Evaluating Sanders’s Medicare for All Act of 2019, Part 4

Part 1 reviewed Title 1, which states that basically everyone will be covered and can receive care from pretty much any provider. Part 2 reviewed Title 2, which states that insurance benefits will be comprehensive without any regular out-of-pocket expenditures. Part 3 reviewed Titles 3 and 4, which lay down some provider standards and also some expectations regarding data reporting.

Ok let’s continue. I’ll try to make the less exciting stuff concise but still get through it so we have the foundation of understanding necessary to critically evaluate this bill.

Title 5

The Centers for Medicare & Medicaid Services (CMS) will be responsible for establishing and reviewing quality standards, such as clinical practice guidelines and other performance reviews and standards.

There’s also a section on health care disparities in here. Providers will be required to report data that help CMS evaluate health care disparities, and then those data have to be reported to Congress regularly.

I don’t have any commentary on this title.

Title 6

Ok this is an important one. It talks about establishing a national health budget. It requires a budget to be made that includes the cost of health services but also covers the cost of other components, including administration, quality assessment activities, innovation, and public health activities.

Interestingly, it says that up to 1% of the budget can be, for up to 5 years, allocated to support people whose health insurance-related jobs are displaced by the implementation of M4A. It will also have a “reserve fund,” which will be available to be used during health emergencies, such as natural disasters or pandemics. Yeah that’s probably a good idea!

The Secretary is responsible for establishing fee schedules for provider reimbursement. And the Secretary will also have to “establish, document, and make publicly available a standardized process for reviewing the relative values of physicians’ services. . . .” And then there are requirements added to make the Secretary accountable by requiring these efforts to be tracked and reported to Congress.

The U.S. Code Title 42 is where payments for physician services is discussed. This bill adjusts that a little bit to require the Secretary to make fee schedules in coordination with the Medicare Payment Advisory Commission (MedPAC), which is a 17-member group of diverse healthcare experts who are appointed for 3 years at a time to analyzing Medicare payments and other Medicare-related issues and then advising Congress on them. One of my health policy idols, Paul Ginsburg, is currently the Vice Chairman of MedPAC. (If anyone wants to introduce me to him, let me know.)

The Comptroller General is also assigned to do periodic audits on these relative values established for physicians’ services.

This title also establishes an Office of Primary Health Care within the Agency for Healthcare Research and Quality (known as AHRQ–I fondly know this agency as the one that funded my first two years of med school and then dropped my institution’s funding when I was about to start my full-time health policy PhD). This Office of Primary Health Care will be tasked with monitoring the number of PCPs and generally working to develop policies that improve the access to and implementation of primary care.

Lastly, the title talks about prescription drug prices. It says drug prices shall be negotiated annually by the Secretary. And the Secretary will develop a prescription drug formulary that promotes generic drug use and discourages the use of “ineffective, dangerous, or excessively costly medications when better alternatives are available.”

I wish I had a better sense for what the implications are of giving the Secretary power to adjust fee schedules and to involve MedPAC in the decisions. Does this mean the not-well-known but still highly criticized RVU Update Committee (known as the RUC, generally referred to as the secretive specialist-dominated group that sets the fee schedule that is, with little to no editing, implemented by CMS) will be a thing of the past? The RUC, by the way, is the reason why proceduralists are paid so much more than non-proceduralists–it’s easy to over-estimate the amount of time it takes to perform a procedure, which then translates into higher per-minute reimbursements to proceduralists.

From a high level, establishing a system of administrative pricing in this way, where smart individuals confer and do it rationally with good oversight and accountability, seems like a great idea. But remember that even the smartest experts will never be able to take all the factors into account that should determine a price. Not only are there different influencing factors that would make the price different in each locality, but also the knowledge of all the factors to get even one price right in one locality is dispersed over all individuals who deal with the service, its necessary inputs, and the alternative uses for those inputs. This is an insight from Friedrich Hayek, and I believe it correctly explains why administrative prices will never be efficient. Read more about that directly from Hayek here. I’ll have to write more on this in the future.

But short-term efficiency aside, I have explained in my Healthcare Incentives Framework how administrative prices also create a major barrier to healthcare evolving toward higher value.

So, maybe a different group of experts making prices with lots of oversight and transparency would be better than what we have now. I’m guessing it would be. But if these experts were willing to set these best-guess prices as price ceilings (allowing providers to choose to be reimbursed less than the set price) and then if Medicare could also somehow pass part of those savings on to the patients, this would overcome some of the issues caused by administrative prices. I’ve explained how this would work and why it’s important in my description of an optimal single-payer system article.

Continue to Part 5.


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