Medicare for All’s Unintended Consequences
What would it mean for the companies' workers, the stock market and the cost of care?
NYT reporters Reed Abelson and Margot Sanger-Katz observe, ”Medicare for All Would Abolish Private Insurance. ‘There’s No Precedent in American History.’”
At the heart of the “Medicare for all” proposals championed by Senator Bernie Sanders and many Democrats is a revolutionary idea: Abolish private health insurance.
Proponents want to sweep away our complex, confusing, profit-driven mess of a health care system and start fresh with a single government-run insurer that would cover everyone.
But doing away with an entire industry would also be profoundly disruptive. The private health insurance business employs at least a half a million people, covers about 250 million Americans, and generates roughly a trillion dollars in revenues. Its companies’ stocks are a staple of the mutual funds that make up millions of Americans’ retirement savings.
Such a change would shake the entire health care system, which makes up a fifth of the United States economy, as hospitals, doctors, nursing homes and pharmaceutical companies would have to adapt to a new set of rules. Most Americans would have a new insurer — the federal government — and many would find the health insurance stocks in their retirement portfolios much less valuable.
“We’re talking about changing flows of money on just a huge scale,” said Paul Starr, a sociology professor at Princeton University and author of “The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of a Vast Industry.”
“There’s no precedent in American history that compares to this,” he said.
Several immediate thoughts jump to mind.
Everyone says “Medicare for All” would eliminate private insurance. But that seems like an unfounded assumption. My late mother was on Medicare. She also had Tricare for Life, a supplemental insurance plan made possible because my late father was an Army retiree and had paid for survivor benefits. As it’s currently structured, at least, Medicare leaves large gaps between coverage and costs. My mother would have gone bankrupt years ago without supplemental insurance. With it, her out-of-pocket costs were negligible.
[UPDATE: Dave Schuler calls to my attention H.R.1384 – Medicare for All Act of 2019, which was introduced on March 13. One could indeed all but eliminate private insurance because it’s in fact more than “Medicare” as we know it without an age limit.]
If “Medicare for All” is more efficient, it’s not obvious why we should care that the alternative system currently “generates roughly a trillion dollars in revenues.” Presumably, that’s money that could be diverted to answer the obvious “How are we gonna pay for it?” question.
Still, to the extent that socializing a large part of the economy takes jobs from a large swath of the populace and disrupts the stocks and mutual funds upon which our current retirement system is largely based, it’s admittedly a problem. (And, no, this isn’t the same thing as “creative destruction,” which capitalists champion as a benefit. This is the government doing something suddenly and by fiat, not the market gradually killing old industries by offering improved substitutes.)
Economists have begun wrestling with basic questions about what this sort of change would mean and disagreeing over whether it would cost more or less than the country’s current health care system.
No one has examined the full economic impact of such plans on jobs, wages, investors, doctors and hospitals — or the health insurance companies themselves. Such an undertaking would be difficult, given the vagueness of key parts of the proposals being discussed and the wide-ranging possible effects.
Sure. Although the simplest conception of “Medicare for All” would be—stay with me here—to take the current Medicare program and—wait for it—apply it to all people living in the United States. Essentially, we’d lower the eligibility age from 65 to 0 and cover what we cover now. [UPDATE: But, again, H.R.1384 – Medicare for All Act of 2019 proposes something more radical.]
There are few international analogues to the Medicare for all proposals, but Canada, which provides similar doctor and hospital benefits for its residents, probably comes closest. Even there, people buy private insurance for benefits that are not covered by the government program, like prescription drugs and dental care.
Right. Which gets back to my first point: the very premise that Medicare for All means no private insurance is suspect. Although, frankly, I don’t know why we wouldn’t cover prescription drugs and dental care while we’re at it. (Indeed, dental insurance sucks under the current system and tends to go away upon retirement, making dental care a luxury good.)
Most other countries with single-payer systems allow a more expansive, competing role for private coverage. In Britain, for example, everyone is covered by a public system, but people can pay extra for insurance that gives them access to private doctors. Most countries in Europe don’t have single-payer systems, but instead allow private insurance companies to compete under extremely tight regulations.
I’m persuadable that this is a preferable model, although it’s hard to see how. Still, that’s not Medicare for All.
Legislators writing the bills acknowledge that people in the health insurance industry would lose their jobs. Proposals in the House and Senate would set aside large funds to help cushion the blow to displaced workers, offering them training, benefits, and income supports.
That’s reasonable enough on the surface but would obviously be massively expensive, if only in the short term.
The health insurance industry is now composed of a mix of for-profit and nonprofit companies of various sizes. About 155 million Americans get private health coverage through an employer, but the reach of the industry extends into publicly funded insurance programs.
A third of Americans enrolled in Medicare, which insures older and disabled people, and four-fifths of those in Medicaid, which covers the poor and disabled, now get their benefits from a private insurer.
Simply talk of Medicare for all makes investors jittery. Shares of the large publicly held insurance companies, including Cigna, Humana and UnitedHealth, fell when Representative Pramila Jayapal, Democrat of Washington, introduced her bill in late February, but have largely rebounded.
The effective takeover of the health insurance industry in the United States would mean a huge hit to the companies’ stocks, although the companies, which have additional lines of business, would most likely survive.
Again, even after repeatedly acknowledging that private insurance would continue to exist under virtually any plan, we keep coming back to pretending otherwise.
While the bills would give relief to insurance industry workers, they would provide no such compensation for investors. Not surprisingly, the insurance industry and many other health care industries vociferously oppose these plans and plan to spend heavily in fighting them.
This strikes me as a non sequitur. To the extent the insurance and health care industries are fighting the plan, they’re not doing it because of the investors.
Many supporters of this approach see elimination of private insurance as a key feature, not a bug, meant to improve the program’s efficiency and equity by streamlining the health care system and weakening profit motives. With a single insurer covering every patient, hospitals and doctors could spend less time and money complying with differing policies, negotiating contracts, and filing forms to get paid.
“It’s worth it,” said Adam Gaffney, the president of Physicians for a National Health Program, which supports single-payer health care and helped design Ms. Jayapal’s bill. “Because we are not going to get to true universal health care without the greater efficiency of a single-payer system.”
Obviously. Insurance companies are a middle man that drive up healthcare costs. They’re almost by definition an inefficiency.
Obamacare was designed to build on the current system, patching its holes while minimizing disruption and avoiding the fierce opposition from industry that helped sink earlier attempts to change the health care system.
But many of us argued at the time that it was obviously a gateway to the destruction of the current system. Indeed, that was my primary opposition to it: rather than simply covering those who couldn’t afford coverage, we were effectively propping up an inefficient insurance industry and at the same time turning it into something other than true insurance. Requiring coverage of pre-existing conditions and mandating people buy it or face penalties solves for some inefficiencies of the market. But it ain’t “insurance.”
But 107 Democratic House members are now co-sponsoring a Medicare for all bill written by Ms. Jayapal. Mr. Sanders, whose update of his bill is expected in the next few weeks, argues that only a single-payer approach would resolve problems he sees as inherent in private insurance. Both proposals are clear that a single, government-run insurer would replace the private sector, but they are less detailed about exactly how the government program would pay for medical care.
Their plans would include nearly every doctor and hospital in the United States and provide generous benefits, including dental care and hearing aids, and would not require patients to pay any out-of-pocket cost to see a doctor. The federal government, of course, would have to cover those benefits, and would need to raise taxes to pay for them.
Now this plan would indeed pretty much kill the private insurance industry. But it’s more aptly described as Medicare and More for All.
Gerald Friedman, a labor economist at the University of Massachusetts Amherst, who was close to Mr. Sanders’s 2016 campaign, estimated then that it could reduce the nation’s health care spending by $6 trillion over a decade, while the left-leaning Urban Institute said it might increase the overall bill by nearly $7 trillion.
That’s . . . quite the gap.
The non-American system with which I’m most familiar, Germany, has plenty of private insurance companies. Providers are private practitioners, as well. It’s not even truly “single-payer,” it’s universal multi-payer, because people over a certain income threshold can opt-out of the publicly-funded system and go fully private.
And yet they cover close to 100% of the population and spend around half per-capita of what we do. And unless things have changed in the past few years, there aren’t any long waits for care, or any of the other anti-universal-coverage bugaboos.
Anyway, this is basically just meant to provide a nation-scale example in support of your statement “Everyone says ‘Medicare for All’ would eliminate private insurance. But that seems like an unfounded assumption.”
It also needs to be pointed out that there are very few pure health insurance providers anymore. Most have become or are in the process of becoming “Integrated Delivery Networks” that also own hospitals and doctor practices. Even in a worst case scenario single payer system, that portion of their businesses would still exist.
Reed Abelson and Margot Sanger-Katz: concern trolls. Have you thought about the risk to your back were we ever to climb off your shoulders? And then there’s the possibility when we retract our vampire squid blood funnel, that your body tries to compensate by producing too much blood! The damn cure is worse than the disease.
Well, there’s also the problem that Medicare itself is administered by private insurance companies. And many of the worst behaviors of insurance companies started in Medicare and migrated to private sector. For example, Harris was blithering a few weeks ago about how awful it is you have to get prior approval for surgeries. But that business *started* with Medicare trying to keep costs under control. And in the early days, the approval process was extraordinarily bad, frequently denying life-saving surgeries.
If you abolish private insurance companies, you now have to create an entirely new massive administration from scratch. And given how CMS is handling its existing duties, this is a recipe for an extremely expensive disaster.
As I have said many times: if you think healthcare is expensive now, just wait until you see how much it costs when it’s free.
In Canada we have single payer for basic health care, with extra coverages for seniors and kids. We have a private insurance market for items like dental, vision care, prescriptions and any number of “extended benefits” which is quite often paid by employers but can be purchased by individuals as well. I could see an impact on private insurance if the US went to Medicare for all but unless it is comprehensive beyond belief there should still be a role for insurance.
It’s dangerous to change the system because it’s 20% of GDP? Talk about your too big to fail. Sounds more to me like this is an argument for doing something radical, not against.
@Hal_10000:
Well, given the example of literally every other advanced economy on Earth, it’s about half what we’re paying.
Medicare for all, isn’t happening. Sorry Bernie, AOC, it is too easy to…see Harry and Louise and expect their fictional kids to return. Medicare for more, Medicare for those who want it, probably. While insurance companies are in part to blame for healthcare costs in the US, their grifting pales in comparison to thievery drug companies, device manufacturers and hospital and clinic networks. Unless government at some level, state or federal gets seriously involved reimbursement setting costs will continue to spiral out of control. Universal coverage is the easy part.
Absolutely correct, given international examples, there is no reason to assert a priori that a universal base insurance eliminates the private health care insurance industry.
Although it seems to me the USA would be ideologically better suited for something like the French model with its universal mandate for health insurance delivered through a set of “mutual insurers” (policy owner owned). French political culture has driven that system to be less privately organized than it was at its inception, but at organization it was structured in a way that really was perfectly compatible with the American situation, including the mutualization of previously employement based health insurance. Ownership wise it technicaly is private.
And of course one can (and for better employers, do) buy extra supplementary insurance above the base Mutuelle offer, various add ons etc.
Having used US (NYC), UK and French systems, I would prefer the French – of course service is quite rude but that’s French service culture, not inherent to the system structure as such.
Overall, such a reform is free market liberating as your system is an enormous drag on young entrepreneurial companies, and really a dead weight loss. Leveling the playing field on base-line health care would liberate a part of the employment and young-entrepreneurial company market to compete more effectively against large players AND internationally.
The beauty of the Republican Health Care Reform that we call Obamacare, is that it worked within the existing system.
Right now the Dennison administration is advocating, in court, for completely wiping out the ACA.
The Conservative thing would have been to fix Obamacare.
When Dennison throws millions more off insurance (on top of the millions they have already thrown off) will Medicare for all be easier to pass?
The Section 303 of the Medicare for All Bill of 2019, the bill recently introduced in the House, would effectively eliminate private insurance:
The incredible and non-value-adding cost of the American health care system is contained in this sentence. But the cost is not caused by private health insurance, directly. Most of the European systems have private health insurance companies as part or, in some cases, virtually all of the mix. So if that’s not the difference, what is? It’s actually pretty simple – in the European countries the government decides what must be covered. In the US it is the insurance companies. Mindless Republicans guided by billionaire hobbyists scare everyone into thinking this is the worst possible thing, but the reality is that it is much, much better than the insurance companies deciding it. Collectively, the insurance companies employ many thousands of people (tens of thousands) whose sole job is to find reasons to deny coverage to their customers when those customers actually get seriously sick. So we end up with a constant battle and constant uncertainty. Every plan is different and every treatment is subject to interpretation.
A rule of thumb is that a successful American company generates $200K to $250K revenue per employee. The insurance company employs 500K people. If you do that math it means they consume $100B+ every year. The Medicare, Medicare and Vets costs are much, much lower and they collectively cover about 55% of the annual medical costs. So by this rule of thumb (and working in some other numbers) it would mean that about 10% of the costs are eaten by private insurers who generate not one single positive health care outcome for that money. But wait, there’s more. In the first year of Obamacare health insurance companies who couldn’t demonstrate that 70% (80%? Either way, a travesty so I’m not going to search for this right now) of their revenues went to paying for health care had to refund the overage to their customers. Many billions of dollars were refunded that year and “direct healthcare costs” were very loosely interpreted (if a department produced a pamphlet on how to quit smoking it was considered direct health care costs). So the indications are that somewhere between 20% and 30% of costs are eaten by the insurance companies. But wait! There’s More! (Points for getting the reference). There are probably as many people or more employed by hospitals, clinical practices, imaging centers, etc to deal with health insurance as work in the health insurance industry directly. Walk into a typical shared practice. There might be 3 doctors, 4 or 5 nurses and a dozen people dealing with the paperwork. Walk into a similar facility in the Netherlands and what is missing? Those dozen people dealing with payment. And this doesn’t even consider the untold hours we’ve all spent on the phone arguing over coverage, getting preapproval, documenting that we got pre-approval, shopping for new physicians when the company changes plan and the current clinicians are no longer in-group.
So, the greatest single pool of money for covering additional people would be to eliminate this monstrous and much worse than useless bureaucracy. But it would also put a 1M people into the unemployment lines. Gradual is the only way.
Factor in these numbers from my most recent Medicare Complete statement of benefits:
Amount provider billed–$77.35 amount approved–$46.46 (All other entries on same format)
$24.99–2.85, $12.00–1.23, $93.20–13.53.
Is it possible that part of the difficulty in processing the competing claims of impact is that we don’t even know where the profit/loss line is on medical care anymore?
@Mikey:
And I’m sure that layering a new bureaucracy onto the already existing system will close that gap. Most of that is past difference in cost growth, so those higher costs are “baked into” the system we have. The only way you could bring those costs down is by cutting the amount of care being given, which is what most other countries do (the NHS has an entire agency whose sole purpose is to decide that treatments are too expensive to be allowed). This is NOT what the Democrats are talking about. They are out there claiming you’ll be able to get everything instantly for free, which is Trump-level delusional.
Medicare’s admin costs are lower as a percentage because they vomit out lots of money for the most expensive patients. But they are higher on a per-patient basis. And they have massive amount of fraud, as that notorious Right Winger Barack Obama spoke of.
It’s also to be remembered, as I noted above, that a lot of this stuff STARTED with Medicare. They were the ones who created the RBRVS and DRG systems. A lot of those Admin staff are there to fight with Medicare/Medicaid over reimbursements, which can be incredibly complex (and have to be gamed because the reimbursement rates have not been raised in 30 years). So even we assume some admin costs go away — a big assumption — others come in to take their place.
@Hal_10000:
I know this sounds logical, but it couldn’t be more incorrect. We could interpret what you are saying this way: when junior breaks his arm and is covered by private insurance the administrative percentage is lower than when grandma breaks her hip and is covered by Medicare. But this isn’t correct. It is well know throughout the system what is covered when grandma breaks her hip. There aren’t a lot of administrative decisions to be made. However, if private health insurance was covering an expensive procedure (hospitalization, home nursing care afterwards, rehabilitation) like grandma’s hip, they would be looking for every opportunity to deny coverage or jack up copay. They would employ many more people in this endeavor.
Just look at Junior’s arm. In the Netherlands the total cost of a kids program arm, x-ray, cast, followup, removal of the cast is almost certainly south of $200. I know this because my brother in law lived in the Netherlands and had to pay out of pocket for such things. The clinicians who treated such things and who were hyper local, literally didn’t have people on staff in the evening or weekends who knew how to do more than punch in the person’s numbers. The cost for a broken arm in the US is much, much more. There is no difference in the care given and very little, if any, difference in the supplies cost to the hospital. It’s all in the overhead.
Now, on one thing I agree with you. In the US, there are people employed in Doctors offices who are spending their time waltzing the Medicare system so as to get reimbursed for necessary care. The difference between this and private payers is that Medicare has many, many, many fewer employees trying to deny coverage. Private insurers are overflowing with them. As well as people whose sole job it is to write plans that sound like they cover everything with low copays but actually cover little and what they do cover is stinkin’ with copays.
James, I think you may be making the same mistake here that you were complaining about with respect to private insurance.
Socializing a large part of the economy doesn’t necessarily take away jobs — it just moves them from the private sector to the public sector. There are still lots of teachers — indeed, more than there were (per capita) when education was not provided directly by the State. Ditto fire fighters, police, road maintenance crews, etc.
@Hal_10000:
Amount, or quality? Cutting the amount of (unnecessary) care being given is A Good Thing. Cutting quality of care would be a bad thing — but places like Switzerland manage to be both cheaper than the US and better in terms of quality.
If you want to argue that there are practical barriers to moving to a system like [insert any of a dozen European countries with better, cheaper healthcare than the US], by all means do so. I will probably agree with you. But don’t repeat the untruth that other countries save money by compromising on quality or access.
In Brazil the construction(Yes, there is no other word for that) required mandating that municipalities and states invested a minimum amount of money with healthcare and with the public healthcare system(SUS).
You would need the same type of institutional design in the US, and that would include these places like Wyoming and Mississippi.
@Hal_10000:
This is just so wrong on so many levels I don’t even know how to address it. European overhead costs run in the 2% to 8% range. Medicare/Medicaid is 3%. Private health insurance is at least 20-30%, and perhaps more. The biggest single area of cost savings is to go after that 20-30%+
And as for the NHS rationing care. Yes. Yes they do. So does the US private insurers. If you don’t think your clinicians are checking your insurance plan before they recommend treatment, you are dreaming. And choosing the NHS is problematic to begin with. First, it is the least liked of all the universal health care systems. Compare it to the Dutch system. When my brother returned from Africa with an obscure developing world parasite he was diagnosed in his local neighborhood clinic on a Sunday and then they literally called around to a dozen clinics all over the country to find the medicine he needed and then apologized to him because they couldn’t get it before Monday afternoon. And then charged him a pittance. And this is for someone paying out of pocket!
And second, as bad is the NHS is, if I talk to anyone who has dealt with both the US and the NHS systems, they vastly prefer the NHS. And that’s the worst system in Europe!
@Hal_10000:
You may be underestimating the amount of people every doctor’s office has that are spending their days dealing with insurance companies.
I had an emergency room visit for appendicitis, was held overnight, pumped full of antibiotics and then released the next day. Surgery followed six weeks later (I’m on blood thinners, it is safer to do the blood thinner dance in a more controlled way, and without an active infection).
The insurance company balked at paying for the emergency room and the overnight observation. I know this because I got a letter from the insurance company. When I followed up on it a week or so later, I discovered that there had already been five complete rounds of back and forth between the hospital and the insurance company.
Then the insurance company didn’t want to pay for the appendectomy as it was obviously elective. More rounds of back and forth.
I’m wary of saying “I am exactly typical, see my case and tremble”, but all the people were in place processing this back and forth without my involvement because it was absolutely routine.
@DrDaveT:
Sure. But I view most of what private insurance companies do as pure extraction. They’re a middle man who collects money from customers and then works diligently to avoid paying that out to doctors and hospitals when said customers seek coverage. Presumably, Medicare for All would require additional administrative support and hire up some fraction of those now doing administrative things for private insurers. But I’d think it would be a small fraction.
I am curious…how would you fix the current health care mess…
@James Joyner:
Ah, I see — I had misinterpreted your comment as suggesting that putting all of these purely parasitic people out of work would be a bad thing, due to lost jobs. My bad.
@MarkedMan: The other big difference is that Medicare, by treating the oldest patients, is more likely than other insurance plans to have patients needing extremely expensive care. On average (with a few exceptions, such as NICU babies), younger patients are far less likely to need that much care. Opening up Medicare means that you can enroll healthier, younger, generally less expensive customers.
@DrDaveT:
If I had my way, we’d put everyone involved in the telemarketing business our of work, too. But I’d still have concerns about replacing those jobs with productive ones for a variety of obvious reasons.
@DrDaveT:
While this may be technically correct it neglects the fact that these unproductive jobs are the biggest reason we have such a great disparity with the European systems wrt cost. These jobs are not healthcare jobs. Ten times the amount of people are employed in the system than are needed to simply administer it. If you don’t take away these jobs then you don’t get cost out of the system.
@Monala: Exactly. Blaming Medicare because they spend a lot of money is like blaming firemen because they are involved in a lot of fires. We have a crazy private system in the US where the average person changes plan every 3 years (and that was 10 years ago, it may be more often by now). Medicare and Vets are able to take a longer view because they know they will have those people for the rest of their lives. But Medicare insures the people the private insurers don’t want to cover. And while Medicaid might have younger, healthier people it also has all the people who are very sick and were literally bankrupted by our crummy private insurance scheme.
@Gustopher:
Extremely routine. 12 years ago I had a colleague who had top tier private insurance through work, an executive plan. Then his son got hit by a speeding train (short story: dumb teenagers taking a short cut. His best friend died). He lived, but his entire left side from skull to toes were severely damaged. Ruptured organs. All the bones were broken on that side. Dozens of operations. My colleague ended up spending hours during work every day and most of his nights fighting with the insurance companies. Their strategy was to flat out reject everything and then force him to show beyond the shadow of a doubt that he and the numerous clinicians had followed procedure absolutely to the letter of the law before they would budge. They would claim that he hadn’t got pre-cleared for something, then when he faxed over the clearance 3 or 4 times and they finally had to admit they received it they would claim that the clearance only covered the lowest cost things on the bill and the higher cost items weren’t spelled out clearly enough. They were endlessly, day and night, trying to grind him down so he would miss the appeals deadlines, at which point they could cut him off without a penny. His office was next to mine and I heard him going through this for a year, and it was still going on when I left the company.
Our system is literally one of the worst in the world. It pretends to give coverage and then whenever something serious happens a different department in the insurance company takes over and they literally get bonuses if they can figure out a way to deny you coverage. This is what the Republicans are defending.
@James Joyner:
Telemarketers are at worst a neutral burden on the economy, and probably a net positive. This is a sharp contrast with the health insurance workers you cite above, who are a net negative. (It’s not their fault, of course, but still.)
There aren’t that many categories of “gainful employment” that the economy would benefit from eliminating completely. Certain flavors of high-leverage traders, arbitrageurs, snake oil salesmen (21st century version), and designers of artificial sweeteners are the only ones that spring to mind…
The transition will be expensive, and a bit painful. I think we would either need to implement a UBI, or some kind of buy out, or super dooper welfare for the displaced workers to avoid a huge problem.
I don’t worry about the investors, since this will take long enough and the companies have time to adjust, or just decide they’ve had a good run and sell off everything and return it to the stockholders as dividends (no one ever does this… why does no one ever do this?).
It will be expensive, and disruptive, and likely affect real estate prices, and everything else in the economy. My blind guess is that we would be looking at something on the order of The Great Recession, but we would come out the other side stronger. And we can plan for it. And a lot of businesses with have their employment costs drop, which becomes a pretty good stimulus package. But, there will be losers.
The alternative is to spend more to keep the current system.
“The only way you could bring those costs down is by cutting the amount of care being given, which is what most other countries do (the NHS has an entire agency whose sole purpose is to decide that treatments are too expensive to be allowed).”
Untrue. This is a zombie idea which has been shot down many times. Guess what? You really can get dialysis in the UK? Who knew? (Certainly not anyone who reads old talking points generated by conservatives 15 years ago.)
“Medicare’s admin costs are lower as a percentage because they vomit out lots of money for the most expensive patients. But they are higher on a per-patient basis. And they have massive amount of fraud, as that notorious Right Winger Barack Obama spoke of.”
So egregiously wrong that I am glad others have corrected this as I would end up getting too snarky. The other part of admin costs that gets ignored is the ones on the provider side. Having been in charge of our billing service I see those costs, and they are much higher for private insurance. When you look at administrative costs on the provider side they are much lower in other countries.
Steve
@James Joyner: No, no, no, in modern conservative economic theory, comparative advantage is a micro economic principle. The only one who has to benefit is the person getting the advantage. Anyone else, well they should have chosen a better skill set to earn their living with, amirite?
@MarkedMan: I have one, too, although fortunately not nearly so bad as your colleague’s.
When my son was about four years old, he had a terrible phobia of the dentist. We tried a couple different dentists and found one who specialized in the more “challenging” kids. Still, there was some necessary dental work that wasn’t going to be do-able while my son was awake, so the dentist said he would have to go under anesthesia in the hospital. We went to our insurance and they said fine, it’s covered.
Until they got the bill. Then it wasn’t. And I fought it but they wouldn’t budge. $10K out of pocket. And when I asked the hospital for the discount they give for cash payments, they said: “Sorry, that’s for people who don’t have insurance…since you do have insurance but it declined to pay, you owe us the whole $10K.”
An expensive lesson in not letting a little boy suffer. Fuck the American health care system.
@MarkedMan:
This is simply factually incorrect. NHS, for example, spends about 10% just on central Administration, not to mention admin at other levels. Canada spends at least 15%, comparable to the 12-18% seen in the US healthcare system (source: Bernie Fricking Sanders; also federal law).
That Medicare/Medicaid figure is for what the Feds spend for their own part. But as I noted above, the Feds do not actually administer these programs. That’s what they spend to administer the administration. If they engaged in the kind of fraud-checking that the private sector does (thus cutting back on the tens of billion in fraud) it would be even higher.
@Mikey:
And this is what we have collection agencies for. In three years, someone would own the debt, having paid 10%, and would be happy to take 20%. So long as you don’t need to buy a house or anything… just set your default ring tone to silence, and wait.
I wish I was joking.
@Gustopher: The agency that holds my security clearance would not have looked kindly on that. I just put it on a credit card and paid it over time, so of course it ended up being rather more than $10K, but I got to keep my job, so it all worked out, or something.
Note: this link is old but it gets into the problems Medicare has with its Administration not doing enough fraud checking and simply cutting checks to anyone. I realize the idea that Medicare is this wonderful efficient system is religion on the Left. But it is simply not born out by facts. And many of the inefficiencies in our system can be laid at the feet of policy that started with the HCFA/CMS.
I don’t disagree with the criticisms of our current system. I disagree with the notion that single payer is going to cure them. One of my formative experiences in healthcare admin (which I did form age 15 to 24) was when Medicare started this whole business of prior approval of healthcare. The first procedure they denied for this was the removal of a bowel obstruction. We had to go all the way up to an Admin Law judge to get them to admit that, no, letting a patient die in agony was not sound medical practice (our doctor did the surgery anyway and we then spent two years fighting to get them to pay for it).
Another example: in the 80s, tech had come to the point where, if a woman had a lump in her breast, you could do an excisional biopsy, have it analyzed while she as on the table, then do a mastectomy if it turned out to be cancerous. Other insurance companies would pay for the biopsy because they understood that doing both procedures in one setting saved pain, lives and money. Medicare would not. They considered the biopsy to be part of the mastectomy, encouraging doctors to take the unnecessary risk of two procedures. That was another five-year fight before they finally changed their minds.
@MarkedMan: It works the same way in Workman’s Comp. I have a friend who worked as a paralegal for a firm that handled the worker side of the claim. He would look up the guidelines, check the reports and make the claim, which the insurance company would routinely challenge. He would note to the claims rep that they were going to lose, and the rep would note that he realized that but the company had in-house counsel so “it costs us nothing to drag this out however long we can.” I assume that the insurer would “win” occasionally when someone died or something else before settlement and often enough so they could justify the practice.
@Gustopher:
Just blue skying here, bur I suspect that the alternative allows them to syphon off all of the remaining capital for use in the construction of golden parachutes for top management. I could be wrong, though, I suppose.
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 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.
So, any purported or claimed savings or efficiencies from an M4A system would depend on how well the various medical lobbies and other interested parties can influence Medicare policies. Up to this point, they’ve been very successful. The obvious examples are the Medicare Sustainable Growth Rate/”doc fix” fiasco and the artificial shortage of doctors created by the limit on Medicare residencies, but there are many others. Suffice it say that our government has not demonstrated any capacity for controlling health care expenditures which continue to rise well above the general rate of inflation.
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.
Edited to add: For clarity and to short-circuit some of the responses I know will come, I am not opposed to a single-payer system. In fact I’d like a single payer system, or at least something with actual universal coverage. But I’m also skeptical of the grandiose promises of advocates when compared to the likely reality. Before I can support an actual single-payer system, I need to be reasonably assured it would work as advertised.
@Hal_10000: I will agree that whatever you want to call the new system will not automatically fix the problems. Then again, ‘this is the best we can do because…’ seems like giving up too early. I wonder if there’s a compromise that sane people could come to? Then again, in a nation where 47% of the nation voted for Trump, I also wonder if there are enough sane people to make a difference in anything pertaining to government and policy.
@Just nutha ignint cracker:
I’m somewhat open to a system like what Delany is talking about: a very bare bones universal system with private care on top of that. This would be similar to what Australia has (and similar to what Medicare is now). The advantage of Delaney’s system over the others is that it could actually happen.
Costs in the US varies widely. I work for one of the most successful HMOs and our efforts at cost control and efficiency are so good that we can offer insurance at maybe 30-50% lower than our competitors. But even though we’re a nonprofit we don’t do that but instead match the market and channel the surplus to our employees (including doctors, nurses, janitors, office admin) as profit sharing because of the nature of health care economics. We don’t manufacture widgets. It’s time intensive to care for patients. If we suddenly became the market leader in insurance cost, our membership rolls would skyrocket and quality deteriorate. We just can’t adjust that quickly to a 50% growth in volume. There’s no benefit to cornering the market.
Furthermore, insurance is a bit of a game with how to design a good payer mix. You want young/healthy/workplace insured to balance out the old/sick/obese/Medicaid/Medicare population, otherwise you will collapse as a system (physicians leave, quality deteriorates, everything eventually gets shut down by the Joint Commission).
Speaking just of Medicare, reimbursement rates are low compared to private insurance, though still better than Medicaid. If we were to go to 100% Medicare patients (under MFA for example), we would be hard pressed (everyone would see a small pay cut or insurance rates would go up) to deliver the same care across the spectrum. We’re probably still taking a small loss with each patient despite being efficient.
Our competitors who are not HMO don’t have incentive to save costs, so their hospital system can be profitable by doing more tests, procedures, surgeries, etc and just direct billing insurance. Medicare pays much less than private, so I can see most of these private independent hospitals collapsing with Medicare for All.
You can “force” a certain level of reimbursement on the collective community, but this may not reduce overall GDP spent on health care. It will increase the government portion and displace existing private spending elsewhere (dark pool shadow insurance, private payers, etc). A two tier system can realistically emerge where Medicare and Medicaid kinda merge to become a crappy public option that everyone gets, but that really if you have any means you will want private insurance. Just like how no one know would want to use VA if they also have private insurance.
This last point can become a wedge issue that Trump has already been trying out. Imagine an ad campaign where he scares seniors that your Medicare is going to be crappified and turned into Medicaid.
Hey guys, Hal_1000 does not know much about health care and does not read well. For example,
“This is simply factually incorrect. NHS, for example, spends about 10% just on central Administration, not to mention admin at other levels”
He cites and article, he clearly doesn’t read, which lumps in training costs with other administrative costs. You need to compare apples to apples. One of the best recent reviews follows at link. In general, admin costs in the US run about 2-4 times what they do in the rest of the world.
https://theincidentaleconomist.com/wordpress/how-much-is-too-much-what-does-the-us-actually-spend-on-health-care-administration/
Steve
(I am waiting for him to next say that Medicare costs dont include the costs of collecting taxes to pay for Medicare. When he does I have the link ready to show that in fact Medicare does account for that in its administrative costs, though maybe should just consider this trolling and ignore it.
Andy- Nice summary. My working assumption is that if we ever adopt this, unlikely, we will just make it similar to current Medicare and would not expect rates to change all that much. The big problem would be in transitioning.
Steve
@Andy:
You’re right that the entrenched powers have lobbied to protect their fief. Examples include drug companies, nursing unions, pharmacists, physician groups, hospitals, and nursing homes. There’s rent extraction at every level of the chain. The problem is that they will fight tooth and nail to keep their privileges. Looking realistically at how other health systems got formed, they either did so after a major war (WWII was popular) or at a time when the above lobbies were small, divided and weak. Even the NHS had to “buy” physicians by promising an uptick in pay under the new system, to overcome their vehement opposition.
Imagine the US government now having to buy out each of the above entities with sweeteners.
You may ask, why doesn’t the government force the above to eat cake and accept a cut in pay and lower reimbursement rates? You can, but change doesn’t come overnight. You risk demoralizing the entire work force, lowering quality, increasing absenteeism, accelerating retirement, losing expertise, and creating a shortage until the new generation/wave comes in to replace things. The disruption would be massive.
@Gustopher: A good friend of mine had an experience like this back in the ’90s. Her partner had insurance; but when he was diagnosed with cancer, they wouldn’t pay and they wouldn’t pay and they wouldn’t pay… They delayed and denied every treatment he needed to save his life until he finally died.
After that she left the USA and went to a country where that would not have happened. It’s been nearly 30 years since he died, and she’s still bitter.
This is what the Republicans are working to send us back to.
@Hal_10000:
Your link does not support your statement in the slightest. The article doesen’t even contain the word Canada. What it does say is that Sander’s estimate of a $500 billion savings is probably too optimistic.
@Gustopher: Oh man anyone who has been into the back area at a hospital/clinic has seen gaggles of RNs on the phone talking to insurance companies and crew for large portions of their day to get patients covered/etc. I have family members who have spent years training to be RNs who litterly don’t even talk to patients because they spend their day on the phone or filling out forms required by the insurance companies….
A pity that this form of prostitution is legal while the other more well known version isn’t…
@Scott O:
Canada’s admin costs. 19% compared to 27% in the US, including all sources. But that’s TOTAL administration. The specific claim I was responding to was that Medicare spends 3% on admin (which none of you “debunking” me defended) vs. private insurance spending 30% or more. Medicare vs. private insurance is the comparison and there is little evidence that Medicare saves a ton of money on Admin.
As someone that worked in the insurance industry, I always saw an M4A system having a public option for everyone and private options for those that wanted to pay. And those same companies competing for contracts to administer M4A in their region. Anything to eliminate private insurance companies is just a pie in the sky.
The one thing I have to ask single payer advocate is this: a single payer system in the US would become the largest insurance company in the world and the single largest government agency in the world. It would have a budget five times that of the Pentagon. How do you look at the rest of our government, contemplate that and say, “Oh, yes, this will be a MODEL of efficiency?”
The other question, unrelated to efficiency is this: how are you comfortable with the idea of Donald Trump setting health insurance policy. You guys lost your minds when SCOTUS decided that all insurance companies had to cover birth control except for a few methods for a tiny amount of employers. What are you going to do when Trump can outlaw birth control coverage with the stroke of a pen?
Always interesting to see what people cite in areas they don’t really understand. If you actually go to Hal’s link, this is what it says.
“In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. ”
You actually have to read the article to know why the exclusions are important. In the study they actually went and verified the percentage of admin costs for every area for which there was data. When you do that you find that admin costs in Canada are about half of what they are here. Hal wants to include health care spending for which there is no actual data, which essentially assumes then that admin costs were equivalent and lowers that ratio.
Also, please note that the study was using data from 1999. (I have been reading health care policy and economics from well before then and read this article when it came out.) There are many more studies on this since then. I provided a link to a review article looking at more recent studies, and they arent that hard to find. As those who follow health care policy know, admin costs have been growing faster than general spending, so you really do need more recent studies.
So what we have here is a mis-stating of findings and the use of an outdated study to try to support a zombie point long ago debunked.
Steve
@Hal_10000:
You are comparing apples and oranges. The NHS spends that on administering all facets of a universal medical system that provides care to every UK resident. The US private insurance burden is simply the administrative costs and profit for dealing with payment. Not one penny of that goes to providing care or taking care of buying medical supplies, paying doctors, buying hospitals and clinics and equipping, maintaining them and keeping the lights on. If you want to compare like to like you would have to find out what fraction of NHS funds go to administering reimbursement for patients. I’m willing to bet it is under 1%, maybe well under.
On top of that the article you cited reinforces everything I’ve said up above. Medicare admistration costs are 1.4%. And the 12 to 18% overhead costs of private insurers leave out profit. And more importantly it leaves out all the other costs created by this horrible private insurance scheme that are not directly born by the Insurance companies but are caused by them. Walk into a doctors office and see how many employees are handling payment and insurance issues. 20% would be the absolute minimum. My guess of 30% is probably closer to the final cost and may we’ll be low.
@Hal_10000: I think I sort of agree with you here. At present our government seems dysfunctional so what works well in other countries may not work here. Or to put it another way we have to fix our government before we can fix our healthcare. Unfortunately I don’t see any way of doing that.
@Hal_10000: Before I challenge something else you said I just want to acknowledge that I really appreciate this discussion. We are coming from two different places but are marshaling actual facts and real world situations to make our points. An actual discussion.
I can only speak for the one person on the left that looks back at me from the mirror, but I don’t think Medicare is a wonderfully efficient system. It is a solid and reasonable system for handling administrative overhead, but the system overall has lots of problems, many of them really bad.
OK, then there’s this:
Note the part I highlighted. The doctors were monetarily incentivized to put a patient at risk and some (most?) of them put the patient at increased risk to get the money.
As to the wisdom of saying the biopsy was part of the surgery, we would have to look at other biopsies and surgeries. I believe that if it is done prior to the operation a breast biopsy is done as an outpatient or even a doctors office procedure with a conscious patient. The purpose is to decide whether an operation is even necessary. It so happens that a breast is a relatively easy thing to biopsy in this manner. But lots of organs are much more difficult or impossible to biopsy in this way and the patient is in the OR when the biopsy is done and so considered part of the operation. Either way, the lab fees are paid, but the doctor isn’t performing two procedures. It sounds like what the doctors wanted was their entire outpatient biopsy charge despite not having done it and already being in the operating room. And they were willing to put their patients at increased risk in order to get that additional money.
@Andy:
While per capita health care costs are rising above inflation, the trend has been downward. Here’s a link showing that the growth rate in overall, inflation adjusted, per capita health care has been slowing since 1975. It bounces around a fair amount, but the trend is downward. Be very wary of statics showing growth that don’t factor in population age (i.e. most of them.) The US population is growing older, and that means that a higher percentage of people are in the high health care cost grouping. And we really should account for obesity too. On average, obese people require dramatically more treatment and interventions than non-obese people, and that was as true in 1975 as it is today. But there are many, many more of them now.
However, I agree with your fundamental drift. M4A is a version of single payer. In theory it could leave everything else the same (god help us). The system could be easily gamed and, as Hal_10000 points out, that already happens in regular Medicare (as it also happens with private insurance.)
We could go to another extreme with single provider such as Britain or Canada has. My concern with that is it could essentially lock medical care into a 2020 era paradigm, stifling innovation in health care delivery and prevention.
@Rick Zhang:
I mostly agree with what you said, but here’s a couple of factoids on these two things.
First, minimal and catastrophic public coverage with private insurers competing on supplemental coverage is the norm in most European systems.
Second, there are effectively two VA systems. The one we hear about is the one dealing with the huge upswell in truly catastrophic war wounds and PTSD from the Iraq and Afghani wars. They are struggling. But to most vets, VA health care is the thing that takes care of millions of vets from WWII, Vietnam, Korea, etc and even moreso that never even saw combat. This is 7-8 years old so it might have changed since, but the VA actually found that if a vet ever came to the VA for care (often because they lost a job and didn’t have private insurance for a while) they tended to stick with it for the rest of their lives even if they were eligible for private insurance again. In response, during the 2000’s the VA changed their whole treatment paradigm, stressing early treatment and keeping people as healthy as possible as long as possible. Private insurers on the other hand have a 3 year rule (“If an intervention doesn’t pay for itself in three years we won’t cover it unless we have to”, pretty much an exact quote to me from a private payer.)
@steve:
Despite the fact that I called him out on the same thing you did, I’m going to defend Hal here. He knows a lot more about health care than the average person and is making good arguments. And these things are not easy. Are Medicare costs climbing at a high rate? Yes. But does the particular report you are reading factor in inflation? And what about the aging of the US population? And if it includes those, does it compensate for the increasing rate of obesity? Most articles don’t make it clear, making it hard to know what they are really saying, and even most journal papers seem to leave out the second two. And in the next decade we will start to see the first round of Medicare patients since the smoking rate went down. How do we factor that in?
@Hal_10000:
Why do I think it would be better? Because, based on my own experience of the Republican driven move to privatize government services since the Reagan era, those changes did not result in the lower costs and better services promised by the billionaire hobbyist funded conservative think tanks and mindlessly embraced by every Republican at every level. I lived in two places where trash collection was privatized. What a mess. No decrease in cost. Different companies trucks blocking the streets on different days. Even when you find a reliable company, they bought and sold each other and it could really be a completely different company a month later and the reliability in the tank as they strove to realize “efficiencies”. And Power deregulation. I’ve moved around and would have difficulty looking at before and after but looking at my brother’s experience with PA, his costs didn’t go down, but his wait for repairs dramatically lengthened now that his service company is out of state. Bottom line, based on my experience moving from government run to privatized has been a net negative.
Marked Man- What I cited is summation of many studies. They account for inflation when appropriate. (These were looking specifically at administrative costs.) Not sure why they would factor in obesity rates and smoking in particular when they are looking at overall costs.
What I think people like Hal do is just find a few studies to support whatever claim they are making. They dont have years of reading this stuff so they dont really know how to read the studies or what they mean. He may or may not have much training in statistics. So people like that cite very old studies or cite stuff they just dont understand believing that they are proving their point when they are not. I guess he gets some credit for at least trying, but that is as far as I can see going.
Steve
@steve: I wasn’t criticizing your research or your thinking, merely pointing out that there are non-trivial second, third and even fourth order effects that make it hard to get to “the” answer.
And by challenging the conventional wisdom or even individual studies, Hal is doing a good thing. In fact, he may point out something that I hadn’t thought about before.
Truly understanding what the data means is hard. Truly understanding how change will affect the system is hard. I’m happy to explore it with anyone who is willing to argue with facts. Or even legitimate assumptions, like when he says he doesn’t trust the government to not screw this up. It’s a legitimate perspective.
America – where we debate the best means to pay exorbitant medical expenses, and ignore the expenses themselves.
Yes. M4A will disrupt other payment/insurance systems. Done correctly it will also disrupt late-night television commercials advertising free knee braces and mobility scooters.
Even better it will disrupt the U.S.’s horrific medical school scheme by which new doctors have to make $500K/year to pay off the incredible debt they incurred during a decade of post-college schooling.
Everybody has their hand out, and the only lever that will control costs is a single payer with the power that only governmental authority can impose.
Lastly, the reason conservatives are up in arms about this has little to do with all of the above. The money people (who run the show for the Republicans) *like* the control they have over their employees through our employer-based-system. The idea that their employees would be free to quit this lousy job and retire or go compete with them, etc. is anathema.
The system stays as it is because nobody wants to be hoisted by their own petard.
The unintended consequences of Medicare for All would certainly be better to deal with than the intended consequences of what the Trump Administration wants to do with the ACA…