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Propaganda And Prejudice Distort The Health Reform Debate

April 22nd, 2009

Editor’s Note: The author of this post, Merton Bernstein, would like to thank Dr. Christina Daw for her research assistance.

Science does not permit ideology to foreclose inquiry; it requires facing facts and following where they and logic lead. Hence many cheered when President Barack Obama announced that science is back, that predisposition will no longer be permitted to trump reality. Everyone knew he was talking about stem cell research.

Who could have guessed that the Obama administration and key congressional players would exclude single-payer/Medicare-for-all programs from consideration even though that means ignoring the cost savings of hundreds of billions of dollars in private plans’ nonbenefit costs? Further, administration health experts advertise their focus on avoiding incentives for unnecessary treatment, but pay no mind to the expensive distortions that follow from physicians’ ownership interests in high-cost equipment and services. Odd that the scientific method does not apply to medical care where science should govern.

Snubbing And Chiding Single-Payer Advocates

Until the day before the Health Care Summit, no advocate of single-payer/Medicare-for-all had been invited to rub shoulders at the White House conference with the hordes of insurance and drug manufacturer officials and lobbyists, right-wing think-tank pundits, major employers and their organizations, and hospital executives — all deeply implicated in the design, execution, and defense of the current dysfunctional medical care insurance nonsystem — the supposed object of “reform.” An 11th hour invitation came only after a threatened demonstration by doctors, nurses, and medical students who back a single-payer proposal sponsored by 94 members of the U.S. House of Representatives. Even the legendarily unbiased Congressional Budget Office had shortly before issued two large studies of medical care, totaling about 400 pages, containing only a few cursory paragraphs about single payer/Medicare-for-all.

The president opened and closed the one-day summit with his usual splendidly composed summary of hurdles to providing medical care to all and curbing costs. He had sharp words only for “bleeding-heart liberals,” chiding them for inattention to costs although they repeatedly stress the huge savings single-payer/Medicare-for-all could deliver. It is his experts who persistently ignore those cost savings while pursuing possibly desirable but unproven methods of reducing costs. So, for example, claims are made for vast savings by health information technology (IT), such as computerization of patient records, which might reduce medical errors if a uniform nationwide system becomes operational — years hence. Similarly, it is unproven that paying health care providers based on outcomes would be feasible; with hundreds of millions of billings, assessing the efficacy of each treatment seems impossible — and impossibly costly.

Savings From Medicare-For-All

Medicare-for-all would save hundreds of billions every year. Private insurers expend enormous sums for insurer commissions, advertising, Wall-Street-scale executive compensation, and profits. In contrast, Medicare spends little or nothing on these unnecessary, unproductive activities. Health care providers and private plans struggle with thousands of different billing schedules. As the New York Times reported: “The average provider — doctors or hospitals — has between 5 and 100 reimbursement rates for the same procedure. . . . A hospital chain may have 150 rates for the same procedure.”

In contrast, Medicare districts employ only one. That helps explain why Medicare’s nonbenefit expenditures require only 4 percent of benefit outlays while private plans expend far more — on the order of 20% for publicly traded companies and as much as 31% of premium for some. We are talking real money. A recent McKinsey Quarterly article found that medical care insurer billing consumes more than $300 billion a year, costing 15 percent or more of medical outlays. Medicare-for-all would make do on a sliver of that. (Harvard Medical School economist Rashi Fein tells the story of a former colleague working at a Montreal hospital, where three people processed bills there, primarily for traveling Americans. Later he worked at Chicago’s Michael Reese Hospital, where the billing facility, jammed with clerks at computers, stretched a football field’s length in two directions.)

Understand that Medicare uses private insurers to administer its program and pays private providers to deliver care; patients select their providers, a choice many private plans limit. Medicare confines its payments to a fee schedule it promulgates after receiving the advice of the Medical Payment Advisory Commission (MedPAC), which comprises a variety of practitioners and others. That price constraint reduces costs. But the big savings come from simplified billing/payment procedures.

In addition, Medicare delivers its benefits at lower cost than means-tested programs like Medicaid and the Children’s Health Insurance Program (CHIP). Absorbing all such programs (and there are many) into Medicare would save tens of billions more and speed up providing care.

Opponents dismiss Medicare-for-all as a “one-size-fits-all” formula. Well, who among us knows how to estimate when we or a family member will need medical care? Who among us can gauge when a heart attack may strike or a drunken driver will cross the median? In this world full of uncertainty, we all share the same need for assured medical care — that’s the size Medicare-for-all fits.

The Effects Of Conflicts Of Interest

Studies repeatedly show that medical care providers with ownership interests in labs and high-cost devices like computed tomography (CT) scan and magnetic resonance imaging (MRI) machines prescribe those services far more than those who do not own any. Medical societies should ban such conflicts of interest; if they don’t, Medicare, which attempts to curb them, should forbid them completely. That would save billions and confine providers to their proper role: treatment based on medical grounds uninfluenced by profit.

So why do the Obama medical care gurus, Senator Baucus and Senator Grassley, and the Congressional Budget Office exclude Medicare-for-all, although it would save far more than any rival plan? In large measure, that results from the propaganda war on single-payer. President Obama says that it would be impractical to try to substitute Medicare for “legacy” private plans because so many are “accustomed to” them. But “accustomed to” simply does not describe plans that are melting down, disappearing, and becoming constantly more unaffordable.

Further, Medicare does not charge higher rates for pre-existing conditions or for elderly and female patients as private plans do, thereby encouraging employers to discriminate in employment. Moreover, with everyone covered for all needed medical care, the greater part of malpractice compensation — medical repair — would be met without the delay and expenses of medical malpractice disputes and litigation.

Yet the Obama, Baucus, Grassley, CBO, and other playlists exclude consideration of Medicare-for-all. With rising discomfort with the price tag of recovery programs, those desiring comprehensive health care cannot afford to disregard a program with such enormous savings. If Medicare-for-all gets “on the table” before the Senate Finance and House Ways and Means committees, the CBO must report its vast savings and its greater efficiency and effectiveness compared with more expensive alternatives. Only by censorship — only by treating Medicare-for-all as nonexistent — can lesser alternatives be discussed with a straight face.

And censorship is not compatible with science.

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10 Responses to “Propaganda And Prejudice Distort The Health Reform Debate”

  1. Claudia Chaufan Says:

    Dear Jack,

    With all due respect, it is good to be skeptical, but that does not mean being blind to the evidence — rather the opposite.

    This journal has tons of articles examining international health care systems, all of which collectively finance health care, and show how this saves money so that those systems can guarantee at least a basic, often very generous, package of care, by applying two basic policy principles: 1) risk pooling 2) compulsory contributions adjusted to income.

    Risk pooling dramatically reduces administrative overhead, allows bulk purchases, and most importantly, allows cross-subsidizing. Without cross-subsidizing health care systems are doomed. Even private insurers know this principle well, although of course they apply it to their, not our, benefit (Alissa Fox, vice president of Blue Cross and Blue Shield Association, was quoted by the New York Times, on Thursday November 20, 2008, as saying that “Insurance works best when everybody is in the pool”… “you need healthy people in the insurance pool to help pay for sicker individuals”…).

    Compulsory contributions guarantee a continuing stream of money to finance the system, which is why in no other industrialized economy is a basic package of care left in the hands of voluntary or liability insurance.

    As to what is politically feasible, to my knowledge it has never been what politicians are willing to do, but rather the cost on them of not doing what their constituents want. When people wake up to the fiscal horror of the dubious plans that are being cooked these days in D.C., maybe they will massively demand from their representatives a rational way to finance health care.

    Then we will have time, and reason, to think about electronic medical records, prevention, and changing payment schemes, etc.

  2. lambert_strether Says:

    First, let me deal with Thomas Barber, who burbles “We don’t have the resources to pay for a Medicare for everyone reform..” Unfortunately, that ignores the evidence of the massive cost savings that Professor Bernstein documents (from McKinsey, among others). Rather than confront the evidence, Barber simply repeats his talking point.

    As far as censorship, that is not too strong a word. The White House went so far as to censor a single payer question and answer from its live blog of one of its health care reform town halls. See:

  3. acavale Says:

    I agree that “Medicare for all” should have been one of the options on the table. However, I am confident that Medicare as currently administered, will neither be comprehensive enough nor be fiscally responsible to achieve any of the goals, i.e. adequate coverage and reduce costs.

    Anyone who has had to deal with Medicare can vouch that it is as cumbersome and difficult to get reimbursed by Medicare as it is with private payers, if not worse. And the myth that Medicare does anything less expensively (other than CEO salaries) is just that, a myth. Just to prove a point, until this month, Medicare did not even have an online enrollment option, meaning every application had to be submitted by snail mail (all 20 pages of it). And they still don’t have any “go-to” representative in case there are questions or problems. So, unless Medicare can be quickly converted into a lean and efficient organization, I am afraid all the projections will undoubtedly fail.

    I am willing to accept any system that allows full cost transparency, reduces the cost/complexity of practicing medicine, does not set arbitrary reimbursement rates (price-fixing), lets consumers (patients) decide what type of service is most valuable to them and does not interfere with the physician-patient relationship/interaction – the fact is that Medicare does not fit any of these criteria. And neither do the private payers.

  4. Christopher Hughes Says:

    T Barber, define “underpays.” We physicians do pretty darn well, thank you. PCPs may be relatively underpaid, but don’t expect the free market to fix that any time soon. When many procedure-based specialists make $400K to $1M, largely on Medicare (or ball park thereof) reimbursements, it is hard to make that case. And the costs in physicians’ billing and administrative overhead (pleading for coverage, etc.) are more a function of the wondereful free market with dozens and hundreds of insurers all making us jump through hoops (different hoops) to get our patients proper care or get our fees.

    The employer based system is broken and should be thrown out. Who wants their insurance tied to their employment? What employer wants ( or is able) to pay our exhorbitant premiums?

    If you read the article, we do indeed have the resources to do this.

    And Mr. Shoemaker, “Point taken, but it is not so clear that the single-payer approach will save us anything on this front. I see a large and lumbering federal bureaucracy administrating payment under the single-payer scenario.”

    Yes, if you do not look past the end of your nose, or past the edge of our waters, you will not know that his can, and is being done. Are there trade-offs? Sure, there always will be. But it is silly to just pretend this doesn’t work elsewhere.

  5. Claudia Chaufan Says:

    Thank you so very much, Professor Bernstein. We need more people like you courageous enough to speak up.

    Mr. Shoemaker, your skepticism will disappear the moment you begin to study health care systems elsewhere. They have problems of course, as any human enterprise does, but they are light years from ours. And their problems are no good argument for not adopting what Prof. Bernstein, and thousands of others, recommend.

    Mr. Barber, I recommend the paper “Paying for National Health Insurance yet not getting it”, in this journal ( It will clarify your doubts about whether America can afford decent health care for all. I use it very productively with my students of comparative health care policy. They are barely out of high school yet get it right away.

    This is really not rocket science. And most of the debate is pure obfuscation, confusing “apples and oranges” (i.e. financing with delivery or methods of payment issues) and health policy with its politics. So follow the money as Professor Bernstein recommends and you will find out why this country, unlike every other civilized industrialized nation, rations health care according to ability to pay, thus allows its people to go bankrupt, get sick or die for lack of access to it.

  6. stewolfson Says:

    I suspect that Medicare for all was left out of the agenda because realpolitick was felt to leave it little chance of enactment. This was, of course, a tactical error. It left the “public option” as the most radical edge of the spectrum of plans proposed for inclusion. And everyone knows what happens to an exposed flank in any battle.
    In fact, Medicare for all is probably the most realistic way to bring economy and efficiency into our system. At the very least, having it on the table makes it clear that the public option, serving as a model for transparent pricing and quality control though coordinated care, is a midstream component of health care reform.

    Steven Wolfson, M.D.

  7. callen Says:

    In a Democracy all ideas should be examined and debated, and then, an informed educated public decides on issues based on their merits. The fact that Medicare for All has not been seriously discussed as a possible option by the Obama Administration and that the media has not informed the public other than saying it is socialism tells me that our Democracy is broken just like our health care system. How can anyone say that single payer is not a viable option when it hasn’t even been given a chance.

  8. R Lande Says:

    Well said Mr Bernstein! The savings really would be substantial so even if it as seen as politically non-viable because of the lobbying powere of insurers and others, it still should be on the table in order to get a clear sense of options.

    The previous poster comments that the Medicare rate are too low for physicians and hospital to subsist on. A reasonable point, however those physicians and hospital would be saving money because they need far less staff because of the simplicity of billing. Also the government would save enough money that it might be possible to raise those rates. I think a better criticism of Medicare-for-all is concern for the number of jobs affected and figure out a transition plan that deals with that.

  9. Jack Shoemaker Says:

    The author of the original article makes the point that under our current financing system, a large portion of our total health-care spending (“real money”) is spent on payement administration. Point taken, but it is not so clear that the single-payer approach will save us anything on this front. I see a large and lumbering federal bureaucracy administrating payment under the single-payer scenario. Is that really going to be more cost-efficient than a professionally-manged (even public) company? I’m skeptical.

    There are two unpleasant problems with health-care cost containment that the single-payer approach will not fix. The first is that providers are paid based on the amount of “stuff” they do, so it is natural to want to do as much as possible. The original author suggests taking care of this problem by prohibiting doctors from owing capital assets like imaging devices. That seems difficult to pull off. Normally markets take care of this over-use problem through the miracle of prices. That is, prices more so as to establish an equilibrium for the want of a product with the supply of that same product. Unfortunately there are no pricing signals in our health-care delivery markets. And, our form of employer-based “insurance” only makes matters worse.

    Rather than impose price controls and supply rationing through a single-payer system, would that the managers of our national government solve the problem of price transparency in the health-care delivery markets. With proper visibility, I am confident that our wonderful economy will react rationally and accordingly without the need to erect an edifice like a Medicare-for-all payment system.

  10. Thomas Barber Says:

    Medicare for all is not a solution – it would create a crash in the system. Medicare rates often set the standard for the lowest possible rates – meaning that Medicare routeinly underpays physicians and hospitals for services for our elderly. Those providers use cost shifting and prviate insurers help make up the deficit. If everyone was paid Medicare rates and insurance we would quickly degenerate into a system with lack of access to everything from surgery to chronic disease management.

    The issues we are facing nationally really are about health care delivery. It is not just about health care financing – the entire system is broken. The employer based system has its problems but should not be thrown out. A combined system makes the most sense – politically and financially

    We don’t have the resources to pay for a Medicare for everyone reform. It is not a viable option.

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