I am asking these questions as a supporter of Single Payer. I have followed the Single Payer movement ever since the articles by Drs. Woolhandler and Himmelstein in 1989, plus the steadfast writing of Dr. Don McCanne, Dr. John Geyman, Dr. Ida Hellander and others in PNHP .
However, I am a diehard “numbers guy.” I am not embarrassed to play the “Pay-for-it game.”
At the end of 20 questions, I also propose regulations that cost relatively little in new taxes, yet will still offer valuable benefits to millions. Many of Medicare’s patient protections can be enacted right now, evenas we discuss the mechanics of single payer.
Single Payer Question Number 1: Approximately how many persons will be covered?
o everyone in the country................. 330 million
o everyone not on Medicare............. 270 million (estimated)
o everyone not on Medicare, Medicaid, or the VA.......... 190 million (estimated)
o everyone down to age 55 in year one, (41 million persons), then down to age 45 in year two,(37 million more persons), etc.
Single Payer Question Number 2: What is the estimated cost per person? Based on • the proposed fee schedule, plus… • how much similar insurance plans cost today, and…. • assuming some level of increased utilization. Examples: $4,000, $5,000, $6,000, $7.000 per person (Medicare for seniors costs about $12,000 a year per person. Single Payer will hopefully cost lessdue to younger ages, but how much less?)
Question Number 3. Therefore --what is the estimated first-year cost of the program? Example: 190 million persons times $7,000 per person = $1.3 trillion Question Number 4. Where will the money come from? Examples for the $1.3 trillion scenario noted above: o Assuming $8 trillion in total wages, a flat 16% payroll tax will raise about $1.28 trillion. (It is worth noting that the payroll tax on health care alone in France, Germany, and Sweden isclose to 16%.) o OR: a 10% payroll tax and an income tax of 5% on all earnings over $20,000 could bring inclose to $1 trillion. o OR: a 4% payroll tax, plus higher taxes on incomes over $250,000, plus a monthlypremium of $140 per adult could be tested. It is best to use reliable revenue, not ‘aspirational revenue.’ (‘Aspirational’ means brand new taxes, which will be strongly resisted and may bring in far lessrevenue than anticipated.) • Higher FICA taxes are reliable revenue; But a wealth tax, or a rerpatriated profits tax, or a financial transactions tax, are aspirationalrevenue. • Hgher rates in each tax bracket is relatively reliable revenue; But a national VAT or sales tax is aspirational revenue. The lobbying for exemptions will beintense, and the IRS would need a whole new police force to enforce collections. We cannot count on higher income tax receipts from workers getting raises, because theiremployers are “off the hook” regarding health insurance – this is aspirational revenue. Ifemployers face a stiff payroll tax for single payer, there may be very few raises. -2-
Consider this scenario…….A firm with 20 employees has a total payroll of $1 million. Itcurrently buys health insurance for 14 of the employees, at a total cost of $100,000 a year. Under single payer, they might owe an 8% tax on the entire payroll, or $80,000. Where is the money for taxable raises of any size? If the new payroll tax is 10%, not 8%,there is no money for raises at all. “Adminstrative savings” are important as well, but they are not really revenue. The promise of savingsmight help providers accept a lower fee schedule, but that may be a stretch. Most providers spend 5% to10% of revenue on getting paid -- but for some doctors and hospitals, the Medicare fee schedule will bea more drastic reduction. A recent study in Minnesota showed that Medicare fees are 50% less thanwhat high-end employer plans pay right now. For example, Medicare pays $2,200 for a C-Section birth.The average hospital gets $4,604 from commercial insurance, and the more expensive hospitals get$5,602. The above questions are “core”, and must be answered first. Attention must also be paid to the following Question Number 5. Can a corporation keep its own employee health plan? ERISA would appear to allow this: the law may have to be tested in court. A single payer plan will not survive if large employers can avoid it and not be subject to any payroll tax. Question Number 6. What if a doctor or hospital will not accept the single payer fee schedule? Can they then “balance bill” something extra, as Medicare currently allows (with restrictions)? Can they practice totally outside the federal system? (It is hard to imagine Congress not allowing outside practice. Congress rarely goes against bigcampaign contributors like doctors and hospitals.) If a patient uses only outside providers, will they still have to pay any new income taxes? Can a person buy health insurance that covers private-market outliers? HR 676 would ban thispractice, though England allows it.
Question Number 7. What if drug makers refuse to negotiate prices? Will Medicare simply refuse to buy some of the most expensive drugs? At least one hundred specialty drugs now cost over $300,000 a year. According to the AMA Journal ofEthics, the 71 most expensive cancer drugs approved between 2002 and 2014 added an average ofonly 2.5 months to the average patient’s chance of survival. In some countries such drugs might notbe purchased at all, or a much lower price would be demanded. Unfortunately, if even one life depends on access to an expensive drug, the mass media and the‘pro-life’ lobby will make it very hard for Medicare to say “no”. The first time that Medicare deniescoverage for any drug or procedure, the cries of ‘rationing’ and ‘death panels’ will go up in force. Medicare now approves all drugs, regardless of price, unlike the VA or Medicaid. This has tochange, as David Anderson of Duke explains….”If we want lower drug prices it means empowering large scale buyers to credibly say “No” and then hold to that “No.” It means forgoing some drugs for some conditions and some states. Otherwise having Medicare negotiate prices for drugs that everyone knows thatthey have to buy is just a time consuming interpretative dance routine.” Question Number 8. What happens to health plans such as Kaiser’s? Most observers considerKaiser to be ‘high-performing insurance’. It is virtually a single payer plan in itself. Question Number 9. Will hospitals be put onto global budgets, as described in HR 676? If this could be accompiished, it might be a real blessing. With no more individual hospital bills, health carebankruptcies would be reduced and insurance premiums could plummet. When hospitals rely on user fees, they incur one set of costs to create individual bills, and then incuranother set of costs to collect from both patients and insurers. It should be much cheaper for them tohave an annual global budget, like the fire department, with no need for individual bills at all. However--who would set over 5,000 individual hospital budgets? Who would decide which hospitals havesalaries that are too high, or too much expensive equipment? Would the government just give a huge lumpsum to each region? Imagine a CMS staff person telling Mayo Clinic hospitals what to spend. Would Congress ever close arural hospital, and put its employees out of work? Plus, if anyone later died because they had to drive anextra 50 miles to an ER, the ‘rationing’ cries would arise again. Full global budgeting seems like a bridge too far at this time. Much, much smaller changes in Medicarecoding have been blocked by providers in recent years. Unfortunately, there are over 3,500 health carelobbyists in Washington and only 535 legislators.
Question Number 10. Will abortion be covered? The Colorado single payer plan was defeated in part because it would not cover abortion. In somestates, a plan would be defeated if it did cover abortion. This issue alone could delay single payer foryears. Question Number 11. Will illegal immigrants be covered? HR 676 appears to promise this. A plan might be defeated in California if it did not cover illegals. In Arizona, though, it might be rejected ifit did cover illegals. According to the Urban Institute, covering illegals nationwide would cost over $77billion a year. Question Number 12 Will a financial reserve be established? If so how much, and how will it be funded? If there is no reserve, what happens if claims exceed premiums? Even in good years, it is common to seehealth costs rising 3 to 5 per cent. . It is not that hard to promise an attractive health plan for the first year. The real test is what happens whenclaims go up. If commercial insurers lose money, they respond by raising rates, increasing deductibles, or just leaving themarket. This is why private insurers are so unpopular. Medicare has rarely raised taxes for Part B, and quietly relies on ‘general revenue’ to pay for most of PartB. This has kept enrollee premiums relatively low, and it is why Medicare is so popular. A Single Payer plan may be too large to hide the deficits. It will be hard enogh to get one tax increase –we cannot expect to get a a new tax hike every year. If health care claims go up, the options are all ugly. Cutting benefits, raising co-pays and deductibles,and denying large claims would all be hugely unpopular. Reducing payments to doctors has neverworked, even in the current Medicare program. Volumes go up to offset lower fees, if the fees are evencut at all.
Question Number 13. If there is a new income tax, will it apply to senior citizens now onMedicare? Will it apply to veterans, who now use TriCare or the VA Health Service? These groups may resent a new income tax, since they already have ‘universal coverage’ and in general feel that they have ‘paid their dues.’ The furor around the 1989 Medicare Catastrophic Tax (which had an$800 tax on a minority of seniors) is an argument for caution. For most Americans, a new 4 per cent income tax might indeed be cheaper than the premiums anddeductibles they are paying right now. But ‘most Americans’ does not mean all Americans. Millions of seniors, veterans, highly paidexecutives, and public employees still have low-deductible insurance plans and pay very, very little inpremiums. New income taxes could make them worse off. Question Number 14. Will the payroll tax apply to all employees, full and part-time? This would be bitterly resisted by cheap-labor businesses, such as restaurants, retail, and agriculture.Remember that about 2.7 million businesses do not provide health insurance at all today. A large payrolltax undermines their whole business model. Low wage firms were a key player in the defeat of the Clinton health plan in the 1990’s. To put it bluntly,the employers who have never paid a nickel for health insurance are not going to placidly accept apayroll tax. Even high-wage firms may have complaints in some cases. Picture a firm that buys generous insurance forits few full-timers, but its many part timers get no benefits at all. A payroll tax will require contributions for allemployees, and this will not be popular. Of course it is possible to exempt low wage firms from the payroll tax. However, exemptions mean lessrevenue, which has to be made up somewhere Forgiving any tax on the first $20,000 is wages sounds wise, but it usually means 12% or a 16% tax up theincome ladder.
Question No. 15. Is there any role for state governments in Single Payer? Will states continue to fund Medicaid and SCHIP, if these programs are “rolled” into single payer? If these two programs go away, I doubt that Washington can compel the states to keep sending in $200billion in tax money. The broad role given to state governments has been a real problem for the ACA. (and for Medicaid as well.) It is no accident that Medicare runs smoother, because it has no state discretionwhatsoever. If Single Payer is going to be subject to state-level subversion, it may never get off the ground. Question Number 16. Will long term care be covered? If every senior who is now cared for by their family can suddenly get long-term care, and at no cost, this will be a multi-billion dollar funding need. Full coverage of long term care might cost an extra $212billion a year, according to the Urban Institute. Question Number 17. Who will process and audit the flood of new claims? This will be a stupendous contracting project. The claims process requires constant oversight ofproviders, the challenge of paying promptly yet checking for fraud, and dealing with appeals. (Onehopes that the claims-paying firms will stop offshoring jobs to cheap-labor countries, as they donow.) Question Number 18. Will anything be done about upcoding? The Medicare schedule can already be stretched to get higher reimbursement for ‘intensity’. Coding for‘secondary conditions’ is also utilized to raise the cost of clams. For example: According to the journal Recycle Intelligence, “Hospitals are coding more and moreEmergency Room visits as high severity. Nationally, that’s a 38 percent increase in high severity ER use and adecrease of 35 percent in low severity ER use. Total claims expense is up almost 99% over ten years on a static voluome of cases.” This is what really creates “the growing cost of health care.” It is not a medical phenomenon at all. It isnot due to patients getting older or sicker. It is just a case of extracting more money from payers. The‘growing cost of care’ is nothing more than taking advantage of easily- manipulated codes. In the words ofhealth care futurist Joe Flower, ‘Money is made in healthcare by doing new things that get a higher-paying code.”
Question Number 19. Will all procedures be approved? Will debatable procedures require some type of prior medical review (i.e. surgery for lower back pain,proton beam therapy for prostate cancer, etc.)? Who would do such reviews, if insurance companies are not involved? One cannot imagine a 15-member national board reviewing all such issues. If any and all surgeries, plus any and all diagnositictests, are approved without challenge, Medicare spending will never go down. .Question Number 20. Under single payer. will anything be done to relieve medical debt? This includes; • Debts of patients; • construction debts of hospitals; • educational debts of doctors. If single payer seems too problematic right now, here are several incrementalreforms to consider. These regulations cost relatively little in new taxes, yet stillprovide millions with greater protection. They will not make health care free atthe point of service, but will greatly reduce the financial pain to patients. REFORM NUMBER ONE -- GET RID OF SURPRISE BILLING If a patient uses a network hospital, all charges must be at network levels. No exceptions. If a patient must use a non-network hospital or doctor in an emergency, then the maximum charge will be ‘Medicare plus 25%..’ Uninsured patients can be charged no more than the Medicare fee schedule --chargemaster billing would becompletely illegal. Every other advanced nation has binding fee schedules for hospitals. (In fact, over half the patients in Americanhospitals are protected by binding fee schedules from Medicare or Medicaid.) We need to get patients under age65 on fixed rates also, instead of ‘grab what you can. Cost of this reform to taxpayers: $0 Cost to providers: Lower incomes for independent radiologists, anesthesiologists, pediatric surgeons, andemergency room physician
REFORM NUMBER TWO: FREE ARBITRATION We need to establish Small Claims Courts just for health care. These will be staffed by physicians and judges. All court costs will be paid by the government, and the patient will not need an attorney. The courts will havethe authority to reduce or even cancel medical bills. The Courts are for persons who are uninsured, or partially insured. In other words, anyone who is sent a bill over$500 that they feel is price-gouging. Sample Arbitration Cases • Extra billing for ‘facility fees’ (i.e higher charges for outpatient care done in hospitals) • Outlandish charges for simple diagnostic tests (i.e. $5000 for an echocardiogram) • $50,000 in charges for an air ambulance trip • $35,000 for an artificial knee that costs about $700 to produce • $20,000 for a pacemaker that costs about $6,000 in the US, and $1,000 in India • $4,000 for a drug infusion that costs $500 in Britain, France, or Germany • $12,000 for an “operating room” to conduct a 20 minute surgery • $15,000 for a ‘Trauma Activation Team” to help with an ER admission • $20,000 for an anti-venom inoculation that costs the hospital about $200. • Any bills received by patients, after an insurance claim has been denied for questionable causes. • Extra charges because the provider used a higher “severity” code when coding the claim. (You can still go to Health Court even if you are insured. For example, if your high-deductible insurer approved$4000 for a simple echocardiogram and left you with a bill for $2000, you still have a grievance. Remember, a50% discount on a $400 hammer still leaves you with a $200 hammer.) In general, the courts will look at what hospitals accept from all iosurers. This will be the “fair price” in most cases. All bill collections are suspended while a patient is waiting for a hearing in these health courts. We should not care if thousands of medical bills wind up sidetracked in health courts. Providers will get themessage, and some will reduce their charges to a level that avoids court challenges. These health court cases will be publicized widely, we hope. The entire goal is that greedy providers should losepatients. In fact they should lose money due to fines and attorney costs if they try and defend their currentbilling excesses. In a real competitive market, they would lose money immedidately for gross overcharges. Butpeople may only use a hospital once, so predatory billing goes unpunished. All economic systems ultimately run on fear and greed. Health care providers now need a good dose of fear to bring them under control. ‘Charging what the market will bear’ is no longer acceptable. Cost to taxpayers: about $500 million to run these courts in every county in America. Cost to providers: For those providers who depend on secrecy, gag orders, facility fees and price gouging, thecost will be high.
REFORM NUMBER THREE- PROTECTION FROM BIG PHARMA All Americans must be protected from sky high prices on new drugs, plus the unconscionable price increases onolder drugs. There is no effective “market discipline” for drugs without substitutes. For these drugs, consumers cannotsimply refuse to buy the product until the price comes down. In the non-health economy, consumer choices prevent most price-gouging. If Samsung tried to triple the priceon a 20 year-old cell phone, they would be laughed out of town. But this kind of free-market restraint does not exist for cancer, hepatitis, etc., and probably never will. The defenseof defenseless patients can be carried out by: • Allowing full, immediate importing of any drug • Removing the FDA’s jurisdiction over generic drugs—i.e. if a drug is approved in other countries, it will beconsidered to be approved here. • Patents will be cancelled for price gouging. • Ceiling or reference prices can be set for drugs with no substitutes (as in Germany) • In extreme cases, the government should go into production itself and charge low prices. We also need a rollback of prices which have seen unjustified annual increases . For example, the price ofHumalog (a 100-year old drug for diabetes) has gone from $21 a vial in 1996 to $275 a vial in 2017. Governmentshould either declare a price of about $30, or set up a federal manufacturing plant and just produce the drug for$30 a vial. Ultimately we need a Pharmacy Pricing Review Board, similar to the Heatlh Courts described in Right #2 above. Cost to taxpayers: $0 Cost to providers: Billions of equity in drug company stocks will disappear. Stockholders should bail out early.
REFORM NUMBER FOUR – RELIEVE MEDICAL DEBT
1. Retirement accounts and home equity must be exempt from medical debt, by law.
2. Debt payments must be limited to 8% of income. If the debt is not paid off after five years of regularpayments, Medicare will step in and pay off what remains, per the Medicsre fee schedule.
3. Fund EMTALA – it is about time. after 30+ years. If we expect hospitals to care for the indigent, we haveto pay them. We should do so with explicit taxes, on-budget and paid by the nation as a whole, not byother patients through “facility fees.”
Cost to Taxpayer: Up t0 $40 billion a year for items #2 and #3. This is about one half of one per cent ofpayroll.
Financial protection from price-gouging should be a right of citizenship ---not something you have to buy froman insurance company. If the insurers can negotiate a low rate, everybody gets it.
We can enforce the above financial rights tomorrow, without having to fight over new taxes. Our goal is, frankly,to execute a squeeze play on providers. We want to
a. reduce when they can bill;
b. reduce what they can bill; and
c. put more citizens onto price-controlled public insurance programs