Wednesday, March 03, 2021

The Kaiser Family Foundation is trying to tell us something

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The Kaiser Family Foundation is one of the most reliable and comprehensive source of healthcare data and analysis in the U.S. Its authority rests in part on maintaining an implicit policy neutrality, letting facts speak for themselves. But sometimes facts speak loudly, and that's the case with a remarkable brief detailing the extent to which the United States' failure to set payment rates for providers, or compel all payers to negotiate common rates, drives our out-of-control spending on healthcare, and our failure to provide affordable access to all.

The brief is an emperor-has-no-clothes declaration, aggregating facts well known to healthcare scholars and simply spotlighting the consequences of our collective failure -- unique among wealthy countries -- to curb the market (and political!) power of hospitals and doctors by forcing them to deal with all payers as a unit. It's a slingshot aimed at an industry Goliath preparing a nuclear arsenal of lobbying and propaganda against any initiative that aims to expand the footprint of government payment rates.

The underlying facts, cited from FAIR Health data, are simple: from 2010 to 2018, per capita spending increased 1.7% per year in Medicare -- and 3.8% per year in commercial insurance. According to the FAIR  estimates used -- which, the authors stress, are more conservative than estimates in various cited studies -- private insurance rates averaged 165% of Medicare for inpatient, 203% for outpatient (which accounts for 36% of current spending) and 133% for physician services. Accordingly (emphasis in original):

Health care spending would decline by more than $350 billion in 2021 if private insurance reimbursed health care providers using Medicare rates. Total spending for the approximately 173 million people under age 65 with private health insurance in our analysis is projected to reach $859 billion in 2021. At Medicare rates, total spending instead would be $507 billion (Figure 1). That $352 billion difference represents a 41% decrease in spending on care for people with private health insurance.

Here's the breakdown of who would save what at Medicare rates:

While the "private nongroup" (individual) market, reshaped by the Affordable Care Act, covers a relatively small slice of the population, these estimates make it painfully clear that the ACA marketplace was created by lawmakers in the grip of a collective idiocy. It was an idiocy without idiots, as no Democrat or group of Democrats -- not Obama, not liberal House members or senators -- had the power to counter the prevailing idiotic premise: that competition among private insurers, left each to negotiate their own payment rates with providers, would control costs and improve the quality of care. It was an idiocy implicitly recognized by the law's creators, as they raised the income eligibility threshold for Medicaid because they knew that that every person covered by Medicaid rather than by the marketplace (and covered more comprehensively) would save money. And yet it was an idiocy that encompassed the American political universe, as Jonathan Cohn's just-released epic chronicle of the political carnage induced by the law's passage and implementation - The Ten Year War  -- makes amply clear.  

That political universe was bounded by a Republican assumption: the private market is always better. It was policed by conservative Democrats, who would not allow a public option. It was upheld by Democrats collectively, who coalesced on a model Republicans might conceivably buy into and who never seriously considered using reconciliation to bypass the filibuster and pass with 50-plus votes a more cost-effective and adequately subsidized program.  It was an idiocy -- or, to be kinder, a shared mythology -- that spawned ancillary shibboleths, such as that imposing high out-of-pocket costs on enrollees or paying for "performance" or taxing generous employer-sponsored plans would fill the cost-control void left by a failure to control payment rates.

It should be noted that Medicare and Medicaid are both delivered in large part (Medicare) or mainly (Medicaid) through private plans, under contracts that constrain the insurers to pay providers rates tightly tethered to the rates set by government.  Insurers participate profitably in those plans. It would have been operationally easy, though impossible politically, to design an individual market modeled on Medicare Advantage, or managed Medicaid, or some kind of hybrid. It will likely yet prove to be politically impossible to reverse-engineer a marketplace in which public payment rates predominate by introducing a strong public option into the ACA marketplace -- let alone opening it on a subsidized basis to people with access to employer-sponsored plans, which would go a long way toward realizing the kinds of savings envisioned by the Kaiser authors. 

We know how to constrain costs and so offer more affordable coverage to everybody. We just lack the political capacity to do it.

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 (they do sometimes speak rather loudly)  

1 comment:

  1. Here is a comparison of Medicare rates and private insurer payments:

    Key Findings

    Private insurers paid nearly double Medicare rates for all hospital services (199% of Medicare rates, on average), ranging from 141% to 259% of Medicare rates across the reviewed studies.
    The difference between private and Medicare rates was greater for outpatient than inpatient hospital services, which averaged 264% and 189% of Medicare rates overall, respectively.
    For physician services, private insurance paid 143% of Medicare rates, on average, ranging from 118% to 179% of Medicare rates across studies.

    This is a much bigger barrier to Med4All than I think you are suggesting.