Senator Wyden asks “Why Wait?”

My answer: because we want to do it right. And, with all due respect, I do not believe that this could possibly happen under the Bush administration.

I respect the Senator’s desire to reform healthcare—and I think that decoupling health care and employment is a fine idea. While employers need to continue to offer financial support, there is no reason that they should be responsible for selecting health care plans, or trying to figure out how to contain costs while maintaining quality. For most, this is not their area of expertise.

The Senator has pointed out the advantage of his plan for employers: they would no longer be exposed to double-digit health care inflation. Fine—but who would be left holding the bag? Employees—who will be required to buy insurance.

Although the Senator asserts that his plan will contain costs, he does not address the two prime factors that drive run-away health care inflation: We pay more for every drug and device and treatment that anyone else in the developed world. Meanwhile perverse financial incentives encourage unnecessary, aggressive and often redundant treatment. (See my first post.)

Recently, the Commonwealth Fund compared savings under Senator Wyden’s plan to savings under Rep. Pete Stark’s single-payer “Americare” bill. Americare “is estimated to reduce national health expenditures by $60.7 billion in 2007-- compared to $4.5 billion under Senator Wyden's bill” the report concluded.

Why does Stark’s bill save so much more money? His is a single-payer plan—he is not funneling taxpayers’ dollars through the fingers of private insurers.

As a result, the Commonwealth Fund reports: “health care costs would decline by $74 billion in 2007.” Because Medicare does not have to advertise, enroll and dis-enroll patients as they move from one plan to another, distribute profits to shareholders-- or seven-digit option packages to executives-- its overhead is much lower. As I noted in my first post, this savings alone will not make health care affordable, but, as they say about lawyers on the bottom of the ocean, it’s a start.

Wyden’s plan also would reduce administrative costs, the Commonwealth fund points out “by creating large regional groups in which people would buy private coverage.” But the 2007 savings would be just $57 billion.

A potentially bigger cost-difference between the two plans is that Stark’s single-payer bill “requires the federal government to negotiate prescription drug prices with pharmaceutical companies, thus reducing national spending on prescription drugs by $33.9 billion in 2007.”

Today the Veteran’s administration is the one arm of the Federal government that is allowed to negotiate with drug-makers, and it has been enormously successful. On average, the VA pays 50% less than Medicare or private insurers for the drugs most popular among Medicare patients.

Why doesn’t the Wyden plan insist on discounts from drug-makers? Why does it allow private insurers to continue to take their cut as the system’s middlemen? Because this is a plan that is trying to protect the stakeholders who have profited so handsomely, and for so long, under our market-driven health care system.

This plan is, as Jon Cohn suggested in his first post, meant to protect the for-profit industry from a single-payer system that would rein in costs—much the way very different government-sponsored health care programs in Germany, Denmark, Switzerland and France have contained prices. (Even when compared to the most expensive system in Europe—Switzerland’s—we pay over 50% more for health care.)

Wyden has suggested that over time, spending will be further contained as these for-profit insurers compete on price. But this assertion runs counter to recent experience. For the past six or seven years, insurers have simply passed on rising prices –which is why premiums have sky-rocketed.

Granted, in the nineties, managed care plans did succeed in containing costs—but only by denying treatment that some doctors and patients felt was necessary. Too often for-profit insurers decided whether or not to include a drug in the formulary of drugs they would cover based, not on medical research regarding the risks and benefits of the drug, but rather based on how much of a discount the drug-maker would offer. Typically, the insurer would approach a drug-maker and say: we’ll include your product—and exclude your rival’s drug from our formulary --if you give us a steep discount.

Private insurers were managing costs; but they were not managing care.

Keep in mind that, as for-profit corporations, a drug-maker’s first allegiance, by law, is to its shareholders—not to its customers. And both drug-makers and medical device-makers have served their shareholder’s well. Genentech’s shareholders, for example, have enjoyed capital gains of roughly 400% over the past ten years. Meanwhile, Genentech’s customers are asked to pay $47,000 for a ten-month couse of treatment on a cancer drug.

The backlash against the for-profit’s industry’s attempt at “managing care” was inevitable. For-profit insurance companies simply do not have the standing—politically or morally-- to make decisions about which drugs and treatments our health care system should cover.

By contrast, Medicare isn’t trying to turn a profit, meet Wall Street’s inflated earnings expectations, or pump up the value of its executives’ options packages.

This may be one reason why both patients and doctors are less suspicious of Medicare’s coverage decisions. Over the years doctors and patients have accepted the vast majority of decisions that Medicare has made about what products and treatments it will and won’t pay for. (Though virtually everyone agrees that Medicare needs to be expanded to cover prescription drugs).

But Medicare does not try to micro-manage care; doctors do not spend hours on the phone arguing with Medicare clerks.

Moreover, as I mentioned in my first post, MedPac, the independent panel that advises Congress on Medicare spending, is urging Congress to improve the way Medicare makes coverage decisions by funding independent “comparative effectiveness” research that will make head-to-head comparisons between competing products and treatments. (This is research that both the drug industry and the device industry have long resisted.)

In this way Medicare can fine-tune its coverage decisions, weeding out new drugs, devices and procedures that are more expensive than the rivals that they are trying to replace-- but no more effective for most patients. In some cases, Medicare might well agree to pay for the new product only for small group of patients who would benefit. (For example, Vioxx was a very useful drug for a relatively small group of patients who risk gastro-intestinal bleeding if they take older, equally effective painkillers. But Merck needed a blockbuster drug and so went all out to market Vioxx as the best pain-killer for everyone---and now, no one has access to Vioxx)

Inevitably, for-profit healthcare invites profiteering, and undermines quality.

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