Convictions are more dangerous enemies of truths than lies.
~ Friedrich Nietzsche
A recent blog post (Clear, Simple and Wrong) was devoted to a critique of the clear, simple and wrong solutions enacted by President Trump’s recent Executive Order. An Executive Order which included the selling of insurance policies across state lines and the selling of short term policies. This post will highlight the same clear, simple and wrong failings of the argument promoting “Single Payer” as the solution to the healthcare crisis.
The heart of a single-payer system is that essential healthcare services are financed by taxes. Healthcare needs beyond essential services (e.g. cosmetic surgery) are often paid for in cash or through supplemental private insurance plans. The arguments against a single payer system arise from awarding the government more control over our lives and health. Arguments for single payer system include decreasing the administrative burden that drives healthcare costs. Proponents of a single payer system vociferously argue that this administrative overhead only serves to fill the pockets of insurance company executives and shareholders and does very little to improving care and access for patients. A couple of simple facts (and their sources) will serve to highlight this argument:
- “Administrative costs accounted for 25 percent—or more than $200 billion—of total hospital spending in the United States. In the other nations included in this study, these costs accounted for between 12 percent of spending (Canada and Scotland) and 20 percent of spending (the Netherlands)”.Sep 8, 2014 A Comparison of Hospital Administrative Costs in Eight Nations: U.S. … www.commonwealthfund.org/publications/in-the…/2014/…/hospital-administrative-costs
- The insurance industry’s net income rose to $13.1 billion, up 46% from a year earlier, according to a report from rating company A.M. http://money.cnn.com/2017/06/15/news/economy/health-insurers-profits-obamacare/index.html
- Executive compensation that includes “performance pay” can, and routinely does, significantly exceed the amount of the salary for a CEO of a health insurer. Doggett pointed out that the pay of Aetna’s CEO is more than $17 million, and Cigna’s chief executive tops $13 million.Mar 8, 2017
$400 million tax break for insurance execs sparks outrage – CNBC.com
As a physician and healthcare executive I can report that there are additional hidden costs due to this ridiculous administrative burden that far exceeds the 25 percent reported. One such cost is increased burn-out and feelings of alienation experienced by providers who are driven to be data entry clerks rather than the healers they worked to become.
Proponents of a single payer system promote this the simplicity and assumed decreased administrative burden as a virtue, but ignore the barriers of implementing such a system and miss the mark on the fundamental problem plaguing healthcare in this country. Opponents of a single payer system decry the control such a system gives to government. Blithely ignoring that this is not control that patients possess, but rather control we have ceded to for-profit entities. Both sides miss the target on how best to provide care and have chosen simple sound bites that ignore reality.
The vast majority of care in this country is provided in a fee-for-service model of care. This model of care treats medical care as an illness based transaction. You are a doctor. You fix someone. You get paid. This Peanuts cartoon perfectly embodies the economic model of care in the United States. This is clear, simple and appears consistent with our economic system. It seems to make sense.
The truth is that life is not about making sense. Our decisions and actions are driven by how we are incentivized. In a fee-for-service paradigm a doctor, hospital, pharmaceutical company or device manufacturer is paid more for doing more. The corollary of this statement is that as a patient you only get those things that you pay for.
W. Edward Deming once wrote that “Every system is perfectly designed to get the results it gets”, and we are paying in dollars and poor care for the system we have. The US ranks 11th out of 11 developed nations in the Commonwealth Fund in the overall performance of healthcare systems and does so at close to twice the per person cost. One result of this dependence on fee-for-service medicine is that the volume of care performed in this country far exceeds that of countries who have better overall healthcare. The Centers for Medicare and Medicaid Services (CMS), and most private insurers, have worked to curtail this excess, but when the foundation of the system is rotten all the fixes are merely band-aids. As Mr Deming would say our system is perfect – perfect if you profit from the system as it is as there are billions and billions of reasons to be satisfied, just not if you are a patient.
In a fee for service system, largely paid for by private health insurance, there is little or no incentive to keep a patient healthy and work toward avoiding or decreasing the burden of chronic disease. Insurers know that most people will have a particular insurance plan for only a couple of years and at age 65 will switch to Medicare. Hence, there is very little incentive for insurers pay for programs that will benefit a patient years into the future.
Traditional Medicare, the suggested model of a single payer system, is largely a fee-for-service insurance product and suffers from many of the same deficiencies inherent in private insurance plans. Fee-for-service medicine as the foundational economic model for our country’s healthcare is a failure. It is necessary to move to a system that supplies the basic healthcare needs of Americans, and one that focuses on maintaining and promoting health. Such a system will both improve health for the nation and come at a lower cost. The mantra of this new paradigm is that “health is cheaper than illness”. In future posts we will continue to look at examples that demonstrate this principle.
If the goal of our healthcare system is maximizing health for both the individual and the country it can be shown that it is less costly to maintain health than to restore a sick person. A system that focuses on maintaining health while caring for those that are ill or injured falls under the name “Population Health”. Under a population health paradigm providers (health systems, hospitals, and doctors) have agreed that for a set reimbursement they will care for a group of individuals. Under this paradigm providers are incentivized to provide care for more than a patient’s immediate medical needs and will focus on chronic disease management, lifestyle management, and care coordination because it is the right thing to do and is a cost effective. Under such a system the incentives of cost and care are aligned and competition for patients will be about providing quality and access, and profit will be generated by providing quality and access most efficiently.
I am not advocating for an abandonment of fee-for-service medicine, but it should not be the foundational element of delivering basic healthcare services. I am advocating for a single system of national coverage to deliver basic care, supplemented by individual coverage for non-essential services. Fee-for-service reimbursement has a very real role in the provision of non-essential healthcare service (e.g. cosmetic surgery), and such non-essential services can be provided on a cash pay basis or through insurance policies that provide for these services.
Healthcare providers should be compensated by caring for lives, rather than caring for disease.