First, congratulations to President-Elect Joe Biden. He’ll have the House on his side, but it’s starting to look like the Senate may be his barrier to moving any of his major healthcare plans forward. Now that he’s been elected, my recent evaluation of his healthcare plan takes on new relevance.
In every election season, people want to know what everyone’s political preferences are. This is a precarious topic especially for me, as someone interested in helping leaders fix healthcare, because any expressed preference risks closing doors. But so does remaining completely ambiguous.
I think readers can guess some of my preferences based on my writings, but I fear there are incorrect assumptions made as well. So let me answer the question as directly as nuance allows.
First, as usual, I will frame this discussion. I believe that all opinions about government can be divided into five major categories, which I explained a year ago in my post describing my framework for categorizing governments. I won’t re-explain the categories or their respective spectra here–go read the explanatory post. It’s super short.
The three spectra most relevant to opinions about how to fix healthcare are the economic spectrum, the welfare spectrum, and the liberty spectrum.
Economic spectrum. I believe in a decentralized locus of decision making. The economic rationale for this is incredibly persuasive to me–the aggregate information conveyed by self-optimizing decisions made by millions of people every day adds up to way more market insight than a central deliberate overseer could ever have. That doesn’t mean I believe there are no benefits to the occasional centralized decision, nor does it mean the end result of the aggregation of all the individual decisions is always optimal, but I do believe that long-term success in a market is far superior when we rely on that information. This assumes people have the information requisite to make self-optimizing decisions, which has mostly not been the case in healthcare. In a case like that, my preferred solution is not to centralize the locus of decision making; rather, it would be to get people the information they need. A major implication of this for our healthcare system is that I do not believe the government should set fixed prices. You will notice that even a U.K.-style system or a single-payer system can be implemented in a way that adheres to this.
Welfare spectrum. This is the one I have the hardest time with. I have been in dozens of homes and seen first hand the depravities of entitled attitudes and multi-generational government dependence. But I have worked as a physician in community hospitals and seen the tragic consequences of being uninsured. I have served in religious capacities and seen the dignity that comes from achieving self-sufficiency. But I have experienced the burden lifted by food stamps and Medicaid. In short, I am pulled in different directions, and where I place myself on this spectrum depends less on the amount of wealth redistribution involved and more on the principles upon which those programs are based. I’ll write more about this next week.
Liberty spectrum. This one also pulls me in a couple different ways. I have strong moral beliefs that I would love for everyone else to espouse, but I also believe we can show an equal amount of love and consideration for those whose beliefs are opposite of ours. I also believe in allowing people their own agency to live their lives how they feel is best, which makes me hesitate to support government policies that enforce or subsidize one set of beliefs over another. But I do have a strong preference for overall minimalism and simplicity. Each additional law and regulation that results in additional complexity in our already overly complex modern lives pains me, and I believe the cumulative burden of complexity on us and on businesses is ignored when discussions of individual policies are undertaken. Therefore, the threshold benefit for me to be willing to support yet another complexity-increasing regulation is incredibly high, and I am predisposed to support changes that lead to overall simplification.
I’m not sure that will adequately sate anyone’s curiosity about my voting record, but those are some of the major principles upon which I rely to make my decisions.
Two last thoughts about my biases. First, I make a point to suspend judgment on any issue until I feel I have thoroughly grasped the arguments–and especially the values that undergird those arguments–from all sides. Second, when one gains additional understanding about an issue, I believe it’s ok for them to change their opinion without it undermining their credibility; a well-reasoned change in opinion should be seen as the mark of an imperfect being who has the intellectual integrity to admit ignorance and continue to strive for a more complete knowledge.
I’ve written a lot of long blog posts lately, and partly that’s because I don’t want to split certain things up. But I, as much as anyone, love when I see an article is really short. It feels like less of a commitment. So, I am committing to deliver short posts more often. That means covering less ground with each post, but I think discussing a specific single principle in a blog post can be very effective. So, now that I’ve gone on so long about short blog posts, here’s this week’s dose of health policy . . .
Let’s talk about terminology.
When I started medical school, I didn’t understand why there were so many doctor words. It seemed to interfere with physicians communicating clearly with patients because they so often slip into using those jargon-y words.
I have since learned that to be clear with your communication, you need words with precise meanings. This avoids so many problem-causing ambiguities. For example, I could tell another doctor a patient has an owie on his back and it hurts, and it would communicate almost nothing. But if I said the patient has a unilateral eruption of erythematous papules and vesicles along the T6 dermatome with associated burning pain and paresthesias, the other doctor would be able to visualize exactly what I’m describing (Herpes zoster, AKA shingles).
Here are two terms that are used ambiguously in health policy discussions all the time: cost and price.
Cost is the amount of money that goes into producing a product or delivering a service. Calculating cost is often challenging. For example, if you admit a patient for a heart failure exacerbation, you can fairly easily allocate physician and nursing time to the cost of their stay, and it’s not too difficult to calculate many other things like the cost of the medicine you administered and the cost of cleaning their room after they’re discharged, but what about the cost of actually staying in that room for 4 days? You start getting into the depreciation of capital expenditures. And how do you allocate a percentage of administrative employees’ salaries to the cost of that patient’s hospital stay? Maybe this is why so many hospitals don’t even bother calculating costs for specific services delivered!
Price is the total amount of money that is paid to the hospital for delivering a service. Sometimes the patient pays part of the price (known, confusingly, as the patient’s “out-of-pocket cost”), and the insurer pays the rest.
The difference between the price and the cost is the profit the hospital made on delivering that service. Think about how impossible it would be to safely set prices when nobody is accurately calculating costs in a hospital. This is going to become a huge issue when patients start shopping for prices and hospitals are required to start pricing competitively. They’ll have no idea if the price they’re setting will make them a profit or not.
And let’s add a bonus term, one that is special to healthcare. The “charge.” This is completely separate from price. I think it’d be clearer if it were known as the “fictitious price.” It’s basically a made-up number that hospitals use as an anchor for the starting point of price negotiations with insurers. Nobody actually is meant to pay these fictitious prices, although it’s the default thing that will be printed on a bill sent to someone who doesn’t have insurance. And some hospitals jerkily expect people to pay that amount, but usually what happens is they put the patient in contact with their finance people and work out a cash-pay price for them instead. Although, how can they set a reasonable cash-pay price if they have no idea what the cost was of delivering that service to the patient?
Let’s use these terms properly so our discussions can be focused around substance rather than arguing over the definitions of terms!
When I was evaluating Joe Biden’s healthcare plan recently, I talked about how to properly evaluate policies that attempt to increase access. I think this is important enough to discuss briefly in its own post.
But first, as a brief reminder, there are traditionally three issues that healthcare reformers are attempting to solve: cost, quality, and access. And I like to combine quality and cost into one variable–value.
Access-increasing policies are typically evaluated based on (1) how many people they will cover and (2) how much they will cost, but we need to add a super important third metric in: How many barriers the policy creates to improving value.
Just because access-increasing reforms of the past have worsened healthcare value doesn’t mean they always have to do that. It just means healthcare reformers of the past haven’t known how to improve the value of healthcare, so they haven’t been able to evaluate their policies on that metric. But that’s what the Healthcare Incentives Framework is for (specifically this part of it), and that’s why I have been using it to evaluate politicians’ access-increasing policies lately.
Last week, I evaluated President Trump’s healthcare platform. The problem is, he doesn’t seem to have one. At least, he doesn’t say anything about one on his official campaign website. This is in stark contrast to Joe Biden, who gives many details on his healthcare plan (see my evaluation of it here).
So, to help President Trump out, I decided to write a healthcare plan for him. Let me be clear from the outset that this is not my personal healthcare plan–it is just one of many possible ways to implement the principles outlined in the Healthcare Incentives Framework, and it’s a way I could see Republicans going about it.
One other reminder: The President doesn’t make laws! But the modern reality in this country is that people want to hear a President’s plan for fixing all sorts of problems, so there we have it. He does have the power to set the agenda and influence his party, so this is by no means a useless endeavor.
Ok, now on to his brand new healthcare plan, which I am pretending to write on behalf of his staff, with a little rhetoric mixed in just for fun . . .
The problem with policies designed to increase access is that they usually create market distortions that become barriers to improving value, so his plan starts by addressing how he will improve value, after which he will show how he has crafted a way to increase access that will not undermine his other efforts.
First, he intends to enable patients to act as consumers and make informed choices. This applies to their ability to shop for the best insurance plans and their ability to shop for the best providers.
Take the insurance side first. To facilitate patients shopping for insurance plans, he has a unique approach for each segment of the insurance market.
For Medicaid, which is administered state by state rather than nationally, instead of allowing states to create and administer a single Medicaid plan, he will require them to contract with multiple insurers to each offer a Medicaid plan. This gives Medicaid enrollees more choices, and their insurance is provided by private businesses rather than government beaurocrats. The good news is, more than 2/3 of all Medicaid enrollees are already such plans (known as Medicaid Managed Care), and when these policies are combined with the other policies described in this plan, they will start to generate significant savings.
For Medicare, President Trump will make a similar change. Instead of the government offering a traditional Medicare plan, Medicare will shift over to relying exclusively on private insurers to create Medicare-compliant plans, and Medicare itself will simply pay those private insurers for each enrollee they have. This is called Medicare Advantage, and 34% of Medicare enrollees are already on such plans. But, again, increasing this number to 100%, when combined with the other changes in this plan, will create greater competition and cost savings.
For the private insurance market, President Trump will continue to rely on healthcare.gov as the marketplace for private health insurance plans. Even though this website was poorly rolled out, it has become a well-known source for health insurance, and now it will rise to its full potential because Medicare Advantage and Medicaid Managed Care plans will be rolled into it, meaning every American who does not get insurance through their employer will be able to shop for their health insurance on healthcare.gov. This will simplify the experience of buying health insurance, and it will strengthen Americans’ ability to find the best plan for them.
On the topic of employer-sponsored insurance, President Trump will take a historic first step in decoupling health insurance from employment because someone who loses their job should not lose their health insurance along with it. He will take this step by extending the employer health insurance tax exemption to all people buying health insurance on healthcare.gov. Employers will also have the option to stop paying for health insurance on behalf of their employees and instead give that money directly to their employees in the form of a pay raise, which allows employees the freedom and choice to use that money to shop for an insurance plan that fits their needs better than their employer’s plan.
President Trump will also get rid of Obamacare’s innovation- and competition-destroying medical loss ratio rule, which will become unnecessary after the changes described here fix the broken insurance markets and allow them to start pricing more competitively on their own.
He will also instruct the Centers for Medicare & Medicaid Services to sponsor bundled payment and reference pricing pilots. These are alternative payment models that enable patients to more easily compare apples to apples the prices of their healthcare provider options and then decide for themselves if they think it is worth it to pay more to go to a more expensive provider (which, in healthcare, usually does not mean better quality!). These pilots will help spread these new payment models as (1) insurers discover it saves them (and their enrollees) money and (2) providers discover that they can also make more money by lowering their prices and winning more patients.
These common-sense policies will transform the healthcare insurance market into one of honest competition and innovation.
President Trump will also make changes to improve the healthcare provider market and allow patients to more easily find the best providers.
First, he will build on the progress he has already made with healthcare price transparency by requiring all healthcare facilities to publish their cash prices for the most common shoppable services. The required price reporting will include bundled prices, when applicable. Over time, as more bundled prices become available, patients will have an even easier time shopping for the best deal because they will be able to compare up front, apples to apples, prices between providers for the same bundle of services.
In additon to price data, patients need quality data. President Trump will require healthcare providers to start tracking and reporting quality metrics that are more useful in helping patients be good shoppers. This means there will be a shift in focus away from aggregate quality ratings and toward the specific metrics that patients need to know most when deciding between different providers.
President Trump will make all those price and quality data publicly available so that entrepreneurs can use them to design creative and simple shopping websites, similar to what we see with flight booking websites.
All those changes to the insurance market and the provider market will help people become better consumers of healthcare. And when our nation has consumers shopping for the best value in healthcare, it will stimulate the kind of competition we have never gotten in healthcare–competition over value. In other words, these changes will shift insurers’ and providers’ focus of innovation onto ways to improve value for patients, and as a result quality and price improvement dividends will accumulate long after these policies have been enacted.
Joe Biden’s plan is costly, and it is fiscally irresponsible because it has nothing in it that will make a major dent in the cost of healthcare, which is the biggest contributor to our growing national deficit.
President Trump also wants to ensure everyone has access to affordable health insurance. How can he make affordable insurance to everyone without interfering with the market changes described above?
His solution is to take the guaranteed renewable insurance approach. Here is how it will work:
At the time of implementation, everyone in the country will have the option to purchase health insurance without their pre-existing conditions being considered. Insurers will only be allowed to set premium prices based on the individual’s age and smoking status.
As long as an individual maintains continuous coverage, they will always be able to continue with the same insurance plan or even switch to a different plan without any of their pre-existing conditions being factored into their premium price.
However, if an individual chooses not to maintain continuous insurance coverage, insurers have the freedom to take pre-existing conditions into account and charge them a different price. If the individual is healthy, they could still be offered a price as low as others their same age and smoking status who maintained continuous coverage. But if the individual has pre-existing conditions, they could be charged as much as the maximum premium, which would be the premium a 64-year-old who smokes would be charged.
Once they have again maintained 12 months of continuous coverage, the prices available to them will revert back to the continuous coverage price being offered to others their same age and smoking status.
This will encourage healthy people to make the choice to maintain insurance coverage without any draconian or unconstitutional big-government mandates. Personal accountability will be maintained.
However, for these changes to work, President Trump will have to solve one more problem that Obamacare created.
Currently, people up to 400% of the federal poverty level (FPL) qualify for subsidies to make sure insurance premiums are not financially grievous. What the middle class above 400% of the FPL has found, however, is that their premiums have rapidly become unaffordable.
President Trump will eliminate that 400% FPL limit and instead switch it to a flat limit of 9% of a family’s income, enabling anyone to afford health insurance if they choose to purchase it.
In summary, President Trump’s plan to fix healthcare starts by making changes to the insurance and provider markets to refocus healthcare competition on innovations that improve value for patients, which will lead to billions of dollars saved. And at the same time, his plan will encourage and enable all Americans to purchase health insurance at affordable prices in a way that does not create market distortions that interfere with value-improving innovation.
And he will accomplish these changes all for a much lower cost than Joe Biden’s foolhardy plan to strengthen the unpopular Obamacare policies and force more people onto government insurance.
Well, Mr. President, there you have it. A ready-made health policy platform, complete with rhetoric, to win over those last few independents and propel you into another four years as President. Let’s just hope you have congress on your side with this plan or it will go nowhere.
I’ve been going through a number of Democrats’ healthcare plans, so it decided it’s President Trump’s turn. As with the others, I will rely exclusively on his official campaign website.
The problem, however, is that President Trump’s campaign website doesn’t give much information like the others. There isn’t an “Issues” section that lays out his plans for all the major policy topics. Instead, he has a “Promises Kept” section, which lists his achievements in each major policy area, including healthcare. This is helpful for seeing what he’s already done, but it doesn’t give any substance on what he plans to do if he wins another term as President. Is this an acknowledgement that he doesn’t have a plan, or does he just want to focus instead on all the things he’s already accomplished? Probably a little of both.
So, in the absence of any declared plan, let’s instead look at some direct quotes from his website. These are what I believe to be the main big-picture points:
The Department of Agriculture provided more than $1 billion in FY2017 to be used to improve access to health care services for 2.5 million people in rural communities.
The Trump administration expanded access to Association Health Plans (AHPs) allowing small business to pool risk across states.
The Trump Administration allows for Short-Term Limited Duration plans to be extended up to 12 months.
As part of the landmark Tax Cuts and Jobs Act President Trump repealed the individual mandate, which forced people to buy expensive insurance and taxed those who couldn’t afford it.
President Trump signed a six-year extension of CHIP to fund healthcare for 9 million.
And then looking at the sidebar on that same webpage, it links to a chronological list of his major healthcare-related achievements. Here, again, are direct quotes of what I believe to be the main big-picture points:
Protected people with preexisting conditions. (2/5/19)
HHS finalized a rule aimed at increasing transparency in the pharmaceutical industry that requires drug companies to disclose the price of medication in direct-to-consumer television advertisements. (5/8/19)
Worked with Congress to stop surprise medical billing. (5/10/19)
Created new insurance options though association health plans, short-term plans, and health reimbursement arrangements: some are up to 60% less expensive. (6/13/19)
President Trump put reforms into place that have expanded Medicare Advantage options and Health Reimbursement Accounts. (6/14/19)
President Trump signed an executive order that increased price and quality transparency in American health care. (6/24/19)
Empowered patients to choose the best doctor at the best price, gave Americans transparency with the price and quality of service before you buy. (6/24/19)
The Trump Administration issued guidance expanding options for individuals with chronic conditions. High deductible plans can now cover products such as insulin, inhalers and statins pre-deductible. (7/18/19)
HHS awarded almost $107 million to 1,273 health centers across the U.S. in order to improve the quality of the centers’ health care services. (8/20/19)
The Administration proposed a rule to require insurance companies and group health plans to provide enrollees with cost estimates. (11/17/19)
Costly Obamacare taxes were repealed, including the “Cadillac tax” and the medical device tax. (12/16/19)
President Trump signed four executive orders to ensure that Americans are receiving the lowest price possible for their prescription drugs. (7/24/20) (Must have been in response to my 6/16/20 post about difficulties finding the lowest cost of prescription drugs!)
President Trump signed an executive order expanding access to telehealth services in order to ensure rural Americans access to healthcare. (8/3/20)
President Trump signed an executive order to lower drug prices by expanding drugs covered by the “most favored nations” pricing scheme to include both Medicare Part B and D. (9/13/20)
President Trump signed an America-First Healthcare executive order, stating the policy of the Federal Government is to protect those with preexisting conditions & ensure access to affordable care. (9/24/20)
I don’t think it’s accurate for me to be too critical of what he has or hasn’t done based on just this information. Take, for example, the executive order to increase price transparency. When you read the details, it represents a legitimate first step toward making prices available to patients. These tiny achievements snippets just don’t give enough detail, nor do they cover all the efforts of his broader administration, such as the CMS-guided shift to value-based purchasing.
But I do think it’s fair for me to say that President Trump has not led the Republicans to making great strides toward fixing any of the three issues usually argued about in healthcare (cost, quality, access). And possibly this is because the Republican party is kind of stuck.
Think about it. Nobody in government has a solid solution to improving cost and quality in healthcare. But Democrats can still at least work toward achieving universal access. Republicans, on the other hand, traditionally don’t prioritize or champion efforts to achieve universal access, so what are they left with? Nothing substantial.
This is the final part in the series. Part 1 was direct quotes from Joe Biden’s official campaign website about his healthcare plan. Part 2 explained the main parts and rationale of that plan. And in this final part I share my assessment of that plan.
First, as a brief summary, let me remind you of the main parts of Joe Biden’s plan.
He is going to get rid of the limit (400% of the federal poverty level) on who qualifies for health insurance premium subsidies when they are buying insurance on the private market, and he will replace it with a flat percentage of income (8.5%). Anyone whose health insurance will cost more than 8.5% of their annual income will qualify for a subsidy. And he’s going to make those subsidies more generous, so whether someone qualifies for a subsidy will be calculated based on their income compared to the price of a gold-level insurance plan rather than a silver-level plan. And, to top it all off, he’s going to create a new government-run health insurance company that will offer an insurance plan on the private market. This “public option” will be available to other groups as well. For example, employers could, instead of administering their own employer-sponsored insurance plans, have their employees get on the public option. And in states where Medicaid eligibility is more restrictive, many of the uninsured will qualify to be on the public option plan for free.
Ok, now for my thoughts on all of that.
First, I like to start by thinking in terms of the big picture. There are three problems healthcare reformers are usually trying to solve. They want to (1) increase access to care, (2) decrease the cost of care (prices), and (3) improve the quality of care. But I merge the last two goals into one by saying that they want to improve the value of care (which takes into account prices and quality).
So how will Joe Biden’s plan do at increasing access and improving the value of care?
Let’s take the increasing access one first. Remember from last week that there are about 30 million uninsured people in the U.S. Joe Biden’s website quotes that this plan will get 97% of Americans insured, which means there will only be about 10 million uninsured people when all this is implemented. Whether that is too many or not is purely a judgment call based on your own personal moral and political beliefs, so I won’t give any comment on that.
What I will comment on, however, is the other aspect of access-increasing policies that needs to be taken into account. You see, there are two questions that need to be considered whenever you are evaluating a policy designed to increase access. The first is what I already mentioned: How many people it will get insured? The second question, which is almost universally forgotten, is this: How will this policy impact our efforts to improve the value of care? If we increase access and, at the same time, impair our efforts to improve the value of care, we have taken one step forward and one step backward all at the same time.
If you’ve read any of my other writings, you will already know that I believe the key to improving value in healthcare is to get more patients to choose higher-value insurers and providers, which comes from giving them price and quality information about their options and then making sure nothing interferes with their incentives to choose the highest-value one for them. When that is happening properly, market share flows to the higher-value providers and, therefore, it stimulates competition over who can offer the highest value to patients.
Single-payer systems, such as Medicare for All (where a single insurance company run by the government insures everyone in the country), typically are implemented in a way that creates many barriers to that value-improving competition. (By the way, to be clear–I am not saying those barriers are intrinsic to single-payer system designs, just that that’s how they always seem to be implemented; if you want to know more on this topic, see my description of an optimal single-payer system and my evaluation of Elizabeth Warren’s healthcare platform.)
In contrast to Medicare for All proposals, improving the Affordable Care Act is pretty much the most value-improvement friendly way to increase access; it doesn’t create any major new barriers to the changes that need to be made to improve value.
Summarizing this analysis of how Joe Biden’s plan does with the first issue (increasing access), fixing the ACA rates poorly on getting everyone covered (although he is going about it in the most reasonable way possible) but it rates highly on not creating new barriers to fixing the second issue.
And now, speaking of that second issue, improving the value of care, let’s see how Joe Biden’s plan does at that.
. . . Crickets. In spite of choosing an access-increasing plan that will not create too many barriers to our efforts to improve value, I don’t see much in his plan that will take advantage of that. I don’t think this is necessarily an oversight. I just think he and his team don’t know what needs to happen to make transformative changes in healthcare value (although that’s what this blog is all about–apparently they haven’t found it yet). But he has at least proposed what he can to try to lower drug costs, which makes political sense because that’s been a hot topic these days.
I haven’t yet mentioned the public option, so let me say something about that before I close this series.
Creating a public option is a workaround. It’s trying to solve a problem without getting at the root of the problem, which severely hampers its effectiveness at solving that problem and also risks causing collateral damage.
The primary problem that a public option is trying to solve is the issue of non-competitive insurance markets. But no other market in society needs a government-produced option to keep the market’s pricing honest, so why does healthcare insurance? The answer is that it doesn’t. What the healthcare insurance market needs is what other markets already have, and it’s the same thing I mentioned above: It needs shoppers to be able to readily identify the highest-value insurance plan and then choose it. Eliminating barriers to this will do more to stimulate competition over value than a public option will, and it risks no collateral damage.
A public option is also a gradual way to shift more of the population onto public insurance and slowly phase out private insurance, which essentially results in a single-payer system. You could call it Medicare-and-Medicaid-and-Public-Option for All. Whether that’s his goal or not, it doesn’t matter, because it opens up an avenue for that to eventually take place. And I’ve already mentioned my concerns about single-payer systems above.
Overall, I am impressed with Joe Biden’s approach to fixing the ACA. It’s a very rational approach, which is why it’s exactly what I described in my KevinMD post in 2019 about a possible optimal future U.S. healthcare system. But I am very concerned about his addition of a public option, which I think will distract from the real changes that need to be made in the health insurance market and will also create serious risk of new barriers to improving the healthcare system’s value. And as for his plan to improve healthcare value, he doesn’t really have one. So it’s only half a plan, really, with some positive aspects and some negative aspects. Drop the public option and propose some things to improve the value of care (here are some suggestions), and we’ve got ourselves a solid option for the future of our healthcare system.
First, possibly due to political feasibility, he isn’t pushing for Medicare for All. He wants to keep the Affordable Care Act (the ACA, or “Obamacare”) and fix the parts of it that aren’t working so well.
So let’s take a look at that.
There are many parts to the ACA, but its main thrust was to increase insurance coverage. Here are some 2019 data to show what kind of numbers we’ll be working with in this discussion:
People over age 65 are on Medicare (60,000,000 people), so that’s straightforward.
But for the rest–the under-age-65 people–they fall into one of four insurance groups . . .
Employer-sponsored insurance (160,000,000 people) if they’re lucky enough to work for an employer that provides benefits
Medicaid (70,000,000 people) if they’re poor enough to qualify
Private insurance from the “private market” (10,000,000 people) if they make too much to qualify for Medicaid and don’t have an employer that provides benefits
Uninsured (30,000,000 people) if they don’t get insurance from their employer, they don’t qualify for Medicaid, and they don’t want to fork out the dough for insurance from the private market
Now, how did the ACA work to decrease the number of uninsured people? There were many ways, but here are the two biggest ways:
First, it allowed states to liberalize their eligibility criteria for Medicaid, and it offered federal funds to pay for most of the costs associated with all those new Medicaid enrollees. That accounts for about 12,000,000 of that 70,000,000 number listed above, some of which were previously uninsured, and others of which were previously on private insurance.
Second, it created a tax (also called a “health insurance mandate”) for anyone who didn’t have health insurance. This was to push the uninsured who didn’t qualify for Medicaid to buy insurance. And because everyone was going to be required to buy insurance, they had to make sure it would be affordable for everyone, so they promised to help cover the cost of insurance premiums for anyone under 400% of the poverty level. And to prevent insurance companies from taking advantage of the government’s willingness to help pay for people’s insurance premiums, they made a rule that insurers have to charge everyone the same premium (although that price can be adjusted up or down to a limited extent depending on two factors only: age and smoking status).
So, an easy way to describe the ACA’s second way it was trying to increase insurance coverage is by saying it was attempting to shift uninsured people into that private market. The ACA even created a nice website (healthcare.gov) to make it extra easy for people to shop for insurance plans on the private market by listing them all there side by side in a standardized fashion, and the website went so far as to pull in people’s tax information to calculate their premium subsidy right up front as well.
Unfortunately, most of the uninsured who didn’t newly qualify for Medicaid still didn’t buy insurance, not only because the tax/mandate was initially weak, but because it was subsequently eliminated. But the sick people are still buying insurance in the private market because it’s worth it for them since their premium is the same as everyone else with their same age and smoking status. This has left that private market’s risk pool with horribly high average risk and, therefore, horribly high premiums, especially for anyone who earns more than 400% of the poverty level and therefore doesn’t qualify for any premium subsidies. And that’s why there are still 30,000,000 people who are uninsured.
The natural solution to this would be to restore the mandate and to get rid of the 400% poverty level limit and just decide to subsidize the premiums for anyone whose premium will amount to, say, more than 8.5% of their annual income. This would shift many healthy people back into the private market and bring premiums down a whole lot by lowering the average risk, which would then pull even more people from the uninsured group into the private insurance group.
And that’s exactly what Joe Biden plans to do. Except for the reinstating the mandate part, which would probably not be popular nor even possible. I guess he hopes that if his subsidies are generous enough, he will get more healthy people into the market even without a mandate.
He is making the subsidies extra generous. Not only can anyone qualify now (as long as their premium is going to be more than 8.5% of their annual income), but also the benchmark plan these subsidies are based on are gold level plans rather than silver (meaning out-of-pocket costs, especially deductibles, will be a lot lower). So we will see how many of those 30,000,000 people will be enticed into buying health insurance.
But he’s gone further than that. I think he feels that insurance companies don’t truly competitively price their plans because he’s also going to create a new publicly run insurance company that will offer its own plan (known as a “public option”) in the private market alongside all the other private insurers’ plans on healthcare.gov. If the public option ends up being way cheaper than all the other private insurance companies’ plans, everyone will choose to get on that public option, and it will force private insurers to start pricing their plans more competitively. This should also help to lower prices in the private market, which will price even more uninsured people into the market.
There are lots of other details to his plan (you can read them in last week’s post), but the parts discussed here are what I believe to be the biggest core pieces. Everything else is somewhat peripheral.
I have lots of thoughts about how this plan into fits into/contributes to/detracts from the overall changes that need to be made in our healthcare system, so look forward to those next week.
Let’s take a look at Joe Biden’s healthcare plan! This is important because, if the democrats win the senate and hold the house, there’s a reasonable chance his healthcare reform plans will, in some shape, become law. But remember the expected caveat: Even though he can have a big influence on setting the priorities and agenda for his party and congress, and even though there is latitude in how he implements laws, it’s still congress that makes the laws.
As usual, I am relying only on the official campaign website for information. Joe Biden has a number of different pages talking about different healthcare issues, such as coronavirus-related issues, gun violence, and the opioid epidemic. But the main one that reviews his plans for the healthcare system as a whole is here.
And what is his plan? Here are what I believe to be all the relevant quotes, copied directly from his website:
Instead of starting from scratch and getting rid of private insurance, he has a plan to build on the Affordable Care Act by giving Americans more choice, reducing health care costs, and making our health care system less complex to navigate.
He’ll also build on the Affordable Care Act with a plan to insure more than an estimated 97% of Americans.
[Give] Americans a new choice, a public health insurance option like Medicare.
Whether you’re covered through your employer, buying your insurance on your own, or going without coverage altogether, the Biden Plan will give you the choice to purchase a public health insurance option like Medicare.
[Increase] the value of tax credits to lower premiums and extend coverage to more working Americans.
Help middle class families by eliminating the 400% income cap on tax credit eligibility and lowering the limit on the cost of coverage from 9.86% of income to 8.5%.
[Offer] premium-free access to the public option for those 4.9 million individuals who would be eligible for Medicaid but for their state’s inaction, and making sure their public option covers the full scope of Medicaid benefits.
States that have already expanded Medicaid will have the choice of moving the expansion population to the premium-free public option as long as the states continue to pay their current share of the cost of covering those individuals.
Biden will ensure people making below 138% of the federal poverty level get covered. He’ll do this by automatically enrolling these individuals when they interact with certain institutions (such as public schools) or other programs for low-income populations (such as SNAP).
The public option, like Medicare, will negotiate prices with providers, providing a more affordable option for many Americans who today find their health insurance too expensive.
Because the premium tax credits will now be calculated based on the price of a more generous gold plan, families will be able to purchase a plan with a lower deductible and lower out-of-pocket spending.
The Biden Plan will bar health care providers from charging patients out-of-network rates when the patient doesn’t have control over which provider the patient sees (for example, during a hospitalization).
Lower costs and improve health outcomes by partnering with the health care workforce. The Biden Administration will partner with health care workers and accelerate the testing and deployment of innovative solutions that improve quality of care and increase wages for low-wage health care workers, like home care workers.
The Biden Plan will repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations.
For these cases where new specialty drugs without competition are being launched, under the Biden Plan the Secretary of Health and Human Services will establish an independent review board to assess their value. The board will recommend a reasonable price, based on the average price in other countries (a process called external reference pricing) or, if the drug is entering the U.S. market first, based on an evaluation by the independent board members. This reasonable price will be the rate Medicare and the public option will pay. In addition, the Biden Plan will allow private plans participating in the individual marketplace to access a similar rate.
As a condition of participation in the Medicare program and public option, all brand, biotech, and abusively priced generic drugs will be prohibited from increasing their prices more than the general inflation rate. The Biden Plan will also impose a tax penalty on drug manufacturers that increase the costs of their brand, biotech, or abusively priced generic over the general inflation rate.
[Allow] consumers to buy prescription drugs from other countries.
The Biden Plan supports numerous proposals to accelerate the development of safe generics, such as Senator Patrick Leahy’s proposal to make sure generic manufacturers have access to a sample.
Vice President Biden supports repealing the Hyde Amendment because health care is a right that should not be dependent on one’s zip code or income. And, the public option will cover contraception and a woman’s constitutional right to choose.
Stop the rash of state laws that so blatantly violate the constitutional right to an abortion, such as so-called TRAP laws, parental notification requirements, mandatory waiting periods, and ultrasound requirements.
Biden will reissue guidance specifying that states cannot refuse Medicaid funding for Planned Parenthood and other providers that refer for abortions or provide related information and reverse the Trump Administration’s rule preventing Planned Parenthood and certain other family planning programs from obtaining Title X funds.
California came up with a strategy that halved the state’s maternal death rate. As president, Biden will take this strategy nationwide.
[Double] America’s investment in community health centers.
Well, I think those quotes already make this week’s post plenty long. Let’s have a week to digest all that, and next Tuesday I’ll provide some commentary on how those proposals do or don’t address the core causes of the issues in our healthcare system.
Bundled payments are a proven strategy in non-healthcare industries, only we call them by different names. We say we’re paying for a “hotel room” when really we’re paying for the use of the room, the cleaning of the room, the “free” wifi, the “free” continental breakfast, access to the concierge, etc. We say we’re paying for a “cruise” when really we’re paying for the cabin, the unlimited food, the port fees, the access to the shows, use of the onboard pools, etc. These terms (“hotel room” and “cruise” are just two examples) are shorthand terms that refer to the bundle of goods and services you get when you pay that single price. That’s how it works in every industry.
Except healthcare. When we get a bill for a knee replacement, it only contains the surgeon’s cost (okay okay, including the hardware). But there’s also a bill for the anesthesiologist. And for the operating room. And for the hospitalization if you need to stay.
Why would all those things be listed individually if you know you will need a surgeon, an anesthesiologist, and an operating room every single time you get a knee replacement?
Enter bundled payments. They finally turn healthcare a little bit more into a normal industry by allowing patients to pay a single price for the bundle of services that should always be included in that one upfront price.
Sidenote: yes, healthcare is and should always be different from other industries in many important ways. For more details on that, read Arrow’s seminal article on the topic. None of this is incompatible with those insights.
When I see a paper like that, I appreciate the effort to summarize the evidence, but I cringe thinking about all the headlines and misinterpretations and misconceptions that it will perpetuate. People are going to start saying that our large-scale efforts to implement bundled payments are a waste of money . . . and they have evidence to back them up!
But that’s totally the wrong conclusion. This is how I interpret this study: I first think about the overall purpose of bundled payments. When you put their role into the context of the Healthcare Incentives Framework, their purpose is to allow patients to know up front the full price for accomplishing the job they have (get their knee functional again). This enables the patient to compare the price of different options. If they also have quality information of those options, now patients have the ability to shop for the best value (Value = Quality / Price). And when patients start choosing which provider to do their knee replacement based on value, market share starts to shift to the higher-value providers, thus forcing the lower-value providers to change in ways that either raise their quality, lower their price, or (hopefully) both! This is the potential benefit of bundled payments–it is an essential component in stimulating a newfound evolution toward higher quality and lower prices in the market for that specific service.
Compare that to how these studies evaluated the utility of bundled payments: They implemented them for a single procedure and usually with just one of many insurers a provider contracts with. Thus, in most cases the providers were still reimbursed the old fashioned way by all their other insurers. And I would guess that very few competitors in any given region were participating in the same bundled payment program. Therefore, there was no way providers were going to completely shift how they deliver the service because of the narrow scope, a lack of uniform incentives, and a lack of any strong financial imperative to do so (their biggest risk was only of losing a percentage of revenue on small portion of their patients–enough to motivate them to try to do some things a little differently but not to completely redesign how they deliver care–and the risk of losing market share to their competitors due to low value was almost nil). In short, these studies did not get even close to creating the environment for an evolution toward higher value.
With this as context, it’s a surprise to me that any of these bundled payment studies found any benefit at all!
Now, if I could perform my dream study (the design details here and here), that would make a splash. It would get us much closer to the true estimation of how impactful bundled payments could be in healthcare. And until a study like that is done, remember the importance of context, and take any evidence on the impacts of bundled payments with a large grain of salt.
Next week I’ll start looking at Joe Biden’s healthcare plans, so look forward to that!
This is the paper that generated the most media attention, much of which incorrectly asserted that the ACP endorsed “Medicare for All.” So let me, at the outset, clear this up: The ACP doesn’t endorse Medicare for All in this paper. It endorses a couple different options to achieve universal coverage, one of which is a single-payer system. There are many ways to achieve a single-payer system, and Medicare for All is just one way to do that. Maybe this sounds like semantics, but I think it’s important to be accurate here because the term “Medicare for All” carries with it a lot of specific ideas about how a single-payer system should be implemented, and it also carries with it specific political affiliations. The ACP was not committing to any of those specific ideas or political affiliations; the writers were only endorsing the general single-payer system approach as one of two options for how to increase insurance coverage.
Now, on to assessing the details of the paper.
Part 1 of this paper reviews the state of insurance coverage and healthcare spending, which sets the stage for Parts 2 and 3 to talk about ways to expand coverage and lower care costs.
Part 2 is mostly what I want to talk about. First, it asserts unabashedly that the ACP feels that universal health insurance coverage is essential. And since having insurance coverage is pointless if its spending requirements are not affordable or if providers are unavailable, it adds those access details in as also being essential.
Then it lists two options that it sees as being able to achieve that goal: a “single-payer financing approach” and a “publicly financed coverage option.” Let’s look at each one.
Single-payer financing approach. This means a single government-run insurance company provides insurance for everyone in the country. It doesn’t necessarily prevent people from purchasing private supplemental insurance, but it would cover everything considered to be essential. The paper then discusses some of the well-known benefits and concerns that come along with having a single-payer system. The interesting part to me, which makes sense coming from a physician organization, is their particular concern about how this would affect physicians. It could decrease administrative burden and uncompensated care, but it could also decrease autonomy. And the big concern is that if it relies on “Medicare’s flawed payment system,” it would perpetuate a few undesirable things, including bad incentives (such as an over-reliance on fee for service), the overvaluing of certain services (procedures), and unsustainably low reimbursements (that would make some providers go bankrupt). Any prior “Medicare for All” proposal I’ve seen relies on Medicare’s payment system, so this is a good example of why the ACP is not endorsing Medicare for All specifically.
Publicly financed coverage option. Another name for this is a “public option.” Basically it’s a government-run insurance plan that will be offered alongside private insurance plans. It would be available for employees to opt into rather than use their employer-sponsored insurance as well. An essential part of this insurance plan is that it would have premium and cost-sharing subsidies (so that, again, lower-income people don’t end up with useless coverage). Later on in this paper, they say that no matter which option is chosen, it needs to have included with it a mandatory or automatic enrollment component. I’m not sure how premiums would be paid for by people auto-enrolled into the public option plan–possibly through filing their taxes–but isn’t this looking more and more like the Affordable Care Act? Require people to have insurance coverage and subsidize lower-income people to be able to buy it? Yes, that’s the ACA. The one difference is that one of the insurance plans people can select from will be run by the government (which, incidentally, was originally part of the ACA plan).
So those are the two options the ACP supports. They also mention another approach: convert all insurers to non-profits and require everyone to have health insurance (another variation of the ACA, but this time there’s no public option and instead all the insurers are non-profits). But they say there is not enough information on how such a system could be applied to the U.S., so they don’t endorse it. And all the other options for reform that are out there (such as “market-based approaches”) would not achieve universal coverage, so they were eliminated from consideration.
Even though the ACP is politically neutral, you can see that their foundational beliefs and priorities line up much more closely with modern liberal thinking rather than conservative thinking/beliefs/priorities. This is what I expected, and I discussed it in my intro to this series.
Part 3 discusses strategies they support to lower healthcare costs. There are 5 of them: invest more in primary and comprehensive care, reduce excessive pricing and improve efficiency, reduce low-value care, rely more on global budgets and all-payer rate setting, and use more reference pricing.
Rather than get into the merits and drawbacks of these different policies here, lets finish this series with a brief discussion about whether the two options they endorse to attain universal coverage will get in the way of the ideas we talked about in Part 2.
If you will recall, the second ACP paper we discussed gave 6 different recommendations, the two main ones being to (1) give patients price and quality information to help them choose higher-value providers and (2) getting providers to shift to value-based purchasing arrangements (especially different forms of capitation) with insurers.
With a single-payer system, usually the implementation involves setting a uniform nationwide price for each service (adjusted by region for cost of living). This would completely ruin their idea of getting patients to choose providers based on value because the price would be the same for all providers. I will not get into detail on how, but setting a price floor like that completely distorts providers’ innovation incentives. It would kill pretty much any cost-lowering innovation that results in slightly reduced quality, even if the innovation could result in drastically lower cost.
But, on the upside, since there’s only one insurer to deal with, a single-payer system would allow for perfectly uniform incentives for any provider that chooses to enter a VBP arrangement!
With a public option like they have described, there is the exact same problem with distorted/ruined incentives due to uniform pricing, but at least the extent of the problem is limited to the number of patients who are on the public option plan. And, as for providers’ efforts to enter into VBP arrangements, it would probably make it slightly easier to get uniform incentives because I assume VBP arrangements would be harmonized between Medicare and this public option. But any provider who wants to design their own VBP arrangement is going to have to have an even harder time attaining uniform incentives because I suspect they would have to convince the plan administrators of Medicare and the public option independently, which means they’re trying to win over yet another public payer to be able to move forward with their idea.
Am I saying that the ACP’s efforts to accomplish universal coverage will interfere with their efforts to improve the care delivery system? Yes. The two options they endorse don’t necessarily need to be implemented in a way that does that, but I see nothing in what they’ve written that specifies that they should be implemented in a way that mitigates those problems. (For details on how this could be done, see what an optimal single-payer system would look like here and what an optimal ACA-type system would look like here.)
I think different groups of people were working on each paper, and even though they were reporting their findings and recommendations to the same group of ACP leaders for approval, it’s quite a difficult task as one of those ACP leaders to be presented with complex recommendations from two different groups and figure out exactly how they might conflict with each other.
Well, there we have it. The ACP endorsed some things that would be very beneficial, but they fell into the same trap of not thinking about these things from a complete system perspective, so their efforts to get more people into the system will interfere with the changes the system needs to deliver better value over time. This is why any healthcare reformer first needs to have a firm understanding of the core causes of low value and how those can be resolved before deciding on the details of how to enact universal coverage.
But I am happy the ACP jumped directly into this arena. It shows that powerful physician groups are also interested in figuring out how to fix the healthcare system. Maybe the biggest benefit from their efforts of researching and releasing these papers (and then having them critiqued) is that it will make the ACP and other provider groups more likely to recognize and support policies that will truly move us closer to fixing our healthcare system.