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Himmelstein and Woolhandler explain savings from single payer

Single-payer health care would save billions for Massachusetts

By David U. Himmelstein and Steffie Woolhandler
The Boston Globe, May 30, 2012

The House and Senate health care proposals would set imaginary limits for spending growth enforced by secret "improvement plans" and wrist slaps for hospitals that overcharge; establish tiered payment schemes to consign the poor and middle class to second-tier hospitals and doctors; push most residents of the Commonwealth into HMOs (oops, we forgot, now they’re called "accountable care organizations," or ACOs); and wipe out small doctor’s offices by "bundling" their pay into ACO payments. Apparently the legislators' theory is that forcing health care providers to consolidate cuts costs. Oligopoly saves money?

Here are six alternative steps the Legislature could take that would actually save money while still preserving care.

*  Cut out the middlemen. Why exactly do we pay private insurers 10 cents of every premium dollar? The plan that covers all 13 million residents of the Canadian province of Ontario has overhead of only 1 percent. Adopting that single-payer approach in Massachusetts would save about $2 billion in insurance overhead in 2013 alone.

*  Pay hospitals the way we pay fire departments: real global budgets that cover all operating costs, not the per-patient schemes that are masquerading as global payments. Billing, collections, and paperwork consume nearly one quarter of hospitals' revenues. Eliminate billing for individual patients and you'd cut that nearly in half. The savings: about $3 billion in 2013.

*  End the medical arms race and enforce real health planning. Hospitals and clinics vie for affluent patients needing lucrative high-tech care. They reap surpluses, a.k.a. profit, which they use to buy fancy machines and superluxe buildings – usually situated where there's already a surplus of such facilities. Inevitably, the surplus facilities induce unnecessary, even harmful overcare. Meanwhile, underserved communities and under-provided services like mental health and substance abuse are starved of investment. Hospital payments should go for patient care, not new buildings. Money for new buildings and technology should flow to a separate fund, and be allocated according to need, not profitability, through a transparent public process. Investing in what's needed instead of what's profitable would save billions and improve care for both the poor and the affluent.

*  Right-size the physician work force: more primary care, fewer specialists. Massachusetts hospitals take pride in training super-specialists who go on to provide profitable but often unneeded care (see above). Meanwhile, the primary care shortage persists. The public, through Medicare, already pays for residency training and should use the power of the purse to make hospitals train the doctors that the public needs. And physicians' fee schedules should be altered to assure that best students are attracted to the most needed, important, and difficult fields – primary care – and that doctors make as much for talking to patients as for putting them through a scanner.

*  Negotiate drug prices statewide. Canadians pay 40 percent less for drugs than we do because they use single-payer buying power to drive down prices from pharmaceutical companies. Why can’t we?

*  Cap health executives' incomes. Why should a hospital CEO make more than the president of the United States?

(David U. Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H. co-founded Physicians for a National Health Program. They are professors at the City University School of New York School Public Health and visiting professors at Harvard Medical School. They worked as primary care doctors in Massachusetts from 1982-2010.)

http://www.bostonglobe.com/opinion/2012/06/01/single-payer-health-care-would-save-billions-for-massachusetts/yNTLRlKucgdJCUCU3P5arM/story.html

Comment: 

By Don McCanne, MD

To explain simply what is meant by "single payer," we often allude to an "Improved Medicare for All." That seems to suggest that we merely need to tweak Medicare and then provide it to everyone - that simply eliminating private insurers is all we need to do. This article by PNHP co-founders David Himmelstein and Steffie Woolhandler briefly describes how the single payer model is much more than that, especially pointing out how it would be tremendously effective in slowing the nearly intolerable increases in health care spending, while dramatically improving the functioning of our health care delivery system.

First, a little background. When the Massachusetts health reform legislation was ready to be enacted, it was criticized for failing to address one of the most important reasons for reform - it did not include effective measures to contain costs, a flaw challenged by single payer supporters. Rather than taking another look at single payer, Gov. Romney's advisor, MIT economist Jonathan Gruber, famously said that first we should get everyone covered by passing this, and then we'll work on controlling spending.

Of course not everyone is covered in Massachusetts, while cost increases continue out of control. In response, the Massachusetts House and Senate have prepared separate but similar bills to control spending, while ignoring the remaining uninsured. Instead of adopting structural changes that would reduce waste - as Himmelstein and Woolhandler recommend - they would apply spending restrictions that could threaten solvency of components of the health care delivery system, while compounding the problems of patient access already evident in the inadequacies of the primary care infrastructure.

As everyone knows, the Affordable Care Act (ACA) was patterned on the same model as used in Massachusetts. Single payer advocates were vehemently proclaiming that ACA would leave too many out of the system, and that it would fail to address rising health care costs - the two primary problems that motivated reform. But we were excluded from the process.

As our members of Congress toiled over the markup of the legislation, measures were included that nominally would control costs. However, with the possible exception of the Independent Payment Advisory Board (IPAB), none of the included measures would have a significant impact on health care costs. Even the IPAB would have the serious flaw of cutting solely Medicare and not private insurer payments to the health care delivery system, threatening underfunding and likely impairing access due to the exodus of physicians from the Medicare program.

The primary reason that the meager measures to contain spending are inadequate is that ACA left in place and built upon our existing dysfunctional financing system with its profound waste. What we needed instead was a complete overhaul of the financing infrastructure, including not only changing to an administratively simplified single payer but also measures such as those listed by Himmelstein and Woolhandler.

Eliminating private insurers and switching to a single public insurer is the most important and effective measure of single payer, but the other measures are essential if we want to join the other wealthy nations that provide quality care to everyone at an average of half of what we are currently spending.

When you advocate for single payer by pushing an "Improved Medicare for All," be sure in the same breath to let your listeners know the extent of our recommendations: "An Improved Medicare for All that would totally overhaul our dysfunctional financing system so that it works best for patients."

In this age of sound bites, if you have another breath, you can point out that single payer would also have a highly favorable impact on the health care delivery system, by enhancing primary care, and by efficiently expanding facilities and high-tech capacity based on medical need instead of profit and extravagance.

Above all, it's crucially important to communicate that single payer is not just your mother's Medicare.