Social insurance is the key--but it can handle competition, just not the type you're used to!
So now my fun with the Canadian health care haters is done, my final posting here in this most excellent discussion is to clarify how one would get competition into a social insurance system that only had one risk pool.
Maggie Mahar is right to say that private plans as constituted don't have the incentive or the moral authority to do what needs to be done in terms of rationalizing the care system. However Joe Paduda is also right to point out that single-payer lacks the incentives that competition brings to improve efficiency and effectiveness in other markets. But it's not enough just to put everybody in the same pool and mandate community rating and guaranteed issue.
Let's be clear. The most important thing is to get everybody in a pool that is essentially funded by progressive taxation, so that nobody is directly responsible for their own health care costs. After all rational people agree that those who use the most healthcare usually have the least to do with how much they use.
Now you have essentially three choices.
You can create a completely socialized system like the VA. You can leave provision of care in the hands of private physicians, hospitals and other entities, with some kind of a modified fee schedule. Or you can create a tightly managed market in which intermediary entities, which might be called health plans or HMOs if you like, are intended to provide the most cost effective care for a population—each offering identical benefits packages and services.
If you are going to do the third variety, you have to be careful about what the “population” consists of. It must be stressed that not only is the intermediary paid the same amount per head for each enrolled member as every other intermediary, but the amount it's paid for its overall population is risk-adjusted so that its population looks actuarially to it like every other intermediary’s population. (There are perfectly good techniques for doing this, primarily by using health risk assessments. CMS is already doing this in Medicare Advantage, and would have done it a long time ago had AHIP not stopped it).
There is also no reason at all why those intermediary organizations should be large for-profit, entities answering only to Wall Street. In fact, it is extremely likely that local cooperatives, such as Group Health Cooperative of Puget Sound, would flourish in those conditions. Similarly, many agricultural cooperatives, credit unions, and even retail cooperatives (like sports outlet REI) do well in markets that are basically rigged against them. This type of a health care market would be rigged in their favor, because their members would want to see any profit reinvested into their own care processes rather than sent off to external investors.
Once you lined up the incentives for these organizations properly, their goal would genuinely be to figure out the most effective way to deliver care to their overall populations with the resources they had. To me, that would compare favorably to a national single-payer fee schedule which would doubtless be at least partially corrupted by the interests of different providers lobbying at the state and federal level. And also it would maintain an element of choice and competition that a single monolithic state-owned provider like the VA lacks. Of course right now the VA looks great because it's being compared with a completely dysfunctional American health care system. I'd like to see a series of intermediary HMO-type organizations compete with it under the right incentives—at least then we'd figure out which system does the job better.
Now to get to my ideal we may have to go through single-payer. After all, the Brits have been fumbling their way towards this for a decade or so now, and the Dutch seem to be further down the track.
My essential fear though, is that we’ll only get to some kind of compromised quasi-universal coverage system that doesn't really cover everybody, keeps a role for a private insurance industry operating under the wrong incentives, and looks like welfare for the poor. In that case this whole cycle will start again, and in about 15-20 years when we go into a more violent collapse—then we will end up with Soviet-style rather than Danish style socialized medicine. And we ought to be able to do much better than that.
Of course, my distinctions from the Don McCanne’s and Maggie Mahar’s of the world are very subtle indeed. I will be standing with them (or more accurately e-mailing back and forth with them) to decry any compromise that will not achieve the dual aims of both guaranteeing fairly-funded health care coverage for everybody, and rationalizing the way that healthcare dollars are spent. But I also accept that there is a long way to go and the point from which we're starting is so bad—as Jonathan's book points out—then our main task is to get the mainstream to understand rational distinctions around a social insurance model, rather than let the conversation continue to be perverted by the free-marketeers. We cannot let the present go on for another century.
Comments (15)
Then you have to ask the question, what service are they providing besides answering the phones?
What value does for-profit insurance bring to what areas? Without great risk of profiteering? And where policing them won't be a greater cost than simply doing it?
I think that may be fine during a transitional period, but I don't see in the long term sense of it.
The only appeal I see in that is similar to the model SKorea used for broadband, which was incredibly efficient. However, broadband and health care are very different beasts. We don't want to perpetuate the problems of the for-profit model. We don't want insurance companies making more bogus claims to consumers and putting their all into advertising while finding ways to skimp on service. Efficiency in service through market competition sounds great, until one realizes the complexity of health care is not the simplicity of broadband, and the likelihood of hiding profiteering is great.
Agreed.
I'd also add I think there is something fundamentally wrong with Paduda's notion of for-profit insurance companies shaping care for patients. There is a fundamental conflict of interest.
I'd much rather trust a non-partisan medical oversight organization, than any for-profit actuary.
It seems it just gets down to the ideological belief that people always do things best for profit. And I don't agree that's always the case. Sometimes, not-for-profit has a clearer shot at the solution.
For-profit HMOs belong in the lucrative and freewheeling optional and supplemental insurance market, where it's truly buyer beware.
April 14, 2007 3:32 AM | Reply | Permalink
I agree with Jonathan that not-for-profit groups like Puget Sound could be part of the solution.
Nationwide, there are a number of not-for -profit health plans that have done some excellent work in figuring out how to improve quality and contain costs. Intermountain in Salt Lake City also comes to mind. Kaiser is another organization which, while not perfect (it is huge, and so inevitably there are weak links) has done an excellent job of trying to pratice evidence-based care while developing the electronic medical records that can help eliminate errors.
There is no reason to eliminate these organizations. They might well continue doing what they do so welll under the umbrella of a "single payer" or Medicare-for-all plan. Medicare could continue paying them as it does now, while giving them a certain amount of autonomy. And Medicare could use them as a model for other health care providers.
But let me stress is that what is key is that these be Not-for-Profits plans. Inevitably, the profit motive creates conflict of interest (between what is best for the shareholder and what is best for the patient.)
And let me add that all not-for-profits profits are not created equal. When I think of Peugot Sound or Intermountain, I do not think of
Blue Cross/ Blue Shield . . . Nor do I think of the many academic medical centers that spend twice as much as the Mayo Clinic or Intermountain to achieve worse outcomes while treating very similar patients.
Most(though not all) academic medical centers haveg gotten into bed with the for-profit health care industry (drug-makers and device-makers) to such a degree that they, too, are conflicted. They take money from industry to research its products and then--surprise! find that the newest, most expensive products are best.
Moreover, in a competitive marketplace, many academic medical centers have begun behaving like for-profits--advertising questionable procedures in order to bring in business while investing in amenities that will attract well-heeled doctors, and their patients--but have little to do with improving care.
April 14, 2007 9:05 AM | Reply | Permalink
It looks like we're all very close, even when your throw in the concept of competition. We agree that the model must be some form of social insurance - with an explicit or de facto single pool funded in an equitable manner through progressive tax policies.
We even agree that integrated health care delivery systems, such as Kaiser or Puget Sound, can be included in any model of social insurance. Maggie and I would exclude for-profit, middleman, network models of HMOs which are not really integrated health care delivery systems, but merely another form of health plan provider. Even for-profit is not always wrong since the physician component of Kaiser Permanente is a for-profit partnership. But I believe that we do agree that we should eliminate passive investors; I feel very strong about that.
Although most single payer advocates cringe when we hear the name of Alain Enthoven, if I remember correctly, Matthew has supported Enthoven's concept of competing integrated health care delivery systems, which Enthoven termed managed competition. And we must remember Enthoven's disappointment when the health plan network models of HMOs flooded the scene.
So where does competition enter? Theoretically, market competition brings us higher quality a lower cost. But with an equitably-funded single pool, financing is based on a highly regulated, administrative process designed to meet legitimate costs and provide fair profit margins. Cost competition in the marketplace doesn't and shouldn't play much of a role in the financing of the health care delivery system.
So competition in a well functioning social insurance model is based primarily on the quality of the health care product. By quality, I am not referring to the narrow concept measuring merely process and outcomes, as in the P4P process. Rather quality is the well earned reputation of providers such as the Mayo Clinic - reputation that is based on a whole host of factors that causes one to identify quality when he/she sees it. If this is the competition that Matthew is supporting, then I support it also. This competitive model would not be limited to integrated health systems, but would also include small groups, solo practitioners, community hospitals and all other sectors of our health care delivery system.
Please note that nothing here changes the single payer model that I so passionately support. All that I've done is to slightly modify my rhetoric in order to be able to include the word (choke) "competition." When Matthew said that social insurance can handle competition, but not the type we're used to, I hope this is what he meant. If so, let's start mobilizing our lawmakers and get on with it.
April 14, 2007 10:44 AM | Reply | Permalink
Ok, I'm agreeing with Mahar again. (This is getting creepy. Somebody pinch me.)
That's a good point, there certainly are good not-for-profit groups who seem to be motivated by moral and professional incentives (remember those?) not shareholder profit, to improve care and efficiency. In fact they do the best job, becasue they have less conflict of interest.
My only concern would be it's the thin edge of a wedge, and would lead to for-profit manipulations sneaking themselves in and then finding ways to cook the books and lobby/corrupt oversight.
Very true.
So I'd like to hear the not-for-profit HMO argument fleshed out a bit. It seems a clear principle and a clear line would have to be drawn, technically and also ideologically, and then embedded as a bedrock principle in the SP foundation, or it would certainly be the first to be attacked and eroded.
April 14, 2007 6:41 PM | Reply | Permalink
A single entity running health care (like Social Security does for retirement) could still foster "competition" and efforts at improved services. This could be done by allowing regional authorities to try various schemes and if they work better than what others are doing then they become the template for use elsewhere.
Currently lots of federal programs allow states to experiment with the details of programs. The key that makes universal health care work is that all the money for essential services goes into one risk pool and that no one can opt out.
People accept mandatory insurance for their autos and mortgaged homes, there is nothing new about this.
--- Policies not Politics
Daily Landscape
April 15, 2007 6:48 AM | Reply | Permalink
I would quibble a bit with the term “risk pool” since the concept of risk does not exist for SP. The government simply creates an entitlement and promises to use its police power to force someone else to pay for my health care.
April 15, 2007 7:25 AM | Reply | Permalink
On the issue of price competition, here is part of an Op-Ed I've written but have not yet submitted. I hope it doesn't stray too far from this group's thoughts.....
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There is no such thing as price competition in the health care industry, and should we ever get to that point, few patients who are really sick will seek out the lowest bidder. Just the opposite is likely to occur. Price too often assumes quality, even when it shouldn't.
Health care providers currently charge what the market will bear, without regard to whether they are providing good care or bad. In fact, bad care increases revenues in the long run, as providers try to correct their mistakes. The public’s only insight into health care quality today is the occasional horror stories picked up by the media.
But it doesn’t have to stay that way, and it won’t for long. Efforts are underway to develop online databases to track physician and hospital performance. Unfortunately there are hundreds of private companies doing their own thing rather than a concerted national effort. The closest thing the Feds have is the VA hospital’s VistA database, which is excellent and available to industry as free open-source software. The government (or a private consortium) should expand it into a national patient database, but we will see.
I would expect the ultimate system to allow a patient to sit in front of a computer and answer a lengthy health questionnaire that would then be turned over to the physician for evaluation. But first it would instantaneously search for patients around the country with similar diseases and a list of physician treatments and successes, grouped by the most common treatments.
Obviously, patients opting in would remain anonymous with identities secured with a private PIN, but the cross-compared physiological data would provide valuable assistance to every physician, especially newcomers. He can accept or reject what others have done, based on the patient’s particular situation, and a cross-compare of prescription and other meds would alert the physician to potential conflicts -- even those that may be causing the patient’s current problems.
In the industry they call this “best practices,” and it is designed to reduce practice variations (two physicians treating the same disease totally differently).
Importantly, this approach can lead to competition on the basis of quality. It’s called “transparency” because ultimately patients will be able to access online a physician’s expertise in treating certain diseases.
It can also be a double-edged sword. Physicians will likely welcome the help in comparing treatments and drug regimens, but only those who are successful will like their records open for the public to see.
But isn’t that what we need? A method to motivate physicians to be better, and to follow best practices and reduce practice variations? Surely the less-capable physicians will either learn to be better or train in other areas. Hospitals whose infection rates are open to public scrutiny will clean up their act, literally, and better health care will lead to fewer medical malpractice lawsuits and people needlessly in wheelchairs.
Such a system also opens the door to implementing Pay-for-Performance (P4P), where the physicians with the better track records receive higher reimbursements.
At least, to a point. A mechanism must be provided to adjust for those physicians willing to take on the more difficult cases. The last thing we want to encourage is cherry-picking to help improve P4P stats. That kind of system (called “outliers”) has been abused in the past by hospitals seeking to increase their reimbursements. Everybody was labeled complicated, thus independent scrutiny will be required.
Jack Lohman
April 15, 2007 1:12 PM | Reply | Permalink
When you are dealing with multiple risk pools now, I don't know what would be better than using "single risk pool." Perhaps "consolidated risk pool?" I prefer the former.
As well, through police powers the government is forcing me to pay for roads I don't drive on and fire departments I don't call. What we are paying for here is a better, safer and more complete society. Besides, you are already paying for everybody else's health care when employers add their costs to their product and you reimburse them at the cash register, or health professionals shift costs to the insured, and bankrupted patients offload their costs to society.
It boggles my mind that we haven't fixed this system long ago, but then again, I've also followed the $200 million in lobbying and campaign contributions from the health care industry that are designed to (and succeed in) keeping the system broken, inefficient and highly profitable.
So no, I guess I'm not really puzzled that this is being discussed today. I do wonder why the public tolerates their federal representatives being on the take. When I was a CEO I'd have fired (or had jailed) an employee who took money from vendors and then provided company assets in return. In American politics, we just re-elect people like that.
April 15, 2007 2:18 PM | Reply | Permalink
rdf: "A single entity running health care (like Social Security does for retirement) could still foster 'competition' and efforts at improved services." Absolutely. It's hard to stress often enough against the right-wing agitprop that no one's eliminating consumer choice of physician, and HMOs now do their best to define choices of physician and treatment.
Social security hasn't limited competition on businesses that have older Americans as a client base. It's put money into the hands of such Americans, so that such businesses will come into being and have to compete. An unfortunate example is advertising from drug companies, which ought to be banned, but appears on the nightly news because young people don't watch the news.
John
http://www.haberarts.com/
April 15, 2007 3:55 PM | Reply | Permalink
Re: . The government simply creates an entitlement and promises to use its police power to force someone else to pay for my health care.
Nonsense. You are paying into a pool from which you receive payments back as needed. That same model as private insurance.
April 15, 2007 7:46 PM | Reply | Permalink
No. The premiums paid to a private insurance plan is actuarially calculated such that they will pay for the expenses I am insuring against over a very long period of time. As I understand SP my premiums will be based on my ability to pay and my benefits are limited only by what the political climate at the time will allow. A very different financial model than insurance.
April 15, 2007 8:48 PM | Reply | Permalink
Single payer will not limit competition, but the current system does, by draining the resources families have available to spend on other products and services that drive our economy.
April 16, 2007 2:50 AM | Reply | Permalink
Re: No. The premiums paid to a private insurance plan is actuarially calculated such that they will pay for the expenses I am insuring against over a very long period of time.
No. Your premiums are pooled with everyone else's and the insurance company's bottom line is based on its payouts versus its income. And the larger the suscriber base the lower the premiums since the risk is spread over more persons. This is why group rates are generally lower than individual rates, and large groups lay less than small groups. Single Payor maximizes that effect by having the largest possible suscriber base.
April 16, 2007 3:56 AM | Reply | Permalink
The word “no” is being overused here, but no.
The premiums I pay are set such that if I maintain the policy for a long time the expensive events that I am insuring against will be covered by my premiums. The insurance company pools a large enough number of policy holders together so that they have enough assets to pay for a cluster of unlikely events.
A larger and larger pool does not reduce premiums, except for marketing or efficiency reasons since the larger the pool the more likely it is that there will be claims. The pool simple needs to be large enough to spread the risk to any policy holder over period of time determined by the statistical likelihood of the event being insured against occurring.
April 16, 2007 8:14 AM | Reply | Permalink
An anecdote. Last Sunday in Belgium (which has of course a national health system )with a sick
5 year old we expected we'd need to go to an Emergency Room but the hotel gave us a list of doctors in private practice. . Called the first one who came in 45 minutes, charged $80 , and provided the diagnosis and prescription we needed.
April 17, 2007 4:43 AM | Reply | Permalink