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‘Medicare For All’ Can Be a Common Enemy to Unite ‘Foes’

It is both comical and infuriating to watch how key healthcare stakeholders react to two different, but highly inter-related subjects: 1) Medicare For All, and 2) Who is at fault for outrageous medical prices. Stakeholders in healthcare include hospital systems, provider groups, health insurance companies and pharmaceutical and device manufacturers. Employers are another major stakeholder, but much too often, they are largely excluded when it comes to contractual relationships between many of the aforementioned players.

When many of these stakeholders are asked who is at fault for charging high prices for medical services, each will conveniently step into a circle and point fingers at one another, as if they are participating in a circular firing squad. It seems that someone else is always at fault, but never the accused.

However, when asked about the growing ‘Medicare For All‘ proposals, commonly believed to eliminate private insurance and ‘socialize medicine,’ many of these same stakeholders will quickly hold hands in support of something centrally sacred to their collective well-being, as if they are military comrades in the HBO mini-series, “Band of Brothers.” These stakeholders’ words and actions are quite transparent about protecting their own self-seeking interests.

Below are just a few examples of this love-hate relationship between various healthcare stakeholders.

Medicare For All

Former Secretary of State, Condoleezza Rice, was quoted as saying, “We need a common enemy to unite us.”  For stakeholders who are frequently at odds with each other, such as medical providers are with insurance companies when it comes to contractual reimbursement arrangements, the relationships can be confrontational, if not outright brutal. However, for various reasons, both typically view Medicare For All as a major threat to their profitable well-being, if not survival. Given what is at stake with a ‘Single-Payer’ system that presumably would be controlled by federal bureaucrats, providers and insurers have found this ‘common enemy’ to mask their mutual differences with each other.

On April 16, UnitedHealth Group CEO David Wichmann warned Democrats that Medicare For All would destabilize the nation’s healthcare system. As mentioned in The Hill, Medicare For All would be a “wholesale disruption of American healthcare [that] would surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system, and limit the ability of clinicians to practice medicine at their best.”

Insurance companies are greatly threatened by the many proposals initiated by progressive Democrats to expand Medicare to the entire U.S. population, most likely greatly reducing the role of private insurers. It must be noted, however, even with any given Medicare For All program implemented, private insurers would most likely be chosen as subcontractors to administer the program, but the profit motive would be greatly reduced from today’s standards.

Not to be outdone, a major counterpart to private insurers, the American Hospital Association (AHA), have similar views to Wichmann’s. AHA President Rick Pollack wrote in February that Medicare For All proposals “could do more harm than good to patient care.” Additionally, this one-size-fits-all approach could disrupt coverage of 180 million Americans who are currently covered by employer plans, and that physicians and other providers “may limit the number of Medicare or Medicaid patients they see because of chronic government underpayment.”

When lobbyists from both stakeholders were recently on stage together in Nashville addressing the Medicare For All topic, such as Matt Eyles (CEO of America’s Health Insurance Plans (AHIP)) and Chip Kahn (CEO of the Federation for American Hospitals), one could almost detect John Lennon’s epic song, “Give Peace A Chance” in the background. Kahn discussed a new organization that he formed, Partnership for America’s Health Care Future, and its purpose of ‘counter-messaging’ against the Medicare For All movement. Eyles acknowledged that AHIP was one of the first groups to become part of this new organization.

Healthcare Prices – Who is at Fault?

The camaraderie found in Medicare For All quickly vanishes when stakeholders are simply asked why healthcare prices are so high. This healthcare ‘hot potato’ can quickly determine just how deep-seated relationships are (or not) between major industry players. The April 15 cover of Modern Healthcare appropriately illustrates fingers pointing at each other, deflecting the price question and placing the blame elsewhere. Additionally, when leaders from Pharmacy Benefit Managers and the Pharmaceutical Research and Manufacturers of America (PhRMA) have appeared in front of the Senate Finance Committee during the past few months to justify their pricing methods, both pointed fingers at one another (insurers also), making sure that their respective organizations and industry were not to blame.

Deflecting responsibility and other self-preservation behaviors will only add to the desire to seek alternative solutions that can reform a grossly underperforming and bloated healthcare system. Stakeholder organizations and industries must decide whether they want to be part of the solution – or, at their own peril – continue to pursue their ‘business-as-usual’ behavior that benefits no one – but themselves.

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The Cost of Having Healthcare Choices

Throughout our lives, each of us must make choices between unpleasant options. For example, our backyard deck is due for a major overhaul since many boards have rotted.  Should we hire a reputable carpenter to replace our deck, which can be very expensive? Or, should I perform the work myself, which may take longer and not look as great? Given my lack of carpentry experience, neither choice is desirable, yet a new deck must be built.

In healthcare, given the paucity of price and outcomes information, we frequently face unpleasant options between the providers (physicians and hospitals) we use and the health plan coverages available for purchase.  Both provide uneasy choices that test our abilities to become full-fledged ‘consumers.’

To become knowledgeable consumers, Americans want to have numerous options available before making a purchase. This is the nature of a market-based economy that allows transparency to keep vendors honest and accountable for their products and services. In a functional marketplace that allows for cost and quality transparency information, sellers are nudged to provide the best possible ‘product’ at the most competitive cost – a winning recipe for delivering ‘high value.’

Cost of Healthcare

According to a recent article, “Healthcare Costs are Bankrupting Us,” by H. Gilbert Welch and Elliott Fisher, among the 54 prescription drugs commonly-used by Americans age 65+, Medicare pays “nearly twice as much per dose as do the government systems in Canada, England and Norway.” Open heart surgery costs 70 percent more than the next highest country, while an appendectomy is over two times more. We pay five times as much in our hospitals than other developed countries. Why? According to the authors, we have a complicated insurance system that requires “an army of billing clerks – employed by hospitals and physicians on one side and private insurance companies on the other.” Because of this, U.S. employer-sponsored health costs continue to outpace other developed countries.

Similarly, another article written by Elisabeth Rosenthal, MD, “Those Indecipherable Medical Bills? They’re One Reason Health Care Costs So Much,” paints the picture of a costly “coding war” between healthcare providers who hire legions of consultants to find ways to “upcode” procedures in medical bills. Not to be outdone, insurers hire their own coding consultants to protect their interests. Meanwhile, the patient gets lost in the complicated claims process – another reason why prices are not transparent to the public.

Cost of Health Insurance

As we all know, rising health insurance premiums have eaten into take-home pay over the years. In Iowa, the 2016 premium for family health coverage was $15,743, which is 186 percent higher than the family premium in 1999 ($5,508). This family premium is 28 percent of the Iowa household income (adjusted for inflation). In the next 10 years, using the average five-year premium growth rate in Iowa (7.7 percent), the family premium would climb to $33,056 – growing to 52 percent of the household income (assuming a 1.5 percent annual increase).

About two-thirds of the Iowa family premium is paid by the employer. Because of high-premium growth over the past decades, incomes of workers are suppressed. After paying for health premiums, take-home money is then used to pay for escalating health-plan deductibles, copayments and coinsurance. This financial tension contributes to personal bankruptcy and emotional stress – not to mention impairing the overall health and well-being of the workforce – a primary purpose for employers offering health coverage.

The Premium Dollar

In March, America’s Health Insurance Plans (AHIP), a national association of health insurers, released a simple chart showing where the premium dollar has been spent during 2014. This chart is based on national data for insured patients under age 65 for commercial and nonprofit health insurance companies. The breakdown of the premium dollar is as follows:

  • Prescription Drugs – 22.1 cents
  • Physician Services – 22.0 cents
  • Outpatient Services – 19.8 cents
  • Inpatient Services – 15.8 cents
  • Operating Costs – 17.8 cents
  • Net Margin – 2.7 cents

Aside from Medicare and Medicaid, which have lower operating costs compared to private (commercial) insurance, almost 80 cents of the premium dollar for private plans is used for medical expenses, while the remaining 20 cents flows to operating costs and net margin. The operating costs for private plans in the U.S. are about twice as high as the overhead costs in other less-complex healthcare systems around the world.

Medical Loss Ratio Status?

Prior to the passage of the Affordable Care Act (ACA) in 2010, many insurers who sold individual health policies admitted that between 55 – 65 cents of the premium dollar was spent on medical expenses, and the remaining amount was retained by the carrier. The ACA established the “medical loss ratio (MLR),” so that at least 85 percent was spent for medical services by large insurers and at least 80 percent was spent by smaller insurers. Of note, should the ACA be repealed, replaced or repaired, whether the MLR remains intact or not is yet another issue to be addressed.

When it comes to health insurance, Americans ‘appear’ to be willing to pay for the privilege of having choices among health insurance carriers and the multitude of plans offered by each carrier. But will having these choices really provide the added ‘value’ in the care we seek? In some cases, thanks largely to limited provider networks, we may (unknowingly) give up the freedom to choose among healthcare providers, such as physicians, hospitals and others. Will this undermine the competition we wish to have among our market providers?

As I ponder the unpleasant choices we have in healthcare, I must also focus on the backyard deck that awaits my attention.

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