ (CMS) Assessment of Medicare Cuts Under HR 3962
On November 13, CMS released estimates of the “costs, savings, and coverage impacts” of HR 3962, showing Medicare spending will be cut by a draconian $570.6 billion, well above the CBO figure. Enrollees unable to cover the difference will be devastated. Millions will get less care when they most need it. In some cases, hospitals and nursing homes may deny it altogether.
Medicare will introduce “permanent annual productivity adjustments to price updates for institutional providers” to maximize “efficiency” – costing $282 billion, over half the total cuts. They’ll affect acute care hospitals, nursing facilities, and home health agencies, and be based on economic productivity overall, but CMS notes that:
“Except in the case of physician services, we are not aware of any empirical evidence demonstrating the medical community’s ability to achieve productivity improvements equal to those of (the) overall economy.”
As a result, provider costs will rise faster than Medicare payment increases. They, in turn, will reduce care or opt out of the program altogether. Many providers have done it because of low compensation. CMS states:
“Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”
Medicaid eligibility will also be impacted, threatening access for millions of poor people, dependent on it as their sole source of care. Although HR 3962 increases spending by $77.5 billion to cover the cost of new enrollees, CMS says higher demand may cause providers:
“to accept more patients who have private insurance (with relatively attractive payment rates) and fewer Medicaid” ones because it won’t be cost effective to do it.
Physicians for a National Health Program (PNHP) on Myths and Facts about a Public Option
Myth: More choice.
Provider and location choices will be limited. Seeking care outside networks will cost more, and authorization will still be required.
Myth: Patients may keep their doctors regardless of employment changes or health.
The employer-based system stays intact. If a new plan is chosen, only doctors in it may be accessed. Patients retaining their own will incur higher out-of-network fees. Insurers may also cherry pick the healthy and avoid the sick. Patients becoming ill risk losing employer-based coverage or face higher premiums to keep it.
Myth: Private insurers will have to compete on a level playing field.
HMO’s “undermine fair competition despite regulations.” They “cherry-pick” the healthy and avoid the high-risk. They also cost up to 19% more than traditional Medicare despite their lower age category enrollees.
Myth: Everyone will have quality, affordable care.
The current system is unsustainable. It will worsen if Obamacare passes. In whatever form, the “international experience with public option schemes” shows they don’t provide universal coverage – because insurers pick the best and screen out the rest.
Myth: Patients will get better care because of “innovation in the quality care physicians provide.”
Quality won’t improve. Today’s dysfunctional system won’t change. It’s driven by profits, high costs, and for insurers denying expensive care or delaying it as long as possible.
Myth: Cost will be reduced.
False because no provider bureaucracy savings will be achieved. “Adding a public option to the array of private insurance companies….will only exacerbate the waste and inefficiency inherent in a patchwork system….”
Health care is a fundamental human right no different than food, shelter, clothing, clean air and water, and other essentials to life and well-being, not something to be bought and sold as a commodity. Universal single-payer coverage is the solution, not America’s dysfunctional for-profit model.
If Obamacare is enacted, it will cost more, deliver less, leave millions uninsured, millions more underinsured and leave a broken system in place. It will enrich the insurance, drug and large hospital chain cartels at the expense of universal coverage. It will solidify a class-based system delivering the best care money can buy. Others will get sub-standard treatment, and for millions none at all. The solution is everybody in, nobody out under a universal, single-payer system. No one should accept less or politicians who won’t provide it.
As imagined by Dave Lindorff
My Fellow Americans.
I stand before you a chastened president. I made a mistake. Two mistakes really. (Wild applause from Republican side.)
I thought that Congress could do its job and through the deliberative process, produce a health care reform plan that would win broad support across the aisle and among all of you. But I’m afraid that I was wrong. Health care is an enormous industry–maybe the biggest and most powerful industry in the country–and it has far too much power in Congress. Literally thousands of lobbyists, carrying tens of billions of dollars in campaign contributions–have invaded these halls (and my house too, by the way) (relieved laughter) and distorted the process, and in the end have stymied reform. (Expect some hissing.)
Meanwhile, I have realized that the answer has been staring us in the face all along.
And that was my second mistake. I told the American Medical Association that while single-payer medical plans, where the government is the insurer, might work well in other countries, the idea of government running health care was not part of our American tradition. In fact, it is, and has been since 1965, when President Lyndon Johnson signed into law the Medicare program. Medicare is, in fact, a classic single-payer program, and polls and surveys show it is enormously popular with older and disabled Americans. Medicare has relieved our parents and grandparents from the fear that they will not get medical care when they stop working, and it has lifted the enormous burden and worry off of younger Americans over how to pay for the care of their elders, and it has done this with enormous efficiency, all while allowing recipients to choose their own doctors and hospitals. (Applause.)
So we really don’t need to re-invent the wheel. There is no point in members of Congress having to hold endless hearings, and to sit and listen to the pitches of lobbyists from the medical establishment. We can just expand Medicare to cover everyone. (applause)
How much would that cost? Well, we know that 10 percent of the elderly–the oldest and sickest among them–account for 50 percent of total Medicare costs, so that means the other 90 percent only cost some $200 billion a year. Even if we assumed that the rest of the population’s medical bills were as high as those 90 percent, it would mean that expanding Medicare to cover them would cost less than $1 trillion a year, and probably closer to $750 billion. So roughly speaking, we’re talking about adding $750 billion a year to the cost of Medicare.
Now that’s a big number, and I know that some of you–a lot of you–worry about higher taxes. (Republican applause.) But let me assure you, expanding Medicare to cover everyone is going to save you money–virtually everyone. Let’s look at why that is, and why you cannot just look at the federal tax when you consider those savings.
Today, the United States spends nearly 20 percent of GDP on health care. That is more than double what any other country in the world spends on health care. And you know what? We don’t get our money’s worth for all that dough. Canadians, who spend half that percentage of their GDP on health care, and who have what amounts to Medicare for all with their single-payer system (they call it Medicare too), have longer lifespans and better infant mortality statistics than we do. In fact, for that matter Cuba and Mexico have better child health statistics than we do!
By the way, I want to introduce, in the gallery, actress Shirley Jean Douglass, whose father, Tommy Douglass, was the founder of Canada’s Medicare program. (Applause.) We will be consulting closely with experts and administrators of Canada’s Medicare program as we move forward with our own reform. (Applause.)
Now I’ve been accused of lecturing (laughs and applause), and I don’t want to sound like a college professor here, but let me just highlight a few reasons why simply expanding Medicare to cover all of us makes not just moral but economic sense. If we were to make that change, we could immediately eliminate the Medicaid program, which as you know is funded by the states, and costs them (and you) about $400 billion a year, mostly to cover low-income families and individuals. Now that money would not be totally eliminated, because Medicare currently doesn’t cover all health care costs–just 80%. And Medicaid covers the remaining 20% for those elderly and disabled people who cannot afford to pay for Medi-Gap private plans. Even so, eliminating Medicaid for the poor, who would be switched to Medicare, would save at least $300 billion. We could also eliminate the Veterans Administration–which incidentally is an excellent example of true government health care, with publicly owned hospitals and doctors on salary, and it runs very well and very efficiently.
Something those folks at last month’s town meetings who were saying government can’t do anything right should think about. (Wild applause from Democratic side.)
Sorry. I just had to say that. (more applause)
Anyhow, eliminating the VA would save another $100 billion so we’ve already saved more than half the amount that was added to the cost of Medicare in order to cover everyone. (applause)
But there are far more savings.
One of the biggest would be the elimination of about $300 billion that is spent each year by hospitals and doctors to provide care to people with no insurance who end up in hospital emergency rooms. The cost of this “charity care” is factored into higher hospital and physician bills, and ultimately into higher insurance premiums paid by the rest of us. Since all those people would now be covered by Medicare, that expense would vanish.
American companies currently pay about 25 billion a year in workers compensation insurance–money that ultimately comes out of workers’ paychecks. That would no longer be necessary, because people injured on the job would be covered by Medicare. (Smattering of applause mostly from Republican side.)
Car insurance rates would be dramatically lower, because car insurance would no longer have to pay for medical costs following an accident. The same is true for homeowners insurance, which would no longer have to cover the costs of someone being injured on your property. (Applause from Pennsylvania delegation, with among the highest car insurance rates in the nation.)
And of course, the biggest savings of all–about $3,000 per person or $12,000 per family every year–namely the cost of private insurance premiums paid by you and/or your employer, would be gone. Think about that a minute: no more co-pays, no more annual deductibles, no more employee share of insurance premiums for yourself or your family. And for businesses that provide health care coverage, a huge savings that will make them more competitive in the global marketplace, and that will also allow them to pay higher wages to their employees. (Prolonged applause.)
Oh, and there is one other huge, if unquantifiable savings to consider. If everyone has Medicare, the total cost of health care will go down dramatically, because everyone will be getting timely treatment, instead of having to put off exams and early treatment of illness or injury. And no one will suffer the terrible anxiety or worrying about whether they can pay for health care for themselves and their families.
So yes, your Medicare withholding will be perhaps 25 percent higher if we expand Medicare to cover everyone. That tax is currently set at 2.9 percent for you and 2.9 percent for your employer, so it would go up to about 3.7 percent of your paycheck. For someone earning $600 a week, that would represent an increased deduction of about $4.50 a week. For someone earning $1,200 a week, it would be an increased deduction of $9. That is a pretty good deal for not having to pay for insurance coverage any more, wouldn’t you agree? (Applause, plus some boos from largely silent Republican side.)
Now for you folks already receiving Medicare, there have been a lot of scare stories out there, some of them being promoted by some irresponsible people right in this chamber (pause for applause and nervous laughter), suggesting that if we expand health care coverage, it will come off of your benefits. Don’t you believe it! (Applause.)
We live in a democracy, and when a lot of people want something, or benefit from something, they collectively defend that particular thing. In the case of Medicare, if everyone is receiving it, and receiving it in the same manner as everyone else, that creates a huge voting bloc in favor of defending that benefit, so by expanding Medicare to all, we would be creating a powerful political force that will defend Medicare from attack, just as the universality of Social Security has made that program bullet-proof (something my predecessor learned when he tried to promote the idea of privatizing it). (Wild applause from Democratic side.)
So here’s the deal.
I’m admitting it was the wrong move to try to lay it on you poor folks in Congress to come up with some completely new, complicated reform of our existing health care system–if you can even call it that. My good friend and former colleague in this building, Chairman John Conyers, had it right all along: We have a great system–Medicare–that we just need to expand to cover everyone. (Applause.)
So to get it started, I’m going to send Congress a couple of bills. One would immediately shift everyone eligible for Medicaid over to Medicare. I’m calling this the States’ Medical Cost Relief and Medicare Expansion Act. It will not only begin the process of expanding Medicare, but will provide badly needed financial relief to states that are suffering from declining tax revenues and rising health care costs because of the recession. (Applause.)
I will also send Congress a bill that will expand Medicare coverage to all Americans and to legal residents. (Applause, some boos from Republicans.)
I am sure that as financially sound as this change is, there will be opposition from the medical industry, so let me add that this is, for me, a moral imperative, too. For too long, this great country has allowed health care to be a matter of whether or not you had a job with health benefits, or enough money to pay for insurance yourself. That is unacceptable. We are our brothers’ and sisters’ keepers, and just as we believe that every child needs an education, we believe that everyone deserves to have access to quality medical care. (loud applause)
So let me add this: If Congress does not pass these two bills by the end of the current session, in time for the holiday recess in December, I will declare a national emergency because of the recession and the huge rise in the uninsured that it has caused, and will issue executive orders implementing both these measures. It’s not the way I would prefer to see things done, but if Congress cannot act, I promise you and the American people, I will. (Applause and boos.)
Let me also say that this program is a priority for me and for all Americans, and anyone–Republican or Democrat–who gets in the way can expect to hear from me, and from the American people, in this coming election year. (Applause.)
Thank you and good night. (applause)
Living in Massachusetts should, by all indicators, mean having access to good health care. Following the landmark passage of a health insurance mandate in 2006, the state today enjoys the nation’s lowest percentage of uninsured citizens. Major cities like Boston have the nation’s highest numbers of doctors per capita and anchor some of the world’s largest and most prestigious medical centers. And Massachusetts isn’t stingy—it spends more on health care per person than any other state. Yet, as a remarkable NPR documentary reported last year, patients calling Massachusetts General Hospital—ranked the fifth best in the nation by U.S. News and World Report—were informed that Harvard’s massive academic hospital was no longer accepting new patients needing primary care. And that problem isn’t limited to Massachusetts General—it’s occurring throughout the state. Despite near-universal insurance, oodles of doctors, reams of cash, and no dearth of bright minds, the average person in Massachusetts can’t find a new primary care doctor.
The nation soon may face the same fate. To have any hope of meaningful national health reform, therefore, we must address the perverse financial incentives that created and continue to inflame this problem.
The root of the shortage can be traced to 1985, when a Harvard economist named William Hsiao developed a scale to measure the relative value of every single one of the thousands of services provided by doctors, a job later compared to measuring “the exact amount of anger in the world.” For example, Hsiao’s team deemed that a hysterectomy required 3.8 times more mental effort and 4.47 times more technical skill than a psychotherapy session. In 1992, Medicare formally adopted Hsiao’s concept; private insurers followed suit. Today, this relative value-based system sets the prices—and therefore drives the priorities of American medicine.
Here’s how it works. Doctors do a job—like placing a coronary artery stent, reading an EKG, or spending an hour examining and diagnosing a patient with a complex problem like insomnia—and earn something called “relative value units.” In 2009, according to Medicare, the stent guy scores about 24 units for his relatively quick procedure, the EKG person gets 0.5 units for the 10 seconds his job requires, and the poor internist gets only 2.5 units for his hour of time. Figuring a doctor’s total take per task is straightforward: Medicare adds up a doctor’s total RVUs, multiplies the total by a fixed amount (roughly $40 right now), and writes the check.
It’s clear that Medicare and all major insurers place far more relative value on fancy procedures like stents, EKGs, skin biopsies, CT scans, and bowel clean-outs than they do on actual face-to-face time with patients. Procedures, they have decreed, require more mental effort and skill than seeing actual people. The implications are obvious. Just visit any hospital: The dermatology, radiology, and cardiology centers that depend on high-volume, relatively quick procedures have gleaming new facilities, while the primary care and psychiatry clinics languish, since they earn their keep from poorly compensated face-to-face time with patients. And, obviously, specialists make more money than primary care doctors. (Even trainees grasp this; recently, only a single graduating internist out of a class of 50 residents at Massachusetts General Hospital planned to become a primary care doctor.)
Fundamentally, the entire payment model of American health care drives medical centers, doctors, and hospital managers to push for more fancy procedures at the expense of primary care doctors. How’d we get here? Since 1992, Medicare has depended almost entirely on the American Medical Association for guidance on how relative values should be set. In a devastating critique published in the Annals of Internal Medicine, scholars from the Urban Institute and the University of California-San Francisco explained that Medicare uncritically accepted 95 percent of the AMA’s recommendations, which are formulated by the group’s Relative Value Scale Update Committee, or RUC.
Of the committee’s 29 members, 23 are appointed from subspecialties like cardiology and dermatology. Just three represent primary care, even though half of all Medicare dollars are spent on face-to-face encounters. Their meetings are closed to uninvited observers. Unsurprisingly, over time, the relative values of various procedures far outpaced face-to-face “evaluation and management.” In 2000, for example, the RUC recommended relative value increases in 469 specialty procedure codes but made no change in codes related to evaluation and management—which are used by primary care doctors for outpatient visits for physicals, back pain, headaches, and so on.
This price-fixing process explains why people can’t find primary care doctors in Massachusetts. By law, Medicare’s costs are capped so what one doctor gains, another loses. (Medicare has long “rationed” care in this manner.) To meet budget targets, Medicare doesn’t alter the relative valuations of different medical services; instead, it simply cuts the multiplier (say, from $40 to $38 per RVU), which just worsens the disparity between specialists and primary care doctors.
Over time, the big-money specialists dominating the AMA have demanded more and more “relative value” for their procedures. Medicare has rolled over and complied, which has drained revenue from the little-money workhorses—primary care doctors. More than any peculiarity of American medicine, these procedure-mad incentives have corrupted our health care system.
The funny thing is, paying more for medical care that’s more valuable does makes sense. That’s how capitalism should work. Unfortunately, ever since William Hsiao created the system in 1985, the collusive market valuation of medical services considered only the doctor (paying for his or her mental effort and stress, for example). The system completely fails to consider the value to the person actually getting the service. If we did, for example, angioplasties for stable chest pain would never be worth so much more than outpatient visits to lower cholesterol and blood pressure, which are just as effective.
Who speaks for patients? The 36-employee Medicare Payment Advisory Committee serves as Congress’ adviser on Medicare policy but lacks the authority and funding to counter the AMA’s lobbying. For years, MedPAC has sensibly argued that Americans shouldn’t outsource medical pricing to a private interest group. Because properly valuing medical services is a public good, we should invest tax dollars in comparative effectiveness studies and a stronger public agency to fight for patients.
That terrifies powerful special interest groups like physician specialty societies and drug companies. In the mid-1990s, the medical device maker Medtronic sued to block a sound federal report showing spinal fusions didn’t help back pain, and Republicans gutted the responsible agency. The Medicare-approved relative value for the pointless surgery remained largely unchanged and the gravy train chugged along. When Barack Obama recently proposed expanding MedPAC and reducing some of the AMA’s influence, the interest groups again fought back ferociously to defend the status quo—and christened MedPAC a “death panel.”
And while nobody’s been looking, they pulled the plug on primary care doctors.
Rachel Maddow talks to Rep. Anthony Weiner, who threw down the gauntlet on health care reform, and forced the Republicans to vote on an amendment abolishing Medicare.
Rachel reports on the battle going on between those in Congress who are representing the interests of the insurance companies, and those representing the interests of their constituents.
Maddow: As for the many, many cries against a publicly funded insurance plan, well Democratic Congressman Anthony Weiner of New York is all over it. Congressman Weiner has cast himself as the health care version of Clarence the Angel, forcing everyone in Congress to think what life would be like without a very popular, already existing publicly funded health insurance plan. Congressman Weiner introduced an amendment tonight that would eliminate Medicare. Of course Mr. Weiner didn’t actually want Medicare to be eliminated. But he did want to force every conservative on the House Energy and Commerce Committee to have to go on the record that their position on the government run health plan upon which forty three million voters rely. In other words, really Republicans? You’re against government funded health care? Care to go on the real record with that? Care to vote to kill Medicare?
Rep. Weiner goes on to explain why his amendment went down in flames and that the Republicans just hate any government run health care, unless it’s Medicare and they are forced to say whether they’d really want to get rid of it. He then tells Rachel about a very bold move he’s going to make on health care reform.
Weiner: But it does lead us to the next logical step where I need my colleagues on both sides of the aisle to start to come to, and that is not why have a public option, but why have a private option at all? If we know for example that the one experiment we have is very successful in publicly funded health care through Medicare, why do we even need the insurance companies? What constructive role are they playing? We know they’re taking tens of billions of dollars each year and putting it into profits that should be going into health care, so tomorrow I’m going to be taking the next step and offering a true single payer health care plan, and I wanted people today to start to think about, “hey maybe that’s the way we do it”. It’s simpler, and we know that it works.
All I can say is amen brother. I think the Democrats have been wrong not to push for single payer and make the Republicans and Blue Dogs walk back from that. The Republicans are going to try to kill any reform whether it’s single payer, or even the compromised position of a public option. I think getting a decent public option in place would lead to single payer, but I don’t understand why they started there. If Congressman Weiner is willing to get enough of them on board with him to fight for single payer, and try to get some real reform passed, I’m with him. I guess we’ll be finding out how this plays with the leadership shortly.