Monday, December 15, 2014

Two Memes that Undercut Medicare-for-All: Managed Care and Competition

Health Affairs Blog
December 11, 2014
Two Theologies Have Blocked Medicare-For-All
By Theodore Marmor and Kip Sullivan

In the 50 years since Medicare was enacted, Congress has never seriously
considered extending Medicare to all Americans, nor even lowering
Medicare's eligibility age below 65. This pattern persisted even during
those periods when national health insurance was at the top of the
national agenda. This is not what the original advocates of Medicare
anticipated when Medicare was enacted in 1965. They saw Medicare as the
cornerstone of a national system of health insurance that would
eventually cover all Americans.

Two Myths that Undercut Medicare-for-All: Managed Care and Competition

In the paper we presented at the Yale conference (Yale Law School,
November 6 & 7) , we reviewed short- and long-term factors affecting the
debate about Medicare over its lifetime, and then turned to a discussion
of two long-term factors: the rise of what came to be called the managed
care movement, and the resurgence of a longstanding campaign promoting
the idea that competition can right the wrongs of American medicine.

The managed care movement helped marginalize support for Medicare's
expansion primarily through its influence on the proponents of national
health insurance. It did so by persuading many potential proponents of
Medicare expansion to pursue a different reform strategy. Insurance
companies practicing managed care, the rhetoric claimed, were more
efficient than Medicare. Managed care kept Medicare-for-all off the
congressional agenda primarily by inducing potential proponents of
Medicare expansion to support managed care rather the expansion of the
traditional Medicare program.

The rise of the pro-competition movement constituted another significant
impediment to Medicare expansion. It did so by strengthening the belief
that market competition among private health insurance firms could be
invigorated, largely by eliminating tax subsidies for insurance and
shifting more costs onto patients, and that vigorous competition would
make the health care sector much more efficient than Medicare could ever
be. But because this movement appealed primarily to conservatives who
did not support universal coverage in the first place, its impact on the
debate about Medicare's expansion, although powerful, was less direct.

To sum up, the pro-competition movement contributed to keeping the
expansion of Medicare off the national agenda by keeping national health
insurance off the national agenda throughout most of Medicare's 50
years. And the managed care movement contributed by persuading liberals
to endorse managed care proposals, not the expansion of Medicare, during
those infrequent periods when universal coverage was at the top of the
national agenda.

Why have the Managed Care and Competition Movements been Politically

The answer, in our view, is two-fold. First, both movements acquired
immense economic power compared with supporters of Medicare expansion.
Second, both movements clothed their diagnoses of and solutions to the
health care crisis in rhetoric that induces listeners to overlook
unproven assumptions that underlie those diagnoses and solutions. This
permitted both movements to present their solutions in idealized,
oversimplified forms, and to compare their idealized forms to real-world
Medicare. Over the years both movements have developed cultures which
resist acknowledging the discrepancy between their assumptions and the

In the first few months of 1970, Paul Ellwood and representatives of the
Nixon administration agreed to promote an unproven diagnosis of the
health care crisis and an unproven solution. The unproven diagnosis was
overuse of the health care system induced by the fee-for-service method
of paying doctors. The unproven solution was a new form of insurance
company they called the "health maintenance organization" (HMO).

Ellwood and Nixon administration officials made the deliberate decision
to refrain from describing how HMOs were supposed to achieve the powers
attributed to them. As assistant HEW secretary Lewis Butler put it,
"Let's specify what we want it to do…. Let's describe the thing by what
we want it to do, not how it's formed."

This convention – describing an entity that will supposedly alleviate
the health care crisis according to what "we want it to do" – was
quickly adopted by Democrats. The convention encouraged, and to some
degree forced, HMO advocates to explain their support for the concept in
highly abstract terms. It also encouraged the use of opinion and wishful
thinking as substitutes for evidence and scientific discourse.

The tendency to adopt abstract concepts defined only by the aspirations
of their proponents, to give these abstract concepts labels designed to
influence rather than illuminate, and to ignore or downplay evidence
contradicting claims made for these concepts has persisted within the
managed care movement ever since. These habits of thought can be seen in
the movement's support for other managed care proposals, including
"pay-for-performance" and "accountable care organizations."

The pro-competition movement has exhibited similar traits – a tendency
not to examine fundamental assumptions and to gloss over evidence
contradicting them. Like the managed care movement, the pro-competition
movement rests its diagnosis on the unproven assumption that financial
incentives are the single greatest cause of health care inflation.
Unlike the managed care movement, which sees physician incentives as
paramount, the pro-competition movement claims patient financial
incentives are the fundamental cause of high medical costs. Like the
managed care movement, the pro-competition movement bases its solution
on unproven assumptions, the most important of which is that patients
can shop for medical care just as they do for food and other commodities.

The willingness of the two movements to compare real-world Medicare with
their idealized proposals has contributed significantly to their ability
to keep the expansion of Medicare off the table. It has also contributed
significantly to their inability to address the problems that bedevil
the American health care system – a chronically unacceptable rate of
uninsured, barriers to care even for the insured, and rising costs.

Comment by Don McCanne

The dream of expanding Medicare to cover all of us has failed to
materialize in a large part because of the nation's obsession with
marketplace concepts of health care financing. On the supply side,
health care providers are responding to financial incentives that
maximize their revenue. On the demand side, patient-consumers are
responding to financial incentives that minimize their out-of-pocket
spending. In both instances, health care access is compromised - in
managed care by erecting structural barriers to care ("managing" the
care), and in competition by erecting financial barriers to care (buying
competitively-priced plans with lower premiums that have higher
deductibles and other cost sharing).

Where did this obsession come from? Gilens and Page have shown that the
very wealthy and large business interests have control over major
legislation. These interests benefit from marketplace approaches to
health care through investments in for-profit insurance companies and in
health care delivery organizations, including for-profit hospitals. In
contrast, their tax burden in publicly-financed health programs is
greater when taxes are progressive. Also many other important government
programs are financed through progressive taxes, so the moneyed
interests benefit by privatizing government functions to the maximum
extent possible.

These interests, along with ideologues, have made a meme of the concept
that private markets are always more efficient than massive government
bureaucracies, when the evidence is almost always to the contrary.
Unfortunately, much of the media have accepted this meme as a given.
Since everyone "knows," based on a lifetime of exposure to these memes,
that the private sector can always do it better, they are quite willing
to support private solutions to problems such as the financing of health

Whenever proposals such as expanding Medicare come up, the insurance
industry pulls the puppet strings in Congress, and the public is
reminded how well UnitedHealth and the other for-profit insurers are
doing in creating private products that have lower out-of-pocket costs
than Medicare (not mentioning that they are doing that with one-third of
the overpayments they receive while keeping the other two thirds for
profits and to pay for the excessive administrative services that they
are selling us - a bad deal for taxpayers).

So those who support the intrusive managed care organizations and who
support shifting more costs directly to patients under the false banner
of marketplace competition (see Kenneth Arrow) have been effective in
suppressing any serious consideration of improving Medicare and
expanding it to cover everyone. As long as the public continues to buy
their meme, there is little likelihood of change.

We need to continue to inform the public on the legitimate findings of
health policy science (national health programs that include everyone
while providing higher quality at a lower cost), but that is a daunting
task considering how difficult it is to communicate complex policies to
a population blunted by unfounded memes.

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