Monday Reads in which I go there …

Good Afternoon!  Happy Martin Luther King Day!!

I’ve been spending the morning getting back up to speed on Health Care Economics which is something I never enjoy but never seem to be unable to avoid.  The facts on the ground never change much. What we know about single payer and third party payer systems remains pretty much the same.  The only thing that seems to change is the hostility in this country on the subject.  I keep having to dredge up the same information over and over with the new twists.

Well, here I go again …

There are three articles that BB sent me this morning that sum up the situation nicely.  I’m going to start with those and then finish up by reviewing the mini-case of the failed single payer case in the state of Vermont.  I’m not doing this because I don’t think single payer health insurance is a good deal ceteris paribus.  It obviously works in other countries.  As the Republicans remind us daily, we are not other countries.  Theoretically, it provides superior risk sharing and economies of scale on cost.  So, my theoretical economist side loves it.  My living in America with everything that’s already standing and Republicans who thwart everything at every turn except tax cuts for the wealthy and wars side has a different train of thought.

Yes, it’s time to heal those suffering badly from Berns. I’m going to be in good company because the public wonks are with me on both accounts.  We yearn for a simpler, cheaper, more efficient way of paying and getting health care.  But, we know the difference between brainstorming and an actionable policy.  I’m cursed with a heart longing for idealism but a brain that reins the damn thing in.  Bernie Sanders plan really isn’t a plan.  It’s a lofty goal.

Here’s Ezra Klein writing for VOX stating ‘Bernie Sanders’s single-payer plan isn’t a plan at all: Sanders’s long-awaited health care plan is, by turns, vague and unrealistic.‘  You should read these links fully if you can manage the time.

Sanders calls his plan Medicare-for-All. But it actually has nothing to do with Medicare. He’s not simply expanding Medicare coverage to the broader population — he makes that clear when he says his plan means “no more copays, no more deductibles”; Medicare includes copays and deductibles. The list of what Sanders’s plan would cover far exceeds what Medicare offers, suggesting, more or less, that pretty much everything will be covered, under all circumstances.

Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments. Patients will be able to choose a health care provider without worrying about whether that provider is in-network and will be able to get the care they need without having to read any fine print or trying to figure out how they can afford the out-of-pocket costs.

Sanders goes on to say that his plan means “no more fighting with insurance companies when they fail to pay for charges.”

To be generous, it’s possible that Sanders is just being cynical in his wording, and what he means is that, under his plan, individuals have to fight with the government rather than private insurers when their claims are denied.

But the implication to most people, I think, is that claim denials will be a thing of the past — a statement that belies the fights patients have every day with public insurers like Medicare and Medicaid, to say nothing of the fights that go on in the Canadian, German, or British health-care systems.

What makes that so irresponsible is that it stands in flagrant contradiction to the way single-payer plans actually work — and the way Sanders’s plan will have to work if its numbers are going to add up.

Behind Sanders’s calculations, both for how much his plan will cost and how much Americans will benefit, lurk extremely optimistic promises about how much money single-payer will save. And those promises can only come true if the government starts saying no quite a lot — in ways that will make people very, very angry.

“They assumed $10 trillion in health-care savings over ten years,” says Larry Levitt, vice president at the Kaiser Family Foundation. “That’s tremendously aggressive cost containment, even after you take the administrative savings into account.”

The real way single-payer systems save money isn’t through cutting administrative costs. It’s through cutting reimbursements to doctors, hospitals, drug companies, and device companies. And Sanders’s gestures towards this truth in his plan, saying that “the government will finally have the ability to stand up to drug companies and negotiate fair prices for the American people collectively.”

But to get those savings, the government needs to be willing to say no when doctors, hospitals, drug companies, and device companies refuse to meet their prices, and that means the government needs to be willing to say no to people who want those treatments. If the government can’t do that — if Sanders is going to stick to the spirit of “no more fighting with insurance companies when they fail to pay for charges” — then it won’t be able to control costs.

Krugman adds a bit more to this today.

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Put it this way: for all the talk about being honest and upfront, even Sanders ended up delivering mostly smoke and mirrors — or as Ezra Klein says, puppies and rainbows. Despite imposing large middle-class taxes, his “gesture toward a future plan”, as Ezra puts it, relies on the assumption of huge cost savings. If you like, it involves a huge magic asterisk.

Now, it’s true that single-payer systems in other advanced countries are much cheaper than our health care system. And some of that could be replicated via lower administrative costs and the generally lower prices Medicare pays. But to get costs down to, say, Canadian levels, we’d need to do what they do: say no to patients, telling them that they can’t always have the treatment they want.

Saying no has two cost-saving effects: it saves money directly, and it also greatly enhances the government’s bargaining power, because it can say, for example, to drug producers that if they charge too much they won’t be in the formulary.

But it’s not something most Americans want to hear about; foreign single-payer systems are actually more like Medicaid than they are like Medicare.

And Sanders isn’t coming clean on that — he’s promising Medicaid-like costs while also promising no rationing. The reason, of course, is that being realistic either about the costs or about what the system would really be like would make it a political loser. But that’s the point: single-payer just isn’t a political possibility starting from here. It’s just a distraction from the real issues.

The deal is this.  We have entire systems, institutions, and agents that have been functioning under multiple plans for quite some time.  This includes Medicaid, Medicare, SCHIP, the VA, and a myriad of private health insurance plans.  You just don’t wave a magic wand and expect that all to unwind costlessly and seamlessly.  You also don’t expect all those folks to be thrilled about it either or to seamlessly transfer their efforts and resources to a new system.  It takes big money and time to do that.   We’re not operating from scratch here.

That also doesn’t take into account politics.  Yes.  POLITICS.  Remember when we first got the ACA and how the majority of Dems and Republicans voted for a single payer plan when the Dems controlled Congress?  Remember how the ACA should work if SCOTUS hadn’t let so many states opt out of the system?  Yes, Virginia, there is no Santa Claus.

Dear Bernie Sanders-supporting Friends: Sanders is nice enough.  He’s got some good ideas.  But, no, I do not think he’s got what it takes to be President. He operates out there in gadfly paradise. Or, as Michel Cohen writes it: ‘Bernie Sanders doesn’t get how politics works’.

Now for my deeper impression of the debate: even with his rising poll numbers in Iowa and New Hampshire, I find it increasingly difficult to take Sanders seriously as a presidential candidate.

Maybe it’s the fact that he’s 74, would be the oldest man to ever become president, and yet couldn’t be bothered to release his medical records until a Clinton surrogate attacked him for it.

Maybe it’s that Sanders finds a way to answer virtually every question by turning it back to another predictable and one-dimensional attack on Wall Street and big money.

Maybe it’s that he gets away with proposing unrealistic policy ideas that have little chance of being passed even by Democrats in Congress, let alone Republicans, and then gets praised for being authentic. Sunday night Sanders finally released his single-payer health care plan, which is all of eight pages and provides little detail on how he’ll implement a complete restructuring of the US health care system. That’s at least an improvement over his plan for breaking up the banks, which is four pages and just as short on detail.

Maybe it’s that every time he answers a question on foreign policy and national security, it’s blindingly apparent that not only does he not understand foreign policy and national security, he simply doesn’t care to know more. I mean, only Bernie Sanders could answer a question about instability Middle East by pivoting to an attack on wealthy nations like Saudi Arabia, which he repeatedly says has to play a greater role in the civil war in Syria, as if no one on his staff could bother to tell him that Saudi Arabia is already playing an important role in the civil war in Syria.

It’s all that and something else — Sanders really does have a singularly naive and simple-minded understanding of American politics. He genuinely seems to believe — and I know this because he repeatedly yelled it at me during the debate — that money is the root of all evil in politics and that if you get the big money out, great things will happen. Sanders said that “a handful of billionaires . . . control economic and political life of this country.” He argued that Republicans and Democrats don’t “hate each other.” He called that a “mythology.” Instead, he said, the “real issue is that Congress is owned by big money and refuses to do what the American people want them to do.”

I’m sorry, but that is a maddeningly simplistic — and wrong — explanation of how American politics works.

Take single-payer health care, which Sanders claims has been difficult to enact because of a corrupt campaign finance system that allows the “pharmaceutical industry” and private insurance companies to spend millions in “campaign contributions and lobbying.”

On the one hand, Sanders is right — those are powerful interests. But so are doctors and hospitals, who’d pay a huge price if single payer became law; so are Republicans, who fought tooth and nail to defeat Obamacare and would do the same for a single-payer plan; so are Democrats, who couldn’t even support a public option for Obamacare and are unlikely to support single payer; so are Americans, who may not be inclined to support another restructuring of the health care system — a few years after the last one. It’s not just about money; it’s also about a political system constructed and reinforced to block the kind of massive reform Sanders is advocating. Money is important, but it’s not even close to the whole story.

How someone who’s been in Washington as long as Sanders can believe that all that stands between doing “what the American people want [Congress] to do” is something as simple as reforming campaign finance is stunning. Sanders, who brags the NRA gives him a D- rating, is the same politician who supported legislation giving gun manufacturers immunity from civil lawsuits and voted against the Brady Bill. Why? Perhaps it is because Sanders comes from a state that has few gun control laws and lots of gun owners. Yes red-state senators who oppose gun control receive contributions from the NRA. They also have constituents who oppose gun control measures and vote on the issue — like Bernie Sanders. It’s as if in Sanders’ mind, parochialism, ideology, or politics plays no role . . . in politics.

So, yes, we have the ACA (Obamacare) which is a “kludge” to borrow a turn of phrase from Krugman.  If we could start from scratch then single payer health insurance would be infinitely cheaper and better.   But, that’s not the way it is.

Krugman admits that Obamacare is far from perfect, an awkward, imperfect solution that does not work for everyone. But he thinks it would be a mistake for Democrats to expend political capital refighting the battle that gave them their biggest victory in decades. Here’s how he lays out his case:

If we could start from scratch, many, perhaps most, health economists would recommend single-payer, a Medicare-type program covering everyone. But single-payer wasn’t a politically feasible goal in America, for three big reasons that aren’t going away.

First, like it or not, incumbent players have a lot of power. Private insurers played a major part in killing health reform in the early 1990s, so this time around reformers went for a system that preserved their role and gave them plenty of new business.

Second, single-payer would require a lot of additional tax revenue — and we would be talking about taxes on the middle class, not just the wealthy. It’s true that higher taxes would be offset by a sharp reduction or even elimination of private insurance premiums, but it would be difficult to make that case to the broad public, especially given the chorus of misinformation you know would dominate the airwaves.

Finally, and I suspect most important, switching to single-payer would impose a lot of disruption on tens of millions of families who currently have good coverage through their employers. You might say that they would end up just as well off, and it might well be true for most people — although not those with especially good policies. But getting voters to believe that would be a very steep climb.

Bottom line for Krugman is that single-payer ain’t gonna happen. Like it or not, the fact that Obamacare did not disrupt the millions of Americans who get health insurance through their employers gives it a leg up. Then there is the fact that taxes would have to be raised on the middle class to pay for it, as even Sanders acknowledges. And even though the middle class would not doubt save even more on their health insurance premiums, Krugman comes down on the side that higher taxes on them would not fly politically.

I’d like to add something to all of this. It’s frequently nice to have test cases for policy change.  Massachusetts was the test case for ChaffeeCare/DoleCare/RomneyCare/ObamaCare.  It wasn’t perfect but it worked.

March 1965: Children watching a black voting rights march in Alabama. Dr Martin Luther King led the march from Selma, Alabama, to the state capital in Montgomery. (Photo by William Lovelace/Express/Getty Images)

According to a new analysis, health care reform in Massachusetts, popularly known as “Romneycare,” didn’t cause hospital use or costs to increase, even as it drove down the number of people without health insurance.

Implemented by the state in 2006, and signed by then-Gov. Mitt Romney, the reform is looked at as a model for the Affordable Care Act, also known as “Obamacare,” the sweeping and controversial health care law that Republican lawmakers in the House tried to repeal for the 37th time Thursday.

Amresh Hanchate, an economist with the Veterans Affairs Boston Healthcare System and lead author of the study, which he presented Thursday at an American Heart Association conference, says that the results of the study were surprising.

 “In light of the [Affordable Care Act], we wanted to validate concerns that insurance reform would lead to dramatic increases in health care use and costs,” he says. “We were surprised to find little impact on health care use. Changes we saw in Massachusetts are very similar to those we saw in New Jersey, New York and Pennsylvania – states without reform.”

When it was implemented, about 8.4 percent of Massachusetts citizens were uninsured; by 2010, just 3 percent were uninsured. Uninsured rates fell most among minorities: In 2006, 15 percent of African-Americans were uninsured, in 2010, that rate was at 3.4 percent. Uninsured rates for Hispanics in the state fell from 20 percent to 9.2 percent during the same period.

Similarly encouraging news is found on the ACA even though it was seriously hampered by the SCOTUS ruling that allowed many states to opt out of the medicaid expansion and hosting local exchanges.  We have one state that tried to have single payer. It failed.  The state was Vermont.  Sanders was asked about it during the debate. He dodged the question by referring it to the state’s governor.  Well, there’s a lot of information out there on it.  I’ll start with NEJM. 

On December 17, 2014, Vermont Governor Peter Shumlin publicly ended his administration’s 4-year initiative to develop, enact, and implement a single-payer health care system in his state. The effort would have established a government-financed system, called Green Mountain Care, to provide universal coverage, replacing most private health insurance in Vermont. For Americans who prefer more ambitious health care reform than that offered by the Affordable Care Act (ACA), Shumlin’s announcement was a major disappointment. Was his decision based on economic or political considerations? Will it damage the viability of a single-payer approach in other states or at the federal level?

Shumlin’s exploration of a single-payer health care system, which included three assessments by different expert groups, was among the most exhaustive ever conducted in the United States. A 2011 study led by Harvard health economist William Hsiao provided optimistic projections: immediate systemwide savings of 8 to 12% and an additional 12 to 14% over time, or more than $2 billion over 10 years, and requirements for new payroll taxes of 9.4% for employers and new income taxes of 3.1% for individuals to replace health insurance premiums (see table) Financial Estimates from Three Projections for a Vermont Single-Payer Health Plan.).

Two years later, a study by the University of Massachusetts Medical School and Wakely Consulting projected savings of just 1.5% over 3 years.2 Finally, a 2014 study by Shumlin’s staff and consultants predicted 1.6% savings over 5 years and foresaw required new taxes of 11.5% for employers and up to 9.5% for individuals. The governor cited these last projections in withdrawing his plan: “I have learned that the limitations of state-based financing, the limitations of federal law, the limitations of our tax capacity, and the sensitivity of our economy make that unwise and untenable at this time . . . . The risk of economic shock is too high,” Shumlin concluded.

Two factors explain most of the decline in the plan’s financial prospects. First, the anticipated federal revenues from Medicaid and the ACA declined dramatically. Second, Shumlin’s policy choices significantly increased the total projected cost of Green Mountain Care: raising the actuarial value of coverage — the expected portion of medical costs covered by a plan rather than by out-of-pocket spending — from 87% to 94%, providing coverage to nonresidents working in Vermont, and eliminating current state taxes on medical providers. Still, even Shumlin’s projections indicated that the plan would reduce Vermont’s overall health spending and lower costs for the 90% of Vermont families with household incomes under $150,000. Despite differing projections, all three studies showed that single payer was economically feasible.

In reality, the Vermont plan was abandoned because of legitimate political considerations. Shumlin was first elected governor in 2010 promising a single-payer system. But in the 2014 election, his Republican opponent campaigned against single payer. Shumlin won the popular vote by a single-percentage-point margin, 46% to 45%, which sent the election to the Democratic-controlled House of Representatives; though the House reelected him easily in January, a clear public mandate for his health care agenda was nowhere in evidence.

Here’s some slightly less academic explanations. This one comes from the Boston Globe.

Vermont took Obamacare a step further. In 2011, Shumlin proudly signed a bill to establish a publicly financed, single-payer system. The law required Shumlin to submit a detailed financial plan by 2013.

Shumlin missed the deadline, raising fears among supporters and critics alike that single-payer health care would cost much more than anticipated. Those fears were realized on Dec. 17, when Shumlin, two years late and just a month from narrowly winning reelection, released the financial analysis.

The numbers were stunning. To implement single-payer, the analysis showed, it would cost $4.3 billion in 2017, with Vermont taxpayers picking up $2.6 billion and the federal government covering the rest. To put the figures into perspective, Vermont’s entire fiscal 2015 budget, including both state and federal funds, is about $4.9 billion.

Shumlin’s office estimated the state would need to impose new personal income taxes of up to 9.5 percent, on top of current rates that range from 3.55 to 8.95 percent. Businesses would be hit with an 11.5 percent payroll tax, on top of 7.65 percent payroll taxes employer pay for Social Security and Medicare.

And even those tax increases might not have been enough. The governor’s office estimated the Green Mountain Care program would run deficits of $82 million by 2020 and $146 million in 2021. Shumlin said he feared the tax increases would harm businesses and the economy.

Okay, this is VERMONT, folks.  Now, try doing that in Louisiana and Kansas or try getting their elected officials in the District to buy off on it.

So, a lot of children just really like believing in Santa Claus and it doesn’t take much to get them to continue their buy-in. Then there was Doctor Daughter who figured out it was her Dad and me at an extremely tender age after careful empirical study then asked me if that was the case.  Of course, I said yes rather than try to lead her on like my parents did me for the sake of my sister. I just told her to go along if other kids believed and their parents hadn’t told them the truth yet.  She did so like a little Nixonian co-conspirator.

I will not lie to you.  Ceteris paribus.  I prefer Single Payer Health Insurance.  Ceteris paribus.  Bernie Sanders has some really nice ideas.

I have never been one of those theoretical researchers.  All of my stuff is empirical. I live in the land of empirical evidence.  Yes, folks socialized medicine works just fine in the UK and is fairly cheap and folks get turned away for stuff that would probably piss the average American off.  Yes, single payer health or a government option works great in Switzerland and other places.  But, this is a country where it appears that our options will be Hillary Clinton or Donald Trump.

Spare me the Santa Claus mythos or the Senator Gadfly mythos.

Sorry this is so long, but as you can see, I had a lot to say and prove.  I vote we try to improve on the ACA and for Hillary.  Just sayin’.

Mea culpas go to any one whose work I over quoted.  I love fair use but I also loved what you wrote.  I quoted and cited you.  Just sayin’.

What’s on your reading and blogging list today?