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December 17, 2008

Jacob Hacker makes the case for public plan choice in national health reform

Costchart Jacob Hacker, at UC Berkeley, who has previously laid out the Medicare-for-all (plus some employer-based insurance) concepts that have been at the core of several Democratic presidential candidates' health reform plans (including the President-elect's), released a paper today demonstrating the value of a government plan such as Medicare as one option among a menu of options for health care coverage under an Obama health reform plan, through The Institute for America's Future. 

A summary of key findings culled from the paper was released as well.

His conclusions:

First, public health insurance outperforms private insurance in controlling costs while maintaining access and benefits—even when compared with private plans that are regulated to ensure broad coverage. Second, public insurance has also made major strides in quality improvement, and a new public plan working with Medicare alongside private plans would be able to make much greater strides in the future. Third, a competing public plan is essential to set a benchmark for private plans, providing a “check and balance” that ensures private plans, as well as the public plan, uphold high standards.

In sum, he presents a strong argument for building on the Massachusetts "Connector" model -- the Connector is the state agency that serves as a clearinghouse for private non-group and small-group health insurance plans required under the Massachusetts universal health care coverage law -- albeit with one significant difference.  Unlike the Connector, which offers only private health plans, the Obama proposal calls for a public health plan to be offered side-by-side with the private plans.  Hacker promotes the notion of using Medicare or a Medicare-like plan -- and not the often-discussed option of allowing folks to buy in to the federal employee health benefits plan -- because Medicare's cost structure and inflation rate is significantly lower than that of private plans.  (A naturally cynical sort, the HealthBlawger wonders if the comparison is truly apples-to-apples.)  It's an interesting read, treading a bunch of familiar territory as well as marshaling the evidence in favor of Medicare or a Medicare-like public plan to be offered through an exchange.

Prof. Hacker and Congressman Stark announced the release of this report on a conference call today.  Stark warns not to look for legislation in the first hundred days of the Obama Administration, and they both emphasized the potential for robust competition between public and private plans which would redound to the benefit of ultimate payors of health care premiums. 

Update 12/17/08:  Following the conference call, Prof. Hacker was kind enough to answer a couple of questions I posed to him via email:

Q:  Much has been said about how Medicare's costs are not fully-loaded and that therefore there is no apples-to-apples comparison being made when promoting "Medicare For All."   So, when you compare Medicare costs and cost growth rates favorably to FEHBP and other private health plan costs and cost growth rates, are you comparing apples and apples?  What about "hidden" or undervalued CMS costs, such as office space (in GSA's budget?); also, are CMS employee expenses fully-loaded?
 
A:  First, the comparison of administrative expenses in public and private plans by the CBO that I cite in my brief (showing a 9 percentage point public-plan edge) looked at Medicare Advantage plans and the Medicare public plan, so these "hidden" costs were constant across the two. I do note that some of Medicare’s administrative expenses are not included in the standard calculations, but there is no question that Medicare has substantially lower administrative costs than private plans—even within the FEHBP. There is simply no contest.
 
Second, this is basically irrelevant to the question of cost growth. The issue there is whether Medicare is more capable of restraining the growth of costs (which it is), not whether Medicare can deliver the same benefits for less (which it can). I compare the growth of Medicare spending per enrollee and private health insurance spending per enrollee for comparable benefits – which is as close to an apples-to-apples comparison as you can get. And Medicare is clearly superior in terms of cost control: Private insurance outlays per enrollee grew an average of 7.6 percent a year between 1983 and 2006, compared with 5.9 percent growth in per enrollee spending under Medicare—a 22 percent difference. (1983 was the year in which Medicare’s prospective payment system for hospitals was implemented; 2006 is the last currently available data year.) The gap is even bigger in recent years. Between 1997 (when the Balanced Budget Act of 1997 further constrained Medicare spending) and 2006, private health insurance spending per enrollee grew at an annual rate of 7.3 percent, compared with an annual growth rate of 4.6 percent under Medicare—a fully 37 percent difference. As these comparisons indicate, not only has Medicare more successfully restrained the rate of increase of per enrollee spending, the rate of growth is also on a steeper downward trajectory under Medicare than under private insurance.    
 
Q:  Given the value in eliminating excess administrative costs to the system associated with having multiple payors, is it your belief that a "connector" with public and private plan offerings would either yield a market with lower prices overall due to competition, or morph into a de facto single payor system, and if so, over how long a period of time?
 
A:  I believe, as do other experts, such as John Holahan and Linda Blumberg at the Urban Institute, that you could have stable competition in which private plans played an important ongoing role. For one, a good number of people will probably want to be in a private plan. For another, the private plans will have greater scope to achieve efficiencies by restricting provider access or more directly coordinating care. The overall effect of this competition, in my view, will be much more effective restraint on costs, yet with built in safety valves for people in both the public plan and competing private plans.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

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The Massachusetts Insurance Commissioner's office recently published a study addressing the marked difference in administrative costs between and among private carriers called "Analysis of Administrative Expenses for Health Insurance Companies in MA." The differential was substantial. The MA experiment has, in a short period of time, created greater access, but has done nothing to control costs. Until reforms begin to address the alignment of costs and quality.....a problem that exists in both the private and public arena.....we can't hope to solve the healthcare dilemma.

Here's a link to the study Jeff mentioned:
http://www.mass.gov/Eoca/docs/doi/Consumer/MAAdminExpenseStudyReport.pdf

The problem is that it's extremely difficult and expensive to tackle access to coverage, cost control and quality control all at once. The idea behind the Massachusetts experiment has been that it's better to start somewhere than not start at all. The Dukakis universal coverage plan was pulled because of an earlier recession, and the current plan looks to be in trouble thanks to the current recession.

See earlier HealthBlawg posts on the subject here:
http://bit.ly/13nrd


The following are facts that are believed to exist regarding the present U.S. Health Care System. This may be why about 80 percent of U.S. citizens understandably want our health care system overhauled:
The U.S. is ranked number 42 related to life expectancy and infant mortality, which is rather low.
However, the U.S. is ranked number one in the world for spending the most for health care- as well as being number one for those with chronic diseases. About 125 million people have such diseases. This is about 70 percent of the Medicare budget that is spent treating these terrible illnesses. Health Care cost presently is over 2 trillion dollars of our gross domestic product. One third of that amount is nothing more than administrative toxic waste that does not involve the restoration of the health of others. This illustrates how absurd the U.S. Health Care System is presently. Nearly 7000 dollars is spent on every citizen for health care every year, and that, too, is more than anyone else in the world.
We have around 50 million citizens without any health insurance, which may cause about 20 thousand deaths per year. This includes millions of children without health care, which is added to the planned or implemented cuts in the government SCHIP program for children, which alone covers about 7 million kids.
Our children
Nearly half of the states in the U.S. are planning on or have made cuts to Medicaid, which covers about 60 million people, and those on Medicaid are in need of this coverage is largely due to unemployment. With these Medicaid cuts, over a million people will lose their health care coverage and benefits to a damaging degree.
About 70 percent of citizens have some form of health insurance, and the premiums for their insurance have increased nearly 90 percent in the past 8 years. About 45 percent of health care is provided by our government- which is predicted to experience a severe financial crisis in the near future with some government health care programs, it has been reported. Most doctors want a single payer health care system, which would save about 400 billion dollars a year- about 20 percent less than what we are paying now. The American College of Physicians, second in size only to the American Medical Association, supports a single payer health care system. The AMA, historically opposed to a single payer health care system, has close to half of its members in favor of this system. Less than a third of all physicians are members of the AMA, according to others.
Our health care we offer citizens is the present system is sort of a hybrid of a national and private health care system that has obviously mutated to a degree that is incapable of being fully functional due to perhaps copious amounts and levels of individual and legal entities.
Health Care must be the priority immediately by the new administration and congress. Challenges include the 700 billion dollars that have been pledged with the financial bailout that will occur, since the proposed health care plan of the next administration is projected to cost over a trillion dollars within the first year or so of the proposed plan to recalibrate health care for all of us in the U.S. Yet considering the hundreds of billions of dollars that are speculated to be saved with a reform of the country’s health care system, health policy analysts should not be greatly concerned on the steakholders who may be affected by this reform of our health care system that is desperately needed.
Half of all patients do not receive proper treatment to restore their health, it has been stated. Medical errors desperately need to be reduced as well, it has been reported, which should be addressed as well.
It is estimated that the U.S. needs presently tens of thousands more primary care physicians to fully satisfy the necessities of those members of the public health. This specialty makes nearly 100 thousand less in income compared with other physician specialties, yet they are and have been the backbone of the U.S. health care system. PCPs manage the chronically ill patients, who would benefit the most from the much needed coordination and continuity of care that PCPs historically have strived to provide for them. Nearly have of the population has at least one chronic illness- with many of those having more than one of these types of illnesses. A good portion of these very ill patients have numerous illnesses that are chronic, and this is responsible for well over 50 percent of the entire Medicare budget. .
The shortage of primary care physicians is due to numerous variables, such as administrative hassles that are quite vexing for these doctors, along with ever increasing patient loads complicated by the progressively increasing cost to provide care for their patients. Many PCPs are retiring early, and most medical school graduates do not strive to become this specialty for obvious reasons. In fact, the number entering family practice residencies has decreased by half over the past decade or so. PCPs also have extensive student loans from their training to complicate their rather excessive workloads as caregivers.
Yet if primary care physicians were increased in number with the populations they serve and are dedicated to their welfare. Studies have shown that mortality rates would decrease due to increased patient outcomes if this increase were to occur. This specialty would also optimize preventative care more for their patients. Studies have also shown that, if enough PCPs are practicing in a given geographical area, hospital admissions are decreased, as well as visits to emergency rooms. This is due to the ideal continuity in health care these PCPs provide if numbered correctly to serve more, the quality improves, as well as the outcomes for their patients. Most importantly, the quality of life for their patients is much improved if there are enough PCPs to handle the overwhelming load of responsibility they presently have due to this shortage of their specialty that is suppose to increase in the years to come. The American College of Physicians believes that a patient centered national health care workforce policy is needed to address these issues that would ideally restructure the payment policies that exist presently with primary care physicians.
Further vexing is that it is quite apparent that we have some greedy health care corporations that take advantage of our health care system. Over a billion dollars was recovered for Medicare and Medicaid fraud last year through settlements paid to the department of Justice because some organizations who deliberately ripped off taxpayers. These are the taxpayers in the U.S. who have a fragmented health care system with substantial components and different levels of government- composed of several legal entities and individuals, which has resulted in medical anarchy, so it seems.
Health 2.0, a new healthcare social networking innovation, is informing patients about their symptoms and potential if not possessing various disease states- largely based on the testimonies of other people on various websites. This may be an example of how so many others rely now on health concerns from those who likely are not medical specialists, instead of becoming a participant, if not victim, of the U.S. Health Care System.
Thanks to various corporations infecting our Health Care System in the United States, the following variables sum up this system as it exists today, which is why the United States National Health Insurance Act (H.R. 676) is the best solution to meet our health care needs as citizens, it appears. We would finally have, as with most other countries, a Universal Health Care system that will allow free choice of doctors and hospitals, potentially. It should be and likely will be funded by a combination of payroll taxes and general tax revenue:
Access- citizens do not have the right or ability to make use of this system as we should.
Efficiency- this system strives on creating much waste and expense as it possibly can.
Quality- the standard of excellence we deserve as citizens with our health care is missing in action.
Sustainability- We as citizens cannot continue to keep our health care system in as it is designed at this time- as it exists today.
http://www.mckinsey.com/mgi/publications/US_healthcare/index.asp
Dan Abshear

diohdan@aol.com


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