Thursday, June 30, 2016

qotd: Our biggest obstacle is lack of personal health care data managers?

The Wall Street Journal
June 28, 2016
The Biggest Obstacle to the Health-Care Revolution
By David Blumenthal

The digitization of our health-care system is well under way, but several obstacles frustrate efforts to take full advantage of the health information revolution.  Perhaps the most important is our difficulty moving patients' data, so that records can follow patients as they go from one site of care to another.

Moving health data goes by the technical term "health information exchange" or HIE. There are some technical barriers to HIE, but they are not the big problems. The big problems are economic and cultural.

The American health system consists of competing economic entities: health systems, hospitals, nursing homes and doctors, to name a few. State and federal authorities zealously enforce antitrust laws to assure that local health-care competition remains strong. But health providers' data about their patients is a valuable economic asset that some doctors and hospitals are understandably reluctant to share with their competitors down the street. Many patients stick with clinicians and hospitals in part because that's where their records are. If the records can travel, so may patients, taking their business with them. Also, many providers believe that they – not patients — own that information, and have no obligation to share it.

A recent federal report cites this "information blocking" by providers as an important obstacle to HIE. Legislative and regulatory remedies to information blocking are under review, but there may be another, equally powerful route to HIE: giving patients their records so they can decide who can have them and when.

The idea is simple. Under provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), providers must share patients' records within 30 days on request. Instead of doctors or hospitals totally controlling their health information, patients could take charge. Managing this information may be challenging for some patients, but they could retain third parties that, for a fee, would steward and distribute health-care data as directed. Patients could designate particular clinicians or institutions, or family members and caretakers, as entitled to access. If so inclined, patients could also share their health information with researchers or public health authorities. Some call this "consumer-mediated health information exchange." A robust new business sector could provide these data services to interested patients.

To move forward with consumer-mediated HIE, several steps will be required. First, the federal government needs to more aggressively enforce HIPAA's information-sharing provisions. Second, we need a new cohort of health-data stewards who can help patients manage their own data. Some process of private certification or public regulation will likely be necessary to assure that these new entities can be trusted to discharge this sensitive and complex responsibility. Third, we will need to perfect the technical ability of these new data stewards to access the electronic-data repositories of health-care providers.

Dr. David Blumenthal is the president of the Commonwealth Fund, a national health-care philanthropy based in New York. From 2009 to 2011, he served as the National Coordinator for Health Information Technology, with the charge to build an interoperable, private, and secure nationwide health information system and to support the widespread, meaningful use of health IT.


Comment by Don McCanne

We have some serious problems in health care that need our immediate attention such as administrative  excesses, wasteful spending, impaired access, maldistribution of health care resources, and financial barriers to care. But the health policy community is entrenched in efforts to expand the administrative oversight of our system as somehow being the solution to problems they seem not to have defined. They are adding to the problem of administrative excesses while ignoring what really needs to be done.

David Blumenthal, having been our National Coordinator for Health Information Technology, seems to define the problem as a lack of health data management through a health information exchange. He would create a "robust new business sector" - a "consumer-mediated health information exchange" - providing data services to patients. Just what we need - more administrative excesses!

Right now our government and the health care industry are deeply involved in drafting rules for the Merit-based Incentive Performance System (MIPS) and the alternative payment model (APM) option as more studies are showing that such efforts are impairing professional satisfaction and increasing physician burnout -  more administrative excesses with detrimental outcomes!

We need to start thinking about the patients and a health care system that would best serve their needs. A single payer national health program is specifically designed to address the real problems noted in the first paragraph above. Patients are not looking to interact with personal data managers; they want health care, and they want it now.

Wednesday, June 29, 2016

qotd: Increasing vaccine prices to address shortages?

The New York Times
June 27, 2016
Low Prices for Vaccines Can Come at a Great Cost
By Austin Frakt

A $30,000 price tag for cancer drug therapy that extends life only a few weeks is understandably alarming. But a $2,000 price tag for all childhood vaccines — credited with eradicating smallpox, preventing a million or more cases of other diseases and averting thousands of deaths each year — is a bargain. In fact, the price of childhood vaccines may be too low for our own good because it contributes to shortages.

Vaccine shortages have popped up in the United States many times over the past 50 years. In 2001, eight of 11 recommended childhood vaccines were unavailable or in short supply.

Vaccine prices have gone up over the years, in large part because of newer vaccines that command higher prices. The number of recommended vaccine doses has also increased, which pushes up the overall cost of full vaccination. Still, vaccines are inexpensive relative to their value. A typical dose costs $50 and, apart from an annual flu shot, only a few doses are required over a lifetime. According to the Duke study, vaccines with lower prices were more likely to be in short supply than those with higher prices. There were no shortages of vaccines with a price per dose above $75.

Commercial market vaccine prices are higher than government ones, but not by enough to prevent shortages.

We probably don't need to raise vaccine prices by a factor of 10 to promote new vaccine investment and stabilize supply. According to one study, a doubling in price would incentivize new vaccine research, development and production.

For drugs as valuable as vaccines, that might be a price worth paying.


NYT Reader Comment:

Don McCanne
San Juan Capistrano, CA 

Are vaccines developed primarily to move wealth from the masses to corporate executives and passive investors? Or are they developed to reduce grief and suffering for all of us?

As a child, I remember putting dimes in the March of Dimes cardboard donor cards, because it was the right thing to do. As a medical student, I remember the iron lungs at San Francisco General Hospital. I remember Jonas Salk saying to Edward R. Morrow about polio vaccine, "There is no patent. Could you patent the sun?" It has been decades since I've seen an iron lung.

Piketty and Saez have shown us what happened: We have moved from the post-war egalitarian society in which our nation thrived by directing production to the common good, and now onto a society that transfers income and wealth to the richest amongst us, even if that means that many will have to do without vaccines because they are not affordable.

Would Jonas Salk rather have been known as a person who became wealthy from a patent on a vaccine, or as a person who helped virtually eliminate polio from the earth? Altruism is still out there. We need to unlock it from from the shackles of the rent seekers.


World Health Organization
April 12-14, 2016
Dealing with vaccine shortages: current situation and ongoing activities
By Dr. Oleg Benes

The way forward

Paradigm change
  * Global solutions to address global challenges
  * Strategic supply management vs transactions

Risk management ESSENTIALS
  * Identification & assessment & management

Systemic approach
  * Articulated policy & strategies
  * Monitoring & early-warning systems

Commitment & collaboration
  * WHO, Member States, regional institutions, partners & industry


CDC Vaccine Price List


Comment by Don McCanne

One of the problems with the U.S. health care system is our heavy reliance on private market dynamics. This has resulted in our exceptionally high prices in health care. The role of our public health system has somewhat moderated price increases for vaccines, but the CDC price list reveals that the costs of vaccine in the private sector are considerably higher than the costs for vaccines provided for our public immunization programs.

Vaccine shortages do occur. Given that we rely on markets, it is understandable why a respected health researcher such as Austin Frakt would reach a conclusion that we need to provide greater financial incentives - higher prices - to motivate vaccine manufacturers to ensure that supplies will not run short.

But how does the rest of the world do it? They cooperate rather than compete. In describing the way forward, the World Health Organization suggests commitment and collaboration. Absent from their list is a suggestion that we should drive prices up until the manufacturers are quite pleased with the cushy margins they would like to have, yet, in the U.S. private sector, we yield to their demands.

My comment in The New York Times is a plea to replace rent seeking in health care with a system based on altruism: We do it because it's right, and it makes us feel proud (and maybe even begin to  associate greed with shame). Altruism is much more likely to occur when we shift from market driven financing to a government health care financing system (again, compare CDC vaccine prices with market based prices - link above).

Tuesday, June 28, 2016

qotd: Jack Bernard explains Medicare for All to his fellow Republicans (and Democrats!)

The Atlanta Journal-Constitution
June 24, 2016
Medicare, an effective program that needs expansion
By Jack Bernard

I have been amazed at the number of negative Medicare-for-all attack pieces printed in various respected papers over the last few months, making me wonder why primarily liberal economists would be attacking a program that progressives have been trying to enact since Truman.

The underlying implication is that the current private system is more effective than a federal government run single-payer model. As a Republican former elected official with a very conservative spending record, I too believe in eliminating governmental waste and in utilizing the private sector when it is more effective.

Therefore, my record makes some citizens surprised when I advocate for Medicare for all. Objectively, the U.S. healthcare system is and has been severely broken. Despite our spending far more per capita, our country is far behind all developed democracies, which scoff when our politicians make the false claim that we have the best healthcare in the world.

Taxpayers are beginning to see the benefits of single-payer versus the ACA. In May, Gallup reported that "58 percent of U.S. adults favor the idea of replacing the law with a federally funded healthcare system that provides insurance for all Americans."

For the most part, it can be funded in much the same way as Social Security, through a payroll tax, with additional funding coming from a variety of other sources. More detail on this subject can be found on the Physicians for a National Health Program website (

But Republicans just continue to repeat their worn-out talking points about our current system being perfect — so long as we repeal the ACA. The Democrat front-runner is little better, supporting the ACA but having no clear plan to cover the 27 million Americans still without coverage or the millions more with inadequate insurance.

Given that special interest groups are making billions from our broken system, and contributing heavily to both parties to keep health insurance private, the real question is "will politicians in both parties ever have the courage to act?"

Jack Bernard, the first director of health planning for Georgia, has been an executive with several national health care firms. A Republican, he's a former chairman of the Jasper County Commission.


Comment by Don McCanne

The original intent of the architects oƒ Medicare was to eventually expand the program to cover everyone. Yet the Republicans have been reluctant to do so, and now the Democrats have specifically excluded it from their party platform. The leadership of both parties need to listen to conservative Republican Jack Bernard, an expert in our health care system. His full article is available at the link above.

Monday, June 27, 2016

qotd: BC/BS of Minnesota dumps broad networks and keeps narrow

Modern Healthcare
June 24, 2016
Minnesota Blues' decision to alter ACA plans mirrors stampede to narrow networks
By Bob Herman

Blue Cross and Blue Shield of Minnesota is cutting back its participation in the state's Affordable Care Act insurance exchange next year after losing nearly $300 million in the individual market in 2015.

However, the large Blues insurer is not completely exiting the state-based marketplace. Fully withdrawing has its consequences: Federal law bars insurers from re-entering the marketplaces for five years, assuming they discontinue all types of individual policies.

Instead, Blue Cross and Blue Shield of Minnesota is dropping health plans with the broadest networks sold on and off the exchange and will push people toward its narrower HMO option called Blue Plus, according to the Star Tribune.

Blue Cross and Blue Shield of Minnesota's decision is not unprecedented and has been embraced by other insurers around the country. The Blues plans in Illinois, New Mexico and Texas—all of which are owned by Health Care Service Corp., a giant Chicago-based company that has lost billions of dollars on ACA plans—abandoned their broad-network exchange plans in favor of the narrow-network HMOs.

Dropping broad-network plans can also be seen as a controversial risk dump for insurers. The sickest people who cost the most to insure often chose plans with higher monthly premiums to gain access to broader provider networks and fewer out-of-pocket costs. In Minnesota next year, those people may opt to buy those plans with other carriers, immediately benefiting the Blues' bottom line while redirecting the insurance risk elsewhere.


Comment by Don McCanne

The individual insurance market has always been unstable. The struggles insurers face are not only how they can make their products more effective and accessible to more individuals, but especially how they can ensure that revenues exceed expenditures. So what can we learn from the response of Blue Cross and Blue Shield of Minnesota to unfavorable market conditions?

Most importantly, they are dumping risk onto other insurers. That places a burden on the other insurers which then translates to even higher premiums, higher cost sharing, fewer benefits, or any combination of these for individuals already enrolled in the other insurance risk pools. That's not good.

In order to maintain a presence in the market, they are continuing to offer its narrow network HMO option. Those who transfer into that plan will have more limited choices of health care providers, perhaps losing coverage for their current health care professionals and institutions. That's not good.

This instability in coverage is a defining feature of private health insurance plans. The insurers will always continue to introduce innovations as they compete for an advantage in the marketplace. When their products appeal to people who have greater health care needs, their model doesn't work, and they pull out. What is working now is passing more costs onto the patients through greeter cost sharing, and limiting access to care by narrowing the networks of covered providers. That's not good.

What seems obvious is that we have selected the wrong intermediary for financing health care. The private insurers function with a business need requiring costly administrative excesses, and they have a need to conform their products to meet business goals rather than patient service goals. That's not good.

What would work best for patients would be a single payer national health program - an improved Medicare for all. But the Republicans are opposed, and the Democratic platform committee just voted to exclude single payer from their platform, and no other political party has enough traction to prevail in the elections. That's not good.

Even though the Medicare for all concept remains popular, it seems that we will not have single payer in the foreseeable future. Churchill and others have said that a democracy is the worst form of government other than all of the others, but sometimes you wonder.

Friday, June 24, 2016

qotd: Republicans offer only detrimental tweaking to our health care system
June 22, 2016
A Better Way to Fix Health Care

Our Principle

In a confident America, everyone has access to quality, affordable health care.

Our Challenge

Obamacare is making things worse by the day. It drives up premiums and deductible costs for individuals, families, and businesses. It forces people off the plans they like. It fuels waste, fraud, and abuse. And it cannot be fixed. Its knot of regulations, taxes, and mandates cannot be untangled. Obamacare must be fully repealed so we can start over and take a new approach.

Our Vision

Over the years, House Republicans have put forward hundreds of ideas to improve health care, ranging from targeted proposals to full alternatives to Obamacare. This is the first time we are unifying these efforts into a single health care plan.

This isn't a return to the pre-Obamacare status quo. And it isn't just an attempt to replace Obamacare and leave it at that. This is a new approach. It's a step-by-step plan to give every American access to quality, affordable health care.

Our plan recognizes that people deserve more patient-centered care, not more bureaucracy. That means more choices, not more mandates. You should have the freedom and the flexibility to choose the care that's best for you. Insurers should compete for your business, and treat you fairly—no matter what. You and your family should have access to the best life-saving treatments in the world. And as you get older, Medicare should give you more choices too. At every step, you should be in the driver's seat. This is a better way.

A Better Way to Fix Health Care - Snapshot (3 pages):

A Better Way: Health Care - Policy Paper (37 pages):


Comment by Don McCanne

As their vision states, the House Republicans have organized their previous concepts on health care reform into a single policy paper. It is heavy on rhetoric that is deceptive and bordering on dishonesty in that their proposals are cloaked in language suggesting that these are beneficial policies when many of them are actually detrimental.

The report includes a rehash of familiar proposals: health savings accounts, selling insurance across state lines, association health plans, medical liability, Medicaid block grants, and converting Medicare to a premium support program. There is really not much new here.

But what is missing are the details that would allow for an objective analysis of the impact were these polices converted into legislation. However, it is easy to translate their rhetoric into what they are really proposing: they would reduce the role of the federal government in financing health care, shifting responsibilities to the states and especially to the the markets, while sharply increasing the financial burden on patients.  Since more of the responsibility for paying for health care would shift to the individual, it is likely that the greatest impact would be to significantly impair access to health care due to financial barriers, especially the lack of cash on hand.

Just one example of their rhetoric:

"Currently under Medicare, for example, beneficiaries and physicians (and other providers) are not allowed to agree to a different treatment regimen for a Medicare covered service. Our plan would develop a personalized care demonstration program that would give beneficiaries and health care professionals the ability to voluntarily enter into an arrangement for items and services outside of the Medicare system. While participating in this voluntary demonstration project, Medicare beneficiaries would still retain their Medicare benefits. With the proper oversight, this is a common-sense approach to giving our seniors the opportunity to make medical financing decisions with their physicians without direct interference from Washington. These freedoms can also help to ensure that Medicare beneficiaries maintain the access to health care professionals they deserve by increasing flexibility and thus the number of physicians who participate in Medicare."

Sounds great - freedom to purchase the care you want instead of that dictated by the federal government. No, that isn't the point. The policy they advocate for here is to allow physicians to charge Medicare patients full fees for authorized services. That currently is not allowed unless a physician totally opts out of the Medicare program - not a practical consideration for most physicians. Why do they have this rule? Without it a two-tiered Medicare program would be created - a concierge tier for the wealthy, and an underfunded welfare program for the rest of us.

But how about a little perspective here? The Republicans propose repealing the Affordable Care Act and then replacing it with slight variants of many of the policies contained in the act. They leave in place most of the health care financing infrastructure: Medicare, Medicaid, employer-sponsored plans, individual plans with public and private exchanges, and private payment. They merely tweak the existing system. The tweaks cause private insurance to become even less effective in providing financial security; the profound administrative waste is perpetuated, and oversight of the outrageous pricing in health care is reduced.

We've already had enough of this. It's time - past time - to demand reform that works, that would make health care affordable for everyone who needs it. It's time for a single payer national health program - an improved Medicare for all.

PNHP is a policy education organization and does not support nor oppose any political parties.

qotd: NHS under Brexit, and what it means for the U.S.

The Guardian
June 14, 2016
What would Brexit mean for the NHS?
By Denis Campbell

Alongside the economy and immigration, the NHS has emerged as a key battleground in the EU debate. That is because the leave campaign decided early on to deploy the health service as a core argument in their plea to voters. Leave leaders Boris Johnson and Michael Gove have said consistently since campaigning began in April that Brexit could free up up to £8bn extra a year to spend on the NHS.

Leaving the EU would not, however, provide more money to spend on the NHS, according to the Institute of Fiscal Studies. "Rather, it would leave us spending less on public services, or taxing more, or borrowing more."

Labour has dismissed the leave campaign's claim of a bigger NHS budget as "misleading, simplistic and complete and utter nonsense". Its own analysis concludes that a post-Brexit economic slump could force the government to cut the Department of Health's budget by £10.5bn – the equivalent of every hospital in England having to shed 1,000 nurses and 155 doctors.

And last week, Tory MP and former GP Sarah Wollaston defected from the Vote Leave campaign saying its claim that Brexit would unlock up to £350m a week for the NHS "simply isn't true".


June 24, 2016
Pharma, researchers, NHS face uncertainty after Brexit win
By Helen Collis

Britain's Brexit result today ignites a long period of uncertainty in the health sector, on the relocation of the European Medicines Agency, on staffing the National Health Service and on funding research.


June 24, 2016
EU referendum: Nigel Farage backtracks on Vote Leave's '£350m for the NHS' pledge hours after result
By Jon Stone

Nigel Farage has disowned a pledge to spend £350 million of European Union cash on the NHS after Brexit.

The Ukip leader was asked on ITV's Good Morning Britain programme whether he would guarantee that the money pledged for the health service during the campaign would now be spent on it.

Speaking on the morning of the referendum result he however said he had never made any such pledge.

When it was pointed out that Vote Leave emblazoned the £350 million claim onto the side of a tour bus and drove it around the country, Mr Farage said: "It wasn't one of my adverts – I can assure you! I think they made a mistake in doing that.


Comment by Don McCanne

There was certainly no uniformity of opinion on what impact Brexit might have on their National Health Service. Now that the results are in, we still will not know until the destabilization begins to settle down.

So what is the most likely outcome? The basic structure of their revered health system will likely remain intact, but it may be subjected to tweaking, the nature of which will depend on the ideology prevalent in the political environment after the shakeup occurs, already beginning with the announcement that Conservative Prime Minister David Cameron will resign.

What impact will this have on health care reform in the United states? Virtually none. The probable Democratic presidential nominee has said that she will perpetuate the current system, adding minor beneficial tweaks. The probable Republican presidential nominee will likely accept the recommendations in the white paper released by the House Republicans which basically proposes perpetuating the current system with tweaks that they consider to be beneficial from a conservative perspective.

Bernie Sanders and colleagues are attempting to shift the Democratic platform to a position of support for a single payer national health program - Medicare for All - but Hillary Clinton has already made it very clear that she would not support such a change.

We can sympathize with the difficulties faced by the Europeans as they work out the Brexit problems and what is to follow. But if we are to learn from this, we must understand how important it is to be informed on public policy and then to elect politicians who will carry out a pledge to make our nation work well for all of us. We don't seem to be doing that now. We do not have the prospect of a Usexit since we have nowhere to go.

Thursday, June 23, 2016

qotd: What can we do about high drug prices?

The Commonwealth Fund
June 22, 2016
Podcast: New Directions in Health Care
Controlling Rising Drug Costs

Prescription drug spending, a significant driver of overall health care costs, has been rising rapidly over the last few years. This episode explores the reasons for higher drug prices, including the introduction of new high-value medications, potentially inefficient research and development, and a lack of price regulation. Producer Sandy Hausman interviews Commonwealth Fund President David Blumenthal, M.D., Duke-Margolis Center for Health Policy Director Mark McClellan, M.D., and Johns Hopkins University School of Public Health Professor Gerard Anderson about the underlying causes and potential solutions.

At Johns Hopkins University's School of Public Health, Professor Gerard Anderson argues government should more aggressively regulate drug prices.

"There are no rules. There's no legislation. You just basically, as a drug company, have the ability to set the price, and if the government has given you a monopoly – and that's what a patent is – then there are no competitors for your drug, and so you can charge essentially whatever you want. You don't have to worry that a lot of people won't have access to the drug, because you're going to make a lot of money on a few people, and that's exactly what happens."

He adds that even generic drug makers may be charging too much.

"Five drugs companies—and soon it will be four—in the generic drug industry control over half of the market, and the reason why generic drugs have been inexpensive in the past is pure price competition. They're selling exactly the same product. That's what a generic drug is, but they're selling it on the basis of price competition, but if there's not a lot of competitors, then you don't get very good price competition."

But Mark McClellan warns against the imposition of price controls, since they may limit patient access to certain medications.

"In the United Kingdom, which has significantly lower drug prices than the United States, there is a government body set up that reviews whether or not the price set by a manufacturer is worth it for certain kinds of patients, and in some patients makes a decision that the price is not worthwhile. That's negotiating leverage. That means that unless the price comes down, people don't have as much access to the drug."

As that debate continues, Dr. Blumenthal says the federal government has found some ways to negotiate for better prices.

"The Veterans Administration and the Department of Defense negotiate drug prices and have the statutory authority to set an upper limit on drug prices — that is the lowest amount that any single purchaser can get from a drug company, and there are other drug price controls that are imposed, for example, by states on behalf of their Medicaid programs. When you put California and New York together — two blue states that often pioneer with these kinds of new programs — those are big parts of the national market."


Comment by Don McCanne

As usual, Professor Gerard Anderson is right again. Between patents for brand products and consolidation in the generic market, drug prices are out of control. He argues that the government should more aggressively regulate prices.

You may remember Anderson as coauthor with Uwe Reinhardt et al. of the classic Health Affairs article, "It's the Prices, Stupid."

Mark McClellan argues that government involvement in setting drug prices risks impairing access to higher priced drugs, but it is the excessive prices in the United States that creates much greater access problems because of the lack of affordability.

David Blumenthal points out that the Veterans Administration, the Department of Defense, and some state Medicaid programs have been effective in limiting drug prices, thus the government does have the potential to play a very important role in combating price gouging by the pharmaceutical industry.

And, of course, with a well designed, government funded and administered single payer system our drug costs would be brought down to reasonable, fair levels - for all of us, collectively.

Tuesday, June 21, 2016

qotd: Health care financial insecurity is at a record low, but…

June 20, 2016
In U.S., Healthcare Insecurity at Record Low
By Jeffrey M. Jones and Nader Nekvasil

Fewer Americans reported not having enough money in the past 12 months to pay for necessary healthcare and/or medicines for themselves or their families than at any point since Gallup and Healthways began tracking this metric in 2008. From 2008 through 2013, the percentage of Americans who experienced difficulty in the past 12 months affording healthcare and medicine was fairly steady, hovering near the average of 18.7%. Since then, the average has been 16.4%, including the new quarterly low of 15.5% in the most recent quarter.

Inline image 1

The increase in the percentage of Americans having health insurance is likely a key reason why fewer Americans are struggling to pay for healthcare. Generally, those without health insurance are at least three times more likely to report not having enough money for healthcare/medicine than their counterparts with health insurance. In the most recent quarter, 41.8% of the uninsured said they had struggled to pay for healthcare costs, compared with 12.3% of those with insurance.

Bottom Line

Although roughly one in six Americans report having times in the past year when they were unable to afford the healthcare or medicine they needed, this is down significantly from just three years ago. The expansion of health insurance coverage to millions more Americans under the Affordable Care Act is likely a major factor in the decline of healthcare insecurity, demonstrating a concrete benefit of the law.

At the same time, there are growing concerns that health insurance costs are set to rise in many parts of the country, as insurers and states adjust to the new healthcare market. These increases would mostly affect Americans who do not qualify for a health insurance subsidy under the Affordable Care Act.


Comment by Don McCanne

The headlines reporting the results of this Gallup survey are celebrating the decline in health care insecurity (e.g., "Fewer Americans Are Having Trouble Paying Health Care Bills, Gallup Finds" - Kaiser Health News). Although any improvement is always good news, a 17 percent decline in health care insecurity is not much to celebrate (declining from 18.7% to 15.5%). Filling the glass less than one-fifth full is disappointing when we could have had a full glass.

The graph in the article shows a very modest decline, but even it is deceptive since it is truncated. The bottom of the graph is cut off at 10% and the top at 24%, but imagine showing the range at 0% to 100%. The curve would look quite flat, demonstrating visually how unimpressive the gain is.

Although it is shameful that 41.8% of the uninsured are struggling with medical bills, 12.3% of those who are insured still face health care insecurity, and many of the insured who are not have simply been fortunate enough to not require a significant amount of health care. So having insurance is not working well for many of those who do need health care.

The health care insecurity described refers only to medical bills; it does not refer to other costs of illness such as lost income. But a well designed single payer system with first dollar coverage for all essential health care services could virtually eliminate medical bills (though a person might still be responsible for charges for services and products that might not be appropriate for a taxpayer financed system). Removing financial barriers is a crucial step toward improving health care access.

Let's enact single payer. Then we can celebrate.

Friday, June 17, 2016

qotd: Making health care affordable through progressive redistribution

Economic Policy Institute
June 9, 2016
Progressive redistribution without guilt
By Josh Bivens

What this report finds:

Boosting income growth for the bottom 90 percent requires a policy agenda that explicitly aims to halt or reverse the rise in inequality in the United States in recent decades. The economic evidence shows no generalizable relationship between rising inequality and faster growth. This is important good news. It means that an agenda based on progressive redistribution can unambiguously raise living standards for the bottom 90 percent and even likely be better for overall growth than the agenda promoted by those who are opposed to strong efforts to check rising inequality and instead want to focus solely on spurring overall growth.

Why this matters:

The lack of a general relationship between inequality and growth means that specifics matter in policy debates. And the specifics of the modern "growth only" agenda will fail. Policies such as cutting top tax rates, deregulating industries, and signing more trade agreements will both fail to appreciably boost growth rates and continue to send a disproportionate share of income gains to the top 10 and 1 percents. The "growth only" agenda has already been tried, and the results have been slower overall growth and sluggish income gains for the vast majority in recent decades.

How we can fix the problem:

Income redistribution over the last few decades has been a zero-sum process, with gains at the top essentially coming straight out of the pockets of the bottom 90 percent of Americans. This zero-sum dynamic means that intelligent policies—including but going way beyond smarter and fairer taxing and spending—can convert these lost potential gains for the bottom and middle into actual income increases without harming overall economic growth. We should:

*  Use the levers of macroeconomic policy (monetary, fiscal, and exchange-rate policy) to target genuine full employment.

*  Make investments that markets are not making—in early childhood education, infrastructure, school construction, energy efficiency, and public health care.

*  Strengthen antitrust regulations and look for other opportunities to introduce competition to private markets, such as public options for health insurance and retirement savings.

*  Reregulate many activities of the financial sector to squeeze out the activities that don't enhance productivity or create efficiency but simply enrich well-placed actors within finance. A financial transactions tax is the clearest example of a policy that can stop this income skimming.

*  Enact climate-change mitigation measures—realizing that policies beyond simply increasing the market price of greenhouse gas emissions can play large and useful roles.

*  Strengthen regulations and institutions that help shift bargaining leverage from capital-owners and corporate managers to low- and middle-income workers. Key examples include higher minimum wages and labor law reform that allows willing workers to join unions and bargain collectively.


Comment by Don McCanne

Health care costs for the typical working family of four now average over $25,000 (2016 Milliman Medical Index). The only way low- and middle-income individuals and families can afford health care is through progressive redistribution. How are we doing?

With Medicaid we are doing quite well. The majority of lower-income individuals in states that participate in the ACA Medicaid expansion have their health care paid for through taxes, especially progressive income taxes. Wealthier individuals pay a higher percentage of income in taxes than do lower income individuals, and the lowest income individuals pay no income taxes at all. That certainly represents progressive redistribution as far as low-income individuals are concerned, though not for those with average incomes.

Medicare is funded primarily by general revenues which tend to be progressive, and by payroll taxes which tend to be proportional to income and thus not as progressive as income taxes since the rates do not increase with income. The exception is that individuals with incomes over $200,000 do pay an additional 0.9% Medicare tax on wages, making it more progressive than it had been before ACA. However, most of the income of the wealthy is not from salaries but rather from tax-advantaged sources, thus the impact is not as great on them as it otherwise would be.

Private plans purchased through the ACA exchanges by lower-income individuals are eligible for subsidies and credits indexed to income and thus are progressively funded for this sector. But middle- and upper-middle-income individuals do not receive these subsidies and thus bear a disproportionate share of our collective (pooled) health care spending (disproportionate as a percentage of income). The latter also is true for those purchasing individual plans outside of the exchanges. For them, funding is regressive since the percent of income paid for heath care decreases as income increases.

By far the largest source of health insurance is through employer-sponsored plans. Almost all economists agree that these are paid for by the employee through forgone wage increases (certainly a contributing cause to flat wages of the last couple of decades). This funding is quite regressive since, as income increases, the percentage of wages devoted to health insurance premiums decreases. Further, premiums are subsidized by tax expenditures (the deductibility of premiums for employer-sponsored plans) which increase as the individual's income increases. High-income individuals receive very generous government subsidies for their health insurance plans whereas lower-income individuals may receive little or none at all. Thus health financing for the majority of us is quite regressive.

The article by Josh Bivens is quite long but well worth reading if you want to understand policies that will shift us to progressive redistribution without having to feel guilt. The economic improvement for the great majority of us, creating a more robust economy, is well worth the trade off of expecting the wealthy to accept more progressive redistribution, which would certainly never negatively impact their very comfortable or even indulgent lifestyles.

Health care? Based on the examples above, we can certainly adopt policies that would significantly improve progressive redistribution so that health care is affordable for everyone. That is exactly what a well-designed single payer system does. No guilt, just ghastly politics.

Thursday, June 16, 2016

qotd: AMA adopts resolution for study of health care payment models, including single payer

2016 AMA Annual Meeting

June 11-15, 1016


Report of Reference Committee A


Excerpt from the Reference Committee report:


Overall your Reference Committee notes a distinction between supporting a single payer system and supporting a study on the issue. Your Reference Committee found testimony by the sponsor to be reasonable and persuasive. Your Reference Committee notes numerous reports by the Council on Medical Service evaluating health care financing payment models and believes it may be timely to reassess a variety of health care financing models, including single payer.




Recommendation A:


Madam Speaker, your Reference Committee recommends that Resolution 111 be amended by addition and deletion as follows:


RESOLVED, That our American Medical Association research and analyze the benefits and difficulties of a single-payer health care system in the United States variety of health care financing models, with consideration of the impact on economic and health outcomes and on health disparities and including information from domestic and international experiences. (Directive to Take Action)


Recommendation B:


Madam Speaker, your Reference Committee recommends that Resolution 111 be adopted as amended.


Recommendation C:


Madam Speaker, your Reference Committee recommends that the title of Resolution 111 be changed to read as follows:



HOUSE OF DELEGATES ACTION:  Resolution 111 adopted as amended.





Comment by Don McCanne


AMA members understand that the financing of health care in the United States is highly flawed, even after implementation of the Affordable Care Act. Although the AMA's official position has been to oppose single payer reform, it has become clear that it is time to take another look at various models of financing health care, including single payer.


The Illinois delegation to the AMA House of Delegates offered a resolution calling for a single payer health care study. The Reference Committee amended the resolution to call for an updated study on health care payment models, with the comment that single payer would be included.


The House of Delegates adopted the resolution as amended.


As a Life Member of the AMA, I am proud that our organization has elected to begin a process based on facts rather than ideology.

Wednesday, June 15, 2016

qotd: European experience with voluntary health insurance

World Health Organization
European Observatory on Health Systems and Policies
Observatory Studies Series No. 43

Voluntary health insurance in Europe: role and regulation

By Anna Sagan and Sarah Thomson

This book offers a succinct overview of the size, operation and regulation of markets for voluntary health insurance (VHI) in countries across Europe. We define VHI as health insurance that is taken up and paid for at the discretion of individuals or employers on behalf of employees, including group policies sponsored by employers that come with the job and are thus not strictly voluntary. VHI can be offered by public and quasi-public bodies and by for- profit (commercial) and non-profit-making private organizations.

National policy developments

The period from 2000 to 2015 has been marked by policy developments in four main areas: the extension of publicly financed coverage to groups of people previously excluded, which has effectively abolished several markets for VHI playing a substitutive role; an intensification of measures to make VHI more accessible and affordable, especially but not only where VHI plays a substitutive or complementary role; an increase in domestic legal challenges to some of these measures; and a reduction in the provision of tax incentives to take up VHI.

In spite of well-established evidence about the inefficiency and inequity of many forms of tax incentive for VHI, over half of the countries in this study (19 out of 34) offer some form of tax incentive for people to buy VHI. However, there has been a notable trend to reduce or abolish tax incentives for VHI, often because they have been found to be expensive for governments and a poor use of public funds. In France, Greece and Portugal, reductions in tax incentives were in part a response to fiscal concerns in the context of the economic crisis. Countries have also reduced or abolished tax incentives for equity reasons or used tax incentives in a targeted way to promote equity and access to health care.

National policy concerns

National policy concerns about VHI often include one or more of the following: inequitable (two-tier) access to health services; the magnitude of public subsidies for VHI; the challenge of ensuring affordable access to VHI for some groups of people; the high administrative costs associated with VHI; and the transaction costs linked to the complexity VHI brings to health systems, particularly in larger markets for VHI.

Concerns about unequal access to health care – so-called two-tier access, in which people with VHI enjoy easier, faster or preferential access to treatment – have been debated in Austria, Denmark, Finland, France, Germany, Italy, Latvia, Poland, Portugal, Spain and the United Kingdom. These concerns are driven by a number of factors. For example, where providers receive payment from public sources and VHI (doctors work in both sectors or there are private beds in public hospitals – the case in most countries), and VHI-paid fees are higher than publicly paid fees, doctors and hospitals will have incentives to prioritize VHI-financed patients. This may result in longer waiting times for those who rely on publicly financed coverage, as well as their having to be treated by less experienced junior medical staff. In addition, the time doctors devote to working in a private capacity is lost to the public sector and doctors working in both sectors may experience role conflicts.

Differential access for people with VHI goes against the principle of access on the basis of need rather than ability to pay. In the United Kingdom, these concerns have been countered by arguing that users of VHI are paying for VHI coverage over and above their tax-financed contributions to the NHS and, furthermore, that their use of VHI-funded care relieves pressure on the NHS, to the benefit of people who rely on the NHS for treatment. Even if this claim is valid, the benefits of VHI may not outweigh the cost in terms of doctors' time and public subsidies. Similar claims have been made in Ireland in the past, where some have argued that public subsidies for VHI are justified because those who opt for VHI effectively forgo a statutory entitlement while continuing to contribute to the funding of the public health service through taxation. They have also argued that VHI reduces demand for publicly financed health care. However, the evidence does not support this claim; a significant proportion of VHI-financed care takes place in public hospitals at less than full economic cost – 60% of adult inpatients with VHI, according to recent figures.

Explicit and implicit public subsidies for VHI have generated fiscal, efficiency and equity concerns in some countries. Implicit subsidies may come from public funding of medical education; failure to charge VHI the full economic cost of using beds in public hospitals; the potential for VHI to shift costs onto the publicly financed part of the health system in other ways if the system lacks transparency and accountability – for example, where there is double coverage; and the backup function of the publicly financed system.

VHI take-up is systematically concentrated among people with higher socioeconomic status, partly because VHI is less accessible to the most vulnerable population groups: older or disabled people, people with chronic conditions, unemployed people and poorer households. This raises questions about policies that lower the breadth, scope or depth of publicly financed coverage in the expectation that VHI will fill the gap. Even in countries with well-established VHI markets that cover a large share of the population, such as France, there is evidence of inequities in the depth of VHI coverage, with resulting inequities in the use of health services. Earlier, we showed how some countries have increasingly adopted measures to address access and affordability issues, particularly in the larger VHI markets. Such measures have not always been sufficiently effective, however, as the French example reveals.

The relatively high administrative costs associated with VHI have been a source of concern in several countries. This is especially the case in countries that have promoted VHI by allowing private insurers to offer publicly financed benefits. In such instances, private insurers have not been seen as providing good value for money.

VHI can bring significant complexity to a health system, adding to transaction costs for governments and households. Monitoring and regulation of VHI markets, efforts to ensure VHI is accessible and affordable for those who need it, developing policies to establish clear boundaries between public and private financing and service delivery, responding to domestic and EU legal challenges – all are likely to be time consuming and expensive.


Comment by Don McCanne

Many European nations, in addition to having some form of universal or near-universal health insurance, also have optional voluntary health insurance plans (VHI). These have raised concerns about access, inequity, two-tiered care, queues, inefficient use of public funds, and the excess costs and inefficiencies due to greater administrative complexity. "Private insurers have not been seen as providing good value," according to this report.

If their public programs fully covered costs for all reasonable health care services that would be expected in a comprehensive health care system, then there should be no need for additional voluntary health insurance. Certain services that should not be funded by a public program, such as luxury hospital suites or vanity cosmetic surgeries, should be paid for privately and not through a common insurance risk pool. Using private payment to jump the queue should be prohibited as well to ensure that the wealthy would continue to support an egalitarian public program.

We already have considerable experience with the waste, inefficiencies, and administrative excesses of plans that are somewhat comparable to their voluntary health plans, except our waste and inefficiencies are even worse. Medigap plans and private Medicare Advantage plans are prime examples. But what we do lack is a universal public financing infrastructure, and that makes our system much more dysfunctional, inequitable, and outrageously priced than the European systems.

Thus a well-designed single payer system that covers everyone for all essential services - an improved Medicare for all - would obviate the need for voluntary health insurance. We'd be much better off without it.

Tuesday, June 14, 2016

qotd: Over 100 million prescriptions written before drug safety recalls

The International Journal of Health Services
June 14, 2016
Unsafe Drugs Were Prescribed More Than One Hundred Million Times in the United States Before Being Recalled
By Sonali Saluja, Steffie Woolhandler, David U. Himmelstein, David Bor, Danny McCormick


For some drugs, safety concerns are only discovered after they have been on the market, sometimes for several years. The U.S. Food and Drug Administration (FDA) has adopted several policies that could increase the likelihood of approving a potentially unsafe medication. We attempted to quantify the number of exposures in the United States to drugs that were newly approved but later withdrawn from the market. We obtained a list of all drugs approved and subsequently withdrawn from the U.S. market due to safety concerns between 1993 and 2010. Using a representative sample of outpatient physician office visits in the National Ambulatory Medical Care Survey, we estimated the number of visits in the United States at which these unsafe drugs were prescribed. Seventeen drugs were approved and later withdrawn during this 18-year period and were prescribed at 112 million physician office visits in the United States. Nine of these drugs were prescribed more than 1 million times before their market withdrawal. New drugs that are later withdrawn due to being unsafe are frequently prescribed in the United States. To minimize the negative health consequences of prescribing potentially unsafe medications, we should reconsider some of the FDA policies that encourage the rapid approval and dissemination of new drugs.

From the Introduction

Each year more than 2 million serious adverse drug reactions occur in the United States, causing an estimated 100,000 deaths. Many safety problems emerge only after drugs have received Food and Drug Administration (FDA) approval. In deed, in the first 16 years after approval, 27 market withdrawals and serious new safety warnings—so-called black box warnings (BBWs)—are issued for every 100 newly introduced drugs. For withdrawn drugs, the median time from FDA approval to removal from the market is five years.

The FDA initiated a series of programs in the 1980s and 1990s that allowed the expedited review of certain drugs. Perhaps as a consequence of these programs, the FDA approves new drugs significantly faster than the regulatory bodies of Europe, Canada, and Japan. Unlike the United States, most European Union countries require that new drugs undergo a secondary review process comparing their efficacy to the existing standard of care before health insurance plans will pay for them. Furthermore, the European Union, Canada, and Japan prohibit direct-to-consumer advertising, which is known to increase prescribing of the advertised drug.

Pharmaceutical firms often heavily market newly approved medications in the United States, and doctors frequently prescribe them. After the FDA relaxed regulations on direct-to-consumer advertising in 1997, including allowing less reporting of product risks, pharmaceutical spending on advertising increased more than three-fold. Patients commonly ask for advertised drugs in the United States and clinicians often feel pressured to prescribe them. Hence, many Americans may be exposed to drugs that pose a risk to their health before their dangers are adequately appreciated.

From the Discussion

This descriptive study is the first systematic attempt to quantify the extent to which the U.S. population is exposed to unsafe drugs in the outpatient setting.

Special FDA programs that allow for the expedited review of some drugs are now commonly used by industry to gain quick access to the U.S. market. Expedited reviews were initiated in the 1980s to allow for rapid approval of HIV drugs. These programs were intended for drugs used in exceptional circumstances: for life-threatening, untreatable, or rare diseases. However, the pharmaceutical industry now frequently uses these programs in non-exceptional circumstances; currently, the majority of new drugs qualify for expedited review. This year the U.S. Congress will consider additional legislation, the 21st Century Cures Act, that would further accelerate approval of some drugs and could expose millions more Americans to medications that have been only briefly studied for safety.

Several policy steps might reduce patients' exposure to unsafe drugs, including: returning to a more stringent FDA approval process, increasing post-marketing surveillance, and eliminating direct-to-consumer advertising.


Comment by Don McCanne

Since it is impossible to read all of the research studies on new drugs, we can be thankful that we have the Food and Drug Administration (FDA) to collate and evaluate all of that information so that we know that new drug products released on the market have been demonstrated to be both effective and safe. Or can we? This new study adds to our concerns.

With the politics in our nation being under the control of the pro-market neoliberals and conservatives, the pharmaceutical industry and insurance companies have been given a most favored status under the belief that markets will serve the public better if not constrained by supposedly excessive government oversight.

In the case of pharmaceuticals, the public can experience the benefits earlier of the new blockbuster miracle drugs if the government (FDA) will just get out of the way, or so they say. More recent laws and regulations have allowed pharmaceutical firms to pay fees to enter an accelerated process for new drug approval (like buying their way to the front of the queue). This accelerated process has been expanded to include most new drugs, ignoring the fact that there may be a conflict of interest when firms can buy off government regulators to expedite approval of their products.

To be sure that the information evaluated truly represents the value of the new drugs, pharmaceutical firms have agreed to register all studies in advance and not just the studies with favorable results. But research studies with adverse results are still being filed away without public oversight, explaining some of the reason that drugs on the market do not have the same benefits and safety margin as the pre-marketing studies submitted to the FDA show. Also the firms have promised close post-marketing surveillance, but that seems to disappear once the drug is approved. Also the firms are not required to compare new drugs with existing drugs even though many turn out to be inferior. Yet with our lax rules on direct-to-consumer advertising, a demand can be created for these new drugs in spite of their typically outrageous prices. Now Congress is advancing the CURES Act to further benefit the biomedical firms, potentially at a cost to the public's health that may offset the benefits.

This problem is serious. The study by Saluia et al. shows that over 100 million prescriptions were issued for drugs that had to be withdrawn from the market because they proved to be unsafe. About 100,000 people die each year from drug reactions, and this is particularly tragic when it is from a drug that never should have been on the market in the first place.

The stewards of a well designed single payer system would demand much better performance from the pharmaceutical industry - drugs and other biomedical products that are effective, that are an improvement over existing treatments, that are reasonably safe, and that are priced appropriately based on legitimate costs and a fair profit margin. Regardless, the government has to step up if we want better quality and value in our nation's drug supply.

Monday, June 13, 2016

qotd: High cost sharing for low-value services may increase overall health care spending

American Society of Health Economics
Sixth Biennial Conference
June 13, 2016
Impact of Increased Cost Sharing on Utilization of Low Value Services
By Jonathan Gruber; Catherine Maclean; Kevin G. Volpp; Bill Wright; Eric Wilkinson

Given rising healthcare costs in the United States and the relatively poor health of Americans, research on cost-effective benefit designs that do not impede patient outcomes is critical.  Value-based insurance design (VBID) programs hold great promise as they align patient out-of-pocket spending with service value, and can thereby direct health dollars away from wasteful services, and improve patient outcomes through better alignment of treatment and patient need.
The existent VBID literature focuses primarily on reducing patient cost sharing for high value care and has tended to be limited to medications.  There is scant information on the effectiveness of raising patient cost sharing for low value care (e.g., unnecessary imaging services).  Moreover, insight from behavioral economics suggests that the latter benefit design may be more effective in changing behavior as it penalizes those patients using services of low value.  Better evidence on VBID programs is needed, given that such programs are embedded in the Patient Protection and Affordable Care Act and numerous employers across the U.S. are implementing such programs.
In this study we evaluated two innovative VBID programs implemented by public employers in the state of Oregon between 2010 and 2012.  The VBID programs we evaluated increased cost-sharing for low value healthcare services.  Specifically, patient co-payments were increased by $100 to $500, representing a much more substantial rise in out-of-pocket spending than has typically been evaluated in the past.  Targeted services included a number of services believed to offer limited benefits to patients (for example, inpatient sleep studies, upper GI endoscopies that are not viewed as medically necessary, and over-used imaging services and surgeries), and emergency room episodes.
To examine the effect of these VBID programs we estimate differences-in-differences (DD) models coupled with administrative claims data spanning 2009-2013 on approximately 300,000 public sector employees and their dependents.  Specially, we exploit programmatic changes that occurred across time, organization, and service, leveraging a quasi-experimental design to estimate the impact of the VBID programs.  To further strengthen our design, we utilize comparable data from three public employers in Oregon that did not implement a VBID program over the same time period as a comparison group.  Our outcomes include healthcare utilization (both on the extensive and intensive margins), healthcare costs, and patient well-being.  We also examine heterogeneity in treatment effects by patient characteristics.

Our findings suggest that increasing cost-sharing for low value healthcare services reduces utilization of some, but not all, targeted services.  However, we find that increased cost-sharing may lead to modest increases in overall healthcare spending.  Finally, we identify heterogeneity by patient characteristics.  These findings suggest that although VBID programs may steer patients away from targeted low value services, these programs may not lead to substantial reductions in healthcare spending overall, at least in the short run.  Future studies should examine longer term impacts of VBID programs and different types of VBID program designs on utilization and costs.


Comment by Don McCanne

It seems intuitive that value-based insurance design (VBID), such as requiring much higher patient cost sharing for low-value care (e.g., much greater out-of-pocket payments for "unnecessary" CT or MRI scans), should help reduce our total health care spending without inducing a major negative impact on health outcomes. But the authors of this study find that "increased cost-sharing may lead to modest increases in overall healthcare spending," even though it may reduce utilization of some, but not all, targeted services.

Thus it appears that VBID may not be a very effective tool for reducing overall health care spending. Besides, philosophically it does not seem right that patients must face a financial penalty for obtaining the care that their health care professionals have recommended.

If penalties were to be assigned for using low-value care, wouldn't it be more appropriate to apply them to the health care provider who would profit by selling more health care services with very limited value? But then how would you determine the threshold of what care is of value and what isn't? Regardless, this report seems to provide an argument for dispensing with penalties in health care.

Maybe since we haven't had much luck with carrots and sticks, we should give up on relying on intuition in implementing health care reform and instead adopt a proven model that is highly effective in improving affordability and access to health care for all - a single payer national health program: Improved Medicare for All.

Friday, June 10, 2016

qotd: Fixing the federal budget through tax policies rather than program reductions

U.S. House of Representatives
Committee on the Budget
June 9, 2016
Hearing: The Need to Control Automatic Spending and Unauthorized Programs


The Honorable David M. Walker, Former Comptroller General of the United States

It is clear that our federal fiscal challenge is so great that, unlike after World War II, we will not be able to "grow our way out of the problem." Our global economic market share, demographic patterns and government commitments are very different today than at the end of World War II. We clearly need to take steps to enhance economic growth, increase individual opportunity and improve our competitive posture. However, the math does not come close to working by relying on growth alone. It is also clear that we will not be able to reduce our federal public debt/GDP to a reasonable and sustainable level without addressing "mandatory" spending programs and engaging in comprehensive tax reform. In that regard, I would respectfully suggest that we need to address both direct and indirect mandatory spending, including tax preferences.

Stuart M. Butler, Ph.D., Senior Fellow in Economic Studies, The Brookings Institution

My testimony today focuses mainly on automatic spending, but let me begin with some remarks on the unauthorized programs.

Unauthorized Programs

Unauthorized programs and agencies are no small issue. As the CBO recently reported, the omnibus appropriations bill for FY 2016 appropriated over $300 billion to agencies and programs lacking authorization.

Authorizations are a very important part of the budget process. They create or redesign a federal agency or program, mapping out its activities and establishing federal obligations and expenditures. A major purpose of reauthorization is to conduct reviews and hearings and to refine the program or agencies' activities based on that evaluation. With the climate in Congress undoubtedly making it more difficult for authorizing committees to move such legislation to the floor, the failure to review and reauthorize important agencies and programs underscores the growing failure of the budget process and the decline in the orderly functioning of Congress. It is embarrassing, to say the least, that many major agencies, such as the FBI and the State Department, have not been authorized for many years and must depend on the appropriations process for anything resembling a budget review.

On the face of it, the answer to this problem is quite simple – do not waive the rules.

Automatic Spending

The growth of automatic or mandatory spending within the federal budget is a similar but much larger problem. Like the growth of unauthorized programs, the rapidly growing proportion of federal spending for mandatory and other automatic spending escapes timely review. These programs also lack a real budget in the generally understood sense of a clear plan with specified spending and funding levels. This is a breakdown of responsible budgeting.

In conclusion Mr. Chairman, I believe the only way to achieve reasonable constraints on automatic spending is to do so within the context of an agreed long-term plan which becomes a default that is difficult – but not impossible – to alter over time. That procedure forces the discussion to take place in the context of the big picture that includes broad national objectives for the economy, broad fiscal goals, and decisions about the relative balance of protections needed for the elderly, the young, and working- age generations. That broad context, with the regular review and default feature of the proposal, provides sufficient political encouragement and protection over time for members to continue supporting the procedure.

Lily Batchelder, Professor of Law and Public Policy, NYU School of Law
My testimony makes three main points.

• Regardless of whether the goal in controlling automatic spending is reducing deficits or paying for important new investments, Congress should focus on cutting tax expenditures. Tax expenditures are simply a type of mandatory spending. With rare exceptions, tax expenditures continue automatically and anyone eligible can claim them, regardless of the budgetary impact. Tax expenditures are tremendously costly and are growing over time. Moreover, most are highly regressive and many are poorly structured. In contrast, almost all traditional mandatory spending programs are progressive and many are well designed.

• Deficit reduction will require compromise and tough policy choices. Budget process reform is not the answer, but rather bipartisan dialogue and compromise. In order to be bipartisan, deficit reduction will require both revenue increases and spending cuts, but it should be weighted towards revenues. Congress has made deep cuts in discretionary spending in recent years. In addition, the aging of the population, the retirement of the Baby Boom generation, and natural health care cost growth all mean we will need to spend more on traditional mandatory spending programs in the coming decades just to maintain our current commitments.

• Caps or limits, enforced by automatic across-the-board cuts, are a bad way to reduce traditional mandatory spending, and this is true of tax expenditures as well. Caps on traditional mandatory spending are pro-cyclical, automatically reducing spending at precisely the wrong time – during economic downturns. Caps on the annual cost of tax expenditures are unworkable. Such caps take a meat axe to complicated policy problems where a scalpel is needed. However, reforming multiple tax expenditures at the same time in a sensible way, such as limiting their value to 28 cents on the dollar, could be a promising approach.

Federal Government Spending, 2015

$1,442 billion Tax expenditures
$889 billion Medicare and Medicaid
$882 billion Social Security
$583 billion Non-defense discretionary
$582 billion Defense discretionary

Share of Cost of Largest Tax Expenditures, 2013

8%  Lowest Quintile
10%  Second Quintile
13%  Third Quintile
18%  Fourth Quintile
51%  Top Quintile (17% for Top 1%)

Value of Tax Expenditures per Household, 2011

$635  Lowest Quintile
$2,333  Second Quintile
$2,897  Third Quintile
$4,559  Fourth Quintile
$24,045  Top Quintile
$154,856  Top 1%


As this Committee continues its important work on addressing our long-term budgetary challenges, I urge you to focus your attention on one type of automatic spending that is both enormously costly and too often overlooked: tax expenditures. The aging of the population, rising income disparities, and the natural growth of health care costs mean demands on federal resources are not going away. Cutting tax expenditures represents the fairest and most efficient way to address our nation's fiscal needs. And within that category, I urge you to focus on cutting those tax expenditures that are the most regressive, the most distortionary, or the least beneficial for society as a whole.


Testimony of David Walker:

Testimony of Stuart Butler:

Testimony of Lily Batchelder


Comment by Don McCanne

Although this hearing was allegedly about programs for which spending is mandatory (such as Social Security and Medicare) and the failure of Congress to formally reauthorize public agencies and programs (such as the FBI and The State Department), it is really about the supposed need to cut spending in essential government programs. This process should be of concern to single payer supporters since, if we had a Medicare for All program, it would be on the chopping block as well.

Two of the witnesses represent the Republican majority. Former Comptroller David Walker has continued to harp on the fact that the growth in Medicare and in the interest payments on our national debt will bankrupt the nation, implying that spending must be reduced, including mandatory spending. Stuart Butler was formerly with The Heritage Foundation and was author of the opposition's plan to the Clinton health care reform proposal - the plan that later became the basis for the Affordable Care Act. He too implies that budget deficits require that mandatory spending must also be subject to the budget process. Neither Walker nor Butler suggest new revenues (taxes) as a means of balancing the budget.

In sharp contrast, Lily Batchelder shows us that a change in tax policy can close the budget gap without the necessity of cutting mandatory spending for essential programs (and discretionary spending has already been cut to the bone). She would emphasize increasing revenues and doing that indirectly by reducing tax expenditures. Tax expenditures are the reduction in taxes paid as a result of deductions taken from taxable income. Those taxes avoided are disproportionately a benefit for the very wealthy and are paid by the rest of us, and they are massive - over $1.4 trillion in 2015!

Our politicians are wrong when they tell us that we have to cut Social Security, reduce Medicare payments by privatizing the program, and that we could never afford to pay for Medicare for All (even though we already spend on health care what the program would cost).

All we have to do is fix the tax code - the most important step being to reduce the tax expenditures disproportionately benefiting the very wealthy. Lily Batchelder explained that to Congress, but do you think they would ever listen?

Thursday, June 9, 2016

qotd: Fed Reserve of NY: Medicaid provides financial peace of mind

Federal Reserve Bank of New York
June 6, 2016
Is Health Insurance Good for Your Financial Health?
By Nicole Dussault, Maxim Pinkovskiy, and Basit Zafar 

What is the purpose of health care? What is the purpose of health insurance? When people fall ill, they seek health care in order to get better. But insurance has a slightly different function: Its main role is not to protect our health per se, but to protect our finances.

Protection against financial hardship was one of the drivers behind passage of the 2010 Patient Protection and Affordable Care Act, commonly known as the Affordable Care Act (ACA). As President Obama said in a 2015 weekly address, "… that's the whole point of health insurance. Peace of mind."

In this blog post, we discuss the results of a research project that examines the effect of the Affordable Care Act's Medicaid expansion on personal financial indicators. We find suggestive evidence that after the implementation of the ACA in the first quarter of 2014, counties with a high uninsurance burden pre-reform in states that subsequently expanded Medicaid had a decrease in average debt sent to collections agencies compared with such counties in states that did not expand Medicaid.

From the Conclusion

While the full effects of the Affordable Care Act on financial health are yet to be seen, and while the effects of the ACA — positive or negative — are not restricted to financial health, we offer suggestive early evidence that the Medicaid expansion is fulfilling the goal of health insurance: providing "peace of mind" by protecting against financial hardship.


Comment by Don McCanne

One of the most important purposes of the Affordable Care Act (ACA) was to make health care affordable. After all, "Affordable" is in its name. This study reported by the Federal Reserve Bank of New York confirms that, indeed, health care has become more affordable for new enrollees in Medicaid, as confirmed by the decline in debt sent to collection agencies in states that did expand Medicaid. But that's not the full story.

One of the problems faced by the architects of ACA was that health care costs have become so expensive that insurance premiums would not be affordable without modifying the private health plans that were to be sold on the exchanges. Thus they established the benchmark silver plan at an actuarial value of 70 percent (the patient pays an average of 30 percent of the costs if not qualified for subsidies). The easiest way to do this was to require high deductibles. Other studies have shown that these deductibles have made health care less affordable and have resulted in a perpetuation of medical debt that frequently ends up being assigned to collection agencies.

Why then would Medicaid patients have a lower incidence of accounts assigned to collection agencies than do those with private plans? It is simply because most Medicaid patients do not have deductibles or other forms of cost sharing. They do not incur much in the way of medical debt. As President Obama said, "That's the whole point of health insurance - Peace of mind."

We can do the same for everyone else. We can prevent financial hardship from medical debt by providing first dollar coverage for everyone. With a well designed single payer system we can control costs through much more patient-friendly means. For those who say that we can't afford that, other nations have first dollar coverage while spending considerably less than we do with our highly dysfunctional financing system. Single payer. It's that simple.

Tuesday, June 7, 2016

qotd: Behavioral economics and countervailing incentives in value-based payment

May 17, 2016
Countervailing incentives in value-based payment
By Daniel R. Arnold


Payment reform has been at the forefront of the movement toward higher-value care in the U.S. health care system. A common belief is that volume-based incentives embedded in fee-for-service need to be replaced with value-based payments. While this belief is well-intended, value-based payment also contains perverse incentives. In particular, behavioral economists have identified several features of individual decision making that reverse some of the typical recommendations for inducing desirable behavior through financial incentives. This paper discusses the countervailing incentives associated with four behavioral economic concepts: loss aversion, relative social ranking, inertia or status quo bias, and extrinsic vs. intrinsic motivation.

From the Introduction

The Department of Health and Human Services (HHS) intends to have 85% of Medicare fee-for-service (FFS) payments tied to quality or value by 2016 and 90% by 2018. In addition, HHS is moving away from FFS in favor of alternative payment models, such as accountable care organizations and bundled-payment arrangements. HHS's goal is to have 30% of Medicare payments tied to quality or value through alternative payment models by the end of 2016 and 50% by the end of 2018. The U.S. health care system's transition to value-based payment is underway.

Loss aversion

While upfront payment has the potential to leverage physician's loss aversion and nudge them toward providing higher-value care, it is also important to recognize the implications loss aversion has for current design features of value-based payment. One example is wage variation. Wage variation under value-based payment is likely to be greater than wage variation under FFS, particularly if value-based payment is tied to patient outcomes that are highly variable. Loss aversion implies that employees respond poorly to variable wages – relatively low wage years are more painful than relatively high wage years are pleasurable. There is some evidence that physicians may respond to low wage years by boosting their incomes in subsequent years, either through increasing prices or shortening patient appointments. Thus, as long as there is some level of productivity-based compensation, certain value-based payment arrangements could increase the likelihood of unappealing income boosting activities that stem from perceived low wage years.

Relative social ranking

There are, however, drawbacks to comparing physicians to their peers. After New York and Pennsylvania began releasing coronary artery bypass graft (CABG) report cards, both states saw surgeons turn away sick patients in an effort to avoid poor outcomes and lower publicly reported ratings. In Pennsylvania, 63% of cardiac surgeons admitted to being reluctant to operate on high-risk patients. In New York, 67% of cardiac surgeons refused to treat at least one patient in the preceding year that was perceived to be high risk.

Another concern is the power of rankings: individuals often attribute more meaning to rankings than is warranted. For instance, Isaac and Schindler have identified a "top 10″ effect–people categorize performance by round numbers (i.e. you are either inside or outside the top ten). This makes moving from rank 11 to rank 10 more important than moving from rank 10 to rank 9, even if the absolute change in performance is the same. Furthermore, the importance of rankings can lead individuals to sabotage others in order to improve their relative ranks. Finally, rankings become particularly problematic when all participants perform well, there is random variation in outcomes, or performance is difficult to measure — all of which can be true for physicians. Outside of health care, team-based, rather than individual, incentives have been shown to reduce these undesirable behaviors.

Inertia or status quo bias

But what happens when the default choice is not clear? Is it still better to give physicians a default option, or instead rely on physicians to actively decide which treatment option is best. A recent study introduced the notion of a "default pull" effect: defaults shape what a decision maker prefers by making him consider whether he prefers the default. This pull can have a substantial effect on choice, even when the default itself is not chosen. It may be better to allow physicians to have their undistorted preferences in situations where there is no obvious best course of treatment.

Another downside of imposed defaults is that they reduce physician autonomy. Ariely and Lanier vividly describe that physicians without autonomy "may feel like Charlie Chaplin's character in Modern Times, pulled through the gears and cogs of a machine in a factory, and as a consequence they often feel defeated when attempting to put their hearts and souls into their profession." But in the opposite direction, some argue that nudges are too weak. For example, calorie labeling has done little to reduce people's calorie intake, which has led some to argue that some public health policies need to be more aggressive – shoves rather than nudges.

The effect of explicit incentives on intrinsic motivation

Himmelstein et al. highlight two important assumptions of pay-for-performance that are rarely made explicit: (1) variation in performance is caused by variation in motivation, and (2) financial incentives will add to total motivation, not undermine it. Incentive pay is unlikely to improve variation in poor performance that is not due to motivation, such as mistakes from fatigue that come from overworked physicians. Assuming a lack of motivation as the problem, pay-for-performance then assumes financial incentives can increase motivation. Financial incentives clearly affect behavior. For instance, shifting physicians from fixed salaries to FFS has been shown to increase the amount of clinical work performed and improve billing practices.

But there is mounting evidence that extrinsic rewards can undermine intrinsic motivation. Of the numerous findings that relate to the crowd-out of intrinsic motivation, two seem particularly relevant to physicians: (1) negative effects of monetary rewards are strongest for complex cognitive tasks and (2) motivational crowd-out spreads to work that is not directly incentivized. With respect to complex cognitive tasks, even very large financial incentives undermine performance. For example, rural villagers in India offered half their annual money income experienced worsened performance on complex memory and puzzle-solving tasks. The spread of motivational crowd-out to work not directly incentivized has been observed in England. In 2004, the U.K. government introduced a pay-for-performance scheme with 136 indicators for family practices. By 2007, improvement for incentivized measures had plateaued, and quality deteriorated for two measures that were not incentivized.


Insights from behavioral economics can be used to create value-based payment policies that promote high-value care. Upfront bonuses, physician rankings, and better default options can all help promote high-value care. But it is important to follow the implications of these behavioral motivators through to all areas of physician decision-making and performance. In doing so, unintended consequences may be revealed along the way.


Comment by Don McCanne

As the government moves away from payment based on volume and forward to payment based on value, it is important to have a thorough understanding of behavioral economics, and the application needs to be done right. The excerpts selected from the article above describe the problem of countervailing incentives in value-based payments.

There will always be a certain volume of care and payment must take that volume into consideration, but that care should be of value. Through approaches such as comparative effectiveness, cost effectiveness, and outcomes research we can determine to a great extent what care is beneficial and affordable, that is, what care is of value.

Through the application of behavioral economics we can motivate health care professionals to strive for higher value care, but we have to get it right. Dedicated, altruistic health professionals are much more likely to set the compass in the right direction than are business school academics and government bureaucrats. But the strategists do need a good foundation in behavioral economics.