Healthcare Financing: Some States Are Planning Ahead

Healthcare Financing: Some States are Planning Ahead
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Making the Healthcare Debate Understandable

Part Four of a Four-Part Series

Context: Parts One, Two, and Three

Earlier parts of this series of commentaries explain the basic differences between healthcare services and healthcare financing, explore why it’s hard to understand (let alone control) medical services costs, and summarize the Affordable Care Act’s intended protections.

This article describes alternative ways of funding healthcare costs, with particular focus on the differences between private insurance and single-payer coverage.

The “Repeal and Replace” Uproar

Members of both political parties agree that parts of the Affordable Care Act (ACA) need improvement, but bi-partisan dialogue hasn’t happened. The Administration’s alternative replacements stirred massive pushback nationwide because they raise premiums, could eliminate some essential benefits (like addiction services, hospitalization, and maternity services), restricted Medicaid subsidies, allow significant premium hikes for near-elderly Americans, and leave millions uninsured. It would also have eliminated critical patient protections (like coverage for pre-existing conditions) or put the millions with pre-existing conditions into state “high risk pools,” with far higher premiums.

<p>The public is learning what active democracy looks like.</p>

The public is learning what active democracy looks like.

In March polling about the first version of the proposed new law, a Pew Research Center poll showed that over half of American adults wanted the ACA retained, one quarter wanted it modified, and only 17% supported the proposed replacement.

Massachusetts led the nation in creating a universal healthcare system to broaden access to healthcare services and insurance. Now Massachusetts and some other states are exploring “single-payer” healthcare financing systems (called by some “Improved Medicare for All”). Such systems would standardize coverage, restrictions, and payment processes while providing subscribers regardless of age the freedom to choose their medical providers.

Comparing Private vs. Single-Payer Health Insurance

Two initiatives exploring single-payer healthcare funding are being considered in the Massachusetts State Legislature and might provoke discussion in other states::

First, House 596 and Senate 610 would create a commission to compare three years of actual Massachusetts healthcare costs against a model of the cost of the same services if they had been paid through a single-payer system. If the commission identifies significant potential savings through a single-payer system, the Legislature would be required to launch single-payer legislation.

Second, H. 2987 and S. 619 would establish a public financing system to cover all healthcare costs (eliminating premiums, co-pays, co-insurance, and deductibles). A public financing authority would combine state and Federal outlays for Medicare and Medicaid with a small health payroll tax that would cost employers less than private group insurance. Such a system would group all Massachusetts residents together for pricing purposes, spreading claims risk across the entire population while eliminating duplicative administrative costs. The result would be lower statewide costs and coverage for all.

Similar “Medicare-for-All” (regardless of age) bills have been or are being considered in California, New York, Pennsylvania, Oregon, Vermont, Maine, and other states. Single-payer systems are working well in many other nations, producing broader coverage, better health outcomes, and lower administrative costs than “market-based” private insurance systems.

A study by Gerald Friedman, professor of economics at UMass Amherst, estimates that a single-payer plan would save 15.75% of the current healthcare spending in the state. “While it would raise some costs by providing access to care for those currently uninsured or under-insured, it would save much larger sums by eliminating insurance middlemen and radically simplifying payment to doctors and hospitals.”

Lowering Drug Costs

The Medicare Modernization Act of 2003 prohibited Medicare from negotiating the price of drugs and from importing drugs (both of which are permitted for VA Medical Services. They could remove these restrictions and enact the “import relief” law within that act.

Further, under this never-used law, the Food and Drug Administration could allow drug imports whenever they are deemed safe and capable of saving Americans money. As only one example, the New York Times cited Daraprim, an anti-parasitic drug whose price was raised by its U.S. manufacturer from $13.50 to nearly $750 per pill. The same pill sells for around $2 overseas.

The pharmaceutical industry contends that such imports would increase public health risks. Yet FDA inspections currently find many overseas plants safe enough to allow a large proportion of ingredients for US-made drugs to come from overseas. In fact, over the past six years the FDA has been allowing imports of cancer and anesthesia drugs to deal with shortages, in accordance with a 2011 executive order (No. 13588). Apparently this country already knows how to ensure that imported drugs from trusted nations can be safe.

Who Controls Your Healthcare?

One of the most politicized arguments in examining healthcare financing has been the question, “Do you want the government standing between you and your doctors and determining what provider you can see and what services you can access?” Currently profit-driven insurers make those determinations.

Serious and costly diseases strike people regardless of their political affiliation, and both insurance companies and Medicare set rules about what claims to pay. Neither Medicare, a unified single-payer system, nor your private insurance company is intervening in your relationship with your doctor, but each has boundaries on whom it will pay, for what.

So the real debate is about whom you want serving as your gatekeeper to healthcare services. If you ask those who currently receive Medicare, they’re nearly unanimous in satisfaction with its cost, coverage, outcomes, efficiency, and the absence of interference in the doctor/patient relationship. Is it perfect? No, but no system will satisfy everyone all the time.

What Should State Legislators Do?

Single-payer healthcare has gained more support as some states seek protect citizens’ health, lower premiums, and preserve patient protections.

If you believe that healthcare is a right and are concerned about the spiraling costs of our profit-driven medical financing system, let your state legislators know that you support Improved Medicare for All.

If you want more data before making up your mind, tell your state legislators to examine the real cost differences between private and single-payer coverage).

For more information, contact (Physicians for a National Healthcare Program) or Harvard’s School of Public Health.

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