There’s been much talk about the pros and cons of Medicare for All as one option in a national health reform plan. Think Progress addressed the major complaints opponents of a governmental option have; Merrill Goozner’s piece last week focused on one of the major issues – the claim by some that governmental plans could set lower prices, thereby lowering reimbursement.
Merrill notes that this might not be such a bad thing. He’s right.
Alas, it’s also not likely a Federal health plan option would have much control over provider pricing.
Recall that the major reason health care costs in the US are so much higher than in every other developed country is price per service. Not rationing, or lines, or less technology, or any of the other hoary red herrings cited by those who mindlessly claim the US has the best health care system in the world. It’s price.
According to the Commonwealth Fund, “Americans do not have access to a greater supply of health care resources than people in most other OECD countries. In fact, the U.S. has fewer per capita hospital beds, physicians, nurses, and CT scanners than the OECD median.” It’s not rationing, we just pay more per service than other countries do. Again quoting the Fund “higher prices for health services such as prescription drugs, hospital stays, and doctor visits, are the main reason for higher U.S. spending.”
The logical misstep made by opponents of a government option is in thinking the Feds would have more market power than a private plan, market power that would enable them to force down prices and thus unfairly compete against private plans. Opponents claim that the Feds would have an unfair advantage due in part to their sheer size; they’re just so big that private plans could not compete.
Unlike the folks at Cato and Heritage, those of us who work in the real world of health insurance know better. Let’s start with a basic question. Exactly how would a governmental option change the market?
There’s been so much consolidation in the health plan industry that many markets are monopsonies (few buyers and many sellers).
Back in 2005, in 96 percent of MSAs one insurer had a combined market share of at least 30 percent. In two-thirds of MSAs, one insurer had market share equal to or greater than 50 percent, and in a quarter of MSAs, one insurer had market share of at least 70 percent.
Now, would a new governmental plan have an advantage over, say, Blue Cross of Alabama, which has market share ranging from 67 percent in Tuscaloosa to 95 percent in Gadsden? Or Blue Cross of Arkansas, with share from 63 percent in Hot Springs to 97 percent in Texarkana? Or the two dominant health plans in Ohio, with combined share ranging from 46 percent to 80 percent?
It wouldn’t; in fact it would be an uphill climb on a very icy slope for a governmental plan to reach market parity, much less market dominance in most of the country’s MSAs. Health plans execs spend every waking hour, and some while asleep, thinking about how they can steal share from their competition. They beat each others’ brains out on a daily basis, fighting over each employer, each member, each new contract. And most are very, very good at it.
Yes, a governmental plan could try to force docs to accept lower fees, and physicians could and would tell the Feds to pound sand. There is precedence for this – try and find a doc who will accept Medicaid in New York. Recall the revolt of physicians last summer when they were facing a dramatic cut in Medicare reimbursement. Physicians do not have to work with any health plan – governmental or private. If the Feds tried to cut reimbursement, private insurers’ provider relations pros would eviscerate them in the provider community.
There just isn’t any logical basis for the argument that a governmental option would somehow be unfair for competition, or drive out private plans, or lead to a government monopoly. Those who argue otherwise ignore the facts, relying instead on anecdotes about rationing, the horrors of lines, and instances of poor treatment in countries with national health care.
Multiple anecdotes do not equal data. If opponents of a governmental option want to stop it, they’d do well to get serious and use their JDs, Ph.Ds and extensive policy world experience to come up with real objections.
I’ll be waiting.

Today’s Politico.Com reports Rep. John Conyers has come out publicly against the nomination of Sanjay Gupta for US Surgeon General. Conyers’ objections come on the heels of revelations that Gupta has been less than forthcoming about his relationships with pharmaceutical and medical firms.
There’s no question Gupta would bring a fresh face and dynamic persona to the US Public Health Service. He’d also help the new Administration’s efforts to drive changes in the health system. But he has little managerial experience and less in the public health sector. Gupta’s resume contains no evidence of any managerial or leadership experience, much less a track record leading a large organization. He has also been forced to retract several statements he made in a much-publicized televised brawl with Michael Moore. This last, coupled with the links to big medicine, has led to some expressing concerns about his objectivity.
Gary Schwitzer writing in 2007 in HealthNewsReview.com noted Gupta promoted the use of medical screening tools, tools that could lead to increased use of drugs. Schwitzer, a journalism professor, has criticized Gupta’s reporting as misleading and incomplete at other times as well. This isn’t an issue in and of itself, but what is troubling is the failure on the part of Gupta or CNN to disclose his relationships with potential beneficiaries of his reporting.
I’m not as concerned about Gupta’s relationships with the same industry the administration will be working to reform (although I’m plenty worried about that) than I am about a possible repeat of the Brownie situation. As the leader of the US Public Health Service, Gupta would play an important role in the nation’s response to a SARS outbreak, biological weapon attack, radioactive event, epidemic or major natural disaster. From my reading of the doctor’s resume, his qualifications to address such an event appear slim.

As the options on the table become somewhat more clear, it appears all but inevitable that any national health reform program will include a public insurance option, sometimes labled as “Medicare for All”. The plans offered by Pres. Elect Obama plan, Sen Baucus, Sen Kennedy and others all include a governmental option. The Medicare for All is also consistent with the views of key House and Senate leaders, including Pete Stark (D CA).
The wailing and whining has already started. Private insurers are aghast at the prospect of competing for members with a government health program. You know, the much-derided Medicare program, the one that private insurers volunteered to fix with their Medicare Advantage programs (yep, the Medicare that was so lousy that private insurers only needed a small subsidy to compete effectively with, and perhaps a little creative marketing as well).
What exactly do they fear? Specifically, three things.
1. A governmental program will get so large that it will crush private insurers.
2. Government plans have unfair advantages over private plans: they don’t need to maintain reserves, earn profits to attract capital, or pay premium taxes.
3. Governments, through their use of monopsony power, can aribitrarily set prices, reimbursement policy, and make coverage determinations
Fear one – if private industry is successful, governmental programs won’t compete effectively, and private options will come to dominate the market at the expense of the public offering. So unless private industry fails, issue one is moot.
Fear two -fair point. Then again, many healthplans are not for profit (e.g. Blues plans and Kaiser Permanente) and therefore don’t need to earn profits either. Premium taxes are rather minimal in most states, amounting to a couple of points. The reserve issue is a significant one, especially as the rating agencies are starting to toughen up their reserve adequacy standards.
Fear three – there has been so much market consolidation among health plans that most markets have two or at most three major health plans ‘competing’ for share. These plans, such as Independence and Aetna in Philly; the Blues in Boston, Blue Cross, Wellpoint and Kaiser in parts of California; the Blues and United Health in several Florida cities; Empire, GHI, and UHC/Oxford in NYC, all have significant market power over providers and employers today, power that would not likely diminish if a Medicare option came on the scene. These health plans set reimbursement policy and rates, have their own P&T committees and appeals processes, and enforce their market power whenever and wherever they can. They already have monopsony power themselves.
I have been and continue to be a supporter of private insurers and health plans. After working in this industry for twenty-five years, I know there are very smart, capable, and talented people in the business. We have our share of knuckleheads, but that’s no different from any other business. The problem we have is most of those smart folks are not working on care management and outcomes assessment, they are in underwriting. Once the industry stops trying to compete on the basis of risk selection and focuses its brains on care management, I’m confident some of the nation’s largest insurers will find themselves able to compete with Medicare quite comfortably.

A positive brand image. That’s what every successful company seeks, and what unsuccessful companies don’t have – and which the Democratic party, despite its recent successes, is sorely lacking. Yes, the 2008 elections were a rousing success for the Democrats, but that success was driven more by the astonishing incompetence and jaw-dropping corruption of the opposition than by a noticeably smarter/better/more accomplished Democratic party.
The Democrats now have eighteen months to become a real political party again, something that is not merely an alternative to the GOP. Sure, there will be new regulatory bodies and enhanced oversight, better personnel selection procedures and more open government, fewer signing statements and more regulations that will affect workers and protect savings and the environment, but how do you put that on a bumper sticker? How does that translate to a message for the masses?
For the past sixteen years, Democrats have attempted to claim the mantle of the advocate for the working man, all the while passing NAFTA, cutting taxes for the wealthy and big business while enabling offshoring. rolling over and being rolled by their more aggressive political opponents. No wonder blue collar voters ditched the Dems; instead of opposing the Republicans’ business-friendly agenda, to a large extent Dems went right along, even if it cost their old core constituency big-time. For the newly-ascendant Democratic Party, significant health reform may be the key to re-establishing the Party’s brand among middle-class and blue-collar voters. Guaranteeing every American access to affordable health care would, in one stroke, regain the party’s tattered reputation as the supporter of the working man, the party of the middle class.
As Thomas Frank notes, “Any kind of national medical program would be so powerfully attractive to working-class voters that it would shift the tectonic plates of the nation’s politics.” Mr Frank, a deep student of the phenomena wherein so many Americans vote against their economic betterment, is referring to the Republicans’ power within middle America, the so-called Red States, where the middle and lower socio-economic class voter consistently supports the GOP’s candidates, driven primarily by social issues. The candidates elected by these voters push positions that end up benefiting big business while reducing wages and the power of labor. Yet the Republican candidates are able to win and stay in office largely on the strength of positions on abortion, guns, school prayer and choice, homosexual rights; issues that appear to be far more important to many Red State voters than economic concerns.
Not only have most Democratic candidates consistently been on the wrong side of many of these social issues (from the perspective of most Red State voters). The Dems have failed to make political hay out of issues as compelling and obvious as declining wages, job losses, and economic blackmail on the part of big business (tax breaks or we’re out of here). These bread-and-butter issues, the ones that land on the kitchen tables of working people, are precisely where the Democrats used to earn their keep.
Right now, those workers with health care know their health care is subject to the whim of their employer, and while they may feel ‘safe’, they know more than a couple people who have lost their insurance and suffered mightily as a result. Bob Laszewski notes that most workers with coverage are pretty satisfied with their health insurance. But my sense is there is something deeper here too; as middle class, white blue and pink collar workers watch the economy slide out from beneath their feet like sand on a beach, there is a just-under-the-surface-anxiety, a nibbling fear that their coverage may not be as rock-solid as they thought.
The Democratic Party would put itself in a very strong position entering the mid-term elections in 2010 if it passes national health reform (or something close enough for political advertising). By actually delivering something of obvious and significant value to the vast majority of voters – for those with coverage today a sense of security, of protection, of solidity; for those without affordable, comprehensive insurance; the party would plant its flag deep in the heart of Red State Republican country.
Passing some form of national health reform, one that includes a guarantee of access to care and protection from financial devastation would blow this gloomy cloud right off the shoulder of the middle class. It will take a masterful job of cat-herding, as the Democrats in Congress are a remarkably diverse lot. This diversity, from southern Blue Dog to Bay Area liberal, is both the strength and weakness of the Dems. While it enables the party to compete and win in diverse areas, now that the party has solid majorities in both houses of Congress, that diversity is a problem. The Democrats task is to find a major “win” to coalesce around, a goal that will clearly and loudly resonate among voters wondering who exactly these Democrats are and what they stand for.
A compelling case can be made that universal health care addresses the issues of concern to each member in the Democratic caucus: a universal plan
– is good for business, as it alleviates employers’ burden of health care selection (possibly) and financing (possibly at least in part) while improving the health of the workforce.
– is good for providers as it eliminates the risk of uncompensated care, allowing providers to concentrate on treatment while (potentially) addressing the problem of under-compensated care
– is good for patients because they will have access to good care regardless of their employment or marital situation
– is good for society as it will lead to an overall improvement in the nation’s health status.
A universal health plan also addresses the single biggest issue in the Party today – solid evidence that it can actually deliver on its promise to fight for the middle class.
Most importantly, passing universal health care would give the Democratic Party a hugely valuable head start on the 2010 election battle, one that may actually give Red State voters reason to consider voting “D”.
No doubt, Republicans will dust off the “socialized medicine” meme and play those old “Harry and Louise” recordings yet again. But I’m not so sure those messages will scare voters, at least not enough to overcome the pervasive anxiety felt by many families throughout middle America. And if the Republicans are able to block health reform, my sense is voters will see them as on the wrong side of the issue. Recall last summer’s battle over raising physician reimbursement; GOP Senators were crucified by voters after the Senators blocked a physician payment increase, a move that may well have helped their Democratic opponents in the fall.
What does this mean for you?
I don’t think Congress is ready for national health reform in 2009. There’s just too much to do and not enough time to do it all.
But politics trumps all.
Now that adults appear to be once again heading up the Democratic Party, they may well seize this political opportunity and press for reform in 2010. Win or lose, it’s a winning move.

The release of a long-awaited study by the Congressional Budget Office today “Key Issues in Analyzing Major Health Insurance Proposals” has stirred up a lot of comment and observation, most of it noting that the current proposals aren’t going to solve the coverage/cost problem.
There’s a lot in the study that’s very good, but much of the discussion has missed a central point. There is enough money in the system today to pay for excellent care for every American – probably more than enough. While we can save $110 billion over ten years by negotiating a 15% rebate on drugs covered by Medicare Part D and another $34 billion from efficiencies resulting from improved health care IT, these totals are chump change next to the amount of money we waste by delivering too much care to people who don’t need it.
As an excellent companion piece, I give you Dartmouth’s latest work, Expanding Coverage without Increasing Health Care Spending. As the Hanoverians put it:
“Most analyses of coverage reform predict that we will spend more as a nation on health care once the uninsured gain coverage and begin consuming more care,” write lead authors John E. Wennberg and Shannon Brownlee. “But we predict that covering everyone will have a much smaller impact on the trend in health care costs, provided that capacity is not increased.”… Not increasing capacity while improving quality and increasing coverage, say the authors, can be achieved in a number of ways, including reducing oversupply of health care services in high spending regions of the country. As documented repeatedly over 20 years of research by the Dartmouth Atlas Project, more spending on health care, more procedures and more hospitalizations, do not result in better health outcomes for patients.” [emphasis added]
The CBO report suffers from a troubling omission – an explicit acknowledgment of the impact of over-utilization on US health care costs. While the authors provide an excellent analysis of a hundred-plus health reform initiatives, they do not address the elephant in the room – too many doctors prescribing too many treatments that have no basis in science, no demonstrated efficacy, deliver no benefit to the patient.
That’s where the money is. Yet the CBO study claims that savings from comparative effectiveness research would be tiny – and most of the benefit would take place more than ten years in the future. Where the study misses the mark is in assuming that the health care funding, regulatory, and delivery systems remain static. Without fundamental change, their numbers are likely correct, and may well be optimistic. That, I would suggest, is the point.
There must be fundamental change – as described by Wennberg and Brownlee – in the health care system. Health care has to move from a cottage industry, overseen by a guild of white-coated demigods, to one blending diagnosticians with care delivery systems. Vertically integrated health systems could, and should, be able to survive and flourish in this new world, while insurers and big health plans will only make it if they buy up delivery systems and utilize their analytical capabilities to drive better outcomes on a population basis.
What does this mean for you?
Buyers – be they employers, governments, or individuals – must start evaluating health care offerings not on the basis of premium cost and size of the network directory but using the metric of functionality – how effectively does the health plan maintain and improve the health of its members.

I’ve been rather negative about the chances we’ll see major health care reform next year. That doesn’t mean the new Congress and President won’t address significant issues – expect major efforts to change physician reimbursement, enable HHS Sec-to-be Daschle to negotiate with big pharma, slash the Medicare Advantage subsidy, invest in Health IT and expand SCHIP coverage. These are really really big issues, and taking action on more than a couple would, in any other year, be seen as major change.
I’ll bet most of these initiatives will pass, making 2009 the most significant year for health legislation since 1964.
But the voices calling for a huge overhaul of the American health care delivery and financing system won’t be happy unless its a top to bottom overhaul of the entire delivery and reimbursement system. Methinks these well-meaning folks will find themselves unsatisfied, the victim of inflated expectations.
That would be unfortunate, to say the least. We’re moving in the right direction, there is significant momentum, and focus is on the right areas. What we don’t need is a pell-mell rush to pass universal coverage and worry about costs later.
There’s an old adage – if you don’t have time to do it right in the first place, what makes you think you’ll have time to fix it later?
If we screw it up on the front end, we’ll have zero political capital to clean up our mess.

The number of Americans without health insurance will exceed 50 million by next summer.
Friday’s employment news was just what the country needed to hear before a pre-holiday shopping weekend – a loss of over a half-million jobs in the prior month, driving the unemployment rate up to 6.7%.
That’s bad.
It’s actually worse than that. Due to the vagaries of Federal statistical collection and reporting, the unemployment rate appears to undercount the unemployed. Here’s how the NYTimes’ David Leonhardt and Catherine Rampell put it:
The number of people out of the labor force — meaning that they were neither working nor looking for work and that the government did not consider them unemployed [emphasis added] — jumped by 637,000 last month, the Labor Department said. The number of part-time workers who said they wanted full-time work — all counted as fully employed — rose by an additional 621,000.”
The number of people working part time also looks to be growing, as the average work week has shrunk to just over 33 hours.
One of the many unpleasant implications of losing a job is losing health insurance. Sure, there’s COBRA, wherein a newly-unemployed can keep insurance for a year and a half to three years if they pay the monthly premium plus an admin fee. To do that, a family will pay about $1100 a month, a huge chunk out of whatever severance and unemployment compensation the breadwinner(s) are due. For those that still have a job, they still have to get enough hours to qualify for health insurance; the declining hours worked per week stats indicate fewer and fewer Americans will meet that test, and therefore will lose their coverage.
Historically, a one percent rise in the unemployment rate adds about 1.1 million individuals to Medicaid and SCHIP rolls, and another million to the ranks of the uninsured.
Since December, the US has lost 1.9 million jobs and the jobless rate has jumped from 5 percent to 6.7 percent, increasing the rolls of the uninsured by 1.7 million. (Not all of those workers had insurance through their employers, and some will end up qualifying for Medicaid and their dependents may qualify for S-CHIP coverage in some states). Adding those unfortunates to the 45.7 million + without coverage in 2007 gives us a total of about 47.4 million.
My sense is this is the best case scenario. These days there are a lot more Americans working part time, and with more employers dropping coverage, those folks who still work are stuck – they can’t get insurance through the job and make too much to qualify for Medicaid or SCHIP in most states. Anecdotal information from conversations with insurance brokers in Florida, Colorado, and Texas is scary – most are seeing a significant drop in the number of existing customers renewing their plans for 2009, and those that are signing up are cutting benefits and raising deductibles and employee contributions.
With the unemployment rate projected to hit 8 percent by Q3 2009, we can expect the number of Americans without health insurance to hit 50 million by summer.
Apologies for starting out your week on a (very) sour note.