Why Insurers Don’t Innovate

Last week, I described how providers and insurers are the parties in the healthcare system that we need to lean on to start innovating in ways that actually bend the cost curve. And it would seem that they have all the incentives in the world to do this, because any innovation that they can do that lowers their cost means they are keeping more money in their pocket (assuming prices are fixed). But there are some challenges.

This week, let’s look at insurers.

Remember that total healthcare spending is a function of two things: the number of care episodes, and the cost of each of those care episodes. Insurers try to lower the cost of care episodes by covering fewer things (benefit exclusions, prior authorizations) and negotiating for lower prices, but they’re fairly limited in their control over that variable. They have more opportunity to reduce the number of care episodes by keeping people healthy (yes, it does always come back to my Healthcare Incentives Framework). If they can accomplish this, all that money they avoided paying out to providers stays in their pocket.

Brief rant: That last sentence is not strictly true. The Affordable Care Act, in an effort to prevent insurers from price gouging, included a provision that requires insurers to pay out 80% or 85% (depending on the market) of the premium money they receive to providers to pay for care, which would theoretically prevent unreasonable profits by forcing them to limit how high they can raise their prices. This seems like a great idea until you realize a few things. First, if an insurer does a great job preventing care episodes, they may end up having to pay a bunch of that money back to enrollees as rebates, so this puts a ceiling on the financial benefits of innovations that lower medical spending, thereby reducing innovation in this area. Second, small insurers don’t have the luxury of millions of covered lives over which they can spread overhead, so this has put some smaller insurers out of business, thereby concentrating the market even more than it was before. Third, the solution to a market problem is not to control prices like this, but to identify what is interfering with competitive pricing and get rid of that. Sure, there have been billions of dollars of rebates paid out, but at the cost of creating new market distortions that will further interfere with true long-term price-lowering solutions.

Anyway, here are two other reasons insurers don’t innovate more to lower the cost of care:

  • Patients don’t like it: When an insurer starts getting too aggressive about trying to send people to your house or change how you live your life, this gives that insurer a bad rap. And in the absence of really good price and quality information about different insurers, people rely heavily on reputations, so it’s very important for insurers to preserve their reputations.
  • The rewards for taking a big risk to innovate in ways that prevent care episodes are small: An insurer can definitely invest a lot of money trying some new program that could keep people out of hospitals, but it’s a big risk to take, so the potential rewards also have to be big. But when they start thinking about how much money the initiative will cost, the likelihood of it saving more than it costs, and the risk of them having to pay back money for rebates if they save too much money, the benefit starts to seem pretty small. Not only that, but also they can’t reassure themselves that, even if the net savings per enrollee are small, it will allow them to lower their premiums and outprice their competitors and win a larger percentage of market share. Why? Because people shopping for healthcare insurance typically have too many variables to think about, so it gets confusing and they end up assuming a lower-priced insurance plan must be cheaper because it’s covering fewer things.

All of these problems are solveable to a great extent. It requires getting rid of the ACA medical loss ratio requirement and instead getting better information to people shopping for health insurance, which would allow them to better identify higher-value insurance plans and rely less on insurer reputations in their selections.

Then, when an insurer does a great job innovating in a way that lowers the number of care episodes, that insurer will be motivated to lower their prices of their own volition and will be assured that new customers will flock to them, thus forcing other insurers to do a better job innovating themselves, and the cost-curve-bending will have begun.

Next we’ll look at why providers don’t innovate.

How Can Innovation Lower Healthcare Spending?

I write a lot about how to decrease our inordinate spending on healthcare, and this week I want to clarify a little bit how I see this actually working. This requires me to define a couple terms:

  • Active demand: Demand that is being fulfilled. In other words, we’re expending resources to fulfill a need.
  • Latent demand: Demand that is not yet being fulfilled. It’s something people want and would be willing to expend resources to get, but there is just no technological or pharmaceutical solution to fulfill that demand. For example, activating latent demand could mean finding a treatment for a disease that has no treatment as of yet, or it could mean finding a better (usually more expensive) treatment for a disease that already has other treatment options.

When innovation activates latent demand, it usually increases spending because it’s allowing us to do more things for more people. But about innovation that doesn’t activate latent demand?

Think about provider-led innovation. Providers can only take the medicines and devices available to them and figure out how to apply them to patients as efficiently as possible. When they innovate, they are finding new ways to apply those things more efficiently. Thus, provider-led innovation usually lowers healthcare spending.

Think also about insurer-led innovation. Insurers are paid a fixed premium every month by their enrollees, and if they are able to innovate in ways that prevent care episodes (say, by hiring a community health worker to visit high-risk patients and keep them out of the emergency department), they end up keeping that unspent money in their pocket. So insurer-led innovation also usually lowers healthcare spending.

If providers and insurers can innovate to lower healthcare spending, why is innovation one of the primary drivers of increasing healthcare spending? Because, the way incentives are set up right now in our healthcare system, there are huge rewards available for anyone who comes up with a new medicine or medical device (pharmaceutical companies, medical device companies, etc.), but there are minimal rewards for providers or insurers that find ways to apply those innovations more efficiently to patients.

I’ll talk more soon about why providers don’t innovate and why insurers don’t innovate.

Medicare for All, the Bernie Sanders Version

Since I’ve spent so much time discussing the extensive details of Elizabeth Warren’s Medicare for All plans (let’s call it WarrenM4A), I think this week it’s time I talked about Bernie Sanders’ M4A plans (SandersM4A). These are the only two leading Democratic candidates who are advocating M4A.

Like I did for my analysis of Elizabeth Warren’s plans, I will rely only on what Bernie Sanders has committed to on his official campaign website. He’s made it easy for me because there is very little on there. Here are the direct quotes of all relevant information from his website (here and here):

“Create a Medicare for All, single-payer, national health insurance program to provide everyone in America with comprehensive health care coverage, free at the point of service.”

“No networks, no premiums, no deductibles, no copays, no surprise bills.”

“Medicare coverage will be expanded and improved to include: include dental, hearing, vision, and home- and community-based long-term care, in-patient and out-patient services, mental health and substance abuse treatment, reproductive and maternity care, prescription drugs, and more.”

“[Make] sure that no one in America pays over $200 a year for the medicine they need by capping what Americans pay for prescription drugs under Medicare for All.”

“Allow Medicare to negotiate with the big drug companies to lower prescription drug prices with the Medicare Drug Price Negotiation Act.”

“Allow patients, pharmacists, and wholesalers to buy low-cost prescription drugs from Canada and other industrialized countries with the Affordable and Safe Prescription Drug Importation Act.”

“Cut prescription drug prices in half, with the Prescription Drug Price Relief Act, by pegging prices to the median drug price in five major countries: Canada, the United Kingdom, France, Germany, and Japan.”

“Eliminate all of the $81 billion in past-due medical debt held by 79 million Americans —one in every six Americans.”

“The federal government will negotiate and pay off past-due medical bills in collections that have been reported to credit agencies.”

“Reform bankruptcy laws to use the existing bankruptcy court system to provide relief for those with burdensome medical debt.”

“End abusive and harassing debt collection practices.”

That’s it. I didn’t quote all his specifics about how he will get rid of medical debt and reform bankruptcy laws, but that is less relevant to a discussion about the future function of the healthcare system itself under his SandersM4A.

My brief summary of those quotes: he’s going to cover everyone with Medicare; he will enhance Medicare’s benefits to include dental, hearing, vision, long-term care, etc.; there will be no out-of-pocket expenses for services; he will use a variety to means to lower prescription prices significantly plus cap out-of-pocket spending on prescriptions to $200/person/year (I assume he is not meaning $200/person/medication/year); and he will negotiate and pay off all existing medical debts.

We see here the same simplicity that WarrenM4A offers, for both patients and providers. That is, after all, one of the main draws of M4A in general–it’s probably the simplest way to cover everyone.

Let’s talk briefly about how SandersM4A will deal with drug prices. Medicare will be allowed to negotiate, which it will be able to do very successfully when it covers all 300-something million of us. We will also be allowed to buy drugs from other countries for those times when, despite Medicare’s negotiations, other countries’ prices are still lower than ours. And then, confusingly, he also says he’s going to peg drug prices to the median prices of some other countries. This doesn’t sound like negotiation, so I’m not sure how it fits with his promise to get Medicare to negotiate drug prices.

Regardless, he is leveraging known successful methods of lowering prices–increase supply, and increase (and also take advantage of!) your bargaining power. This is very similar to what WarrenM4A proposes, which you can review here.

Unfortunately, that’s about as much as I can say about SandersM4A. There’s no discussion about how he would transition, nor how he would set prices, which is probably politically prudent (although frustrating). He’s getting rid of all cost sharing, which seriously impedes the opportunity to stimulate value-improving innovations over time, as I’ve written about before. But, who knows, maybe he would implement many of the other pricing features I’ve described to achieve an optimal single-payer system and thereby prevent the unfortunate demise I have predicted for WarrenM4A.

I’ll repeat myself one final time: M4A can be implemented without much thought about or understanding of the realities of market mechanisms, or it can be implemented in a way that leverages those market mechanisms to also fix healthcare for the long term. So far, I’m not seeing any evidence of the latter from these candidates.

Reading Elizabeth Warren’s Healthcare Plan, Part 7

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Part 3: How she will “improve the ACA” to get her transition to M4A started

Part 4: All the other things she’ll do before starting the transition to M4A, including some Medicaid changes, increasing access for rural and underserved patients, making antitrust enforcement stricter, and a variety of other incremental changes

Combine all the details from parts 2, 3, and 4, and you have the most likely scenario of how the healthcare system will end up with a Warren administration!

Part 5: How she will transition to M4A, which is mainly by lowering Medicare eligibility to age 50 and then offering a Medicare “public option” for people ages 0-49 that pretty much anyone can opt into

Part 6: A description of what she would have M4A look like based on the details she’s shared on her website

This is the final installment of my series on Elizabeth Warren’s healthcare plans. Let’s talk a little bit about how the healthcare system would do with a M4A as she has described it.

The first thing to note is that it will be simple, especially after all cost-sharing requirements are phased out. Everyone is covered, nearly all providers in the country will be in network, and there will be no confusing coverage issues or cost sharing issues. I love simple, especially because complexity in our current system is such an insidious and ubiquitous cause of waste.

Not only will it be simple for patients, but also it will be simple for providers. They only deal with one insurer, one price for each service, one set of coverage rules, one form for prior authorizations, etc. This will certainly contribute to lower administrative costs (a huge problem), but it will be in a zillion ways that are hard to predict until we see it happen.

People commonly voice to me this concern about a lack of cost sharing: “Won’t this mean people will run to the doctor every time they have a cough, so they’re going to drive up total healthcare spending a bunch because of all these unnecessary services?” Yes, people will have a lower threshold for receiving care. The Rand Health Insurance Experiment showed us that long ago. The thing is, people don’t know in advance which services that they’re seeking out are necessary and which are unnecessary, so getting rid of cost sharing will also get more people care that they actually need. There’s a theoretical benefit here that disease will be caught earlier when it’s cheaper to manage, although I haven’t seen evidence that bears that out. But the real issue with eliminating cost sharing is explained here.

Let’s move on to total healthcare spending to see what this single-payer system will do about that. Experts disagree on whether/how much this plan would decrease total healthcare spending, but remember that there’s a current level of spending and then there’s the long-term trend of spending. My guess is that the level of spending would go down a little bit due to the greater simplicity, even with more people covered and more generous benefits. But what about the trend of spending?

We will still have an aging and progressively more obese and sicker population. We will still have continued medical innovations that allow us to do more things for more people. Can you see that, even if we lower our current level of spending by implementing M4A, our spending trend is still going to grow faster than our GDP? How would Elizabeth Warren combat that?

The short answer is by administratively lowering prices–globally if necessary, but mostly via provider-specific price lowering according to “the progress of provider adjustments to new, lower rates.”

I love simplicity, but I equally despise administrative pricing, especially in this fashion that smacks of Soviet price controls. She seems to be proposing to “reward” a provider that does a good job getting costs down by giving them less money. What incentive does that create? This is going to get gamed like crazy.

And when providers–who have no direct control over their patients getting older and fatter and sicker–are required to deliver more care to these people (thus pushing up total healthcare spending), she will punish them by imposing global rate cuts. Or, she will try. That will be the true test of the power of the hospital and physician lobbies.

What will happen next? Some new reform will come along to solve the unsolved spending crisis, and we’ll be back to trying to overhaul our system.

If our country chooses M4A, so be it. I, as an individual, have very little control over that. But if we’re going to do it, maybe I can have some small influence on getting us to do it properly. Like I’ve said before, everything depends on how you implement a single-payer system to determine the sustainability of it. And I’ve already written about what needs to happen for it to be successful. That’s the purpose of my Building a Healthcare System from Scratch series, and I’ve also shown how the principles from that series would apply to an optimal single-payer system.

So, to conclude this series, I will say that Elizabeth Warren’s vision for M4A has some things going for it from a design standpoint, and her plan to get us there is very clever, but her legacy will be doomed to fiscal failure probably within a couple decades if she doesn’t also set up the mechanisms that are required to solve the spending trend problem.

Reading Elizabeth Warren’s Healthcare Plan, Part 6

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Part 3: How she will “improve the ACA” to get her transition to M4A started

Part 4: All the other things she’ll do before starting the transition to M4A, including some Medicaid changes, increasing access for rural and underserved patients, making antitrust enforcement stricter, and a variety of other incremental changes

Combine all the details from parts 2, 3, and 4, and you have the most likely scenario of how the healthcare system will end up with a Warren administration!

Part 5: How she will transition to M4A, which is mainly by lowering Medicare eligibility to age 50 and then offering a Medicare “public option” for people ages 0-49 that pretty much anyone can opt into

I categorized everything Elizabeth Warren has written on her website (at least as of late 2019 when I read through it all) about healthcare into the following groups:

  1. General details that will apply regardless of how close she gets to achieving Medicare for All (M4A)
  2. Her plan to transition to M4A
  3. Her vision of what M4A would look like if it is achieved

Last post, we talked about number 2. So now let’s look at number 3: Elizabeth Warren’s vision for the future American healthcare system, which she plans to achieve by the end of her first term in office.

First, we’re already clear that she plans on covering everyone with a single publicly run health insurance company we lovingly refer to as Medicare. What would this coverage include? Everything Medicare already covers, plus more mental health and substance use services, contraceptives, vision, expanded dental coverage, audiology, physical therapy, and long-term care. So, very comprehensive.

How much would Medicare enrollees pay? Initially, there would be premiums of unspecified amounts, and everyone would have an annual out-of-pocket max of $1,500 (the premiums you pay don’t apply to that $1,500), but that’s all-inclusive of parts A, B, and D. Over time, all premiums, copays, and deductibles would be phased down to $0. She doesn’t specifically mention coinsurance, but I think she intends to get rid of all out-of-pocket costs completely.

How will she pay providers? She says initially they will get 110% of current Medicare prices, which is higher than 100% because presumably she has to make up for the fact that they will no longer be getting payments from private insurers, which tend to be higher than what Medicare pays. And then she says something I find interesting. Some hospitals will initially get more than 110% (rural hospitals, teaching hospitals, and the ambiguous “others with challenging cost structures”), and some will get less than 110% (those hospitals that are “doing fine with current Medicare rates”). I guess she wants to directly control profitability–hospitals that make more money will get paid lower prices!

The “geographic base rate adjustments”–a multiplier that adjusts prices up or down depending on the cost of doing business in that region–will remain in place, which makes perfect sense.

She doesn’t want to pay providers 110% forever. Over time, she will decrease that number as providers adjust their administrative staff down to adjust to the new simplified life of only dealing with one insurer. But she also says these decreases will be provider specific according to the “overall plan size and the progress of provider adjustments to new, lower rates.” Again, there’s a lot of administrative latitude going into setting provider-specific prices.

She’ll also start paying primary care doctors more and will decrease pay for “overpaid specialists.”

But what if all of this isn’t enough to reign in runaway healthcare spending? What will she do then? She will enforce further global rate reductions, plain and simple.

Elizabeth Warren also makes a point to explain how employers fit into all of this. Since they no longer have to pay for private insurance for their employees, they will be expected to pay Medicare directly for covering their employees. She doesn’t mention whether this requirement will go away once all premiums are phased to $0, but I find it unlikely that she would willingly give up such a reliable stream of income. Regardless, this requirement would not apply to businesses with fewer than 50 employees, and it would slowly phase in as the number of employees increases. Self-employed folk don’t have to pay the Medicare premium either unless they exceed a certain amount of income. And if any employer out there that gets a killer deal on healthcare insurance from a private company, they can go ahead and use that private company as long as they pass on whatever savings they are getting directly to their employees.

There you have it. A M4A system in the United States. I’ll save my assessment and recommendations for next time.

Reading Elizabeth Warren’s Healthcare Plan, Part 5

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Part 3: How she will “improve the ACA” to get her transition to M4A started

Part 4: All the other things she’ll do before starting the transition to M4A, including some Medicaid changes, increasing access for rural and underserved patients, making antitrust enforcement stricter, and a variety of other incremental changes

Combine all the details from parts 2, 3, and 4 and you have the most likely scenario of how the healthcare system will end up with a Warren administration

Ok, now we’re to the more interesting stuff. As a reminder, this is how I’ve categorized all of Elizabeth Warren’s plans:

  1. General details that will apply regardless of how close she gets to achieving Medicare for All (M4A)
  2. Her plan to transition to M4A
  3. Her vision of what M4A would look like if it is achieved

Let’s talk about her transition to M4A! I think I could sum it up by calling it her “Medicare for 50+ and a public option” plan.

Just as a reminder, the current non-Veterans Administration health insurance market in the USA is divided into a lot of different segments, here are the main ones: Private insurance through an employer (AKA employer-sponsored insurance), private insurance not through an employer, Medicaid (for the poor), Medicare (for age 65+).

In Elizabeth Warren’s transition to M4A, she’s going to impact all four of those segments. She will first lower the Medicare age to 50. So anyone age 50+ who doesn’t already have insurance will be auto-enrolled, and anyone 50+ who is already paying for insurance will probably switch since Medicare will be free for them.

So what about the people ages 0-49? She’s going to create a Medicare “public option.” Let me define that term. It basically means that Medicare (a publicly run insurance plan) will be listed as an option alongside all the other private plan options.

So, for example, if someone is getting private insurance on the open market (usually on healthcare.gov), Medicare will be listed there as an option they could choose. This will probably be the cheapest plan for many since the premium will be $0 for anyone <200% of the FPL, and it will be capped at 5% of income for anyone between 200% and 400% of the FPL.

For people who already have employer-sponsored insurance, they can choose to decline their employer’s insurance and get on the Medicare option instead. Employees looking for better coverage, a broader network, and/or less cost sharing would probably go for that. If an employee does that, the employer would be responsible to pay Medicare directly for that employee’s premium.

And as for Medicaid, each state will have the option of continuing their Medicaid program as is, or they can dissolve their Medicaid program altogether and instead use that money to pay Medicare to cover all those people.

What about the benefits and network of this Medicare public option? They would be the same as traditional Medicare. So any provider that already takes Medicare or Medicaid would be required to also take Medicare public option patients.

My assessment: Given that her goal is to get as many people onto Medicare as possible in this transition, she’s found a way to make it easier and cheaper for people in every segment to do that. Think about it from the perspective of a state. Continue putting so much effort and expense into running Medicaid, or just pay Medicare to cover all those people instead? I don’t know if it would end up being cheaper for states to do that, but if it is (and I’d guess she’s planning on designing it to be so), it would be a no-brainer for most states that aren’t morally opposed to turning more power over to the federal government.

Now think about it from the perspective of an employer. Continue dealing with the complexity and frustration of negotiating good insurance for your employees, or just get a guaranteed great network and cheap premiums (since Medicare doesn’t have to negotiate prices with providers!)? Again, a no-brainer for most.

The only group of people I can think of that might continue to have a large percentage on private insurance is people ages 0-49 who make more than 400% of the FPL and work for a large employer that has leveraged their size to negotiate a better health insurance deal than Medicare.

With regards to designing a transition to M4A that gets more people on a public plan, this is an elegant way to do it. Instead of “taking away” people’s private insurance, it induces people to willingly leave their private insurance for something that will be cheaper and probably also have a broader network, more comprehensive coverage, and lower cost sharing.

My recommendation: If you are thinking solely about getting to M4A, I can’t see anything wrong with this method of doing it. Remember I’m ignoring political feasibility and considerations of how it will be paid for.

I’ll end this post with the same caveat as the last one. People need to remember that getting everyone covered with insurance is not the only thing to worry about in a healthcare system. The other big issue long term for our country is the continuously rising cost of healthcare, which will become even more the government’s problem once it has the full responsibility for paying for it. Elizabeth Warren does talk about some cost savings that will come along with achieving M4A, and I’ll wait to address those more after I’ve discussed her vision for what M4A would look like. More to come!

Reading Elizabeth Warren’s Healthcare Plan, Part 4

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Part 3: How she will “improve the ACA” to get her transition to M4A started

I’ve been saying that Elizabeth Warren’s healthcare plans fall into 3 categories:

  1. General details that will apply regardless of how close she gets to achieving Medicare for All (M4A)
  2. Her plan to transition to M4A
  3. Her vision of what M4A would look like if it is achieved

This week I’ll round out the many other general details she mentions that don’t apply to category 2 or 3. I think, given the somewhat low likelihood that M4A will actually be achieved, we could consider this and the two prior posts in this series as the most likely scenario of what our healthcare system will look like with a Warren presidency.

She’s given us quite a variety of details, so let’s just run though them.

She’s going to make some changes to Medicaid (which, as a reminder, is a program run by each state using some government funds), including eliminating some state Medicaid programs’ policies of dropping coverage for silly administrative reasons, having stricter standards for the adequacy of provider networks in Medicaid managed care plans, and she’ll allow more states to do creative Medicaid expansions (using 1115 waivers) even if it increases federal spending.

She wants to improve access to care for rural and underserved patients, so she will reimburse rural hospitals at a higher rate, increase funding for Community Health Centers, increase apprenticeship programs to train up more of the healthcare workforce from those communities, lift the cap on residency spots in rural and underserved areas, and she will increase loan repayment programs for caregivers who work in underserved areas or who work for the Indian Health Service.

On the topic of antitrust, she wants to be stricter. She will appoint stricter enforcers of antitrust laws, block all future mergers unless they can prove that the newly merged entity will maintain or improve care (doesn’t seem like a very high standard, actually), repeal a law (called COPA) that allows for laxer enforcement of antitrust laws for some parties, and she will even go so far as to break up mergers that she thinks never should have happened.

She seems to talk specifically about unions quite often, so she must really want their support (or maybe want to avoid their resistance). Much of it applies to her M4A plans, like allowing them to negotiate moving to M4A earlier and requiring employers to pass along any savings obtained from that directly to the employees, but she will also lower taxes on union-negotiated health plans.

And then there are a bunch of things in the “other” category. I won’t list all of them, but the main ones that stuck out to me reading through all her stuff are as follows:

  • Prevent hospital systems and EMR companies from blocking sharing of medical information
  • Lower post-acute care reimbursement
  • Establish site-neutral reimbursements (this means that a specific service will be reimbursed the same regardless of whether it was provided in a hospital versus an outpatient clinic)
  • Expand bundled payments
  • Establish some standardization for the insurance industry’s paperwork (e.g., prior auths, appeals) and billing processes
  • Create a nationwide all-payer claims database (so we can see what providers are actually getting paid for delivering services all over the country)
  • Ban non-compete and no-poach agreements
  • Lift the cap on residency spots
  • Give grants to states that want to expand scope-of-practice laws so more non-physicians can practice primary care

My assessment: Having now looked at the most likely scenario for our healthcare system under Elizabeth Warren in Parts 2-4 of this series, I would consider it a collection of incremental changes. A few more people will be insured via Medicaid, a few more people will get subsidies to buy ACA plans, a few hospital mergers will be prevented, medications will be a little cheaper, and underserved areas will have a few more caregivers with a little more funding at their disposal.

Don’t get me wrong, these will make a lot of people happier, and that is fantastic. But they won’t make a huge dent in the number of uninsured (unless she re-implements the tax penalty for going uninsured, which I don’t think she’s admitted to yet), and they’ll do even less to affect the other primary driver of recurring efforts to reform healthcare over the last several decades–its cost. High costs are what push budgetary constraints and get politicians riled out about how to reform so that they can spend less on healthcare. High costs of care are what drive insurance prices to such heights that few can buy it without government subsidies, which then causes the uninsured ranks to swell even more.

My recommendation: Have a back-up plan. If the transition to M4A gets stalled, then this is what we’ll be left with, and it’s not going to win any awards. Changes need to be made that enable the cost of care to go down. I have explained those changes in my Building a Healthcare System from Scratch series.

That series also explains that even if M4A is achieved and also succeeds at lowering total healthcare spending (not a guarantee), it will only temporarily bring down the level of spending, but the trend will be largely unchanged, so we’ll be right back to where we were before M4A within a decade or two. Therefore, with or without M4A, her plan is missing the key components that will enable the cost of care to start going down. But I’ll get into that more when I talk about her vision for M4A.

Reading Elizabeth Warren’s Healthcare Plan, Part 3

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Elizabeth Warren’s plans for the healthcare system fall into 3 categories:

  1. General details that will apply regardless of how close she gets to achieving Medicare for All (M4A)
  2. Her plan to transition to M4A
  3. Her vision of what M4A would look like if it is achieved

So let’s continue where we left off in Part 2 and finish looking at the other things she plans that fall into the first category . . .

Improving the Affordable Care Act

Just as a little review, as the health insurance market stands today, people who don’t get their insurance through their employer have to go to the private market to get it. (There was originally a tax penalty if you weren’t insured, but President Trump got rid of that.) The best place to shop for plans on the private market is healthcare.gov, for a couple reasons. First, it shows you your insurance plan options in an easy side-by-side comparison format to make shopping easier. Second, for anyone who might have to pay approximately 10% or more of their income on insurance, that website will connect with the IRS website to pull your income information and then allow you to buy the plan at a reduced rate (and sometimes lower the deductible on that insurance plan too), and the government covers the rest and sends its portion directly to the insurer for you.

These plans on healthcare.gov are referred to as “ACA plans” because the ACA is the law that established that website and those subsidies. Elizabeth Warren plans to improve access to ACA plans in a few ways. First, she will re-fund programs that help people get signed up for coverage on healthcare.gov. She will also make those ACA subsidies apply to lots more people by lowering the income cap to 5%. And it looks like she will also try to cover all out-of-pocket costs for people who earn less than 200% of the federal poverty level. She will also outlaw “junk plans” that are currently allowed as alternatives to ACA plans but have fewer things covered.

My assessment: I guess by “improve the ACA” she mostly means “get more people covered with ACA plans.” And it seems pretty straightforward that those policies listed will work. This does nothing to accomplish her other goal–of making healthcare cheaper–but this is just a short-term effort to get more people insurance until she can bring about her bigger goal of M4A. And she’s doing it in a clever way by starting to have the government shoulder more of the burden of paying for healthcare insurance, which will ease us into her eventual transition to M4A.

But did you notice the glaring omission? She says nothing about the tax penalty for being uninsured. I’m guessing she’s also going to re-implement that, which will help her accomplish her immediate goal of getting more people covered with ACA plans by bringing healthy people back into the insurance pool. I guess talking about plans to make people choose between buying an expensive product they think they might not need or else pay a big tax penalty is not a strategically smart thing to bring up when you’re running for president.

My recommendation: Her plans here make sense given her goal of transitioning to M4A. In the short term, use what we’ve got (“improve the ACA”) in a way that helps start to transition more of the responsibility of paying for healthcare to the government. In other words, get more people into the current system and cover more of their premiums with government funds. I wish she’d be up front about planning on re-implementing the uninsured tax penalty. If she wants to make that tax penalty effective, it has to apply to everyone and be large enough that the vast majority of people will choose insurance rather than choose to pay the penalty and get nothing in return.

I’ve said nothing of my concern that she doesn’t adequately address how to make the actual cost of care cheaper, but I also understand why. This is only a short-term plan to ease us into her transition to M4A–she’s not looking at it as a long-term thing. So I’ll save my comments about that topic for a later post in the series when I describe her vision of what M4A could look like.

And maybe this is a good time to remind readers that I’m making no judgments on the moral aspects of her plan. I’m not trying to argue whether government intervention in healthcare is good or bad. You can decide that for yourself. I’m just trying to evaluate how effective her plan would be at addressing the current issues in our healthcare system.

Reading Elizabeth Warren’s Healthcare Plan, Part 2

I took a week off to celebrate Christmas with my family, and now I’m back for my assessment of the extensive quotes from Elizabeth Warren’s website that I shared in Part 1.

Reading through it all, I think it can naturally divide into three sections:

  1. General details that will apply regardless of how close she gets to achieving Medicare for All (M4A)
  2. Her plan to transition to M4A
  3. Her vision of what M4A would look like if it is achieved

In each section, I will not rehash every single detail she gives, but I will mention the things that I believe are the most relevant to the performance of the healthcare system as she would have it.

This was originally going to just be a two-part series, but shorter posts are less daunting to read, so I’ll tackle this in bite-size chunks. Therefore, I’ll start working my way through the main categories I’ve identified in Section 1, starting with . . .

Pharmaceutical Prices

She is going to crack down hard on medication prices. How? By getting Medicare to aggressively negotiate for all drug prices. The bargaining power of Medicare will increase as it covers more people, so this will become more effective at lowering prices over time. Eventually Medicare will not allow prices more than 110% of average international market prices, and there will be no artificial price floor for how low those prices can end up. If drug companies play hardball and refuse to agree to the prices Medicare is demanding, she will resort to regulatory mechanisms to bypass drug patents and require re-licensing of those drugs. Or if all that fails, she will just have HHS manufacture the drug itself if it finds a way to legally do so. She also promises to incentivize pharmaceutical companies to develop new drugs that we need (antibiotics, cancer drugs, vaccines).

My assessment: I agree that Medicare should negotiate for drug prices just like other insurers do all over the world. But I have concerns with her contingency plans if those negotiations have unsatisfactory results. If the prices are too high, that’s either because the pharmaceutical company has the power in the negotiation because they have a patent-induced monopoly (which we give them on purpose so they can reap the benefits of their investments), or it’s from a failure in the generic market.

If she doesn’t like patents, she should shorten them or change them in some other way. Don’t just override them–all that will do is create significant uncertainty about the potential rewards for major research investments, which will reduce how much pharmaceutical companies will be willing to invest, especially in certain areas, and it will distort the market, probably in undesirable ways.

If there’s a failure in the generic market, maybe she should find out what’s causing that failure. Business strategy history shows a million times over that a market that’s earning large profits will draw new entrants like crazy, all of whom will try to earn some of that profit, which stimulates competition and eventually lowers prices and profits to reasonable levels. I firmly believe we need to understand very clearly the causes of market failures we observe before we intervene on them.

I’m also skeptical that she can effectively incentivize pharmaceutical companies to invest in the “drugs we need” when everything else she’s doing is dis-incentivizing pharmaceutical company investments. Again, if drugs that many patients need are not being researched, there must be a reason drug companies are not going after such large potential markets, and I’d hesitate to treat the symptom by offering subsidies for developing specific types of drugs/vaccines before I understand why they’re not already investing in them.

My recommendation: Stick with the plan to have Medicare negotiate like it should be doing already, but don’t impose some artificial price ceiling. Definitely get rid of any artificial price floor though. Take a hard look at patents to see if they should be adjusted. Don’t create uncertainty by threatening to undermine patents and licenses. Have some smart people figure out what’s going on in generic drug markets and solve those problems with smart policies rather than creating a government-run pharmaceutical company. And find out why pharmaceutical companies are not developing as many “drugs we need” as you think they should. If it’s simply because the potential reward is too low, go ahead and offer subsidies to cover part of their investment.

Next Tuesday, I’l look at some of the other main categories of things she talks about in Section 1.

Reading Elizabeth Warren’s Healthcare Plan, Part 1

Having written a fair amount about how to fix healthcare systems lately, I think looking at some current reform proposals will be fun. Maybe a good place to start is with Elizabeth Warren’s Medicare for All proposal–she’s got quite a few details out there.

This will be a two-part series because this week I read through all of her website’s pages that focus on healthcare (here, here, and here) and am really just using this post as my notebook of all the details I could find that are specifically about her vision of the structure of the healthcare system. I ignored all the details about how she would pay for it and how much it would cost (I’ve written about the cost of single-payer recently already). So, what follows is some extensive quoting.

In next week’s post, I’ll give my short summary of what I understand all of that to mean and give my assessment of how it will change the value delivered by our healthcare system over the long term.

  • “Elizabeth supports Medicare for All, which would provide all Americans with a public health care program”
  • “Everybody is covered. Nobody goes broke because of a medical bill.”
  • “Everyone can see the doctor they need. Nobody goes broke. And your doctor gets paid by Medicare instead of fighting with an insurance company.”
  • “allow the Department of Health and Human Services to step in where the market has failed. HHS would manufacture generic drugs in cases in which no company is manufacturing a drug, when only one or two companies manufacture a drug and its price has spiked, when the drug is in shortage, or when a medicine listed as essential by the World Health Organization faces limited competition and high prices”
  • “Medicare should aggressively negotiate with drug companies. We should crack down on rampant abuse of the patent and regulatory system. And we should import drugs from countries that sell the same medicines and meet strong safety standards but that charge their citizens a fraction of our costs.”
  • “hold insurers accountable for providing adequate mental health benefits and ensure Americans receive the protections they are guaranteed by law. She has also worked to hold the Department of Health and Human Services accountable for improving insurers’ compliance with mental health parity laws through an online consumer portal”
  • “invest $100 billion in federal funding over the next ten years in states and communities to fight [the opioid] crisis — because that’s what’s needed to make sure every single person gets the treatment they need. It gives directly to first responders, public health departments, and communities on the front lines of this crisis — so that they have the resources to provide prevention, treatment, and recovery services for those who need it most”
  • “[demand] states use Medicaid to its fullest to tackle the [opioid] crisis, expanding access to medication-assisted treatment, and ensuring treatment programs and recovery residences meet high standards”
  • “create a new Medicare designation for rural hospitals that reimburses them at a higher rate and offers flexibility of services to meet the needs of their communities”
  • “strengthen antitrust protections to fight hospital mergers”
  • “increase funding for Community Health Centers by 15 percent per year over five years and establish a $25 billion dollar capital fund to support a menu of options for improving access to care in health professional shortage areas”
  • “grow the current health workforce in rural communities by lifting the cap on medical residency placements, targeted in underserved areas, by 15,000 over the next five years and increasing the National Health Service Corps and Indian Health Service loan repayment programs to full loan repayment”
  • “Medicare for All is the best way to cover every person in America at the lowest possible cost because it eliminates profiteering from our health care and leverages the power of the federal government to rein in spending”
  • “ensure that Americans have access to all of the coverage they need – not just what for-profit insurance companies are willing to cover – including vision, dental, coverage for mental health and addiction services, physical therapy, and long-term care for themselves and their loved ones”
  • “pursue comprehensive anti-corruption reforms to rein in health insurers and drug companies”
  • “reverse Donald Trump’s sabotage of health care, protect individuals with pre-existing conditions, take on the big pharmaceutical companies to lower costs of key drugs for millions of Americans, and improve the Affordable Care Act, Medicare, and Medicaid”
  • “create a true Medicare for All option that’s free for tens of millions”
  • “give every American over the age of 50 the choice to enter an improved Medicare program, and I’ll give every person in America the choice to get coverage through a true Medicare for All option”
  • Coverage under the new Medicare for All option will be immediately free for children under the age of 18 and for families making at or below 200% of the federal poverty level (about $51,000 for a family of four). For all others, the cost will be modest, and eventually, coverage under this plan will be free for everyone.”
  • “a boost of $100 billion in guaranteed, mandatory spending for new NIH research over the next ten years to radically improve basic medical science and the development of new medical miracles for patients”
  • “fight to pass legislation that would complete the transition to full Medicare for All”
  • “supplemental private insurance that doesn’t duplicate the benefits of Medicare for All would still be available”
  • “I will act immediately to lower the cost of prescription drugs, using every available tool to bring pressure on the big drug companies. I’ll start by taking immediate advantage of existing legal authorities to lower the cost of several specific drugs that tens of millions of Americans rely on.”
  • “bypass [pharmaceutical] patents (while providing “reasonable and entire compensation” to patent holders) using “compulsory licensing authority.””
  • “require re-licensing of certain patents developed with government involvement when the contractor was not alleviating health or safety needs”
  • “fix our broken generic drug market by stepping in to publicly manufacture generic drugs”
  • “launch a full-scale effort to enforce [the mental health parity] requirements”
  • “The Trump administration has abandoned its duty to defend current laws in court, cheering on efforts to destroy protections for pre-existing conditions, insurance coverage for dependents until they’re 26, and the other critical Affordable Care Act benefits. In a Warren administration, the Department of Justice will defend this law. And we will close the loopholes created by the Trump administration, using 1332 waivers, that could allow states to steer healthy people toward parallel, unregulated markets for junk health plans. This will shut down a stealth attack on people with pre-existing conditions who would see their premiums substantially increase as healthier people leave the marketplace. “
  • “The Trump administration has expanded the use of junk health insurance plans as an alternative to comprehensive health plans that meet the standards of the ACA. These plans cover few benefits, discriminate against people with pre-existing conditions, and increase costs for everyone else. And in some cases they direct as much as 50 percent of patient premiums to administrative expenses or profit. I will ban junk plans.”
  • “re-fund the Affordable Care Act programs that help people enroll in ACA coverage”
  • “reverse the Trump administration rule that artificially reduced premium tax credits for many people, making coverage less affordable – and instead will expand these credits”
  • “prohibit restrictive and ineffective [Medicaid] policies like work requirements – which have already booted 18,000 people in Arkansas out of the program – as well as enrollment caps, premiums, drug testing, and limits on retroactive eligibility that can prevent bankruptcy”
  • “reverse the Trump administration’s terrible proposed rule permitting health plans and health providers to discriminate against women, LGBTQ+ people, individuals with limited English proficiency, and others”
  • “roll back the Trump administration’s domestic and global gag rules, which deny Title X and USAID funding to health care providers who provide abortion care or even explain where and how patients can access safe, legal abortions. And I will overturn the Trump administration’s embattled proposed rule to roll back mandatory contraceptive coverage.”
  • “Because of something called the “family glitch,” an entire family can lose access to tax credits that would help them buy health coverage if one parent is offered individual coverage with a premium less than 9.86% of their family income. I’ll work to make sure that a family’s access to tax credits is based on the affordability of coverage for the whole family”
  • “extend eligibility for ACA tax credits to all people who are legally present, including those eligible for the Deferred Action for Childhood Arrivals program”
  • “require employers to pass along the full value of the [medical loss ratio] rebate directly to employees”
  • “expand the medically necessary dental services Medicare can provide”
  • “Medicare payments to [Medicare Advantage] plans for each enrollee are supposed to reflect the cost of covering that person through traditional Medicare, but overwhelming evidence shows that these private plans make their enrollees appear sicker on paper than they actually are to earn inflated payments at the expense of taxpayers. Some suggest that this adds $100 billion or more to Medicare spending over ten years. My administration will put an end to this fraud.”
  • “With the approval of the federal government, states can use Section 1115 demonstration waivers to expand coverage to people who aren’t otherwise eligible for Medicaid. Currently, however, states can only obtain these waivers if projected federal spending under the new program will not be higher than without the waiver. While I pursue legislative reforms to expand coverage, I’ll also change this administrative restriction”
  • “Some states take [Medicaid] coverage away if someone misses just one piece of mail or forgets to notify the state within 10 days of a change in income. These kinds of harsh policies help explain why more than a million children “disappeared” from the Medicaid and CHIP programs in the past year. I will eliminate these kinds of unfair practices, and instead work with states to make it easier for everyone – families, children, and people with disabilities – to maintain this essential coverage.”
  • “roll back the Trump administration’s proposed changes to rules regulating Medicaid managed care plans, which would dilute important standards, such as requiring health plans to maintain adequate provider networks guaranteeing access to care for Medicaid enrollees.”
  • “I will appoint aggressive antitrust enforcers who recognize the problems with hospital and health system consolidation to the Department of Justice and Federal Trade Commission. My administration will also conduct retrospective reviews of significant new mergers, and break up mergers that should never have taken place.”
  • “ramp up the enforcement against information blocking by big hospital systems and health IT companies, and I will appoint leaders to the FTC and DOJ who will conduct a rigorous antitrust investigation of the health records market, especially in the hospital space.”
  • “I view good health plans negotiated through collective bargaining as a positive achievement for working people, and I will seek as part of the first phase of my plan the elimination of the excise tax on those plans.”
  • “fund a true Medicare for All option. The plan will be administered by Medicare and offered on ACA exchanges.”
  • “benefits of the true Medicare for All option will match those in the Medicare for All Act. This includes truly comprehensive coverage for primary and preventive services, pediatric care, emergency services and transportation, vision, dental, audio, long-term care, mental health and substance use, and physical therapy.”
  • “offer coverage at no cost to every kid under the age of 18 and anybody making at or below 200% of the federal poverty level (about $51,000 for a family of four) – including individuals who would currently be on Medicaid, but live in states that refused to expand their programs.”
  • “States will be encouraged to begin paying a maintenance-of-effort to the Medicare for All option in exchange for moving their Medicaid populations into this plan and getting out of the business of administering health insurance. For states that elect to maintain their Medicaid programs, Medicaid premiums and cost sharing will be eliminated, and we will provide wraparound benefits for any Medicare for All option benefits not covered by a state’s program to ensure that these individuals have the same free coverage as Medicaid-eligible people in the Medicare for All option.”
  • “This plan will begin as high-quality public insurance that covers 90% of costs and allows people to utilize improved ACA subsidies to purchase coverage and reduce cost sharing. There will be no premiums for kids under 18 and people at or below 200% of the federal poverty level. For individuals above 200% FPL, premiums will gradually scale as a percentage of income and are capped at 5.0% of their income. Starting in year one, the plan will not have a deductible — meaning everyone gets first dollar coverage, and cost sharing will be zero for people at or below 200% FPL. Cost sharing will scale modestly for individuals at or above that level, with caps on out-of-pocket costs. In subsequent years, premiums and cost sharing for all participants in this plan will gradually decrease to zero.”
  • “The Medicare for All option will have the ability to negotiate for prescription drugs using the mechanisms I’ve previously outlined
  • “Anyone who is uninsured or eligible for free insurance on day one, excluding individuals who are over 50 and eligible for expanded coverage under existing Medicare, will be automatically enrolled in the Medicare for All option. Individuals who prefer other coverage can decline enrollment.”
  • “Workers with employer coverage can opt into the Medicare for All option, at which point their employer will pay an appropriate fee to the government to maintain their responsibility for providing employee coverage. In addition, unions can negotiate to include a move to the Medicare for All option via collective bargaining during the transition period, with unionized employers paying a discounted contribution to the extent that they pass the savings on to workers in the form of increased wages, pensions, or other collectively-bargained benefits.”
  • “I have identified cost reforms that would save our health system trillions of dollars when implemented in a full Medicare for All system. The more limited leverage of a Medicare for All option plan will accordingly limit its ability to achieve these savings – but as more individuals join, this leverage will increase and costs will go down. Provider reimbursement for this plan will start above current Medicare rates for all providers, and be reduced every year as providers’ administrative and delivery costs decrease until they begin to approach the targets in my Medicare for All plan. The size of these adjustments will be governed by overall plan size and the progress of provider adjustment to new, lower rates.”
  • “any person over the age of 50 will be eligible for expanded coverage under the existing Medicare program”
  • “critical benefits like audio, vision, full dental coverage, and long-term care benefits will be added to Medicare, and we will legislate full parity for mental health and substance use services”
  • “Identical to the Medicare program, enrollees will pay premiums in Part B and D, with a $300 cap on drug costs in Part D. Plugging a huge hole in the current Medicare program, out-of-pocket costs will be capped at $1,500 per year across Parts A, B, and D, eliminating deductibles and reducing cost sharing. In subsequent years, premiums and cost sharing will gradually decrease to zero.”
  • “Identical to the Medicare for All option, workers 50-64 can opt into expanded Medicare, at which point their employer will pay an appropriate fee to the government to maintain their responsibility for providing employee coverage.”
  • “The expanded Medicare program will receive the ability to negotiate for prescription drugs using the mechanisms I’ve previously outlined, helping to drive down costs for patients. And we will create a publicly run prescription drug plan that is benchmarked off the best current Part D plan.”
  • “Every person without health insurance over the age of 50 will be automatically enrolled in the expanded existing Medicare program.”
  • “Provider reimbursement for new beneficiaries will start above current Medicare rates for all providers, and be reduced every year as providers’ administrative and delivery costs decrease until they begin to approach the targets in my Medicare for All plan. It will be a new condition of participation that providers who take Medicare or other federally subsidized insurance also take the Medicare for All option. We will also adopt common sense reforms to bring down bloated reimbursement rates, including reforms around post-acute care, bundled payments, and site neutral payments.”
  • “lift the upper limit on eligibility for Premium Tax Credits, allowing people over 400% of the federal poverty level to purchase subsidized coverage”
  • “allow any person or family to receive ACA tax credits and opt into ACA coverage, regardless of whether they have an offer of employer coverage. If an individual currently enrolled in qualifying employer coverage moves into an ACA plan, their employer will pay an appropriate fee to the government to maintain their responsibility for providing employee coverage.”
  • “Right now, people may pay up to 9.86% of their income before they get subsidies. Under my plan, this cap would be lowered – and to make sure those tax credits cover more, we will benchmark them to more generous “gold” plans in the Marketplace. And we will increase eligibility for cost sharing reductions, ensuring that more individuals can get into an affordable exchange plan immediately.”
  • “Right now, if someone’s income goes up, they can be forced to repay thousands of dollars in back premiums. We will change this and base tax credits on the previous year’s income. And if someone’s income goes down, they will get the higher subsidy for that year.”
  • “To help states try out different payer arrangements and pilot programs, we will allow states to receive passthrough funding to expand or improve coverage via the ACA’s Section 1332 waivers. Combined with Medicaid waivers, these changes will allow interested states to start experimenting immediately with consolidating public payers and move towards a single-payer system.”
  • “boost medical research by investing an additional $100 billion in guaranteed, mandatory spending in the NIH over ten years, split between basic science and the creation of a new National Institute for Drug Development that will help take the basic research from the other parts of NIH and turn it into real drugs that patients can use”
  • “invest $100 billion in federal funding over the next ten years in states and communities to fight [the opioid] crisis – providing resources directly to first responders, public health departments, and communities on the front lines of this crisis”
  • “To cut down on time wasted on paperwork, we will create single standardized forms for things like prior authorizations and appeals processes to be used by all insurers (private and public), and we will establish uniform medical billing for insurers and doctors.”
  • “Right now, there are so many middlemen in health care that no one knows for certain how much we pay for different services across the whole system. A centralized repository of de-identified claims data will help the government, researchers, and the market better understand exactly what we pay for health care and what kind of quality it gets us.”
  • “ban non-compete and no-poach agreements and class action waivers across the board, while making it easier for private parties to sue to prevent anti-competitive actions. I’ll work with states to repeal Certificate of Public Advantage, or COPA, statutes that shield health care organizations from federal antitrust review and can lead to the creation of large monopolies with little to no oversight. And I’ll also push to ensure our antitrust laws apply to all health care mergers.”
  • “end the practice of surprise [out-of-network] billing by requiring that services from out-of-network doctors within in-network hospitals, in addition to ambulances or out-of-network hospitals during emergency care, be treated as in-network and paid either prevailing in-network rates or 125% of the Medicare reimbursement rate, whichever is lower”
  • “dramatically scaling up apprenticeship programs to build a health care workforce rooted in the community”
  • “lift the cap on residency placements, allowing 15,000 new clinicians to enter the workforce”
  • “expand the National Health Service Corps and Indian Health Service loan repayment program to allow more health professionals – including physicians, physician assistants, registered nurses, nurse practitioners, and other licensed practitioners – to practice in underserved communities”
  • “provide grants to states that expand scope-of-practice to allow more non-physicians to practice primary care”
  • push to close the mental health provider gap in schools”
  • “fight to pass legislation to complete the transition to the Medicare for All system defined by the Medicare for All Act by the end of my first term in office”
  • “Moving to this system would mean integrating everyone into a unified system with zero premiums, copays, and deductibles”
  • “for unions that seek specialized wraparound coverage and individuals with specialized needs, a private market could still exist”
  • “allow private employer coverage that reflects the outcome of a collective bargaining agreement to be grandfathered into the new system to ensure that these workers receive the full benefit of their bargain before moving to the new system”
  • “Medicare for All will sharply reduce administrative spending and reimburse physicians and other non-hospital providers at current Medicare rates”
  • “rebalance rates in a budget neutral way that increases reimbursements for primary care providers and lowers reimbursements for overpaid specialties
  • “While private insurance companies pay higher rates, this system would be expected to continue compensating providers at roughly the same overall rate that they are currently receiving. Why? This is partially because providers will now get paid Medicare rates for their Medicaid patients – a substantial raise. But it’s also because providers spend an enormous amount of time on billing and interacting with insurance companies that reduces their efficiency and takes away from time with patients.”
  • “reimburse hospitals at an average of 110% of current Medicare rates, with appropriate adjustments for rural hospitals, teaching hospitals, and other care providers with challenging cost structures”
  • “my Medicare for All program maintains these base rate adjustments for geography and other factors. In my plan for Rural America, for example, I have committed to creating a new designation under Medicare for rural hospitals due to the unique challenges health systems face in rural communities. That’s why my plan allows for adjustments above the 110% average rate for certain hospitals, like rural and teaching hospitals, and below this amount for hospitals that are already doing fine with current Medicare rates.”
  • “Today, for example, insurers can charge dramatically different prices for the exact same service based on where the service was performed. Under Medicare for All, providers will receive the same amount for the same procedure”
  • “We can also make adjustments to things that we know Medicare currently pays too much for – like post-acute care – by adjusting those payments down slightly while accounting for the patient’s health status”
  • “We build on the success of value-based reforms enabled by the Affordable Care Act, including by instituting bundled payments for inpatient care and for 90 days of post-acute care.”
  • “Under Medicare for All, hospitals won’t be able to force some patients to pay more because the hospital can’t agree with their insurance company. Instead, because everyone has good insurance, providers will have to compete on better care and reduced wait times in order to attract more patients.”
  • “I will appoint aggressive antitrust enforcers to the Department of Justice and Federal Trade Commission and allow hospitals to voluntarily divest holdings to restore competition to hospital markets. I’ve also previously committed to strengthening FTC oversight over health care organizations, including non-profit hospitals, to crack down on anti-competitive behavior. And I will direct my FTC to block all future hospital mergers unless the merging companies can prove that the newly-merged entity will maintain or improve care.”
  • “Under Medicare for All, the federal government would have real bargaining power to negotiate lower prices for patients. I will adopt an altered version of the mechanism outlined in the Lower Prescription Drug Costs Now Act which leverages excise taxes to bring manufacturers to the table to negotiate prices for both branded and generic drugs, with no drug exceeding 110% of the average international market price, but removes the limit of the number of drugs Medicare can negotiate for and eliminates the “target price” so Medicare could potentially negotiate prices lower than other countries.”
  • “If negotiations fail, I will use two tools – compulsory licensing and public manufacturing – to allow my administration to ensure patient access to medicines by either overriding the patent, as modeled in the Medicare Negotiation and Competitive Licensing Act, or by providing public funds to support manufacturing of these drugs, as modeled in my Affordable Drug Manufacturing Act.”
  • “incentivize pharmaceutical companies to develop the drugs we need – like antibiotics, cancer cures, and vaccines”
  • “Medicare for All covers each patient for their entire lifespan. There’s no perverse incentive to deny the prescriptions they need today because the long-term benefits to their health won’t benefit their current private insurance company”
  • “if [healthcare spending] growth rates exceed this [projected average 10-year GDP growth of 3.9%], I will use available policy tools, which include global budgets, population-based budgets, and automatic rate reductions, to bring it back into line”
  • “Over the next ten years, individuals will spend $11 trillion on health care in the form of premiums, deductibles, copays, and out-of-pocket costs. Under my Medicare for All plan, that amount will drop from $11 trillion to practically zero.”
  • “instead of [American] companies sending those payments to private insurance companies, they would send payments to the federal government for Medicare in the form of an Employer Medicare Contribution.”
  • “People who are self-employed would be exempt from making Employer Medicare Contributions unless they exceed an income threshold.”
  • “Small businesses – companies with under 50 employees – would be exempt from this [Employer Medicare Contributions] requirement too if they aren’t paying for employee health care today. When either new or existing firms exceed this employee threshold, we would phase in a requirement that companies make Employer Medicare Contributions equal to the national average cost of health care per employee for every employee at that company.”
  • “Employers currently offering health benefits under a collective bargaining agreement will be able to reduce their Employer Medicare Contribution if they pass along those savings to workers in the form of increased wages, pensions, or other collectively-bargained benefits. New companies or existing companies who enter into a collective bargaining agreement with their employees after the enactment of Medicare for All will be able to reduce their Employer Medicare Contributions in the same way. Employers can reduce their contribution requirements all the way down to the national average health care cost per employee.”
%d bloggers like this: