May 20, 2017
Barstool Politickin’ presented our single-payer health insurance plan to the International Skeptics Forum, in an open thread between May 16 and May 19, 2017. These are the answers we received. The posts were lightly edited for grammar, and a small number of irrelevant posts were deleted.
Trebuchet: Open enrollment should be before the plan year, like Medicare. Level one may be a bit high. Probably should be some level of deductible. Nice to see the inclusion of dental, however, which isn’t covered at any level of Medicare. Level two: Some of that would actually reduce costs of level one.
lionking: Level one looks a lot like Medicare in Australia. Levels two and three can be covered by additional private health insurance, which I have. I have no problem with ancillary and elective medicine being covered by additional insurance premiums.
J (John): We’re contemplating plan premiums in the neighborhood of the Medicare Part B plus D premium (around $170 per month per person, with a family cap). Physician fees would be based on the current Medicare fee schedules with geographic adjustments. Pharmaceuticals would be a bit of a sticky wicket; we don’t want to disincentivize research and development, but the skyrocketing cost of drugs has to be addressed. As a stopgap we would set drug reimbursements at average sales price plus 6 percent markup (Medicare’s rate) but shorten patent protection from ten years to five in order to increase competition (generics would be available sooner).
Startz: Aren’t almost all the items you propose to cover now paid for by Medicare Part A, not Part B? The U.S. spends something like $10,000/person/year on healthcare now. Some argue that a single payer plan would have significant cost savings. But surely not on the order of 80%.
J: Actually, no; Medicare A covers hospital charges, while B covers physician charges, most diagnostic testing, laboratory charges, and so on. There would certainly be cost savings under a single-payer plan, due to the leverage a single payer would have in setting reimbursement rates as well as administrative streamlining; we estimate those savings at around 30 percent of current healthcare expenditures. So instead of $10,000 per year per person, we’d be spending around $7,000. We’d still have the most expensive system in the world, but the gap wouldn’t be nearly as wide as it now is.
Startz: Well, you did include hospital care as being covered. I’m not trying to nitpick though.
Let’s say that your figure of $7,000/year is right. Suggesting a 30% reduction isn’t unreasonable, and some of the costs that make up the $10,000 aren’t included in your basic plan. How does $170 per month, with a family cap, cover $7,000?
J: Well, you have to remember that the $7,000 is an average; many people, perhaps even most, won’t utilize remotely close to that amount in a year. The per-capita numbers are skewed by the extreme costs of catastrophic illness and injury; I’m at work so I can’t post links, but according to the Kaiser Family Foundation the top 5 percent of healthcare consumers accounted for slightly over half of all healthcare expenditures. High-cost cancer drugs accounted for about one-third of Medicare Part D expenses last year. There will, obviously, need to be some kind of mechanism to account for this imbalance; we were contemplating a risk pool along the lines of the Minnesota plan, with a separate funding mechanism to cover it (perhaps a small payroll tax, or an earmark within the funds received from premiums.)
Startz: How much would the risk pool cost? Let’s take your numbers. Suppose everyone puts in $170/month (no family caps, no one who doesn’t pay in). That provides $2,040 a year. So an average of $7,000 leaves $4,960 for the risk pool. The U.S. has about 320 million people, so I think you need another $1.6 trillion. I don’t think that’s going to get covered by a small payroll tax.
J: Health care represented about 18 percent of GDP last year, so about $3.2 trillion. However, “health care” is an extremely broad umbrella. One of the largest items under the “health care” umbrella is, of course, health insurance premiums. Things like vitamins, health club memberships, exercise equipment and so on also come under that umbrella. The best information that we’ve been able to find (through the Kaiser Family Foundation) indicates that the actual cost of health care rendered or prescribed by physicians is around $1.5 trillion per year. A 30 percent reduction brings us down to $1.05 trillion. Premium income, as you point out, would be around $600 billion; that would cover the lower 95 percent of utilization, with perhaps $50 billion left over for reserves against future claims. The catastrophic claims would be the rub; we’d probably have to have some form of government reinsurance to cover these services.
Startz: I suspect your 1.5 trillion is a bit low. On the other hand, even if you’re “just” $450 billion short, you ought to get “credit” for whatever the federal and state governments are currently spending on Medicare/caid.
Segnosaur: The problem with payroll deductions is that you have to deal with 1) people that are self-employed, and 2) people that are part time/work minimal hours, and thus wouldn’t be able to make their minimum payments. (Not insurmountable problems but still need to be considered.) You may almost be better to take things out of general tax revenue rather than payroll deductions.
More importantly… if it’s a government-run health care, are you also going to allow private hospitals to function alongside the public (government funded) ones?
The best health care systems in the world seem to have some sort of mix of public and private. Although there are accusations that allowing private care is somehow “unfairly jumping the queue” (i.e. people who pay more get faster access), in practice it is a great benefit, since it allows your health care system to be more responsive. Canada has a (more or less) single payer system (funded through tax revenues, but delivered privately), and we have significant problems with wait lists.
psionl0: Australia’s Medicare system is very dishonest. The Medicare levy is simply additional general revenue for the government but it doesn’t raise anywhere near enough to cover the cost of government funded health care. From the outset it instantly resulted in lengthy queues for public hospital treatment and massive out of pocket expenses for private treatment.
The “medibank stage two” system introduced by the Fraser government appeared to provide the best compromise between public and private health insurance. People had to pay a medibank levy through their taxes (as they do today) and got a basic level of doctor and hospital treatment. People could opt out of this levy if they had private health insurance. At least private health insurance companies had to be competitive then. Some even offered a “basic hospital only” package that cost less than the medibank levy.
Unfortunately, the medibank levy didn’t cover the cost of government provided health care (I believe). So the government had two options: increase the levy or restrict coverage. The government chose the latter. This was the beginning of a never ending series of frustrating changes to the health system. By the time Bob Hawke introduced the current system, everybody was saying “enough” and no government since has been game to change the system.
I haven’t crunched the numbers on J’s proposals but I suspect that underfunding will also be a recurrent problem with his proposals.
Aren’t you frightened that reducing patent protection would stifle medical research by halving the incentives? You might make existing drugs and those in the pipeline cheaper, but turn off the supply of new drugs.
J: Segnosaur could be right about simply taking the money from general revenues. The current Medicare deduction is 1.45% for employees and employers, and raises about $800 billion annually. We’d have to increase that to something on the order of 4% each to fund the plan, but the tradeoff would be that there wouldn’t be any health insurance premiums; so most employees (and employers, for that matter) would see a decrease in costs. This is a work in progress and we are continuing to discuss possible funding designs.
I might not have been clear earlier; the government will not be running healthcare itself, except for the VA and any expansion of that system needed to accommodate the national-service program. Most hospitals and medical facilities would still be privately owned, but would be paid by the government. So, yes, public and private facilities would be side-by-side.
MikeG makes a good point regarding patent protections, and one that we have considered. Granted, it might stifle some research and development, or, conversely, it might make drugs more expensive in the short run as manufacturers try to recoup more costs in the shorter patent period, but we believe that opening the drug markets to generics sooner will be a net positive.
Bob001: Why do you want to cover everything under the sun? That boosts costs for everyone, and insurance coverage of elective care reduces price competition. Why should completely optional services like Lasik or tummy tucks be covered by insurance?
Instead of starting from scratch, why not build on existing models? Medicare generally works pretty well and is well understood. Medicaid can work well if states fund it properly. Even good corporate health insurance generally works pretty well; the key issue is how to pay for the same coverage for everyone. Federal government workers can choose from a wide array of health plans, with varying options, premiums and deductibles.
And what, by the way, is wrong with the basic Obamacare model, with more generous subsidies to users and guarantees to insurance companies?
And health care systems abroad range from the British NHS (like our VA) where all hospitals and doctors are part of the government system, to Canada (like our Medicare), where a national or provincial government pays private providers, to Germany, Switzerland, Japan etc., where private insurers pay private providers, but all are closely regulated like public utilities.
But all of this could come after you decide how to pay for it: increased FICA taxes, private premiums with government subsidies, etc., etc. Start with the money question before you debate coverage details.
J: Fair questions, Bob. We want to cover everything in the interest of completeness; we intend this to be a true single-payer system, where people don’t have to pay at all for medical services (beyond their premiums, that is.) Also, the plan does charge extra for those completely elective services; it’s basically a voluntary tax to cover those things.
Medicare is, as you said, well understood, by far the largest health insurance plan in the country, and quite efficient. Medicaid also is a fairly efficiently run program. We have based our model on the concept of Medicare-for-all, with some expansions to cover things that are currently excluded. We’re not trying to re-invent the wheel here, but we are trying to think in a different direction as far as coverage and provider reimbursement.
The problem with private commercial insurance (as well as the Obamacare exchanges) is spiraling cost. Health insurance premiums have more than doubled since 2001, while average deductibles have quadrupled in the same period. We’re paying a lot more for a lot less coverage, and this model is not sustainable over the long run. We need to address the money question, yes, but also the coverage question and the access question.
HEALTHCARE TOWN HALL – SINGLE-PAYER SPITBALLING
Testing …. Welcome to J&T’s first-ever Internet Town Hall meeting. If you were around last fall, you might have seen our live-blog of the final presidential debate. We are going to use the same basic format.
This is an experiment, so bear with us. Feel free to chime in – PLEASE chime in, we need all the help we can get – and follow along for the next hour or so as we discuss single-payer healthcare. I’ll post a short op-ed I wrote last week in the first comment; you can respond to that, make up your own thing, or tell us a knock-knock joke. Anything goes. Well, except for trolling; we’ll delete personal insults and unsupported accusations. This is a nice neighborhood.
But it’s going to be pretty loose, and we expect it to wander all over the place. I’ll post my op/ed from last week at the top, then we’ll see where the conversation goes:
There are two expandable single-payer healthcare models in place in the United States: Medicare and the Veteran’s Health Administration. Medicare expansion seems to get all the attention, but is it our best option? The VHA has features in place that might make it more desirable as our national healthcare model.
Medicare expansion would still leave the neediest health care patients with large bills to pay. In 2011, according to the AARP Public Policy Institute, the majority of Medicare users spent at least 18 percent of their income on medical expenses, premiums and deductibles.
Many of those bills wound up in collections or written off – effectively charged back to taxpayers. The VHA system’s benefits are based on previous service; VHA medical bills are, in effect, paid in advance. A single-payer plan based on the VHA model would not have to deal with a consumer debt variable; the cost could be calculated up front.
The VHA’s notorious system bugs will have to be worked out, but most of them can be eliminated through proper funding and management. Citizens can earn a lifetime of good quality healthcare through national service, gaining peace of mind – and perhaps a little national pride in the bargain.
C (Chris Early): Sounds good to me. The status-quo folks will point to the VA’s sketchy management history and say any new program either can’t or won’t be run any better. There needs to be an answer for that.
T: You got straight to the 64 dollar question on the VA, Chris. Most of the VA issues are management and support-related, I think – not systemic flaws. The last time I was in the VA hospital it was like the Zombie Apocalypse – except all the zombies had walkers and wore ballcaps with military unit insignia.
J: I would disagree with the status-quo folks on Medicare; Medicare is the most efficiently-administered healthcare delivery system in the country, by a mile. So the government can, and does, do healthcare well. I would echo Terry’s comment that the VA’s problems aren’t built-in; they’re due to chronic understaffing and mismanagement at the individual level.
T: I like the idea of expanding the VA as opposed to Medicare for a uniquely American reason: It’s a patriotic organization. If we combine healthcare and national service under a single umbrella, it won’t feel like socialism, it’ll feel like patriotism. If it works, it will be patriotism.
J: I think that offering VHA healthcare in exchange for national service is an outstanding idea; it wouldn’t be limited to the young and fit, either. Anyone would be eligible to perform service; we could have people act as childcare workers, elder care workers, infrastructure builders… on and on.
T: I especially like the idea of using a combination of healthcare coverage and training opportunities to solve our massive human care issues. We need people to take care of the old and the young, and we need them to be properly trained. And one of the beauties of a strong internal system is that a large portion of the cost is reinvested. We pay our own people, and they have money to contribute to the economy. It’s a jobs bill AND a healthcare bill.
J: I think we can all agree that the current system is severely broken; Americans pay, by far, the most in the world for their healthcare in both absolute and per-capita terms. There are a lot of proposals out there to fix the system, but none of them address the fundamental problem, which is the tremendous inefficiency of the current healthcare system.
T: John, you are in the business – what are the biggest abuses you see?
J: I’d say the biggest inefficiency is the gatekeeper system of healthcare; I spend probably half my days dealing with issues related to authorizations, or not having authorizations, etc. The hospital group I service has an entire department devoted to dealing with these issues; that’s money being devoted to administration that could be devoted to patient care..
T: I know we struggle with that … I think our administrative load is something like 22 percent, compared to most of the single-payer countries, who only spend 3-5 percent of their medical budgets on paper clips and gummy notes.
J: This is kind of weird for me… I’m advocating for the elimination of my own job, but I would be superfluous in a single-payer system.
I (Ida, John’s wife): Hey, who gets free gummy notes? Not John. I have to buy them for him right along with pens.
J: And don’t forget insurance-carrier profit; that typically runs at about 9 percent of gross revenue. If our proposed single-payer plan was organized as a nonprofit, we could save about 30 percent of current healthcare expenditures… that’d bring us in line with the rest of the civilized world on a per-capita basis.
T: OK, John, in English?
J: Currently, the US pays about $8,200 per person per year for healthcare. The second-most expensive healthcare system in the world is Norway’s; they pay about $5,300 per person per year. If the US reduced expenses by 30 percent, we’d be down around $5,700 a year… still the highest but not hugely so.
T: And how much of that is insurance company profit? Nine percent, you say?
J: About that, yes.
T: How much money, you figure, are insurance companies saving by hiring underwriters to cherry-pick their clients?
J: The savings are probably pretty considerable, although it’d be hard to quantify. Also, you have to consider the effect of interest; if an insurer can delay payment on a claim by 30 days, that’s 30 days’ use of that money they get for free, and 30 days’ interest (or investment income) they get. That’s not much on your $80 ingrown toenail, but multiply it by 13 million policyholders (an Aetna-sized company) and you’ll see it ain’t chump change.
D (David Willoughby): I remember when insurance was actually affordable; it covered everything from child birth to major surgery, without much out of pocket cost. Now the same coverage is either exponentially more expensive, or nonexistent. I came up with a simple and effective solution. Open up free trade across state lines, saturate the market, let the smaller guys play too, then prices are bound to go down. I’m not too keen on AHCA as they call it now, but they hit a valid point here, mutual companies make sense. Not a one size fits all plan that works for some and sends other to the poor house.
T: John wrote an article about mutual insurance … lemme find the link.
J – Mutual Attraction
Back in the good ol’ days, the ’50’s, when Ike was in the White House and Ward and June were on your seven-inch Philco TV, most health insurance companies were what is known as mutual insurance companies.
That doesn’t mean they insured each other; in this context, it means that the companies were owned by their policyholders. Every policyholder had a “share” in the company, and had a vote in the company’s planning and decision-making. The company’s profits were either paid to the policyholders as dividends or retained as reserves against future claims.
This model worked very well for a long time, and it still works well today; many of the largest life insurance carriers (Northwestern Mutual, Mass Mutual) are still mutual companies.
However, sometime back in the ’90s, it became apparent to the executives running health insurance companies that there was more money to be made if those pesky policyholders were cut out of the loop, and the executives were allowed to make decisions based on profitability, rather than on the benefit to the company (and those pesky policyholders) as a whole. So the executives sold the policyholders on the idea of demutualization, and there was a wave of these transactions.
There are a few holdouts; Mutual of Omaha is probably the best-known mutual health insurer, thanks to Marlin Perkins as well as their insurance business.
The mutual model should be revived in the health-insurance field. Imagine the possibilities of a government-backed mutual insurance company, something like Fannie Mae or Freddie Mac are for mortgages. We could have relatively inexpensive basic health insurance, with riders you could add to cover things like infertility treatment, weight-loss surgery, plastic surgery-a completely a la carte health insurance system. The possibilities are endless.
D: I was reading that on your page earlier. And it makes sense, question is, how come common folk get it But not those that can make the change? It baffles me at times. I understand its corporate greed, but there has to be a way.
T: Well, one of the biggest hurdles a single-payer plan has to face is that in America, once businesses get a chance to profit, they feel like they are entitled profit forever. Corporate Welfare.
D: I get that – I want to make as much money as I can as well. But at what cost?
T: There is a documentary on YouTube that runs about 45 minutes, called “Sick around the World” … T.R. Reid travels to several countries with centralized healthcare systems and shows us how they work. Most of them turned healthcare insurance into a nonprofit business model, and it seems to work fine. Some of the insurance companies make more than they did before.
J: After watching that doc, you’ll wonder “why can’t we do that here?” The short answer is “lack of political will.”
T: Desperation can change political will; yesterday’s dogma is today’s dirty diaper.
D: That makes sense, if a 21-year-old, fresh into the work force, pays his insurance premiums and rarely uses his coverage, that’s money in the bank, and there is still plenty to pay providers for the serious stuff.
T: That’s the key, Dave. We need to get everyone involved, and get them in young. That way even catastrophic healthcare can be paid for without putting anyone in the poor house. John has been working on the math … what’s the latest on the healthcare nut, John?
J: We’ve calculated the lifetime nut at around $250,000. That sounds like a lot of money, but it’s actually only about $300 a month over a 40-year working lifetime; and it could potentially be less, depending on interest rates.
D: That’s exactly right John, about the political will. Whether it be partisan politics getting in the way, or special interest groups lobbying, it all becomes political, both side want to be the hero, but don’t want to lose the money and power. Don’t HSA accounts work the same way in a sense?
J: Most HSA’s are hybrids; they have a really cheap high-deductible insurance element, and a savings element. So you might pay, say, $200 a month to your employer; $20 of that might go to pay your cheap insurance premium, and the other $180 would go into your HSA. That money accumulates over time, and you can use it to pay towards your high deductible. The beauty of the HSA is that the money carries over year to year, so if you don’t get sick during a year, all the money you put into the HSA carries over to help you pay your deductible the next year. It’s actually a really good system for someone who doesn’t go to the doctor a lot.
D: Thanks for the information on HSA, John. But this administration isn’t any better; its like putting a Band-Aid over a huge crack in the dam. Sooner or later, it’s going to burst and they’ll say, “nobody saw it coming.”
T: This administration hasn’t had much time yet, to be fair … but the schism in the GOP makes it impossible to get anything through that smells even mildly political.
D: Partisan politics is killing and dividing this country, I’m afraid almost irreparably.
T: Oh, it’s a pendulum thing, Dave. We’ve been through worse. You never know which one’s going to kill us. It might help to stop electing incompetent boobs like Trump … but in some ways Trump is doing the system a favor. By the time he’s done – assuming he doesn’t break the system, and I don’t think he will – by the time he’s done, we’ll be so shell-shocked by his term that we’ll run back into each other’s arms and apologize.
D: My only problem with centralized healthcare is more government, which really doesn’t thrill me. Less government, more of the people governing ourselves, I do understand that’s like trying to herd cats, but it is achievable. I doubt Trump will break the system, bend the hell out of it, but the same affect.
T: Did you read my article, “Why Single-Payer Healthcare”? I address that. I don’t want to build another bureaucracy, but the system is unbelievably overburdened as it is. A centralized system actually shrink the government.
J: There’d actually be less administration under a single-payer plan; you wouldn’t need armies of billers and coders and ancillary paper-pushers. The single-payer would also run the show as far as reimbursement; when you’re the only game in town payment-wise, you don’t negotiate; you dictate.
It would put me out of work. You guys hiring?
T: We spend 22 percent of $2.6 trillion every year on administration. Taiwan, by contrast, spends about 2 percent of their overall budget on administration. That’s a big number – big enough by itself to pay the entire catastrophic healthcare nut. The top 1 percent of Americans cost a little over a half-trillion dollars in 2009. That’s about what the difference in administration would be.
D: It’s a huge number, I believe big pharma should be put in check as well. Their profit margin is incredibly high, to the point that it’s stupid.
J: Oh, I agree fully. Granted, pharma R&D is tremendously expensive, but there should be much shorter limits on patents. Currently, drug patents last for 10 years; during that time, no one else can make the drug (no generics) and the patent holder can charge whatever they want. Patents should be limited to three years; that should be long enough to recoup the cost of R&D and make a few bucks. After that, let the generics in.
T: Why not just cut the developers in for a piece of the generics? Then they can go play golf or chase hookers while the money pours in. Tie it to licensing.
J: Oh, the developer can still sell it. It’s just that after the patent period they have competition. And that competition usually drops the price by 80 or 90 percent.
T: They should get a piece of the competition – but we can’t be a free market only when it’s convenient for the money men.
D: Case in point – a Xarelto starter kit costs $800; even with insurance I come out of pocket about $350 – that’s a big hit.
T: What is Xarelto, Dave?
D: It’s a blood thinner, it helps control my A fib, and prevents clotting in the arteries.
T: How about they get, say, half of whatever the competition sells for a set period of time? The percentage can be negotiated up or down to regulate the market – balance price fairness with developmental expense fairness.
D: But that would be too easy, and would cut into the country club memberships, the mansions and yachts.
J: I agree, Terry. The developer should (and probably does) get licensing from the generic manufacturers. There’d need to be transparency about R&D though. The drug makers might push back on that.
T: That’s a hefty copay on Xarelto- nearly half.
J: And when it goes off patent it’ll cost about $80.
D: I asked about a generic but none are available.
J: It goes off patent in 2020. So no generics till then.
T: Have you checked Canada, Dave?
D: Not there but Mexico.
T: Is the box light enough to toss over a wall?
D: Maybe a year’s supply. But there are already drug cartel tunnels so we’re good there.
J: Running Xarelto through the tunnels… that’s a new twist.
D: I’m in, maybe we buy it on the cheap there – sell it at a 35% markup.
J: The problem with overseas drugs is quality; a lot of the stuff out there doesn’t meet FDA standards. If there were international standards, that’d go a long way.
D: International standards would take cooperation on many fronts, that puts us right back at the beginning.
J: Well, if I were you, I’d want to be sure that my five-milligram Xarelto pill actually contained five milligrams, and not two. Or forty.
J: This same story plays out over and over again. When Gemzar – an anticancer drug – went generic a few years ago, the price went from $600 a shot to $60 a shot almost overnight. Obviously it doesn’t cost $600 to make, or they’d still be charging it. Price gouging pure and simple; they charge more because they CAN, that’s all.
D: R&D can get pricey but for the cost, you’d think that fixing one problem wouldn’t cause 6 or 7 others.
J: Yeah… your cancer is treated, but you’re at risk for heart disease, stroke, high blood pressure, leprosy, hairy palms, giant eyeball, explosive diarrhea, typhoid, rickets, and purple flatulence.
T: The entire medical cost system is riddled with principle agent syndrome … that’s where the buyer isn’t the same person as the user. Any industry that relies heavily on insurance deals with it all the time. If the costs are not controlled closely by the user, eventually they will grow out of control, like weeds that never experience the taste of a lawn mower.
J: I know we’re all in favor of less government, but price controls on pharmaceuticals are probably overdue.
T: I honestly think smaller government would be more cost-friendly. Every layer of bureaucracy lies on top of the truth like an opaque sheet, obscuring the view. Vermin operate in the dark.
D: That I am in full agreement with. It kills me to see elderly either get the meds they need or a nutritional meal.
T: We don’t need a million agencies to keep costs down – we just need to enable users to keep a closer eye on their costs. In a single-payer system, costs are easy to keep track of. It’s one freakin’ agency.
D: If the populace only knew, and have 2 tugs of a goats dangle down, maybe it would be plausible.
D: But the point is still the same. People like my mother, that worked their while life, get put in situations that are near impossible.
T: If we get our way, Dave, there will never be another unpaid medical bill. It will all be paid for – at no cost to the government. If all hands lift, the burden won’t be so heavy.