Precision medicine, big data, Alzheimer’s Disease, migraine, and RNA therapeutics.
Learnings from the April 2018 meeting.
Edited by Jill Condello, PhD, ICON Access, Commercialisation & Communications
For 30 years, Judy Spelman had a front-row seat on the daily drama of hospital life — much of that time working as an emergency room nurse. But as California's walking wounded passed through her care, some stood out. Like the kids who came in to the ER with pneumonia that started as a head cold, but left untreated because their parents didn't have health insurance. Or the uninsured diabetics whose delayed care forced doctors to amputate noses and toes. Or even those with insurance, who had to wait hours in pain as the crowds of uninsured patients swarmed facilities.
"Nurses are particularly well placed at the vortex of the health care system," says Spelman, gaining a first-hand look at how the system affects doctors, administrators, janitors, patients, and everyone else who relates to it. The problem, she concluded, was health care financing.
Then Spelman set to work on a solution. She took up the single-payer cause and turned her hand toward crafting a new piece of legislation that was intended to right some of the wrongs that had confronted her in the ER. Now a full time health care consultant to California Senator Sheila Kuehl and the lead author of Senate Bill 921, Spelman is working to carry the message of what she learned to the state representatives who will decide the fate of her bill. At best, it will be an uphill fight every inch of the way.
Single payer has been body slammed in humiliatingly lopsided public referendums, discounted even by many of the experts who are sympathetic to the cause as fundamentally incompatible with American culture, and damned by the right as a potentially new Hydra-headed monster of Big Government that would demand to be fed big taxes. Inside the health care industry, major provider groups like the American Medical Association shun single payer.
The revolution, should it come at all, isn't scheduled to arrive anytime soon on any national agendas. Republicans in charge of Congress and the White House would quickly usher any such proposals out of the halls of federal power. Even at a state level, single-payer advocates will certainly be faced with an opposition that will be well funded, professionally led, and armed with a well-tried blueprint for arousing voter opposition. And with state budgets running billions in the red, any appetite for new initiatives is badly dulled.
Does that make the odds impossible to beat?
Don't tell that to Spelman. More foot soldiers sign up with Health Care For All — California every day; five pages of small-print listings of organizations back the initiative. They join rank-and-file true believers in a host of advocacy groups that stretch all the way to Maine. Medical professional collectives ranging from the American Women Medical Association to the American Medical Student Association have either embraced single payer as the only logical way forward or are growing warmer to its approach. Some labor unions are on board. Even the prestigious National Academy of Sciences has called for single-payer test projects to assess its full potential. And before bowing out of the next presidential race, Al Gore endorsed the notion — giving considerable hope to the movement while sparking a firestorm of conservative political scorn — by announcing that he had "reluctantly" reached the conclusion that single payer was the only answer to the country's health care crisis.
Several important motivators are at work here. MCOs are riding on the third year of an underwriting upswing that is pushing premium hikes at a painful double-digit growth rate — swelling costs and profits in an industry that already consumes more than $1.4 trillion a year. As a combination of rapidly rising costs and increased managed care margins continues to fuel significant new insurance costs, companies are sharing the pain by requiring employees to shoulder much of the new load. Self-employed workers are already painfully familiar with the average $7,954 annual sticker price for family insurance. Meanwhile, a stubbornly weak economy is swelling the number of uninsured past the 41 million mark — with another estimated 34 million Americans "occasionally" unable to afford insurance over the course of a year. And with states scrambling to cut Medicaid programs in a savage budget crisis, coverage will become even more problematic.
If those trends continue unabated for years to come, the theory goes, higher costs will spawn a new political consciousness and a solid majority of citizens will be aroused to demand a solution that can simultaneously cover everyone while tapping existing public agencies and the managed care market for the money to make it work.
Single-payer advocates may never lay their hands on the Holy Grail of federal or state legislation, but they can't be ignored either. Their arguments showcase some of the most controversial aspects of managed care: its premium cycles and the need of public, for-profit groups to cater to investors by pushing profits even in struggling times. They also raise serious questions about managed care's added administrative costs compared to Medicare.
Calls for single payer are part of a growing chorus of support for reform — both from inside as well as outside MCOs. Falling short of single payer, say reformers, something will have to change — ranging from new universal care initiatives to a downswing in the premium cycle and a return to tighter HMO controls over utilization. The response of managed care may well determine whether it can offer effective private alternatives from within — or find itself fighting an ever-growing political battle just to survive.
There have been many different types of single-payer options bruited about over the years. Most advocate a public pooling of health care money into the hands of a central public authority — much like the model adopted by Health Care for All — California.
Replacing private insurance, the group decided on a formula that calls for a 6-percent tax paid by employers and a 3-percent-payroll tax on employees that would be combined with state and federal money already being used to provide services.
Analysts showed that this formula would result in a reduction in money that families paid as well as employers, says Healthcare for All board member Carolyn Negrete.
The lion's share of the state's projected savings, about $14 billion, would be saved by "getting rid of insurance companies and HMOs," says Negrete, "money that would then go into delivery." Another $4 billion could be saved in discounts available through bulk purchasing agreements with $3 billion in cost cuts coming from improved preventive care measures that would be extended through the whole population, including the uninsured.
Those numbers aren't just wishful thinking. The General Accounting Office published a controversial study in the early '90s that maintained a single-payer system would streamline health care delivery, hold down costs, and extend coverage. Negrete's group, like many others over the past 15 years, turned to John Sheils at the Lewin Group to demonstrate how single payer could work to the public's advantage.
"If you put together a well-designed program, we generally show that you can actually save a little money, cover everyone, and provide more services at a lower cost," says Sheils, who emphasizes his independence and a good deal of skepticism about the long-range possibilities of a single-payer system.
In most cases, single-payer advocates back a pooling of funds into one pot. Instead of Medicare and Medicaid and private insurance funded by a combination of public and private money, companies and people would be taxed in such a way that their overall burden would be tempered somewhat — unless they had never bought insurance for themselves or their employees. The central authority would establish reimbursement rates on a regional basis in coordination with providers, who would bill for any work done in much the way fee-for-service Medicare works for about 90 percent of all the aged in the country.
But the working formula depends on several key factors: Tapping the huge sums of money already spent on health care and applying it more equitably; tossing MCOs and their administrative costs and profit demands out; and providing basic health care services for the poor and uninsured who often rely now on ERs for any care they receive.
"We need to move away from a for-profit system," says Eric Hodgson, MD, president of the American Medical Student Association, which has come out as an enthusiastic supporter of single payer. It's the lobbying power of business interests, he maintains, that is the chief obstacle to making major reform a reality.
Ironically, Sheils says that the key to an efficient single-payer system relies on some important lessons learned from managed care. Using primary care docs to act as gatekeepers to specialists, he says, or requiring a copay of some kind — even a modest $5 charge for doctor's visit — is needed to apply a common-sense brake on unlimited access to care.
Says Sheils: "If you set up a program with no copays, you have a lot more utilization than even with a small copay." In one Rand Corp. report, says Sheils, no copays translated into a 30-percent increase in utilization.
Crunching the numbers in such a way that provides a standard benefit for the mass of uninsured people effectively requires the elimination of traditional managed care. The typical MCO, says Sheils, consumes administrative expenses equal to 15 percent of claims. For Medicare — what amounts to a single-payer system for the country's seniors — that figure drops to 2 percent.
Another factor: Market clout. A single-payer system would be able to negotiate savings on bulk purchases of drugs and medical equipment.
"If there's one buyer," says UCLA professor Tom Rice, "that one buyer has a lot of power."
Most health care providers get excited about single payer when you discuss reductions in their own administrative costs, or tapping MCO administrative costs and leveraging discounts, says Sheils. Under single payer, providers wouldn't have to negotiate and renegotiate terms for a multitude of contracts, establish varying rules on utilization and adjudicate a myriad of claims with many different organizations.
But that's not enough to make the numbers work. In order to create savings for consumers, providers have to reduce the rates they're charging.
Adds Sheils: "A lot of providers are excited about single payer until we get to that."
But it's the unhappiness of the people paying for the care that will drive home a measure like single payer. As the cost of insurance continues to go up, say advocates, citizens as well as some companies may find the growing burden simply too big to carry.
Earlier this year, a report by the Kaiser Family Foundation and the Health Research and Educational Trust concluded that employer costs for health care jumped 12.7 percent this year — the biggest one-year hike since 1990. But employers didn't absorb all of that. Out-of-pocket expenses for workers jumped 27 percent over 2001 levels, underscoring the trend of cost sharing.
Just about everyone agrees that premiums are going to keep going up, at least in the short term. Last fall Charles Boorady, an analyst then with Goldman Sachs, caused a stir with his projections that insurance premiums would continue to accelerate ahead of actual costs through 2006. Now with Smith Barney Citigroup, he relies on research from the actuaries at Milliman USA for charts showing premiums steaming ahead this year with a 14-percent jump with actual costs accelerating by about 12.5 percent. Slowly sinking, but still double-digit increases would follow in 2004 and 2005, with an 8-percent increase in 2006.
Single coverage employee contributions of slightly more than $10 per month in 1983 will hit $100 a month this year — a $23 monthly increase in just one year. Meanwhile, managed care profitability — a key measure of success on Wall Street — hit 4.8 percent last year, according to Medicare, up from a 1-percent loss in 1999.
"Three more years of this type of inflation," responds Jon Gabel, vice president for health system studies at the Health Research and Educational Trust, "could bring family coverage to nearly $11,000."
At that rate, says Gabel, it won't just be consumers looking for a change — you might also see companies start agitating for some new system to pay for health care. "Five years from now," he says, "if you still have double-digit inflation, I imagine that there will be several employers that want to bail out."
"I don't think there's any question that a combination of substantial increases in health care premiums and the economic downturn are the fluids for making more and more people uncomfortable with our system," agrees Stuart Altman, PhD, a professor at Brandeis University's Schneider Institute for Health Policy. "Therefore, as more and more people are uncomfortable with our system, the prospects of a single-payer system really go up."
For many advocates, Medicare serves as a rough, working model for the kind of system they want for all Americans.
Writing in a recent article for Health Affairs, Marilyn Moon and Cristina Boccuti of the Urban Institute concluded that Medicare would be a much more effective purchaser of pharmaceuticals than MCOs.
"Medicare has proven to be more successful than private insurance has been in controlling the growth rate of health care spending per enrollee," they write. "Moreover, Medicare beneficiaries are generally more satisfied with their health care than are privately insured people under age sixty-five."
The United States does a relatively poor job of making health care services available for all compared to many of the industrialized countries around the world. In a famously quoted statistic, the World Health Organization ranked the U.S. 37 in the world for health outcomes. And Canada usually comes up as the most frequently cited example of what can be done right and wrong in a single-payer world.
There's certainly no shortage of emotion when it comes to commenting on Canada's health care system. In more recent times, criticism has been whet to a killing cutting edge with a growing number of cases where delivery has been severely delayed by an overburdened and under-funded system.
Canada's health care system was "more popular when it was more fully funded," says UCLA's Rice. And it was inevitable that an erosion of benefits during an economic downswing would trigger heated attacks.
But Rice and others note that there's one very important distinction between the health care systems in Canada and the U.S.: Americans spend 76 percent more per capita on health care than Canadians. The eminent Princeton health care economist Uwe Reinhardt pegged the average per capita health care spending in America at $4,631, compared to the much leaner $2,535 spent in Canada and the meager $1,763 recorded in Great Britain.
Meanwhile, adds Rice, the Canadian provinces that administer the system have proven hardball negotiators when it comes to setting prices for services.
Importing single-payer ideas, though, will face a very tough crowd.
The problem for the U.S., says Altman, is the sheer size of a program that would entail the entire population. "I think that the bite of the apple from government would be so large that government would have a hard time swallowing it," he says. And while he counts himself as a supporter of a universal system that finds some way to ensure some sort of coverage for everyone, the immensity of a single-payer program would make it tough to administer and even harder to approve.
In the end, many of the experts say that for any type of reform to work, the structure will need to be quintessentially American for it to work. And no model outside of this country has had to deal with a tradition of American individualism hammered out over more than 200 years.
"I think in many ways single payer would be a good change," says Moon, a noted Medicare expert at the liberal Urban Institute. "The problem is, I don't think it will ever happen. I think the key thing that always stands in the way of major health reform in the United States — including single-payer/Medicare approach — is that people who have strong coverage don't want to give it up. They don't want to be put in, at best, an average plan, a legitimate plan.
"And providing Cadillac plans to everybody would be very difficult."
Most Americans just don't care for a one-size-fits-all approach, especially when the government is doing the measuring. That deep-seated public distrust in government, says Sheils, is plainly evident at every level of American society.
"Even when we have done focus groups with the uninsured," he says, "even they express concern with a large government program."
"You see a lot of people very worried," says Gary Claxton, vice president of the Health Care Marketplace Project at the Kaiser Family Foundation, "but you don't see a lot of people saying that a government-dominated payer system is the way to go."
That broad public bias was evident last fall, says Sheils, when voters in Oregon turned thumbs down on the single-payer plan outlined in Measure 23 at the rate of 4 to 1. And California reformers are building their plans on top of the 10-year-old ruins of Proposition 189, a single-payer referendum that also received a drubbing at the polls.
To help fuel opposition, the American Association of Health Plans commissioned a study of its own that asserted Measure 23 would create a health care train wreck leading to higher taxes, an erosion of services, and rapidly escalating prices.
"We are very concerned that Oregon's single-payer health care system could have dramatic, unintended consequences for the people of Oregon," said AAHP president Karen Ignagni in a doomsday message that was hammered home repeatedly — and clearly hit a nerve among voters.
It's important to consider just how appealing a variety of managed care companies competing for members can be, says Sheils. MCOs cost more to operate than single-payer plans, adds Sheils, but people are buying something real with that money: They're buying choice. And Sheils is quick to pick up on the Cadillac question.
"If we all drove identical automobiles, all painted the same color with all the same features, we'd save a lot on automobiles," he says. "But we don't consume automobiles that way and it isn't clear that we should consume health care that way either. Americans love choice. We love having options. So I think it would be a mistake to simply dismiss higher administrative costs on the grounds of inefficiency or adding nothing of value. They enable choice, and that's important."
There's also a fundamental problem with cost projections, says Sheils. Many times, they turn out to be inaccurate. The last big push for health care reform under Bill Clinton prompted a proposal that Sheils says would have created a system that cost more to operate than the one we have today. Reformers never factored in the way managed care worked aggressively to control costs in the '90s.
And it may well be that a strong enough backlash against rising costs could bring that old economizing trend back.
"A question for the future is whether we see a return to more affordable but more aggressive care management in some form and tighter networks will look attractive as alternatives to higher prices," says Bruce Pyenson, a principal and consulting actuary at Milliman. And it may not be a long time coming. "My guess is that the HMO industry will need to include that as options over the summer for their large accounts. They need a fallback option in case they get hard pushback from large accounts."
The health care industry tends to run counter cyclical, says Pyenson, with premium trends rising in hard economic times and falling in times of substantial economic growth. A repeat of that roller coaster drop as the economy recovers in the next few years may well muffle single-payer advocates for years.
In the end, managed care may reform itself — again.
But don't expect single-payer advocates to pitch their camps anytime soon. Negrete notes that when Health Care For All – California settled on its legislative champion, she agreed to devote a full six-year term to making single payer a reality.
As for Spelman, she's ready to go the distance, arguing for single payer every step of the way.
"At one time women didn't have the right to vote," she says. In the not too distant past, schools were segregated. Both conditions were built on commonly accepted, ingrained American values. But those old inequities changed as people recognized they were wrong.
"Things change," says Spelman. And she believes health care will too.
Precision medicine, big data, Alzheimer’s Disease, migraine, and RNA therapeutics.
Learnings from the April 2018 meeting.
Edited by Jill Condello, PhD, ICON Access, Commercialisation & Communications