Government Run Health Care
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I’ve posted before on how I think the Massachusetts health reform plan does and doesn’t send useful signals to the federal health care reform debate, and I’ve also posted on the public/private plan question currently before Congress. To repeat my previous observation, I think another government run health plan - on top of Medicare and Medicaid - is a bad idea. Yesterday, the Boston Globe weighed in on behalf of a government run health plan at the national level, and said the fact that Massachusetts doesn’t have one isn’t pertinent to the federal debate. The paper made four points to buttress its argument…
1) Massachusetts has always had a heavily regulated individual market, unlike most states, and didn’t, therefore, have the same access issues to coverage for individuals that other states have.
2) Massachusetts has a lot of mandated benefits, ensuring comprehensive coverage for its residents, unlike other states.
3) Massachusetts had a low number of uninsured residents to begin with, a generous Medicaid program, and a mostly non-profit health insurance marketplace, unlike the national scene, which has mostly for-profit carriers, less generous Medicaid plans, and a higher percentage of uninsured residents.
4) A government run health plan will keep the private plans “honest.”
Let’s start with the last one first - because this is the argument I hear most often in favor of a government run plan. I find this odd. Medicare - the largest government run health plan - has a $35 TRILLION unfunded liability. It hasn’t balanced its own budget for at least twenty years. It is, by all accounts, one of the biggest ticking financial timebombs facing this country. It cuts hospital and physician fees whenever it feels like it, which are now 30-40% below private sector payment rates, yet according to the left-leaning Center for American Progress, it hasn’t managed the health care costs of its beneficiaries any better than the private plans have over the past thirty years. It sets the table for the rest of health care on physician fees, and has as much to do with the devaluing of primary care as any other player in the system, and overpays for volume and new technology.
Private health plans can’t run deficits and print money. We have to break even, fund our own capital investments, and put money aside to pay the future health care costs of our members. And we have to negotiate our fee schedules with physicians and hospitals. And the feds are supposed to run the plan that keeps us honest? Hmmmm.
I also think #’s 1, 2 and 3 are all issues that could be addressed through federal regulatory and eligibility policy, as they have been in Massachusetts. I would point out, however, that individual coverage in Massachusetts before health care reform - because of the rules, requirements and regulations associated with it - was the second most expensive health insurance market in the country. In this case, we had comprehensive coverage whenever you wanted it, but the vast majority of individuals couldn’t afford it. Something for folks to keep in mind as they debate federal reform.
Anyone who’s read this blog knows I’m no fan of the status quo. But that doesn’t mean I think one more federal program that’s underfunded, arbitrary, and wrong-headed is the answer to this nation’s health care cost and coverage problem.
Medicare does not have the luxury to collect premiums from 25 year olds that help to offset costs. The basic fact is the Medicare provides insurance to the population of people who most frequently require patient care. They do this with the lowest administrative costs.
So what happens if this same group with low administrative costs could offer a public insurance option? You have to fight for the 25 year olds and you well know that the public model is cheaper. What is wrong with offering people another choice?
In all honesty, I do think that you have done a lot of great work at HPHC, but this GOVERNMENT RUN HEALTHCARE thing you are pushing is kind of embarrassing. I would re-think it.
Charlie,
My position on the public health insurance option is the same as yours. My impression, however, is that advocates believe a public plan modeled after and possibly linked to Medicare would have the market power to force providers to accept payment rates far below what private insurers pay. Most hospitals, for their part, suggest that they could not continue in business if they had to accept Medicare rates from all comers even if there were no uncompensated care and if Medicaid rates were increased to the Medicare level.
I think it might be useful if hospitals, especially the academic medical centers, could articulate how care would change (for the worse) and what they would have to do differently in running their institutions if they had to accept Medicare rates from everyone. Similar input from doctors would also be enlightening. Would we see a wave of early retirements among doctors? Would face time with patients need to shrink even more? How would practice patterns change?
Medicare seems to work, at least to some extent, because there is still a large private sector to shift costs to. If a public plan based on Medicare rates quickly displaced most of the private insurance market, cost shifting would no longer be possible. This is a classic example of what economists call the fallacy of composition. While I’m sure that advocates of a public insurance option are well intentioned, there are likely to be significant adverse unintended consequences if private insurance is largely displaced. I, for one, would like to see some informed real world explanations of exactly what that means before it’s too late.
Charlie, Very eloquent, indeed, on the problems with the government plan option. The Commonwealth Fund study issued recently says that 105 million people would leave private health insurance plans very quickly, given the choice of a government option which is less expensive because it reimburses doctors and hospitals at Medicare rates.
Even the proposed “compromise” plan (which purportedly would have an all-payer reimbursement rate) is unrealistic because there would be huge budget pressures to lower federal expenditures over time. So, it would be Medicare experience of ratcheting down reimbursements.
Thanks for your take on why this is not the way to go.
Massachusetts Medicaid managed care plans (private plans that contract with the state to provide coverage to Massachusetts medicaid recipients) have the option to pay hospitals at the rates set by the state.
To my knowledge, none of these private plans pay hospitals using the state rates, preferring instead to negotiate for improved care management, utilization controls, and the like.
JohnK - First of all, I appreciate your willingness to continue to offer your thoughts here, even though I’m concluding you and I don’t share a lot of common ground on some of these policy issues. Thanks.
Second, can someone who supports the government run plan explain to me how the math works - for the taxpayer? I really don’t care that much about the fact that Medicare pays 40% less than the private sector does for health care, or that its administrative expenses are spread throughout the federal government and are never accurately accounted for. I happen to think both of these facts are relevant to the public/private competition debate - but so what - they’re almost beside the point.
Simply put, neither party has been serious about the financial disasters that are Medicare, Medicaid and Social Security since the 1980s - when Ronald Reagan and Tip O’Neill last “fixed” Social Security - for a while.
The idea of burdening my children - and my children’s children - with another underfunded federal entitlement program is something I’m simply not willing to support. Someday, the bills come due. We can get from here to there on health care reform without it.
Third - Barry Carol’s comments about the impact a Medicare For All-like program would have on docs and hospitals is an important point as well. This is not as simple as most people would like to think it is - and I say that as someone who’s written many times about the need for fundamental reform.
And thanks for the props for HPHC. It’s a very good health plan - filled with very good people.
Charlie - You really hit the nail on the head with this post. The numbers simply don’t add up and these are HUGE numbers we are talking about. The current federal deficit for this year is over one trillion dollars, our current national debt must be close to fifteen trillion and our unfunded liabilities in Medicare and Social Security are over fifty trillion dollars. Medicare is heading straight off a cliff financially and this is the program they want to copy? Yikes! How does the federal government plan to pay to cover another forty million uninsured people in the U.S.? Government can either tax people more, cut other spending or borrow/print money until we have so much accumulated debt that people will eventually lose faith in the dollar (At some point China and other lenders will start asking if we even have the ability to pay off the debt we have already run up). That’s pretty much it and I don’t see a lot of people telling us which of these three options the government will use to fund this massive new healthcare entitlement program. The huge costs of Medicare, Social Security and debt service payments are already going to crowd out everything else in future federal budgets so I simply do not see how they plan on paying for all of this.
Okay, let’s look at it this way. At $20 per patient, how many patients does a primary care doctor need to see in order to pay for his staff of 5, his medical malpractice insurance of $140,000, his office rent, his phones, faxes, equipment, his medical supplies, his health insurance, his school loans, his mortgage, heat, food, etc.
Now, how good is your care going to be if your doctor feels overworked and undervalued? If he’s older, he’ll retire. If he’s any good, he won’t stay in primary care.
Think about. Play it out.
Sonia - Help me understand where the $20 figure is coming from.
We’ve tried so many different ways to do healthcare in this country, I’m wondering when we’ll exhaust all the bad ideas so that—to paraphrase Winston Churchill—we Americans can finally get it right. We’ve contorted our tax code, made a hodge-podge of our state laws and mangled the relationship between employers and their employees to such an extent that health insurance has become more important than almost any other piece of the American Dream.
So here’s an idea: let’s TRY a federally-operated competitor to private plans. There are obvious problems here. In no particular order:
* Congress is notorious for postponing adequate funding. This has been human nature at least since the times of Ancient Greece. I have no hope it will change today or tomorrow. Do you?
* A federal plan will soon develop the equivalent of $700 toilet seats, a bridge to nowhere or other outrageous and impractical mechanisms, but as long as we have a free press, this stuff should make it onto the front page and certainly onto talk radio. Isn’t this how a democracy works?
* Those “special interests” we all hate will devise ways to get higher fees for providers or more comprehensive care for certain conditions. I have no doubt that many mandated benefits we take for granted here in Massachusetts will be among them: out-patient psychiatric care, broader coverage for autism, breast cancer, and many other lamentable aspects of the human condition. WE JUST ARE those “special interests”. Shouldn’t WE be allowed to get whatever additional benefits we can?
*The federal plan will likely escape premium taxes, ERISA requirements and the panoply of state mandates, but that just won’t last. Unless the plan evolves into a simple extension of Medicaid, popular sentiment will compel it to add the protections of ERISA and the like. I can’t think how it could make sense to charge premium tax, but I’m surely missing something here.
All this should conduce to a plan doomed to self-destruction within a few years. Maybe.
If it does self-destruct, we can fairly claim that we tried it and it didn’t work. And if it succeeds in any important way, perhaps we can use the lessons to build the next iteration of American style healthcare.
Hi Charlie,
I am a small group employee benefit specialist licensed in NJ, NY and MA, the 3 “reform states” in our country. I also do work with United Healthcare in marketing their product with the AARP. This has enabled me to see both sides of the debate. I have seen the “free market” side with the private, for profit carriers marketing product to small business owners and I have seen the government’s MAPD plans while marketing to the Medicare and Dual Eligible population.
Folks need to know under the current system, physicians are bailing on Medicare left and right. One of the difficulties I have in marketing the MAPD plan is doctors will not accept it because of the 120-180 day lag in payment of government reimbursement. This does not bode well for the system at large. If things are messed up this bad with only one sector of our population involved, how much worse will it get when you are dealing with the entire population?
The other thing is, to prevent this exodus of doctors from Medicare will government mandate physician participation? Will physicians become part of ObamaCorps? Will the government force a doctor to participate and then be mandated to accept whatever reimbursement the government feels is “fair and equitable”. This is important because it is this same government who refuses to protect those doctors through Tort Reform which will help lower those $350,000 a year Med Mal rates. If the government wanted to help cease physician complaint over reimbursement, they should make Med School free. If doctors didn’t have to re-pay hundreds of thousands of dollars in school loans and then pay those unreal med mal insurance rates….these government intrusions into compensation wouldn’t be so bad. The problem is the government through their trial lawyer allies keep doctors exposed to frivilous lawsuits and government does not step in to set rates for Med School all lead up to a scenario where government puts doctors in a very unenviable position.
Our small group reform in NJ is a mess. Out of reach individual rates, over 1,208 mandated coverages and no way for a carrier to evaluate risk before offering coverage. Add on top of that, the government has final say in the carriers rate structure and you have in essence government run healthcare with the private carriers being the admin and the broker community their sales force.
Government has yet to show they can do this in a profitable manner in the same way they demand the private crriers to. Until the time comes when the government can demonstrate that profitability, they should not be trusted with this authority.
Thanks,
Rob Kulessa
Toms River NJ
“johnk Says
Medicare does not have the luxury to collect premiums from 25 year olds that help to offset costs.”
I respectively disagree. Medicare premiums are paid via payroll taxes by teenage children as well as by anyone employed and paying payroll taxes. Althought most utilization is by the elderly, most of the payment comes not from monthly Part B premiums but taxes on payroll. But unlike SSI, there is no ceiling on payroll subject to Medicare taxes.
A National Healthcare insurance plan also faces consumer concerns in the perception on quality of care in public vs private healthcare delivery systems. Most veterans are entitiled to access healthcare through the VA; but if I had to guess, most go through private payor systems. The systemic financial concern then becomes akin to parents choosing public vs private schools and end up with a two tier healthcare financing system.
Then, as in public vs private k-12 education, the choice in how and where to receive care will continue to be available to higher income families while middle and lower income families are forced into an over utilized, under-funded public system.
“The basic fact is the Medicare provides insurance to the population of people who most frequently require patient care. They do this with the lowest administrative costs.”
Again, I disagree. The idea that a public system will be more cost effective than private payors, I find it doubtful. As a comparison, I look to any private charity which is consistently able to deliver 88-92 cents on the dollar to their ultimate beneficaries vs public welfare systems where we are lucky to get 59 cents on the dollar to beneficiaries.
Is there room for reform? Absolutely! Is single payor the answer? Absolutely not.
Katharine - My understanding of the Medicaid rate issue is a little different than yours. Unless the Medicaid Plans negotiate their own rate with physicians and hospitals, they pay charges for services, not the Medicaid rate. I know the legislature has considered - and rejected - legislation over the years that would give the Medicaid Plans the right to use Medicaid rates as a fallback if they couldn’t reach agreement with the providers they do business with. That, obviously, would be interesting, since Medicaid rates are below what the Medicaid Plans pay for services, and charges are usually above what the Plans pay.
Gerry - I hear you on the “try it” idea. My concern with that is a simple one - the feds almost never “try” anything in health care. Once they do it - they do it - usually the same way - forever (exaggeration intended). My bigger worry is the federal deficit. At this point, anything that makes it bigger is problematic for the U.S. - on a lot of levels.
I worry that all this discussion sounds much more significant than it really is.
It seems to me that changing funding from private to public will not address our fundamental healthcare system problems: medical arms race, poor preventive care, treatment variation, moral hazard (up to 1/3 of our healthcare costs generate no discernable benefit, per Dartmouth researchers) and an far-too-powerful general hospital sector.
Absent serious systemic changes - called for by the Inst of Medicine, Crossing the Quality Chasm in 2001, for example - the change from private to public funding will have little positive effect.
I’m not optimistic that the fundamental incentive and quality changes are likely to occur…so I’m afraid that I’m also not optimistic that we’ll actually improve our healthcare delivery system.
But we will definitely make a lot of noise.
Gary - My previous post on the McKinsey findings on improving health care in the U.S. would agree with you. While DC thinks it’s all about who pays for what and how much, most of the analysts who know what they’re talking about say that affordability and quality improvement in health care are derived from different solutions. Doesn’t mean this won’t be noisy though. I agree with you on that!
Hi Charlie:
A retiring physician told me that he got $20 for Medicare and Medicaid patients for which he was told he can spend 7 minutes! I used the $20 figure because if national health care comes to light, why would they pay a doctor more to treat us? If you want to be more realistic, you could use $30 to $50 reimbursement levels. How many patients do you need to see at $50. There are 60 minutes in an hour. Do the math.
My doctor of 25 years retired last year. He told me it wasn’t worth coming to work. The scenario I speak of was his.
My new primary care physician with the fancy laptop was too busy telling me I had reflux when I told him I thought I had pneumonia. After 4 visits, I ended up in the hospital for 5 days on IV antibiotics and almost died of double pneumonia.
If they’re not paid enough, they won’t take the extra time to look up from the computer!
Unfortunately, they have to be so focused on seeing the next patient quickly so they can get more $$. It’s not about the patient anymore. I don’t think any doctor going into medicine ever thought he would be more of a salesman than a healer.
Charlie - It amazes me that people are not more concerned about the annual deficit, national debt and future unfunded liabilities of programs like Social Security and Medicare…. programs that a lot of people are counting on being there for them. Maybe the numbers are so big that people just can’t wrap their heads around it and the very real problems these will lead to. Government throws around billions of dollars like it is nothing so I guess even comprehending trillions of dollars in debt is a hard concept to grasp. Social Security and Medicare are going to make Bernie Madoff’s ponzi scheme look like kids play. All of us paying into these programs every pay check and the very real possibility there will be nothing there for us when it comes to be our turn to receive the benefits. We are going to see either massive benefit cuts or massive tax increases to pay out what we have already promised so the idea of government adding massive new healthcare programs is just bewildering to me. At some point not too far off these bills are going to come due and it is going to be very ugly for all of us.
Hi Sonia - I think $20 is low - but I share your concern about primary care generally. I’ve written before on this blog that I believe Medicare payment policy for the past thirty years or so has favored new technology and procedures, and devalued time. The end result has been a huge rise in the difference between what a primary care physician earns and a specialist earns - and, not surprisingly - the number of medical school students going into primary care has fallen like a stone - while the number going into medical specialites has continued to grow.
On some level, this is both sad and ironic. Medicare’s RBRVS payment system for physicians was supposed to support primary care. It never did. As a result, the split between practiting primary care docs and specialists went from 50/50 when Medicare began RBRVS to 30/70 - specialists.
Can you please explain the premium split law, I believe it is a law that caps the premium spread 2 to 1 for mass health ins rates? Other states have greater allowable premium spreads like 8 to 1 etc. For expample if a health plan needs to charge $700 for the high rate then the lowest premium can only be $350? Iis this per age bracker or across the board? In my eyes increasing the premium spread in MA would allow ins companies to provide lower premiums to more people, (but now they are prevented by this tight 2 to 1 prem spread.
Your thoughts
Thank you for the response. I do not come here as often as I would like.
What is not stated here is that this is an option. Anyone can choose any insurance they wish. Medicare is a cost burden due to the patient population that it insures. I don’t understand how you have defined this as an entitlement program. How is someone entitled if they are shopping for health care insurance. The public insurance will have to fund itself.
What we do know is that a public plan will have a fraction administrative costs by private plans and will likely have a lower premium based on cost efficiencies. If you are worried about reimbursement the public option still has to negotiate with hosptials and physicians, if they don’t like the terms they can drop the coverage. Patients who want to keep their physicians can switch to another insurer. Nothing is being mandated here. The public option is competing with BC and HPHC so they will need to keep providers and patients satisfied.
Enjoy the weekend…!
JohnK - Thanks for the follow-up. Three observations…
1) There is no evidence that the public plan will fund itself. People say that - but the history on this topic runs overwhelmingly in the opposite direction. Public health insurance programs almost always run big deficits, primarily because they can’t/won’t make tough choices about revenues, benefits and expenses.
2) Let’s see if the public plan actually does have to negotiate with providers. Medicare and Medicaid do not negotiate. They set a rate, and it’s take it or leave it. Given their size and public purpose - and the ability of providers to shift this underfunding onto private health plans - most providers take it.
3) The administrative expense argument is thin too. I worked for eight years in state government, and I know how this works. Government agencies - including, I presume, this one - don’t carry many of their own costs in their own administrative budgets - but the taxpayers still pay for them. Included in the off-budget categories would be the cost of pensions, health insurance, capital investments, worker’s compensation or UI payments, IT expenses, and in the case of Medicare, the fees paid to private plans to pay claims. Fully loaded, this thing won’t be any cheaper administratively than we are.
Like I’ve said before, the public/private competition thing is the least of my worries. I care a lot more about creating yet another underfunded federal health insurance program that someone - someday - is going to have to pay for.
Charlie and all,
Are folks familiar with some of Regina Herlzinger’s (sp) offerings on the subject? Specifically the concept of moving from an employer based system to one where health insurance is purchased and owned by the individual. The benefits being portability as well as the concept that such a model would promote more individual responsbility. Milton Friedman suggested a similar approach in a paper pubished in early 2000’s.
Charlie - can such a model be operationalized on a sustainable basis? I ask as I noted on another post that HPHC experiences 40% attrition rate at 5 months for individual policies. My sense is that no risk mgmt organization can run a business w/ such a fall out? However, the notion of individually owned insurance has great appeal to me — especially in comparison to a government health plan that enables us to further slide towards a complete nanny state.
Thanks for your insights all.
Dan - Most states require individuals to purchase auto insurance to drive a car, and the default rates are relatively low (although there’s probably a 10% non-compliance problem). Auto insurance also doesn’t apply to everyone, and it’s much much cheaper than health insurance.
That said, Regina believes employer-based insurance is inefficient and ineffective, because it locks people into plan design choices and job choices they wouldn’t make if the health insurance decision belonged to them. I think she’s right about that. Changing it requires turning the existing model upside down - virtually impossible to do in a country where - despite all the yelling and screaming in DC - most people LIKE THE COVERAGE THEY HAVE.
I think finding a solution that gets rid of the employer as a major player simply isn’t going to happen - but I also think we’ve done a bad job of making markets work for individuals and very small businesses. Individuals still can’t buy coverage for themselves and their famllies on their own on a pre-tax basis, the way employers do. This is patently absurd. Let’s start there.