Vouchers Are Not a Plan

Opponents of a single payer health care system in the United States like to say it would cost too much, even throwing in the inappropriate complaint that the CBO has not scored any plan.  Of course that won’t happen until congress puts bills such as H.R. 676 through the committee system. As an alternative a voucher plan is often offered up. The only thing that the voucher system offers is a cost-shifting lid on government spending. No control over total health care costs. No access to medical care for those who cannot afford the ever-increasing costs not covered by the vouchers. No system. An improved, expanded Medicare would require hard, thoughtful work and discipline, but it can succeed. We can pick and choose figures to argue over but  there is no ethical and rational alternative.

The financing of Medicare for All is a well explored issue. As far back as 1991 the GAO reported that, “If the universal coverage and single-payer features of the Canadian system were applied in the United States, the savings in administrative costs alone would be more than enough to finance insurance coverage for the millions of Americans who are currently uninsured. There would be enough left over to permit a reduction, or possibly even the elimination, of copayments and deductibles, if that were deemed appropriate.”   Later the same year the CBO reported, “If the nation adopted…[a] single-payer system that paid providers at Medicare’s rates, the population that is currently uninsured could be covered without dramatically increasing national spending on health. In fact, all US residents might be covered by health insurance for roughly the current level of spending or even somewhat less, because of savings in administrative costs and lower payment rates for services used by the privately insured. The prospects for controlling health care expenditure in future years would also be improved.” (“Universal Health Insurance Coverage Using Medicare’s Payment Rates”) .  Fourteen years later the lack of true (not just for the government) cost controls make improved Medicare for All an even more imperative goal.

For a good, up-to-date discussion (2013 figures) of H.R. 676 see the article by Gerald Friedman, professor of economics at the University of Massachusetts, Amherst. Friedman extrapolates on (1) the savings on provider administrative overhead and  pharmaceutical costs, (2) the regressive and obsolete funding sources to be replaced by progressive taxation (in billions of dollars), (3) the savings on administrative costs of insurers, Medicaid, and employers (in billions of dollars) and (4) the savings on federal tax expenditures.

As Professor Friedman states, “On top of the enormous administrative savings of single payer, the savings from effective cost-control would make it possible to provide universal coverage and comprehensive benefits to future generations at a sustainable cost.”


…and study Friedman’s charts

Funding with progressive taxationFunding with Tobin Tax

NARROW NETWORKS: Less Choice, More Cost Shifting

As the Affordable Care Act (ACA) unfolds we are now entering the era of the health insurance exchanges. In response to the law’s various requirements the insurance industry is remodeling its concept of provider networks to create new “narrow” networks for the individual and small group markets.  This is a throwback to the failed HMO concept of severely limiting patients’ choices of physicians and hospitals in a cynical effort to control costs. In the exchanges the insurance companies must offer products that cover the list of Essential Health Benefits (EHB) and  their plans must meet actuarial values (AV) specified for various ”Metal” levels, e.g., Bronze =60%, Silver=70%, etc. The AV is the expected percentage of all the medical expenses that the insurance company will pay in that category. Enrollment in a plan cannot be denied on the basis of pre-existing medical problems and there can be no lifetime cap on covered expenses.

In response to these requirements most of the plans being designed in the various states use a narrow list of doctors, hospitals, laboratories, etc. The insurers have large amounts of data to guide them in choosing the least expensive providers. This choice does not concern itself with quality of care no matter how the insurance companies try to frame it. The required size and makeup of the plans is rather loosely defined with federal rules stating that the insurers “must maintain a network of a sufficient number and type of providers, including providers that specialize in mental health and substance abuse, to assure that all services will be available without unreasonable delay.” State rules are generally just as vague.

Every day we now read about the latest shift to narrow networks. In Massachusetts, insurer Harvard Pilgrim launched its Focus Network, plugging 10 percent lower premiums. In California, Blue Shield has a number of SaveNet HMO plans that contract with select doctor and hospital groups, creating networks averaging a little more than half the size of its standard ones. For example, one serving Marin and Sonoma counties will offer a network of about 100 primary care doctors and 325 specialists. Anthem Blue Cross Blue Shield in Wisconsin and Aurora Health Care have secured the first major company to offer their health plan that guarantees cost savings of at least 8 percent for employers (not for patients). This is occurring all over the country. A McKinsey & Co. analysis found 47 percent of 955 plans proposed for the online marketplaces were for health maintenance organizations or plans with similar designs. The New York Times recently published an article by Robert Pear highlighting some of the concerns about this problem. He quotes a recent Pricewaterhousecoopers HealthResearch Institute report that discussed insurers bypassing major medical Centers in numerous states including California, Illinois, etc.

When insured by a narrow network policy it becomes a hazard course for anyone (you) trying to choose a new physician, replace the physician who has known you for years or find a specialist, especially a sub-specialist. “Yes, we have a cardiologist in your area. No, we don’t have an electrophysiologist in your plan. ” Or maybe your primary care physician feels that the best orthopedic surgeon for your type of problem is one that isn’t on your narrow plan’s list. Or the specialist in the network wants you to go to the nearby university medical center. If you make a mistake and go to a non-plan hospital you may end up with thousands of dollars of unpaid bills.  Or the hospital may be on the list but the contracted group of “hospitalist” physicians may not be. And maybe you went to that hospital because you were out of town on vacation. With these hurdles add the fact that the narrower the network the fewer the alternatives and the longer one will have to wait for an appointment.

The plans being offered are low priced and have high deductibles and co-pays. They will appeal to the young and healthy who, at the time of enrollment, haven’t needed medical care.  Patients with multiple and complex medical needs are not going to be satisfied with the limited coverage, limited physicians (may not even include their long term primary care physicians and specialists), and limited hospitals, etc. This gives the insurance companies an opportunity to cherry-pick the least costly patients without violating the regulation against denial for pre-existing illnesses. When they develop their new narrow networks they also refine their cherry-picking techniques even further by mining the usage data from their old networks to weed out the providers who care for the most complex cases. Furthermore they also can count on costs being diverted to the patient when a patient’s care is acquired outside the narrow network either intentionally or unintentionally.  All of this is done under the ruse of cost-containment. The goal is to take in as much money as possible and to pay out as little as possible.

The shell game of cost-shifting to the patient is not cost containment. Of course all of these problems of cost, choice and continuity of care would be non-existent in a system of universal coverage such as single payer medicine.


Suggested Reading:

Insurers limit doctors, hospitals in state-run exchange plans
Exclusive arrangements and tight networks become more common as insurers and government officials search for ways to hold down medical costs.
   May 24, 2013|By Chad Terhune, Los Angeles Times

Can narrow networks boost exchange coverage?
   January 25, 2013 | By Dina Overland, FierceHealthPayer

HMO-Like Plans May Be Poised To Make Comeback In Online Insurance Markets
   Jan 22, 2013 |By Julie Appleby KHN Staff Writer, Kaiser Health News

Narrow network plans could drive up costs
   September,19,2013|By Dina Overland, FierceHealthPayer

 Insurers limiting doctors, hospitals in health insurance market
   September 14, 2013 | By Chad Terhune, Los Angeles Times

Lower Health Insurance Premiums to Come at Cost of Fewer Choices
   September 22, 2013 |By Robert Pear, The New York Times

Most exchange plans limit member choice
   August 16, 2013 |By Julie Bird, Fiercehealthpayer

 Health Exchanges: Open for Business
   HRI’s Closer Look
PricewaterhouseCoopers Health Research Institute