Medicare-for-All Requires Squeezing Hospitals

Bernie Sanders and other advocates focus on insurance companies and drug companies. But that's not where the money is.

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Under the provocative headline “This Is The Part Of ‘Medicare For All’ That You Never Hear About,” HuffPo’s Jonathan Cohn points to an issue we actually hear about only occasionally.

Sen. Bernie Sanders (I-Vt.) and his allies talk a lot about how “Medicare for All” would take back money from insurers and drug companies, and use those savings to help make sure every American has generous health insurance. That is accurate.

But Sanders and his allies rarely mention that Medicare for All would also restrict the flow of money into the rest of the health care industry, including the parts that aren’t as easy to demonize in speeches.

At the top of that list are hospitals, which alone account for roughly one-third of the nation’s health care spending. No other sector, not even pharmaceuticals, rivals it. Under the Medicare for All proposals from Sanders as well as some other potential reforms getting attention these days, the federal government would limit payments to hospitals, quite possibly reducing their incomes significantly.

Sanders goes after insurers and drug companies because they’re easy villains. Given a mostly private medical system, the former provide peace of mind and protection against financial ruin but they’re an unnecessary middle man that jack up costs. The latter provide life-saving or -enhancing miracles but they do so at enormous cost.

Hospitals are a different story. While people hate their administrative bloat, they tend to like physicians, nurses, and other practitioners. But, obviously, if society is going to pay for everyone’s health care, we have an interest in containing costs. And, as with Willie Sutton and banks, we need to go after hospitals because that’s where the money is.

The case for squeezing hospitals is strong, given the available research on what they charge and why. Even some experts historically wary of government regulation are warming to the concept.

But actually crafting a policy that would cut hospital payments enough to free up big sums of money without adverse effects wouldn’t be easy and getting such a policy through Congress could be even tougher. The hospital industry is already pushing back and, as this debate moves forward, it’s only going to push harder.

Well, sure.

Both the Sanders bill and a House counterpart from Rep. Pramila Jayapal (D-Wash.) envision enrolling nearly everybody in a single, newly created government insurance plan that would control payments to all parts of the health care system, including for hospitals. Sanders would make this transition in four years, Jayapal in two.

With the Sanders bill, the federal government would simply pay hospitals the way that Medicare does now ― which, for the most part, means providing a fixed fee based on each patient’s diagnosis. In the Jayapal version, the government would basically give hospitals lump sums of money based on past expenses, and let them decide how best to allocate it.

Either of these approaches would represent a major break with the status quo, in which hospitals have to take whatever the government gives them on Medicare and Medicaid and other programs, but can then demand higher payments from private insurance. The result is a messy, confusing system where hospitals try to maximize revenue from a mix of private insurance paying more and public programs paying less, with a huge spread between the two.

This is not how developed countries typically operate. Even in countries like the Netherlands, which provide universal coverage through private insurance, government limits what hospitals make by establishing fees, overall budgets, or some combination of the two. Here in the U.S., more than half the states used to regulate hospital prices in one way or another and, in the 1970s, then-President Jimmy Carter pushed hard for legislation to regulate hospital charges nationally. It was supposed to be the first step toward creating a national health system.

That effort failed in the face of industry opposition and nearly every state with a system for setting hospital rates eventually ditched it, as regulation fell out of fashion among the nation’s most influential politicians and intellectuals. But after watching the private sector try and fail to control hospital prices for the better part of 50 years, even some economists who once dismissed the idea of government “price controls” are saying the idea deserves more serious consideration.

Okay. So what’s the problem?

Medicare covers a little less than 90 percent of actual hospital costs, according to industry data. And although some experts question the figure’s accuracy or significance, few doubt that forcing hospitals to take Medicare payments for all patients would reduce their revenue ― even after allowing for the savings hospitals would likely realize from streamlined billing, fewer charity care obligations, and other changes that Medicare for All would bring.

I’m admittedly not an expert on health care financing. Still, if Medicare covers some 90 percent of costs and under Medicare-for-All there would be zero patients getting free care, zero need to deal with other insurance companies, I’d think the net would be something of a wash.

Regardless, Cohn makes the case that a haircut would be reasonable:

Prices here in the U.S. are much higher than in other countries, even for everyday services like knee replacements and routine baby deliveries, with scant evidence that the care here is better.

The story is the same within the U.S., where hospital prices vary enormously from region to region. It’s not the hospitals with the best outcomes charging the highest prices, research has shown pretty consistently. It’s the ones with the most market power ― in some cases, because they have monopolies and are basically able to demand what they want from private insurers.

All of that suggests that the hospitals could handle major reductions without harm to access to quality. “The evidence is pretty clear that there’s room to cut without major damage,” says Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy.

Maybe the best proof comes from the hospitals facing cost pressure today ― say, because they serve a lot of low-income patients who are either on low-paying government insurance plans or have no insurance it all, or because they are run by investor-owned companies that demand profits.
“By and large, they are in competitive hospital markets, large and urban,” says Len Nichols, a health economist at George Mason University. “They have no choice but to become more efficient, for unlike their less-efficient brethren, they can’t just charge the private sector what they want.”

So, I’m continuing to not see a significant downside.

“We don’t have this great flexibility to drive down operating costs ― we have shortages of talent, we don’t set the price of drugs,” says Larry Tisdale, vice president for finance at the Idaho Hospital Association. “Half of Idaho hospitals today, over half actually, don’t have a positive operating margin.”

Whether or not those figures tell the whole story, even advocates for more ambitious cuts to hospitals, like Don Berwick, co-founder of the Institute for Health Innovation and a former administrator of Medicare and Medicaid, say “there is a lot of variation” from institution to institution. “Small and rural hospitals are highly vulnerable,” Berwick said. “One needs to be very gentle.”

Not every hospital closure is a problem. The worry is that some hospitals might cut back on services like psychiatry that typically lose money but are already insufficient to meet current demand. Reducing hospital income crudely could make these sorts of problems worse, causing even longer waits for services ― or simply making it harder to deliver care effectively.

“Yes, there’s plenty of waste and administrative inefficiency, but that couldn’t be wrung out of the system overnight,” said Larry Levitt, senior vice president at the Henry J. Kaiser Family Foundation. “There is a real risk of delays in care and quality problems if payment rates are cut too much and too fast while coverage is being expanded.”

So . . . we might need to pay slightly higher rates in rural areas? Or maybe the rural areas are currently charging less because the markets won’t bear major city prices? These seem like small obstacles.

There’s quite a bit more to the post and it’s worth a read.

One takeaway—and it’s obvious when pointed out but probably not something most of us think about—-is that “Medicare-for-All” isn’t actually a policy so much as an idea.

Sometimes, this can be a major problem. An obvious recent case is “Brexit.” Given a choice between the status quo and some vaguely defined alternative, a slightly majority of Brits took a leap of faith on the latter. When forced to turn it into an actionable plan, however, there hasn’t yet been enough support to implement the idea.

But I don’t see that as the situation here. Even if Candidate Sanders had an incredibly detailed implementation plan ready to go—which would be politically stupid, given that opponents would be able to attack specific pieces of it—a President Sanders would have to get it through both Houses of Congress. There’s no way to know what that would look like; there are just too many unknown variables.

Presumably, most of the details of a Medicare-for-All law would be left to regulators at the Department of Health and Human Services and/or the Food and Drug Administration to flesh out. And they would be constantly tweaked as we learned from practice.

Additionally, I would expect a lot of follow-on reforms if the Federal government took over the entirety of the burden of financing healthcare. We’d almost certainly increase the number of physicians in the system, especially in the primary care field. Presumably, we’d heavily or entirely subsidize their education to relieve them of the massive debt that now accompanies going to medical school and the need to generate massive fees to recoup those expenses.

FILED UNDER: Economics and Business, Government, Health
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. OzarkHillbilly says:

    U.S. health spending twice other countries’ with worse results

    Here’s an idea, maybe we could study other countries healthcare systems and see how they do it?

    Naaaaaaaaaaaahhhhhhh, that would be un-American!

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  2. Tony W says:

    My last visit to the local hospital’s emergency room was a stint of 4 hours waiting in a hallway with broken ribs because the treatment rooms were all tied up with people using the ER as primary care.

    After 10 minutes with a doctor and 15 minutes in the x-ray room I was sent home with a prescription for muscle relaxants – resulting in a $2400 bill all-up.

    The building itself rivals the Tajmahal in its opulence. Not hard to understand if each of the 150 or so patients just in the ER that night were billed that much as a minimum.

    We absolutely need reform in this country, and you are right – spending is where the reform is most needed. There are a lot of people making a lot of money, however, and they will fight tooth and nail to preserve the system as-is.

    On a side note, with my current health plan I have to drive past the closest 3 hospitals in order to get to one on my insurance – so it’s about 25 minutes to get to the ER I am supposed to use, if there’s no traffic.

    ‘Murica

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  3. Slugger says:

    The biggest thing that makes Medicare for all possible is the age distribution of illness. Illness is actually fairly uncommon from age ten till the Medicare years. Even in the Medicare population, illness and medical spending is modest from 65 to 75 when it rises a lot. Many people have low needs before reaching Medicare age. Maternity is the big exception. I needed very little medical care in my youth, and insuring me was a winner for the insurance company. I’m 73 and have never spent a night in hospital.

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  4. steve says:

    Under our current system many hospitals have decided to take the approach of trying to maximizing revenue. They look for the procedures and care with he best ROI and maximize that care. They really have not worked that hard at controlling costs. In my network, we have worked pretty hard at controlling costs, and our costs are 20%-30% less than our main competitor (they have been much better at generating revenue). So, I dont really think that we know how much we can lower costs without negative effects. There are studies on the issue, but they usually limit themselves to one area of medical care.

    Rather than looking at this as squeezing hospitals, I would suggest that we look at it as forcing hospitals to become more focused on costs. When asked to talk about this issue I like to tell the story of how my partner and i worked out a system to save the hospital millions in testing costs. However, the hospital was not interested at that time as they could charge for all those tests. Now that we focus on costs we have implemented those and other programs that have saved us those millions and more.

    Finally, rural hospitals are tough. We staff 2 tiny, critical access hospitals. The finances are tricky. That said, my impression from having taken over these places is that many of them are very poorly run. The stories I could tell! To be fair, it is hard to get quality people to want to work in rural areas. Not many people want to go through medical school then live some place with marginal schools, no access to cultural events or major sports venues. The hunting and fishing may be great, but that doesn’t make up for what your kids lose.

    Steve

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  5. MarkedMan says:

    A well written column, James. I would add that there are sound reasons to believe that insurance overhead and profits contribute to as much as 30% of our costs. The numbers put out by the insurance companies are sheer nonsense. If anyone is interested in my justification of the 30% number I gave it in a post a few months back and will search for it in request.

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  6. Michael Reynolds says:

    If the nation as a whole, public, private and employer-insured spends $1 on health care, there’s no reason why Medicare for all would cost anything more than that $1. And if we remove much of the profit motive we will inevitably cut that $1 to something less than $1. Right? Medicare has already been shown to be as efficient as anything in the private sector, so there would likely be savings there was well. Now, going forward would we want to cut costs? Absolutely. But it’s not a necessary precondition, it’s ‘elective surgery’ at this point.

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  7. de stijl says:

    I have an idea that might seem radical. Banish the MBAs from healthcare. Monetizing health care was a really bad idea.

    Every other industrialized nation has already done so, decades ago.

    We have a wide and deep and rich body of data on which to base rational public policy decisions. Currently, we spend way, way more than them with much, much worse outcomes. Our current system is flawed in principle, bad at producing actual good outcomes, but generates loads of cash. Loads of cash attract wannabe MOTU MBAs who’ve subsequently wrecked the joint. Plus antsy shareholders, and mutual fund managers who now care about UHC’s quarterly revenues and profit margins.

    Monetizing healthcare was a terrible idea. Putting Gordon Gekko in charge compounded the issue.

    Healthcare should be treated as a public utility. Everyone needs it, the infrastructure is expensive, and the demand is inelastic. Every city in America can deliver electricity and water and haul away your trash. It isn’t hard – we already have the framework.

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  8. de stijl says:

    The first step might not even be that radical – just offer a Medicare buy-in option.

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  9. al Ameda says:

    The notion that ‘Medicare-for-all’ would squeeze hospitals implies that the current system of private insurance-for-all is not already squeezing hospitals and is somehow NOT a threat to their financial viability. Nothing could be further from the truth. The current non-Medicare-for-all system is replete with waste and unequally distributed health delivery outcomes.

    ACA (aka ObamaCare) attempted, in part, to address some of this problem by allowing states to expand Medicaid. This had the beneficial result of making rural based clinics and hospitals more viable because it ensured that those establishments would be reimbursed for the costs they incurred in providing healthcare delivery to lower income populations. In California this means that many clinics and hospitals in the rural Central Valley area have a better chance of surviving.

    We do not have to eliminate the private health insurance market in order to implant a plan to provide health insurance to all. What we need to do is adopt a National Health Care Policy Plan, and provide a voucher to people which may be used to purchase that Plan from any insurance provider, and cap the profit that private insurance companies may charge to broker and sell the National Policy Plan. Also, if you want more coverage you may purchase it in the private market.

    Other countries do this, Switzerland for example, why not America?
    Wait, don’t answer that …..

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  10. Hal_10000 says:

    @Michael Reynolds:

    There is zero evidence that Medicare is more efficient than the private sector. It is mostly administered by private companies with the feds taking a slice off the top for their own management. Moreover, many of the worst aspect of our healthcare system grew out of Medicare policy (e..g, constantly gaming the system to get them to pay). It boggles the mind that people think M4A — which would be five times the size of the Pentagon — would be efficient.

    Doctors’ medicare fees have only gotten minimal increased in the last thirty years and most see Medicare patients at a loss. Bernie and his followers simply assume that we can make a 20% cut in healthcare fees because … well, because they want it to happen so they don’t have to raise taxes even more.

    As I’ve said, if you think healthcare is expensive now, just wait until you see how much it costs when it’s free. The US is not other countries — Medicaid and Medicare have already shown that.

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  11. de stijl says:

    @Hal_10000:

    just wait until you see how much it costs when it’s free.

    You’re straw-manning here. No one thinks that healthcare is free.

    The US is not other countries

    Pick any country in Europe. They spend substantially less on healthcare per capita and the patient outcome is better, and that system is either nationalized or governmentally subsidized or some syncretic amalgamation. Math and economics do not halt at our borders.

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  12. Mikey says:

    @Hal_10000:

    As I’ve said, if you think healthcare is expensive now, just wait until you see how much it costs when it’s free.

    If we look around the world, it becomes clear that is “half as much.”

    (And of course it’s not “free,” it’s just done properly.)

    The US is not other countries

    Germany is not other countries. France is not other countries. Canada is not other countries. England is not other countries. What’s your point? That we’re so fucking special we can’t accomplish what everyone else has?

    It’s simple, really–we don’t lack the means to accomplish what the other countries have. We lack the will.

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  13. Andy says:

    I’m going to steal from comments I made in another thread on this topic.

    First, let’s firm-up what M4A is and what it isn’t. It is not socialized health care, it is socialized health insurance (or more accurately, health coverage). That is a major and important distinction. The vast majority of the actual health-care delivery systems would remain private – what would change is their revenue streams would come exclusively from the federal (and possibly state) government and not from other private parties (employers, private insurance individuals, etc).

    Because of that, my big concern with M4A is our political system. Dr. Taylor has written extensively here in many posts explaining why “institutions matter.” He’s exactly right about that and they also matter for any M4A system, which would have to work with our institutions and systems and not those of the UK, France or any other country.

    As it currently works (simplistically), private insurance companies and providers negotiate reimbursement rates for procedures and other aspects of health care delivery. For Medicare and M4A, these rates are set by the government and are ultimately determined by the political process. Since health care providers (including hospitals) are still largely composed of private businesses, they will have every incentive to use our political system to maximize their revenues once their revenues come only from the government.

    The fundamental question here is whether M4A would, in reality, give hospitals a haircut. Cohn’s assumption that this would inevitably happen is a bad assumption. I’m skeptical of the premise that Medicare reimbursement rates would remain about the same as they are now (resulting in substantial cost savings) forcing a de facto and major revenue reduction down the throats of hospitals and other providers.

    The existing Medicare system has never been able to contain Medicare cost growth to the rate of inflation (the Medicare Sustainable Growth Rate/”doc fix” fiasco is the best example) thanks to opposition from the medical lobby. Why should we believe this will suddenly be possible with M4A? I’m skeptical that those whose incomes rely on 1/5 of our entire economy would sit by and take a massive pay cut by limiting payments to current Medicare reimbursement rates. The doctor lobbies have already said for years that many hospitals and practices would go out of business if their revenues were limited to Medicare reimbursement rates. I don’t believe them, but the fact of the matter is that Congress or rule-making agencies are unlikely to force that kind of a haircut on the medical sector.

    So the notion that hospitals will have to take a haircut is almost certainly not true, because our political system would have to contend with the powerful medical lobby which would certainly use its influence to ensure providers don’t get much, if any, of a pay cut.

    So I think proponents need to consider how M4A would actually function under our political system and not some idealized model. To me, that’s the fundamental issue that must be addressed with any actual M4A proposal. We can’t afford to simply assume M4A here will work as it does in countries that are very different from ours in terms of governance and political culture. And, as we’ve seen in so many other areas, our system of government is very prone to regulatory capture and rent-seeking. Health care is no different and the allure of tapping into what amounts to 1/5 of the entire economy will create powerful incentives for various actors to extract and maximize rents. Our system of government has shown, again and again, that it is very vulnerable to regulatory capture and rent-seeking – and that’s the primary problem with Cohn’s analysis – it doesn’t factor that in at all.

    And the Medicare system is already a victim of rent-seeking and regulatory capture, thanks to the AMA’s RUC and the artificially low limits on annual residencies, to name just two. Those are two long-identified regulatory problems (by policy experts on both the left and right) which no one has done anything about. We can’t fix clear examples of regulatory capture and rent-seeking now, how can we expect these problems to go away with M4A?

    One takeaway—and it’s obvious when pointed out but probably not something most of us think about—-is that “Medicare-for-All” isn’t actually a policy so much as an idea.

    Yes, I can understand why, politically, M4A proponents like Sanders don’t want to talk about the details. But the details matter a great deal. The deals will make or break the system. At some point proponents like Sanders need to move beyond platitudes to show how it would actually work in the real world.

    Presumably, most of the details of a Medicare-for-All law would be left to regulators at the Department of Health and Human Services and/or the Food and Drug Administration to flesh out. And they would be constantly tweaked as we learned from practice.

    Well, I hope not.

    Too often we implement policy with rosy assumptions, great expectations and just assume the details will work themselves out by the relevant agencies guided by “experts” in government guided by industry stakeholders. Following that path with 1/5 of the economy for something as important as health care is stupid and dangerous IMO.

    Additionally, I would expect a lot of follow-on reforms if the Federal government took over the entirety of the burden of financing healthcare. We’d almost certainly increase the number of physicians in the system, especially in the primary care field. Presumably, we’d heavily or entirely subsidize their education to relieve them of the massive debt that now accompanies going to medical school and the need to generate massive fees to recoup those expenses.

    Why should we assume that? We could do that now without M4A. We currently have an artificial shortage of doctors in the country which was created by the limit on Medicare residencies. That limit is the result of the medical lobby because it results in increased provider salaries. Why should we presume this would change under a M4A system?

    Bottom line is that any M4A system has to account for the realities of our society, politics, and government, not some idealized fantasy where everyone and everything suddenly starts acting differently.

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  14. Michael Reynolds says:

    @Hal_10000:
    But the Pentagon is efficient – at what it does, which is be the dominant military power in the world. Size does not automatically mean inefficiency: Amazon’s pretty large, and damned efficient. Ditto Wal-Mart, Apple and Costco.

    As for gaming the system, what do you think happens with regular insurance? I had a non-dangerous but cancerous skin thing. Had it removed. The dermatologist and I agreed that I’d pay for the labs off the books so that no cancer diagnosis would appear in the record.

    When I moved from NC to CA I had to create a corporation to get any coverage at all pre-ACA. It’s an absurdly wasteful system as is. The notion that paperwork split among dozens of health insurers is efficient is silly, that’s not Amazon, that’s any random bunch of shops on main street. And like other commenters above, I am sick of this Acquired Helplessness Syndrome where we, and only we, just can’t somehow manage it.

    This is just another iteration of the problem of wealth concentrated at the top. Maybe doctors and hospitals can earn a bit less and more people can be cared for. Maybe we break the AMA’s stranglehold on med schools and work regs. Maybe we do what the Aussies have done and automate prescriptions. And maybe we try to educate consumers as to what they do and don’t need. Or we could stop big pharma from advertising to consumers. Or start charging big pharma for their use of patents that grew out of taxpayer funded research.

    But mostly if we intend to rein in the medical establishment we need a stronger bargaining position. And there’s no stronger position than that of 100% of consumers.

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  15. de stijl says:

    @Mikey:

    If we look around the world, it becomes clear that is “half as much.”

    Best retort ever. 10 /10. Five stars. Highly recommended.

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  16. Michael Reynolds says:

    @Andy:
    The current system gave us the opioid epidemic. What is that going to cost? The current system pushes new drugs directly to consumers. What does that cost us? The current system allows Big Pharma to earn billions off patents from federally funded research. That costs us a mountain of money. Then there are the uninsured who eventually cost us either in emergency room visits or support for their orphans.

    This is Acquired Helplessness. Can we fire a missile with such accuracy that it actually hits another missile thousands of miles away? Oh, sure, we can do that. And who does that? The US government. Do not tell me the USG has the capacity to operate a global submarine and surface fleet in all the world’s oceans simultaneously, but we can’t figure out how to use a base of 100% of all health care consumers to push down costs. If that were true the Republicans would not have passed a law outlawing Medicare from bargaining for drugs. Pharma knows damned well that if Medicare could squeeze them it would save us and cost them hundreds of billions of dollars.

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  17. Matt says:

    @Hal_10000: This is the second time in the last few months where you’ve trotted out those same talking points. Just like last time reality and facts are being used to destroy your talking points. You’re a smart guy so I can’t understand why you keep sticking to talking points that are so easily debunked. After having your arguments thoroughly debunked and countered by those in the industries involved I would of assumed you’d reconsider your beliefs.

    Why haven’t you?

    Also why do you believe the USA is such a special snowflake that it’s just impossible to compare the USA to any other country??

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  18. Andy says:

    @Michael Reynolds:

    To be clear I’m not advocating for the current system – it is truly awful. I’m simply against utilizing wishful thinking when it comes to proposed alternatives, to include M4A.

    And to reiterate, I would like some kind of nationalized health care or some kind of public option. After all, me and mine have benefitted greatly thanks to Tricare and the VA.

    However, as a pragmatist, I can’t ignore the foreseeable obstacles to implementing a Sanders-style M4A – obstacles that advocates ignore, dismiss or, like this Cohn piece, make rosy assumptions. The hard reality of real-world effects is usually a lot different.

    We can’t just assume that M4A will work without knowing, much less understanding, the details and how it would function in the real world.

    You mention the military. One of the reasons we are better than other nations is because we pay very close attention to the details.

    You look at the Iraq war and we went through the Iraqi military like, to use Patton’s phrase, shit through a goose. The reason is because of careful planning, knowing the enemy and our own capabilities, and understanding the operational environment. In military planning that was Phase I-III, and we did really, really well.

    However, Phase IV (postconflict operations) was shit. The reason is because there was very little planning and preparation for it because the military was told the State Department would handle the post-war transition. The Phase IV plans had US military forces doing very little except drawing down to zero within a few months after the conflict.

    One famous line from Third Infantry Division’s after-action report read:

    Higher headquarters did not provide the Third Infantry Division (Mechanized) with a plan for Phase IV. As a result, Third Infantry Division transitioned into Phase IV in the absence of guidance.

    That was true of the entire post-conflict effort and that failure turned our Iraq intervention into a strategic disaster.

    If one wants M4A to succeed and use the example of our dominant military as a comparison for why it will or should succeed, then the implementation and planning for M4A need to match the scope and attention for our successful military efforts, not the wishful thinking, lack of planning and understanding that characterized our military disasters, like our post-conflict planning and operations for Iraq.

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  19. Gustopher says:

    @Michael Reynolds: Restructuring one seventh of the economy is a lot harder than launching a cruise missile. Physics has pretty clear equations, at least compared to economics.

    There will be winners and losers, and we will have unintended negative consequences that we will have to react to quickly. Some hospitals may declare bankruptcy, particularly for-profit hospitals.

    A lot of the cost of emergency room visits is the cost of having all this equipment available, even if not used. If you reduce the number of people using the ER as primary care, and that availability cost is spread among fewer visits, and the cost of a pulmonary embolism or ominous chest pain increases — possibly to a point where Medicare reimbursement is too low.

    We’re going to get at least some of this very wrong.

    The alternative is to wait until we are restructuring one fifth of the economy, which would be worse.

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  20. Matt says:

    @Gustopher:Well I can’t help but imagine that a massive cost would be associated with the reality that a majority of people who visit an ER never pay their bill. I’ve seen numbers north of 68% of ER patients fail to pay their bill. So the few who do pay their ER bill are also paying for the majority who don’t pay their ER bill..

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  21. DrDaveT says:

    @steve:

    Under our current system many hospitals have decided to take the approach of trying to maximizing revenue. They look for the procedures and care with he best ROI and maximize that care.

    As Michael later reaffirmed, they also take the approach of outright lying about what care they are providing, classifying conditions and procedures in ways that are better reimbursed, rather than in ways that are more accurate.

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  22. HankP says:

    It won’t just be squeezing hospitals, it will be squeezing doctors, pharmaceuticals, equipment manufacturers and companies that provide administrative services. Which is as it should be, since they’ve been fleecing us blind for the past 40 years.

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  23. Todd says:

    For profit healthcare is an oxymoron

    As long as we continue to be a country where we think that becoming a doctor or a hospital administrators is a good, and acceptable way to get “rich” then we will be a country with out of control healthcare costs.

    Insurance companies were never the biggest problem … it’s always been hospitals.

    Even without medicare for all, we could fix this issue right now:

    Require that if a hospital accepts any insurance (including medicare) they must accept all insurance … and they must charge the same (publicly visible) prices for everyone.

    Eliminate “networks” and you take away hospitals bargaining power.

    This would finally allow insurance companies to actually compete with each other … by trying to come up with ways to keep their customers as healthy as possible.

    I’m sure there are a thousand reasons why this wouldn’t work. But at the top of that list is that the American healthcare system, like many other sectors of our society is not really about keeping Americans healthy; it’s primarily about making sure that sick people are a reliable source of revenue in a lucrative business model.

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  24. An Interested Party says:

    To use a line from a post from a few days ago: We can’t have nice things because of…

    … the American healthcare system, like many other sectors of our society is not really about keeping Americans healthy; it’s primarily about making sure that sick people are a reliable source of revenue in a lucrative business model.

    We’ll be a better country when the needs of the many are more important than the needs of the few…

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  25. de stijl says:

    LCD Soundsystem / We’re North American Scum
    https://youtu.be/Jmm14g4cAFc

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  26. grumpy realist says:

    @An Interested Party: We really need to start thinking of providing medical services as a public good. Too bad we didn’t have it written into the Constitution the way we did the postal service.

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  27. steve says:

    “Eliminate “networks” and you take away hospitals bargaining power.”

    Nope. All of the early studies on market power were done before networks were common.

    “This would finally allow insurance companies to actually compete with each other”

    ” and they must charge the same (publicly visible) prices for everyone.”

    I favor transparency on principle, but just be aware that when transparency is available it has not cut spending.

    “We can’t just assume that M4A will work without knowing, much less understanding, the details and how it would function in the real world.”

    Agree 100%. While we know that in general Medicare has been better at controlling costs than the private sector, that is damning with faint praise. Medicare, like defense contracts, has been used to reward favored interests. That could change, but we dont have any guarantees. Overall, without any real details I dont find it that rewarding to debate this.

    Steve

    Most states only have a few insurance companies. They dont really want to compete. Never have. They also worry about market share.

    ” by trying to come up with ways to keep their customers as healthy as possible.”

    Zero evidence that wellness programs work. What has worked to keep costs down is programs that work with chronically ill patients to keep them out of the hospital.

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  28. MarkedMan says:

    We won’t be able to change our system until we are shut of the Republicans. The Party has become a refuge for racists and whiners, for deniers and losers. It is characterized by the bitter and angry mutterings and shoutings of old men at the end of the bar, their rantings a putrid mishmash of “No problem can ever be solved!” and “No problem is real!” As a nation we carry these enfeebled and addled complainers on our backs out of a sense of nostalgia, but we will all be better off when the party is tossed in the ash bin of history.

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  29. Todd says:

    @steve: quick clarification when it comes to insurance companies “competing”. I am not in favor of multiple insurance companies. I favor medicare for all (or something like it). Alternative, if we insist on “private” insurance, we’d likely be better off with one (or maybe two) large national companies … precisely because they’d have the bargaining power with hospitals to actually help control prices.

    I stand by my contention that hospitals not insurance companies have always been the problem when it comes to rising costs.

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  30. Hal_10000 says:

    @Matt:

    That’s an odd definition of “destroyed” when I cited point after point about administrative costs and Medicare/Medicaid’s significant overhead costs. Or pointed out time after time where bad insurance industry practices started out with Medicare before spreading to the private sector.

    But sure, I understand. You don’t want you sacred cow kicked.

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  31. MarkedMan says:

    @Todd:

    I stand by my contention that hospitals not insurance companies have always been the problem when it comes to rising costs.

    I agree that hospitals contribute significantly. But I would still argue that the single largest contributor to US health costs are the direct and indirect costs attributed to insurance. As mentioned above, I think 30% is a very reasonable estimate and it may be more. Perhaps the most damning proof of this is what happens every year under Obamacare’s 80/20 rule. This simply states that insurance companies must have at least 80% of their revenues going to payments for medical care. Anything they keep more than that must be refunded to their ratepayers. Last year they collectively had to pay out $707M. So, right away, we know that most private insurers are operating very close to that 20% margin, so close that they frequently go over it. Yes, they claim all sorts of nonsense numbers using voodoo math, but if those numbers were true they wouldn’t be paying these fines.

    So if the insurance companies are taking about 20%, why do I say 30% is a reasonable number. There are a number of contributors (for instance, you may be surprised at some of the costs insurance companies are able to claim as “directly related to health care”), but the biggest, by far, is the hundreds of thousands (millions?) of people across the US that work in doctors offices, hospitals, clinics, nursing homes, imaging centers, etc, etc, etc, whose primary function is dealing with insurance plans. In European plans these people either do not exist or are tiny fractions of what they are in the US.

    Medicare/Medicaid on the other hand, are administered at a cost of the low single digits (depending on how you count, 1-3%). And yes, there are staff at hospitals that deal with M&M reimbursement, but it is typically much less of a burden than the literally hundreds or thousands of companies and plan variations that they deal with on the private side.

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  32. MarkedMan says:

    @Hal_10000:

    That’s an odd definition of “destroyed” when I cited point after point about administrative costs and Medicare/Medicaid’s significant overhead costs.

    But you just assert these things based on your or others analysis and don’t offer any proof. In the meantime every fact-based analysis shows the costs in the low single digits.

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  33. DrDaveT says:

    Here’s a quick and timely case study of how the system is broken. Numbers are approximate, but the correct order of magnitude.

    Last week, I got a letter from one of several healthcare providers who had participated in a recent medical procedure. This provider turned out to be out-of-network, though that was invisible to me at the time of the procedure. The letter was to notify me that they charge $4000 for that procedure, but that my insurance company was only willing to pay about $1500. Before billing me, they were offering me the opportunity to ask my insurance company to pay a larger portion of the amount.

    Through my HR office at work, I contacted the insurer and made the request. They agreed to pay $3500 total, and wrote me a check.

    I got back in touch with the provider, expecting to be asked to pay the remaining $500 out of pocket. Instead, I was told to pay $3500 — nothing more out of pocket. I was also told that, if the insurance company had not agreed to increase their contribution, I would only have been billed $300 total.

    WTF?

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  34. MarkedMan says:

    @DrDaveT: Our system is so f*cked up it is literally beyond belief. And I mean “literally” literally. Many of us have had the experience of explaining some kind of health care billing tsunami to someone and realize that they feel you must be misunderstanding what happened since nothing could be that crazy.

    Contrast that to the excellent healthcare system in the Netherlands, with outcomes equal to or better than ours (sometimes dramatically better, i.e. infant mortality). A relative went into the local clinic when he was living there during the off hours (I think Sunday afternoon) to get the results of the a bad bicycle spill x-rayed and cleaned up. Despite being off hours there were four people there. Not a single one of which had ever dealt with actual payment. The one person they were sure would know how to do it only worked the day shift during the normal work week. And even that person was still a doctor or nurse of some sort. Think about that. Aside from building maintenance, everyone that worked in a clinic manned 24/7 by 4 or more people were medical professionals and directly related to health care. And almost none of them ever did more for “payment” then take the patients medical ID number. Oh – and when they found the forms and figured out the cost it was almost nothing. Less than $100.

    And the Republicans say “There is nothing we can do, we shouldn’t even try”

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  35. Just nutha ignint cracker says:

    @Matt: Hal’s not talking “facts;” he’s talking “beliefs.” Very strong and hard to refute–even with facts.

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  36. Just nutha ignint cracker says:

    @steve: I don’t think that the history of wellness programs purposed them to keeping overall costs down. As I recall, wellness programs were for the purpose of lowering the use of catastrophic care functions and preventative care. When I had fee-for-service insurance, I didn’t get health screenings. They weren’t covered. The practice was to wait until you had a heart attack, blood in your stool, etc. and then schedule bypass surgery, perforated ulcers, and colon cancer treatment because they were “real diseases.”

    Fee-for-service might even be cheaper overall–depending, of course, on heart attack and stroke fatality rates and such.

    ETA: “WTF?”
    Easy, if they had asked your insurer to increase it’s payment they’d have been told to pound sand. Moreover, when you had complained to your state insurance commission about the non-transparent nature of the billing, it would probably have disallowed the charge. Getting you to carry their water for them allowed them to collect almost all of it.

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  37. Monala says:

    @Andy: I think this is a great description of issues that need to be addressed to implement M4A.

    I do have a question: we can’t be the only nation that deals with rent-seeking and regulatory capture. How have other nations managed to overcome those obstacles?

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  38. dazedandconfused says:

    @Monala:

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  39. dazedandconfused says:

    @Monala:

    Other nations? A comparative study between our system and five others :
    https://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/

    For how our government has done it in the VA:
    https://www.amazon.com/Best-Care-Anywhere-Health-Currents/dp/1609945174

    There’s about a week’s worth of reading and viewing. Sadly, that’s what it takes. A rather fun study of problem solving is “Dirty Rotten Strategies”, and if you google around you will find the authors using our healthcare system as an example for their definitions of “problem” and “mess”. A problem is something that can be corrected with a simple fix. A mess is something that requires comprehensive change. Our healthcare system is, for them, the very definition of a mess and they go into our system in depth to describe it.

    James pointed out a detailed plan would be politically stupid. I suggest a way to dodge that bullet: Propose a national poll of the five systems described in “Sick Around the World”. The top two of those systems would be in a final poll. After which we would adopt it verbatim. All the work of writing one from scratch dodged and the political hacks would have to poke holes in all of them at once. Let them try!

    Btw…if we had a Canadian style system there would be no need for VA hospitals, nor the mountains of paperwork generated in the determining of who qualifies and who doesn’t. Just a thought….

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  40. Matt says:

    @Hal_10000: Hey since you’re responding here maybe you can answer a question you ran from in the other medical thread.

    What makes the USA so mega special snowflake level that it’s impossible to compare healthcare there to other first world nations??

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  41. James Joyner says:

    @dazedandconfused:

    if we had a Canadian style system there would be no need for VA hospitals

    I thought that for a long time but have been assured by people in the know that there’s a need for specialty hospitals to deal with combat wounds, PTSD, Gulf War Syndrome, and other service-specific ailments. Mostly, it’s a function of normal docs simply not seeing enough cases of those things to develop expertise. But there’s also a cultural/psychological aspect of having those maladies treated in the presence of others who’ve gone through the same experiences.

    Certainly, though, VA wouldn’t need to deal with ordinary medical issues if we had universal coverage.

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  42. DrDaveT says:

    @Just nutha ignint cracker:

    Getting you to carry their water for them allowed them to collect almost all of it.

    Yeah, I got that part. I feel like an unwitting accessory to insurance fraud. But the difference between $300 and $3500 is clearly pure graft here — and business as usual.

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  43. steve says:

    “I stand by my contention that hospitals not insurance companies have always been the problem when it comes to rising costs.”

    You do realize that hospital spending accounts for only about 1/3 of all health care spending, and that the fastest growth spending has been in outpatient care up until recently. So hospitals bear some of the blame, but insurance companies are at least equally to blame, and I would place more on them, though I concede that is probably opinion. Still, insurance companies get so many shots at controlling costs that hospitals do not incur and controlling costs iOS kind of their job.

    just nutha- I was referring to the extensive wellness programs where they send you to exercise classes, diet classes, etc. Also, the data is actually kind of mixed on screening (what you are talking about) and its effects on costs. In some studies they actually increase costs since we find disease and treat when if we had not it might have gone away or the pt might have died, both of which are cheaper. So outcomes are generally better (even that is mixed since we probably over treat) but it costs more.

    Steve

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  44. dazedandconfused says:

    @James Joyner:

    True.

    However I can’t see clinging to a terribly inefficient system for a percentage of patients which starts with a decimal point and at least one zero. I recall the incident where the VA had so many case files stacked up they were bending the floor. The reason for those files is to provide court-proof documentation to exclude and include people.

    For the poor, it’s mainly just to legally justify the transfer of the costs to a different department of our government. Heck of a waste.

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  45. MarkedMan says:

    @dazedandconfused: In a system where everyone was covered, it’s simply not that big of a deal whether someone is included or excluded. A not insignificant amount of the Medicare/Medicaid and SS Disability goes to deciding who is covered and who is not. It becomes much less of a thing when it’s simply a question of “what pot does this come from” as opposed to “do we kick this peasant to the street or not?”

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  46. dazedandconfused says:

    @MarkedMan:

    No, it’s not that much smaller a deal. These decisions can and do get challenged in court and hospitals are legally bound not to toss peasants out in the street. Not only do mountains of paperwork have to maintained for lawyers but hospitals must treat people without a guarantee of payment, let alone prompt payment.

    This affects pricing for those who can pay. Bigly.

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  47. MarkedMan says:

    @dazedandconfused: I guess I wasn’t clear. I agree that in our current system, it is a huge deal to a provider whether someone is covered by one program or another. I was contrasting that to European systems where everyone is covered.

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  48. Tony W says:

    Costs are the problem, how we pay those costs is secondary, although a single payer will increase efficiency – reducing double billing, rejected expenses, etc.

    Hospitals are out of control for sure, but there is rent-seeking up and down the system.

    * Artificial limits on numbers of new medical students and exhorbitant barriers to entry for new doctors.
    * Medical equipment companies charging huge markups because of end-consumer price insensitivity. Watch any late-night TV program and enjoy the ads for free scooters and back-braces, just call with your medicare card in hand.
    * Medical school costs and HUGE student loans, enabling mid-six-digit incomes after 15 years of post-high-school dues-paying
    * Pharmacy companies, discussed at length here.

    I feel like a single-payer with both the muscle and the determination to cause pain and force down costs, perhaps slowly over time, is the only way to get this under control.

    ReplyReply
  49. dazedandconfused says:

    @MarkedMan:

    I may have read it wrong. We are in full agreement.

    ReplyReply

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